<PAGE>
As filed with the Securities and Exchange Commission on February 11, 2000
Registration Statement No. 333-93585
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
DIGITAS INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 8742
(State or Other (Primary Standard Industrial 04-3494311
Jurisdiction (I.R.S. Employer
Classification Code Number) Identification No.)
of Incorporation or
Organization)
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
---------------
David W. Kenny
Chief Executive Officer
The Prudential Tower, 800 Boylston Street
Boston, MA 02199
(617) 867-1000
(617) 867-7308 (fax)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Stuart M. Cable, P.C. Marschall I. Smith, Esq. Keith F. Higgins, Esq.
Jeffrey C. Hadden, P.C. General Counsel Ropes & Gray
oodwin,GProcter & Hoar LLP Digitas Inc. One International Place
Exchange Place The Prudential Tower Boston, Massachusetts
Boson,tMassachusetts 02109- 2881 02110-2624
800 Boylston Street
(617) 570-1000 Boston, Massachusetts 02199 (617) 951-7000
(617) 523-1231 (fax) (617) 867-1000 (617) 951-7050 (fax)
(617) 369-8240 (fax)
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the SEC, acting pursuant to Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we and the selling stockholders are not +
+soliciting offers to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued , 2000
9,300,000 Shares
DIGITAS INC.
COMMON STOCK
-----------
Digitas Inc. is offering 6,200,000 shares of common stock and the selling
shareholders are offering 3,100,000 shares of common stock. This is our initial
public offering and no public market currently exists for our shares. We
anticipate that the initial public offering price will be between $18 and $20
per share.
-----------
We have filed an application for the common stock to be quoted on the Nasdaq
National Market under the symbol "DTAS."
-----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 7.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions Digitas Shareholders
-------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Per
Share.... $ $ $ $
Total..... $ $ $ $
</TABLE>
Digitas Inc. and the selling shareholders have granted the underwriters the
right to purchase up to an additional 930,000 and 465,000 shares to cover over-
allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 2000.
-----------
MORGAN STANLEY DEAN WITTER
DEUTSCHE BANC ALEX. BROWN
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
, 2000
<PAGE>
Gate
Graphic showing the word transformation with text reading as follows:
. A heritage of trail-blazing marketing innovation. Recognized expertise in
the science of building customer relationships. And the depth of resources and
services necessary to help Fortune 100 and other companies envision and
implement the business transformations that will gain them a sustainable
competitive advantage in the new digital economy; and
. After spending many years and dollars building sales forces, marketing
strategies, brand names, supply chains, distribution channels, and data
management systems to create customer value, many Fortune 100.
[Examples of three Web sites follow.]
<PAGE>
Inside cover:
Text reading as follows:
End-to-end solutions in redefining a client's business model, we draw on
our comprehensive Internet services capabilities, consulting and integrated
marketing experience to help clients:
Develop a digital business strategy
Create enterprise-wide customer-
centric value propositions
Build new technology and marketing
infrastructure
Provide enterprise-wide training,
organizational alignment and support
Develop integrated marketing plans
Execute seamlessly across multiple
marketing and service channels
Measure performance and maximize
ROI.
[Three examples of Web sites of Neiman Marcus follow.]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 7
Use of Proceeds..................... 16
Dividend Policy..................... 16
Industry Information................ 17
Capitalization...................... 18
Dilution............................ 19
Unaudited Pro Forma Combined
Financial Data..................... 20
Selected Historical Financial
Data............................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of
Operations......................... 22
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business............................ 29
Management.......................... 42
Certain Relationships and Related
Transactions....................... 53
Principal and Selling
Shareholders....................... 55
Description of Capital Stock........ 57
Shares Eligible for Future Sale..... 61
Underwriters........................ 64
Validity of Common Stock............ 66
Experts............................. 66
Where You can Find More
Information........................ 66
Index to Financial Statements....... F-1
</TABLE>
----------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We and the selling shareholders are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of common stock.
Until , 2000, all dealers that buy, sell or trade Digitas'
common stock, whether or not participating in this offering, may be required
to deliver a prospectus. This delivery requirement is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUMMARY
This summary may not contain all of the information that is important to
you. You should read the entire prospectus, including the financial statements
and related notes, before making an investment decision.
DIGITAS INC.
Digitas is a leading Internet professional services firm that provides
integrated, Internet-based strategic, technological and marketing solutions to
Fortune 100 and other industry leading companies. We develop large-scale, long-
term, strategic relationships with a select group of clients that have embraced
the Internet as a principal means of business transformation. We help our
clients leverage their existing infrastructure and the Internet to develop
stronger and more profitable customer relationships. We employ approximately
1,240 professionals and are headquartered in Boston, Massachusetts with offices
in New York City, San Francisco, Salt Lake City and London.
OUR MARKET OPPORTUNITY
The Internet is fundamentally changing the way consumers and businesses
interact. While many companies have built on-line storefronts, most still view
them as simply another independently operated channel for enabling transactions
and interacting with customers. This business model, however, prevents the new
on-line business from capitalizing on the power of the enterprise's existing
assets. To fully capture the potential of the Internet and maximize customer
value, companies must transform their businesses to a "bricks and clicks"
business model, in which their existing assets are integrated with a digital
strategy. This transformation is particularly challenging for large businesses
that have made significant investments in existing sales forces, marketing
strategies, brand names, supply chain management systems, distribution channels
and data management systems. However, it is also these companies that stand to
gain the most from a fully integrated business model.
To transform their businesses, companies are increasingly seeking assistance
from outside Internet professional services firms. However, at a time when
companies need a service provider to do more than build a Web site or enable
on-line transactions, we believe that few Internet professional services
providers have the depth of resources and range of services necessary to
address the large-scale engagements and demands of large companies such as
Fortune 100 companies on an on-going basis.
We believe there is a need for an innovative Internet professional services
provider, which has the scale, breadth of experience and expertise to help
companies understand and capitalize on the potential of the Internet as a part
of their overall business strategy and to leverage the power of their existing
assets to drive growth, maximize customer value and build a sustainable
competitive advantage.
3
<PAGE>
OUR SOLUTION
In redefining a client's business model, we draw on our comprehensive
Internet professional services capabilities and marketing experience to provide
a fully integrated, end-to-end solution with the following key elements:
Define digital business strategy. We work with members of our clients'
senior management to define new business strategies which are broad-based and
grounded in a thorough understanding of our clients' overall business and
competitive environment.
Create enterprise-wide customer value propositions. We employ a customer-
centric approach to develop new customer value propositions that enhance
customer loyalty and generate new business opportunities by taking advantage of
our clients' existing assets such as distribution channels, customer service
networks and customer information systems.
Build new technology and marketing infrastructure. We build new technology
and marketing infrastructure for our clients, including Web sites that enhance
our clients' brands and electronic customer relationship management systems, or
eCRM systems, that are designed to manage customer relationships.
Implement solutions on enterprise-wide basis. We provide training,
organizational alignment and support to help our clients implement solutions
across their enterprises. We also coordinate the efforts of various client
businesses to create customer-oriented applications with a consistent corporate
message.
Develop integrated marketing plan. We design integrated marketing plans that
typically involve identifying customer segments, developing marketing
strategies and optimizing on-line media planning and channel allocation,
including mix, messaging and frequency.
Execute across marketing and service channels. We leverage our on-line media
buying, design and creative services and event sponsorships to market
seamlessly across multiple channels to help our clients build relationships
with their customers.
Performance measurement. Through every step of our solution, we measure the
value being delivered to our clients. We continually work with our clients to
determine the relevant metrics and our performance against those metrics. We
collect data frequently and use it to continually refine our solution and
maximize our clients' return on investment.
OTHER INFORMATION
The Holding Company Formation
Bronner Slosberg Humphrey Co. is a Massachusetts business trust which serves
as the ultimate parent of Digitas, LLC, the Delaware limited liability company
through which our business is operated. Immediately prior to the closing of
this offering, all outstanding equity interests in Bronner Slosberg Humphrey
Co. will be exchanged on a one-for-one basis for equivalent equity interests of
Digitas Inc., a newly-formed Delaware holding company. This offering will be
for shares of common stock of Digitas Inc.
Our principal executive offices are located at the Prudential Tower, 800
Boylston Street, Boston, Massachusetts 02199. Our telephone number at that
location is (617) 867-1000 and our Internet address is www.digitas-inc.com. We
have applied to register our trademark Digitas Inc. This prospectus also
contains the trademarks and trade names of other entities which are the
property of their owners. All information that we present in this prospectus
for any date or period gives effect to the formation of the new holding company
and the exchange of equity interests.
4
<PAGE>
THE OFFERING
Common stock offered by:
<TABLE>
<C> <S>
Digitas.......................................... 6,200,000 shares
Selling shareholders............................. 3,100,000 shares
Total........................................ 9,300,000 shares
Common stock to be outstanding after this offering.. 56,903,479.4 shares(1)
Use of proceeds..................................... To repay outstanding debt
and for general corporate
purposes, including
working capital,
expansion of our
operations and possible
acquisitions and
investments. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.............. DTAS
</TABLE>
- --------
(1) The number of shares of our common stock that will be outstanding after
this offering is based on 50,703,479.4 shares of common stock outstanding
as of December 31, 1999. It excludes:
. up to 930,000 shares of common stock to be issued by us pursuant to the
over-allotment option granted to the underwriters;
. 28,308,972.2 shares of common stock issuable upon exercise of stock
options outstanding as of December 31, 1999 at a weighted average
exercise price of $2.66 per share;
. 900,000 shares of common stock issuable upon exercise of warrants
outstanding as of December 31, 1999 at a weighted average exercise price
of $2.52 per share;
. 10,254,700 shares of common stock available for future grant under our
stock option plans as of December 31, 1999; and
. 2,200,000 shares of common stock reserved for purchase after this
offering under our employee stock purchase plan.
5
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(in thousands, except per share data)
Effective January 1, 1999, the two companies through which we operated our
business were acquired by a private equity investor and several existing
shareholders. We refer to that transaction as the "recapitalization." These two
companies, which we refer to collectively as the "predecessor," were under
common control prior to the recapitalization, and their combined financial
information is presented for all periods before the recapitalization. Our
financial information for periods after the recapitalization reflects the
application of purchase accounting in connection with the recapitalization and
thus is not comparable to the financial information of the predecessor. Before
the recapitalization, the two predecessor companies were S corporations and
thus were not subject to federal income taxation. In addition, because the two
companies had different numbers of common shares outstanding that bear no
relationship to our current number of common shares outstanding, net income
(loss) per share has not been presented for periods before the
recapitalization.
The pro forma statement of operations data for 1998 give effect to the
recapitalization as if it had occurred on January 1, 1998.
<TABLE>
<CAPTION>
Pro Forma
Predecessor (Combined) Predecessor (Combined) Company
--------------------------- ---------------------- ------------
Year Ended December 31,
---------------------------
Year Ended
Year Ended December 31,
1996 1997 1998 December 31, 1998 1999
------- -------- -------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Revenue................. $83,157 $101,238 $122,309 $122,309 $187,007
Operating expenses:
Professional services
costs................. 43,272 57,610 65,696 65,696 102,247
Selling, general and
administrative
expense............... 40,982 40,552 48,485 48,485 67,048
Stock-based
compensation.......... 628 6,325 25,820 5,690 10,743
Amortization of
intangible assets..... -- -- -- 36,688 36,688
------- -------- -------- -------- --------
Total operating
expenses.............. 84,882 104,487 140,001 156,559 216,726
Loss from operations.... (1,725) (3,249) (17,692) (34,250) (29,719)
Other expense, net...... (1,281) (2,431) (2,698) (6,548) (7,281)
Benefit from (provision
for) income taxes...... (160) 114 1,439 (4,047) (567)
------- -------- -------- -------- --------
Net loss................ $(3,166) $ (5,566) $(18,951) $(44,845) $(37,567)
======= ======== ======== ======== ========
Net loss per share:
Basic and diluted...... $ (0.74)
========
Weighted average shares
outstanding:
Basic and diluted...... 50,703
Pro forma net loss per
share:
Basic and diluted (1).. $ (0.69)
========
Pro forma weighted
average shares
outstanding:
Basic and diluted (1).. 54,580
</TABLE>
- --------
(1) The pro forma basic and diluted weighted average shares outstanding
includes the additional number of shares necessary to repay approximately
$68.5 of long term debt assuming an offering price of $19 per share. The
pro forma basic and diluted net loss per share includes the elimination of
approximately $7.1 million of interest expense associated with the long-
term debt assuming the offering occurred on January 1, 1999 and the debt
was repaid.
<TABLE>
<CAPTION>
As of
December 31, 1999
--------------------
Actual As Adjusted
-------- -----------
Balance sheet data:
<S> <C> <C>
Cash and cash equivalents.................................. $ 441 $ 34,434
Total assets............................................... 252,889 286,882
Total long-term debt, less current portion................. 62,422 1,714
Shareholders' equity....................................... 119,836 227,036
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the following risks and all other information
contained in this prospectus before purchasing our common stock. If any of the
following risks occur, our business, results of operations and financial
condition could be harmed. In that case, the trading price of our common stock
could decline, and you could lose all or part of your investment.
Risks Related to Our Business
The loss of even one significant client could have a material adverse
effect on our business, financial condition and results of operations
We derive a significant portion of our revenues from large-scale
engagements for a limited number of clients. Most of these relationships,
including those with our second and third largest clients, are terminable by
the client without penalty on 90 days prior written notice. Our relationship
with our largest client is terminable without prior notice. The loss of any
major client could dramatically reduce our revenues. For 1999, our three
largest clients collectively accounted for approximately 62% of our revenues,
and our largest client accounted for approximately 23% of our revenues. The
loss of any of these clients could significantly reduce our revenue and have a
negative impact on our operating results and reputation in our market.
Our failure to meet our clients' expectations could result in negative
publicity and losses and could subject us to liability for the services we
provide
The average dollar amount of our client engagements has grown significantly
while the time frame for delivering our services has generally decreased. As
clients have dedicated more money and resources to our engagements with them,
their expectations have also increased. As our client engagements become
larger and more complex and are required to be completed in a shorter time
frame, we face increased management challenges and greater risk of mistakes.
Many of the services we provide are critical to the operations of our clients'
businesses. Any failure on our part to deliver these services in accordance
with our clients' expectations could result in:
. delayed or lost client revenues;
. adverse client reactions;
. negative publicity;
. additional expenditures to correct the problem; and
. claims against us.
While our agreements with clients often limit our liability to damages
arising from our rendering of services, we cannot assure you that these
provisions will be enforceable in all instances or would otherwise protect us
from liability. Although we carry general liability insurance coverage, our
insurance may not cover all potential claims to which we are exposed or may
not be adequate to indemnify us for all liability that may be imposed.
If we are not successful in creating a worldwide network of offices, we may
jeopardize our relationships with existing clients and limit our ability to
attract new clients
Increasingly, our clients are insisting that their Internet professional
services providers be able to handle assignments on a worldwide basis. Failure
to have a worldwide network of offices may jeopardize our existing client
relationships and limit our ability to attract new clients. Our London office
may be able to serve Europe, the Middle East and Africa, but we will need to
establish regional offices for Asia and Latin America in the near future. We
also need to deepen and broaden our expertise in dealing with worldwide
assignments by hiring more senior executives with multi-national marketing and
Internet expertise.
7
<PAGE>
We need qualified professionals to grow our business, and they are in short
supply
Our future success depends in large part on our ability to retain, hire,
train and motivate qualified people. Skilled professionals are in short
supply, and competition for them is intense. As a result, we may be unable to
retain our qualified professionals to meet our existing business needs. In
addition, we may be unable to hire a sufficient number of qualified
professionals to meet our business plans. We may also have difficulty
attracting and hiring our desired number of qualified professionals after the
offering since some may perceive that the stock option component of their
compensation package is no longer as valuable. Moreover, even if we are able
to expand our employee base, the resources required to train and retain our
employees may adversely affect our operating margins. If we are unable to hire
and retain qualified professionals, we may be unable to complete work for our
existing clients or accept work from new clients.
We depend on our key personnel, and the loss of their services may
adversely affect our business
We believe that our success will depend on the continued employment of our
senior management team and other key personnel, including David W. Kenny,
Kathleen L. Biro, Robert Galford, Michael Goss, Marschall Smith and Michael
Ward. This dependence is particularly important to our business because
personal relationships are a critical element of obtaining and maintaining
client engagements. If one or more members of our senior management team or
other key personnel were unable or unwilling to continue in their present
positions, our business could be seriously harmed. In addition, if any of our
key personnel join a competitor or forms a competing company, some of our
clients might choose to use the services of that competitor or those of a new
company instead of our own. Furthermore, other companies seeking to develop
in-house business capabilities may hire away some of our key personnel.
Fluctuations in our quarterly revenues and operating results may lead to
reduced prices for our stock
Our quarterly revenues and operating results are volatile. We believe that
period-to-period comparisons of our operating results are not necessarily
meaningful. These comparisons cannot be relied upon as indicators of future
performance. However, if our operating results in any future period fall below
the expectations of securities analysts and investors, the market price of our
securities would likely decline.
Factors that may cause our quarterly results to fluctuate in the future
include the following:
. variability in market demand for Internet professional services;
. timing and amount of client bonus payments;
. length of the sales cycle associated with our service offerings;
. unanticipated variations in the size, budget, number or progress toward
completion of our engagements;
. unanticipated termination of a major engagement, a client's decision not
to proceed with an engagement we anticipated or the completion or delay
during a quarter of several major client engagements;
. efficiency with which we utilize our employees, including our ability to
transition employees from completed engagements to new engagements;
. our ability to manage our operating costs, a large portion of which are
fixed in advance of any particular quarter;
. changes in pricing policies by us or our competitors;
. timing and cost of new office expansions;
. our ability to manage future growth; and
. costs of attracting and training skilled personnel.
Some of these factors are within our control while others are outside of our
control.
8
<PAGE>
Failure to manage our growth may impact our operating results
We expect to continue to rapidly grow our business. The expansion of our
business and customer base has placed, and will continue to place, increased
demands on our management, operating systems, internal controls and financial
and physical resources. If not managed effectively, these increased demands
may adversely affect the services we provide to our existing clients. In
addition, our personnel, systems, procedures and controls may be inadequate to
support our future operations. Consequently, in order to manage our growth
effectively, we may be required to increase expenditures to expand, train and
manage our employee base, improve our management, financial and information
systems and controls, or make other capital expenditures. Our results of
operations and financial condition could be harmed if we encounter
difficulties in effectively managing the budgeting, forecasting and other
process control issues presented by rapid expansion.
Our planned international operations may be expensive and may not succeed
We expect to expand our international operations. We have limited
experience in marketing, selling and supporting our services outside of North
America and the United Kingdom. Development of such skills may be more
difficult or take longer than we anticipate, especially due to language
barriers, cultural differences, currency exchange risks and the fact that the
Internet infrastructure in foreign countries may be less advanced than in the
United States. In addition, we will have to attract and retain experienced
management and employees, and we may be unable to do so. Moreover,
international operations are subject to a variety of additional risks that
could seriously harm our financial condition and operating results. These
risks include the following:
. the impact of recessions in economies outside the United States;
. political and economic instability;
. potentially adverse tax consequences;
. reduced protection for intellectual property rights in some countries;
. longer payment cycles and problems in collecting accounts receivable;
. the burden and expense of complying with foreign laws and regulations;
. currency issues, including fluctuations in currency exchange rates and
the conversion to the euro by all countries of the European Union by
year end 2003;
. tariffs, trade barriers and other import and export restrictions
including restrictions on the import and export of sensitive
technologies; and
. seasonal reductions in business activity in parts of the world, such as
during the summer months in Europe.
We must maintain our reputation and expand our name recognition to remain
competitive
We believe that establishing and maintaining name recognition and a good
reputation is critical to attracting and expanding our targeted client base as
well as attracting and retaining qualified employees. We also believe that the
importance of reputation and name recognition will increase due to the growing
number of Internet professional services providers. We are changing our name
in connection with this offering. If our reputation is damaged or if we are
unable to establish name recognition with respect to our new name, we may
become less competitive or lose our market share. In addition, our name could
be associated with any business difficulties of our clients. As a result, the
difficulties or failure of one of our clients could damage our reputation and
name and make it difficult for us to compete for new business.
9
<PAGE>
Our business will be negatively affected if we do not keep up with the
Internet's rapid technological changes, evolving industry standards and
changing client requirements
The Internet professional services industry is characterized by rapidly
changing technology, evolving industry standards and changing client needs.
Accordingly, our future success will depend, in part, on our ability to meet
these challenges in a timely and cost-effective manner. Among the most
important challenges facing us is the need to:
. effectively use leading technologies;
. continue to develop our strategic and technical expertise;
. influence and respond to emerging industry standards and other
technological changes;
. enhance our current service offerings; and
. develop new services that meet changing customer needs.
Our success depends on increased adoption of the Internet as a means of
conducting business
Our future success depends heavily on the acceptance and use of the
Internet as a means for conducting business. If commerce on the Internet does
not continue to grow, or grows more slowly than expected, our growth would
decline and our business would be seriously harmed. Customers and businesses
may reject the Internet as a viable commercial medium for a number of reasons,
including:
. inadequate network infrastructure;
. delays in the development of Internet enabling technologies and
performance improvements;
. delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity;
. delays in the development of security and authentication technology
necessary to effect secure transmission of confidential information;
. changes in, or insufficient availability of, telecommunications services
to support the Internet; and
. failure of companies to meet their customers' expectations in delivering
goods and services over the Internet.
The Internet professional services industry is highly competitive and has
low barriers to entry; if we cannot effectively compete, our revenue may
decline
The Internet professional services industry is relatively new and intensely
competitive. We expect competition to intensify even further as the Internet
professional services market evolves. Some of our competitors have more
clients, greater brand or name recognition and greater financial, technical,
marketing and public relations resources than we do. As a result, our
competitors may be in a stronger position to respond quickly to new or
emerging technologies and changes in client requirements. They may also
develop and promote their products and services more effectively than we do.
There are relatively low barriers to entry into the Internet professional
services industry. In addition, we have no patented technology and limited
other proprietary rights that would preclude or inhibit competitors from
providing services similar to ours. As a result, new and unknown market
entrants pose a threat to our business.
Current or future competitors may also develop or offer services that are
comparable or superior to ours at a lower price, which could affect our
ability to retain existing clients and attract new clients. In addition,
current and potential competitors have established or may establish corporate
relationships among themselves or other third parties to increase their
ability to address customer needs. Accordingly, it is possible that new
competitors
10
<PAGE>
or alliances among competitors may emerge and rapidly acquire significant
market share. We cannot assure you that we will be able to continue to compete
successfully with our existing competitors or any new competitors.
Actual and perceived conflicts of interest may restrict us in obtaining new
clients
Actual and perceived conflicts of interest are inherent in our industry. We
sometimes decline to accept potential clients because of actual or perceived
conflicts of interest with our existing clients. In addition, potential
clients may choose not to retain us for reasons of actual or perceived
conflicts of interest. Many of our clients compete in industries where only a
limited number of companies gain meaningful market share. As a result, if we
decide not to perform services for a particular client's competitors, or if
potential clients choose not to retain us because of actual or perceived
conflicts and our client fails to capture a significant portion of its market,
we are unlikely to receive future revenue in that particular industry.
Potential future acquisitions could be difficult to integrate, disrupt our
business, adversely affect our operating results and dilute shareholder value
We may acquire other businesses in the future, which may complicate our
management tasks. We may need to integrate widely dispersed operations with
distinct corporate cultures. Our failure to do so could result in our
inability to retain the management, key personnel, employees and clients of
the acquired business. Such integration efforts also may distract our
management from servicing existing clients. Our failure to manage future
acquisitions successfully could seriously harm our operating results. Also,
acquisition costs could cause our quarterly operating results to vary
significantly. Furthermore, our shareholders could be diluted if we finance
the acquisitions by incurring debt or issuing equity securities.
We may need to raise additional capital, which may not be available to us,
and which may, if raised, dilute your ownership interest in us
We expect that our net proceeds from this offering will be sufficient to
meet our working capital and capital expenditure needs for at least the next
12 months. After that, we may need to raise additional funds, and we cannot be
certain that we will be able to obtain additional financing on favorable terms
or at all. If we need additional capital and cannot raise it on acceptable
terms, we may not be able to:
. open new offices;
. create additional market-specific business units;
. enhance our infrastructure;
. hire, train and retain employees;
. keep up with technological advances;
. respond to competitive pressures or unanticipated requirements; or
. pursue acquisition opportunities.
Our failure to do any of these things could restrict our growth, hinder our
ability to compete and seriously harm our financial condition. Additionally,
if we are able to raise additional funds through equity financings, your
ownership interest in us will be diluted.
We have a history of reported net losses and there can be no assurance that
we will soon report net income
We have experienced substantial net losses for the three years ended
December 31, 1999. These losses have been attributable to charges for stock-
based compensation and the amortization of intangible assets. We expect to
continue to report large charges for these items over the next four years. Our
anticipated revenue growth may not compensate for these charges and we may not
achieve profitability during this time period.
11
<PAGE>
The Year 2000 problem may adversely affect our business
The Year 2000 problem refers to the potential for system and processing
failures of date-related data arising from the use of two digits by computer-
controlled systems, rather than four digits, to define the applicable year. We
may encounter the Year 2000 problem in three contexts:
. Our clients. The failure of our clients to ensure that their operations
are Year 2000 compliant could have a material adverse effect on them,
which, in turn, could limit their ability to retain third party service
providers such as Digitas. In addition, clients or potential clients may
delay purchasing software and related products and services, including
those of Digitas, due to concerns related to Year 2000 problems.
. Our suppliers. Our business could be adversely affected if we cannot
obtain products, services or systems that are Year 2000 compliant when
we need them or if the products, services or systems that we have
obtained are not Year 2000 compliant.
. Our services. The solutions which we provide to our clients integrate
software and other technology from different providers. If there is a
Year 2000 problem with respect to a solution provided by us, it may be
difficult to determine whether the problem relates to services which we
have performed or is due to the software, technology or services of
other providers. Furthermore, in the past, we entered into a number of
contracts with express or implied warranties with respect to Year 2000
readiness which may make us vulnerable to Year 2000-related lawsuits,
whether or not the services we have performed are Year 2000 compliant.
We cannot be certain what the outcomes of these types of lawsuits may
be.
Risks Related to the Securities Markets and This Offering
Our stock price may be volatile and may result in substantial losses for
investors purchasing shares in the offering
The market price of our common stock is likely to be highly volatile. The
stock market in general, and the market for Internet-related stocks in
particular, has been highly volatile. This volatility often has been unrelated
to the operating performance of particular companies. We cannot assure you
that our common stock will trade at the same levels of other Internet-related
stocks or that Internet-related stocks in general will sustain their current
market prices. We also cannot assure you that an active public market for our
securities will develop or continue after this offering.
In addition, the trading price of our common stock could be subject to wide
fluctuations in response to:
. our perceived prospects;
. variations in our operating results and our achievement of key business
targets;
. changes in securities analysts' recommendations or earnings estimates;
. differences between our reported results and those expected by investors
and securities analysts;
. announcements of new contracts or service offerings by us or our
competitors;
. market reaction to any acquisitions, joint ventures or strategic
investments announced by us or our competitors; and
. general economic or stock market conditions unrelated to our operating
performance.
In the past, securities class action litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. This type of litigation could result in substantial costs and a
diversion of management attention and resources.
12
<PAGE>
Concentration of ownership may limit your ability to influence corporate
matters
Immediately following this offering, our executive officers, directors and
significant shareholders collectively will own approximately 80.1% of the
outstanding shares of our common stock. If these shareholders choose to act or
vote together, they will have the power to control the election of our
directors, and the approval of any other action requiring the approval of our
shareholders, including any amendments to our certificate of incorporation and
mergers or sales of all or substantially all of our assets. In addition,
without the consent of these shareholders, we could be prevented from entering
into transactions that could be beneficial to us or our other shareholders.
Also, third parties could be discouraged from making a tender offer or bid to
acquire Digitas at a price per share that is above the then-current market
price.
We will have broad discretion over the use of our net proceeds from this
offering, and you may not agree with how we use them
Our management will have significant flexibility in applying our net
proceeds from this offering and may use the net proceeds in ways with which
shareholders disagree. Management's failure to effectively apply these net
proceeds could have an adverse effect on our ability to implement our business
strategy.
Purchasers in this offering will incur immediate and substantial dilution
The assumed initial public offering price of our common stock of $19.00 per
share is substantially higher than the net tangible book value per share of
the outstanding common stock after the offering of $1.14 per share. As a
result, if we were liquidated for our net tangible book value immediately
following this offering, each shareholder purchasing in this offering would
receive $17.86 per share less than the price they paid for their common stock.
In addition, because our success is so heavily dependent on our ability to
attract and retain talented personnel, we expect to offer a significant number
of stock options to employees in the future. As of December 31, 1999, there
were 28,308,972.2 shares of common stock issuable upon exercise of outstanding
stock options, with 10,254,700 shares of common stock reserved for future
grant. In addition there were 900,000 shares of common stock issuable upon
exercise of outstanding warrants. New issuances will cause further dilution to
investors.
Future sales of our common stock may depress our stock price
Sales of a substantial number of shares of our common stock in the public
market after the closing of this offering, or the perception that such sales
could occur, could adversely affect the market price of our common stock and
could make it more difficult for us to raise funds through future offerings of
common stock. For a description of the shares of common stock that are
available for future sale, see "Shares Eligible for Future Sale."
Risks Related to Legal Uncertainty
We may be subject to lawsuits as a result of our attempts to hire qualified
people
Some companies have adopted a strategy of suing or threatening to sue
former employees and their new employers. As we hire new employees from our
current or potential competitors we may become a party to one or more lawsuits
involving the former employment of one of our employees. Any future litigation
against us or our employees, regardless of the outcome, may result in
substantial costs and expenses to us and may divert management's attention
away from the operation of our business.
We may not be able to protect our intellectual property and proprietary
rights
We cannot guarantee that the steps we have taken to protect our proprietary
rights will be adequate to deter misappropriation of our intellectual
property. In addition, we may not be able to detect unauthorized use of our
intellectual property and take appropriate steps to enforce our rights. If
third parties infringe or misappropriate our trade secrets, copyrights,
trademarks or other proprietary information, our business could be seriously
13
<PAGE>
harmed. In addition, although we believe that our proprietary rights do not
infringe on the intellectual property rights of others, other parties may
assert infringement claims against us or claim that we have violated their
intellectual property rights. Such claims, even if not true, could result in
significant legal and other costs and may be a distraction to management. If
any party asserts a claim against us relating to proprietary technology or
information, we may need to obtain licenses to the disputed intellectual
property. We cannot assure you, however, that we will be able to obtain any
licenses at all. In addition, protection of intellectual property in many
foreign countries is weaker and less reliable than in the United States so, as
our business expands into foreign countries, risks associated with protecting
our intellectual property will increase.
Changes in government regulation of the Internet could adversely affect our
business
To date, government regulations have not materially restricted the use of
the Internet by our clients in their markets. However, the legal and regulatory
environment that pertains to the Internet may change. New laws and regulations,
or new interpretations of existing laws and regulations, could impact us
directly or indirectly by preventing our clients from delivering products or
services over the Internet or slowing the growth of the Internet. New state,
federal and foreign laws and regulations may be adopted regarding any of the
following issues:
. user privacy;
. the pricing and taxation of goods and services offered over the
Internet;
. the content of Web sites;
. consumer protection; and
. the characteristics and quality of products and services offered over
the Internet.
Any new legislation could inhibit the increased use of the Internet as a
commercial medium which in turn would decrease the demand for our services and
have a material adverse effect on our future operating performance.
We may become subject to claims regarding foreign laws and regulations,
which could subject us to increased expenses
Because we plan to expand our international operations and because many of
our current clients have international operations, we may be subject to the
laws of foreign jurisdictions for violations of their laws. These laws may
change, or new, more restrictive laws may be enacted in the future.
International litigation is often expensive and time-consuming and could
distract our management's attention away from the operation of our business.
Provisions of Delaware law and of our charter and by-laws may make a
takeover more difficult
Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed
by our management and board of directors. Public shareholders who might desire
to participate in such a transaction may not have an opportunity to do so. In
our certificate of incorporation we also have a staggered board of directors
which makes it difficult for shareholders to change the composition of the
board of directors in any one year. These anti-takeover provisions could
substantially impede the ability of public shareholders to benefit from a
change in control or change our management and board of directors. See
"Description of Capital Stock."
This prospectus contains forward-looking statements that involve substantial
risks and uncertainties
This prospectus contains forward-looking statements. In some cases you can
identify these statements by forward-looking words such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "should," "will,"
and "would" or similar words. You should read statements that contain these
words carefully because they discuss our future expectations, contain
projections of our future results of operations or of our
14
<PAGE>
financial position or state other "forward-looking" information. We believe
that it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control and our actual results may differ materially from the
expectations we describe in our forward-looking statements. Before you invest
in our common stock, you should be aware that the occurrence of the events
described in these risk factors and elsewhere in this prospectus could have an
adverse effect on our business, results of operations and financial position.
15
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of 6,200,000 shares of
common stock in this offering will be approximately $107.2 million, assuming
an initial public offering price of $19.00 per share and after deducting
estimated underwriting discounts and commissions and our estimated offering
expenses. We estimate that our net proceeds will be used as follows:
. approximately $69.0 million will be used to repay outstanding debt under
the term loan portion of our credit facility;
. approximately $15.5 million will be used to repay outstanding borrowings
under the revolving credit portion of our credit facility;
. approximately $1.9 million will be used to repay accrued and unpaid
interest on the term loan and revolving credit; and
. approximately $4.5 million will be used to repay two outstanding notes
issued in connection with the repurchase of options and warrants.
The remaining $16.3 million will be used to support the working capital
requirements and capital expenditures associated with our anticipated growth,
including expenditures related to infrastructure improvements and the opening
of new offices in the U.S. or abroad.
We may invest a portion of the net proceeds that are not used to retire
debt to finance selective acquisitions of complementary businesses, make
strategic investments in new businesses, or accelerate our office expansion
plans, in each case as economically justified opportunities are presented. We
intend to consider both acquisitions and internal development as alternatives
for expanding our current capabilities and geographic presence. Although we
regularly review strategic acquisition opportunities, we have no binding
agreements with respect to any material acquisitions at this time.
As of December 31, 1999, there was approximately $69.0 million outstanding
under the term loan portion of our credit facility, which bore interest on
that date of 8.475%. The term loan portion of the credit facility is repayable
in quarterly installments which commenced on September 30, 1999 with final
maturity on December 31, 2004. We received the proceeds of the term loan
portion of the credit facility in January 1999 and used them in connection
with the recapitalization primarily to repay indebtedness, satisfy contractual
obligations to former shareholders, make transaction payments to existing
equity holders, repurchase stock options and stock appreciation rights and pay
expenses. As of December 31, 1999, there was nothing outstanding under the
revolving credit portion of our credit facility, which bore interest on that
date of 9.8%. The revolving credit portion of the credit facility is repayable
on December 31, 2004. The revolving credit facility was originated in January
1999 and is used to finance seasonal working capital requirements.
Until allocated for specific use, we will invest our net proceeds in
government securities and other short-term, investment-grade securities.
Digitas will not receive any of the proceeds from the sale of common stock in
this offering by the selling shareholders.
DIVIDEND POLICY
We currently intend to retain any future earnings to finance the expansion
of our business and do not expect to pay any cash dividends in the foreseeable
future. Any decision to pay cash dividends after the offering will be at the
discretion of our board of directors after taking into account such factors as
our financial condition, operating results, current and anticipated cash
needs, plans for expansion and restrictions in our financing agreements.
16
<PAGE>
INDUSTRY INFORMATION
This prospectus includes data concerning the Internet professional services
industry that we obtained from material published by International Data
Corporation. These publications generally indicate that they have obtained
information from sources that they believe are reliable, but that they do not
guarantee the accuracy and completeness of the information. Although we
believe that these industry publications are reliable, we have not
independently verified their data. We also have not sought the consent of any
of these publications to refer to their data in this prospectus.
17
<PAGE>
CAPITALIZATION
The following table sets forth our cash, short-term debt and capitalization
as of December 31, 1999:
. on an actual basis; and
. as adjusted to reflect our sale of 6,200,000 shares of common stock in
this offering at an assumed initial public offering price of $19.00 per
share, after deduction of estimated underwriting discounts and
commissions and our estimated offering expenses and the use of the net
proceeds as described in "Use of Proceeds."
<TABLE>
<CAPTION>
As of
December 31, 1999
----------------------
Actual As Adjusted
-------- ------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents................................. $ 441 $ 34,434
======== ========
Short-term debt .......................................... $ 7,928 $ 587
======== ========
Long-term debt, less current portion...................... $ 62,878 1,714
Shareholders' equity (deficit):
Common stock, no par value per share; 50,703,479.4
shares authorized, issued and outstanding, actual; and
56,903,479.4 shares issued and outstanding, as
adjusted............................................... -- --
Additional paid-in capital.............................. 159,864 267,064
Accumulated deficit..................................... (40,028) (40,028)
-------- --------
Total shareholders' equity............................ 119,836 227,036
Total capitalization.................................. $182,714 $228,750
======== ========
</TABLE>
The table above excludes 28,308,972.2 shares of common stock issuable upon
exercise of stock options outstanding at December 31, 1999 at a weighted
average exercise price of $2.66 per share and 900,000 shares of common stock
issuable upon exercise of warrants outstanding at December 31, 1999 at a
weighted average exercise price of $2.52 per share.
18
<PAGE>
DILUTION
As of December 31, 1999, we had a net tangible book (deficit) of $(42.3)
million or $(.83) per share of common stock. Net tangible book value per share
is determined by dividing our tangible net book value (total tangible assets
less total liabilities) by the total number of shares of common stock
outstanding. After giving effect to the sale of the 6,200,000 shares of common
stock offered by us in this offering at an assumed initial public offering
price of $19.00 per share, and after deducting estimated underwriting
discounts and commissions and offering expenses payable by us, our adjusted
net tangible book value would have been approximately $64.9 million, or $1.14
per share of common stock. This represents an immediate increase in net
tangible book value of $1.97 per share to existing shareholders and an
immediate dilution of $17.86 per share to new investors purchasing shares of
common stock in the offering. The following table illustrates this dilution on
a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $19.00
Net tangible book value per share before the offering as of
December 31, 1999......................................... $(.83)
Increase in net tangible book value per share attributable
to new investors.......................................... 1.97
-----
Net tangible book value per share after the offering......... 1.14
------
Dilution per share to new investors.......................... $17.86
======
</TABLE>
The following table summarizes, as of December 31, 1999, the number of
shares of common stock purchased from us, the total consideration paid and the
average price per share paid by our existing shareholders and to be paid by
new investors in this offering at an assumed initial public offering price of
$19.00 per share, and before deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
shareholders(1)........ 50,703,479 89% $153,555,000 59% $2.52
New investors(1)........ 6,200,000 11 107,200,000 41 19.00
---------- --- ------------ -----
Total................. 56,903,479 100% 260,755,000 $ 100%
========== === ============ =====
</TABLE>
- --------
(1) Sales by selling shareholders in this offering will reduce the number of
shares held by existing shareholders to 47,603,480 or approximately 84%
and will increase the number of shares held by new investors to 9,300,000
or approximately 16% of the total number of shares of common stock
outstanding after this offering.
The discussion and table above exclude:
. 930,000 shares to be issued by us pursuant to the underwriters' over-
allotment option;
. 28,308,972 shares of common stock issuable upon exercise of stock
options outstanding at December 31, 1999 at a weighted average price of
$2.66 per share;
. 900,000 shares of common stock issuable upon exercise of warrants
outstanding at December 31, 1999 at a weighted average price of $8.75
per share;
. 10,254,700 shares available for future grant under our stock option
plans at December 31, 1999; and
. 2,200,000 shares of common stock reserved for purchase after this
offering under our employee stock purchase plan.
To the extent these options and warrants are exercised and the underlying
shares are issued, there will be further dilution to new investors.
19
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined statement of operations data
reflect the combined results of operations of the predecessor for the year
ended December 31, 1998, as if the recapitalization and related purchase
accounting described in Note 3 to the financial statements had occurred on
January 1, 1998.
The unaudited pro forma combined statement of operations data are based on
the historical financial statements for the predecessor and the assumptions
and adjustments described in the accompanying notes. The unaudited pro forma
combined statement of operations data do not purport to represent what our
results of operations actually would have been if the recapitalization had
occurred on the date indicated or what the results may be for any future
periods. The unaudited pro forma combined statement of operations data are
based upon assumptions that we believe are reasonable and should be read in
conjunction with our financial statements and accompanying notes thereto
included elsewhere in this prospectus.
Unaudited Pro Forma Combined Statement of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------
Predecessor Pro Forma
(Combined) Adjustments Combined
----------- ----------- ---------
<S> <C> <C> <C>
Statement of operations data:
Revenue................................. $122,309 -- $122,309
Operating expenses:
Professional services costs............ 65,696 -- 65,696
Selling, general and administrative
expense............................... 48,485 -- 48,485
Stock-based compensation............... 25,820 $(20,130)(/1/) 5,690
Amortization of intangible assets...... -- 36,688 (/2/) 36,688
-------- -------- --------
Total operating expenses.............. 140,001 16,558 156,559
Income (loss) from operations........... (17,692) (16,558) (34,250)
Other income (expense).................. (2,698) (3,850)(/3/) (6,548)
Benefit from (provision for)
income taxes........................... 1,439 (5,486)(/4/) (4,047)
-------- -------- --------
Net income (loss)....................... $(18,951) $(25,894) $(44,845)
======== ======== ========
</TABLE>
- --------
(1) Reflects exclusion of stock appreciation rights compensation expense of
$20,130,000 as appreciation would have been recorded in the period prior
to the recapitalization taking place.
(2) Reflects a portion of the $171,726,000 of goodwill which is being
amortized over seven years and a portion of the $27,134,000 of other
intangible assets which are being amortized over two to six years, as if
the recapitalization took place at the beginning of the period.
(3) Reflects additional interest expense, at an assumed interest rate of
8.43%, from the $73,399,000 debt incurred in connection with the
recapitalization as if it occurred at the beginning of the period. Other
expense increases as a result of the amortization of debt issue costs. A
.125% change in the assumed interest rate of 8.43% would change interest
expense by approximately $90,000 on an annual basis.
(4) Represents tax adjustments to reflect the pro forma income tax provision
at an effective tax rate of 9.92%.
20
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following financial data for each of the years 1995 through 1998 have
been derived from our annual financial statements, which have been audited by
PricewaterhouseCoopers LLP. The data for 1999 have been derived from our
annual financial statements, which have been audited by Arthur Andersen LLP.
Because the recapitalization has been accounted for as a purchase, the
financial statements for the periods after January 1, 1999 are not comparable
to prior periods. Our historical results are not necessarily indicative of
results for any future period. Before the recapitalization, the two
predecessor companies were S corporations and thus were not subject to federal
income taxation. In addition, because the two companies had different numbers
of common shares outstanding that bear no relationship to our current number
of common shares outstanding, net income (loss) per share has not been
presented for periods before the recapitalization.
<TABLE>
<CAPTION>
Predecessor (Combined) Company
------------------------------------ ------------
Year
Year Ended December 31, Ended
------------------------------------ December 31,
1995 1996 1997 1998 1999
------- ------- -------- -------- ------------
(in thousands, except per share
data)
<S> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenue..................... $66,244 $83,157 $101,238 $122,309 $187,007
Operating expenses:
Professional services
costs..................... 32,922 43,272 57,610 65,696 102,247
Selling, general and
administrative expense.... 35,607 40,982 40,552 48,485 67,048
Stock-based compensation
(1)....................... 628 6,325 25,820 10,743
Amortization of intangible
assets.................... -- -- -- -- 36,688
------- ------- -------- -------- --------
Total operating
expenses................ 68,529 84,882 104,487 140,001 216,726
Loss from operations........ (2,285) (1,725) (3,249) (17,692) (29,719)
Other income (expense),
net........................ 151 (1,281) (2,431) (2,698) (7,281)
Benefit from (provision for)
income taxes............... (345) (160) 114 1,439 (567)
------- ------- -------- -------- --------
Net loss.................... $(2,479) $(3,166) $ (5,566) $(18,951) $(37,567)
======= ======= ======== ======== ========
Net loss per share
Basic and diluted......... $ (0.74)
--------
Weighted average common
shares outstanding
Basic and diluted......... 50,703
<CAPTION>
As of December 31,
--------------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Cash and cash equivalents... $11,685 $ 301 $ 1,868 $ 37 $ 441
Total assets................ 36,971 33,649 49,705 62,270 252,889
Total long-term debt, less
current portion............ -- 2,990 3,701 1,749 62,878
Shareholders' equity
(deficit).................. 383 4,625 (9,831) (27,760) 119,836
</TABLE>
- --------
(1) Stock-based compensation of the predecessor includes annual profit
distributions and appreciation of stock appreciation rights ("SARs") held
by predecessor employees. Stock-based compensation related to
appreciation of SARs resulting from the recapitalization of $20,130,000
was recognized in the fourth quarter of 1998. Stock-based compensation of
the company relates to stock options granted to employees at exercise
prices below the estimated fair value of the related common stock. See
Note 8 to the financial statements.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements and related notes appearing elsewhere in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those indicated
in forward-looking statements. See "Risk Factors."
Overview
In 1980, Bronner Slosberg Humphrey Co. was formed to provide direct
marketing and promotion services. In 1995, Strategic Interactive Group, an
Internet professional services firm, was formed to provide end-to-end Internet
business solutions to corporate clients. Between 1995 and 1998, Strategic
Interactive Group and Bronner Slosberg Humphrey Co. operated as two separate
entities which were under common control. By January 1999, Strategic
Interactive Group had grown so large and the two companies had become so
interrelated that the two businesses were merged into a single entity
following a recapitalization by a private equity investor and several of our
existing shareholders. The purpose of the recapitalization was to combine the
entities, realign the ownership of the combined entities with those senior
employees who would most actively lead our future growth, establish an equity-
based incentive program to motivate our current and future employees and
enhance our ability to make strategic investments in our people and services.
Business Operations
Our revenue is generated from providing professional services to our
clients. We expect that our revenue will continue to be driven primarily by
the number and scope of our client engagements. We focus on large-scale, long-
term, strategic relationships with a select group of clients. For 1999, our
three largest clients accounted for approximately 62% of our revenue and our
largest client accounted for approximately 23% of our revenue.
Historically, we have offered our services to clients primarily on a time
and materials basis. For these engagements, we recognize revenue as services
are provided based on actual costs incurred. As our client relationships have
grown, we have increasingly entered into broad contracts under which we
deliver our services based on mutually agreed upon scopes of work. These
contracts generally include estimates on total fees that clients will be
charged for the year. For these contracts, we recognize revenue on a
percentage of completion method based on the ratio of costs incurred to total
estimated costs. Additionally, some of our contracts include a bonus provision
whereby we get additional compensation based on our performance as evaluated
by our clients against agreed upon measures. We recognize bonus revenue in the
period we are informed that the bonus has been awarded. Most of our contracts
allow us to invoice our clients on a pro-rata basis for our services.
We incur significant reimbursable costs, such as on-line media buying and
production costs, on behalf of our clients. In accordance with the client
agreements, there is not a markup on reimbursable costs and the client's
approval is required prior to Digitas incurring them. Revenue does not include
reimbursable costs.
Professional services costs consist of professional salaries, payroll taxes
and benefits for our professional staff plus other non-reimbursable costs
directly attributable to servicing our clients. In addition to the
compensation of employees engaged in the delivery of professional services,
professional salaries include compensation for selling and management by our
senior account managers and most of our executives. We expect that per capita
professional services costs will increase over time due primarily to wage
increases, particularly among technology professionals.
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<PAGE>
Selling, general and administrative expense consists primarily of
administrative and executive compensation, recruiting, professional fees, rent
and office expenses. In 2000, we expect to make significant expenditures for
recruiting and training as we expand our operations. We have incurred
significant costs to expand our operations internationally through our office
in London. We believe that a key source of our growth will be servicing
existing clients on a worldwide basis, as well as attracting new clients in
international markets.
Stock-based compensation before the recapitalization consisted of annual
distributions and increases in the value of stock appreciation rights
resulting from the pending acquisition of the company. Stock-based
compensation after the recapitalization consisted primarily of non-cash
compensation arising from stock options granted to employees at exercise
prices below the estimated fair value of the related common stock, the
repurchase of stock options from an employee and shares of common stock sold
to members of the board of directors at a price below the estimated fair
value.
In connection with the recapitalization we recorded $198.9 million of
goodwill and other intangible assets. This amount, which represents the excess
of purchase price over net assets acquired, is being amortized over two to
seven years.
We were taxed as an S corporation until January 1999 when we terminated our
S corporation election and became subject to federal taxation. No provision or
liability for federal taxes is reflected for periods prior to 1999. For the
periods prior to 1999, we have recorded provisions, tax assets and liabilities
for Massachusetts and various states where we do business that have a limited
state corporate income and excise tax.
Results of Operations
The following table sets forth selected items included in our statement of
operations as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
Predecessor
(Combined) Company
------------- ------------
Year Ended
December Year
31, Ended
------------- December 31,
1997 1998 1999
----- ----- ------------
<S> <C> <C> <C>
Revenue.......................................................................................... 100.0 % 100.0 % 100.0 %
Operating expenses:
Professional services costs.................................................................... 56.9 53.7 54.7
Selling, general and administrative expense.................................................... 40.1 39.7 35.9
Stock-based compensation....................................................................... 6.2 21.1 5.7
Amortization of intangible assets.............................................................. -- -- 19.6
----- ----- -----
Total operating expenses..................................................................... 103.2 114.5 115.9
-----
Loss from operations............................................................................. (3.2)% (14.5)% (15.9)%
===== ===== =====
</TABLE>
Year ended December 31, 1999 compared to year ended December 31, 1998
Revenue. Revenue for 1999 increased by $64.7 million, or 52.9%, to $187.0
million from $122.3 million for 1998. The increase was due to growth in
revenue from new clients of $18.7 million and existing clients of $46.0
million. This increase in revenue was due to growth in the market for
Internet-related services.
Professional services costs. Professional services costs for 1999 increased
by $36.5 million, or 55.6%, to $102.2 million from $65.7 million for 1998.
Professional services costs represented 54.7% of revenue for 1999, as compared
to 53.7% of revenue for 1998. The increase in absolute dollars was due to an
increase in the number of professionals we hired to support the increased
demand for our services. Professional services costs increased as a percentage
of revenue for, 1999 due to investments in the opening of our London office
and an increase in average compensation per professional.
23
<PAGE>
Selling, general and administrative expense. Selling, general and
administrative expense for 1999 increased by $18.5 million, or 38.3%, to $67.0
million from $48.5 million for 1998. As a percentage of revenue, selling,
general and administrative expense decreased from 39.7% in 1998 to 35.9% in
1999. The increase in absolute dollars for 1999 was due to increases in
outside fees for recruiting professionals, rent and travel costs related to
office expansion in New York and the opening of a new office in London, and
our overall growth in administrative headcount. The decrease as a percentage
of revenue was due to the economies of scale associated with higher revenue
levels.
Stock-based compensation. Stock-based compensation for 1999 consisted of
non-cash compensation arising from stock options granted to employees at
exercise prices below the estimated fair value of the related common stock of
$5.8 million, the repurchase of stock options from an employee of $1.9 million
and $3.0 million for shares of common stock sold to members of the board of
directors at a price below the estimated fair value.
Amortization of intangible assets. The increase in amortization of
intangible assets resulted from our recapitalization which was effected in
January 1999.
Interest expense, net. Interest expense, net, for 1999 increased by $4.6
million to $7.3 million from $2.7 million for 1998. The increase in interest
expense, net, for 1999 was due to the interest expense on our long-term
borrowings related to the recapitalization. Additionally, we increased
borrowings against our line of credit to fund increased working capital needs.
Benefit from (provision for) income taxes. The provision for income taxes
for 1999 was $567,000 compared to a benefit of $1.4 million in 1998. We were
an S corporation in 1998. Therefore, we were only taxable at the state level,
and we did not provide for any federal income taxes in this period.
Year ended December 31, 1998 compared to year ended December 31, 1997
Revenue. Revenue for 1998 increased by $21.1 million, or 20.8%, to $122.3
million from $101.2 million for 1997. The increase in revenue was due to
growth from new clients of $17.7 million and existing clients of $3.4 million.
This increase in revenue was due to growth in the market for Internet-related
services. In 1998, we sought to expand our client base and were successful in
developing relationships with new, large-scale clients. The revenue growth in
1998 as compared to 1997 was primarily attributable to building those
relationships.
Professional services costs. Professional services costs for 1998 increased
by $8.1 million, or 14.0%, to $65.7 million from $57.6 million for 1997.
Professional services costs represented 53.7% of revenue for 1998 as compared
to 56.9% of revenue for 1997. The increase in absolute dollars for 1998 was
due to an increase in the number of professionals we hired to support the
increased demand for our services. The decrease as a percentage of revenue for
1998 was due to an increase in employee utilization rates.
Selling, general and administrative expense. Selling, general and
administrative expense for 1998 increased by $7.9 million, or 19.6%, to $48.5
million from $40.6 million for 1997. As a percentage of revenue, selling,
general and administrative expense was not materially different from 1997 to
1998. The increase in absolute dollars was due to a one time payment to senior
management in connection with the recapitalization. This increase was also due
to general growth of the business, including opening a new office in New York,
increased recruiting costs and expanded adminstrative headcount.
Stock-based compensation. Stock-based compensation in 1998 consisted of
annual distributions of $3.0 million, $2.6 million of compensation expense due
to the vesting of options in connection with the recapitalization, and
increases in the value of stock appreciation rights resulting from the pending
acquisition of the company of $20.1 million. Stock-based compensation in 1997
included annual distributions on stock appreciation rights of $3.4 million and
$2.9 million related to three employees who forfeited their rights to
previously issued options.
Interest expense, net. Interest expense, net, for 1998 increased by $0.3
million to $2.7 million from $2.4 million in 1997. The increase in interest
expense, net, was due to increased borrowings to fund increased working
capital needs during 1998, offset by a reduction in interest rates.
24
<PAGE>
Benefit from (provision for) income taxes. The income tax benefit for 1998
was $1.4 million compared to a tax benefit of $114,000 in 1997. We were an S
corporation in both 1998 and 1997. Therefore, we were only taxable at the
state level, and we did not provide for federal income taxes in either of
these years.
Quarterly Results of Operations
The following table sets forth a summary of our unaudited quarterly
operating results for each of the four quarters ended December 31, 1999 both
in absolute dollars and as a percentage of our revenue in each quarter. This
information has been derived from our unaudited interim financial statements
which, in our opinion, have been prepared on substantially the same basis as
the audited financial statements contained elsewhere in this prospectus and
include all normal recurring adjustments necessary for a fair presentation of
the financial information for the periods presented. The results for any
quarter are not necessarily indicative of future quarterly results of
operations, and we believe that period-to-period comparisons should not be
relied upon as an indication of future performance that may be expected for
any future period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------
March 31, 1999 June 30, 1999 September 30, 1999 December 31, 1999
-------------- ------------- ------------------ -----------------
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
Statement of operations
data:
Revenue................. $38,813 $ 44,047 $51,047 $ 53,100
Operating expenses:
Professional services
costs................ 20,041 24,350 28,847 29,009
Selling, general and
administrative
expense.............. 13,905 15,593 16,336 21,214
Stock-based
compensation ........ -- 5,197 751 4,795
Amortization of
intangible assets.... 9,172 9,172 9,172 9,172
------- -------- ------- --------
Total operating
expenses............... 43,118 54,312 55,106 64,190
------- -------- ------- --------
Loss from operations.... (4,305) (10,265) (4,059) (11,090)
Other income (expense):
Interest income....... -- -- 12 43
Interest expense...... (1,647) (1,874) (1,823) (1,992)
------- -------- ------- --------
(1,647) (1,874) (1,811) (1,949)
------- -------- ------- --------
Loss before provision
for income taxes....... (5,952) (12,139) (5,870) (13,039)
Provision for income
taxes.................. (91) (186) (90) (200)
------- -------- ------- --------
Net loss................ $(6,043) $(12,325) $(5,960) $(13,239)
======= ======== ======= ========
As a percentage of
revenue:
Revenue................. 100.0 % 100.0 % 100.0 % 100.0%
Operating expenses:
Professional services
costs................ 51.6 55.3 56.5 54.6
Selling, general and
administrative
expense.............. 35.8 35.4 32.0 40.0
Stock-based
compensation ........ -- 11.8 1.5 9.0
Amortization of
intangible assets.... 23.6 20.8 18.0 17.3
------- -------- ------- --------
Total operating
expenses............... 111.1 123.3 108.0 120.9
------- -------- ------- --------
Loss from operations.... (11.1) (23.3) (8.0) (20.9)
Other income (expense):
Interest income....... -- -- -- 0.1
Interest expense...... (4.2) (4.3) (3.5) (3.7)
------- -------- ------- --------
(4.2) (4.3) (3.5) (3.6)
------- -------- ------- --------
Loss before provision
for income taxes....... (15.3) (27.6) (11.5) (24.5)
Provision for income
taxes.................. (0.2) (0.4) (0.2) (0.4)
------- -------- ------- --------
Net loss................ (15.6)% (28.0)% (11.7)% (24.9)%
======= ======== ======= ========
</TABLE>
25
<PAGE>
Revenue. Our growth in revenue on a quarterly basis was due to increased
demand for our Internet professional services. We recognize bonus revenue in
the period we are informed that the bonus has been awarded. Contractually we
are informed of bonuses in the first and second quarters and accordingly, we
expect that our quarterly revenue in these quarters will be positively
impacted compared to the third and fourth quarters.
Professional services costs. Professional services costs in each quarter in
1999 increased in absolute dollars as we continued to hire professionals to
keep up with client demand. As a percentage of revenue, professional services
costs have fluctuated based on employee utilization, investments in the
opening of our London office and the timing of recognition of bonus revenue.
We expect professional services costs as a percentage of revenue to increase
in the near term as we hire new professionals and expand our operations.
Selling, general and administrative expense. Selling, general and
administrative expense increased in absolute dollars in each quarter in 1999
due to increased personnel costs, growth in administrative headcount, and rent
and other expense related to regional office expansions. As a percentage of
revenue, selling, general and administrative expense decreased as a percentage
of revenue through the first three quarters due to the economies of scale
associated with higher revenue levels. As a percentage of revenue, selling,
general and administrative expenses increased during the fourth quarter due to
a real estate brokerage fee, severance costs and professionals fees related to
year 2000 and other infrastructure related improvements.
Liquidity and Capital Resources
From inception through the recapitalization, we funded our operations
primarily through cash provided by operations, notes from shareholders and
bank borrowings. In connection with the recapitalization, we established
credit facilities totalling $93.4 million to repay our existing bank
borrowings, repay our notes to our shareholders, make transaction payments and
repurchase shares in connection with the recapitalization and provide working
capital to fund our ongoing operations. Long-term debt also includes an amount
related to the build out of our Boston office for costs incurred in excess of
the lease allowance.
On December 31, 1999, our long term credit agreement consisted of the
following:
. $68.5 million outstanding under a $73.4 million term loan due December
31, 2004; and
. a $25.0 million revolving credit facility expiring on December 31, 2004
of which up to $15.0 million may be used to support standby letters of
credit.
Amounts borrowed under the term loan and the revolving credit facility bear
interest, at our option, at either the base rate plus a margin of 0.5% to
2.0%, or LIBOR plus a margin of 1.5% to 3.0%. At December 31, 1999, the
applicable borrowing rate for the term loan was 8.5% and the borrowing rate
for the revolving credit was 9.8%. Additionally, we are required to pay a
commitment fee of 0.5% of the average daily unused amount of the revolving
credit. At December 31, 1999, we had no cash borrowings under the revolving
credit and $10.3 million outstanding standby letters of credit, leaving $14.7
million available for future borrowings.
We are required to maintain, until November 25, 2000, an interest rate
protection vehicle which would establish a maximum interest rate of not more
than 10% per annum and would have a notional principal amount of not less than
50% of the total term debt of $73.4 million.
The credit facilities contain change of control provisions and impose
restrictive covenants upon us related to the incurrence of indebtedness,
contingent obligations, transactions with affiliates, business combinations,
investments, asset sales and payments of dividends. Financial covenants,
including interest coverage and leverage ratios, maximum capital expenditures
and minimum EBITDA levels, effective through the first quarter of 2001, are
also imposed on us. Additionally, we are required to reduce the outstanding
aggregate principal balance of the revolving credit facility so that the
balance does not exceed $8.0 million for 30 consecutive days during each
consecutive 12 month period. As of December 31, 1999, we were in compliance
with the credit facility.
26
<PAGE>
Our operating activities provided cash of $1.5 million in 1997, $8.2
million in 1998 and $14.4 million in 1999.
Additionally, distributions paid to shareholders used cash of $315,000 in
1998 and $2.5 million for 1999.
We incurred capital expenditures of $7.9 million in 1997, $6.3 million in
1998, and $8.5 million in 1999. These expenditures were incurred primarily for
computer equipment, telecommunications equipment, furniture and fixtures, and
leasehold improvements to support our growth. In 2000, we expect to spend
approximately $22.0 million on similar types of capital expenditures,
including approximately $8.5 million for infrastructure, leasehold
improvements, and relocation expenses for our new office space in New York and
London. We expect to spend approximately $10.5 million on corporate technology
systems in 2000.
We believe that the proceeds of this offering and funds that are available
under our line of credit will be sufficient to finance our working capital and
capital expenditure requirements for the next twelve months.
Market Risk
Under the terms of our credit agreement, we utilize interest rate swap
agreements to fix interest rates on portions of the variable rate term loan
and to mitigate the effect of changes in interest rates on earnings. We
entered into separate agreements on February 22 and 24, 1999, each for a
notional amount of $20.0 million and each having a maturity date of February
2001. Under the terms of the agreements, we locked in fixed rates of 5.36% and
5.30%, on the notional amounts and we compensate the financial institution or
are compensated by the financial institution for the differential between the
fixed rates and the current LIBOR rate. The interest rate differential payable
or accruable on the agreements is recognized on an accrual basis as an
adjustment to interest expense. At December 31, 1999 the fair values of the
interest rate swaps, which represent the amounts we would receive or pay to
terminate the respective agreements, are net receivables of $240,000 and
$273,000 based on dealer quotes. The variable rates at December 31, 1999 were
6.5% and 6.1%.
The market risk exposure from the interest rate swap is assessed in light
of the underlying interest rate exposures. Credit risk is minimized as the
agreement is with the major financial institutions Fleet Bank and BankBoston.
We monitor the credit worthiness of these financial institutions and full
performance is anticipated.
Year 2000 Compliance
Year 2000 Issue. The year 2000 issue refers to problems resulting from
computer programs or systems which store or process date-related information
using only the last two digits to refer to a year. These programs or systems
may not be able to distinguish properly between a year in the 1900's and a
year in the 2000's. Failure of these programs or systems to distinguish
between the two centuries could cause the programs or systems to create
erroneous results or even to fail.
Our State of Readiness. We established a year 2000 readiness team to carry
out a program for the assessment of our vulnerability to the year 2000 issue
and remediation of identified problems. The team consisted of senior
information technology and business professionals and met on a regular basis.
An outside consultant also worked with the readiness team on a temporary basis
to assist them in carrying out their tasks.
27
<PAGE>
The readiness team developed a program with the following key phases to
assess our state of year 2000 readiness:
. develop a complete inventory of our hardware and software, and assess
whether that hardware and software is year 2000 ready;
. test our internal hardware and software which we believe have a
significant impact on our daily operations to assess whether it is year
2000 ready;
. upgrade, remediate or replace any of our hardware or software that is
not year 2000 ready; and
. develop a business continuity plan to address possible year 2000
consequences which we cannot control directly or which we have not been
able to test or remediate.
We completed all of the tasks that our program required, including:
. we completed the inventory of hardware and software at all of our
locations and determined that all of the inventoried hardware and
software which we believe have a significant impact on our daily
operations are year 2000 ready or can be made ready with minimal changes
or replacements, based on our vendors' web site certifications
statements and commercially available year 2000 testing products;
. we developed a list of all vendors which we deem to have a significant
business relationship with us. Of the approximately 21 vendors we
identified, we obtained web site certifications or obtained assurances
with respect to the year 2000 readiness of products or services that we
purchase from those vendors;
. we completed testing and implementation of any changes necessary to our
internal hardware and software which we believe have a significant
impact on our daily operations to confirm their year 2000 readiness;
. we completed an internal review to determine the commitments we made to
our customers with respect to the year 2000 readiness of solutions which
we provided to those customers; and
. we formulated a business continuity plan that encompassed our strategy
for preparation, notification and recovery in the event of a failure due
to the year 2000 issue. The plan included procedures to minimize
downtime and expedite resumption of business operations and other
solutions for responding to internal failures in our internal
information technology department as well as widespread external
failures related to the year 2000 issue.
Costs. Through December 31, 1999, we have incurred approximately $3.6
million in connection with our year 2000 readiness program. This amount
included internal labor costs, outside consulting costs and additional
hardware and software purchases. We do not expect to incur any material
additional expenses in connection with our year 2000 readiness program,
although there can be no assurance that we will not be required to do so.
Risks. We believe that the most reasonably likely worst case scenarios
related to the year 2000 issue for our business are as follows:
. if a solution which we provided to a client causes damage or injury to
that client because the solution was not year 2000 compliant, under the
terms of some agreements we could be liable to the client for breach of
warranty; and
. if there is a significant and protracted interruption of
telecommunication services to our main office, we would be unable to
conduct business because of our reliance on telecommunication systems to
support daily operations, such as internal communications through e-
mail.
To date, we are unaware of any problems with our systems that are year 2000
related, nor are we aware of any year 2000 issues with our vendors or
customers that could cause any significant interruption in our normal business
operations or otherwise materially harm our business.
28
<PAGE>
BUSINESS
Overview
Digitas is a leading Internet professional services firm that provides
integrated Internet-based strategic, technological and marketing solutions to
Fortune 100 and other industry leading companies. We help our clients leverage
their existing infrastructure and the Internet to develop stronger and more
profitable customer relationships. By assisting our clients in developing a
"bricks and clicks" business strategy, we help them establish a competitive
advantage in the new digital economy. We draw on our comprehensive Internet
professional services capabilities and marketing experience to provide end-to-
end solutions that integrate digital strategy, technology and infrastructure,
multi-channel marketing execution and measurement.
We develop large-scale, long-term, strategic relationships with a select
group of clients that have embraced the Internet as a principal means of
business transformation. Our clients include industry leaders such as American
Electric Power, American Express, AT&T, Bausch & Lomb, Charles Schwab & Co.
Inc., General Motors, Harcourt, Johnson & Johnson, L.L. Bean, and Neiman
Marcus, which together accounted for approximately 78% of our total net
revenues for 1999. We employ approximately 1,240 professionals and are
headquartered in Boston, Massachusetts with offices in New York City, San
Francisco, Salt Lake City and London.
Industry Background
The Internet is fundamentally changing the way consumers and businesses
interact, introducing a new means of communicating, obtaining information,
purchasing goods and services, providing customer support, and soliciting
feedback. International Data Corporation, or IDC, estimates that the number of
Internet users will grow from 142 million at the end of 1998 to 500 million at
the end of 2003 and that revenues generated from Internet commerce in 2003
will exceed $2.3 trillion. The emergence of the Internet is also redefining
the core economics of businesses and forcing companies to re-evaluate and
transform the way they have traditionally conducted business and interacted
with their customers, suppliers and distribution partners.
While businesses were early to embrace the Internet as a new commercial
medium, their ability to take advantage of its full potential continues to
evolve. Initially, businesses employed internal information technology
departments or hired outside Web site design firms to develop corporate Web
sites that were viewed as additional means of advertising or promoting their
businesses. As the number of Internet users has increased and corporate Web
sites have drawn more visitors, businesses have begun to view the Internet as
another distribution channel, or an on-line storefront, through which to
conduct customer transactions. The ability to conduct transactions over the
Internet, however, requires the integration of client/server systems with Web
site design and infrastructure. Most internal information technology
departments do not have the resources to perform this integration work and as
a result many companies are seeking the assistance of outside Internet
professional services providers. IDC defines Internet services as the
consulting, design, systems integration, support, management and outsourcing
services associated with the development, deployment and management of Web
sites. IDC expects the worldwide market for Internet services to grow at a
five-year compounded annual rate of 59%, from $7.8 billion in 1998 to $78.5
billion in 2003.
We believe most businesses must transact with customers over the Internet
to retain and enhance their competitive positions. Widespread adoption of the
on-line transaction model, however, is only the beginning of the Internet's
transformation of traditional business models. While many companies have built
on-line storefronts, most still view them as simply another independently
operated channel for enabling transactions and interacting with customers.
This business model prevents the new on-line business from capitalizing on the
power of the enterprise's existing assets. To capture the full potential of
the Internet and maximize customer value, companies must view the Internet as
a principal means of fundamentally redefining the way they develop customer
relationships, manage brand names and build a sustainable competitive
advantage. The transformation to a "bricks and clicks" business model, in
which a company's existing assets are integrated with a digital strategy, is
particularly challenging for large businesses that have made significant
investments in existing sales
29
<PAGE>
forces, marketing strategies, brand names, supply chain management systems,
distribution channels, and data management systems. However, it is also these
companies that stand to gain the most from a fully integrated "bricks and
clicks" business model that transforms customer relationships.
At a time when companies need a service provider to do more than build a Web
site or enable on-line transactions, we believe few Internet professional
services providers have the depth of resources and range of services necessary
to address the large scale engagements and demands of Fortune 100 companies on
an ongoing basis. For instance, marketing firms typically provide off-line or
on-line services, but not both. Web design firms typically specialize only in
the front-end design of on-line storefronts. Similarly, traditional information
technology service providers typically focus only on the enhancement of legacy
systems and the implementation of traditional business applications. Strategic
consulting firms typically provide high level recommendations but are not held
accountable for implementation or results. Finally, Internet professional
service providers typically build e-commerce business systems in which on-line
business is conducted independently of the rest of the company and without the
benefit of the company's traditional assets.
We believe that in the new digital economy there is a need for an innovative
Internet professional services provider that has the scale, breadth of
experience and expertise to help companies understand and develop the potential
of the Internet as a part of their overall business strategy and to leverage
the power of their existing assets to drive growth, maximize customer value and
build a sustainable competitive advantage.
The Digitas Solution
We help our clients transform their businesses and customer relationships by
developing and implementing strategies to build on-line business solutions
linked to their traditional assets. We serve as a primary strategic partner to
our clients and utilize our strategic insight, marketing expertise, creativity
and execution skills to help them evaluate their business strategy, the value
they offer to their customers, their brand and the initiatives required to
succeed in the marketplace. We work with our clients to create a seamless
customer experience across all points of contact so that our clients can
develop higher value, long-term customer relationships. In addition, we seek to
quantify the value our solutions create and thereby enable our clients to
measure their return on investment. As a result of our broad-based perspective
and partnership approach, we have been able to couple development of
overarching interactive strategies with fast-paced execution that change the
way our clients acquire new customers, increase brand loyalty and build a
competitive economic model.
In redefining a client's business model, we provide a fully-integrated, end-
to-end solution, the key elements of which are illustrated in the following
chart:
"Bricks and Clicks" Business Integration
[CHART APPEARS HERE]
30
<PAGE>
Define digital business strategy. We help our clients understand the impact
of the Internet on their core business models and define new business
strategies for the digital economy. Rather than focusing on a narrow
technology or marketing strategy, or the implementation of a single project,
we employ a broad-based approach grounded in a thorough understanding of our
clients' overall business strategy and competitive environment. We work with
members of our clients' senior management who are committed to transforming
their business strategies and organizations.
Create enterprise-wide customer value propositions. Based on these new
strategies, we help our clients develop new customer value propositions that
involve more than creating attractive on-line storefronts. We seek to enhance
customer loyalty and generate new business opportunities by taking advantage
of existing assets such as distribution channels, customer service networks
and customer information systems. We believe that our customer-centric
approach allows us to deliver solutions that create economic value for our
clients.
Build new technology and marketing infrastructure. Our solutions often
require us to build new technology and marketing infrastructures for our
clients. As part of our solution, we develop creative Web sites that enhance
our clients' brands and build and integrate electronic customer relationship
management, or eCRM, systems databases that are designed to manage customer
relationships. In developing new infrastructures, we also create links to
legacy information systems and other existing infrastructure.
Implement solutions across client enterprise. Solutions are most effective
when they are implemented consistently throughout a client's organization. We
help our clients implement solutions across their enterprises by providing
appropriate training, organizational alignment and support. We coordinate the
efforts of various client businesses to create customer oriented applications
with a consistent corporate message. We also create and execute customized
pilot programs designed to test our solutions prior to implementation across
the enterprise.
Develop integrated marketing plan. We design integrated marketing plans
that typically involve identifying customer segments, developing marketing
strategies and optimizing on-line media planning and channel allocation,
including mix, messaging and frequency.
Execute across marketing and service channels. We leverage our on-line
media buying, design and creative services and event sponsorships to market
seamlessly across multiple channels to help our clients build relationships
with their customers.
Performance measurement. Through every step of our solution, we measure the
value being delivered to our clients. We continually work with our clients to
determine the relevant metrics and our performance against those metrics. We
collect data frequently and use it to continually refine our solution and
maximize our clients' return on investment.
Strategy
We intend to be the leading provider of digital strategy, technology and
infrastructure and integrated marketing solutions to industry-leading
companies. Our strategies for achieving this objective are as follows:
Expand relationships with our existing clients. Our current client list
includes industry leaders with whom we have developed multi-year, large-scale
relationships. In 1999, approximately 86% of our revenue came from clients
with whom we have previously worked. We believe there are significant
opportunities for additional growth with our existing clients as they
transform their businesses and we add additional capabilities.
Select additional industry leading clients to build new long-term client
relationships. We will seek relationships with additional industry leading
companies which we believe will be successful in the digital economy. These
companies could include additional Fortune 100 companies or emerging
companies, including "dot-coms," which are poised to be leaders in their
industries. In developing new client relationships, we will
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<PAGE>
continue to be highly selective and will seek industry leading clients who are
committed to a long-term and close working relationship with us. We believe
that our focus on industry leading companies provides us with the best
opportunities to leverage the depth of our expertise, attract outstanding
professionals, enhance our reputation and have an impact on the industries in
which our clients' operate.
Maintain focus on large-scale, long-term relationships. We will maintain
our focus on large-scale, long-term client relationships. This strategy allows
us to build in-depth, client-specific knowledge, create more fully integrated
solutions and develop closer partnerships with our clients. We are also
extremely focused on quality, and working on a small number of long-term,
large-scale engagements allows us to devote the time and resources necessary
to develop innovative solutions which fully satisfy the needs of our clients.
Maintain and grow a creative corporate culture. We have created a corporate
culture that attracts intelligent, motivated individuals and fosters
creativity and innovation. To retain this culture and uphold our high
standards of quality as we grow our business, we must continue to attract and
retain qualified individuals with superior creative, technological and
management skills. By hiring talented individuals and providing them with
relevant training and support, we believe we have created a scalable hiring
strategy without compromising our high standards.
Expand and enhance our capabilities. We believe there is a significant
opportunity to further extend our client relationships by providing new on-
line and off-line services and capabilities to our new and existing clients.
We intend to expand our capabilities in a number of areas including wireless
applications, Internet workflow management, measurement tools, analytical
capabilities and channel optimization. Towards this end, we have a dedicated
team of technical specialists who evaluate new technologies and unique
applications for these technologies.
Broaden our global reach. We seek to further broaden our global presence by
opening new offices in strategic locations. We currently expect to open two
new offices in 2000 to support our international efforts. We believe that we
need to have a local presence in key markets to meet the needs of our
multinational clients both globally and locally. In addition, we believe our
local presence will also enable us to build new relationships with industry
leading companies in foreign markets.
Services
We provide our clients with end-to-end solutions that combine a broad range
of services in digital strategy, technology, marketing and measurement. The
following table is a brief summary of our capabilities in our four service
categories.
<TABLE>
<CAPTION>
Technology and Integrated Performance
Digital Strategy Infrastructure Marketing Measurement
---------------- -------------- ---------- -----------
<S> <C> <C> <C>
. Business . Web Site . Marketing Plan Development . Web Site Usability
Transformation Development Research
. e-commerce Strategy . eCRM . Media Planning and . Web Site Performance
Buying and Diagnostics
. Enterprise Customer . User Interface Design . On-line and Off-line . Consolidated Cross-
Management Creative Channel Reporting
. Operating Model . Customer Database . Events, Partnerships . Data Analytics
Definition Development and Promotions
. Application . Channel Optimization
Development
. Solutions Integration
</TABLE>
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Digital Strategy
We work closely with our clients' senior management to gain an in-depth
understanding of their enterprise-wide business objectives and competitive
environment. This knowledge is used as the basis for establishing business
strategies that capitalize on the power of the Internet to build customer
value propositions and improve our clients' competitive positions in the
digital economy. Our digital strategy capabilities include the following:
Business transformation. We analyze our clients' existing assets and value
chain to identify opportunities for a digital strategy. We then utilize our
expertise in technology, infrastructure, customer experience, and integrated
marketing to identify the economic rationale and create a detailed plan of
action to effect fundamental business transformation.
e-commerce strategy. We define and develop the most effective strategy for
marketing, transacting and distributing products and services over the
Internet. This may include enabling direct customer transactions or supporting
the off-line channel sales cycle.
Enterprise customer management. We define and develop a consistent and
branded relevant customer experience across all points of contact to create
value for both our clients and their customers. We also identify opportunities
for collecting and leveraging customer data to create and enhance customer
value propositions and returns on investments for the clients' businesses.
Operating model definition. We define new organizational structures,
business processes and management systems that are required to successfully
execute the digital strategy, and we integrate these into the existing
business. We also examine existing operational practices to identify
opportunities to improve services and reduce costs.
Technology and Infrastructure
We identify and implement innovative technology solutions within the broad
strategic context of our clients' businesses. We design the required
technology and infrastructure and select and manage external vendors to
support seamless dialogue and data management across marketing channels. We
also provide training and process management, organizational alignment and
channel implementation support. Our specific technology and infrastructure
capabilities include the following:
Web site development. We build on-line value propositions for our clients
by designing and developing large-scale, complex e-commerce enabled Web sites
that utilize state of the art technologies and leverage existing assets.
Electronic customer relationship management (eCRM). We develop and
implement customized applications to assist clients in building a seamless,
interactive and value-based dialogue with their customers across all
distribution channels and geographies. We also implement customized software
applications to manage marketing campaigns. We try to remain abreast of the
latest tools and technologies available to help manage customer relationships
and ensure that our clients are industry leaders in using these technologies.
User interface design. We design and develop functional, user-friendly Web
sites, navigation systems and graphical user interfaces to create a positive
customer experience and effectively meet our clients' specific business
objectives.
Customer database development. We design and develop customer databases to
collect and analyze customer profile information, including demographic
information, on-line and off-line transactional history and Web use patterns.
The databases are designed to allow increased access to information across all
marketing channels and thereby optimize customer interaction.
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Application development. We create customized applications, such as
proprietary content databases, specialized search functions and registration
engines, to improve customer interactions with our clients' businesses.
Solutions integration. We frequently select and manage third party vendors
to assist our clients in integrating existing enterprise/legacy systems with
new Web and eCRM applications.
Integrated Marketing
Our extensive marketing, media and creative capabilities and experience
allow us to deliver measurable increases in customer value and loyalty through
innovative marketing solutions powered by customer insight, marketing
analytics and operational expertise. Our marketing capabilities include the
following:
Marketing plan development. We develop integrated, measurable, marketing
campaigns across all direct customer channels, including Web, teleservices,
advertising and direct response channels.
Media planning and buying. We design media campaigns across all channels
and allocate client expenditures to optimize customer response. We are a large
purchaser of on-line media, which enables us to negotiate discounts which we
pass on to our clients.
On-line and off-line creative. We leverage our creative expertise in
marketing executions across numerous channels, clients and technologies. We
provide creative services to assist our clients in branding and marketing
their products and services through both on-line channels, such as e-mail,
Internet, and intranet, and off-line channels, such as teleservices, direct
response, print and television, catalogues and direct mail.
Events, partnerships and promotions. We plan events and negotiate
partnerships and promotions that reinforce brand attributes, generate customer
interest and improve business results.
Performance Measurement
Performance measurement quantifies the results of our solutions to
determine their effectiveness and to illustrate to clients their return on
investment. We leverage our direct marketing heritage, extensive array of
proprietary methodologies and working relationships with other measurement
tool providers to provide meaningful measurement of the impact our solutions
have on our clients' businesses. Our specific measurement capabilities
include:
Web site usability research. Through rapid prototyping and live customer
feedback, we identify opportunities to optimize Web site usability prior to
the launch of our clients' Web sites.
Web site performance and diagnostics. We measure the overall effectiveness
of a Web site with its targeted users and identify areas for potential
upgrades.
Consolidated cross-channel reporting. We design reporting strategy and
infrastructure and implement integrated management reporting systems across
our clients' businesses.
Data analytics. We analyze customer behavior and transactional data to
improve effective targeting, messaging, and personalization.
Channel optimization. We measure performance across multiple marketing and
distribution channels to ensure ongoing optimization of marketing resources.
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Clients, Marketing and Sales
We primarily market our services to Fortune 100 and other industry leading
companies. We seek clients that are committed at senior levels to building
long-term partnerships with us to leverage their existing traditional asset
bases to take advantage of the Internet's significant new opportunities for
customer interaction. We are also seeking to work with Internet-based companies
to enhance their customer relationships. In particular, we seek to work with
companies operating in industries in which the economics of customer loyalty
are most compelling, thereby providing us with the opportunity to greatly
impact market share and the return on their customer base investments. These
industries include financial and consulting services, software, technology and
telecommunications, travel and leisure, industrial and consumer brands and
retail.
Our current clients include, among others, the following companies:
<TABLE>
<S> <C>
Aetna General Motors
American Electric Power Harcourt
American Express Johnson & Johnson
Aquent L.L. Bean
AT&T Morgan Stanley Dean Witter
Bausch & Lomb Neiman Marcus
Charles Schwab & Co. Inc.
</TABLE>
Our results of operations and our business depend on our relationship with a
limited number of large clients. In 1999, our revenue was derived from 38
clients. Of our total revenues during 1999, General Motors accounted for
approximately 23%, American Express accounted for approximately 22% and AT&T
accounted for approximately 17%.
We do not have a separate sales and marketing force. Rather, our
relationship managers are primarily responsible for our marketing and sales
efforts. Members of our senior management team also market our services through
their speaking engagements at industry conferences. Additionally, we rely on
our strong reputation, quality client base and proven results to retain our
existing clients and develop new client relationships. In fact, many of our
existing clients have recommended our services to potential clients.
Client Case Studies
American Express
American Express is a world leader in charge and credit cards, travel-
related services, financial planning, investment products, insurance and
international banking. It has built one of the world's preeminent service
brands.
Digitas began its relationship with American Express in 1981 by working on
direct marketing programs. In May 1998, we expanded our relationship with
American Express by working on various aspects of its Web site. Examples of
specific initiatives include:
. User interface and ease of navigation. We helped American Express
implement a customer-centric navigation approach that segmented
personal, small business, and corporate customers to address the needs
of each group separately. This new approach created a single user
experience across all American Express business units.
. "MyAmex". We worked with American Express to create and deploy "MyAmex"
as a customer's personalized gateway to the company, allowing quick
access to those elements of site content and functionality most relevant
to individual customers.
. Web site templates. We partnered with American Express to develop style
guide standards that would be used for all site design across
americanexpress.com on a global basis. More specifically, we designed
templates and components that we built into American Express' new
content management utility.
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. Blue from American Express. We helped design and implement a marketing
campaign for the company's new Blue credit card offering utilizing both
direct mail and on-line marketing channels. This included assisting in
the development of a lifecycle management strategy, designing and
implementing an on-line simulcast of a concert in Central Park to launch
Blue, and creating the blue.com site.
. Measurement engine. We worked with American Express to develop a
measurement plan and select a reporting utility to measure performance
across americanexpress.com, including the initial reporting templates.
We continue to work with American Express as its principal interactive
agency for direct and on-line marketing initiatives.
General Motors
General Motors Corporation is the world's largest full-line vehicle
manufacturer. General Motors invests significant amounts each year on
"Customer Influence" through advertising, field sales and dealer support,
sales incentives, relationship marketing, event sponsorship and promotional
activities. General Motors has recognized, however, that the Internet is
transforming the vehicle manufacturing, distribution, and sales landscape and
that these traditional methods of customer influence must be integrated into
the digital world to remain effective.
Over the past three years, Digitas has developed a broad and deep strategic
and operational partnership with numerous business units of General Motors to
help capture the power of the digital economy and leverage the value of their
traditional marketing investments and assets. The following descriptions
illustrate two isolated segments of our broad strategic relationship with
General Motors.
Enterprise customer management
At the beginning of the second quarter of 1998, we began working with
General Motors' Corporate Advertising and Marketing Group to do the following:
. Develop vision and digital strategy. We created an executive strategy
for customer relationship management, which became the founding charter
of General Motors' Global Enterprise Customer Management Group
established in January 1999.
. Plan and execute marketing planning programs. Over the past year, we
have designed and implemented cross-divisional, channel integrated
marketing programs at both the regional and national levels.
. Design customer management system database. We designed General Motors'
centralized household vehicle customer database, which enabled General
Motors to identify significant customer and prospect opportunities, use
a single platform for common measurement and collect and store
information about customer behavior.
. Build multi-channel lead management system. We designed and managed the
construction of an automated lead management system which provides
General Motors' national and regional enterprise customer management and
divisional marketing initiatives with tracking, treatment, and
measurement capabilities.
. Design and implement new marketing segmentation and measurement
processes. To help General Motors take full advantage of the new
strategies and systems introduced, we implemented new processes for
modeling and segmenting the customer and prospect base and for managing
marketing investments to assist General Motors in planning, executing,
measuring and continually improving its multi-channel initiatives.
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Pontiac GMC vehicle division
We have completed approximately 125 initiatives for Pontiac GMC, many of
which are of similar scope and style to the two Pontiac initiatives described
below.
. Aztek pre-launch Web site and reporting. The Aztek Web site was an on-
line experiment designed to test a new and more efficient way of
introducing new vehicles to the market and to pioneer the use of
customer feedback in the design of vehicles. Pontiac previewed the
concept car at the 1999 Detroit Auto Show. To leverage the resulting
media attention, Digitas built a Web site and collected on-line audience
comments and feedback. As a result, Pontiac gained real-time knowledge
of customer impressions and preferences. This information drove further
evaluation of the vehicle design and will, ultimately, influence the
consumer launch of the car.
. Sunfire eCare program. Pontiac targets young, first-time car buyers with
its Sunfire model. To provide proactive and reactive customer care for
this valuable demographic group, we implemented an innovative Web site
which incorporates a real-time chat/call center to answer first time
purchasers' questions. Call center agents can provide a caller with
information and images in real time on a caller's computer, making
communications more informative and valuable and potentially resulting
in more sales.
General Motors reports that, as a result of our work to date, including the
replacement of multiple, redundant legacy database systems with a centralized
enterprise management system, it has seen improved customer loyalty, higher
customer conversion rates, lower costs to acquire new or re-gain former
customers, greater incremental sales per dollar invested, and an increasing
number of cross-sales. Through our interactive relationship, Digitas has
helped Pontiac become one of the leading General Motors divisions in terms of
Internet use. Although our relationship with General Motors is already very
large, we believe it is in its early stages and has both opportunities for
continued growth within our current relationships as well as opportunities for
additional relationships with other divisions.
Neiman Marcus Group
As a leader in the luxury fashion and apparel industry, Neiman Marcus has
built an enviable customer franchise by offering world renowned designer
brands and providing a best-in-class personalized shopping experience. In
early 1999, Neiman Marcus decided to take advantage of the opportunities
offered by the Internet to reach new customers and to enhance its
relationships with existing customers.
In April 1999, Neiman Marcus Group retained Digitas as its overall
strategic and tactical partner to help define their digital strategy. The
solution we offered included the following:
. Develop digital strategy. We worked with Neiman Marcus to define a
digital strategy which leveraged the Neiman Marcus brand to establish
Neiman Marcus as the premier lifestyle platform for affluent consumers
on the Web. Our strategy was to establish for Neiman Marcus a complete
e-commerce organization which included neimanmarcus.com, a Web site that
is fully integrated with the existing Neiman Marcus store and catalogue
businesses.
. Develop creative and innovative Web site. We focused our creative
efforts on developing a Web site that both offers users a high-end
shopping experience and enhances the Neiman Marcus brand name. The Web
site offers customers an easy to use interface, quick transaction times
and information concerning specific product availability. To set the
standard in on-line service while taking advantage of existing store
inventory and fashion expertise, we worked with Neiman Marcus to develop
the Neiman Marcus Virtual Studio. The Studio uses new interactive and
visual telepresence technology for virtual merchandising and live
assistance to connect customers with store associates. Users can either
phone, e-mail, or chat on-line in real-time with sales associates.
. Design and build e-commerce infrastructure. We worked with Neiman Marcus
to design and build an e-commerce organization and technology
infrastructure that included merchandising, content management, eCare
and site management processes. In addition, we integrated the Web site
with catalogue and store databases to promote seamless customer service.
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. Coordinated cross-channel Web marketing campaign. We worked with Neiman
Marcus to design a comprehensive cross-channel Web marketing campaign
which utilized on-line and off-line techniques to drive customers to the
Neiman Marcus Web site and which was coordinated with existing customer
mailings, special in store and top customer events, and banner ads and
sponsorships.
Through the implementation of our solution, we believe that Neiman Marcus
will be able to penetrate geographic locations not served by its stores and
improve its operating efficiency, marketing results and the quality of service
provided to its customers. The integration of the store, catalogue and Web
databases should permit Neiman Marcus to target past customers more
effectively, enhance existing customer relationships and achieve significant
cost savings. We are continuing to work with the senior management of Neiman
Marcus to further refine and build upon its digital strategy, migrate more of
its systems to the Web, improve the existing Web site and more effectively
target and service its customer base.
Competition
Competition in the Internet professional services industry is intense. We
compete with companies that offer strategic consulting, Web design,
information technology and e-commerce services as well as the in-house
development efforts of many companies. Our current competitors include the
following:
. web consulting firms and on-line agencies, such as Agency.com, Diamond
Technology Partners, iXL Enterprises, Proxicom, Razorfish, Scient,
USWeb/CKS and US Interactive;
. general management consulting firms, such as Bain & Company, Booz Allen
& Hamilton, Boston Consulting Group and McKinsey & Company;
. advertising and direct marketing agencies, such as Ogilvy One and
Wunderman Cato Johnson;
. systems integrators that primarily engage in fixed-time/fixed-fee
contracts, such as Cambridge Technology Partners, Sapient and Viant;
. large systems integrators, such as Andersen Consulting and the
consulting arms of the "Big Five" accounting firms;
. the professional services groups of computer equipment companies, such
as IBM Global Services;
. outsourcing firms, such as Computer Sciences Corporation, Electronic
Data Systems and Perot Systems; and
. internal information technology departments of current and potential
clients.
Because relatively low barriers to entry characterize our industry, we also
expect other companies to enter our market.
We believe that the principal competitive factors in our industry are:
. quality of services;
. technical and strategic expertise;
. ability to provide end-to-end solutions;
. speed of development and implementation of Internet solutions;
. value of the services provided compared to the price of such services;
. reputation and experience of professionals delivering the service;
. project management capabilities;
. brand recognition and size of the firm; and
. effectiveness of sales and marketing efforts.
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We believe that we presently compete favorably with respect to most of these
factors. In particular, we believe that we offer an integrated set of skills
and expertise that many existing service providers are not well suited to
provide. However, the market for Internet professional services is evolving
and we cannot be certain that we will compete successfully in the future. We
expect that competition will continue to intensify and increase in the future,
particularly if large information technology consulting firms focus more
resources on Internet solution opportunities.
People and Culture
We believe we have an entrepreneurial culture in which creativity, teamwork
and individual development are strongly encouraged. Our employees are our
single greatest asset and the key to reaching our company-wide goal to be the
undisputed industry leader in Internet professional services. In furtherance
of this mission all of our employees collaborate to apply their creativity in
the conception, design, and implementation of innovative client solutions. Our
formal training program, to which we allocate substantial financial resources
and personnel, emphasizes improvement of individual skills as well as
optimization of team performance. We also conduct shared learning sessions in
which business and technological developments are discussed amongst the
various teams. Through the training and shared learning programs we continue
to bolster the talent and expertise of our employees which in turn improves
our Internet professional services capabilities. The end result is a dynamic
and rewarding work environment for intelligent, motivated individuals.
Our training program is part of a larger core competency model instituted
in 1998 that is intended to incorporate the personal interests and career
goals of each employee with their individual development and team performance
training. Employees meet with a staffing officer to discuss their interests
and goals and thereby allow us to assign them to client teams which they will
find to be the most satisfying. We believe that our ongoing solicitation and
consideration of individual interests and goals enables us to improve the
attractiveness of the work environment to our employees and strengthens each
working group thereby further improving our competitive position in the
industry.
To retain this culture and uphold the high standard of quality work that we
have set, we must continue to attract qualified individuals with superior
strategic, creative, technological and management skills in numbers sufficient
to meet the growing demands for our services. To this end, we have a dedicated
recruiting team of 28 individuals that utilizes various methods to attract the
most talented and promising professionals, including job boards, advertising
in newspapers and trade magazines, college and business school recruiting,
competitive targeting and an internal referral bonus program. In addition, we
retain recruiting professionals to supplement the recruiting efforts of our
in-house recruiting team. We recognize that the demand for Internet
professional services, however, is growing faster than the number of trained
professionals who are capable of providing those services and, therefore,
retention and training of existing employees is very important. By hiring
intelligent individuals and then providing them with relevant training and
support, we believe that we have created a truly scalable hiring strategy
without compromising our high standards.
We provide our employees with a competitive base salary, performance driven
incentive programs, stock options in Digitas and comprehensive benefits
packages. Employees are rewarded for individual as well as team performance
and the success of their clients in the marketplace. For many of our
employees, however, a significant attraction is being part of a winning team
that applies industry leading expertise and technology to transform businesses
to be the best in their industry.
As of January 31, 2000, we had approximately 1,240 full-time employees,
approximately 1,200 of whom were located in the United States and 40 of whom
were located in Europe. Our employees include approximately 180 digital
strategy consultants, 280 technology professionals, 260 design and creative
professionals, 310 integrated marketing managers, and 210 executive and
support personnel.
Our employees are not represented by any union and, except for senior
management and certain other employees, are retained on an at-will basis.
However, the regulations of some European countries in which we
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operate may make it difficult for us to terminate employees in those
countries. In addition, those regulations govern the amount of vacation time
that must be given to employees, which is significantly more vacation than in
the United States.
Intellectual Property Rights
We seek to protect our intellectual property through a combination of
license agreements and trademark, service mark, copyright and trade secret
laws. We enter into confidentiality agreements with our employees and clients
and use our best efforts to limit access to and distribution of proprietary
information licensed from third parties.
We pursue the protection of our trademarks in the United States and
internationally. We have obtained a U.S. trademark registration for Bronner
Slosberg Humphrey on November 23, 1999. We filed applications for trademark
registration of Bronnercom and BSH on December 13, 1999, Digitas on July 9,
1999, Reveloce and Reveloce Interactive on December 16, 1999, Sansome on April
15, 1999, The Sansome Group on January 26, 1999, SIG on April 5, 1999,
Signition on December 15, 1999 and Strategic Interactive Group on September
29, 1999. In the United Kingdom we filed applications for trademark
registration of Bronner Slosberg Humphrey on July 9, 1999, Bronnercom on June
24, 1999, Digitas on December 23, 1999 and Strategic Interactive Group on July
1, 1999.
Our efforts to protect our intellectual property rights could be inadequate
to deter misappropriation of proprietary information. For example, we may not
detect unauthorized use of our intellectual property. In addition, the legal
status of intellectual property on the Internet is currently subject to
various uncertainties. See "Risk Factors--We may not be able to protect our
intellectual property and proprietary rights" and "Risk Factors--Changes in
government regulation of the Internet could adversely affect our business."
U.S. and Foreign Government Regulation
Congress has recently passed legislation that regulates various aspects of
the Internet, including on-line content, copyright infringement, user privacy,
taxation, access charges, liability for third-party activities and
jurisdiction. In addition, federal, state, local and foreign governmental
organizations also are considering, and may consider in the future, other
legislative and regulatory proposals that would regulate the Internet. Areas
of potential regulation include libel, pricing, quality of products and
services and intellectual property ownership.
The European Union also has recently enacted several directives relating to
the Internet. In order to safeguard against the spread of illegal and socially
harmful materials on the Internet, the European Union has adopted the "Action
Plan on Promoting the Safe Use of the Internet." Other European Commission
directives address the regulation of privacy, e-commerce, security, commercial
piracy, consumer protection and taxation of transactions completed over the
Internet.
It is not known how courts will interpret both existing and new laws.
Therefore, we are uncertain as to how new laws or the application of existing
laws will affect our business. In addition, our business may be indirectly
affected by our clients who may be subject to such legislation. Increased
regulation of the Internet may decrease the growth in the use of the Internet,
which could decrease the demand for our services, increase our cost of doing
business or otherwise have a material adverse effect on our business, results
of operations and financial condition. See "Risk Factors--Changes in
government regulation of the Internet could adversely affect our business.
Facilities
Our headquarters and principal administrative and finance operations are
located in a leased facility in Boston, Massachusetts consisting of
approximately 200,000 square feet of office space. The lease for this office
space expires in November 2005. We also occupy office space in locations in
New York City under three separate leases. One of the leases covers
approximately 12,000 square feet of office space and expires in September
2002. The second and third New York leases cover an aggregate of approximately
38,000 square feet in the same building and expire in September 2004 and
September 2002. Due to our growth, in November 1999 we executed a fourth lease
for 132,000 square feet in a new New York City location. That lease expires in
March 2011. We anticipate relocating all of our New York staff to the new
larger location in September or October 2000. We will continue to
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be obligated on our existing leases and will need to sublet these leases to
minimize cost and financial obligations. At this time, we cannot be certain
that we will be able to execute subleases that coincide with our move or that
the terms of the subleases will completely offset our costs. We also lease
office space in San Francisco, under a lease that expires in January 2010. In
addition, we have leases for office space in London and Salt Lake City that
each expire in September 2004.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, and their ages and positions as of
January 31, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Director, Chairman and Chief Executive
David W. Kenny.............. 38 Officer
Kathleen L. Biro............ 47 Director, Vice Chairman and President
Robert Galford.............. 47 Chief People Officer
Michael Goss................ 40 Chief Financial Officer and Treasurer
General Counsel, Secretary and Assistant
Marschall I. Smith.......... 53 Treasurer
Michael Ward................ 36 Chief Operating Officer
Michael E. Bronner.......... 40 Director, Chairman Emeritus and Founder
John L. Bunce, Jr........... 41 Director
Orit Gadiesh (1)(2)......... 48 Director
Philip U. Hammarskjold (2).. 34 Director
Patrick J. Healy (1)........ 33 Director
Arthur Kern (1)(2).......... 53 Director
</TABLE>
- --------
(1) Member of the compensation committee.
(2) Member of the audit committee.
David W. Kenny was named Chief Executive Officer of Digitas in September
1997 and Chairman in December 1999. He joined Digitas as a director and Vice
Chairman in January 1997. From 1991 to 1997, Mr. Kenny was a partner at Bain &
Company, a strategy consulting firm, and was named to its Policy Committee in
1995. Mr. Kenny also serves as a director of Harvard Business School
Publishing, The Corporate Executive Board and Teach for America. He holds a
B.S. degree from the General Motors Institute and an M.B.A. from Harvard
Business School.
Kathleen L. Biro joined Digitas in 1991 and has served as President and a
director since December 1999 and as Vice Chairman since April 1999. Ms. Biro,
together with Robert Cosinuke and Ruben Pinchanski, founded Strategic
Interactive Group and served as its Chief Executive Officer from its founding
in April 1995 to December 1999. Prior to joining Digitas in 1991, Ms. Biro
served as Senior Vice President of Global Product Management for Bankers Trust
Global Operations and Information Systems business. Ms. Biro also sits on the
boards of directors of net.Genesis and Be Free. She holds a B.S. and an M.S.
in Educational Administration from New York University and an M.B.A. in
Marketing and Finance from the Columbia University Graduate School of
Business.
Robert Galford joined Digitas in January 2000 as Chief People Officer. From
January 1994 to January 2000 Mr. Galford served as managing director of
Counsel to Management and as an adjunct faculty member of Columbia University
Graduate School of Business. Prior to 1994, Mr. Galford served as a vice
president of The MAC Group/Gemini Consulting. Mr. Galford is a member of the
board of directors of Forrester Research, Inc. and Access Data Corporation.
Mr. Galford holds a J.D. from Georgetown University Law Center, an M.B.A. from
Harvard Business School and a B.A. from Haverford College.
Michael Goss has served as Chief Financial Officer and Treasurer of Digitas
since January 2000. From December 1994 to January 2000 Mr. Goss served as a
director and as the Chief Financial Officer of Playtex Products, Inc. Prior to
December 1994, Mr. Goss served as Vice President Corporate Development and
Treasurer of Oak Industries, Inc. Mr. Goss has an M.B.A. from Harvard Business
School and a B.A. from Kansas State University.
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Marschall I. Smith joined Digitas in October 1999 as General Counsel and
Secretary. From February 1994 to October 1999, Mr. Smith was associated with
Hamilton Holmes Associates, a financial and legal services consulting firm,
and served as Senior Vice President and General Counsel of IMC Global, Inc., a
mining and chemical manufacturer in Northbrook, Illinois. Mr. Smith holds an
A.B. from Princeton University, a J.D. from the University of Virginia Law
School and an M.B.A. from the University of Chicago Graduate School of
Business.
Michael Ward has served as Chief Operating Officer of Digitas since March
1998. Mr. Ward joined Digitas in August 1997 as a Senior Vice President. Prior
to that, he was associated with Bain & Company, a strategy consulting firm,
since December 1994. Mr. Ward holds B.S. and B.A. degrees from the University
of Pennsylvania and an M.B.A. from the Amos Tuck School at Dartmouth College.
Michael E. Bronner founded Digitas in 1980 and served as Chief Executive
Officer until September 1997 and Chairman until December 1999. Mr. Bronner is
currently a director and Chairman Emeritus of Digitas. Mr. Bronner is
currently the Chairman and founder of Lifetime Rewards.com. Mr. Bronner is
also Chairman of the Boston Walk Committee for the March of Dimes and serves
as a director of the Boys and Girls Clubs, the Boston Public Library
Foundation and the New England Aquarium.
John L. Bunce, Jr. has served as a director of Digitas since January 1999.
Mr. Bunce joined the predecessor to Hellman & Friedman LLC in 1988, became
partner of that entity in January 1996 and has served as a Managing Director
of Hellman & Friedman LLC since January 1998. He also serves on the boards of
directors of National Information Consortium and Western Wireless Corporation.
Mr. Bunce holds a B.A. from Stanford and an M.B.A. from Harvard Business
School.
Orit Gadiesh has served as a director of Digitas since February 1999. Ms.
Gadiesh has served as the Chairman of the Board of Bain & Company, a strategy
consulting firm, since December 1994. Ms. Gadiesh is a board of directors and
council member at the Harvard Business School, the Wharton School, the Kellogg
School and the Harvard Business School Press Publications Review Board. She is
also a member of the Greater Boston Chamber of Commerce and the Massachusetts
Business Roundtable. She holds a B.A. from Hebrew University, Jerusalem, and
an M.B.A. from Harvard Business School.
Philip U. Hammarskjold has served as a director of Digitas since December
1999. Mr. Hammarskjold joined the predecessor to Hellman & Friedman LLC in
1992, became partner of that entity in January 1996 and has been a Managing
Director of Hellman & Friedman LLC since January 1998. He has served on the
board of directors of The Covenant Group, Inc. since 1995 and served on the
board of directors of Young & Rubicam Inc. from December 1996 to December
1999. Mr. Hammarskjold holds a B.S.E. from Princeton University and an M.B.A.
from Harvard Business School.
Patrick J. Healy has served as a director of Digitas since January 1999.
Mr. Healy has been employed by Hellman & Friedman LLC since 1994 and has
served as a Managing Director since January 1999. He serves on the board of
directors of National Information Consortium, Inc. Mr. Healy holds an A.B.
from Harvard College and an M.B.A. from Harvard Business School.
Arthur Kern has served as a director of Digitas since January 1999. Prior
to investing in media and marketing services companies, he was co-founder and
Chief Executive Officer of American Media, a group owner of commercial radio
stations sold to AMFM (Chancellor Broadcasting) in 1994. Mr. Kern serves on
the boards of directors of Yahoo!, Inc. and Northwest Broadcasting, a
privately held company that owns and operates Fox Television affiliates in the
Northwest. Mr. Kern holds a B.A. from Yale University.
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<PAGE>
Board Composition
The number of our directors is currently fixed at eight. Following the
closing of this offering, our board of directors will be divided into three
classes, each of whose members will serve for a staggered three-year term. Our
board of directors will consist of three Class I directors, whose term of
office will continue until the 2001 annual meeting of shareholders, two Class
II directors, whose term of office will continue until the 2002 annual meeting
of shareholders, and three Class III directors, whose term of office will
continue until the 2003 annual meeting of shareholders. The Class I directors
will be John L. Bunce, Jr., David W. Kenny and Arthur Kern; the Class II
directors will be Orit Gadiesh and Patrick J. Healy; and the Class III
directors will be Kathleen L. Biro, Michael E. Bronner and Philip U.
Hammarskjold. At each annual meeting of shareholders, a class of directors
will be elected for a three-year term to succeed the directors of the same
class whose terms are then expiring.
There are no family relationships among any of our directors or executive
officers.
Board Committees
Audit Committee. The members of the audit committee, a majority of whom are
independent directors, are responsible for recommending to the board of
directors the engagement of our outside auditors and reviewing our accounting
controls and the results and scope of audits and other services provided by
our auditors. The audit committee consists of Messrs. Hammarskjold, Chairman,
and Kern and Ms. Gadiesh.
Compensation Committee. The members of the compensation committee, a
majority of whom are independent directors, are responsible for reviewing and
recommending to the board of directors the amount and type of consideration to
be paid to senior management, administering our stock plans and establishing
and reviewing general policies relating to compensation and benefits of
employees. The compensation committee consists of Messrs. Healy and Kern,
Chairman, and Ms. Gadiesh.
Director Compensation
Directors who are employees receive no additional compensation for their
services as directors. Non-employee directors do not currently receive a fee
for their service as directors, although the board of directors may in the
future decide to pay non-employee directors a fee for their services. We
reimburse our directors for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors. Non-employee directors are also
eligible to participate in our stock option plans. Since their election to the
board of directors, we have granted to each of Messrs. Bronner and Kern and
Ms. Gadiesh non-qualified options to purchases 156,000 shares of our common
stock. The options granted to Mr. Kern and Ms. Gadiesh were granted on June 1,
1999, have an exercise price of $2.52 per share and become exercisable in full
on June 1, 2002, regardless of whether the director is serving as a director
of Digitas at that time. The options granted to Mr. Bronner were granted on
December 2, 1999, have an exercise price of $8.75 per share and become
exercisable in full on December 2, 2002, regardless of whether Mr. Bronner is
serving as a director of Digitas at that time.
Executive Compensation
The following table sets forth the total compensation paid or accrued in
the year ended December 31, 1999 to our Chief Executive Officer, each of our
other executive officers whose aggregate compensation exceeded $100,000 and
one former executive officer who received total compensation in excess of
$100,000 but was not serving as an executive officer on December 31, 1999. We
refer to each of these people in this prospectus as our "named executive
officers." No other executive officer earned an aggregate of salary and bonus
in excess of $100,000 for the year ended December 31, 1999.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Number of
Shares of
Underlying
Options All Other
Name and Principal Position Salary Bonus Granted(1) Compensation
- --------------------------- ------------------- ------------ ------------
<S> <C> <C> <C> <C>
David W. Kenny................ $ 500,000 $ 550,000 3,300,000 $1,983,074(2)
Chairman and Chief
Executive Officer
Kathleen L. Biro.............. 420,833 425,000 1,080,000 976,236(3)
Vice Chairman and President
Michael Ward.................. 370,833 350,000 900,000 202,717(4)
Chief Operating Officer
Meryl Beckingham (5).......... 305,000 425,000(6) 330,000 593,785(7)
Former Chief Financial
Officer and Former Executive
Vice President
</TABLE>
- --------
(1) Does not include rollover options granted to the named executive officer
in connection with the recapitalization in exchange for the cancellation
of stock appreciation rights or stock options, as applicable, held by the
named executive prior to the recapitalization. Mr. Kenny received
6,000,000 rollover options and Mr. Ward received 600,000 rollover options
in connection with the recapitalization. Ms. Biro received 1,299,085.2
rollover options and Ms. Beckingham received 270,000 rollover options in
connection with the recapitalization.
(2) Includes:
. transaction payment in the amount of $1,977,974 paid to Mr. Kenny in
connection with the recapitalization;
. parking expenses in the amount of $4,200 paid by Digitas on behalf of
Mr. Kenny; and
. $900 representing the dollar value of insurance premiums paid by Digitas
with respect to a term life insurance policy purchased for Mr. Kenny's
benefit.
(3) Includes:
. transaction payment in the amount of $309,064 paid to Ms. Biro in
connection with the recapitalization;
. deferred compensation payment in the amount of $658,000 paid to Ms. Biro
in accordance with the terms of her employment agreement;
. parking expenses in the amount of $4,200 paid by Digitas on behalf of
Ms. Biro;
. $810 representing the dollar value of insurance premiums paid by Digitas
with respect to a term life insurance policy purchased for Ms. Biro's
benefit; and
. $4,162 representing the dollar value of insurance premiums paid for by
Digitas with respect to an individual, supplemental long-term disability
policy purchased in 1994 for Ms. Biro.
(4) Includes:
. transaction payment in the amount of $197,797 paid to Mr. Ward in
connection with the recapitalization;
. parking expenses in the amount of $4,200 paid by Digitas on behalf of
Mr. Ward; and
. $720 representing the dollar value of insurance premiums paid by Digitas
with respect to a term life insurance policy purchased for Mr. Ward's
benefit.
(5) Ms. Beckingham resigned from her position as Chief Financial Officer and
Executive Vice President effective December 15, 1999.
(6) Includes annual bonus in the amount of $175,000 and special bonuses in
the aggregate amount of $250,000 paid to Ms. Beckingham in consideration
for her services in effecting the recapitalization.
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<PAGE>
(7) Includes:
. $500,000 payment paid to Ms. Beckingham in connection with her
resignation from Digitas;
. transaction payment in the amount of $89,009 paid to Ms. Beckingham in
connection with the recapitalization;
. parking expenses in the amount of $4,200 paid by Digitas on behalf of
Ms. Beckingham; and
. $576 representing the dollar value of insurance premiums paid by Digitas
with respect to term life insurance policy purchased for Ms.
Beckingham's benefit.
Ms. Beckingham will be entitled to receive up to an additional $420,000
between January 2000 and January 2001 in connection with her resignation from
Digitas. We also agreed to pay the cost of Ms. Beckingham's health insurance,
life insurance and long term disability insurance plans through January 31,
2000 and to provide her with other payments and benefits in connection with
her resignation.
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<PAGE>
The following table sets forth information regarding stock options granted
during 1999 to our named executive officers. All of the options, other than
options to purchase 900,000 shares that were granted to Ms. Biro under the
1999 option plan and options to purchase 300,000 shares that were granted to
Mr. Ward under the 1999 option plan, were granted under the 1998 option plan.
All of the options are non-qualified stock options, have a ten-year term and
generally terminate 30 days after the named executive's employment with us
terminates for any reason. During 1999, we granted options to purchase an
aggregate of 14,792,000 shares of common stock to employees, excluding
rollover options to purchase an aggregate of 16,466,644.8 shares.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
for Option Term (2)
----------------------
Number of
Shares of
Common
Stock Percent of Total Exercise
Underlying Options Granted Price
Options to Employees in Per Expiration
Name Granted(1) Fiscal Year(%)(1) Share($) Date 5%($) 10%($)
- ---- ---------- ---------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
David W. Kenny.......... 3,300,000(3) 22.31% $2.5184 1/6/09 $5,226,463 $13,244,884
Kathleen L. Biro........ 180,000(4) 1.22 2.5184 8/1/09 285,080 722,448
900,000(5) 6.08 8.75 12/2/09 4,952,545 12,550,722
Michael Ward............ 600,000(4) 4.06 2.5184 1/6/09 950,266 2,408,161
300,000(5) 2.03 8.75 12/2/09 1,650,848 4,183,574
Meryl Beckingham........ 210,000(4) 1.42 2.5184 1/6/09 332,593 842,856
120,000(4) .81 2.5184 5/1/09 190,053 481,632
</TABLE>
- --------
(1) Does not include rollover options granted to the named executive officer
in connection with the recapitalization in exchange for the cancellation
of stock appreciation rights or stock options, as applicable, held by the
named executive officer prior to the recapitalization. Mr. Kenny received
6,000,000 rollover options and Mr. Ward received 600,000 rollover options
in connection with the recapitalization. Ms. Biro received 1,299,085.2
rollover options and Ms. Beckingham received 270,000 rollover options in
connection with the recapitalization.
(2) Potential realizable value is based on the assumption that our common
stock appreciates at the annual rate shown, compounded annually, from the
date of grant until expiration of the ten-year term. These numbers are
calculated based on Securities and Exchange Commission requirements and
do not reflect our projection or estimate of future stock price growth.
Potential realizable values are computed by multiplying the number of
shares of common stock subject to a given option by the fair market value
on the date of grant, as determined by our board of directors, assuming
that the aggregate stock value derived from that calculation compounds at
the annual 5% or 10% rate shown in the table for the entire ten-year term
of the option and subtracting from that result the aggregate option
exercise price.
(3) Options to purchase 600,000 shares were immediately exercisable as of the
grant date. The remainder of the options vest in equal installments on
the third, fourth and fifth anniversary of the grant date.
(4) Options vest in equal installments on the third, fourth and fifth
anniversary of the grant date.
(5) Options vest 25% on the first anniversary of the grant date and
additional 6.25% on each consecutive three-month period thereafter.
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<PAGE>
The following table sets forth information concerning the number and value
of unexercised options to purchase common stock held as of December 31, 1999
by the named executive officers. There was no public trading market for our
common stock as of December 31, 1999. Accordingly, the values of the
unexercised in-the-money options have been calculated on the basis of the fair
value at December 31, 1999 of $8.75 less the applicable exercise price,
multiplied by the number of shares acquired on exercise. None of the named
executive officers exercised any stock options in 1999.
Aggregated Option Exercises and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at Fiscal Year-End at Fiscal Year-End
-------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
David W. Kenny........ 6,600,000.00 2,700,000.00 $47,553,000.00 $16,821,000.00
Kathleen L. Biro...... 1,299,085.20 1,080,000.00 9,223,504.92 1,121,400.00
Michael Ward.......... 600,000.00 900,000.00 4,650,000.00 3,738,000.00
Meryl Beckingham...... 0.00 0.00 0.00 0.00
</TABLE>
1998 Option Plan
In contemplation of the recapitalization, our board of directors adopted
our 1998 option plan. The plan allows us to:
. grant incentive stock options; and
. grant non-qualified stock options.
More specifically, the plan authorized the grant of 16,466,644.8 rollover
options in exchange for the cancellation of stock appreciation rights and
stock options held by the SAR and option holders prior to the recapitalization
and an additional 11,744,700 options that are not rollover options. In
September 1999, the board of directors amended the plan to decrease the number
of non-rollover options that could be granted under the plan to 10,152,000
shares.
All options granted under the plan have been non-qualified stock options.
As of December 31, 1999, options to purchase 24,579,420.8 shares of common
stock were outstanding under the plan and 510,000 shares were available for
future grant under the plan. The board does not intend to grant any additional
options under the plan after the offering.
Grants under the plan may be made to employees and non-employee directors,
consultants and independent contractors who contribute to the management,
growth and profitability of the business of Digitas or its affiliates.
A committee of the board of directors or, if no such committee is formed,
the board of directors, administers the plan which includes determining the
participants in the plan and the number of shares of common stock to be
covered by each option, amending the terms of any option, subject to
limitations, and interpreting the terms of the plan.
Each rollover option is immediately exercisable as of the date of grant and
has an exercise price equal to the base value of the stock appreciation rights
or the exercise price of the stock options, as applicable, from which the
options were converted. All other options granted under the plan are generally
subject to a five-year vesting schedule pursuant to which the options vest in
equal annual installments on the third, fourth and fifth anniversaries of the
grant date. In addition, all options other than rollover options must have a
per share exercise price equal to or greater than the fair market value of a
share of Digitas' common stock as of the grant date, as determined by the
board of directors or a committee of such board. All options granted under the
plan terminate
48
<PAGE>
on the tenth anniversary of the grant date. Vested options may be exercised
for specified periods after the termination of the optionee's employment or
other service relationship with us or our affiliates.
Under the plan, the exercise price of vested options may be delivered to us
by certified or bank check, wire transfer or such other instrument as the
board of directors or a committee of such board may accept. In addition, under
the terms of the plan, the committee may in its discretion approve payment by
delivery of unrestricted shares of common stock or by delivery of an exercise
notice, along with a copy of irrevocable instructions to a broker selling the
underlying shares of the optionee.
In the event greater than 50% of the equity interest in Digitas is
acquired, measured by vote or value, solely for cash consideration by a non-
affiliate, all options under the plan will become fully vested and exercisable
immediately prior to the closing of the transaction.
1999 Option Plan
In September 1999, our board of directors adopted our 1999 option plan
which allows for the grant of up to 13,592,700 shares of common stock. The
plan allows us to:
. grant incentive stock options; and
. grant non-qualified stock options.
To date, all options granted under the plan have been non-qualified stock
options. As of December 31, 1999, options to purchase 3,848,000 shares of
common stock were outstanding under the plan and 9,744,700 shares were
available for future grant under the plan.
Grants under the plan may be made to employees and non-employee directors,
consultants and independent contractors who contribute to the management,
growth and profitability of the business of Digitas or its affiliates.
A committee of the board of directors or, if no such committee is formed,
the board of directors, administers the plan which includes determining the
participants in the plan and the number of shares of common stock to be
covered by each option, amending the terms of any option, subject to
limitations, and interpreting the terms of the plan. The administrator of the
plan may authorize our chief executive officer to grant options under the plan
at fair market value to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act or "covered employees"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986. In
December 1999, our compensation committee granted this authority to Mr. Kenny.
The exercise price of all other options granted under the plan is
determined by the board of directors or a committee of the board. Under
present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code of 1986 may not be granted at an exercise price less than the fair market
value of the common stock on the date of grant, or less than 110% of the fair
market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power.
Non-qualified stock options granted under the plan may be granted at prices
which are less than the fair market value of the underlying shares on the date
granted. Under the plan, incentive stock options and non-qualified stock
options are generally subject to a four-year vesting schedule pursuant to
which the options vest 25% on the first anniversary of the grant date and an
additional 6.25% on each consecutive three-month period thereafter. The
options generally terminate on the tenth anniversary of the grant date. In
addition, vested options may be exercised for specified periods after the
termination of the optionee's employment or other service relationship with us
or our affiliates.
Under the plan, the exercise price for vested options may be delivered to
us by certified or bank check, wire transfer or such other instrument as the
board of directors or a committee of such board may accept. In addition, under
the terms of the plan, the committee may in its discretion approve payment by
delivery of unrestricted
49
<PAGE>
shares of common stock or by delivery of an exercise notice, along with a copy
of irrevocable instructions to a broker selling the underlying shares of the
optionee.
In the event greater than 50% of the equity interest in Digitas is
acquired, measured by vote or value, solely for cash consideration by a non-
affiliate, all options under the plan will become fully vested and exercisable
immediately prior to the closing of the transaction.
2000 Stock Option and Incentive Plan
Our board of directors and shareholders have adopted the 2000 stock option
and incentive plan, which allows for the issuance of up to 7,718,200 shares of
common stock. The plan permits us to:
. grant incentive stock options;
. grant non-qualified stock options;
. grant stock appreciation rights;
. issue or sell common stock with vesting or other restrictions, or
without restrictions;
. grant rights to receive common stock in the future with or without
vesting;
. grant common stock upon the attainment of specified performance goals;
and
. grant dividend rights in respect of common stock.
These grants may be made to officers, employees, directors, consultants,
advisors and other key persons of Digitas or our affiliates.
Our compensation committee has the right, in its discretion, to select the
individuals eligible to receive awards, determine the terms and conditions of
the awards granted, accelerate the vesting schedule of any award and generally
administer and interpret the plan. The compensation committee may authorize
our chief executive officer to grant options under the plan at fair market
value to individuals who are not subject to the reporting and other provisions
of Section 16 of the Exchange Act or "covered employees" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986.
The exercise price of options granted under the plan is determined by the
compensation committee with respect to individuals subject to Section 16
reporting requirements and the chief executive officer with respect to all
other options granted. Under present law, incentive stock options and options
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986 may not be granted at an exercise price less
than the fair market value of the common stock on the date of grant, or less
than 110% of the fair market value in the case of incentive stock options
granted to optionees holding more than 10% of the voting power.
The exercise price may also be delivered to us by the optionee in the form
of a promissory note if the loan of such funds to the optionee has been
authorized by the compensation committee and the optionee pays so much of the
exercise price as represents the par value of the common stock acquired in a
form other than a promissory note and by a broker under irrevocable
instructions to the broker selling the underlying shares from the optionee.
Non-qualified stock options may be granted at prices which are less than
the fair market value of the underlying shares on the date granted. Options
are typically subject to a four-year vesting schedule pursuant to which the
options vest 25% on the first anniversary of the grant date and an additional
6.25% on each consecutive three-month period thereafter. The options generally
terminate ten years from the date of grant and may be exercised for specified
periods after the termination of the optionee's employment or other service
relationship with us. Upon the exercise of options, the option exercise price
must be paid in full either in cash or by certified or bank check or other
instrument acceptable to the compensation committee or, in the sole discretion
of the committee, by delivery of shares of common stock that have been owned
by the optionee free of restrictions for at least six months.
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<PAGE>
The plan and all awards issued under the plan terminate upon any merger,
reorganization or consolidation, sale of all or substantially all of our
assets or all of our outstanding capital stock or liquidation or other similar
transaction, unless Digitas and the other parties to such transactions have
agreed otherwise. All participants under the plan will be permitted to
exercise, for a period of 30 days before any such termination, all awards held
by them which are then exercisable or become exercisable upon the closing of
the transaction.
2000 Employee Stock Purchase Plan
We have adopted an employee stock purchase plan under which employees will
be eligible to purchase shares of our common stock at a discount through
periodic payroll deductions. The 2000 employee stock purchase plan is intended
to meet the requirements of Section 423 of the Internal Revenue Code.
Purchases will occur at the end of twelve-month offering periods at a purchase
price equal to 85% of the market value of our common stock at either the
beginning of the offering period or the end of the offering period, whichever
is lower. The first offering period under the plan will begin on March 1, 2000
and will end on February 28, 2001. Participants may elect to have from 1% to
10% of their pay withheld for purchase of common stock at the end of the
offering period, up to a maximum of $25,000 within any offering period. We
have reserved 2,200,000 shares of common stock for issuance under this plan.
Employment Agreements
We have employment agreements with each of Messrs. Kenny, Galford, Goss,
Smith, Ward and Ms. Biro. Each employment agreement entitles the executive to
an annual base salary and an annual bonus. Under those agreements, Mr. Kenny
is entitled to an annual base salary of $500,000; Ms. Biro, an annual base
salary of $400,000; Messrs. Galford, Goss and Ward, an annual salary of
$350,000; and Mr. Smith an annual base salary of $200,000. Each executive's
base salary is subject to annual review for possible raises. Since entering
into their employment agreements, the compensation committee has increased Mr.
Ward's annual base salary to $400,000 and Ms. Biro's annual base salary to
$450,000. Ms. Biro's employment agreement also entitles her to an aggregate of
$872,333 in deferred compensation. Of this amount, $658,000 was paid in 1999
and the remaining $214,333 will be paid by May 30, 2000, if Ms. Biro is still
employed by us at that time.
Each employment agreement has a two year term which automatically extends
for additional one year terms unless we or the named executive elect not to
renew the agreement. Each employment agreement can be terminated during its
term by us or by the executive. The executive is entitled to receive severance
benefits, including one year of salary and group health benefits if we
terminate the employment agreement without cause or the executive terminates
the employment agreement because we breached the employment agreement.
Furthermore, in the event that the executive's employment is terminated within
two years following a change of control, either by us without cause or by the
executive due to an adverse change in our place of business or the executive's
responsibility or compensation, then all unvested options held by the
executive will also become immediately vested. In the case of Mr. Kenny,
severance benefits include two years of salary and group health benefits.
If, however, the employment agreement is terminated because of the
executive's death or for any reason other than by us without cause, then the
executive receives only:
. his or her base salary for 90 days following termination of employment;
. any unpaid annual bonus for a fiscal year that has already ended;
. benefits under long-term disability insurance coverage if termination is
due to disability; and
. vested benefits, if any.
Each employment agreement is further subject to non-competition, non-
solicitation and confidentiality provisions and customary provisions with
respect to benefits, reimbursement of expenses and non-exclusivity of rights.
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<PAGE>
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1999, each of Messrs. Healy, Kern, Kenny
and Ms. Gadiesh served as members of the compensation committee of our board
of directors. Mr. Kenny has served as our chief executive officer since
September 1997. None of these individuals serves as an executive officer of
any entity that has one or more of its executive officers serving as a member
of our board of directors or compensation committee.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Recapitalization
In connection with the recapitalization, Positano Partners Ltd., a Bermuda
exempt company owned by Hellman & Friedman Capital Partners III, L.P., H&F
Orchard Partners III, L.P. and H&F International Partners III, L.P., purchased
shares of Bronner Slosberg Humphrey Co. and Strategic Interactive Group Co.
from the existing stockholders of those entities and we repurchased shares of
Bronner Slosberg Humphrey Co. from Mr. Bronner and the Michael E. Bronner 1998
Annuity Trust, dated July 16, 1998, of which Mr. Bronner and his wife are
collectively the trustee. The aggregate purchase price for these shares was
approximately $127,450,000, of which approximately $122,975,000 was paid to
Mr. Bronner and the Michael E. Bronner 1998 Annuity Trust, approximately
$830,850 was paid to Ms. Biro and approximately $3,644,150 was paid to other
shareholders of Bronner Slosberg Humphrey Co. and Strategic Interactive Group
Co. who are not executive officers or directors of Digitas. Messrs. Bunce,
Hammarskjold and Healy, each members of our board of directors, are each
Managing Directors of Hellman & Friedman LLC, an affiliate of Hellman &
Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P. and H&F
International Partners III, L.P.
We also granted to Positano a warrant to purchase an aggregate of 900,000
shares of our common stock in connection with the recapitalization. The
warrant is fully exercisable for $2.5184 per share. Pursuant to the terms of
the recapitalization agreement, the shares subject to the warrant are subject
to upward or downward adjustment.
Also as part of the recapitalization, Positano, Messrs. Bronner and Kenny
and the Bronner Slosberg Humphrey Co. trustee entered into a governance
agreement. Under the governance agreement, Positano is granted an approval
right over a number of specified fundamental corporate transactions as well as
the right to nominate and have elected two members of our board of directors.
The governance agreement also entitles Mr. Bronner and our chief executive
officer to be members of our board of directors. The governance agreement will
terminate upon consummation of this offering. Following the offering, Hellman
& Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P. and H&F
International Partners III, L.P., collectively, will have the right to elect
at least one director so long as they own at least 5% of our outstanding
common stock.
We also entered into a shareholders agreement in connection with the
recapitalization. The shareholders agreement among other things entitles
Positano and Mr. Bronner to purchase at a discount shares of our common stock
held by former employees who are parties to the agreement to the extent we do
not elect to repurchase those shares. To date, neither Positano nor Mr.
Bronner has exercised these repurchase rights. The shareholders agreement also
entitles the shareholders and option holders who are parties to the agreement,
including Mr. Bronner, Positano and each of the executive officers other than
Messrs. Smith, Galford and Goss to participate in certain sales of common
stock by either Positano or Mr. Bronner. Sales of common stock in connection
with this offering are excluded. Prior to this offering neither Positano nor
Mr. Bronner have sold any shares of our common stock in a transaction that
would entitle the other parties to the shareholders agreement to participate.
Upon consummation of this offering, the shareholders agreement will terminate.
Positano, Mr. Bronner and members of our senior management, including each
of our executive officers other than Messrs. Smith, Galford and Goss entered
into an escrow agreement in connection with the recapitalization. In the event
we breached our representations or warranties under the recapitalization
agreement, the escrow agreement entitles Positano to receive up to an
aggregate of approximately $18 million in cash, shares and options received by
certain members of our senior management in connection with the
recapitalization. The escrow agreement also entitles Messrs. Bronner and Kenny
to direct the voting of all shares of common stock held in escrow. The escrow
agreement will terminate immediately prior to the consummation of this
offering.
Under the registration rights agreement we entered into in connection with
the recapitalization, Positano and Mr. Bronner have demand registration rights
with respect to the common stock they hold. Positano, Mr. Bronner and the
other shareholders and option holders who are parties to the registration
rights agreement, including each of our executive officers other than Messrs.
Smith, Galford and Goss also have piggyback registration rights under the
registration rights agreement. See "Shares Eligible for Future Sale."
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<PAGE>
Mr. Bronner entered into a noncompetition, nonsolicitation and
confidentiality agreement with us in connection with the recapitalization. In
accordance with the terms of the agreement, Mr. Bronner is entitled to a
salary of $500,000 per year while he is serving as chairman of the limited
liability company through which our business is operated. On December 2, 1999,
Mr. Bronner resigned as chairman of that company and was named Chairman
Emeritus of Digitas.
Other Transactions
In January 1999, we issued to Positano two fully exercisable options, each
to purchase 90,000 shares of common stock at an exercise price per share equal
to $1.1775, and an aggregate exercise price of $211,950, in exchange for an
aggregate payment of $241,350.
Also in 1999, we sold an aggregate of 399,271.8 shares of our common stock
to one director and one trust of which a director is the trustee. The shares
were sold for $2.5184 per share or an aggregate of $1,005,506.14, which price
the board of directors deemed to be the fair market value per share at the
time of sale. The following table sets forth the number of shares sold to the
director and/or trust and the date upon which the shares were sold:
<TABLE>
<CAPTION>
Name Date of Sale Shares of Common Stock
---- --------------- ----------------------
<S> <C> <C>
The Arthur Kern Revocable Trust...... August 2, 1999 99,271.80
Orit Gadiesh......................... August 26, 1999 300,000.00
</TABLE>
Mr. Bronner is the chairman and founder of Lifetime Rewards.com, a former
client. During the last year, we provided approximately $85,000 in services to
Lifetime Rewards.com. We believe that the terms of our relationship with
Lifetime Rewards.com were no less favorable to us than they would have been
had they been obtained from unaffiliated third parties.
In January 2000, we purchased options to purchase 300,000 shares of our
common stock held by Mr. Kenny for a per share purchase price of $8.75 and an
aggregate purchase price of $2,625,000, less $303,255, the aggregate exercise
price of such options. Also in January, 2000, we purchased options to purchase
180,000 shares of our common stock held by Positano for a per share purchase
price of $8.75 and an aggregate purchase price of $1,575,000, less $211,950,
the aggregate exercise price of such options. We also purchased in January
2000 warrants to purchase 120,000 shares of our common stock held by Positano
for a per share purchase price of $8.75 and an aggregate purchase price of
$1,050,000, less $302,202, the aggregate exercise price of such warrants. We
paid for such purchases by delivering a promissory note which will be repaid
with the proceeds from this offering.
We believe that each of the transactions described above was entered into
on terms no less favorable to Digitas than could be obtained with
nonaffiliated parties. We have adopted a policy providing that all material
transactions between us and our officers, directors and affiliates must be
approved by a majority of the members of our board of directors and by a
majority of the disinterested members of our board of directors and be on
terms no less favorable to us than could be obtained from unaffiliated
parties.
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<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of Digitas common stock as adjusted to reflect the sale of the
common stock offered hereby, by:
. all persons known by us to own beneficially 5% or more of the common
stock;
. each of our directors;
. the chief executive officer and the other named executive officers;
. each of the selling shareholders; and
. all directors and executive officers as a group.
Unless otherwise indicated, each of the shareholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the shareholder.
The number of shares beneficially owned by each shareholder is determined
under rules issued by the Securities and Exchange Commission and includes
voting or investment power with respect to securities. Under these rules,
beneficial ownership includes any shares as to which the individual or entity
has sole or shared voting power or investment power and includes any shares as
to which the individual or entity has the right to acquire beneficial
ownership within 60 days after January 31, 1999 through the exercise of any
warrant, stock option or other right. The inclusion in this prospectus of such
shares, however, does not constitute an admission that the named shareholder
is a direct or indirect beneficial owner of such shares. The applicable
percentage of "beneficial ownership" after the offering is based upon
50,703,479.4 shares of common stock outstanding as of January 31, 1999. The
address for Hellman & Friedman Capital Partners III, L.P., H&F Orchard
Partners III, L.P. and H&F International Partners III, L.P. is c/o Hellman &
Friedman LLC, One Maritime Plaza, San Francisco, California 94111. The address
for Squam Lake Investors, III L.P. and Sunapee Securities, Inc. is Two Copley
Place, Boston, Massachusetts 02116. The address for each of our directors and
named executive officers is c/o Digitas Inc., The Prudential Tower, 800
Boylston Street, Boston, Massachusetts 02199.
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)(2)
------------------------------------------------------
Prior to Offering After the Offering
-------------------- --------------------
Shares to be
Sold in
Name of Beneficial Owner Number Percent Offering Number Percent
- ------------------------ ------------ ------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
5% Shareholders
Hellman & Friedman
Capital Partners III,
L.P. (2)............... 36,899,157.0 71.77% 2,801,851 34,097,306.0 67.25%
H&F Orchard Partners
III, L.P. (3).......... 2,716,800.0 5.35 206,294 2,510,506.0 4.95
H&F International
Partners III, L.P.
(4).................... 812,614.2 1.60 61,704 750,910.2 1.48
Other Selling
Shareholders
Squam Lake Investors,
III L.P................ 317,700.0 * 24,124 * *
Sunapee Securities,
Inc.................... 79,380.0 * 6,028 * *
Directors and Named
Executive Officers
Michael E. Bronner (5).. 7,109,520.6 14.02 -- 7,109,520.6 14.02
David W. Kenny (6)...... 6,300,000.0 11.05 -- 6,300,000.0 11.05
Kathleen L. Biro (7).... 1,814,746.8 3.49 -- 1,814,746.8 3.49
Michael Ward (8)........ 600,000.0 1.17 -- 600,000.0 1.17
Orit Gadiesh............ 300,000.0 * -- 300,000.0 *
Arthur Kern (9)......... 297,815.4 * -- 297,815.4 *
Meryl Beckingham........ 0 * -- 0 *
John L. Bunce, Jr.
(10)................... 0 * -- 0 *
Philip U. Hammarskjold
(10)................... 0 * -- 0 *
Patrick J. Healy (10)... 0 * -- 0 *
All executive officers
and directors, as a
group
(11 persons)........... 16,422,082.8 27.88 -- 16,422,082.8
</TABLE>
55
<PAGE>
- --------
* Represents less than 1% of the outstanding shares of common stock
(1) Assumes the underwriters do not elect to exercise the over-allotment
option to purchase an additional 930,000 shares of common stock from us
and 465,000 shares of common stock from the selling shareholders.
(2) Includes 36,187,251 shares and warrants immediately exercisable at an
exercise price of $2.5184 per share for 711,906 shares.
(3) Includes 2,664,384 shares and warrants immediately exercisable at an
exercise price of $2.5184 per share for 54,416 shares.
(4) Includes 796,936.2 shares and warrants immediately exercisable at an
exercise price of $2.5184 per share for 15,678 shares.
(5) Includes 4,257,317.4 shares held by Michael Bronner and 2,852,203.2
shares owned by the Michael E. Bronner 1998 Annuity Trust pursuant to
which Michael Bronner has sole dispositive power over the shares until
July 16, 2000. Michael Bronner and Lisa Bronner are collectively the
trustee of the Michael E. Bronner 1998 Annuity Trust and have sole voting
power with respect to the shares.
(6) Includes options held by David W. Kenny which are immediately exercisable
at an exercise price of $1.01085 per option for 5,700,000 shares and
options immediately exercisable at an exercise price of $2.5184 per
option for 600,000 shares.
(7) Includes 515,661.6 shares held by Kathleen L. Biro and options
immediately exercisable at an exercise price of $1.6499 per option for
1,299,085.2 shares.
(8) Includes options held by Michael Ward which are immediately exercisable
at an exercise price of $1.1775 per option for 150,000 shares and options
immediately exercisable at an exercise price of $0.9419 per option for
450,000 shares.
(9) Includes 297,815.4 shares held by the Arthur Kern Revocable Trust of
which Arthur Kern has sole dispositive and voting power.
(10) Messrs. Bunce, Hammarskjold and Healy are affiliated with Hellman &
Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P. and
H&F International Partners III, L.P. H&F Investors III is the sole
general partner for each of Hellman & Friedman Capital Partners III,
L.P., H&F Orchard Partners III, L.P. and H&F International Partners III,
L.P. The managing general partner of H&F Investors III is Hellman &
Friedman Associates III, L.P., which in turn has H&F Management III, LLC
and H&F Investors III, Inc. as its general partners. The sole owner of
H&F Investors III, Inc. is The Hellman Family Revocable Trust. Messrs.
Bunce, Hammarskjold and Healy are members of H&F Management III, LLC.
The investment decisions of H&F Management III, LLC and H&F Investors
III, Inc. are made by a seven person executive committee of which Mr.
Bunce is a member. While Hellman & Friedman Capital Partners III, L.P.,
H&F Orchard Partners III, L.P. and H&F International Partners III, L.P.,
H&F Investors III, Inc., Hellman & Friedman Associates III, L.P., H&F
Management III, LLC, The Hellman Family Revocable Trust and Messrs.
Bunce, Hammarskjold and Healy could each be deemed to beneficially own
the shares held by Hellman & Friedman Capital Partners III, L.P., H&F
Orchard Partners III, L.P. and H&F International Partners III, L.P.,
each of them disclaims beneficial ownership except to the extent of its
or his indirect pecuniary interest.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
As of December 31, 1999, there were 50,703,479.4 shares of common stock
issued and outstanding and stock options to purchase 28,308,972.2 shares of
common stock, 15,598,972.2 of which were then exercisable and outstanding
warrants to purchase 900,000 shares, all of which were then exercisable and
outstanding. At December 31, 1999, there were fourteen holders of record of
our common stock. Following the offering, our authorized capital stock will
consist of 200,000,000 shares of common stock, par value $.01 per share, of
which 56,903,480 will be issued and outstanding, and 10,000,000 shares of
undesignated preferred stock, par value $.01 per share, issuable in one or
more series designated by our board of directors, of which no shares will be
issued and outstanding.
Common Stock
Voting Rights
The holders of our common stock have one vote per share. Holders of our
common stock are not entitled to vote cumulatively for the election of
directors. Generally, all matters to be voted on by stockholders must be
approved by a majority, or, in the case of election of directors, by a
plurality, of the votes cast at a meeting at which a quorum is present, voting
together as a single class, subject to any voting rights granted to holders of
any then outstanding preferred stock.
Dividends
Holders of common stock will share ratably in any dividends declared by our
board of directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid
to holders of shares of common stock.
Other Rights
On liquidation, dissolution or winding up of Digitas, all holders of common
stock are entitled to share ratably in any assets available for distribution
to holders of shares of common stock. No shares of common stock are subject to
redemption or have preemptive rights to purchase additional shares of common
stock.
Preferred Stock
Our certificate of incorporation provides that shares of preferred stock
may be issued from time to time in one or more series. Our board of directors
is authorized to fix the voting rights, if any, designations, powers,
preferences, qualifications, limitations and restrictions applicable to the
shares of each series. Our board of directors may, without stockholder
approval, issue preferred stock with voting and other rights that could
adversely affect the voting power and other rights of the holders of the
common stock and could have anti-takeover effects, including preferred stock
or rights to acquire preferred stock in connection with implementing a
shareholder rights plan. We have no present plans to issue any shares of
preferred stock. The ability of our board of directors to issue preferred
stock without stockholder approval could have the effect of delaying,
deferring or preventing a change of control of Digitas or the removal of
existing management.
Indemnification Matters
We have entered into indemnification agreements with each of our directors.
The form of indemnity agreement provides that we will indemnify our directors
or executive officers for expenses incurred because of their status as a
director or executive officer, to the fullest extent permitted by Delaware
law, our certificate of incorporation and our bylaws.
57
<PAGE>
Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director
has breached his or her duty of loyalty, failed to act in good faith, engaged
in intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation
Law or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers
shall be, and in the discretion of our board of directors, non-officer
employees may be, indemnified by Digitas to the fullest extent authorized by
Delaware law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with service for or
on behalf of Digitas. The by-laws also provide for the advancement of expenses
to directors and, in the discretion of our board of directors, officers and
non-officer employees. In addition, our by-laws provide that the right of
directors and officers to indemnification shall be a contract right and shall
not be exclusive of any other right now possessed or hereafter acquired under
any by-law, agreement, vote of stockholders or otherwise. We also have
directors' and officers' insurance against various liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Digitas
as described above, 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. At present,
there is no pending material litigation or proceeding involving any director,
officer, employee or agent of Digitas in which indemnification will be
required or permitted.
Provisions of our Certificate of Incorporation and By-laws that may have Anti-
takeover Effect
A number of provisions of our certificate of incorporation and by-laws
which will be effective upon completion of this offering concern matters of
corporate governance and the rights of stockholders. These provisions, as well
as the ability of our board of directors to issue shares of preferred stock
and to set the voting rights, preferences and other terms, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by our board of directors, including takeovers which stockholders may
deem to be in their best interests. These provisions, together with our
classified board of directors, also could delay or frustrate the removal of
incumbent directors even if the removal of incumbent directors would be
beneficial to our stockholders. Our board of directors believes that these
provisions are appropriate to protect the interests of Digitas and of our
stockholders. Our board of directors has no present plans to adopt any further
measures or devices which may be deemed to have an "anti-takeover effect."
Classified Board of Directors
Our board of directors is divided into three classes serving staggered
three-year terms, with one class being elected each year. Our classified
board, together with other provisions of our certificate of incorporation
authorizing the board of directors to fill vacant directorships or increase
the size of the board, may prevent a stockholder from removing, or delay the
removal of incumbent directors and simultaneously gaining control of the board
of directors by filling vacancies created by such removal with its own
nominees.
No Stockholder Action by Written Consent
Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders.
58
<PAGE>
Special Meetings of Stockholders
Our certificate of incorporation and by-laws provide that a special meeting
of stockholders may be called only by our board of directors unless otherwise
required by law. Our by-laws provide that only those matters included in the
notice of the special meeting may be considered or acted upon at that special
meeting unless otherwise provided by law.
Advance Notice of Director Nominations and Stockholder Proposals
Our by-laws include advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders. For the first annual
meeting following the completion of this offering, a stockholder's notice of a
director nomination or proposal will be timely if delivered to the secretary
of Digitas at our principal executive offices not later than the close of
business on the later of the 75th day prior to the scheduled date of such
annual meeting or the 10th day following the day on which public announcement
of the date of such annual meeting is made by Digitas.
Director Vacancies and Removal
Our certificate of incorporation provides that vacancies in our board of
directors may be filled only by the affirmative vote of a majority of the
remaining directors. Our certificate of incorporation provides that directors
may be removed from office only with cause and only by the affirmative vote of
holders of at least seventy-five percent of the shares then entitled to vote
at an election of directors.
Amendment of the Certificate of Incorporation
Any amendment to our certificate of incorporation must first be approved by
a majority of our board of directors and, if required by law, thereafter
approved by a majority of the outstanding shares entitled to vote with respect
to such amendment, except that any amendment to the provisions relating to
stockholder action, directors, limitation of liability and the amendment of
our certificate of incorporation must be approved by not less than 75% of the
outstanding shares entitled to vote with respect to such amendment.
Amendment of By-laws
Our certificate of incorporation and by-laws provide that our by-laws may
be amended or repealed by our board of directors or by the stockholders. Such
action by the board of directors requires the affirmative vote of a majority
of the directors then in office. Such action by the stockholders requires the
affirmative vote of at least seventy-five percent of the shares present in
person or represented by proxy at an annual meeting of stockholders or a
special meeting called for such purpose unless our board of directors
recommends that the stockholders approve such amendment or repeal at such
meeting, in which case such amendment or repeal shall only require the
affirmative vote of a majority of the shares present in person or represented
by proxy at the meeting.
Statutory Business Combination Provision
Following the offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly held Delaware corporation
from consummating a "business combination," except under special
circumstances, with an "interested stockholder" for a period of three years
after the date such person became an "interested stockholder" unless:
. before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
. upon the closing of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares held
by directors who are also officers of the corporation and shares held by
employee stock plans; or
59
<PAGE>
. following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of 66% of the outstanding voting
stock of the corporation not owned by the interested stockholder. The
term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior
three years, owned, 15% or more of a corporation's outstanding voting
stock.
The term "business combination" includes mergers, consolidations, asset
sales involving 10% or more of a corporation's assets and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved
by holders of a least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contain any such exclusion.
Trading on the Nasdaq National Market System
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "DTAS."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be American
Stock Transfer & Trust Company.
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that sales of common
stock or the availability of common stock for sale will have on the market
price of our common stock prevailing from time to time. Nonetheless,
substantial sales of common stock in the public market following this
offering, or the perception that such sales could occur, could lower the
market price of our common stock or make it difficult for us to raise
additional equity capital in the future.
Following this offering, there will be 56,903,479.4 shares of our common
stock outstanding on a fully diluted basis. Of these shares, the 9,300,000
shares which are being sold in this offering generally will be freely
transferable without restriction or further registration under the Securities
Act, except that any shares held by our "affiliates" as defined in Rule 144
under the Securities Act may be sold only in compliance with the limitations
described below.
Sales of Restricted Securities
The remaining 47,603,479.4 shares of common stock which will be outstanding
after the offering will be "restricted securities" as defined in Rule 144, and
may be sold in the future without registration under the Securities Act
subject to compliance with the provisions of Rule 144 or any other applicable
exemption under the Securities Act.
In general, under Rule 144 a shareholder who has beneficially owned his or
her restricted securities for at least one year, including the holding period
of any prior owner, except an affiliate from whom those shares were purchased,
is entitled to sell, within any three-month period commencing 90 days after
the date of this prospectus, a number of shares that does not exceed the
greater of 1% of the then outstanding shares of our common stock,
approximately 569,035 shares immediately after this offering, or the average
weekly trading volume in our common stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided requirements concerning availability of public information, manner of
sale and notice of sale are satisfied. In addition, a shareholder that is not
one of our affiliates at 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, including the holding period of any prior owner, except an affiliate
from whom those shares were purchased, is entitled to sell the shares
immediately under Rule 144(k) without compliance with the above described
requirements under Rule 144.
Securities issued in reliance on Rule 701, such as shares of our common
stock acquired pursuant to the exercise of certain options granted under our
stock plans, are also restricted securities and, beginning 90 days after the
date of this prospectus, may be sold by shareholders other than our affiliates
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one-year holding period
requirement.
Stock Options
We intend to file registration statements on Form S-8 with respect to the
aggregate of 42,411,345 shares of common stock issuable under our stock option
and incentive plans and our employee stock purchase plan promptly following
the consummation of this offering. Shares issued upon the exercise of stock
options after the effective date of the Form S-8 registration statement will
be eligible for resale in the public market without restriction, except that
affiliates must comply with Rule 144.
Lock-up Agreements
Shareholders and all officers and directors holding an aggregate of
approximately 54,147,733 shares and vested options to purchase shares have
agreed, subject to limited exceptions, not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or
61
<PAGE>
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, or enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership
of, any shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock for a period of 180
days after the date of this prospectus, without the prior written consent of
Morgan Stanley & Co. Incorporated. However, if the reported last sale price of
the common stock on the Nasdaq National Market is at least twice the initial
public offering price per share for 20 of the 30 trading days ending on the
last trading day preceding the 90th day after the date of this prospectus, 25%
of the shares of common stock of Digitas subject to the 180-day restriction
described above will be released from these restrictions. The release of these
shares will occur on the later to occur of:
. the 90th day after the date of this prospectus if Digitas makes its
first post-offering public release of its quarterly or annual earnings
results during the period beginning on the eleventh trading day after
the date of this prospectus and ending on the day prior to the 90th day
after the date of this prospectus, or
. on the second trading day following the first public release of Digitas'
quarterly or annual results occurring on or after the 90th day after the
date of this prospectus, if Digitas does not make its first post-
offering public release as set forth in the preceding clause.
These early release provisions do not apply to executive officers and
directors. Morgan Stanley & Co. Incorporated may in its sole discretion choose
to release any or all of these shares from such restrictions prior to the
expiration of such 90 or 180-day period.
Registration Rights
In connection with the January 1999 recapitalization, we entered into a
registration rights agreement with Positano, Mr. Bronner and each of our other
shareholders and option holders as of the date of the recapitalization. Each
individual who has been granted options under the 1998 option plan since the
recapitalization has also become a party to the registration rights agreement.
Under the registration rights agreement, we have granted:
. Positano the right to require us, subject to the terms and conditions
set forth in the registration rights agreement, to register shares of
common stock held by it for sale in accordance with their intended
method of disposition of those shares; and
. Mr. Bronner the right to require us, subject to the terms and conditions
set forth in the registration rights agreement, to register the number
of shares of common stock held by him and the Michael E. Bronner 1998
Annuity Trust for sale in accordance with their intended method of
disposition of those shares.
Positano may request up to three demand registrations and Mr. Bronner may
request one demand registration, each as described above. Mr. Bronner may only
demand the registration of his securities if we have already consummated an
initial public offering and the aggregate market value of the shares of common
stock proposed to be registered by him is greater than or equal to $15
million. In addition, Positano may request that we defer any demand
registration requested by Mr. Bronner for up to 180 days after the date of
such request. Positano has the right to select the underwriters in connection
with any demand registration in which it is participating other than a Mr.
Bronner demand registration in which Mr. Bronner is offering a greater number
of shares of common stock.
Subject to limitations set forth in the registration rights agreement, the
other parties to the registration rights agreement have the right to
participate in any demand registration requested by Positano or Mr. Bronner.
In addition, we have granted Positano, Mr. Bronner and the other parties to
the registration rights agreement, the right, subject to exceptions set forth
in the registration rights agreement, to participate in registrations of
common stock initiated by us on our own behalf or on behalf of any other
stockholder.
The registration rights agreement provides that if requested by the
managing underwriter(s) of any underwritten offering of shares of common
stock, Positano, Mr. Bronner and the other parties to the registration rights
agreement will agree, not to effect any public sale or distribution of any
shares of common stock for a
62
<PAGE>
period of up to 180 days following and seven days prior to the effective date
of demand or piggyback registration. See "Underwriters."
Under the registration rights agreement, we are required to pay expenses
incurred by us and the fees and expenses of one counsel to the selling
shareholders in connection with any demand and piggyback registrations. We
also have agreed to indemnify the holders of registration rights under the
registration rights agreement against specific liabilities, including
liabilities under the Securities Act, and to contribute to payments they may
be required to make. The registration rights agreement will terminate on the
earlier of the date upon which the parties to the registration rights
agreement no longer hold any shares of common stock that must be registered in
order to be sold or the date upon which the parties agree that the agreement
should be terminated. After the consummation of this offering, the
registration rights agreement will terminate as to any party other than
Positano and Mr. Bronner at the time such party owns fewer than one percent of
our outstanding common stock.
Effect of Sale of Shares
Prior to this offering, there has been no public market for our common
stock, and no prediction can be made as to the effect, if any, that market
sales of shares of common stock or the availability of shares for sale will
have on the market price of our common stock prevailing from time to time.
Nevertheless, sales of significant numbers of shares of our common stock in
the public market could adversely affect the market price of the common stock
and could impair our future ability to raise capital through an offering of
our equity securities.
63
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement, the underwriters named below, for whom Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc., Salomon Smith Barney Inc., Banc
of America Securities LLC and Bear, Stearns & Co. Inc. are acting as
representatives, each agreed to purchase, and we and the selling shareholders
agreed to sell to them, the number of shares of common stock set forth
opposite the names of the underwriters below:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated................................
Deutsche Bank Securities Inc.....................................
Salomon Smith Barney Inc.........................................
Banc of America Securities LLC...................................
Bear, Stearns & Co. Inc..........................................
---------
Total.......................................................... 9,300,000
=========
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and the selling stockholders and subject to
prior sale. The underwriting agreement provides that the obligations of the
underwriters to pay for and accept delivery of the shares of common stock
offered in this offering are subject to the approval of various legal matters
by their counsel and to other delineated conditions. The underwriters are
obligated to take and pay for all of the shares of common stock offered in
this offering, other than those covered by the over-allotment option described
below, if any shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page and part to dealers at a price that represents a concession not
in excess of $ a share under the initial public offering price. Any
underwriters may allow, and the dealers may reallow, a concession not in
excess of $ a share to other underwriters or to other dealers. After
the initial offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the representatives of
the underwriters.
Digitas and the selling shareholders have granted to the underwriters an
option, exercisable for 30 days from the date of this prospectus, to purchase
up to an aggregate of 930,000 and 465,000 additional shares of common stock,
at the initial public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The underwriters may
exercise an option solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the shares of common stock offered in
this offering. To the extent the option is exercised, each underwriter must,
subject to specified conditions, purchase a number of additional shares
approximately proportionate to that underwriter's initial purchase commitment.
If the underwriters' over-allotment option is exercised in full, the total
price to public would be $ , the total underwriters' discounts and
commissions would be $ , and the total proceeds to us would be
$ .
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 10% of the shares of common stock offered in this
offering for our directors, officers, employees and related persons. The
number of shares of common stock available for sale to the general public will
be reduced to the extent such individuals purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered.
Digitas, our directors, officers and our shareholders have each agreed,
without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters, during the period ending 180 days after the date
of this prospectus, not to, directly or indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
64
<PAGE>
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, whether
such shares or any such securities are then owned by such person or are
thereafter acquired directly from us; or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
common stock,
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise. This lock-up
restriction is subject, in limited circumstances for shares held by
shareholders other than officers and directors of Digitas, to earlier release.
See "Shares Eligible for Future Sale."
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We have filed an application for our common stock to be quoted on the
Nasdaq National Market under the symbol "DTAS."
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the underwriters may bid for, and purchase,
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
the previously distributed shares of common stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
A prospectus in electronic format will be made available on the Web sites
maintained by one or more of the underwriters. The representatives may agree
to allocate a number of shares to underwriters for sale to their on line
brokerage account holders. The representatives will allocate shares to the
underwriters that may make Internet distributions on the same basis as other
allocations.
We, the selling shareholders and the underwriters have agreed to indemnify
each other against specific liabilities, including liabilities under the
Securities Act.
Deutsche Bank Securities Inc., one of the representatives of the
underwriters, is affiliated with Bankers Trust Company, one of Digitas'
lenders. More than 10% of the net proceeds Digitas receives from this offering
may be used to repay indebtedness owing to Bankers Trust. As a result, the
offering must be conducted in compliance with the conflict-of-interest
requirements of NASD Regulation, Inc., the regulatory agency that governs the
compensation paid to underwriters in securities offerings. Under these rules,
the initial public offering price of the common stock can be no higher than
that recommended by a qualified independent underwriter, as that term is
defined in the NASD's rules. Morgan Stanley & Co. Incorporated has agreed to
serve as a qualified independent underwriter and has conducted due diligence
and will recommend the maximum price for the shares of common stock to be
offered.
Pricing of the Offering
Prior to this offering, there has been no public market for the shares of
common stock. Consequently, the initial public offering price for the shares
of common stock was determined by negotiations between Digitas and the
representatives of the underwriters. Among the factors to be considered in
determining the initial public offering price are:
. our record of operations, our current financial position and future
prospects;
65
<PAGE>
. the experience of our management;
. our revenue, earnings and other financial and operating information in
recent periods; and
. the price-earnings ratios, price-revenue ratios, market prices of
securities and other financial and operating information of companies
engaged in activities similar to ours.
VALIDITY OF COMMON STOCK
The validity of the shares of common stock we are offering will be passed
upon for us by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Legal
matters in connection with this offering will be passed upon for the
underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The combined financial statements as of December 31, 1998 and 1997 and for
each of the two years in the period ended December 31, 1998 included in this
prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. The consolidated financial
statements and financial statement schedules included in or made a part of
this prospectus and Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
On December 27, 1999, PricewaterhouseCoopers LLP resigned as our principal
accountant. The reports of PricewaterhouseCoopers LLP on our financial
statements for 1998 and 1997 did not contain an adverse opinion or a
disclaimer of opinion nor were the reports qualified in any respect. We had no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. We engaged Arthur Andersen LLP as our principal accountants on
January 7, 2000.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common
stock we propose to sell in this offering. This prospectus, which constitutes
part of the registration statement, does not contain all of the information
set forth in the registration statement. For further information about us and
the common stock we propose to sell in this offering, we refer you to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. If a contract or document has been filed as an exhibit
to the registration statement, we refer you to the copy of the contract or
document that we have filed. You may inspect the registration statement,
including exhibits, without charge at the principal office of the Securities
and Exchange Commission in Washington, D.C. You may inspect and copy the same
at the public reference facilities maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549, and at the Commission's regional offices located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
7 World Trade Center, Suite 1300, New York, New York 10048. You can also
obtain copies of this material at prescribed rates by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. In addition, the Securities and Exchange Commission maintains a
website at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
66
<PAGE>
DIGITAS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Accountants........................................ F-2
Balance Sheet of the Predecessor (combined) at December 31, 1998, and of
the Company at December 31, 1999 ........................................ F-4
Statement of Operations of the Predecessor (combined) for the years ended
December 31, 1997 and 1998, and of the Company for the year ended
December 31, 1999 ....................................................... F-5
Statement of Shareholders' Equity (Deficit) of the Predecessor (combined)
for the years ended December 31, 1997 and 1998, and of the Company for
the year ended December 31, 1999 ........................................ F-6
Statement of Cash Flows of the Predecessor (combined) for the years ended
December 31, 1997 and 1998, and of the Company for the year ended
December 31, 1999 ....................................................... F-7
Notes to Financial Statements ............................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Digitas,
We have audited the accompanying balance sheet of Bronner Slosberg Humphrey
Co. (a Massachusetts Business Trust), also known as Digitas, as of December
31, 1999 and the related statement of operations, shareholders' equity
(deficit) and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Digitas as of December 31,
1999, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
January 31, 2000 (except withrespect to the matter discussedin Note 7 for
which the date isFebruary 10, 2000)
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Bronner Slosberg Humphrey Co. and
Strategic Interactive Group, Co.
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the combined financial
position of Bronner Slosberg Humphrey Co. and Strategic Interactive Group, Co.
at December 31, 1998 and 1997, and the combined results of their operations
and their combined cash flows for each of the two years in the period ended
December 31, 1998, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, 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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 15, 1999
F-3
<PAGE>
DIGITAS
BALANCE SHEET
(dollars in thousands)
<TABLE>
<CAPTION>
Predecessor
(combined) Company
------------ ------------
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................................................... $ 37 $ 441
Accounts receivable, net of allowance for doubtful accounts of $741 and $1,053 at December 31, 1998
and 1999, respectively............................................................................ 23,782 40,296
Accounts receivable, unbilled...................................................................... 15,150 25,521
Other current assets............................................................................... 1,505 1,999
Deferred tax assets................................................................................ 1,952 --
-------- --------
Total current assets.............................................................................. 42,426 68,257
Fixed assets, net.................................................................................... 17,975 20,237
Intangible assets, net............................................................................... -- 162,172
Other assets......................................................................................... 1,869 2,223
-------- --------
Total assets...................................................................................... $ 62,270 $252,889
======== ========
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable................................................................................... $ 9,849 $ 15,352
Line of credit..................................................................................... 7,000 --
Current portion of long-term debt.................................................................. 172 7,530
Billings in excess of cost and estimated earnings on uncompleted contracts......................... 10,517 17,761
Accrued expenses................................................................................... 7,039 12,717
Accrued compensation............................................................................... 40,145 16,369
Capital lease obligations.......................................................................... 1,369 398
Notes payable, shareholders........................................................................ 12,003 --
-------- --------
Total current liabilities......................................................................... 88,094 70,127
Long-term debt, less current portion................................................................. 1,432 62,422
Capital lease obligation, long-term portion.......................................................... 317 456
Deferred tax liability............................................................................... 139 --
Other long-term liabilities.......................................................................... 48 48
-------- --------
90,030 133,053
Commitments (Note 15)
Shareholders' equity (deficit):
BSH common shares, no par value per share, 48,930,022 shares authorized, issued, and outstanding at
December 31, 1998 and 50,703,480 shares authorized, issued and outstanding at December 31, 1999... 1 --
SIG common shares, no par value per share, 387,920 shares authorized, issued, and outstanding at
December 31, 1998 and none at December 31, 1999................................................... 1 --
Additional paid-in capital......................................................................... 3,435 159,864
Interest receivable on shareholders' notes......................................................... (94) --
Accumulated deficit................................................................................ (27,921) (40,028)
Less: treasury stock, at cost, 16,211,786 shares at December 31, 1998 and none at December 31,
1999.............................................................................................. (3,182) --
-------- --------
Total shareholders' equity (deficit).............................................................. (27,760) 119,836
-------- --------
Total liabilities and shareholders' equity........................................................ $ 62,270 $252,889
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DIGITAS
STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Predecessor (combined) Company
---------------------- -------
Year ended December 31, Year ended December 31,
------------------------ -----------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenue..................... $ 101,238 $ 122,309 $ 187,007
----------- ----------- -----------
Operating expenses:
Professional services
costs.................... 57,610 65,696 102,247
Selling, general and
administrative expense... 40,552 48,485 67,048
Stock-based compensation.. 6,325 25,820 10,743
Amortization of intangible
assets................... -- -- 36,688
----------- ----------- -----------
Total operating expenses.. 104,487 140,001 216,726
----------- ----------- -----------
Loss from operations........ (3,249) (17,692) (29,719)
----------- ----------- -----------
Other income (expense):
Interest income........... 182 21 55
Interest expense.......... (2,613) (2,719) (7,336)
----------- ----------- -----------
(2,431) (2,698) (7,281)
----------- ----------- -----------
Loss before provision for
income taxes............... (5,680) (20,390) (37,000)
Benefit from (provision for)
income taxes............... 114 1,439 (567)
----------- ----------- -----------
Net loss.................... $ (5,566) $ (18,951) $ (37,567)
=========== =========== ===========
Net loss per share (Note 2)
Basic and diluted......... $ (0.74)
===========
Weighted average common
shares outstanding (Note 2)
Basic and diluted......... 50,703,479
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DIGITAS
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(dollars in thousands)
<TABLE>
<CAPTION>
Notes
Common stock Additional receivable Interest on Retained Treasury stock
------------------ paid-in from shareholders' earnings -------------------
Shares Amount capital shareholders notes (deficit) Shares Amount
---------- ------ ---------- ------------ ------------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Predecessor
(combined)
Balance at December 31, 1996.. 51,535,166 $ 2 $ 5,498 $ (3,304) $ (205) $ (3,089) 6,993,261 $ (3,527)
Issuance of
common stock.... 8,040
Reversal of prior
year treasury
stock
redemption,
net............. 1,339,356 (669,678) 1,247
Treasury stock
redemption...... (1,010,308) 176 505,154 (902)
Cancellation of
note receivable
in connection
with exchange
agreement....... (2,554,312) (2,063) 2,063 1,277,156
Interest income
on shareholders'
notes........... (161)
Net loss......... (5,566)
---------- ----- --------- -------- ------ --------- --------- --------
Balance at December 31, 1997.. 49,317,942 2 3,435 (1,065) (366) (8,655) 8,105,893 (3,182)
Offset of note
receivable from
shareholder
against note
payable from
another
shareholder..... 1,065 272
Distribution to
shareholders.... (315)
Net loss......... (18,951)
---------- ----- --------- -------- ------ --------- --------- --------
Balance at December 31, 1998.. 49,317,942 $ 2 $ 3,435 $ -- $ (94) $ (27,921) 8,105,893 $ (3,182)
========== ===== ========= ======== ====== ========= ========= ========
<CAPTION>
Total
shareholders'
equity
(deficit)
-------------
<S> <C>
Predecessor
(combined)
Balance at December 31, 1996.. $ (4,625)
Issuance of
common stock....
Reversal of prior
year treasury
stock
redemption,
net............. 1,247
Treasury stock
redemption...... (726)
Cancellation of
note receivable
in connection
with exchange
agreement....... --
Interest income
on shareholders'
notes........... (161)
Net loss......... (5,566)
-------------
Balance at December 31, 1997.. (9,831)
Offset of note
receivable from
shareholder
against note
payable from
another
shareholder..... 1,337
Distribution to
shareholders.... (315)
Net loss......... (18,951)
-------------
Balance at December 31, 1998.. $ (27,760)
=============
Company
Company
Balance at
January 1,
1999............ -- -- -- -- -- -- -- --
Issuance of
common stock in
connection with
Recapitalization.. 50,086,487 152,148
Repurchase of
stock options
and warrants.... (2,566)
Exercise of stock
options ........ 118,448 151
Distribution to
shareholders ... (2,461)
Stock-based
compensation ... 8,875
Issuance of
common stock ... 498,544 1,256
Net loss......... (37,567)
---------- ----- --------- -------- ------ --------- --------- --------
Balance at December 31, 1999 .. 50,703,479 $ -- $ 159,864 $ -- $ -- $ (40,028) -- $ --
========== ===== ========= ======== ====== ========= ========= ========
Balance at
January 1,
1999............ --
Issuance of
common stock in
connection with
Recapitalization.. 152,148
Repurchase of
stock options
and warrants.... (2,566)
Exercise of stock
options ........ 151
Distribution to
shareholders ... (2,461)
Stock-based
compensation ... 8,875
Issuance of
common stock ... 1,256
Net loss......... (37,567)
-------------
Balance at December 31, 1999 .. $ 119,836
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DIGITAS
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Predecessor
(combined) Company
----------- -------
Year ended Year ended
December 31, December 31,
------------ ------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $(5,566) $(18,951) $(37,567)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 3,360 4,645 43,865
Loss on disposal of fixed assets.............. 137 67 74
Stock-based compensation...................... -- 22,762 8,875
Provision for doubtful accounts............... 310 216 1,137
Deferred income taxes......................... (124) (1,628) --
Changes in operating assets and liabilities:
Accounts receivable.......................... (4,051) (7,786) (17,651)
Accounts receivable, unbilled................ (4,992) (1,257) (10,371)
Other current assets......................... (1,105) 133 (494)
Other assets................................. (12) (1,836) (282)
Accounts payable............................. 7,451 (3,461) 5,503
Billings in excess of costs and estimated
earnings on uncompleted contracts........... 1,582 3,441 7,244
Accrued expenses............................. 831 3,681 9,519
Accrued compensation......................... 3,715 8,138 4,563
Other liabilities............................ -- 48 --
------- -------- --------
Net cash provided by (used in) operating
activities................................. 1,536 8,212 14,415
------- -------- --------
Cash flows from investing activities:
Purchase of fixed assets...................... (7,944) (6,329) (8,525)
Business acquired net of cash................. -- -- (65,200)
------- -------- --------
Net cash used in investing activities....... (7,944) (6,329) (73,725)
------- -------- --------
Cash flows from financing activities:
Principal payments under capital lease
obligations.................................. (299) (611) (306)
Proceeds from sale leaseback transaction...... 1,807 -- --
Net proceeds from line of credit, bank........ 4,055 2,345 --
Proceeds from note payable, bank, net of debt
issuance costs............................... 5,000 5,000 70,558
Proceeds from (payment of) note payable,
tenant allowances............................ 105 (155) (158)
Proceeds from notes payable, shareholders..... 3,251 3,000 --
Payment of notes payable, bank................ (1,250) (8,750) (4,893)
Payment of notes payable, shareholders........ (4,532) (4,228) --
Interest receivable on shareholders' notes.... (162) -- --
Distributions to shareholders................. -- (315) (2,461)
Repurchase of stock options and warrants...... -- -- (4,433)
Proceeds from issuance of common stock........ -- -- 1,407
------- -------- --------
Net cash provided by (used in) financing
activities................................. 7,975 (3,714) 59,714
------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................... 1,567 (1,831) 404
Cash and cash equivalents, beginning of
period........................................ 301 1,868 37
------- -------- --------
Cash and cash equivalents, end of period....... $ 1,868 $ 37 $ 441
======= ======== ========
Supplemental disclosure of cash flow
information:
Cash paid for taxes........................... $ 21 $ 230 $ 1,011
Cash paid for interest........................ 1,692 2,034 6,781
Supplemental disclosures of noncash investing
and financing activities:
Equipment acquired under capital lease........ -- $ 594 $ 606
Assignment of notes receivable................ -- 1,065 --
Interest accrued on notes receivable
assignment................................... $ 2,241 272 --
Cancellation of note payable to shareholder... 2,187 -- --
Issuance of notes payable to shareholders..... 1,666 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation and Description of Business
Basis of Presentation
Bronner Slosberg Humphrey Inc. was incorporated in Massachusetts in 1980 as
a Subchapter S corporation. Strategic Interactive Group, Inc. was incorporated
in Massachusetts in 1995 as a Subchapter S corporation. Through December 31,
1998, certain shareholders of Bronner Slosberg Humphrey Inc. ("BSH") owned a
majority of the outstanding shares of Strategic Interactive Group, Inc.
("SIG"). Accordingly, financial statements of the two entities are combined
for 1998 and prior years and are referred to herein as the "Predecessor".
On November 5, 1998, BSH and SIG completed transactions in which each
company was reorganized into a Massachusetts business trusts (each a "Trust")
with a wholly-owned limited liability company ("LLC"). After formation of the
Trusts and LLCs, the two companies were merged with and into Bronner Slosberg
Humphrey, LLC and Strategic Interactive Group, LLC, respectively, with each
shareholder of the original S corporations receiving as consideration an
equivalent number of beneficial common shares in the Trusts as the
shareholders held in the S corporations prior to the mergers. The
reorganization of the companies into Trusts and subsidiary LLCs has been
accounted for at historical cost as a combination of entities under common
control.
Effective January 1, 1999, the Predecessor completed a transaction with a
private equity investor and the existing shareholders (the
"Recapitalization"). Under the terms of the Recapitalization, the private
equity investor acquired a certain number of shares directly from the existing
shareholders for $102.0 million. In addition the Company borrowed $70.6
million from a bank. Of the borrowings; $32.7 million was used to repurchase
stock, stock options and stock rights; $27.4 million was used to repay
outstanding debt, accrued interest and other existing obligations of the
Company at the date of the Recapitalization; $5.1 million was used to pay
acquisition costs; and $5.4 million was used for general working capital
purposes. On the date following the close of the Recapitalization, SIG
effectively merged into Bronner Slosberg Humphrey Co. Bronner Slosberg
Humphrey Co. serves as the ultimate parent of Digitas, LLC, the Delaware
limited liability company through which the business is operated.
Substantially all of the stock options and stock appreciation rights of the
Predecessor were replaced with stock options in Bronner Slosberg Humphrey Co.
with equivalent in-the-money value which existed at the date of
Recapitalization. The Recapitalization was accounted for as a purchase as
described in Note 3. On December 22, 1999, Digitas Inc., a Delaware
corporation was formed to ultimately hold the ownership interests of Bronner
Slosberg Humphrey Co. and Digitas, LLC after completing a reorganization to
become the sole shareholder of the Trust. The "Company" refers to Digitas, LLC
prior to this reorganization and Digitas, thereafter. A United Kingdom
subsidiary was formed in late 1998 and is included in the financial statements
of the Predecessor and the Company subsequent to that date.
The financial statements of the Company and the Predecessor are not
comparable in certain respects due to the application of purchase accounting
as of the date of the recapitalization. The Predecessor's combined financial
statements represent the historical basis of financial position, results of
operations and cash flows for the periods presented. The financial information
of the Predecessor presented herein does not necessarily reflect what the
financial position and results of operations of the Company would have been
had it been recapitalized for all the periods and may not be indicative of
future operations or financial position.
The Predecessor and the Company have experienced substantial net losses for
the three years ended December 31, 1999. These losses have been attributable
to charges related to stock-based compensation and the amortization of
intangible assets.
The Company expects to continue to increase its operating expenses and
capital spending in order to facilitate its anticipated growth. As a result of
seasonal working capital requirements, the Company's plan
F-8
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
indicates that additional working capital financing would be required to
support its planned investments. In the event that an initial public offering
is not completed on a timely basis, the Company would seek to extend its
existing loan facilities by $10 million.
Operations
The Company is an Internet professional services firm that provides
integrated, Internet-based strategic, technological and marketing solutions to
Fortune 100 and other industry leading companies that have utilized the
Internet as a principal means of business transformation. The Company develops
large-scale, long-term, strategic relationships with a select group of
clients.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt instruments
purchased with an original maturity of three months or less. Cash equivalents
are stated at cost plus accrued interest which approximates market.
Fixed Assets
Fixed assets are recorded at cost. Expenditures for renewals and
improvements are capitalized, and repairs and maintenance are charged to
operations as incurred. Equipment held under capital leases is stated at the
present value of minimum lease payments at the inception of the lease and
amortized using the straight-line method over the lease term. Leasehold
improvements are recorded net of construction allowances provided by the
landlord. Depreciation is recorded on the straight-line basis over the
estimated useful life of the related assets, which are as follows:
<TABLE>
<S> <C>
Furniture and fixtures................ 7 years
Computer equipment and software....... 3-5 years
Capital leases........................ Lesser of lease term or useful life
Leasehold improvements................ Lesser of lease term or useful life
Intangible Assets
Intangible assets consist of assembled workforce, favorable lease and
excess cost over fair value of net assets acquired ("goodwill") and are stated
at cost less accumulated amortization. Assembled workforce is the estimated
cost to replace the entire workforce in place at the purchase date, including
replacement costs consisting of costs to recruit, relocate and train a new
workforce. Favorable lease is the difference between the fair market value of
a new lease signed on the purchase date and the actual lease in existence.
Intangible assets are amortized on a straight-line basis over their estimated
future lives, which are as follows:
Assembled workforce................... 2 years
Favorable lease....................... 6 years
Goodwill.............................. 7 years
</TABLE>
Capitalized Financing Fees
Capitalized financing fees are amortized over the term of the underlying
debt utilizing the effective interest rate method, and the amortization is
included in interest expense.
F-9
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
Internal Use Software
American Institute of Certified Public Accountants ("AICPA") Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," was adopted, effective January 1, 1999. The
company capitalizes external costs related to software and implementation
services in connection with its internal use software systems.
Impairment of Long-Lived Assets
The Company records impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
Fair Value of Financial Instruments
The fair value of cash and cash equivalents, accounts receivable, short-
term debt and accounts payable approximate their carrying value due to the
immediate or short-term maturity of these financial instruments. The fair
value of long-term debt is based on the current rates offered to the company
for debt instruments of similar risks and maturities and approximates its
carrying value.
Revenue Recognition
Revenue pursuant to fixed-price contracts is recognized as services are
rendered on the percentage-of-completion method of accounting (based on the
ratio of costs incurred to total estimated costs). Revenue pursuant to time
and materials contracts are recognized as services are provided. Certain
contracts contain provisions for performance incentives. Such contingent
revenue is recognized in the period in which the contingency is resolved.
Unbilled accounts receivable on contracts is comprised of costs incurred plus
estimated earnings from revenue earned in advance of billings under the
contract. Advance payments are recorded as billings in excess of cost and
earnings on uncompleted contracts until the services are provided. Included in
accounts receivable and unbilled accounts receivable are reimbursable costs
which have been incurred on behalf of the Company's clients. In accordance
with the client agreements, there is no markup on reimbursable costs and the
client's approval is required prior to the Company incurring them. Revenue
does not include reimburseable costs.
Provisions for estimated losses on uncompleted contracts are made on a
contract-by-contract basis and are recognized in the period in which losses
are determined.
Professional Services Costs
Professional services costs consist primarily of compensation and benefits
of the Company's employees engaged in the delivery of professional services
plus other nonreimbursable service costs.
Research and Development Costs
Research and development costs are charged to operations as incurred. To
date, substantially all research and development activities have been pursuant
to customer contracts and have been expensed as professional services costs.
Net Income Per Share
Basic and diluted earnings per share are computed in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings
per Share". SFAS No. 128 requires both basic earnings per share, which is
based on the weighted average number of common shares outstanding, and diluted
earnings per
F-10
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
share, which is based on the weighted average number of common shares
outstanding and all dilutive potential common equivalent shares outstanding.
The dilutive effect of options is determined under the treasury stock method
using the average market price for the period. Common equivalent shares are
included in the per share calculations where the effect of their inclusion
would be dilutive.
Before the Recapitalization, the two predecessor companies were S
corporations and thus were not subject to federal income taxation. In
addition, because the two companies had different numbers of common shares
outstanding that bear no relationship to the current number of common shares
outstanding, net income (loss) per share has not been presented for periods
before 1999.
The following table reconciles the weighted average common shares
outstanding to the shares used in computation of diluted weighted average
common shares outstanding at December 31, 1999:
<TABLE>
<S> <C>
Weighted average common shares outstanding.......................... 50,703,479
Dilutive effect of options and using the treasury stock method...... --
----------
Diluted weighted average common shares outstanding.................. 50,703,479
</TABLE>
As of December 31, 1999, 29,208,972 options and warrants were outstanding,
but not included in the above calculation as their effect would have been
antidilutive as the Company was in a loss position.
Income Taxes
The Predecessor was taxed under the provisions of Subchapter S of the
Internal Revenue Code, whereby the corporate income is taxed to the individual
shareholders based on their proportionate share of the Company's taxable
income. Massachusetts taxes profits on S corporations with receipts exceeding
$6,000,000.
On November 5, 1998, the Predecessor reorganized resulting in its
conversion into a Massachusetts business trust, a reorganization which affects
the Massachusetts tax treatment of the Predecessor and the Company and its
shareholders that are residents of Massachusetts. The Predecessor and the
Company recorded a provision for Massachusetts taxes that reflects its change
in status during 1998.
Effective January 1, 1999, the Predecessor terminated its S corporation
election and is subject to corporate-level federal and certain additional
state income taxes.
The Company accounts for income taxes using the asset and liability method
in accordance with SFAS No. 109, "Accounting for Income Taxes". Under SFAS No.
109, deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
income tax bases for operating profit and tax liability carryforward. Deferred
tax assets and liabilities are measured using enacted tax rates for the years
in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets or liabilities of a change in tax rates is
recognized in the period in which the tax change occurs.
Stock-based Compensation
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25), and related interpretations are applied in accounting for
its employee stock option plans. The disclosure option of FASB No. 123,
"Accounting for Stock-Based Compensation", which includes information with
respect to stock-based compensation determined under the "fair value" method
has been utilized in the accompanying financial statements.
F-11
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
Foreign Currency Translation
The functional currency of the Company's foreign subsidiary is the U.S.
dollar. Monetary assets and liabilities of the subsidiary are translated into
U.S. dollars at the exchange rate in effect at period-end and nonmonetary
assets and liabilities are remeasured at historic exchange rates. Income and
expenses are remeasured at the average exchange rate for the period.
Translation gains and losses are reflected in SG&A in the statement of
operations. Translation losses were approximately $158,000 for the year ended
December 31, 1999.
Management's Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.
Comprehensive Income
Effective January 1, 1998, SFAS No. 130, "Reporting Comprehensive Income",
was adopted. This statement requires that all components of comprehensive
income be reported in the financial statements in the period in which they are
recognized. For each year reported, comprehensive income (loss) under SFAS No.
130 was equivalent to the Company's net income (loss) reported in the
accompanying statement of operations.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether
a derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company will adopt SFAS No. 133 as required by
SFAS No. 137, "Deferral of the Effective Date of the FASB Statement No. 133",
in fiscal year 2001. The Company has not yet determined the impact that the
adoption of SFAS No. 133 will have on its financial position or results of
operations.
3. Recapitalization
The Recapitalization described in Note 1 has been accounted for under the
purchase method. Accordingly, the purchase price has been allocated to
tangible and intangible assets acquired and liabilities assumed based on their
respective fair values on the acquisition date based on an independent
appraisal.
Consideration and acquisition costs:
<TABLE>
<S> <C>
Cash paid for stock, options and stock rights................... $134,739
Fair value of stock and options exchanged ...................... 51,742
Acquisition costs............................................... 5,104
--------
$191,585
========
</TABLE>
Allocation of purchase price:
<TABLE>
<S> <C>
Goodwill........................................................ $171,726
Workforce-in-place.............................................. 22,900
Favorable lease................................................. 4,234
Net liabilities acquired........................................ (7,275)
--------
$191,585
========
</TABLE>
F-12
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following unaudited pro forma results of operations reflects the
combined results of operations of the Predecessor for the year ended
December 31, 1998 as if the purchase had occurred on the first day of the
period presented. The unaudited pro forma information is not necessarily
indicative of the combined results that would have occurred had the
purchase taken place on the first day of the period presented, nor is it
necessarily indicative of results that may occur in the future.
<TABLE>
<CAPTION>
Year ended
December 31,
------------
1998
------------
<S> <C>
Revenue...................................................... $122,309
Net loss..................................................... (44,845)
</TABLE>
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
Predecessor
(combined) Company
------------ ------------
December 31, December 31,
------------ ------------
1998 1999
------------ ------------
<S> <C> <C>
Furniture and fixtures............................................................................... $ 7,401 $ 10,416
Computer equipment and software...................................................................... 16,499 22,025
Leasehold improvements............................................................................... 4,285 5,696
Capital leases....................................................................................... 3,236 1,449
------- --------
31,421 39,586
------- --------
Less accumulated depreciation........................................................................ (13,446) (19,349)
------- --------
$17,975 $ 20,237
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was approximately $3,360,000, $4,645,000, and $6,795,000, respectively.
5. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
Company
------------
December 31,
1999
------------
<S> <C>
Assembled workforce.......................................... $ 22,900
Favorable lease.............................................. 4,234
Goodwill..................................................... 171,726
--------
198,860
Less accumulated amortization................................ (36,688)
--------
$162,172
========
</TABLE>
There were no intangible assets as of December 31, 1997 and 1998.
F-13
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Debt
Debt consists of the following:
<TABLE>
<CAPTION>
Predecessor
(combined) Company
------------ ------------
December 31, December 31,
------------ ------------
1998 1999
------------ ------------
<S> <C> <C>
Line of credit........................................ $ 7,000 $ --
Notes payable, term loan.............................. -- 68,505
Notes payable, tenant allowance....................... 1,604 1,447
Notes payable, shareholders........................... 12,003 --
------- -------
20,607 69,952
Less: current portion................................. (19,175) (7,530)
------- -------
Total long-term debt................................ $ 1,432 $62,422
======= =======
</TABLE>
Credit Agreements
During 1998, the Predecessor entered into various amendments to the Credit
Agreement which increased the line of credit to $15,000,000 and extended the
expiration date from May 31, 1998 to November 30, 1998. A new term loan of
$5,000,000 ("Bridge Loan") was entered into on March 13, 1998 and expired on
September 30, 1998. Principal and interest on the term and bridge loans were
payable at LIBOR plus .25% to .75% or the prime rate plus 0% to .25% based on
quarterly leverage ratios.
On November 25, 1998, the Predecessor entered into a Credit Agreement (the
"New Agreement") which replaced the existing Credit Agreement and all other
previous lending agreements. The New Agreement included a revolving line of
credit and a $10,000,000 standby letter of credit facility. Under the line of
credit terms, the maximum line was equal to $35,000,000 less outstanding
standby letters of credit and expired on October 31, 2001. At December 31,
1998, $7,000,000 was outstanding under the line of credit and approximately
$6,194,000 was outstanding under standby letters of credit. The interest rate
on the line of credit was either the bank's prime rate or the LIBOR rate, at
the Predecessor's discretion, plus the applicable margin of 0% to .25% on
prime loans and .5% to 1.5% on LIBOR loans based on certain ratios as set by
the bank. The rate at December 31, 1998 was 7.75%. The standby letter of
credit facility expired on October 31, 2001, subject to renewal, which was at
the discretion of the bank, and had an annual commitment fee that ranged from
.20% to .25%. The New Agreement was collateralized by the combined assets of
Predecessor company and contained certain restrictive covenants. The covenants
limited shareholder distributions and payments on subordinated debt to certain
maintainable ratios for cash and also included minimum leverage and debt
service ratios. As part of the New Agreement, the Bridge Loan and the Credit
Agreement were paid in full.
On December 31, 1999, the Company's long term credit agreement consisted of
the following:
. $68,505,000 outstanding under a $73,399,000 term loan due December 31,
2004
. a $25,000,000 revolving credit facility expiring on December 31, 2004 of
which up to $15,000,000 may be used to support standby letters of credit.
Amounts borrowed under the term loan and the revolving credit facility bear
interest, at the Company's option, at either: i) the Base Rate (as defined in
the credit agreement) plus a margin of 0.5% to 2.0%, or ii) LIBOR plus a
margin of 1.5% to 3.0%. At December 31, 1999, the applicable borrowing rate
for the term loan was 8.5% and the borrowing rate for the revolving credit was
9.8%. Additionally, the Company is required to
F-14
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
pay a commitment fee of 0.5% of the average daily unused amount of the
revolving credit. At December 31, 1999, the Company had no cash borrowings
under the revolving credit and $10,289,000 outstanding standby letters of
credit, leaving $14,711,000 available for future borrowings.
The Company is required to maintain, for at least 2 years after the Closing
Date, an interest rate protection vehicle which would establish a maximum
interest rate of not more than 10% per annum and would have a notional
principal amount of not less than 50% of the total term debt of $73,399,000.
The term loan is repayable as follows (in thousands):
<TABLE>
<S> <C>
2000.............................................................. $ 7,341
2001.............................................................. 10,276
2002.............................................................. 13,213
2003.............................................................. 16,143
2004.............................................................. 21,532
-------
$68,505
=======
</TABLE>
The above table does not include future payments on the notes payable,
tenant allowances that are included in long-term debt in the accompanying
balance sheet and discussed below.
The credit facilities contain certain change of control provisions and
impose certain restrictive covenants upon the Company related to the
incurrence of indebtedness, contingent obligations, transactions with
affiliates, business combinations, investments, asset sales and payments of
dividends. Certain financial covenants, including interest coverage and
leverage ratios, maximum capital expenditures and minimum EBITDA levels
(effective through Q1 of 2001) are also imposed on the Company. Additionally,
the Company is required to reduce the outstanding aggregate principal balance
of the revolving credit facility such that the balance does not exceed
$8,000,000 for 30 consecutive days during each consecutive 12 month period. As
of December 31, 1999, the Company was in compliance with the credit facility.
Notes Payable, Tenant Allowances
Since 1995, the Predecessor has received tenant allowances, which are
required to be reimbursed to the landlord through 2005. Interest expense
recognized in relation to these notes amounted to $179,000, $169,000, and
$153,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
Notes Payable, Shareholders
Notes payable, shareholders, include demand notes of approximately
$10,656,000 at December 31, 1998. These notes accrued interest monthly at a
range of 8% to 8.25% per annum. Notes payable, shareholders, also include
notes payable to certain shareholders, for the repurchase of stock that are
payable in quarterly installments. All notes payable, shareholders were paid
in connection with the recapitalization described in Note 3.
For the years ended December 31, 1997 and 1998, interest expense on notes
payable, shareholders was approximately $1,216,000 and $1,114,000,
respectively. Accrued interest related to these notes was approximately
$1,786,000 and $2,471,000 at December 31, 1997 and 1998, respectively.
F-15
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Shareholder's Equity
Common Stock
Under the Declaration of Trust of each of Bronner Slosberg Humphrey Co. and
Strategic Interactive Group Co., an unlimited amount of common shares were
authorized for no par value. All holders of common shares are entitled to one
vote per share and all dividends on common shares shall be distributed pro
rata, when and if declared by the board of directors.
Stock Split
On April 1, 1997, the Board of Directors approved a 6,911.02-for-1 stock
split of BSH common stock and amended the articles of incorporation to
increase the number of authorized shares from 12,500 to 1,000,000 shares of
common stock.
On December 2, 1999, the Board of Directors approved a 30-for-1 stock split
of the Company's common stock. Share amounts have been restated to reflect the
split.
On February 10, 2000, the Board of Directors approved a 2-for-1 stock split
of the Company's common stock. All share and per share amounts have been
restated to reflect the split.
Shareholder Transactions
In 1996, BSH entered into a Stock Redemption Agreement (the "1996
Agreement"). Under the terms of the 1996 Agreement, a shareholder sold back to
BSH 3,619,992 shares of common stock that were purchased in 1991. In
consideration for the stock redemption, BSH forgave a note receivable of
$1,065,000 and issued a note payable to the shareholder in the amount of
$2,187,000. In 1997, BSH restated the 1996 Agreement and canceled the related
note payable. Under the restated agreement, BSH reissued 1,339,356 shares of
common stock and a related note payable for $940,000 which accrues interest at
8.25% payable in quarterly installments.
During 1996, under various stock purchase and stock option agreements,
three officers of BSH purchased shares of common stock. As part of this
transaction, BSH issued notes receivable from shareholders of $2,239,000 due
on March 31, 2009, which accrued interest at the prime rate. During 1997,
notes receivable in the amount of $2,063,000 with two former shareholders were
canceled in connection with an exchange agreement whereby the shareholders
gave up their shares of stock in exchange for SAR units under the SAR Plan
(see Note 8).
In 1997, BSH entered into a stock redemption agreement with a shareholder.
Under this agreement, BSH repurchased 970,308 shares of BSH common stock and
40,000 shares of SIG common stock for the cancellation of the remaining note
receivable balance of $176,000 issued in 1996 and the issuance of a note
payable for $726,000 due by December 31, 1998, which accrued interest at
8.25%.
On January 1, 1998, in connection with a sale of BSH shares between two
shareholders, a $1,065,000 note receivable from one of the shareholders to BSH
issued in 1996 was assumed by another shareholder. All previously owed amounts
from BSH to the selling shareholder for previous loans made by the selling
shareholder to BSH and an obligation to pay a 1995 year-end compensation
payment were discharged due to BSH's issuance of a note payable to the selling
shareholder in the amount of $1,764,000.
On December 29, 1998, BSH declared and paid a cash dividend of $.00643095
per share on its outstanding common shares for a total distribution to
shareholders of $315,000.
F-16
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Stock-based Compensation
Stock Appreciation Rights
The Predecessor established a 1997 Stock Appreciation Right Plan (the "BSH
SAR Plan") which became effective on April 1, 1997 and a 1997 Stock
Appreciation Right Plan (the "SIG Plan" and, with the BSH Plan, the "SAR
Plans") which became effective August 1, 1997. Under the SAR Plans, certain
key employees are granted stock appreciation right units (each a "BSH SAR" or
a "SIG SAR" and collectively the "SARs") which vest in accordance with a
vesting schedule indicated on each SAR agreement. Participants are eligible
for an annual distribution for each SAR unit vested at the end of each year
based on the Predecessor's operating income after charges and reserves have
been deducted as determined by the Board. Additionally, the entities are
obligated to pay each participant the appreciation on the SARs upon the
occurrence of a triggering event, as defined in the SAR Plans. Account
appreciation, as defined by the SAR Plans, is the difference between the fair
market value of each SAR less the base value.
BSH issued 11,970,000 and 2,040,000 SAR units in 1997 and 1998,
respectively. SIG issued 10,200 SAR units in 1997 and 2,040 in 1998.
Compensation expense of $3,429,000 was recorded for the year ended December
31, 1997 related to the SAR annual distribution. Effective January 1, 1999,
there was a triggering event. In connection with the triggering event,
6,570,000 of the 6,765,000 BSH SARs outstanding at that time were converted on
a one-for-one basis into options to purchase shares of beneficial interest in
Bronner Slosberg Humphrey Co. ("Trust Options"). In addition, the remaining
195,000 BSH SARs outstanding at that time were redeemed for cash. For the SIG
SARs, each of the 5,100 SIG SARs outstanding at the time of the triggering
event were converted on a one-for-one basis effective January 1, 1999 into
options to purchase shares of beneficial interest in Strategic Interactive
Group Co. These same options were then converted effective January 1, 2000 on
an approximately 29-for-1 basis into 148,060.80 Trust Options. In 1998, the
Predecessor did not award a SAR annual distribution due to the triggering
event, but issued bonuses in lieu of the SAR annual distribution in the
amounts of $3,058,000 for the year ended December 31, 1998. Predecessor
recorded compensation expense of $20,130,000 for SAR appreciation for the year
ended December 31, 1998.
Stock Option Plans
BSH established an informal Employee Stock Option Plan (the "Stock Option
Plan") in 1989. Under the Stock Option Plan, grants could be made to selected
officers and employees at fair market value on date of grant. Options became
exercisable as to 25% of the grants, on an initial date as defined in the
employee stock option agreements, and up to an additional 25% each year
thereafter. The BSH Stock Option Plan was terminated in connection with the
recapitalization in January 1999.
The following table summarizes stock option activity under the Stock Option
Plan:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998 December 31, 1999
-------------------- -------------------- -------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
--------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period ............. 2,073,302 $0.085 1,658,644 $0.09 829,322 $0.09
Options granted......... -- -- -- -- -- --
Options rolled into 1998
Plan................... -- -- -- -- (829,322) 0.09
Options exercised ...... -- -- -- -- -- --
Options canceled........ (414,658) 0.07 (829,322) 0.09 -- --
--------- ------ --------- ----- -------- -----
Outstanding at end of
period ................ 1,658,644 $ 0.09 829,322 $0.09 -- --
</TABLE>
SIG established an Employee Stock Option Plan (the "1995 Plan") in 1995.
Under the 1995 Plan, grants could be made to selected officers. The 1995 Plan
authorizes the granting of stock options for up to an aggregate
F-17
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
of 240,000 shares of common stock and expires 10 years from the date of the
grant. Options became exercisable as to 33% of the grant on April 1, 1996 and
an additional 33% each year thereafter.
The following table summarizes stock option activity under the 1995 Plan:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998 December 31, 1999
--------------------- ------------------- ---------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
---------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period ............. 3,519,516 $0.0017 3,058,568 $1.65 3,058,568 $1.65
Options granted ........ 3,058,568 1.65 -- -- -- --
Options rolled into 1998
Plan................... -- -- -- -- (3,030,524) 1.65
Options exercised ...... (235,572) 0.0017 -- -- -- --
Options canceled ....... (3,283,944) 0.0017 -- -- (28,044) 1.65
---------- ------- --------- ----- ---------- -----
Outstanding at end of
period ................ 3,058,568 $ 1.65 3,058,568 $1.65 -- --
Weighted-average grant
date fair value of
options granted during
the year at fair market
value................... $ 35.44 -- --
</TABLE>
In 1997, SIG terminated the 1995 Plan. In exchange for all unexercised
outstanding options, all option holders entered into an exchange agreement,
whereby they received exchange compensation, deferred compensation and
3,058,568 stock options. The 3,058,568 stock options were exercisable upon
SIG's engagement of underwriters in connection with a proposed public offering
provided the offering were to occur before May 15, 2000 or upon consummation
of a change in control provided the change in control would be effective
before May 15, 2000. In 1998, it became probable that a change in control
would be effective with the January 1, 1999 Recapitalization therefore the
Predecessor recorded compensation expense of $2,632,000 based on the
difference between the fair market value and the exercise price of the
outstanding options.
In contemplation of the Recapitalization in 1999, the board of directors of
BSH adopted the 1998 option plan (the "1998 Plan"). The 1998 Plan authorized
the grant of (i) 17,126,644.8 rollover options in exchange for the
cancellation of stock appreciation rights and stock options held by the SAR
and option holders prior to the recapitalization and (ii) an additional
11,744,700 options that are not rollover options. In September 1999, the board
of directors amended the plan to decrease the number of non-rollover options
that could be granted under the plan to 10,152,000 shares.
All options granted under the 1998 Plan were non-qualified stock options.
Grants under the plan may be made to employees and non-employee directors,
consultants and independent contractors.
A committee of the board of directors administers the plan which includes
determining the participants in the plan and the number of shares of common
stock to be covered by each option, amending the terms of any option, subject
to certain limitations, and interpreting the terms of the plan.
Each rollover option is immediately exercisable as of the date of grant and
has an exercise price equal to the base value of the stock appreciation rights
or the exercise price of the stock options, as applicable, from which the
options were converted. All other options granted under the plan are generally
subject to a five-year vesting schedule pursuant to which the options vest in
equal annual installments on the third, fourth and fifth anniversaries of the
grant date. In addition, all options other than rollover options must have a
per share exercise price equal to or greater than the fair market value of a
share of the Company's common stock as of the grant date, as determined by the
board of directors or a committee of such board. All options granted under the
plan terminate on the tenth anniversary of the grant date. Vested options may
be exercised for specified periods after the termination of the optionee's
employment or other service relationship with us or our affiliates.
F-18
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
In September 1999, the board of directors adopted the 1999 option plan (the
"1999 Plan") which allows for the grant of up to 13,592,700 shares of common
stock.
Grants under the plan may be made to employees and non-employee directors,
consultants and independent contractors who contribute to the management,
growth and profitability of the Company's business or its affiliates.
A committee of the board of directors administers the plan which includes
determining the participants in the plan and the number of shares of common
stock to be covered by each option, amending the terms of any option, subject
to certain limitations, and interpreting the terms of the plan.
Non-qualified stock options granted under the plan may be granted at prices
which are less than the fair market value of the underlying shares on the date
granted. Under the plan, incentive stock options and non-qualified stock
options are generally subject to a four-year vesting schedule pursuant to
which the options vest 25% on the first anniversary of the grant date and an
additional 6.25% on each consecutive three-month period thereafter. The
options generally terminate on the tenth anniversary of the grant date. In
addition, vested options may be exercised for specified periods after the
termination of the optionee's employment or other service relationship with
the Company or its affiliates.
In December 1999, the Board of Directors authorized the Company to purchase
300,000 options to purchase shares of the Company's common stock held by an
employee. The purchase price for the options was $8.75 per share, less the
exercise price of $1.01 per share, an aggregate of $2.3 million. These options
were issued in connection with the Recapitalization and approximately $500,000
of the $2.3 million is included in the purchase price of the Company.
Accordingly, the Company has recorded a compensation charge of $1.8 million
for this transaction in the accompanying statement of operations for the year
ended December 31, 1999 and the balance of $500,000 has been recorded as a
reduction to paid in capital, as of December 31, 1999.
The following summarizes stock option activity under the 1998 and 1999
Plans:
<TABLE>
<CAPTION>
Options Weighted
available average
for grant exercise
shares price
---------- --------
<S> <C> <C>
Options exchanged in connection with recapitalization
..................................................... 22,946,644 $1.55
Options granted....................................... 8,780,000 5.25
Options exercised..................................... (118,448) 1.27
Options canceled...................................... (3,299,224) 1.86
---------- -----
Outstanding at December 31, 1999...................... 28,308,972 $2.66
Weighted average fair value of options granted during
the year at fair market value ....................... $6.52
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------- ---------------------
Weighted
average Number
Number remaining Weighted exercisable Weighted
Range of outstanding at contractual average at average
exercise December 31, life (in exercise December 31, exercise
price 1999 years) price 1999 price
-------- -------------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.94-1.65 14,818,972 9.0 $1.18 14,818,972 $1.18
$2.52 9,642,000 9.2 2.52 780,000 2.52
$8.75 3,848,000 9.9 8.75 -- --
---------- --- ----- ---------- -----
$0.94-8.75 28,308,972 9.2 $2.66 15,598,972 $1.24
========== === ===== ========== =====
</TABLE>
F-19
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
In addition to the Recapitalization, during 1999 the Company issued
8,360,000 stock options to employees at exercise prices ranging from $2.52 to
$8.75, which at the time of the grant, was below fair market value of the
Company's common stock. As a result of these option grants, we have estimated
cumulative compensation expense of $55.6 million which represents the
aggregate difference between the option exercise price and the deemed fair
market value of the common stock determined for financial reporting purposes
for grants to employees. The amount will be recognized as compensation expense
over the vesting period of the underlying stock options. The Company recorded
compensation expense of $5.8 million during the year ended December 31, 1999,
related to these options.
Had compensation cost for the 1998 and 1999 plans (excluding exchanged
shares) been determined based on the fair value at the grant dates as
calculated in accordance with SFAS No. 123, the Company's net loss for the
year ended December 31, 1999 would have been as follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Net loss:
As reported.................................................. $(37,567)
Pro forma.................................................... $(41,491)
Net loss per share:
As reported................................................. $ (0.74)
Pro forma................................................... $ (0.82)
</TABLE>
There were no compensation costs for the years ended December 31, 1997 and
1998 related to the Stock Option Plans.
The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used: volatility of 55% no expected dividend yield, risk
free interest rates of 4.60%-6.19% and expected life of five years.
During 1999 the Company issued 498,544 shares of common stock to certain
current and former members of the Board of Directors for an aggregate purchase
price of $1.3 million. The Company has recorded a compensation charge of $3.0
million which represents the aggregate difference between the stock price and
the deemed fair market value of the common stock determined for financial
reporting purposes.
Common Stock Warrants
In connection with the recapitalization, the Company issued warrants to
purchase 900,000 shares at an exercise price per share of $2.52. The Company
issued the warrants to the buyer and the value ascribed to the warrants was
included in the recapitalization which was accounted for as a purchase.
In December 1999, the Board of Directors authorized the Company to
repurchase warrants to purchase 180,000 shares of the Company's common stock
with an exercise price $1.18 per share and warrants to purchase 120,000 shares
of the Company's common stock with an exercise price of $2.52 per share held
by a non-employee shareholder. The purchase price for the options was $8.75
per share less the respective exercise price. The aggregate consideration paid
for these options was $2.1 million which has been recorded as a reduction to
paid in capital as of December 31, 1999.
F-20
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Income Taxes
The components of loss before income taxes and the benefit from (provision
for) income taxes are as follows:
<TABLE>
<CAPTION>
Predecessor
(combined) Company
----------------- ------------
December 31, December 31,
----------------- ------------
1997 1998 1999
------- -------- ------------
<S> <C> <C> <C>
Loss before income taxes...................... $(5,680) $(20,390) $(37,000)
Benefit from (provision for) income taxes
Current
Federal................................... -- -- 311
State and local........................... (10) (189) (567)
Deferred
Federal................................... -- -- 11,016
State and local........................... 232 1,368 349
Increase (decrease) in valuation allowance.... (108) 260 (11,676)
------- -------- --------
Benefit from (provision for) income taxes..... $ 114 $ 1,439 $ (567)
======= ======== ========
</TABLE>
The reconciliation of the difference between the United States statutory
rate to the effective rate is as follows:
<TABLE>
<CAPTION>
Predecessor
(combined) Company
------------- ------------
December
31, December 31,
------------- ------------
1997 1998 1999
----- ----- ------------
<S> <C> <C> <C>
United States statutory rate....................... 0% 0% 35.0%
State taxes, net of federal benefit................ -- 6 (0.5)
Goodwill and other permanent differences........... -- -- (3.6)
Increase in valuation allowance.................... 2 1 (32.5)
----- ----- -----
Effective tax rate................................. 2% 7% (1.6) %
===== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to a significant
portion of the deferred income tax assets (liabilities), net, are as follows:
<TABLE>
<CAPTION>
December
31, December 31,
------------ ------------
1997 1998 1999
---- ------ ------------
<S> <C> <C> <C>
Deferred tax assets:
Amortization of intangibles.......................... $-- $ -- $ 8,645
Accrued expenses..................................... 265 1,906 1,090
Net operating loss carryforward...................... 260 -- 311
Stock-based compensation............................. -- -- 1,867
Allowance for doubtful accounts...................... 32 46 168
---- ------ --------
Total tax deferred assets............................ 557 1,952 12,081
---- ------ --------
Basis difference of property and equipment............ 112 139 177
---- ------ --------
Valuation allowance.................................. (260) -- $(11,904)
---- ------ ========
Total............................................... $185 $1,813 --
==== ====== ========
</TABLE>
F-21
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company has incurred losses for the three years ended December 31,
1999. Management believes that, based on the history of such losses and other
factors, the weight of available evidence indicates that it is more likely
than not that the Company will not be able to realize its deferred tax assets
and thus a full valuation reserve has been recorded at December 31, 1999 for
these costs.
10. Employee Profit Sharing Plan
In 1996, an Employee Profit Sharing Plan (the "Profit Sharing Plan") was
established which pays certain employees a percentage of their earnings
dependent on financial results as determined by the Board of Directors. The
cost of the Profit Sharing Plan was approximately $1,828,000, $2,132,000 and
$2,306,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
The Profit Sharing Plan was terminated effective December 31, 1999, with final
payments made before March 15, 2000. To replace this benefit program, the
Company adopted a stock option and incentive plan (see Note 11.)
11. Employee Savings Plan
For the years ended December 31, 1997, 1998 and 1999, the Predecessor and
the Company had a noncontributory Employee Savings Plan (the "Plan"), which
was administered in accordance with the provisions of Section 401(k) of the
Internal Revenue Code. The Plan was a voluntary program in which employees who
met certain requirements elected to reduce their annual salary by up to 18%
and have this amount contributed to the Plan on their behalf. Effective
December 1999, the board of directors and shareholders adopted the 2000 stock
option and incentive plan (the "2000 Plan"). This new plan provides for a
Company match of employee contributions, up to 4%, subject to certain IRS
restrictions. In addition, under the 2000 Plan, employees will be eligible to
purchase common shares at a discount through periodic payroll deductions.
12. Other Related Party Transactions
A law firm, with a partner who was a member of the Predecessor's Board of
Directors during all of 1997 and a portion of 1998, provided legal services to
the Predecessor. Fees paid or accrued to the firm approximated $663,000 and
$216,000 for the years ended December 31, 1997 and 1998 respectively. No fees
were paid or accrued to the firm in 1999 (see Note 8.)
A shareholder/director is the chairman and founder of an internet company,
a former client. During the year ended December 31, 1999, we provided
approximately $85,000 in services under normal business terms to this company.
13. Financial Instruments and Risk Management
Interest Rate Risk Management
Per the terms of the Credit Agreement (see Note 6), the Company utilizes
interest rate swap agreements to fix interest rates on certain portions of the
variable rate term loan and to mitigate the effect of changes in interest
rates on earnings. The Company entered into separate agreements (the
"Agreements") on February 22 and 24, 1999, each for a notional amount of $20
million and each having a maturity date of February 2001. Under the
Agreements, the Company locked in fixed rates of 5.36% and 5.30%,
respectively, on the notional amounts and the Company compensates the
financial institution or is compensated by the financial institution for the
differential between the fixed rates and the current LIBOR rate. The interest
rate differential payable or accruable on the agreements is recognized on an
accrual basis as an adjustment to interest expense. At December 31, 1999
F-22
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
the fair values of the interest rate swaps, which represent the amounts the
Company would receive or pay to terminate the respective agreements, are net
receivables of $240,000 and $273,000, respectively, based on dealer quotes.
The variable rates at December 31, 1999 were 6.5% and 6.1%.
The market risk exposure from the interest rate swap is assessed in light
of the underlying interest rate exposures. Credit risk is minimized as the
agreement is with a major financial institution. The Company monitors the
credit worthiness of this financial institution and full performance is
anticipated.
14. Segment Information
Bronner, Slosberg & Humphrey Inc. and Strategic Interactive Group, Inc.,
were two separate businesses under common control until the Recapitalization
effective January 1, 1999. For purposes of these financial statements only BSH
and SIG have been combined for all periods prior to 1999 and have been titled
as Predecessor. Effective January 1, 1999, BSH and SIG have been integrated
into one operating Company, Digitas ("the Company"). The Company's chief
decision-maker, as defined under SFAS No. 131, is the Chief Executive Officer.
Since the integration, the Company manages its business as one segment. As a
result, the financial information disclosed in these financial statements
represents all of the material financial information related to the Company's
single operating segment.
The Company attempts to limit its concentration of credit risk by securing
well-known clients. While the Company often enters into written agreements
with its clients, such contracts are typically terminable between 30 and 90
days notice. Management believes a loss of significant clients could have a
material adverse effect on the Company's business, financial condition and
results of operations. The table below summarizes customers that individually
comprise greater than 10% of the company's revenue.
<TABLE>
<CAPTION>
A B C
--- --- ---
<S> <C> <C> <C>
1997......................................................... 43% * *
1998......................................................... 23% 24% 17%
1999......................................................... 17% 22% 23%
</TABLE>
* Less than 10% in year presented
15. Commitments
Capitalized Leases
During 1997, the Predecessor entered into an agreement for the sale and
leaseback of certain furniture and fixtures. The Predecessor had a purchase
option at the end of four years equal to remaining amounts due under the lease
plus $1.00. The lease is classified as a capital lease. The book value of the
assets was approximately $1,613,000. The gain realized on the transaction
totaling approximately $194,000 has been deferred and is being amortized over
the life of the assets. Assets under the capital lease were capitalized at
approximately $1,807,000 with an interest rate of 11.1% and are amortized over
the remaining life of the assets which is 5.5 years on average. The
Predecessor paid all amounts outstanding on this lease agreement on January 6,
1999. Additionally, the Company has certain noncancelable leases to finance
telephone and copier equipment.
The total capitalized cost of the assets subject to capital leases was
approximately $3,236,000 and $1,449,000 with accumulated amortization of
approximately $1,344,000 and $590,000 as of December 31, 1998 and 1999,
respectively.
F-23
<PAGE>
DIGITAS
NOTES TO FINANCIAL STATEMENTS--(Continued)
Other Lease Obligations
Office facilities and certain office equipment are leased by the Company
under cancelable and noncancelable operating lease agreements expiring at
various dates through 2011.
The Company leases office space under noncancelable operating leases.
Rental expense, including amounts described above, consisting of minimum lease
payments under noncancelable operating leases amounted to approximately
$6,013,000, $6,819,000, and $8,591,000 for the years ended December 31, 1997,
1998 and 1999, respectively. The Company subleases a portion of its space to
another tenant. The Company's minimum payments were partially offset by tenant
income of $144,000, $228,000, and $286,000 for the years ended December 31,
1997, 1998 and 1999, respectively. Total minimum future tenant income under
these subleases as of December 31, 1999 are approximately $119,000 through May
2000. The future minimum rental payments, under capital and operating leases,
as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
------- ---------
<S> <C> <C>
2000.................................................... $408 $ 11,446
2001.................................................... 237 14,779
2002.................................................... 199 14,762
2003.................................................... 47 14,486
2004.................................................... -- 14,589
Thereafter.............................................. -- 52,103
---- --------
Total minimum rental payments required.................. 891 $122,165
========
Less amount representing interest....................... (37)
----
Present value of net minimum lease payments............. 854
Less current maturities................................. (398)
----
Long-term obligations, capital lease.................... $456
====
</TABLE>
F-24
<PAGE>
Back inside cover:
Digitas logo with list of clients as follows:
Client List
Aetna
American Electric Power
American Express
AT&T
Aquent
Bausch & Lomb
General Motors
Harcourt
Johnson & Johnson
L.L. Bean
Morgan Stanley Dean Witter
Neiman Marcus
Charles Schwab & Co. Inc.
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 12. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses payable by us in
connection with the offering and distribution, including fees and expenses
attributable to shares to be sold on behalf of the selling shareholders
(excluding underwriting discounts and commissions):
<TABLE>
<CAPTION>
Nature of Expense Amount
- ----------------- -------
<S> <C>
SEC Registration Fee................................................... $52,800
NASD Filing Fee........................................................ 20,500
Nasdaq National Market Listing Fee..................................... 1,000
Accounting Fees and Expenses........................................... *
Legal Fees and Expenses................................................ *
Printing Expenses...................................................... *
Blue Sky Qualification Fees and Expenses............................... 15,000
-------
Transfer Agent's Fee................................................... *
Miscellaneous.......................................................... *
-------
TOTAL................................................................
</TABLE>
The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq
National Market fees, are in each case estimated.
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our certificate of incorporation provides that no director of
Digitas be personally liable to Digitas or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (1)
for any breach of the director's duty of loyalty to Digitas or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) in respect of
unlawful dividend payments or stock redemptions or repurchases, or (4) for any
transaction from which the director derived an improper personal benefit. In
addition, our certificate of incorporation provides that if the Delaware
General Corporation Law is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the corporation shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporation Law, as so amended.
Article V of our by-laws provides for indemnification by Digitas of its
officers and particular non-officer employees under specific circumstances
against expenses, including attorneys fees, judgments, fines and amounts paid
in settlement, reasonably incurred in connection with the defense or
settlement of any threatened, pending or completed legal proceeding in which
any such person is involved by reason of the fact that such person is or was
an officer or employee of the registrant if such person acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of Digitas, and, with respect to criminal actions or
proceedings, if such person had no reasonable cause to believe his or her
conduct was unlawful.
Item 15. Recent Sales of Unregistered Securities
Since its formation on November 5, 1998, our predecessor entity, Bronner
Slosberg Humphrey Co., a Massachusetts business trust (the "Trust"), has
issued the following securities that were not registered under the Securities
Act of 1933, as amended (the "Securities Act"). The share numbers and per
share values give effect to the 30-for-1 stock split effected by the Trust in
the form of a stock dividend on December 2, 1999 and a two-for-one stock split
effected by the Trust on February 10, 2000.
II-1
<PAGE>
(i) In connection with the formation of the Trust, on November 5, 1998 the
Trust issued 60,000 shares of beneficial interest in the Trust (the "Shares")
to Michael E. Bronner under Section 4(2) of the Securities Act ("Section
4(2)") for sales by an issuer not involving a public offering.
(ii) On November 6, 1998, in connection with the merger of Bronner Slosberg
Humphrey, Inc. (the "Predecessor Corporation") with and into Bronner Slosberg
Humphrey, LLC ("BSH LLC"), the Trust:
(a) issued 48,930,021.60 Shares in the Trust to three investors in
exchange for the cancellation of the same number of shares, with
the same par value, held by such investors in the Predecessor
Corporation, all pursuant to Section 4(2) for sales by an issuer
not involving a public offering;
(b) assumed options to purchase 829,322.40 shares of the Predecessor
Corporation granted to two employees pursuant to employee stock
option agreements of the Predecessor Corporation as if such
options were granted by the Trust, without any changes being made
to either holder's rights under these employee stock option
agreements and in reliance on Section 3(b) of the Securities Act
("Section 3(b)") and Rule 701 promulgated thereunder ("Rule 701")
relative to sales pursuant to certain compensatory plans (to date,
no option holder has exercised these options); and
(c) assumed 13,530,000 units of stock appreciation rights ("SARS")
granted to seventeen investors under the Predecessor Corporation's
1997 stock appreciation rights plan as if such SARS were granted
by the Trust, without any changes being made to such holder's
rights thereunder, and pursuant to Rule 506 ("Rule 506") of
Regulation D promulgated under Section 4(2) ("Regulation D") for
sales by an issuer not involving a public offering. The investors
that participated in this Rule 506 offering each qualified as an
accredited investor pursuant to Rule 501 under Regulation D ("Rule
501").
(iii) On January 6, 1999, in connection with the recapitalization of the
Trust, the Trust:
(a) issued options to purchase 13,140,000 Shares in the Trust to
sixteen investors under the 1998 Option Plan (the "1998 Plan") in
exchange for the cancellation of 13,140,000 SARS, and the
redemption of 390,000 SARS held by seventeen investors and, all
granted in reliance on Section 3(a)(9) of the Securities Act
("Section 3(a)(9)") for exchanges by the issuer with certain
security holders and 330,000 of which were also granted to
fourteen of the investors pursuant to Rule 506 of Regulation D
promulgated under Section 4(2) for sales by an issuer not
involving a public offering; the investors that participated in
this Rule 506 offering each qualified as an accredited investor
pursuant to Rule 501 under Regulation D (to date, no option holder
has exercised these options);
(b) issued options to purchase 829,322.40 Shares in the Trust to two
employees under the 1998 Plan in exchange for the cancellation of
829,322.40 options granted pursuant such employees' stock option
agreements assumed in connection with the merger of the
Predecessor Corporation with and into BSH LLC and in reliance on
Section 3(a)(9) for exchanges by the issuer with certain security
holders (these options were repurchased by the Trust on July 6,
1999); and
(c) issued options to purchase 6,660,000 Shares in the Trust to
eighteen investors under the 1998 Plan pursuant to closing option
agreements, of which 402,000 were issued to three investors in
reliance on Rule 701 relative to sales pursuant to certain
compensatory plans and 6,258,000 were issued to fifteen investors
pursuant to Rule 506 of Regulation D promulgated under Section
4(2) for sales by an issuer not involving a public offering; the
investors that participated in this Rule 506 offering each
qualified as an accredited investor pursuant to Rule 501 under
Regulation D (to date, 1,050,000 of these options which were held
by three investors have expired);
II-2
<PAGE>
(d) issued a warrant for 900,000 Shares to one investor pursuant to
the terms of the warrant agreement, dated as of January 6, 1999,
and in reliance on Section 4(2) for sales by an issuer not
involving a public offering.
(iv) On January 7, 1999, in connection with the transfer of Strategic
Interactive Group Co.'s ("SIG CO") membership interest in SIG Holding LLC
("SIG Holding") to the Trust, the Trust:
(a) issued 11,261,434.80 Shares of the Trust to SIG Co. in exchange
for the transfer of its membership interest in SIG Holding and in
reliance on Section 4(2) for sales by an issuer not involving a
public offering; and
(b) issued options to purchase 3,326,644.80 Shares of the Trust to
nine investors pursuant to the Trust's 1998 Plan in exchange for
the transfer by SIG Co. of its membership interest in SIG Holding,
of which 40,063.80 were issued to two investors pursuant to Rule
701 relative to sales pursuant to certain compensatory plans and
3,286,581 were issued to seven investors pursuant to Rule 506 of
Regulation D promulgated under Section 4(2) for sales by an issuer
not involving a public offering. The investors that participated
in this Rule 506 offering each qualified as an accredited investor
pursuant to Rule 501 under Regulation D (118,448.40 Shares of the
Trust have been issued to a holder upon the exercise of his
options).
(v) From January 8, 1999 to December 31, 1999, the Trust has issued the
following:
(a) in August 1999, the Trust sold 99,271.80 of its Shares to Arthur
Kern as trustee of the Arthur Kern Revocable Trust for an
aggregate purchase price of $249,834.03 and pursuant to Rule 506
of Regulation D promulgated under Section 4(2) for sales by an
issuer not involving a public offering; the investors that
participated in this Rule 506 offering each qualified as an
accredited investor pursuant to Rule 506 under Regulation D;
(b) in August 1999, the Trust sold 99,271.80 of its Shares to Alan
Beck for an aggregate purchase price of $249,834.03 and pursuant
to Rule 506 of Regulation D promulgated under Section 4(2) for
sales by an issuer not involving a public offering the investors
that participated in this Rule 506 offering each qualified as an
accredited investor pursuant to Rule 506 under Regulation D;
(c) in August 1999, the Trust sold 300,000 of its Shares to Orit
Gadiesch for an aggregate purchase price of $755,000.00 and
pursuant to Rule 506 of Regulation D promulgated under Section
4(2) for sales by an issuer not involving a public offering; the
investors that participated in this Rule 506 offering each
qualified as an accredited investor pursuant to Rule 506 under
Regulation D;
(d) pursuant to the Trust's 1998 Plan, the Trust has issued options to
purchase 4,752,000 Shares of the Trust to twenty-one investors, of
which 180,000 were issued to one such investor in reliance on Rule
701 relative to sales pursuant to certain compensatory plans and
4,572,000 were issued to twenty investors in reliance on Rule 506
of Regulation D promulgated under Section 4(2) for sales by an
issuer not involving a public offering; the investors that
participated in this Rule 506 offering each qualified as an
accredited investor pursuant to Rule 506 under Regulation D (to
date, no option holder has exercised these options); and
(e) pursuant to the Trust's 1999 Option Plan the Trust has issued a
total of 3,847,999 options to purchase Shares of the Trust, of
which 2,281,999 were issued to 1,201 investors in reliance on Rule
701 relative to sales pursuant to certain compensatory plans and
1,566,000 were issued to seven investors in reliance on Rule 506
of Regulation D promulgated under Section 4(2) for sales by an
issuer not involving a public offering. The investors that
participated in this Rule 506 offering each qualified as an
accredited investor pursuant to Rule 501 under Regulation D (to
date, no option holder has exercised these options).
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger, dated as of November 6, 1998, by and
among Bronner Slosberg Humphrey, LLC; Bronner Slosberg Humphrey Inc.;
and Bronner Slosberg Humphrey Co.
2.2 Agreement and Plan of Merger, dated as of November 6, 1998, by and
among Strategic Interactive Group, LLC; Strategic Interactive Group,
Inc.; and Strategic Interactive Group Co.
2.3 Agreement and Plan of Merger, dated as of January 7, 1999, by and among
Bronner Slosberg Humphrey, LLC; Strategic Interactive Group, LLC; and
Bronner Slosberg Humphrey Co.
2.4 Agreement and Plan of Merger, dated as of January 7, 1999, by and among
BSH Holding LLC; SIG Holding LLC; and Bronner Slosberg Humphrey Co.
2.5 The Recapitalization Agreement, dated as of November 28, 1998, by and
among Hellman & Friedman Capital Partners III, L.P.; H & F Orchard
Partners III, L.P.; H & F International Partners III, L.P.; Positano
Partners Ltd.; Bronner Slosberg Humphrey Co.; Strategic Interactive
Group Co.; the Shareholders of BSH and SIG; the Option Holders of BSH
and SIG; the Share Appreciation Rights Holders of BSH and SIG; and the
Other Rights Holders of BSH (including the Amendment Agreement, dated
as of January 6, 1999).
3.1 Certificate of Incorporation of Digitas Inc.
3.2 By-laws of Digitas Inc.
4.1 Specimen certificate for shares of common stock, $.01 par value, of
Digitas Inc.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being offered.
10.1 The Bronner Slosberg Humphrey Co., 1998 Option Plan.
10.2 The Bronner Slosberg Humphrey Co., 1999 Option Plan.
+10.3 Form of 2000 Stock Option and Incentive Plan.
10.4 Form of 2000 Employee Stock Purchase Plan.
10.5 Lease Agreement, dated as of May 31, 1995, by and between The
Prudential Insurance Company of America and Bronner Slosberg Humphrey
Inc. (including amendment numbers 1-6, each dated as of May 31, 1995).
10.6 Seventh Amendment to Lease, dated as of March 29, 1999, by and between
BP Prucenter Acquisition, LLC and Bronner Slosberg Humphrey, LLC.
10.7 Eight Amendment to Lease, dated as of July 30, 1999, by and between BP
Prucenter Acquisition, LLC and Bronner Slosberg Humphrey, LLC.
10.8 Sublease, dated as of December 22, 1997, by and between EMI
Entertainment World, Inc., and Bronner Slosberg Humphrey Inc.
10.9 Sublease, dated as of March 22, 1999, by and between EMI Music, Inc.
and Bronner Slosberg Humphrey, LLC.
10.10 Agreement of Sublease, dated as of April 29, 1999, by and between
Warner Music Group Inc. and Bronner Slosberg Humphrey, LLC.
10.11 Agreement of Sublease, dated as of November 15, 1999, by and between
Bill Communications, Inc. and Bronnercom, LLC.
10.12 Sub-Sublease Agreement, dated as of June 5, 1998, by and between
Strategic Interactive Group, Inc. and Allegiance Telecom, Inc.
(including the termination of the Sub-Sublease Agreement, dated as of
December 7, 1999).
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.13 Sublease Agreement, dated as of August 21, 1997, by and among Tesseract
Corporation; Strategic Interactive Group, Inc.; and Bronner Slosberg
Humphrey Inc. (including the First Amendment, dated as of June 15,
1999).
10.14 Lease Agreement, dated as of August 23, 1999, by and between M&S
Balanced Property Fund, L.P. and Bronnercom, LLC.
10.15 Lease Agreement, dated as of May 20, 1999, by and between Forward
Publishing Limited and Bronner Slosberg Humphrey (UK) Inc.
10.16 Credit Agreement, dated as of January 6, 1999, by and among Bronner
Slosberg Humphrey, LLC and Strategic Interactive Group, LLC (as
borrower); the Lenders listed therein (as lenders); Bankers Trust
Company (as administrative agent); Fleet National Bank (as documentation
agent); and BankBoston, N.A. (as syndication agent).
10.17 The First Amendment to Credit Agreement, dated as of November 5, 1999,
by and among Bronnercom, LLC (as borrower); the lenders listed on the
signature page thereof (as lenders); Bankers Trust Company (as
administrative agent); and Fleet Boston Corporation (as documentation
and syndication agent).
10.18 Warrant Agreement, dated as of January 6, 1999, by and between Bronner
Slosberg Humphrey Co. and Positano Partners Ltd.
10.19 Escrow Agreement, dated as of January 6, 1999, by and among Michael E.
Bronner; David W. Kenny; Bronner Slosberg Humphrey Co.; Strategic
Interactive Group Co.; Positano Partners Ltd.; and Boston Safe Deposit
and Trust Co.
10.20 Shareholders Agreement, dated as of January 6, 1999, by and among
Positano Partners Ltd.; the Holders (as defined therein); Michael E.
Bronner; The Michael E. Bronner 1998 Annuity Trust; Bronner Slosberg
Humphrey Co.; Bronner Slosberg Humphrey, LLC; and BSH Holding.
10.21 Governance Agreement, dated as of January 6, 1999, by and among Positano
Partners Ltd.; Vesuvio, Inc.; Michael E. Bronner; and David W. Kenny.
10.22 Registration Rights Agreement, dated as of January 6, 1999, by and among
Bronner Slosberg Humphrey Co.; Positano Partners Ltd.; Michael E.
Bronner; and the Persons listed on Schedule 1 thereto.
10.23 Employment Agreement, dated as of January 6, 1999, by and between
Kathleen Biro and Bronner Slosberg Humphrey, LLC.
10.24 Employment Agreement, dated as of January 6, 1999, by and between David
W. Kenny and Bronner Slosberg Humphrey, LLC.
10.25 Employment Agreement, dated as of January 6, 1999, by and between
Michael Ward and Bronner Slosberg Humphrey, LLC.
10.26 Employment Agreement, dated as of January 10, 2000, by and between
Michael Goss and Digitas Inc.
10.27 Employment Agreement, dated as of January 10, 2000, by and between
Robert Galford and Digitas Inc.
10.28 Employment Agreement, dated as of January 10, 2000, by and between
Marschall Smith and Digitas Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
*10.29 Advertising Agreement, dated as of January 19, 1999, by and between
AT&T Corp. and Bronner Slosberg Humphrey.
10.30 General Agreement, dated as of April 12, 1999, by and between AT&T
Corp. and Bronner Slosberg Humphrey.
*10.31 Advertising Agreement, dated as of April 12, 1999, by and between AT&T
Corp. and Bronner Slosberg Humphrey (including the Agreement Amendment,
dated as of May 12, 1999).
*10.32 Advertising/Marketing Agreement, dated as of October 11, 1995, by and
between AT&T Communications, Inc.-Business Communications Services and
Bronner Slosberg Humphrey Inc. (including the Agreement Amendment,
dated as of November 27, 1995).
*10.33 Direct Marketing Agreement, dated as of July 24, 1997, by and between
Cellular Telephone Company (d/b/a AT&T Wireless Services, Northeast
Region) and Bronner Slosberg Humphrey Inc.
10.34 Letter of Engagement, dated as of July 1, 1999, by and among AT&T
Interactive Group, AT&T Corporation and Strategic Interactive Group.
*10.35 Marketing & Advertising Services Agreement, dated as of January 1,
2000, by and between Bronnercom, LLC and General Motors Corporation.
(Draft)
10.36 Agreement 2000 Compensation, dated as of January 5, 2000, by and
between General Motors Corporation, Oldsmobile Division and Bronnercom,
LLC.
*10.37 Advertising/Marketing Promotion Agency Agreement, dated as of October
1, 1997, by and between American Express Travel Related Services
Company, Inc. and Bronner Slosberg Humphrey Inc.
10.38 Form of Indemnification Agreement.
21.1 Subsidiaries of Digitas Inc.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Report of Independent Public Accountants on Financial Statement
Schedule.
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
99.1 Form of 180 Day Lock-up Agreement.
99.2 Form of 90/90 Day Lock-up Agreement.
</TABLE>
- --------
+ To be filed by amendment to the registration statement.
* Filed herewith; portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the Financial Statements or Notes
to those statements.
II-6
<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes 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
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act 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 of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, Commonwealth of Massachusetts, on February 11, 2000.
DIGITAS INC.
By: /s/ David W. Kenny
-----------------------------------
Name: David W. Kenny
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints each of David W. Kenny and Michael Ward
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to
any other registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act), and to file the
same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto each said attorney-
in-fact and agent full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that any said attorney-in-fact and agent,
or any substitute or substitutes of any of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Signature Title
Date
/s/ David W. Kenny Chief Executive Officer and February 11, 2000
- ----------------------------- Chairman of the Board of
David W. Kenny Directors
(principal executive
officer)
/s/ Michael Goss Chief Financial Officer February 11, 2000
- ----------------------------- (principal financial officer
Michael Goss and principal accounting
officer)
/s/ * Director February 11, 2000
- -----------------------------
Michael E. Bronner
/s/ * Director February 11, 2000
- -----------------------------
John L. Bunce, Jr.
* Director February 11, 2000
- -----------------------------
Orit Gadiesh
</TABLE>
II-8
<PAGE>
<TABLE>
<S> <C>
/s/ * Director February 11, 2000
- -----------------------------
Patrick J. Healy
/s/ * Director February 11, 2000
- -----------------------------
Arthur Kern
/s/ * Director February 11, 2000
- -----------------------------
Kathleen L. Biro
/s/ * Director February 11, 2000
- -----------------------------
Philip U. Hammarskjold
/s/ Michael Ward February 11, 2000
- -----------------------------
Michael Ward
Attorney in Fact
.
</TABLE>
II-9
<PAGE>
SCHEDULE II
DIGITAS
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Charge To
Description Beginning Expense Deductions Ending
----------- --------- --------- ---------- ------
<S> <C> <C> <C> <C>
FISCAL YEAR 1999
Allowance for Doubtful Accounts........... $741 $1,137 $(825) $1,053
FISCAL YEAR 1998
Allowance for Doubtful Accounts........... 707 310 (276) 741
FISCAL YEAR 1997
Allowance for Doubtful Accounts........... 551 156 -- 707
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- ----------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger, dated as of November 6, 1998, by
and among Bronner Slosberg Humphrey, LLC; Bronner Slosberg
Humphrey Inc.; and Bronner Slosberg Humphrey Co.
2.2 Agreement and Plan of Merger, dated as of November 6, 1998, by
and among Strategic Interactive Group, LLC; Strategic
Interactive Group, Inc.; and Strategic Interactive Group Co.
2.3 Agreement and Plan of Merger, dated as of January 7, 1999, by
and among Bronner Slosberg Humphrey, LLC; Strategic Interactive
Group, LLC; and Bronner Slosberg Humphrey Co.
2.4 Agreement and Plan of Merger, dated as of January 7, 1999, by
and among BSH Holding LLC; SIG Holding LLC; and Bronner
Slosberg Humphrey Co.
2.5 The Recapitalization Agreement, dated as of November 28, 1998,
by and among Hellman & Friedman Capital Partners III, L.P.; H &
F Orchard Partners III, L.P.; H & F International Partners III,
L.P.; Positano Partners Ltd.; Bronner Slosberg Humphrey Co.;
Strategic Interactive Group Co.; the Shareholders of BSH and
SIG; the Option Holders of BSH and SIG; the Share Appreciation
Rights Holders of BSH and SIG; and the Other Rights Holders of
BSH (including the Amendment Agreement, dated as of January 6,
1999).
3.1 Certificate of Incorporation of Digitas Inc.
3.2 By-laws of Digitas Inc.
4.1 Specimen certificate for shares of common stock, $.01 par
value, of Digitas Inc.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities being offered.
10.1 The Bronner Slosberg Humphrey Co., 1998 Option Plan.
10.2 The Bronner Slosberg Humphrey Co., 1999 Option Plan.
+10.3 Form of 2000 Stock Option and Incentive Plan.
10.4 Form of 2000 Employee Stock Purchase Plan.
10.5 Lease Agreement, dated as of May 31, 1995, by and between The
Prudential Insurance Company of America and Bronner Slosberg
Humphrey Inc. (including amendment numbers
1-6, each dated as of May 31, 1995).
10.6 Seventh Amendment to Lease, dated as of March 29, 1999, by and
between BP Prucenter Acquisition, LLC and Bronner Slosberg
Humphrey, LLC.
10.7 Eight Amendment to Lease, dated as of July 30, 1999, by and
between BP Prucenter Acquisition, LLC and Bronner Slosberg
Humphrey, LLC.
10.8 Sublease, dated as of December 22, 1997, by and between EMI
Entertainment World, Inc., and Bronner Slosberg Humphrey Inc.
10.9 Sublease, dated as of March 22, 1999, by and between EMI Music,
Inc. and Bronner Slosberg Humphrey, LLC.
10.10 Agreement of Sublease, dated as of April 29, 1999, by and
between Warner Music Group Inc. and Bronner Slosberg Humphrey,
LLC.
10.11 Agreement of Sublease, dated as of November 15, 1999, by and
between Bill Communications, Inc. and Bronnercom, LLC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- ----------- ----
<C> <S> <C>
10.12 Sub-Sublease Agreement, dated as of June 5, 1998, by and
between Strategic Interactive Group, Inc. and Allegiance
Telecom, Inc. (including the termination of the Sub-Sublease
Agreement, dated as of December 7, 1999).
10.13 Sublease Agreement, dated as of August 21, 1997, by and among
Tesseract Corporation; Strategic Interactive Group, Inc.; and
Bronner Slosberg Humphrey Inc. (including the First Amendment,
dated as of June 15, 1999).
10.14 Lease Agreement, dated as of August 23, 1999, by and between
M&S Balanced Property Fund, L.P. and Bronnercom, LLC.
10.15 Lease Agreement, dated as of May 20, 1999, by and between
Forward Publishing Limited and Bronner Slosberg Humphrey (UK)
Inc.
10.16 Credit Agreement, dated as of January 6, 1999, by and among
Bronner Slosberg Humphrey, LLC and Strategic Interactive Group,
LLC (as borrower); the Lenders listed therein (as lenders);
Bankers Trust Company (as administrative agent); Fleet National
Bank (as documentation agent); and BankBoston, N.A. (as
syndication agent).
10.17 The First Amendment to Credit Agreement, dated as of November
5, 1999, by and among Bronnercom, LLC (as borrower); the
lenders listed on the signature page thereof (as lenders);
Bankers Trust Company (as administrative agent); and Fleet
Boston Corporation (as documentation and syndication agent).
10.18 Warrant Agreement, dated as of January 6, 1999, by and between
Bronner Slosberg Humphrey Co. and Positano Partners Ltd.
10.19 Escrow Agreement, dated as of January 6, 1999, by and among
Michael E. Bronner; David W. Kenny; Bronner Slosberg Humphrey
Co.; Strategic Interactive Group Co.; Positano Partners Ltd.;
and Boston Safe Deposit and Trust Co.
10.20 Shareholders Agreement, dated as of January 6, 1999, by and
among Positano Partners Ltd.; the Holders (as defined therein);
Michael E. Bronner; The Michael E. Bronner 1998 Annuity Trust;
Bronner Slosberg Humphrey Co.; Bronner Slosberg Humphrey, LLC;
and BSH Holding.
10.21 Governance Agreement, dated as of January 6, 1999, by and among
Positano Partners Ltd.; Vesuvio, Inc.; Michael E. Bronner; and
David W. Kenny.
10.22 Registration Rights Agreement, dated as of January 6, 1999, by
and among Bronner Slosberg Humphrey Co.; Positano Partners
Ltd.; Michael E. Bronner; and the Persons listed on Schedule 1
thereto.
10.23 Employment Agreement, dated as of January 6, 1999, by and
between Kathleen Biro and Bronner Slosberg Humphrey, LLC.
10.24 Employment Agreement, dated as of January 6, 1999, by and
between David W. Kenny and Bronner Slosberg Humphrey, LLC.
10.25 Employment Agreement, dated as of January 6, 1999, by and
between Michael Ward and Bronner Slosberg Humphrey, LLC.
10.26 Employment Agreement, dated as of January 10, 2000, by and
between Michael Goss and Digitas Inc.
10.27 Employment Agreement, dated as of January 10, 2000, by and
between Robert Galford and Digitas Inc.
10.28 Employment Agreement, dated as of January 10, 2000, by and
between Marschall Smith and Digitas Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- ----------- ----
<C> <S> <C>
*10.29 Advertising Agreement, dated as of January 19, 1999, by and
between AT&T Corp. and Bronner Slosberg Humphrey.
10.30 General Agreement, dated as of April 12, 1999, by and between
AT&T Corp. and Bronner Slosberg Humphrey.
*10.31 Advertising Agreement, dated as of April 12, 1999, by and
between AT&T Corp. and Bronner Slosberg Humphrey (including the
Agreement Amendment, dated as of May 12, 1999).
*10.32 Advertising/Marketing Agreement, dated as of October 11, 1995,
by and between AT&T Communications, Inc.-Business
Communications Services and Bronner Slosberg Humphrey Inc.
(including the Agreement Amendment, dated as of November 27,
1995).
*10.33 Direct Marketing Agreement, dated as of July 24, 1997, by and
between Cellular Telephone Company (d/b/a AT&T Wireless
Services, Northeast Region) and Bronner Slosberg Humphrey Inc.
10.34 Letter of Engagement, dated as of July 1, 1999, by and among
AT&T Interactive Group, AT&T Corporation and Strategic
Interactive Group.
*10.35 Marketing & Advertising Services Agreement, dated as of January
1, 2000, by and between Bronnercom, LLC and General Motors
Corporation. (Draft)
10.36 Agreement 2000 Compensation, dated as of January 5, 2000, by
and between General Motors Corporation, Oldsmobile Division and
Bronnercom, LLC.
*10.37 Advertising/Marketing Promotion Agency Agreement, dated as of
October 1, 1997, by and between American Express Travel Related
Services Company, Inc. and Bronner Slosberg Humphrey Inc.
10.38 Form of Indemnification Agreement.
21.1 Subsidiaries of Digitas Inc.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Report of Independent Public Accountants on Financial Statement
Schedule.
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
99.1 Form of 180 Day Lock-up Agreement.
99.2 Form of 90/90 Day Lock-up Agreement.
</TABLE>
- --------
+ To be filed by amendment to the registration statement.
* Filed herewith; portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
<PAGE>
EXHIBIT 1.1
_______________ SHARES
DIGITAS INC.
COMMON STOCK, $0.01 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
February __, 2000
<PAGE>
February __, 2000
Morgan Stanley & Co. Incorporated
Deutsche Banc Alex. Brown
Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Digitas Inc., a Delaware corporation (the "COMPANY"), proposes to issue and
sell to the several Underwriters named in Schedule II hereto (the
"UNDERWRITERS"), and Hellman & Friedman Capital Partners III, L.P., H&F Orchard
Partners III, L.P., H&F International Partners III, L.P., Squam Lake Investors,
III L.P. and Sunapee Securities, Inc. (together, the "SELLING SHAREHOLDERS")
severally propose to sell to the several Underwriters, an aggregate of
_______________ shares of the Common Stock, $0.01 par value per share of the
Company (the "FIRM SHARES"), of which _____________ shares are to be issued and
sold by the Company and _____________ shares are to be sold by the Selling
Shareholders, each Selling Shareholder selling the amount set forth opposite
such Selling Shareholder's name in Schedule I hereto.
The Company also proposes to issue and sell to the several Underwriters not
more than an additional ______________ shares of its Common Stock, $0.01 par
value per share (the "ADDITIONAL SHARES") if and to the extent that you, as
Managers of the offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "SHARES". The shares of Common
Stock, $0.01 par value per share, of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK". The Company and the Selling Shareholders are hereinafter
sometimes collectively referred to as the "SELLERS".
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The
<PAGE>
registration statement as amended at the time it becomes effective, including
the information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION
STATEMENT"; the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "PROSPECTUS". If the Company has filed an
abbreviated registration statement to register additional shares of Common Stock
pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION
STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT"
shall be deemed to include such Rule 462 Registration Statement.
It is understood and agreed that immediately prior to the closing of the
above-mentioned offering of the Firm Shares, DGT Merger Corp., a Massachusetts
corporation and a wholly owned subsidiary of the Company, will be merged with
and into Bronner Slosberg Humphrey Co., a Massachusetts Business Trust (the
"Trust"), with the Trust being the surviving entity (the "Merger"). The Merger
will be accomplished on the terms and conditions set forth in that certain
Agreement and Plan of Merger, dated as of [the date hereof], by and between the
Company, DGT and the Trust (the "Merger Agreement"). Upon the effectiveness of
the Merger, the Trust will become a wholly owned subsidiary of the Company, and
all shares of capital stock or options to purchase capital stock in the Trust
will be canceled and converted into the right to receive capital stock or
options to purchase capital stock in the Company, on the terms set forth in the
Merger Agreement.
Salomon Smith Barney Inc. has agreed to reserve a portion of the Shares to
be purchased by it under this Agreement for sale to the Company's directors,
officers, employees and business associates and other parties related to the
Company (collectively, "Participants"), as set forth in the Prospectus under the
heading "Underwriters" (the "Directed Share Program"). The Shares to be sold by
Salomon Smith Barney Inc. and its affiliates pursuant to the Directed Share
Program are referred to hereinafter as the "Directed Shares." Any Directed
Shares not orally confirmed for purchase by any Participants by the end of the
business day on which this Agreement is executed will be offered to the public
by the Underwriters as set forth in the Prospectus.
1. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective, or in the case of
a Rule 462 Registration Statement, will become effective upon filing; no
stop order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) the Registration Statement and the Prospectus
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comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement, or any amendment thereto, or the
Prospectus, or any supplement thereof, based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and the Trust (considered as one entity) and its
subsidiaries, taken as a whole; and the Trust has been duly organized and
is validly existing as a Massachusetts Business Trust in good standing
under the laws of the Commonwealth of Massachusetts, with the power to own
its properties and conduct its business as described in the Prospectus, and
is duly qualified for the transaction of business and is in good standing
under the laws of each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing would
not have a material adverse effect on the Company and the Trust (considered
as one entity) and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company or the Trust has been duly
incorporated, is validly existing as a corporation or business trust in
good standing under the laws of the jurisdiction of its incorporation or
formation, has the corporate or similar power and authority to own its
property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and the Trust (considered as one
entity) and its subsidiaries, taken as a whole; all of the issued shares of
capital stock or other equity interests of each subsidiary of the Company
or the Trust have been duly and validly authorized and issued, are fully
paid and non-assessable (in the case of corporate subsidiaries) and are
owned directly or indirectly by the Company or the Trust, free and clear of
all liens, encumbrances, equities or claims.
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(e) This Agreement has been duly authorized, executed and delivered by
the Company and the Trust.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock (including the Shares to be sold by the
Selling Shareholders) outstanding prior to the issuance of the Shares to be
sold by the Company (after giving effect to the Merger) have been duly
authorized and are validly issued, fully paid and non-assessable.
(h) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered against payment therefor in accordance with
the terms of this Agreement, will be validly issued, fully paid and non-
assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company and the Trust of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company, the Limited Liability Company
Agreement of the Trust or any agreement or other instrument binding upon
the Company or the Trust or any of its subsidiaries that is material to the
Company and the Trust (considered as one entity) and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or the Trust or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company or the Trust of its obligations under this
Agreement, except the registration of the Shares under the Securities Act
or such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Shares.
(j) Since the respective dates as of which information is given in the
Registration Statement or the Prospectus, there has not occurred any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and the Trust
(considered as one entity) and its subsidiaries, taken as a whole, from the
description thereof set forth in the Prospectus (exclusive of any
amendments or supplements to the Registration Statement and/or the
Prospectus subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or, to the
Company's and the Trust's knowledge, threatened to which the Company and
the Trust or any of its subsidiaries is a party or to which any of the
properties of the Company and the Trust or any of their subsidiaries is
subject that are required to be described in the
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Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required.
(l) Each prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Securities Act, complied when so filed in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder.
(m) The Company is not, and after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus will not be, required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(n) The Company and the Trust and their subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, license or approval,
except where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company
and the Trust (considered as one entity) and its subsidiaries, taken as a
whole.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and the Trust (considered as one entity) and its
subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between the
Company or the Trust and any person granting such person the right to
require the Company to file a registration statement under the Securities
Act with respect to any securities of the Company or to require the Company
to include such securities with the Shares registered pursuant to the
Registration Statement, which contract, agreement or understanding has not
been disclosed in the Registration Statement and the provisions of which
have not been complied with or waived in respect of this Offering.
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(q) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
disclosed in the Registration Statement or the Prospectus with respect to
the Merger, (1) the Company and the Trust (considered as one entity) and
its subsidiaries have not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Trust has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and the Trust and its subsidiaries, except in each case as
described in the Prospectus.
(r) The Company and the Trust or one of their subsidiaries has good
title in fee simple to all real property and good title to all personal
property owned by them which is material to the business of the Company and
the Trust and their subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and the Trust and their subsidiaries; and any real property and
buildings held under lease by the Company and the Trust and their
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such property and buildings by the
Company and the Trust and their subsidiaries, in each case except as
described in the Prospectus.
(s) Other than as set forth in the Prospectus, the Company and the
Trust and their subsidiaries own or possess, or can acquire on reasonable
terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently employed
by them in connection with the business now operated by them, and none of
the Company, the Trust nor any of their subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse affect on the Company and the Trust (considered as one
entity) and their subsidiaries, taken as a whole.
(t) No material labor dispute with the employees of the Company and
the Trust or any of their subsidiaries exists, except as described in the
Prospectus, or, to the knowledge of the Company and the Trust, is imminent;
and neither the Company nor the Trust is aware of any existing, threatened
or imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could have a
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material adverse effect on the Company and the Trust (considered as one
entity) and their subsidiaries, taken as a whole.
(u) The Company, the Trust and their subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which they are engaged; none of the Company, the Trust nor any of their
subsidiaries has been refused any insurance coverage sought or applied for;
and neither the Company nor any of its subsidiaries has any reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described in the Prospectus.
(v) The Company, the Trust and their subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their
respective businesses, except to the extent failure to have the same would
not have a material adverse effect on the Company and the Trust (considered
as one entity) and its subsidiaries, taken as a whole, and none of the
Company, the Trust nor any of their subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which proceedings, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the Company and the Trust
(considered as one entity) and its subsidiaries, taken as a whole, except
as described in the Prospectus.
(w) The Company and the Trust and each of their subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (3) access to assets is permitted only in accordance
with management's general or specific authorization; and (4) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(x) To the Company's knowledge, the accountants who have certified or
shall certify the financial statements filed or to be filed with the
Commission as part of the Registration Statement and the Prospectus are
independent accountants as required by the Securities Act and the rules and
regulations thereunder. The consolidated financial statements of the
Company (together with the related notes thereto) included in the
Registration Statement present fairly the financial position and results of
operations of the Company at the respective dates and for the respective
periods to which they apply,
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subject to normal year-end adjustments. Such consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as otherwise stated therein. The pro forma financial information of
the Company included in the Registration Statement has been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements, has been properly compiled on the bases
described therein and, in the opinion of the Company, the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(y) The Shares have been approved for listing on the Nasdaq National
Market.
(z) The Registration Statement, the Prospectus and any preliminary
prospectus comply, and any amendments or supplements thereto will comply,
with any applicable laws or regulations of foreign jurisdictions in which
the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share
Program.
(aa) No consent, approval, license, authorization or order of, or
registration or qualification with, any governmental body or agency or
court, other than those obtained, is required in connection with the
offering of the Directed Shares in any jurisdiction where the Directed
Shares are being offered.
(bb) Neither the Company nor the Trust has offered, or caused the
Underwriters or their affiliates to offer, Shares to any person pursuant to
the Directed Share Program with the specific intent to unlawfully influence
(i) a customer or supplier of the Company or the Trust to alter the
customer's or supplier's level or type of business with the Company or the
Trust, or (ii) a trade journalist or publication to write or publish
favorable information about the Company or the Trust or its products.
(cc) The Trust has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations of
the Trust or any of its subsidiaries has been affected by the Year 2000
Problem (that is, any significant risk that computer hardware or software
applications used by the Trust and its subsidiaries will not, in the case
of dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000); as a result of such review, (i) the Trust has no
reason to believe, and does not believe, that (A) there are any issues
related to the Trust's preparedness to address the Year 2000 Problem that
are of a character required to be described or referred to in the
Registration Statement or Prospectus which have not been accurately
described in the Registration Statement or Prospectus and (B) the Year 2000
Problem has had or will have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business or operations of the
Trust and its subsidiaries, taken as a whole, or result in any
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<PAGE>
material loss or interference with the business or operations of the
Company and the Trust (considered as one entity) and its subsidiaries,
taken as a whole; and (ii) the Trust reasonably believes, after due
inquiry, that the suppliers, vendors, customers or other material third
parties used or served by the Company and the Trust and such subsidiaries
have addressed, are addressing or will address the Year 2000 Problem in a
timely manner, except to the extent that a failure to address the Year 2000
Problem by any supplier, vendor, customer or material third party would not
have a material adverse effect on the condition, financial or otherwise, or
on the earnings, business or operations of the Company and the Trust
(considered as one entity) and its subsidiaries, taken as a whole.
(dd) To the knowledge of the Trust and the Company, no officer or
director of the Company or the Trust is in breach or violation of any
employment agreement, non-competition agreement, confidentiality agreement,
or other agreement restricting the nature or scope of employment to which
such officer or director is a party, and, to the knowledge of the Company
and the Trust, the conduct of the Company's business, as described in the
Registration Statement and Prospectus, will not result in a breach or
violation of any such agreement.
(ee) There are no outstanding options to acquire shares of capital
stock of the Company except as disclosed in the Registration Statement and
the Prospectus and except as have been granted under the [ ].
(ff) There are no outstanding warrants to acquire shares of capital
stock of the Company except as disclosed in the Registration Statement and
the Prospectus and except as have been granted under the [ ].
(gg) The Merger Agreement is in full force and effect, has been duly
authorized, executed and delivered by the Company and the Trust, and is
valid and binding on the Company and the Trust in accordance with its
terms, with neither party in default thereunder.
2. Representations and Warranties of the Selling Shareholders. Each of the
----------------------------------------------------------
Selling Shareholders, severally and not jointly represents and warrants to and
agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Shareholder.
(b) The execution of and delivery by or on behalf of such Selling
Shareholder of, and the performance by such Selling Shareholder of its
obligations under, this Agreement, the Custody Agreement signed by such
Selling Shareholder and American Stock Transfer & Trust Company, as
Custodian, relating to the deposit of the
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Shares to be sold by such Selling Shareholder (the "CUSTODY AGREEMENT") and
the Power of Attorney appointing certain individuals as such Selling
Shareholder's attorneys-in-fact to the extent set forth therein, relating
to the transactions contemplated hereby and by the Registration Statement
(the "POWER OF ATTORNEY") will not contravene any provision of applicable
law, or the certificate of incorporation or by-laws of such Selling
Shareholder (if such Selling Shareholder is a corporation), or any
agreement or other instrument binding upon such Selling Shareholder or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over such Selling Shareholder, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by such Selling Shareholder of its
obligations under this Agreement or the Custody Agreement or Power of
Attorney of such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states, the Securities Act or
the NASD Rules in connection with the offer and sale of the Shares.
(c) Such Selling Shareholder has, and on the Closing Date will have,
valid title to the Shares to be sold by such Selling Shareholder and the
legal right and power, and all authorization and approval required by law,
to enter into this Agreement, the Custody Agreement and the Power of
Attorney and to sell, transfer and deliver the Shares to be sold by such
Selling Shareholder.
(d) The Custody Agreement and the Power of Attorney have been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder and are valid and binding agreements of such Selling
Shareholder.
(e) Upon sale and delivery of and payment for the Shares to be sold by
such Selling Shareholder pursuant to this Agreement, title to such Shares
will pass free and clear of any security interests, claims, liens, equities
and other encumbrances other than any such security interest, claim, lien
equity or encumbrance created by or resulting from an action taken by an
Underwriter.
(f) The information in the Prospectus which specifically relates to
such Selling Shareholder which has been furnished in writing by or on
behalf of such Selling Shareholder expressly for use in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendments or
supplements thereto does not on the date of the execution of this Agreement
or will not on the Closing Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Agreements to Sell and Purchase. Each Seller, severally and not jointly,
-------------------------------
hereby agrees to sell to the several Underwriters, and each Underwriter, upon
the basis of the representations and warranties herein contained, but subject to
the conditions hereinafter
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<PAGE>
stated, agrees, severally and not jointly, to purchase from such Seller at
$______ a share (the "PURCHASE PRICE") the number of Firm Shares (subject to
such adjustments to eliminate fractional shares as you may determine) that bears
the same proportion to the number of Firm Shares to be sold by such Seller as
the number of Firm Shares set forth in Schedule II hereto opposite the name of
such Underwriter bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 5 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule II hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated ("Morgan Stanley") on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder, (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof of
which the Underwriters have been advised in writing or (C) transactions by any
person other than the Company relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
offering of the Shares.
Each Selling Shareholder hereby agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, it will not, during the
period ending 180 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or
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contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or (ii) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise; provided,
however, that if the last reported sale price of the Common Stock per share is
at least twice the price per share of the Common Stock sold hereunder for 20 out
of the 30 consecutive trading days ending on the trading day immediately
preceding the 90th day after the date of the Prospectus, then the foregoing
restrictions shall be earlier released with respect to 33% of the shares of
Common Stock held by such Selling Shareholder on the date hereof on the later to
occur of (a) the 90th day after the date of the Prospectus if the Company makes
its first post-offering public release of its quarterly or annual earnings
results during the period beginning on the eleventh trading day after the date
of the Prospectus and ending on the day prior to the 90th day after the date of
the Prospectus, or (b) the second trading day after the first public release of
the Company's quarterly or annual results occurring on or after the 90th day
after the date of the Prospectus if the Company does not make its first
post-offering public release as set forth in the foregoing clause (a).
Notwithstanding the foregoing, (a) gifts and transfers by will or intestacy or
(b) transfers to (A) such Selling Shareholder's members, partners, affiliates or
immediate family or (B) a trust, the beneficiaries of which are such Selling
Shareholder and/or members of such Selling Shareholder's immediate family, shall
not be prohibited by this Agreement; provided that (x) the donee or transferee
agrees in writing to be bound by the foregoing in the same manner as it applies
to such Selling Shareholder (and a copy of such agreement is delivered to Morgan
Stanley) and (y) if the donor or transferor is a reporting person subject to
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), any
gifts or transfers made in accordance with this paragraph shall not require such
person to, and such person shall not voluntarily, file a report of such
transaction on Form 4 under the Exchange Act. "Immediate family" shall mean
spouse, lineal descendants, father, mother, brother, sister or first cousin of
the transferor and father, mother, brother or sister of the transferor's spouse.
In addition, the restrictions contained in clauses (i) and (ii) above shall not
apply to (a) transactions entered into with the prior written consent of Morgan
Stanley on behalf of the Underwriters, or (b) transactions relating to shares of
Common Stock or other securities acquired in open market transactions after the
completion of the Public Offering. Such Selling Shareholder further agrees that,
without the prior written consent of Morgan Stanley on behalf of the
Underwriters, he, she or it will not, during the period commencing on the date
hereof and ending 180 days after the date of the Prospectus, make any demand for
or exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
4. Terms of Public Offering. The Sellers are advised by you that the
------------------------
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is
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<PAGE>
advisable. The Sellers are further advised by you that the Shares are to be
offered to the public initially at $_____________ per share (the "PUBLIC
OFFERING PRICE") and to certain dealers selected by you at a price that
represents a concession not in excess of $______ per share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $_____ per share, to any Underwriter or
to certain other dealers.
5. Payment and Delivery. Payment for the Firm Shares to be sold by each
--------------------
Seller shall be made to such Seller in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on ____________, 2000, or at such other time on the same or such other
date, not later than _________, 2000, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the "CLOSING
DATE".
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 3 or at such other time on the same or on such other date, in any event
not later than _______, 2000, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The obligations of the
-------------------------------------------
Sellers to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [__________] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
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(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 6(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Goodwin, Procter & Hoar LLP, outside counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power to own its property and
to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing under the laws
of the Commonwealth of Massachusetts, the State of New York and
[_______________], which are the only jurisdictions in the United
States in which the Company owns or leases real property or maintains
an office;
(ii) each subsidiary of the Company has been duly incorporated or
formed, is validly existing as a corporation or business trust in good
standing under the laws of the jurisdiction of its incorporation or
formation, has the
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corporate or similar power to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing under the laws of the
Commonwealth of Massachusetts, the State of New York and
[____________];
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock (including the Shares to be sold
by the Selling Shareholders) outstanding prior to the issuance of the
Shares to be sold by the Company have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock or other equity
interests of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable (in the case
of corporate subsidiaries) and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(vi) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-
assessable, and the issuance of such Shares will not be subject to any
preemptive rights, or, to the best of such counsel's knowledge,
similar rights;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company, and the
performance by the Company of its obligations under, this Agreement
will not result in a violation of any provision of applicable law or
the certificate of incorporation or by-laws of the Company or, to the
best of such counsel's knowledge, result in a breach or violation of
or cause a default under any agreement or other instrument binding
upon the Company or any of its subsidiaries that is filed as an
exhibit to the Registration Statement or identified by counsel to the
Underwriters and identified on a schedule to such opinion, or, to the
best of such counsel's knowledge, result in a violation of any
judgment, order or decree, known to such counsel, of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, except the registration under the Securities
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Act of the Shares or such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale
of the Shares;
(ix) the statements (A) in the Prospectus under the captions
"Description of Capital Stock" and "Underwriters" (but only with
respect to the description of this Agreement set forth therein) and
(B) in the Registration Statement in Items 14 and 15, in each case
insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein;
(x) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(xi) the Company is not, and after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus will not be required to register as an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended;
(xii) such counsel is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) appears on its
face to be appropriately responsive in all material respects to the
requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder although such counsel does
not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or
the Prospectus, except for those referred to in the opinion in
subsection (ix) of this Section 6(c).
Such counsel shall also state that counsel has participated in
the preparation of the Registration Statement and Prospectus and has
participated in discussions with the Representatives, counsel for the
Underwriters, and representatives of the Company and its accountants.
On the basis of the information such counsel has gained in the course
of the performance of the services referred to above, such counsel
shall confirm to you that nothing that came to such counsel's
attention in the course of such review has caused them to believe that
the Registration Statement or any amendment thereto contains any
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untrue statement of material fact or omits any material fact required
to be stated therein or necessary to make the statements therein not
misleading, or that, as of its date, the Prospectus and any amendments
thereto, contained any untrue statement of a material fact or omitted
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, or that either the Registration Statement
or the Prospectus and any amendments thereto contained any untrue
statement of a material fact or omitted any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and such counsel shall state that they do not know of any
amendment to the Registration Statement required to be filed.
Also, such counsel need not make any statement as to the
financial statements, other financial, operating, statistical or
accounting data and related schedules contained in the Registration
Statement or Prospectus.
(d) The Underwriters shall have received on the Closing Date an
opinion of McDermott, Will & Emery, counsel for Squam Lake Investors, III
L.P. ("Squam") and Sunapee Securities, Inc. ("Sunapee"), dated the Closing
Date, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of Squam and Sunapee;
(ii) the execution and delivery by Squam and Sunapee of, and the
performance by Squam and Sunapee of their obligations under this
Agreement and the Custody Agreement and Power of Attorney will not
contravene any provision of applicable law, or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
Squam or Sunapee or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over Squam or Sunapee, and no consent, approval,
authorization or order of, or qualification with, any governmental
body or agency is required for the performance by Squam and Sunapee of
their obligations under this Agreement or the Custody Agreement or
Power of Attorney, except such as may be required by the Securities
Act, the securities or Blue Sky laws of the various states or NASD
Rules in connection with offer and sale of the Shares (as to none of
which such counsel need opine);
(iii) to the best of such counsel's knowledge, as of the time
immediately preceding the time of delivery of the Shares to be sold by
them to the Underwriters, Squam and Sunapee had valid title to the
Shares to be sold by them and the full right, power, and authority to
enter into this Agreement and the Custody Agreement and Power of
Attorney and to sell, transfer and deliver the Shares to be sold by
them;
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<PAGE>
(iv) the Custody Agreement and the Power of Attorney of Squam and
Sunapee have been duly authorized, executed and delivered by them and
are valid and binding agreements of them; and
(v) upon payment pursuant to this Agreement for the Shares,
delivery of the Shares to be sold by Squam and Sunapee as directed by
the Underwriters to Cede & Co., or another nominee as may be
designated by Depository Trust Company ("DTC"), and assuming that
neither DTC nor any such Underwriter has any "notice of an adverse
claim" (as defined in Section 8-105 of the UCC)) to the Shares, (A)
DTC shall be a "protected purchaser" of such Shares within the meaning
of Section 8-303 of the Uniform Commercial Code, as in effect in The
Commonwealth of Massachusetts (the "UCC"); (B) under Section 8-501 of
the UCC, each Underwriter will acquire a valid "security entitlement"
(as defined in Section 8-102 of the UCC) to the Shares being so
purchased on behalf of such Underwriter, and (C) to the extent
governed by the UCC, no action based on any "adverse claim" (as
defined in Section 8-102 of the UCC) to the Shares (or security
entitlement with respect thereto) may properly be asserted against the
Underwriters with respect to such security entitlement.
(e) The Underwriters shall have received on the Closing Date an
opinion of Wachtell, Lipton, Rosen & Katz, counsel for Hellman & Friedman
Capital Partners III, L.P., H&F Orchard Partners III, L.P. and H&F
International Partners III, L.P.(each an "H&F Seller" and collectively the
"H&F Sellers"), dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of each of the H&F Sellers;
(ii) the execution and delivery by each of the H&F Sellers of
their obligations under, this Agreement and the Custody Agreement and
Power of Attorney of each of the H&F Sellers will not contravene any
provision of applicable law, or the certificate of incorporation or
by-laws of any of the H&F Sellers (if such Selling Shareholder is a
corporation), or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon any of the H&F Sellers or,
to the best of such counsel's knowledge, any judgment, order or decree
of any governmental body, agency or court having jurisdiction over any
of the H&F Sellers, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required
for the performance by each of the H&F Sellers of their obligations
under this Agreement or the Custody Agreement or Power of Attorney,
except such as may be required by the securities or Blue Sky laws of
the various states in connection with offer and sale of the Shares;
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<PAGE>
(iii) Each of the H&F Sellers have valid title to the Shares to
be sold by each of them and the legal right and power, and all
authorization and approval required by law, to enter into this
Agreement and the Custody Agreement and Power of Attorney and to sell,
transfer and deliver the Shares to be sold by each of them;
(iv) the Custody Agreement and the Power of Attorney of each of
the H&F Sellers have been duly authorized, executed and delivered by
each of the H&F Sellers, respectively, and are valid and binding
agreements of each of the H&F Sellers; and
(v) upon sale and delivery of and payment for the Shares to be
sold by each of the H&F Sellers pursuant to this Agreement, title to
such Shares will pass free and clear of any security interests,
claims, liens, equities and other encumbrances other than any such
security interest, claim, lien, equity or encumbrance created by or
resulting from an action taken by an Underwriter.
(f) The Underwriters shall have received on the Closing Date an
opinion of Ropes & Gray, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 6(c)(vi), 6(c)(vii),
6(c)(ix) (but only as to the statements in the Prospectus under
"Description of Capital Stock" and "Underwriters") and 6(c)(xii) above.
With respect to Section 6(c)(xii) above, Goodwin, Procter & Hoar LLP
and Ropes & Gray may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to Section 6(c) above,
Goodwin, Procter & Hoar LLP may rely upon an opinion or opinions of counsel
for any Selling Shareholders and, with respect to factual matters and to
the extent such counsel deems appropriate, upon the representations of each
Selling Shareholder contained herein and in the Custody Agreement and Power
of Attorney of such Selling Shareholder and in other documents and
instruments; provided that (A) each such counsel for the Selling
Shareholders is satisfactory to your counsel, (B) a copy of each opinion so
relied upon is delivered to you and is in form and substance satisfactory
to your counsel, (C) copies of such Custody Agreements and Powers of
Attorney and of any such other documents and instruments shall be delivered
to you and shall be in form and substance satisfactory to your counsel and
(D) Goodwin, Procter & Hoar LLP shall state in their opinion that they are
justified in relying on each such other opinion.
The opinions of Goodwin, Procter & Hoar LLP, Wachtell, Lipton, Rosen &
Katz and McDermott, Will & Emery described in Sections 6(c), 6(d) and 6(e)
above
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<PAGE>
(and any opinions of counsel for any Selling Shareholder referred to in the
immediately preceding paragraph) shall be rendered to the Underwriters at
the request of the Company or one or more of the Selling Shareholders, as
the case may be, and shall so state therein.
(g) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from each of PricewaterhouseCoopers, LLP and Arthur Andersen LLP
independent public accountants, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
(h) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the Closing
Date.
(i) The Merger shall have been consummated as contemplated by the
Prospectus.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the delivery to you on the Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares and other
matters related to the issuance of the Additional Shares.
7. Covenants of the Company. In further consideration of the agreements of
------------------------
the Underwriters herein contained, the Company covenants with each Underwriter
as follows:
(a) To furnish to you, without charge, 6 signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 7(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
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<PAGE>
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering
of the Shares as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish
to the Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To refrain from releasing any of the officers, directors or
beneficial owners of common stock from the "lock-up" agreements referenced
in Section 6(f) above.
(e) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(f) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending March 31, 2001, that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158).
(g) To place stop transfer orders on any Directed Shares that have
been sold to Participants subject to the three month restriction on sale,
transfer, assignment, pledge or hypothecation imposed by NASD Regulation,
Inc. under its Interpretative Material 2110-1 on free-riding and
withholding to the extent necessary to ensure compliance with the three
month restrictions.
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<PAGE>
(h) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent required
by the National Association of Securities Dealers, Inc. (the "NASD") or the
NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of the effectiveness of the
Registration Statement. Salomon Smith Barney Inc. will notify the Company
as to which Participants will need to be so restricted. The Company will
direct the removal of such transfer restrictions upon the expiration of
such period of time.
(i) To comply with all applicable securities and other applicable
laws, rules and regulations in each jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program.
8. Expenses. Whether or not the transactions contemplated in this Agreement
--------
are consummated or this Agreement is terminated, (A) the Company agrees to pay
or cause to be paid all expenses incident to the performance of its obligations
under this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all other
fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 7(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all fees and expenses of counsel to
the Underwriters incurred on behalf of, or disbursements by, Morgan Stanley in
its capacity as "qualified independent underwriter", (vi) all fees and expenses
in connection with the preparation and filing of the registration statement on
Form 8-A relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vii) the cost of printing
certificates representing the Shares, (viii) the costs and charges of any
transfer agent, registrar or depositary, (ix) all expenses in connection with
any offer and sale of the Shares outside of the United States, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection with offers and sales outside of the United States, (x) the costs
and expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of road
show
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slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company or the Trust, travel and lodging expenses of the representatives and
officers of the Company or the Trust and any such consultants, and the cost of
any aircraft chartered in connection with the road show, (xi) all other costs
and expenses incident to the performance of the obligations of the Company and
the Trust hereunder for which provision is not otherwise made in this Section,
(xii) all fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in connection with
the Directed Share Program; and (B) the Selling Shareholders agree to pay or
cause to be paid all of the expenses incident to the performance of their
obligations under this Agreement, including any fees, disbursements and expenses
of their respective counsel. It is understood, however, that except as provided
in this Section, Section 9 entitled "Indemnity and Contribution", and the last
paragraph of Section 11 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
The provisions of this Section shall not supersede or otherwise affect any
agreement that the Sellers may otherwise have for the allocation of such
expenses among themselves.
9. Indemnity and Contribution.
--------------------------
(a) The Company and the Trust will jointly and severally indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
The Company and the Trust also jointly and severally agree to
indemnify and hold harmless Morgan Stanley and each person, if any, who
controls Morgan Stanley within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages, liabilities and judgments incurred as a result
of Morgan Stanley's participation as a "qualified independent underwriter"
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<PAGE>
within the meaning of Rule 2720 of the National Association of Securities
Dealers' Conduct Rules in connection with the offering of the Common Stock,
except for any losses, claims, damages, liabilities, and judgments
resulting from Morgan Stanley's, or such controlling person's, willful
misconduct.
The Company also agrees to indemnify and hold harmless Morgan Stanley
and each person, if any, who controls Morgan Stanley within the meaning of
either Section 15 of the Act, or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
incurred as a result of Morgan Stanley's participation as a "qualified
independent underwriter" within the meaning of Rule 2720 of the National
Association of Securities Dealers' Conduct Rules in connection with the
offering of the common stock, except for any losses, claims, damages,
liabilities and judgments resulting from Morgan Stanley's, or such
controlling person's, willful misconduct.
(b) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter, the Company, its directors,
its officers who sign the Registration Statement and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in
each case only with respect to information relating to each of the H&F
Sellers, Squam and Sunapee furnished in writing by or on behalf of any of
each of the H&F Sellers, Squam and Sunapee, respectively, expressly for use
in the Registration Statement, any preliminary prospectus, the Prospectus
or any amendments or supplements thereto. In no event shall the liability
of any Selling Shareholder for indemnification under this Section 9(b)
exceed the proceeds, net of underwriting discounts and commissions,
received by such Selling Shareholder in the Offering. This indemnity
obligation will be in addition to any liability which the Selling
Shareholders may otherwise have, but in no event will any Selling
Shareholder's total liability under this Section 9(b) exceed the proceeds,
net of underwriting discounts and commissions, received by such Selling
Shareholder in the Offering.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Shareholders, the directors of
the Company, the officers of the Company who sign the Registration
Statement and each person, if any, who controls the Company or any Selling
Shareholder within the meaning of either
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<PAGE>
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only with reference to information relating to such
Underwriter furnished to the Company or the Trust in writing by such
Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to Section 9(a), 9(b) or 9(c), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for (i) the fees and expenses of more
than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who controls
the Company within the meaning of either such Section and (iii) the fees
and expenses of more than one separate firm (in addition to any local
counsel) for all Selling Shareholders and all persons, if any, who control
any Selling Shareholder within the meaning of either such Section, and that
all such fees and expenses shall be reimbursed as they are incurred. In
the case of any such separate firm for the Underwriters and such control
persons of any Underwriters, such firm shall be designated in writing by
Morgan Stanley & Co. Incorporated. In the case of any such separate firm
for the Company, and such directors, officers and control persons of the
Company, such
- 25 -
<PAGE>
firm shall be designated in writing by the Company. In the case of any such
separate firm for the Selling Shareholders and such control persons of any
Selling Shareholders, such firm shall be designated in writing by the
persons named as attorneys-in-fact for the Selling Shareholders under the
Powers of Attorney. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding. Notwithstanding anything contained herein to the
contrary, if indemnity may be sought pursuant to Section 10 hereof in
respect of such action or proceeding, then in addition to such separate
firm for the indemnified parties, the indemnifying party shall be liable
for the reasonable fees and expenses of not more than one separate firm (in
addition to any local counsel) for Salomon Smith Barney Inc., the
directors, officers, employees and agents of Salomon Smith Barney Inc., and
all persons, if any, who control Salomon Smith Barney Inc. within the
meaning of either the Act or the Exchange Act for the defense of any
losses, claims, damages and liabilities arising out of the Directed Share
Program. Notwithstanding anything contained herein to the contrary, if
indemnity may be sought pursuant to Section 9(a) hereof in respect of such
action or proceeding, then in addition to such separate firm for the
indemnified parties, the indemnifying party shall be liable for the
reasonable fees and expenses of not more than one separate firm (in
addition to any local counsel) for Morgan Stanley in its capacity as
"qualified independent underwriter" and all persons, if any, who control
Morgan Stanley within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act.
(e) To the extent the indemnification provided for in Section 9(a),
9(b) or 9(c) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause 9(e)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
9(e)(i) above but also the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the
- 26 -
<PAGE>
Sellers on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by each Seller and the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares. The relative fault of
the Sellers on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Sellers or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 9 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 9(e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages
that such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 9 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 9 and the representations, warranties and other statements of the
Company and the Selling Shareholders contained in this Agreement shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter, any Selling
Shareholder or any person controlling any Selling Shareholder, or the
Company, its officers or directors or any person controlling the Company
and (iii) acceptance of and payment for any of the Shares.
- 27 -
<PAGE>
10. Directed Share Program Indemnification.
--------------------------------------
(a) The Company agrees to indemnify and hold harmless Salomon Smith
Barney Inc. and its affiliates and each person, if any, who controls
Salomon Smith Barney Inc. or its affiliates within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act
("Salomon Smith Barney Inc. Entities"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement
or alleged untrue statement of a material fact contained in any material
prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program, or caused by
any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading; (ii) caused by the failure of any Participant to pay for and
accept delivery of Directed Shares that the Participant has agreed to
purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities
(or expenses relating thereto) that are finally judicially determined to
have resulted from the bad faith or gross negligence of Salomon Smith
Barney Inc. Entities.
(b) In case any proceeding (including any governmental investigation)
shall be instituted involving any Salomon Smith Barney Inc. Entity in
respect of which indemnity may be sought pursuant to Section 10(a), the
Salomon Smith Barney Inc. Entity seeking indemnity shall promptly notify
the Company in writing and the Company, upon request of the Salomon Smith
Barney Inc. Entity, shall retain counsel reasonably satisfactory to the
Salomon Smith Barney Inc. Entity to represent the Salomon Smith Barney Inc.
Entity and any other the Company may designate in such proceeding and shall
pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Salomon Smith Barney Inc. Entity shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Salomon Smith Barney Inc. Entity unless (i)
the Company shall have agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties)
include both the Company and the Salomon Smith Barney Inc. Entity and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The Company
shall not, in respect of the legal expenses of the Salomon Smith Barney
Inc. Entities in connection with any proceeding or related proceedings the
same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Salomon Smith
Barney Inc. Entities. Any such firm for the Salomon Smith Barney Inc.
Entities shall be designated in writing by Salomon Smith Barney Inc. The
Company shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there
be a final judgment for the plaintiff, the Company agrees to indemnify the
Salomon Smith Barney Inc. Entities from and against any loss or liability
by reason of such settlement or judgment. The Company
- 28 -
<PAGE>
shall not, without the prior written consent of Salomon Smith Barney Inc.,
effect any settlement of any pending or threatened proceeding in respect of
which any Salomon Smith Barney Inc. Entity is or could have been a party
and indemnity could have been sought hereunder by such Salomon Smith Barney
Inc. Entity, unless such settlement includes an unconditional release of
the Salomon Smith Barney Inc. Entities from all liability on claims that
are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section 10(a) is
unavailable to a Salomon Smith Barney Inc. Entity or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then the Company, in lieu of indemnifying the Salomon Smith Barney Inc.
Entity thereunder, shall contribute to the amount paid or payable by the
Salomon Smith Barney Inc. Entity as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Salomon Smith Barney Inc. Entities on the other hand from the offering of
the Directed Shares or (ii) if the allocation provided by clause 10(c)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
10(c)(i) above but also the relative fault of the Company on the one hand
and of the Salomon Smith Barney Inc. Entities on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and of the Salomon Smith Barney Inc. Entities on the other hand in
connection with the offering of the Directed Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering of
the Directed Shares (before deducting expenses) and the total underwriting
discounts and commissions received by the Salomon Smith Barney Inc.
Entities for the Directed Shares, bear to the aggregate Public Offering
Price of the Shares. If the loss, claim, damage or liability is caused by
an untrue or alleged untrue statement of a material fact, the relative
fault of the Company on the one hand and the Salomon Smith Barney Inc.
Entities on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement or the omission or
alleged omission relates to information supplied by the Company or by the
Salomon Smith Barney Inc. Entities and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(d) The Company and the Salomon Smith Barney Inc. Entities agree that
it would not be just or equitable if contribution pursuant to this Section
10 were determined by pro rata allocation (even if the Salomon Smith Barney
Inc. Entities were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in Section 10(c). The amount paid or payable by
the Salomon Smith Barney Inc. Entities as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses
- 29 -
<PAGE>
reasonably incurred by the Salomon Smith Barney Inc. Entities in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 10, no Salomon Smith Barney Inc. Entity
shall be required to contribute any amount in excess of the amount by which
the total price at which the Directed Shares distributed to the public were
offered to the public exceeds the amount of any damages that such Salomon
Smith Barney Inc. Entity has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
The remedies provided for in this Section 10 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
Salomon Smith Barney Inc. Entity at law or in equity.
(e) The indemnity and contribution provisions contained in this
Section 10 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by or
on behalf of any Salomon Smith Barney Inc. Entity or the Company, its
officers or directors or any person controlling the Company and (iii)
acceptance of and payment for any of the Directed Shares.
11. Termination. This Agreement shall be subject to termination by notice
-----------
given by you to the Company or the Trust, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of
any securities of the Company shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 10(a)(i) through 10(a)(iv), such event, singly
or together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.
12. Effectiveness; Defaulting Underwriters. This Agreement shall become
--------------------------------------
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule II bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may
- 30 -
<PAGE>
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 12 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you, the Company and the Selling Shareholders for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholders. In any such
case either you or the relevant Sellers shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased, the non-defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase Additional
Shares or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of any Seller to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
13. Counterparts. This Agreement may be signed in two or more counterparts,
------------
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
14. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the internal laws of the State of New York.
15. Headings. The headings of the sections of this Agreement have been
--------
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
- 31 -
<PAGE>
Very truly yours,
DIGITAS INC.
By:
----------------------------------
Name:
Title:
BRONNER SLOSBERG HUMPHREY CO.
By:
----------------------------------
Name:
Title:
The Selling Shareholders
named in Schedule I hereto,
acting severally
By:
----------------------------------
Attorney-in-Fact
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Deutsche Banc Alex. Brown
Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule II hereto.
By: Morgan Stanley & Co. Incorporated
By:
-----------------------------
Name:
Title:
- 32 -
<PAGE>
SCHEDULE I
NUMBER OF
FIRM SHARES
SELLING SHAREHOLDER TO BE SOLD
Hellman & Friedman Capital Partners III, L.P.
H&F Orchard Partners III, L.P.
H&F International Partners III, L.P.
Squam Lake Investors, III L.P.
Sunapee Securities, Inc.
-------------
Total ........
=============
- 33 -
<PAGE>
SCHEDULE II
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. Incorporated
Deutsche Banc Alex. Brown
Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
[NAMES OF OTHER UNDERWRITERS]
-------------
Total ........
=============
- 34 -
<PAGE>
EXHIBIT A
[FORM OF LOCK-UP LETTER]
____________, 1999
Morgan Stanley & Co. Incorporated
Deutsche Banc Alex. Brown
Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING
AGREEMENT") with Bronnercom Inc., a Delaware corporation (the "COMPANY"),
providing for the public offering (the "PUBLIC OFFERING") by the several
Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of ___ shares (the
"SHARES") of the Common Stock $0.01 par value per share of the Company (the
"COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares
to the Underwriters pursuant to the Underwriting Agreement or (b) transactions
relating to shares of Common Stock or other securities acquired in open market
transactions after
- 35 -
<PAGE>
the completion of the Public Offering. In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
_________________________
(Name)
_________________________
(Address)
- 36 -
<PAGE>
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "DIGITAS INC.", FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF
DECEMBER, A.D. 1999, AT 12 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[GRAPHIC]
[GRAPHIC] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
3144200 8100 AUTHENTICATION: 0156636
991552310 DATE: 12-22-99
<PAGE>
CERTIFICATE OF INCORPORATION
OF
DIGITAS INC.
1. The name of the corporation is Digitas Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, 19801. The name of its registered agent at such address is The
Corporation Trust Company.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Million (1,000,000) shares of Common Stock. The par
value of each share is $.01.
5. The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ---------------
Jeffrey C. Hadden, P.C. Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation.
6. The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified, is as follows:
Name Mailing Address
---- ---------------
David W. Kenny The Prudential Tower
800 Boylston Street
Boston, MA 02199
Kathleen L. Biro The Prudential Tower
800 Boylston Street
Boston, MA 02199
Michael E. Bronner The Prudential Tower
800 Boylston Street
Boston, MA 02199
2
<PAGE>
John L. Bunce, Jr. The Prudential Tower
800 Boylston Street
Boston, MA 02199
Orit Gadiesh The Prudential Tower
800 Boylston Street
Boston, MA 02199
Philip Hammarskjold The Prudential Tower
800 Boylston Street
Boston, MA 02199
Patrick J. Healy The Prudential Tower
800 Boylston Street
Boston, MA 02199
Arthur Kern The Prudential Tower
800 Boylston Street
Boston, MA 02199
7. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide.
9. 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 (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. No amendment or repeal of this Section shall adversely affect
the rights and protection afforded to a director of the corporation under this
Section for acts or omissions occurring prior to such amendment or repeal.
10. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
3
<PAGE>
11. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders, of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
THE UNDERSIGNED incorporator, for the purpose of forming a corporation
pursuant to the General Corporation Law of the State of Delaware. does hereby
make this certificate, hereby declaring and certifying that it is his free act
and deed and the facts herein stated are true, and accordingly he has hereunto
set his hand this 21st day of December, 1999.
/s/ Jeffrey C. Hadden
-------------------------------------
Jeffrey C. Hadden, P.C., Incorporator
4
<PAGE>
EXHIBIT 3.2
BY-LAWS
of
DIGITAS INC.
ARTICLE I
---------
Stockholders
------------
1. Annual Meeting. The annual meeting of stockholders shall be held each
--------------
year at the place, date and time determined by the Board of Directors or the
President, provided that the date of the meeting is within six months after the
end of the fiscal year of the corporation. The purposes for which the annual
meeting is to be held, in addition to those prescribed by law, by the
Certificate of Incorporation (the "Certificate of Incorporation") or by these
By-laws, may be specified by the Board of Directors or the President. If no
annual meeting has been held on the date fixed above, a special meeting in lieu
thereof may be held or there may be action by written consent of the
stockholders on matters to be voted on at the annual meeting, and such special
meeting or written consent shall have for the purposes of these By-Laws or
otherwise all the force and effect of an annual meeting.
2. Special Meetings. Special meetings of stockholders may be called by the
----------------
President or by the Board of Directors. Special meetings shall be called by the
Secretary, or in case of death, absence, incapacity or refusal of the Secretary,
by any other officer, upon written application of one or more stockholders who
hold at least twenty-five percent in interest of the capital stock entitled to
vote at such meeting. The call for the meeting shall state the place, date, hour
and purposes of the meeting. Only the purposes specified in the notice of
special meeting shall be considered or dealt with at such special meeting.
3. Notice of Meetings. A written notice stating the place, date and hour
------------------
of all meetings of stockholders, and in the case of special meetings, the
purposes of the meeting shall be given by the Secretary (or other person
authorized by these By-Laws or by law) not less than ten nor more than sixty
days before the meeting to each stockholder entitled to vote thereat and to each
stockholder who, under the Certificate of Incorporation or under these By-laws
is entitled to such notice, by delivering such notice to him or by mailing it,
postage prepaid, and addressed to such stockholder at his address as it appears
in the records of the corporation. Notice need not be given to a stockholder if
a written waiver of notice is executed before or after the meeting by such
stockholder, if communication with such stockholder is unlawful, or if such
stockholder attends the meeting in question, unless such attendance was for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened. If a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken, except that if the adjournment
<PAGE>
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
4. Quorum. The holders of a majority in interest of all stock issued,
------
outstanding and entitled to vote at a meeting shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the votes properly
cast upon the question, whether or not a quorum is present. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment notwithstanding the withdrawal of enough stockholders to reduce the
voting shares below a quorum.
5. Voting and Proxies. Stockholders shall have one vote for each share of
------------------
stock entitled to vote owned by them of record according to the books of the
corporation unless otherwise provided by law or by the Certificate of
Incorporation. Stockholders may vote either in person or by written proxy or
express directly or by written proxy their consent or dissent to a corporate
action taken without a meeting, but no proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period or is
irrevocable and coupled with an interest. Proxies shall be filed with the
Secretary of the meeting, or of any adjournment thereof. Except as otherwise
limited therein, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting.
6. Action at Meeting. When a quorum is present, any matter before the
-----------------
meeting shall be decided by vote of the holders of a majority of the shares of
stock voting on such matter except where a larger vote is required by law, by
the Certificate of Incorporation or by these By-laws. Any election by
stockholders shall be determined by a plurality of the votes cast, except where
a larger vote is required by law, by the Certificate of Incorporation or by
these By-laws. The corporation shall not directly or indirectly vote any share
of its own stock; provided, however, that the corporation may vote shares which
it holds in a fiduciary capacity to the extent permitted by law.
7. Action without a Meeting. Any action required or permitted by law to be
------------------------
taken at any annual or special meeting of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
all of the outstanding shares of stock entitled to vote on the matter and shall
be delivered to the corporation by delivery to its registered office, by hand or
by certified mail, return receipt requested or to the corporation's principal
place of business or to the officer of the corporation having custody of the
minute book. Every written consent shall bear the date of signature and no
written consent shall be effective unless, within sixty days of the earliest
dated consent delivered pursuant to these By-laws, written consents signed by a
sufficient number of stockholders entitled to take action are delivered to the
corporation in the manner set forth in these By-laws.
8. Stockholder Lists. The officer who has charge of the stock ledger of
-----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order,
2
<PAGE>
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
ARTICLE II
----------
Directors
---------
1. Powers. The business of the corporation shall be managed by or under
------
the direction of a Board of Directors who may exercise all the powers of the
corporation except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws. In the event of a vacancy in the Board of
Directors, the remaining Directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
2. Election and Qualification. Unless otherwise provided in the
--------------------------
Certificate of Incorporation or in these By-laws, the number of Directors which
shall constitute the whole board shall be determined by vote of the Board of
Directors or by the stockholders at the annual meeting. Directors need not be
stockholders.
3. Vacancies; Reduction of Board. A majority of the Directors then in
-----------------------------
office, although less than a quorum, or a sole remaining Director, may fill
vacancies in the Board of Directors occurring for any reason and newly created
directorships resulting from any increase in the authorized number of Directors.
In lieu of filling any vacancy the stockholders or the Board of Directors may
reduce the number of Directors.
4. Enlargement of the Board. The Board of Directors may be enlarged by the
------------------------
stockholders at any meeting or by vote of a majority of the Directors then in
office.
5. Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-laws, Directors shall hold office until their
successors are elected and qualified or until their earlier resignation or
removal. Any Director may resign by delivering his written resignation to the
corporation. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
6. Removal. To the extent permitted by law, a Director may be removed from
-------
office with or without cause by vote of the holders of a majority of the shares
of stock entitled to vote in the election of Directors. A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.
3
<PAGE>
7. Meetings. Regular meetings of the Board of Directors may be held
--------
without notice at such time, date and place as the Board of Directors may from
time to time determine. Special meetings of the Board of Directors may be
called, orally or in writing, by the President, Treasurer or two or more
Directors, designating the time, date and place thereof. Directors may
participate in meetings of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other, and participation in a meeting
in accordance herewith shall constitute presence in person at such meeting.
8. Notice of Meetings. Notice of the time, date and place of all special
------------------
meetings of the Board of Directors shall be given to each Director by the
Secretary, or Assistant Secretary, or in case of the death, absence, incapacity
or refusal of such persons, by the officer or one of the Directors calling the
meeting. Notice shall be given to each Director in person or by telephone or by
telegram sent to his business or home address at least twenty-four hours in
advance of the meeting, or by written notice mailed to his business or home
address at least forty-eight hours in advance of the meeting. Notice need not be
given to any Director if a written waiver of notice is executed by him before or
after the meeting, or if communication with such Director is unlawful. A notice
or waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting.
9. Quorum. At any meeting of the Board of Directors, a majority of the
------
Directors then in office shall constitute a quorum. Less than a quorum may
adjourn any meeting from time to time and the meeting may be held as adjourned
without further notice.
a. Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, a majority of the Directors present may take any
action on behalf of the Board of Directors, unless a larger number is required
by law, by the Certificate of Incorporation or by these By-laws.
b. Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the Board of Directors may be taken without a meeting if a
written consent thereto is signed by all the Directors and filed with the
records of the meetings of the Board of Directors. Such consent shall be treated
as a vote of the Board of Directors for all purposes.
c. Committees. The Board of Directors, by vote of a majority of the
----------
Directors then in office, may establish one or more committees, each committee
to consist of one or more Directors, and may delegate thereto some or all of its
powers except those which by law, by the Certificate of Incorporation, or by
these By-laws may not be delegated. Except as the Board of Directors may
otherwise determine, any such committee may make rules for the conduct of its
business, but in the absence of such rules its business shall be conducted so
far as possible in the same manner as is provided in these By-laws for the Board
of Directors. All members of such committees shall hold their committee offices
at the pleasure of the Board of Directors, and the Board may abolish any
committee at any time. Each such committee shall report its action to the Board
of Directors who shall have power to rescind any action of any committee without
retroactive effect.
4
<PAGE>
ARTICLE III
-----------
Officers
--------
1. Enumeration. The officers of the corporation shall consist of a
-----------
President, a Treasurer, a Secretary, and such other officers, including one or
more Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the
Board of Directors may determine.
2. Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at their first meeting following the annual
meeting of stockholders. Other officers may be chosen by the Board of Directors
at such meeting or at any other meeting.
3. Qualification. No officer need be a stockholder or Director. Any two or
-------------
more offices may be held by the same person. Any officer may be required by the
Board of Directors to give bond for the faithful performance of his duties in
such amount and with such sureties as the Board of Directors may determine.
4. Tenure. Except as otherwise provided by the Certificate of
------
Incorporation or by these By-laws, each of the officers of the corporation shall
hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer may resign by delivering his written
resignation to the corporation, and such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
5. Removal. The Board of Directors may remove any officer with or without
-------
cause by a vote of a majority of the entire number of Directors then in office;
provided, that an officer may be removed for cause only after reasonable notice
and opportunity to be heard by the Board of Directors.
6. Vacancies. Any vacancy in any office may be filled for the unexpired
---------
portion of the term by the Board of Directors.
7. President and Vice Presidents. The President shall be the chief
-----------------------------
operating officer of the corporation and shall have general charge of its
business operations, subject to the direction of the Board of Directors. The
President shall preside, when present, at all meetings of stockholders and the
Board of Directors. The Board of Directors shall have the authority to appoint a
temporary presiding officer to serve at any meeting of the stockholders or Board
of Directors if the President is unable to do so for any reason.
Any Vice President shall have such powers and shall perform such duties as
the Board of Directors may from time to time designate. In the absence of the
President or in the event of his inability or refusal to act, the Vice President
(or in the event there be more than one Vice President, the Vice Presidents in
the order designated by the directors, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
5
<PAGE>
and when so acting, shall have all the powers and responsible of and be subject
to all the restrictions upon the President.
8. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the
----------------------------------
direction of the Board of Directors, have general charge of the financial
affairs of the corporation and shall cause to be kept accurate books of account.
He shall have custody of all funds, securities, and valuable documents of the
corporation, except as the Board of Directors may otherwise provide.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
a. Secretary and Assistant Secretaries. The Secretary shall record
-----------------------------------
the proceedings of all meetings of the stockholders and the Board of Directors
in books kept for that purpose. In his absence from any such meeting an
Assistant Secretary, or if he is absent, a temporary secretary chosen at the
meeting, shall record the proceedings thereof.
The Secretary shall have charge of the stock ledger (which may, however,
be kept by any transfer or other agent of the corporation) and shall have such
other duties and powers as may be designated from time to time by the Board of
Directors or the President.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
b. Other Powers and Duties. Subject to these By-laws, each officer
-----------------------
of the corporation shall have in addition to the duties and powers specifically
set forth in these By-laws, such duties and powers as are customarily incident
to his office, and such duties and powers as may be designated from time to time
by the Board of Directors.
ARTICLE IV
----------
Capital Stock
-------------
1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary. Such signatures may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on such certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law. The corporation shall be permitted to issue fractional
shares.
6
<PAGE>
2. Transfers. Subject to any restrictions on transfer, shares of stock may
---------
be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate therefor properly endorsed
or accompanied by a written assignment or power of attorney properly executed,
with transfer stamps (if necessary) affixed, and with such proof of the
authenticity of signature as the corporation or its transfer agent may
reasonably require.
3. Record Holders. Except as may otherwise be required by law, by the
--------------
Certificate of Incorporation or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
4. Record Date. In order that the corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not precede the date on which it is established, and which shall not be more
than sixty nor less than ten days before the date of such meeting, more than ten
days after the date on which the record date for stockholder consent without a
meeting is established, nor more than sixty days prior to any other action. In
such case only stockholders of record on such record date shall be so entitled
notwithstanding any transfer of stock on the books of the corporation after the
record date.
If no record date is fixed, (a) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, (b) the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is necessary,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in this state, to its principal place of business, or
to an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded, and (c) the record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
5. Replacement of Certificates. In case of the alleged loss, destruction
---------------------------
or mutilation of a certificate of stock, a duplicate certificate may be issued
in place thereof, upon such terms as the Board of Directors may prescribe.
7
<PAGE>
ARTICLE V
---------
Indemnification
---------------
1. Indemnification of Directors and Officers. The corporation shall
-----------------------------------------
indemnify, to the fullest extent permitted by the General Corporation Law of the
State of Delaware any person who was or is a party or is threatened to be made a
party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise, and whether by or in the right of the corporation,
its stockholders, a third party or otherwise (a "Proceeding"), by reason of the
fact that he is or was a Director or officer of the corporation, or is or was a
Director or officer of the corporation serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against all expense (including, but not limited to,
attorneys' fees), liability, loss, judgments, fines, excise taxes, penalties and
amounts paid in settlement actually and reasonably incurred by him in connection
with such Proceeding, including expenses incurred in seeking such
indemnification. In addition, the corporation shall grant such indemnification
to each of its Directors and officers with respect to any matter in a Proceeding
as to which his liability is limited pursuant to Section 9 of the Certificate of
Incorporation of the corporation. However, such indemnification shall exclude
(i) indemnification with respect to any improper personal benefit which a
Director or officer is determined to have received and of the expenses of
defending against an improper personal benefit claim unless the Director or
officer is successful on the merits in said defense, and (ii) indemnification of
present or former officers, directors, employees or agents of a constituent
corporation absorbed in a merger or consolidation transaction with this
corporation with respect to their activities prior to said transaction, unless
specifically authorized by the Board of Directors or stockholders of this
corporation. Such indemnification shall include prompt payment of expenses
incurred by a Director or officer in defending a Proceeding in advance of the
final disposition of such Proceeding, upon receipt of an undertaking by or on
behalf of the Director or officer to repay such amounts if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation under
this Article V, which undertaking shall be an unsecured general obligation of
the Director or officer and may be accepted without regard to his ability to
make repayment.
2. Indemnification of Employees and Agents. The corporation may, to the
---------------------------------------
extent authorized from time to time by the Board of Directors, grant rights to
indemnification and to an advancement of expenses, pursuant to the provisions of
this Article V, to any person who was or is a party or is threatened to be made
a party to or is otherwise involved in any Proceeding by reason of the fact that
he is or was an employee or agent of the corporation or is or was serving at the
request of the corporation, as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
3. Nature of Indemnification Rights. The indemnification rights provided
--------------------------------
in this Article V shall be a contract right and shall not be deemed exclusive of
any other rights to which any person, whether or not entitled to be indemnified
hereunder, may be entitled under any statute, by-law, agreement, vote of
stockholders or Directors or otherwise, both as to
8
<PAGE>
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director, officer, employee or agent and inure to the benefit of the heirs,
executors and administrators of such a person. A Director or officer shall be
entitled to the benefit of any amendment of the Delaware General Corporation Law
which enlarges indemnification rights hereunder, but any such amendment which
adversely affects indemnification rights with respect to prior activities shall
not apply to him without his consent unless otherwise required by law. Each
person who is or becomes a Director or officer of the corporation shall be
deemed to have served or to have continued to serve in such capacity in reliance
upon the indemnity provided for in this Article V.
4. Amendment. The provisions of this Article may be amended as provided in
---------
Article VI; however, no amendment or repeal of such provisions which adversely
affects the rights of a Director or officer under this Article V with respect to
his acts or omissions prior to such amendment or repeal, shall apply to him
without his consent.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
1. Fiscal Year. Except as otherwise determined by the Board of Directors,
-----------
the fiscal year of the corporation shall end on December 31 of each year.
2. Seal. The Board of Directors shall have power to adopt and alter the
----
seal of the corporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts,
------------------------
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the President or Treasurer, or
by any other officer of the corporation designated by the Board of Directors,
except as the Board of Directors may generally or in particular cases otherwise
determine.
4. Voting of Securities. Unless otherwise provided by the Board of
--------------------
Directors, the or President or Treasurer may waive notice of and act on behalf
of this corporation, or appoint another person or persons to act as proxy or
attorney in fact for this corporation with or without discretionary power and/or
power of substitution, at any meeting of stockholders or shareholders of any
other corporation or organization, any of whose securities are held by this
corporation.
5. Resident Agent. The Board of Directors may appoint a resident agent
--------------
upon whom legal process may be served in any action or proceeding against the
corporation.
6. Corporate Records. The original or attested copies of the Certificate
-----------------
of Incorporation, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock and transfer records,
which shall contain the names of all stockholders, their record addresses and
the amount of stock held by each, shall be kept at the
9
<PAGE>
principal office of the corporation, at the office of its counsel, or at an
office of its transfer agent.
7. Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
8. Amendments. These By-laws may be amended or repealed or additional
----------
By-laws adopted by the stockholders or by the Board of Directors; provided, that
(a) the Board of Directors may not amend or repeal Article V or this Section 8
of Article VI or any provision of these By-laws which by law, by the Certificate
of Incorporation or by these By-laws requires action by the stockholders, and
(b) any amendment or repeal of these By-laws by the Board of Directors and any
By-law adopted by the Board of Directors may be amended or repealed by the
stockholders.
Adopted December 21, 1999
10
<PAGE>
EXHIBIT 4.1
================================================================================
================================================================================
COMMON STOCK COMMON STOCK
DIGITAS INC.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN
IN BOSTON, MA OR NEW YORK, NY DEFINITIONS
CUSIP 25388K
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK PAR VALUE $.01 PER
SHARE OF DIGITAS INC., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized Attorney, upon surrender of this
Certificate, properly endorsed. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[Signature of Chairman and Chief [Signature of Secretary]
Executive Officer]
Chairman and Chief Executive Officer Corporate Secretary
COUNTERSIGNED AND REGISTERED:
American Stock Transfer & Trust Company
TRANSFER AGENT AND REGISTRAR
By [Signature of Authorized Officer]
AUTHORIZED SIGNATURE
<PAGE>
DIGITAS INC.
The Corporation will furnish without charge to each stockholder upon
request a copy of the full text of the powers, designations, preferences and
relative, participating, optional or other rights of the shares of each class of
stock (and any series thereof) authorized to be issued by the Corporation and
the qualifications, limitations or restrictions of such preferences and/or
rights, all as set forth in the Certificate of Incorporation and amendments
thereto filed with the Secretary of State of the State of Delaware.
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:
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 rights Under Uniform Gifts to Minor
of survivorship and not as Act _________________
tenants in common
(State)
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 OR 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, AND
MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE
17 Ad-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 WHICH MAY
INCLUDE A COMMERCIAL BANK, TRUST COMPANY OR SAVINGS ASSOCIATION,
<PAGE>
EXHIBIT 5.1
[Letterhead of Goodwin, Procter & Hoar LLP]
February 11, 2000
Digitas Inc.
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Ladies and Gentlemen:
We have acted as counsel to Digitas Inc., a Delaware corporation (the
"Company"), in connection with the offer and sale by the Company of up to
7,130,000 shares of common stock, par value $.01 per share ("Common Stock"), of
the Company and by certain selling shareholders (the "Selling Stockholders") of
up to 3,565,000 shares of Common Stock (the "Shares"). The Shares include an
overallotment option of up to 930,000 Shares of Common Stock to be sold by the
Company and up to 465,000 shares of Common Stock to be sold by the Selling
Stockholders. This opinion is being delivered in connection with the Company's
Registration Statement on Form S-1 (No. 333-93585) (the "Registration
Statement") relating to the registration of the offering and sale of the Shares
under the Securities Act of 1933, as amended (the "Securities Act"). All of the
Shares are to be sold by the Company to the several underwriters (the
"Underwriters") of which Morgan Stanley & Co. Incorporated, Deutsche Bank
Securities Inc., Salomon Smith Barmey Inc., Banc of America Securities LLC, and
Bear Stearns & Co. Inc. are the representatives (the "Representatives") pursuant
to an Underwriting Agreement (the "Underwriting Agreement") to be entered into
between the Company, the Selling Stockholders, and the Representatives of the
Underwriters.
In connection with rendering this opinion, we have examined the form of the
proposed Underwriting Agreement being filed as an Exhibit to the Registration
Statement; the Certificate of Incorporation and By-laws of the Company, each as
amended to date; such records of the corporate proceedings of the Company as we
deemed material; and such other certificates, receipts, records and documents as
we considered necessary for the purpose of this opinion. In our examination, we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as certified,
photostatic or facsimile copies, the authenticity of the originals of such
copies and the authenticity of telephonic confirmations of public materials. As
to facts material to our opinion, we have relied upon certificates or telephonic
confirmations of public officials and certificates, documents, statements and
other information of the Company or representatives or officers thereof.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America, the laws of The Commonwealth of
Massachusetts and the laws of the State of Delaware.
<PAGE>
Page 2
February 11, 2000
Based upon the foregoing, we are of the opinion that (i) when the
Underwriting Agreement is completed (including the insertion therein of pricing
terms) and executed and delivered by the Company and on the behalf of the
Underwriters, and the Shares are sold to the Underwriters and paid pursuant to
the terms of the Underwriting Agreement, the Shares will be duly authorized,
validly issued and fully paid and non-assessable by the Company, and (ii) the
shares of stock to be sold by the Selling Shareholders have been duly
authorized, validly issued and are fully paid and nonassessable by the Company.
The foregoing assumes that all requisite steps will be taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 10.4
DIGITAS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Digitas, Inc. 2000 Employee Stock Purchase Plan ("the
Plan") is to provide eligible employees of Digitas Inc., a Delaware corporation
(the "Company"), and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"). One million one hundred thousand (1,100,000) shares of Common Stock in
the aggregate have been approved and reserved for this purpose. The Plan is
intended to constitute an "employee stock purchase plan" within the meaning of
Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
and shall be interpreted in accordance with that intent.
1. Administration. The Plan will be administered by the person or persons
--------------
(the "Administrator") appointed by the Company's Board of Directors (the
"Board") for such purpose. The Administrator has authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard thereto shall be final and conclusive. No member of the
Board or individual exercising administrative authority with respect to the Plan
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.
2. Offerings. The company will make consecutive, overlapping monthly
---------
offerings to eligible employees to purchase Common Stock under the Plan
("Offerings"). Each Offering shall begin on the first business day of each month
and end in the last business day prior to the first anniversary of such Offering
(the "Offering Period"). Unless otherwise determined by the
1
<PAGE>
Administrator, the initial Offering will begin on the effective date of the
Company's first underwritten public offering and will end on February 28, 2001
(the "Initial Offering"). The Administrator may, in its discretion, designate a
different period for any Offering, provided that no Offering shall exceed twelve
(12) months in duration.
3. Eligibility. All employees of the Company (including employees
who are also directors of the Company) and all enployees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that they are customarily
employed by the Company or a Designated Subsidiary for more then twenty (20)
hours a week and they are employed by the Company prior to the first day of the
relevant Offering Period.
4. Participant. An employee on any Offering Date, who is not, as of
such date, participating in another Offering of the Company, may participate in
such Offering by submitting an enrollment form to his appropriate payroll
location at least three (3) business days before the Offering Date (or by such
other deadline as shall be established for the Offering.) The form will (a)
authorize the purchase of Common Stock for him in each Offering in accordance
with the terms of the Plan, (b) specify the exact name or names in which shares
of Common Stock purchased for him are to be issued pursuant to Section 10 and
(c) provide for a whole percentage to be deducted from his Compensation (as
defined in Section 11). An employee who does not enroll in accordance with these
procedures will be deemed to have waived his right to participate. Unless an
employee files a new enrollment form or withdraws from the Plan, his deductions
will continue at the same percentage of Compensation for future Offerings,
provided he remains eligible. Notwithstanding the
2
<PAGE>
foregoing, participation in the Plan will neither be permitted nor be denied
contrary to the requirements of the Code.
5. Employee Contributions. No employee shall be eligible to contribute
----------------------
more than ten percent (10%) of his Compensation. In any year, each eligible
employee may authorize payroll deductions, in whole percentages, at a minimum of
one percent (1%) per pay period up to a maximum of ten percent (10%) of his
Compensation for each pay period. The Company will maintain book accounts
showing the amount of payroll deductions made by each participating employee for
each Offering. No interest will accrue or be paid on payroll deductions.
6. Deduction Changes. Except as may be determined by the Administrator in
-----------------
advance of an Offering, an employee may not increase or decrease his payroll
deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering for which he is eligible to
participate (subject to the limitations of Section 5) by filing a new enrollment
form at least three (3) business days before the next Offering Date (or by such
other deadline as shall be established for the Offering). The Administrator may,
in advance of any Offering, establish rules permitting an employee to increase,
decrease or terminate his payroll deduction during an Offering.
7. Withdrawal. An employee may withdraw from participation in the Plan by
----------
delivering a written notice of withdrawal to his appropriate payroll location.
The employee's withdrawal will be effective as of the next business day.
Following an employee's withdrawal, the Company will promptly refund to him his
entire account balance under the Plan (after payment for any Common Stock
purchased before the effective date of withdrawal). Partial
3
<PAGE>
withdrawals are not permitted. The employee may not re-enroll in any Offering
from which he has withdrawn, but may enroll in a subsequent Offering in
accordance with Section 4.
8. Grant Options. On each Offering Date, the Company will grant to each
-------------
eligible employee who is the a participant in the Plan an option ("Option") to
purchase, at the Option Price hereinafter provided for, (a) a number of shares
of Common Stock, which number shall not exceed the number of whole shares which
is less than or equal to $25,000 divided by the closing price per share of
Common Stock on the Offering Date, or (b) such other lesser maximum number of
shares have been established by the Administrator in advance of the Offering. An
Option may be exercised by an eligible employee on the last business day of each
month in the Offering Period or, if not exercised prior to the last business day
of such Offering Period, shall be deemed to have been exercised as of such date
(either being an "Exercise Date"). The purchase price for each share purchased
under such Option (the "Option Price") will be 85% of the Fair Market Value of
the Common Stock on the Offering Date or the Exercise Date, whichever is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase stock under the Plan,
4
<PAGE>
and any other employee stock purchase plan of the Company and its Parents and
Subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such stock (determined on the option grant date or dates) for each calendar
year in which the Option is outstanding at any time. The purpose of the
limitation in the preceding sentence is to comply with Section 423(b)(8) of the
Code.
9. Exercise of Option and Purchase of Shares. Upon any Exercise Date on
-----------------------------------------
which an eligible employee has chosen to exercise his Option and upon the
Exercise Date that is the last business day of an Offering Period, each employee
who continues to be a participant in the Plan shall exercise or be deemed to
have exercised his Option on such date and shall acquire from the Company such
number of whole shares of Common Stock reserved for the purpose of the Plan as
his accumulated payroll deductions on such date will purchase at the Option
Price, subject to any other limitations contained in the Plan. Any amount
remaining in an employee's account at the end of an Offering Period solely by
reason of the inability to purchase a fractional share will be carried forward
to the next Offering; any other balance remaining in an employee's account at
the end of an Offering will be refunded to the employee promptly.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or in the name of a broker authorized by the
employee to be his, or their, nominee for such purpose.
11. Definitions.
-----------
The term "Compensation" means the amount of base pay, prior to salary
reduction pursuant to either Section 125 or 401(k) of the Code, but excluding
overtime, commissions,
5
<PAGE>
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances or travel expenses, income or gains on the exercise of
Company stock options, and similar items.
The term "Designated Subsidiary" means any present or future subsidiary (as
defined below) that has been designated by the Board to participate in the Plan.
The Board may so designate any Subsidiary, or revoke any such designation, at
any time and from time to time, either before or after the Plan is approved by
the stockholders.
The term "Fair Market Value of the Common Stock" means (i) if the Common
Stock is admitted to trading on a national securities exchange or the Nasdaq
National Market, the closing price reported for the Common Stock on such
exchange or system for such date or, if no sales were reported for such date,
for the next preceding date for which a sale was reported, or (ii) if clause (i)
does not apply but the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
average of the highest bid and lowest asked prices reported for the Common Stock
on NASDAQ for such date or, if no bid and asked prices were reported for such
date, for the next preceding date for which such prices were reported; provided
that, in the case of the Initial Offering under the Plan, the term "Fair Market
Value of the Common Stock" means the offering price to the public of the Common
Stock on such date.
The term "Parent" means a "parent corporation" with respect to the Company,
as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to the
Company, as defined in Section 424(f) of the Code.
6
<PAGE>
12. Rights on Termination of Employment. If a participating employee's
-----------------------------------
employment terminates for any reason before an Exercise Date for any Offering,
no payroll deduction will be taken from any pay due and owing to the employee
and the balance in his account will be paid to him or, in the case of his death,
to his designated beneficiary as if he had withdrawn from the plan under Section
7. An employee will be deemed to have terminated employment, for this purpose,
if the corporation that employs him, having been a Designated Subsidiary, ceases
to be a subsidiary, or if the employee is transferred to any corporation other
than the Company or a Designated Subsidiary.
13. Special Rules. Notwithstanding anything herein to the contrary, the
-------------
Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such
rules are consistent with the requirements of Section 423(b) of the Code. Such
special rules may include (by way of example, but not by way of limitation) the
establishment of a method for employees of a given Designated Subsidiary to fund
the purchase of shares other than by payroll deduction, if the payroll deduction
method is prohibited by local law or is otherwise impracticable. Any special
rules established pursuant to this Section 13 shall, to the extent possible,
result in the employees subject to such rules having substantially the same
rights as other participants in the Plan.
14. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a holder
of the shares of
7
<PAGE>
Common Stock covered by an Option under the Plan until such shares have been
purchased by and issued to him.
15. Rights Not Transferable. Rights under the Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
16. Application of Funds. All funds received or held by the Company under
--------------------
the Plan may be combined with other corporate funds and may be used for any
corporate purpose.
17. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the
Administrator. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Administrator to give
proper effect to such event.
18. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend the Plan in any respect, except that without the approval, within
twelve (12) months of such Board action, by the holders of a majority of the
shares of stock of the Company present or represented and entitled to vote at a
meeting of stockholders, no amendment shall be made increasing the number of
shares approved for the Plan or making any other change that would require
stockholder approval in order for the Plan, as amended, to qualify as an
"employee stock purchase plan" under Section 423(b) of the Code.
8
<PAGE>
19. Insufficient Shares. If the total number of shares of Common Stock
-------------------
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions accumulated
on behalf of each participant that would otherwise be used to purchase Common
Stock on such Exercise Date.
20. Termination of the Plan. The Plan may be terminated at any time by
-----------------------
the Board. Upon termination of the Plan, all amounts in the accounts of
participating employees shall be promptly refunded.
21. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of
such stock.
The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Tax Withholding. Participation in the Plan is subject to any required
tax withholding on income of the participant in connection with the Plan. Each
employee agrees, by entering the Plan, that the Company and its Subsidiaries
shall have the right to deduct any such taxes from any payment of any kind
otherwise due to the employee, including shares issuable under the Plan.
9
<PAGE>
24. Notification Upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
25. Effective Date and Approval of Shareholders. The Plan shall take
-------------------------------------------
effect on the effective date of the Company's first initial public offering
subject to the approval by the holders of a majority of the shares of stock of
the Company present or represented and entitled to vote at a meeting of
stockholders, which approval must occur within twelve (12) months of the
adoption of the Plan by the Board.
10
<PAGE>
EXHIBIT 10.5
THE PRUDENTIAL TOWER
PRUDENTIAL CENTER
BOSTON, MASSACHUSETTS 02199
LEASE COVER SHEET
Lease Date: May 31, 1995
Tenant: Bronner Slosberg Humphrey, Inc.
Floor: Floors Eighteen through Twenty, and Twenty-Two and Twenty-Three
Notice Address:
PRUDENTIAL TOWER
Boston, MA 02199
1. Building Net Rentable Area: 1,226,539 Rentable Square Feet (RSF)
Initial Premises Net Rentable Area: 128,031 RSF
Additional Premises: 24,309 RSF
2. Term Commencement Date: Earlier of date Tenant occupies Premises for
operation of its business or December 15, 1995
3. Rent Commencement Date: December 15, 1995 subject to Section 3.1
4. Expiration Date: November 30, 2005 - subject to Tenant's right
to Extend the Term
5. Rent
A. Fixed Rents:
Years 1-10 at a rate of $27.50 per RSF-
<TABLE>
<CAPTION>
Initial Premises without Initial Premises including
additional Premises additional Premises
------------------- -------------------
<S> <C> <C>
Annual Amount $3,520,852.50 $4,189,350.00
Monthly Payment Amount 293,404.38 349,112.50
</TABLE>
B. Reimbursement Rent - as provided in Articles 2 and 3
<PAGE>
6. A. Base Operating Expense: 1995 Actuals
B. Real Estate Tax: Base calendar 1995
Tenant Share: 10.44% for Initial Premises
12.42 for Initial Premises and Additional Premises
7. Use of Premises: General Offices including offices of an advertising
agency which include, but not limited to, incidental
production facilities.
8. Tenant Extension Option: Two periods of five years each on
twelve months advance notice
9. Tenant Expansion Options: 1 Floor End of 3rd Year
1 Floor End of 5th Year
First Offer
10. Lease Security: Letter of Credit for 50% Lease Transaction
Costs declining as set forth in Section 12.14
11. Additional Premises: 24,309 RSF consisting of Third Floor of
Building - See Section 12.19 as shown on
Exhibit A-6
Lease Date: May 31, 1995
LANDLORD: TENANT:
THE PRUDENTIAL INSURANCE COMPANY BRONNER SLOSBERG HUMPHREY,
OF AMERICA INC.
By:/s/ Robert J. Walsh By:/s/ Robert E.
______________________ _________________________
Vice President its SVP, CFO duly authorized
<PAGE>
LEASE
PRUDENTIAL CENTER
BOSTON, MASSACHUSETTS
TABLE OF CONTENTS
Article
- -------
1. Description of Premises and Term of Lease
Section 1.1 Demise
1.2 Easement for Utility Lines, etc.
1.3 Areas Outside Premises
1.4 Term
1.5 Commencement Date
2. Finishing the Premises
Section 2.1 Work
3. Payment of Rent and Tenant's Share of Increased Operating Expenses
Section 3.1 Rent
3.2 Operating Expenses
3.3 Utility Charges
3.4 Real Estate Taxes
4. Covenants of Landlord
Section 4.1 Repairs by Landlord
Default by Landlord
4.2 Services by Landlord
5. Additional Covenants by Tenant
Section 5.1 Use of Premises
5.2 Tenant's Covenants
5.3 Assignment, Subletting
5.4 Excess Payments
5.5 Repairs by Tenant
5.6 Permits and Workmanship
5.7 Liens
5.8 Control of Premises
5.9 Reserved
<PAGE>
5.10 Reserved
5.11 Tenant's Statement
5.12 Surrender of Premises-Removal of Trade Fixtures
5.13 Personal Property Tax
5.14 Landlord's Right to Perform Tenant's Obligations
6. Damage or Destruction by Fire or Casualty
Section 6.1 Total or Partial Destruction by Fire or Otherwise
6.2 Damage Within Last Two (2) Years
6.3 Apportionment
7. Eminent Domain
Section 7.1 Entire or Partial Taking
7.2 Condemnation Award
7.3 Rent Abatement
7.4 Apportionment
7.5 Eminent Domain Defined
8. Default
Section 8.1 Default by Tenant
8.2 Landlord's Remedies
9. Quiet Enjoyment
10. Landlord's Reservation of Rights
Section 10.1 Rights Reserved to Landlord
10.2 Access to Premises by Landlord
10.3 Landlord's Safety Measures
10.4 Hazardous Substances
10.5 Interruption of Service
11. Insurance Covenants, Tenant
Section 11.1
11.2
11.3
11.4
11.5
<PAGE>
11.6
11.7
12. Miscellaneous Provisions
Section 12.1 Waiver of Subrogation
12.2 Subordination
12.3 Landlord's Remedies Cumulative
12.4 Partial Invalidity
12.5 Successors and Assigns
12.6 Article Headings and Marginal Notes
12.7 Notices
12.8 Written Approvals
12.9 Broker's Commission
12.10 Entire Agreement
12.11 Submission of Lease-No Option
12.12 Massachusetts Law Governs
12.13 Tenant's Parking Rights
12.14 Lease Security
12.15 Tenant's Extension Rights
12.16 Tenant's Expansion Rights
12.17 Exhibits
12.18 Tenant's Signage
12.19 Additional Premises
<PAGE>
LEASE
PRUDENTIAL CENTER
BOSTON, MASSACHUSETTS
THIS LEASE made this 31st day of May, 1995, between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having its principal
office at Prudential Plaza, Newark, New Jersey (hereinafter called "LANDLORD"),
and Bronner, Slosberg Humphrey, Inc., a Massachusetts corporation with an office
on the 18th through 20th and 22nd and 23rd Floors, Prudential Tower, Boston,
Massachusetts, (hereinafter called "TENANT").
WITNESSETH:
In consideration of the mutual covenants herein expressed, LANDLORD and
TENANT hereby covenant and agree as follows:
ARTICLE I
DESCRIPTION OF PREMISES AND TERM OF LEASE
1.1 Demise
------
LANDLORD hereby leases to TENANT and TENANT hereby leases from LANDLORD
the Premises (hereinafter called "the Initial Premises") shaded on Exhibit
A-1 through A-5 attached hereto and made part hereof consisting of all
useable space on Floors 18, 19, 20, 22 and 23, Tower Building, consisting
of approximately 128,031 rentable square feet (RSF) in that part of
Prudential Center in Boston, Massachusetts which is shown on Exhibit AA
attached hereto and made part hereof (whereupon the Initial Premises are
shaded), excepting and reserving from the Initial Premises the roof and
the exterior walls of the Building in which the Initial Premises are
located, and subject to all rights hereinafter reserved to LANDLORD and to
all rights reserved to LANDLORD by operation of law. Said Building (as the
same may from time to time be constituted after changes therein, additions
thereto and eliminations therefrom pursuant to rights of LANDLORD
hereinafter reserved) is hereinafter called "the Building." The Initial
Premises are a portion of those described in Certificate of Title 64667
issued to LANDLORD from the Suffolk Registry District of the Land Court.
For all purposes of this Lease, the term "Prudential Center" shall refer
only to such part of Prudential Center as is shown on said Exhibit A-A.
1.2 EASEMENT FOR UTILITY LINES, ETC.
--------------------------------
LANDLORD reserves the right to place (or permit any other tenant so to
place) in, over, below and upon the Initial Premises but not within
TENANT'S useable areas (reasonable notice shall be given TENANT and the
work shall be performed in such a
<PAGE>
manner as to keep to a minimum interference with TENANT'S use of the
Initial Premises and without affecting tenant's business) utility lines,
conduits, pipes, tunneling and the like to serve the Initial Premises and
other premises and to use, replace, maintain and repair (or permit any
other tenant so to do) such utility lines, conduits, pipes, tunneling and
the like in, over, below and upon the Initial Premises as may have been
installed in the Building or Prudential Center.
1.3 AREAS OUTSIDE INITIAL PREMISES
------------------------------
LANDLORD reserves and excepts all rights of ownership and use in all
respects outside the Initial Premises, including without limitation, the
Building and all other structures and improvements and plazas and common
areas in Prudential Center, except that at all times during the term of
this Lease, TENANT shall have a reasonable means of access from a public
street to the Initial Premises. Without limitation of the foregoing
reservation of rights by LANDLORD, it is understood that in its sole
discretion LANDLORD shall have the right to change and rearrange the
plazas and other common areas, to change, relocate and eliminate
facilities therein, to erect new buildings thereon, to permit the use of
or lease all or part thereof for exhibition and displays and to sell,
lease or dedicate all or part thereof to public use; and further that
LANDLORD shall have the right to make changes in, additions to and
eliminations from the Building and other structures and improvements in
Prudential Center, the Initial Premises excepted; provided however that
TENANT, its employees, agents, clients, customers, and invitees shall at
all times have reasonable access to the Building and Initial Premises.
LANDLORD is not under any obligation to permit individuals without proper
building identification to enter the Building after 6:00 p.m.
1.4 TERM
----
TO HAVE AND HOLD the Initial Premises for the term of ten (10) years
beginning on the Commencement Date as hereinafter defined, (the "Term"),
subject to TENANT'S right to extend the Term as provided in Section 12.15.
In the event that TENANT should hold over after the expiration or sooner
termination of the Term, TENANT shall be a lessee at sufferance subject to
all of the terms and provisions of this Lease in effect immediately prior
to such holdover, except that TENANT shall pay on account of the Rent an
amount equal to 2.0 times the Rent most recently in effect.
2
<PAGE>
1.5 COMMENCEMENT DATE
-----------------
The Commencement Date shall be the earlier of the date TENANT occupies the
Premises for the purpose of conducting its business or December 15, 1995,
provided LANDLORD delivers the Initial Premises to TENANT no later than
the date set forth on Schedule 1 attached. In the event any floor of the
Initial Premises are not delivered to TENANT on or before the date
specified in Schedule 1, there shall be an abatement of the portion of the
rent attributable to such floor on the basis of one day's abatement for
each day of delay in the delivery of such floor beyond the date set forth
in Schedule 1. LANDLORD and TENANT agree to execute a document setting
forth the Commencement Date after the Commencement Date has been
determined.
ARTICLE 2
FINISHING THE INITIAL PREMISES
2. WORK
----
LANDLORD shall deliver the Initial Premises in their "as is" shell
condition as described in Exhibit B attached and made a part hereof on the
dates provided in Schedule 1.
In connection with the preparation of the Initial Premises (the Work) for
TENANT'S use and occupancy, TENANT has selected (i) Elkus/Manfredi
(Tenant's Architect) and (ii) Mead Consulting Inc., as TENANT'S
Construction Manager. TENANT will select four (4) contractors, acceptable
to LANDLORD to bid on the Work. TENANT shall select a contractor (Tenant's
Contractor), subject to LANDLORD'S reasonable approval, whose labor will
work in harmony with other labor working at Prudential Center. The Work
will be performed in accordance with mutually acceptable plans and
specifications (the Plans) drawn by Tenant's Architect. TENANT will cause
Tenant's Architect to deliver copies of the Plans, including
specifications for the Work, to LANDLORD for LANDLORD'S approval. LANDLORD
shall review the Plans on a fast track basis providing for review,
comments and approval by LANDLORD of portions of the Plans prior to
completion of all the Plans. LANDLORD shall advise TENANT in writing
within fourteen (14) days of the receipt of the Plans of LANDLORD'S
approval of the Plans. LANDLORD shall specify in reasonable detail any
portion of the Plans not approved so that TENANT may modify such portion
to comply with LANDLORD'S suggestion. LANDLORD'S review and approval of
the Plans shall not imply compliance with any codes, standards or
otherwise. Tenant's Contractor shall perform the Work in a good and
workmanlike manner in accordance with all applicable codes. The Work shall
be Substantially Complete when (i) Tenant's Architect has issued a
Certificate of Substantial Completion and (ii) permission has
3
<PAGE>
been obtained from the city of Boston Building Department to occupy the
Initial Premises with only minor items of finish or adjustment (Punch List
Items) remain to be finished. TENANT shall complete or cause to be
completed all Punch List Items within thirty (30) days of Substantial
Completion. Any delay in completion of the Work due to changes requested by
TENANT or actions of Tenant's Architect or Tenant's Construction Manager or
for any other reason not the fault of LANDLORD shall not result in a delay
in the Rent Commencement Date whether the Work is substantially complete or
not.
Tenant's Architect, Tenant's Contractor and Tenant's Construction Manager
shall comply with Prudential Center General Conditions of Contract attached
as Exhibit G and shall provide Landlord's Contract Manager with evidence of
insurance in accordance with requirements for insurance for contractors
working at Prudential Center. TENANT shall deliver copies of all contracts
with Tenant's Architect, Tenant's Contractors and Tenant's Construction
Manager to LANDLORD.
LANDLORD shall provide TENANT a tenant improvement allowance equal to
$45.00 per RSF (Tenant Allowance), subject to adjustment as provided below.
Tenant's Allowance will be utilized by LANDLORD to pay for (i) the
reasonable fee and charges of Tenant's Architect; (ii) the costs and fee of
Tenant's Contractor as set forth in the Construction Contract which shall
be reasonably acceptable to LANDLORD; (iii) the reasonable fees of Tenant's
Construction Manager; (iv) TENANT'S reasonable moving costs as evidenced in
invoice form a licensed professional mover, the total of which is
hereinafter referred to as Tenant's Total Costs. Items (i), (ii) and (iii)
above of Tenant's Total Costs shall be capped as of the date the
Construction Contract is executed.
Prior to the commencement of the Work, TENANT shall obtain from Tenant's
Contractor and provide to LANDLORD, a schedule of values as provided in
Article 3 of Exhibit G. LANDLORD shall make progress payments for the Work
to Tenant's Contractor as provided in Article 3 of Exhibit G attached.
Payments shall be made to Tenant's Architect and Tenant's Construction
Manager monthly based upon the percentage of completion of services
rendered at the end of each month.
In the event Tenant's Allowance is insufficient to pay Tenant's Total
Costs, LANDLORD agrees to increase Tenant's Allowance to an amount equal
to Tenant's Total Costs (but in no event shall Tenant's Allowance exceed
$55.00 per RSF). If Tenant's Allowance is increased as provided above,
TENANT shall reimburse LANDLORD by paying to LANDLORD throughout the
initial term hereof Reimbursement Rent, payable as additional rent at the
rate of $.16 per RSF per year for every one ($1.00) Dollar per RSF of
Tenant's Total Costs in excess of Forty-Five
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($45.00) Dollars per RSF with appropriate adjustment for partial dollar
increases. [For example, if Tenant's Total Costs equal Forty Seven and
50/100 ($47.50) Dollars per RSF, Tenant's Reimbursement Rent would be $2.5
x .16 = $.40 (per RSF) times 128,031 (RSF of Initial Premises equals
$51,212.40 per year payable monthly in the amount of $4,267.70.]
Reimbursement Rent shall be payable monthly in advance throughout the
initial fixed term of ten (10) years as provided in Section 3.1.
In the event Tenant's Total Costs are less than $45.00 per RSF, LANDLORD
agrees to reduce the Rent provided for in Section 3.1 by $.16 per RSF for
each $1.00 per RSF Landlord Total Costs are less than $45.00 per RSF with
appropriate adjustment for partial dollar decreases.
LANDLORD shall allow TENANT early access to the Initial Premises for
purpose of installing TENANT'S fixtures and wiring provided TENANT shall
not interfere with the completion of the Work.
ARTICLE 3
PAYMENT OF RENT
AND
TENANT'S SHARE OF INCREASED OPERATING EXPENSES
3.1 RENT
----
In the event TENANT occupies all or a part of the Initial Premises prior
to December 1, 1995 (Early Occupancy Period), TENANT shall not be
obligated to pay rent during the Early Occupancy Period. However, TENANT
shall reimburse LANDLORD for operating costs and real estate taxes during
the Early Occupancy Period at the rate of $1.00 per month for each RSF
occupied. TENANT'S reimbursement shall be pro rated for any partial month.
If TENANT occupies the Initial Premises for the purpose of conducting its
business on or after December 1, 1995, the Rent Commencement Date shall be
the day TENANT so occupies the Initial Premises but not later than
December 15, 1995.
LANDLORD reserves and TENANT covenants and agrees, commencing on the Rent
Commencement Date, to pay to LANDLORD without notice or demand, and
without setoff, defense, counterclaim, reduction or abatement, except as
otherwise provided in this Lease, at the office of LANDLORD at Prudential
Center or elsewhere as designated from time to time by written notice to
TENANT and in the manner herein prescribed for payment thereof, rent for
the Initial Premises as follows:
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(a) Fixed Rent
----------
A fixed guaranteed annual rent, hereinafter called "Rent" payable in
equal monthly installments in advance on the first day of each month
throughout the term of this Lease, in the amounts on the Lease Cover
Sheet attached hereto and made a part hereof, subject to adjustment as
provided below.
Rent for any partial months at the beginning and end of the Term shall
be a pro rata portion (based on the number of days in the particular
month) of the monthly installment of Rent for the respective Lease
year.
(b) Reimbursement Rent as Provided in Section 2
-------------------------------------------
LANDLORD and TENANT agree when the amount of any Reimbursement Rent or
reduction in rent all as provided for in Section 2 is determined, the
parties will enter into a Lease Amendment setting forth the amount of
Reimbursement Rent or Rent Reduction as the case may be.
TENANT also agrees to pay to LANDLORD, on demand, interest on all
overdue installments of Rent (Fixed and Reimbursement) commencing five
(5) days from the due date thereof until payment thereof in full at a
rate equal to the lesser of (a) the maximum rate permitted by
applicable law, or (b) ten (10%) percent.
3.2 INCREASED OPERATING EXPENSES
----------------------------
Commencing on January 1, 1996, TENANT also agrees to reimburse
LANDLORD for TENANT'S share of Increased Operating Expense in excess
of Base Operating Expenses in accordance with Exhibit F attached
hereto and made a part hereof.
TENANT also agrees to pay LANDLORD, on demand, interest on all overdue
installments of TENANT'S share of increased operating expenses
commencing five (5) days from the due date thereof until payment
thereof in full at a rate equal to the lesser of (a) the maximum rate
permitted by applicable law, or (b) ten (10%) percent.
3.3 UTILITY CHARGES
---------------
TENANT shall pay directly to Boston Edison the costs of electrical
service consumed in those portions of the Initial Premises located
above the 18th Floor for lighting and receptacles within the Initial
Premises as measured by separate meters located on each floor of the
Initial Premises.
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For the portion of the Initial Premises located on the 18th Floor, TENANT
shall reimburse LANDLORD for the costs of electrical service consumed in
the Premises determined by a check meter. TENANT reimbursement is estimated
to be $1.00 per RSF in 1994 subject to adjustment to reflect LANDLORD'S
cost per kilowatt of electricity and any change in TENANT'S wage.
LANDLORD'S charges for condenser water used in HVAC units, if any, serving
the Initial Premises exclusively as measured by a meter installed if
necessary as part of the Work pursuant to Section 2.1, shall be billed to
and paid for monthly by TENANT. LANDLORD'S charges for chilled water shall
be commercially reasonable and shall not exceed the rates charged to other
tenants of the Building.
3.4 REAL ESTATE TAXES
-----------------
Commencing on January 1, 1996, TENANT covenants and agrees to pay as
Additional Rent each year of the term the amount equal on a per square foot
basis of the increase in real estate taxes over the amount paid by LANDLORD
in calendar 1995 as real estate taxes (Tax Base). TENANT shall make
payments in its share of increased real estate taxes monthly with the
payment of Rent and Additional Rent based upon LANDLORD'S good faith
estimate of its share of increased Real Estate Taxes. TENANT'S monthly
payment shall equal 1/12 TENANT'S estimated annual liability for increased
taxes which LANDLORD shall adjust periodically to reflect tax bills
received from the City of Boston. Each year at the time LANDLORD provides
TENANT with a statement of operating costs as provided in Exhibit F,
LANDLORD shall also provide TENANT with a statement of tax payments.
LANDLORD shall refund to TENANT any overpayments at any time and TENANT
shall promptly pay any underpayment. LANDLORD shall deliver to TENANT upon
request copies due TENANT of relevant tax bills with allocation detail.
The benefit of any tax abatement obtained by LANDLORD shall, after
deduction of the reasonable and customary costs of obtaining such
abatement, inure pro rata to TENANT.
It is the intent of the LANDLORD and TENANT that with respect to real
estate property taxes and any other taxes imposed in lieu thereof, and that
TENANT shall pay TENANT'S share of real estate taxes in excess of the Tax
Base and, in the event the scheme of taxation is altered in any way, TENANT
shall pay, and hereby covenants and agrees to pay, its proportionate share
of such charges.
7
<PAGE>
ARTICLE 4
COVENANTS OF LANDLORD
4.1 REPAIRS BY LANDLORD
-------------------
Subject to the provisions of Articles 6 and 7 and except for any loss,
destruction or damage caused by omission, negligence or fault of TENANT,
LANDLORD covenants and agrees at LANDLORD'S cost and expense: to cause to
be kept the structural floor slabs, exterior walls, load-bearing interior
walls, columns of the Initial Premises and building system including the
heating, ventilating, plumbing and electrical, that service the Initial
Premises and the rest of the Building including common areas (including all
doors and interior glass, finish and coverings) in good order, repair and
condition. Nothing in this section shall impose any obligation to repair
interior portions of the Initial Premises including doors, interior glass,
finish and coverings.
DEFAULT BY LANDLORD
-------------------
LANDLORD shall in no event be in default in the performance of any
obligations under this Section 4.1 unless and until LANDLORD shall have
failed to perform such obligations within thirty (30) days (or such
additional time as is reasonably required to correct any such default)
after notice by TENANT to LANDLORD adequately specifying wherein LANDLORD
has failed to perform any such obligation, and in no event shall LANDLORD
be liable to TENANT for any indirect or consequential damages.
4.2 SERVICES BY LANDLORD
--------------------
LANDLORD further covenants and agrees:
(i) LANDLORD shall subject to all governmental orders or decrees furnish
space heating and cooling (air conditioning) as normal seasonal changes may
require to provide reasonably comfortable space temperature (the parties
hereto agree that the range of 68oF - 76oF is reasonably comfortable space
temperature) and ventilation for occupants of the Initial Premises under
normal business operation, daily from 8:00 A.M. to 6:00 P.M. (Saturday
8:00 A.M. to 1:00 P.M.), Sundays and holidays excepted. The Building's HVAC
System performance, characteristics and standards are set forth in Schedule
II attached. Whenever machines or equipment (not normally utilized in
general office use) are used in the Initial Premises which materially
affect the temperature otherwise maintained, LANDLORD reserves the right,
upon thirty (30) days written notice to TENANT to install supplementary air
conditioning and heating units in the Initial Premises and the cost of such
units and the installation thereof shall be paid by TENANT to LANDLORD upon
demand. The cost of operating and
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maintaining the same shall be borne by TENANT. If approved by LANDLORD
in writing, TENANT may install such supplementary systems under the
control and direction of LANDLORD.
(ii) LANDLORD shall provide the cleaning services and incidental
supplies set forth on Exhibit C attached hereto and made a part hereof.
(iii) LANDLORD shall supply, for normal business office use, water for
lavatory and toilet purposes in the Building toilet rooms.
(iv) LANDLORD shall furnish non-exclusive use of fully automatic
(operator less) passenger elevators for ingress to and egress from the
floor or floors upon which the Initial Premises are located. The service
shall be supplied daily by passenger elevators serving such floors from
8:00 A.M. to 6:00 P.M., Saturday, Sundays and holidays excepted.
Automatic freight elevator service shall be available in common with
other tenants from 8:00 A.M. to 5:00 P.M. daily, Saturdays, Sundays and
holidays excepted. TENANT shall have limited non-exclusive elevator
access to the Initial Premises (i.e. controlled by Building security
services) 24 hours a day 365 days a year, subject to disruptions caused
by acts of God or other causes beyond LANDLORD'S control. TENANT may
arrange with LANDLORD'S Contract Manager for after hours (after 5:00
p.m. and before 8:00 a.m.) freight elevator service provided TENANT
reimburses LANDLORD for the reasonable costs of such service plus a
reasonable administrative fee. LANDLORD reserves the right to program
the elevator service in the Building to obtain in its sole discretion
the most efficient and economically feasible method of bringing in and
taking out all persons using the Building. TENANT agrees to cooperate in
the programming of such service of those elevators serving the floor or
floors on which the Initial Premises are located.
ARTICLE 5
ADDITIONAL COVENANTS OF TENANT
TENANT further covenants and agrees:
5.1 USE OF Initial Premises
-----------------------
To use and occupy the Initial Premises for general offices, including
offices of an advertising agency which include incidental production
facilities and for no other use whatsoever. TENANT shall not cause or
permit any noise or sounds to emit from the Initial Premises, into the
rest of the Building, or otherwise disturb other tenants in the
Building.
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It is expressly agreed that TENANT shall not use the Initial Premises, or
permit the same to be used, for any manufacturing or mechanical purposes
or for the sale of food or alcoholic or non-alcoholic beverages for
consumption on or off the Initial Premises or for cooking and preparation
of food even though any of such uses might, but for this provision, be
regarded as incidental to the business of TENANT. TENANT may, for its own
use, have microwave ovens, coffee makers, and refrigerators for storage
and preparation of light meals for officers, employees and guests. TENANT
may, with LANDLORD'S approval not to be unreasonably withheld or delayed,
at TENANT'S cost and expense subject to compliance with all applicable
codes, install within the Initial Premises a full service kitchen for the
serving of meals to officers, employees and business invitees and guests
of TENANT in a non-cafeteria format.
5.2 TENANT'S COVENANTS
------------------
In connection with TENANT'S use of the Initial Premises:
(i) TENANT shall not conduct any auction, fire, bankruptcy, going out of
business, liquidation or similar sales and TENANT shall not use any walk
or passageways adjacent to Initial Premises for business purposes.
(ii) TENANT shall comply with all laws, orders and regulations and with
the directions of any public officer authorized by law with respect to
the Initial Premises and the use and occupancy thereof and shall not
suffer or permit any use of the Initial Premises which directly or
indirectly is forbidden by law, ordinance or governmental or municipal
regulation or order or which may be dangerous to life, limb or property.
(iii) TENANT shall not erect, install or maintain any sign, lettering,
placard or similar matter if all or any part of such sign, lettering,
placard or similar matter is painted upon or posted or otherwise affixed
to the exterior or interior of any window or door or the glass thereof or
is otherwise located in such manner as to be visible from the outside of
the Initial Premises, without in each case obtaining LANDLORD'S advance
written consent not to be unreasonably withheld. Neither LANDLORD'S name
nor the word "Prudential" alone or in any combination other than
"Prudential Center" shall be used by the TENANT for any purpose
whatsoever. TENANT shall not use the words "Prudential Center" other than
as part of the business address of TENANT and then only in such manner as
will not appear to be part of TENANT'S name. TENANT shall not use the
words "Prudential Center" in any manner which is undignified, confusing,
detrimental or misleading in LANDLORD'S opinion and shall give no greater
prominence to the words "Prudential Center" than to any other part of the
business address of TENANT and shall give less prominence to the words
"Prudential Center" than to TENANT'S name. LANDLORD shall provide TENANT,
at LANDLORD'S cost and expense, with appropriate listings in the Building
Directory. TENANT, at its
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sole cost and expense, may, with LANDLORD'S approval not to be unreasonably
withheld or delayed, install signage in the lobby of the floor the Initial
Premises are on consistent with the Building signage policy.
(iv) TENANT shall not do or permit to be done any act or thing which will
invalidate or be in conflict with fire or other insurance policies covering the
Building or its operation or the Initial Premises or part of either; or do or
permit to be done anything in or about the Initial Premises or bring or keep
anything therein which shall not comply with all rules, orders, regulations or
requirements of the Board of Fire Underwriters or any similar organization (and
TENANT shall at all times comply with all such rules, orders, regulations and
requirements); or which shall increase the rate of insurance on the Building,
its appurtenances or contents, unless TENANT shall reimburse LANDLORD to the
extent of such increase.
(v) TENANT shall not install or operate (except for incidental food
refrigerators, toasters, microwave ovens), any refrigerating, heating or air
conditioning apparatus without the written permission of LANDLORD which
permission shall not be unreasonably withheld or delayed.
(vi) TENANT shall not place any radio or television antenna on the roof or on
or in any part of the Building other than the inside of the Initial Premises; or
operate or permit to be operated any musical or sound-producing instrument or
device inside or outside the Initial Premises which may be heard outside the
Initial Premises; or operate any electrical device from which may emanate
electrical waves or any other emanations which interfere with or impair radio or
television or telephone broadcasting or reception from or in the Building or
elsewhere in Prudential Center.
(vii) TENANT shall not place anything or allow anything to be placed near the
glass of any door, partition or window which may be unsightly from outside the
Initial Premises; or obstruct any passageway, exit, stairway, elevator, shipping
platform or truck concourse. TENANT shall lend its full cooperation to keep such
areas free from all obstruction and in a clean and sightly condition and move
all supplies, furniture and equipment as soon as received directly to the
Initial Premises and move all such items and waste being taken from the Initial
Premises directly to the loading platform designated by LANDLORD at or about the
time arranged for removal therefrom. TENANT shall also keep the premises free of
vermin and shall not permit any odors to emanate from the Initial Premises.
(viii) TENANT shall not move any safe, vault or other heavy equipment in or out
of the Initial Premises except in such a manner and at such time as LANDLORD
shall in each instance authorize, not to be unreasonably withheld.
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<PAGE>
(ix) TENANT shall not place a load upon the floor area of the Initial
Premises exceeding seventy-five (75) pounds per square foot.
(x) TENANT shall make no material installations, alterations or additions
in or to the Initial Premises without LANDLORD'S prior written consent,
not to be unreasonably withheld, and then only pursuant to plans and
specifications approved by LANDLORD in advance in each instance. TENANT
may, with prior written notice to LANDLORD, make non-structural cosmetic
changes to Initial Premises which do not exceed $20,000.00 in cost.
(xi) TENANT shall obey and comply with all rules and regulations
promulgated by the LANDLORD pursuant to Section 10.1 hereof, so long as
the same are applying in a non-discriminatory manner to all tenants in
Building.
5.3 ASSIGNMENT, SUBLETTING
----------------------
TENANT shall not assign, transfer, mortgage or pledge this Lease or
sublease (which term shall be deemed to include the granting of
concessions and licenses and the like) all or any part of the Initial
Premises without first obtaining on each occasion the written consent of
LANDLORD, which consent shall not be unreasonably withheld or delayed, or
suffer or permit this Lease or the leasehold estate hereby created or any
other rights arising under this Lease to be assigned, transferred or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the occupancy of the Initial Premises by
anyone other than TENANT. Any attempted assignment, transfer, mortgage,
pledge, sublease or other encumbrance made without such written consent
shall be void. No assignment, transfer, mortgage, pledge, sublease or
other encumbrance shall affect the continuing primary liability of TENANT
and no consent to any of the foregoing in a specific instance shall
operate as a waiver in any subsequent instance. TENANT may, with written
notice to LANDLORD, assign this Lease or sublet all or a portion of the
Initial Premises to an entity which (i) controls TENANT, (ii) is
controlled by TENANT, (iii) is controlled by the same entity as TENANT,
(iv) is the successor to TENANT by merger or consolidation.
5.4 EXCESS PAYMENTS
---------------
In the event that the aggregate of all payments received by, or paid to
discharge an obligation of, TENANT as a result of any assignment,
subletting or permission to use or occupy the Initial Premises, whether or
not LANDLORD shall have consented hereto (it being agreed by TENANT that
nothing herein contained shall in any way affect the covenant contained
herein prohibiting an assignment of subletting of the Initial Premises
without LANDLORD'S prior consent), shall exceed the aggregate of all
payments less all reasonable and customary transaction costs payable by
TENANT
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hereunder, then TENANT agrees to pay to LANDLORD 50% of the amount of any
such excess after the deduction of all reasonable and ordinary transaction
costs.
5.5 REPAIRS BY TENANT
-----------------
TENANT shall, subject to the provisions by Section 4.1 and Articles 6 and
7, and subject to reasonable wear and tear and any loss or damage from a
casualty, at TENANT'S own cost and expense: keep neat and clean and in
good order, repair and condition the Initial Premises, including without
limitation, all interior glass, windows, walls and doors and the interior
of the Initial Premises and all air conditioning, heating, plumbing,
electrical, ventilating, lighting and other mechanical equipment within
and serving the Initial Premises (other than building standard air
conditioning, heating, plumbing and electrical which LANDLORD shall
maintain and repair) and all the installations made by TENANT pursuant to
Article 2 or otherwise, and will make all alterations, improvements,
replacements, repairs or renovations to the Initial Premises required by
any laws, rules, regulations or requirements of all public authorities or
the fire insurance rating association having jurisdiction required as a
result of TENANT'S unique use of the Initial Premises, make all repairs
and replacements and do all other work necessary for the foregoing
purposes and also make at LANDLORD'S request all repairs to and
replacements of the items referred to in Section 4.1 and LANDLORD'S
property outside the Initial Premises which are necessitated solely by
any negligence, fault or omission of TENANT, all of the foregoing repairs
and replacements to be at least equal in condition to the original
condition of the item repaired or replaced. TENANT shall use reasonable
diligence to conserve steam and hot and cold water supplied by LANDLORD.
5.6 PERMITS AND WORKMANSHIP
-----------------------
TENANT shall pay when due the entire cost of any work in the Initial
Premises undertaken by TENANT so that the Initial Premises shall at all
times be free of liens for labor and materials; procure all necessary
permits before undertaking such work; do all of such work in a good and
workmanlike manner, employing materials of good quality and complying
with all governmental requirements; and defend, save harmless and
indemnify LANDLORD from all claims, injury, loss or damage to any person
or property occasioned by or growing out of such work. TENANT further
agrees to employ for such work one or more responsible contractors whose
labor will work in harmony with any other labor then working in
Prudential Center and to cause such contractors employed by TENANT to
carry Workmen's Compensation Insurance in accordance with statutory
requirements and Comprehensive Public Liability Insurance covering such
contractors on or about the Initial Premises in such reasonable amounts
as LANDLORD shall require and to submit certificates evidencing such
coverage to LANDLORD prior to the commencement of such work.
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5.7 LIENS
-----
In the event any mechanic's lien shall at any time be filed against the
Initial Premises by reason of work, labor, service or materials performed
or furnished to TENANT or to anyone holding the Initial Premises through
or under TENANT, TENANT shall forthwith cause the same to be discharged
of record by bonding over or otherwise. If TENANT shall fail to cause
such lien forthwith to be discharged after being notified of the filing
thereof, then, in addition to any other right or remedy of LANDLORD,
LANDLORD may, but shall not be obligated to, discharge the same by paying
the amount claimed to be due, and the amount so paid by LANDLORD and all
costs and expenses, including reasonable attorneys' fees, incurred by
LANDLORD in procuring the discharge of such lien, shall be due and
payable by TENANT to LANDLORD on the first day of the next following
month, with interest thereon at a rate equal to the lesser of (a) the
maximum rate permitted by applicable law, or (b) eighteen (18%) percent.
5.8 CONTROL OF INITIAL PREMISES
---------------------------
On the day Tenant's Contractor commences the Work described in Article 2,
TENANT shall assume exclusive control of the Initial Premises and all
tort liabilities incident to the control or ownership thereof, and
defend, save harmless and indemnify LANDLORD from all claims, damage or
costs, including attorneys' fees, arising on account of any injury or
damage to any person or property including, without limitation, the
personal property of TENANT and TENANT'S servants, employees, agents,
guests, visitors and licensees, on the Initial Premises, or otherwise
resulting from the use or maintenance or occupancy by TENANT or anyone
claiming under it of the Initial Premises. Notwithstanding the foregoing,
it is understood that TENANT will assume control of the Initial Premises
on a floor by floor basis as provided in Schedule 1 and, TENANT shall not
have any liability for a floor until TENANT or TENANT'S Contractor
assumes control of such floor.
TENANT further agrees that LANDLORD shall not be responsible or liable to
TENANT, or to those claiming by, through or under TENANT for any loss or
damage that may be occasioned by or through the acts, omissions,
negligence, fault or misconduct of any person other than LANDLORD its
agents and employees including, without limitation, persons occupying
premises which adjoin or are adjacent to or connect with the Initial
Premises or any part of the Building.
All of the furnishings, fixtures, equipment, effects and property of
every kind, nature and description of TENANT and of all persons claiming
by, through or under TENANT which, during the continuance of this Lease
or any occupancy of the Initial Premises by TENANT or anyone claiming
under TENANT, may be on the Initial
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Premises or elsewhere in Prudential Center, shall be at the sole risk and
hazard of TENANT, and if the whole or any part thereof shall be destroyed
or damaged by fire, water or otherwise, or by the leakage or bursting of
water pipes, steam pipes, or other pipes, by theft or from any other
cause, no part of said loss or damage is to be charged to or to be borne
by LANDLORD.
Notwithstanding the foregoing provisions, LANDLORD shall in no event be
indemnified or held harmless or exonerated from any liability to TENANT or
to any other person, for injury, loss, damage, or liability arising from
any omission, fault, negligence or other misconduct of LANDLORD within the
meaning of the provisions of Massachusetts General Laws, Chapter 186,
Section 15, as the same are in force at the time of delivery of this
Lease.
5.9 (Intentionally left blank)
5.10 (Intentionally left blank)
5.11 TENANT'S STATEMENT
------------------
Tenant agrees from time to time, not more than twice per calendar year,
upon not less than fifteen (15) days prior written request by LANDLORD, to
execute, acknowledge and deliver to LANDLORD a statement in writing
certifying that this lease is unmodified and in full force and effect (or,
if there have been any modifications that the same is in full force and
effect as modified and stating the modification), the dates to which the
Operating Expenses, Rent, and any other rent and charges have been paid,
the TENANT has accepted possession of the Initial Premises, no Rent or
other charges have been paid more than thirty (30) days in advance, the
TENANT (subject to TENANT'S then current knowledge) has no defenses,
offsets or counterclaims against its obligations hereunder and whether or
not the LANDLORD is in default in the performance of any of its
obligations hereunder. Any such statement delivered pursuant to this
Section 5.11 may be relied upon by any prospective purchaser or mortgagee
of the Initial Premises or any prospective assignee of any mortgage of the
Initial Premises.
5.12 SURRENDER OF INITIAL PREMISES-REMOVAL OF TRADE FIXTURES
-------------------------------------------------------
At the expiration or earlier termination of this Lease, TENANT shall
remove all interior stairways (except for the interior stairway between
the 18th and 19th Floors)
15
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and other installations in the Initial Premises made after the
Commencement Date (Special Improvements) as LANDLORD shall have indicated
at the time LANDLORD approves the plans for such Special Improvements.
TENANT shall also remove all moveable fixtures, moveable partitions,
personal property and all its signs wherever located and shall surrender
all keys to the Initial Premises, Additional Premises and any other space
then being leased hereunder, and yield up the same in as good, clean and
safe repair, order and condition, reasonable wear and tear excepted.
LANDLORD and TENANT, at or prior to the Commencement Date for each
respective floor being leased, shall agree on a written list of items in
the Initial Premises subject to this provision. Any property not so
removed shall be deemed abandoned and may be removed and disposed of by
LANDLORD in such manner as LANDLORD shall determine and TENANT shall pay
LANDLORD the entire cost and expense incurred by it in effecting such
removal and disposition and in making any incidental repairs and
replacements to the Initial Premises and Building. TENANT shall further
indemnify LANDLORD against all loss, costs, and damage, including
attorneys' fees, resulting from TENANT'S failure and delay in
surrendering the Initial Premises as above provided.
5.13 PERSONAL PROPERTY TAX
---------------------
TENANT shall pay promptly when due all taxes which may be imposed upon
personal property (including, without limitation, fixtures and equipment)
in the Initial Premises to whomever assessed, and shall pay all license
and similar fees and taxes which may be imposed on the business of TENANT
conducted upon the Initial Premises so that such taxes shall not become a
charge upon LANDLORD'S property.
5.14 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
------------------------------------------------
If TENANT shall at any time default in the performance of any obligation
under this Lease, LANDLORD shall have the right (after written notice to
TENANT of its intention to do so), but shall not be obligated, to perform
such obligation notwithstanding the fact that no specific provision for
such substituted performance by LANDLORD is made in this Lease with
respect to such default. In performing such obligation, LANDLORD may make
any payment of money or perform any other act. LANDLORD agrees to
withhold making such payment as long as TENANT is in good faith
protesting the payment of such obligation and TENANT further agrees to
indemnify and hold LANDLORD harmless from any losses to LANDLORD
resulting from such withholding of payment. All sums so paid by LANDLORD
and all necessary incidental costs and expenses in connection with the
performance of any such act by LANDLORD, shall be payable to LANDLORD
immediately on demand, and, if not paid within five (5) days after
demand, shall accrue interest at a rate equal to the lesser of (a) the
maximum rate permitted by applicable law, or (b) twelve (12%)
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percent. LANDLORD may exercise the foregoing rights without waiving any
other of its rights or releasing TENANT from any of its obligations under
this Lease.
ARTICLE 6
DAMAGE OR DESTRUCTION BY FIRE OR CASUALTY
6.1 TOTAL OR PARTIAL DESTRUCTION BY FIRE OR OTHERWISE
-------------------------------------------------
If the Building is damaged and made substantially untenantable by fire or
casualty, whether or not the Initial Premises are damaged, LANDLORD may
by written notice to TENANT given within sixty (60) days after such
occurrence terminate this Lease, provided LANDLORD terminates the leases
of all other tenants similarly situated. Such termination shall be
effective as of the date of such damage if the Initial Premises have been
made untenantable by said casualty, otherwise as of a date sixty (60)
days following the giving of such notice of termination, subject to the
option hereby given TENANT to advance said effective date of termination,
such option to be exercised by written notice specifying such earlier
effective date of termination.
Unless this Lease is terminated under the foregoing provisions of this
Section 6.1, if the Initial Premises are made partially or wholly
untenantable by fire or casualty, LANDLORD shall use reasonable dispatch
to restore that part thereof originally constructed by LANDLORD or any
prior owner thereof (including any work described in Article 2) to
substantially the condition of such part at the time of such damage,
subject, however, to zoning laws and building codes then in force, and
only to the extent of insurance proceeds recovered by LANDLORD. LANDLORD
shall not be responsible for any delay in the performance of the
foregoing obligation which may result from governmental regulations,
inability to obtain labor or materials or any other cause beyond
LANDLORD'S reasonable control. There shall be a reasonable abatement of
Rent and Operating Expenses, parking charges and all other amounts
payable under this Lease from the later of the time of any such damage to
the Initial Premises or the date the conduct of TENANT'S business at the
Initial Premises is substantially impaired as a result of damage to the
Building (provided, in the later instance, TENANT has vacated or
partially vacated the Initial Premises) until completion of restoration
as aforesaid by LANDLORD. Notwithstanding anything to the contrary, in
this Article 6, if, within 150 days of the fire or casualty, (i) LANDLORD
shall not have completed the restoration or (ii) LANDLORD shall not have
sufficiently repaired the damage to the Building and the conduct of
TENANT'S business continues to be substantially impaired or the Initial
Premises are not reasonably accessible, TENANT shall have the right, by
notice to LANDLORD to terminate this lease effective as of the date of
the notice.
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6.2 DAMAGE WITHIN LAST TWO YEARS
----------------------------
Notwithstanding the foregoing provisions of Section 6.1, if any
substantial damage to or destruction of the Initial Premises (i.e. 50% or
more of the Initial Premises) shall occur within the last two (2) years
of the term, and shall be of such a character that the Initial Premises
cannot reasonably be expected to be repaired and restored within one
hundred twenty (120) days from such damage or destruction, then either
party may elect to terminate this Lease by written notice given to the
other party within thirty (30) days after such damage or destruction and
in such event this Lease shall terminate as of the date of such damage or
destruction.
6.3 APPORTIONMENT
-------------
In the event of any termination under the provisions of this Article 6,
Rent and other payments shall be apportioned as of the termination date.
ARTICLE 7
EMINENT DOMAIN
7.1 ENTIRE OR PARTIAL TAKING
------------------------
If the entire Initial Premises, or such portion thereof as would
substantially impair the conduct of TENANT'S business, shall be taken by
right of eminent domain, either party may terminate this Lease by written
notice given to the other party within thirty (30) days after TENANT has
been deprived of possession, such termination to be effective as of the
date on which TENANT has been deprived of possession. If the Building or
any substantial part thereof, whether or not including the Initial
Premises, is taken by right of eminent domain, LANDLORD may terminate
this Lease by written notice given to TENANT within thirty (30) days
after such taking, such termination to be effective as of the date on
which TENANT has been deprived of possession if TENANT has so been
deprived, otherwise as of the date specified in such notice which shall
be not less than (15) nor more than thirty (30) days after the giving of
such notice. Should any part of the Initial Premises be taken and this
Lease is not terminated in accordance with the foregoing provisions,
LANDLORD covenants and agrees promptly to restore that part of the
Initial Premises originally constructed by LANDLORD to an architectural
unit as nearly like the condition of such part prior to such taking as
shall be practicable, but only to the extent of the condemnation proceeds
received by LANDLORD.
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7.2 CONDEMNATION AWARD
------------------
LANDLORD shall have, and hereby reserves and excepts, and TENANT hereby
grants and assigns to LANDLORD, exclusive rights to recover and retain
the award for any taking of or damage done to the Initial Premises or any
part thereof (including, without limitation, all such installations made
by TENANT under Article 2 or otherwise except for TENANT'S trade
fixtures) or the leasehold estate hereby created or to any other premises
of LANDLORD over, under and in the vicinity of the Initial Premises.
TENANT shall have and LANDLORD hereby grants and assigns to TENANT
exclusive rights to recover and retain any amounts which may be
specifically awarded to it for any taking or damage by public authority
to any of TENANT'S trade fixtures and/or relocation expenses.
7.3 RENT ABATEMENT
--------------
In the event of any such taking of the Initial Premises, the Rent or a
fair and just proportion thereof according to the nature, duration and
extent of the damage sustained, shall be suspended or abated until the
Initial Premises or what may remain thereof shall be restored by LANDLORD
pursuant to Article 7.1.
7.4 APPORTIONMENT
-------------
In the event of any termination under the provision of the Article 7,
rent and other payments shall be apportioned as of the termination date.
7.5 EMINENT DOMAIN DEFINED
----------------------
The term "eminent domain" shall include the exercise of any similar
governmental power and any purchase or other acquisition by governmental
authority in lieu of condemnation.
ARTICLE 8
DEFAULT
8.1 DEFAULT BY TENANT
-----------------
If at any time after the date hereof (whether the term of this Lease is
then in force or has not yet begun) any of the following shall occur:
a. TENANT shall be in default in the performance of any of its
material obligations set forth in Article 3 continuing for five (5)
days after
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notice from LANDLORD (provided, however, that there shall be no grace
period if TENANT has received two (2) notices of default under Article
3 in any twelve (12) month period); or TENANT shall be in default in
the performance of any other obligation, or agreement by TENANT set
forth herein continuing for ten (10) days after notice from LANDLORD
(or if any such default is non-monetary and cannot reasonably be cured
within such time period, such period shall be extended for so long as
it takes to cure such default as long as TENANT has commenced curing
within such time period and thereafter diligently prosecutes the
curing of the defect); or
b. any assignment, trust or other arrangement for the benefit
of creditors is made by TENANT; or
c. the leasehold interest hereunder is taken on execution or is
subjected to any lien and such levy or lien is not removed or
reasonable security for its removal is not provided, in either case
within ten (10) days after such levy or lien becomes effective; or
d. a petition is filed by TENANT or those claiming through or
under TENANT, for adjudication as a bankrupt or for reorganization or
an arrangement or for any other relief under the Bankruptcy Reform Act
or other federal or state insolvency laws, or, any involuntary
petition under any of the provisions of said Act or laws is filed
against TENANT or those claiming through or under TENANT and said
involuntary petition is not dismissed within ninety (90) days of
filing; or
e. within a period of thirty (30) days after written notice
from LANDLORD to TENANT, specifying any other default or defaults in
the performance of any other obligation of TENANT, TENANT has not
corrected or commenced to correct, to LANDLORD'S reasonable
satisfaction, the default or defaults so specified;
then, in any such case, LANDLORD may lawfully, immediately or at any time
thereafter, and without notice or demand subject to applicable law,
either enter into and upon the Initial Premises or any part thereof and
expel TENANT and those claiming through or under TENANT and remove their
goods, effects and fixtures and store them at TENANT'S expense without
liability for prosecution or damage thereof or mail a notice of
termination to TENANT, and upon such entry or mailing, this Lease and
TENANT'S possessions and all rights relating to the Initial Premises
shall terminate, cease and be at an end, including all of TENANT'S
statutory rights of redemption, said rights being hereby waived by
TENANT.
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The failure of LANDLORD at any time to exercise any of its options to
forfeit and terminate this Lease in case of a default shall not waive the
right of forfeiture or termination of this Lease as herein provided. Any
right accruing to LANDLORD hereunder to forfeit or terminate this Lease
shall not be waived or defeated except by the written waiver of LANDLORD,
and acceptance of rent shall not, in any event, be construed as a waiver.
8.2 LANDLORD'S REMEDIES
-------------------
In the event that this Lease is terminated under any of the provisions
contained in Section 8.1 or shall be otherwise terminated for breach of
any obligation of TENANT, TENANT covenants to pay forthwith to LANDLORD,
as compensation, the excess of the total rent reserved for the residue of
the term over the rental value of the Initial Premises for said residue
of the term. In calculating the rent reserved there shall be included in
addition to the Rent and Operating Expenses, the value of all other
considerations agreed to be paid or performed by TENANT for said residue.
TENANT further covenants as an additional and cumulative obligation after
any such ending to pay punctually to LANDLORD all the sums and perform
all the obligations which TENANT covenants in this Lease to pay and
perform in the same manner and to the same extent and at the same time as
if this Lease had not been terminated. In calculating the amounts to be
paid by TENANT under the next foregoing covenant TENANT shall be credited
with any amount paid to LANDLORD as compensation as in this Section 8.2
provided and also with the net proceeds of any rent obtained by LANDLORD
by reletting the Initial Premises, after deducting all LANDLORD'S
expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Initial Premises for such
reletting.
In lieu of any other damages or indemnity and in lieu of full recovery by
LANDLORD of all sums payable under the provisions of the next preceding
paragraph, LANDLORD at any time after such termination and before such
full recovery by LANDLORD under the provisions of the next preceding
paragraph may, by written notice to TENANT, elect to recover as
liquidated damages an amount equal to the aggregate of the annual Rent
and Operating Expenses accrued under Article 3 in the twelve (12) months
ended next prior to such termination plus the amount of any Rent of any
kind accrued and unpaid at the time of termination and less the amount of
any recovery by LANDLORD under the provisions of the next preceding
paragraph up to the time of payment of such liquidated damages.
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ARTICLE 9
QUIET ENJOYMENT
QUIET ENJOYMENT
---------------
LANDLORD covenants that it has full authority to make this Lease for the
full term thereof and that TENANT, paying the Rent reserved and
performing and observing the agreements and conditions herein on its part
to be performed and observed, shall and may during the term hereof
peaceably and quietly have, hold and enjoy the Initial Premises, subject,
however, to all provisions of this Lease.
ARTICLE 10
LANDLORD'S RESERVATION OF RIGHTS
10.1 RIGHTS RESERVED TO LANDLORD
---------------------------
Without limitation of any of the rights LANDLORD would otherwise have and
without effecting an eviction or disturbance of TENANT'S use or
possession of the Initial Premises or giving rise to any claim or set-off
or abatement of rent or assuming any obligation by the reservation or
exercise of any such rights, LANDLORD may exercise any and all of the
following rights:
(i) To designate the time, manner and sources of furnishing
refuse and garbage collections and further to designate the times and
the routes of incoming and outgoing freight and the removal routes of
all garbage and refuse.
(ii) To have passkeys to the Initial Premises to be used only in
the event of an emergency and TENANT cannot be located, or pursuant to
Section 10.2 hereof.
(iii) At any time or times to decorate and to make, at its own
expense, repairs, alterations, additions and improvements, structural
or otherwise, in or to the Building or part thereof, and during such
operations with reasonable advance written notice to and advance
coordination with TENANT to take into and through the Initial Premises
or any part of the Building all materials required, and to close or
temporarily suspend operation of entrances, doors, corridors,
elevators and other facilities. LANDLORD agrees that it will carry out
work under this subparagraph so as to keep to a minimum interference
with TENANT'S use of the Initial Premises.
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(iv) To modify, alter or relocate facilities utilized in common
with other tenants in the Building or Prudential Center.
(v) To adopt and from time to time amend rules and regulations
for the protection and welfare of Prudential Center and for the
maintenance of high standards of conduct, safety, care and cleanliness
therein, with which TENANT agrees to comply provided they apply to the
other office tenants of the Prudential Center. LANDLORD shall not be
responsible to TENANT for noncompliance with said rules and
regulations by any other occupant of Prudential Center.
(vi) To install and maintain signs on the exterior of the
Building which do not obstruct the windows in the Initial Premises and
to install and maintain signs in the interior of the Building outside
the Initial Premises.
(vii) To approve all sources from which TENANT is to obtain sign
painting and lettering, ice and mineral or drinking water and vending
machines.
(viii) To require all persons entering or leaving the Building's
or the banks of elevators servicing the Building between the hours of
6:00 P.M. and 7:00 A.M. on weekdays, and at all hours on Saturday,
Sunday and holidays to identify themselves by signature registration
and supporting evidence with the designated representative of LANDLORD
if any.
10.2 ACCESS TO INITIAL PREMISES BY LANDLORD
--------------------------------------
Without limitation of any other rights which are reserved by or granted
to LANDLORD in this Lease or which LANDLORD would otherwise enjoy,
LANDLORD and persons authorized by it may on reasonable notice or except
in an emergency and at time(s) convenient to TENANT'S business operations
enter into the Initial Premises for the purposes of (a) inspecting the
same, (b) making timely repairs which LANDLORD is obligated to make under
the provisions of this Lease, (c) making repairs to the Initial Premises
which TENANT is obligated to make and has failed to make within ten (10)
days after written demand subject to Section 5.14 by LANDLORD and
performing any other duty which TENANT is obliged to perform by the
provisions of this Lease and has failed to perform after like demand (the
reasonable cost and expense of which repairs and performance TENANT
covenants and agrees to pay upon demand of LANDLORD along with interest
thereon from the date of expenditure until payment is made in full at a
rate equal to the lesser of (a) the maximum rate permitted by applicable
law, or (b) twelve (12%) percent), and (d) performing any acts related to
the safety, protection and preservation of the Initial Premises and the
Building, subject to the convenience of TENANT except in
23
<PAGE>
emergencies. LANDLORD may, during the progress of any work on or in the
Initial Premises, keep and store in the Initial Premises all necessary
materials, tools and equipment and, except in the event of LANDLORD'S
negligence or wilful misconduct, LANDLORD shall not be liable for
inconvenience, annoyance, disturbance, loss of business or other damage
to TENANT by reason of the exercise of any of the aforesaid rights or on
account of bringing materials, supplies and equipment into or through the
Initial Premises during the course thereof and the obligations of TENANT
under this Lease shall not thereby be affected in any manner. The
foregoing right of entry does not impose, nor does LANDLORD assume
(except as provided in Section 4.1) any responsibility or liability for
the repair, maintenance or supervision of the Initial Premises or of any
of the fixtures or appurtenances therein contained or therewith connected
or of any of TENANT'S property.
10.3 LANDLORD'S SAFETY MEASURES
--------------------------
TENANT agrees without any diminution or abatement of Rent to observe and
be bound by such safety measures as may directly or indirectly affect the
Initial Premises which LANDLORD may take, in connection with the
prosecution by LANDLORD of any construction work in or adjacent to
Prudential Center, for the safety of the general public, the preservation
and protection of Prudential Center and any and all persons having access
thereto. It is agreed, however, that pedestrian ingress and egress shall
be available at all times during such construction.
10.4 HAZARDOUS SUBSTANCES
--------------------
TENANT shall not cause or permit any Hazardous Substances to be used,
stored, generated or disposed of on or in the Initial Premises by TENANT,
TENANT'S agents, employees or contractors, without first obtaining in
each instance, LANDLORD'S written consent. TENANT may, without LANDLORD'S
consent, but with written notice to LANDLORD as to amount and location,
store and use (for all but minimal quantities of one gallon or less)
Hazardous Substances normally used in TENANT'S business operations
conducted on the Initial Premises, as long as (a) such operations are
within the scope of the uses permitted under this Lease and (b) in doing
so, TENANT complies with all provisions of this Section 10.4. Any such
use, storage, generation or disposal of Hazardous Substances shall comply
with all applicable federal, state and local laws and regulations. If
TENANT or TENANT'S agents, employees or contractors use, store, generate
or dispose of Hazardous Substances on or in the Initial Premises, or if
the Initial Premises become contaminated in any manner for which TENANT
is legally liable, TENANT shall indemnify and hold harmless the LANDLORD
from any and all claims, damages, fines, judgment, penalties, costs,
liabilities or losses arising during or after the term and arising as a
result of such contamination by TENANT. This indemnification includes,
without limitation, any
24
<PAGE>
and all costs incurred due to any investigation of the site or any
cleanup, removal or restoration mandated by a federal, state or local
agency or political subdivision. Without limitation of the foregoing, if
TENANT causes or permits the presence of any Hazardous Substance on the
Initial Premises and such results in contamination, TENANT shall
promptly, at its sole expense, take any and all necessary actions to
return the Initial Premises to the condition existing prior to the
presence of any such Hazardous Substance on the Initial Premises. Except
in the case of an emergency, TENANT shall first obtain LANDLORD'S
approval for any such remedial action, which approval shall not be
unreasonably withheld or delayed and which, in any event, shall be
granted if the regulatory authorities with jurisdiction have approved the
proposed remedial action. TENANT shall not have any responsibility or
liability (a) for any Hazardous Substance brought upon, generated or
disposed of on or from the Initial Premises or Building by any party
other than TENANT or TENANT'S agents, employees or contractors, or (b)
for any Hazardous Substance on the Initial Premises or Building on or
prior to the Commencement Date of the term of this Lease.
As used herein, "Hazardous Substance" means any substance which is toxic,
ignitable, reactive, or corrosive and which is regulated by a local
government, the Commonwealth of Massachusetts, or the United States
government. "Hazardous Substances" includes any and all material or
substances which are defined as "hazardous waste", "extremely hazardous
waste" or a "hazardous substance" pursuant to state, federal or local
governmental law. "Hazardous Substance" includes but is not restricted to
asbestos, polchlorobiphenyls ("PCB's") and petroleum.
LANDLORD has replaced the asbestos containing fireproofing originally
installed in the Initial Premises with non-asbestos containing
fireproofing. LANDLORD agrees to provide TENANT advance written notice of
any scheduled asbestos abatement work on floors adjacent to the Initial
Premises.
To the best of LANDLORD'S knowledge and belief, LANDLORD represents and
warrants to TENANT that (i) no investigative order, settlement,
agreement, enforcement order or litigation with respect to Hazardous or
Toxic Materials or Substances is proposed, threatened, anticipated or in
existence with respect to the Initial Premises or the Building; and (ii)
no notice, demand, claim, citation, complaint, request for information or
similar communication has been received by LANDLORD with respect to
Hazardous or Toxic Materials or Substances in, on, under or at the
Building, the Initial Premises or Prudential Center.
LANDLORD agrees, subject to the provisions of this Lease, to be
responsible for the cost of removal and remediation of Hazardous
Substances or Toxic Materials or Substances or conditions resulting from
the presence or release of the same at the Building, the Initial Premises
or Prudential Center to the extent not the responsibility of
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TENANT or any other person, but only to the extent LANDLORD is so
required and liable under Applicable Environmental Laws.
10.5 INTERRUPTION OF SERVICE
-----------------------
LANDLORD shall not be required to supply any service to the Initial
Premises except as expressly stipulated in this Lease and, except in the
case of LANDLORD'S negligence or wilful misconduct, LANDLORD shall not
be liable under any circumstances for interruption of any service due to
accident, to making repairs, alterations or additions, to labor
difficulties, to trouble in obtaining fuel, electricity, service or
supplies or to any cause beyond LANDLORD'S reasonable control, except to
the extent such interruption is the result of LANDLORD'S negligence. Any
interruption of services resulting from LANDLORD'S negligence shall
entitle TENANT to an equitable abatement of rent commencing on the third
business day of such interruption for the remainder of such interruption.
ARTICLE 11
INSURANCE
11.1 INSURANCE
---------
TENANT hereby agrees to indemnify, defend and hold harmless LANDLORD, its
subsidiaries, directors, officers, agents and employees from and against
any and all damage, loss, liability or expense including but not limited
to reasonable attorneys' fees and legal costs suffered by same directly
or by reason of any claim, suit or judgment brought by or in favor of any
person or persons for damage, loss or expense due to, but not limited to,
bodily injury, including death resulting anytime therefrom, and property
damage sustained by such person or persons which arises out of, is
occasioned by or in any way attributable to the use or occupancy of the
Initial Premises and adjacent areas by the TENANT or otherwise, the acts
or omissions of the TENANT, its agents, employees or any contractors
brought onto the Initial Premises by the TENANT, or the failure by TENANT
to perform, fulfill or observe any obligation or liability of TENANT set
forth herein, except that caused by the negligence, acts of omission or
fault of LANDLORD or its employees, agents, customers and invitees. Such
loss or damage shall include, but not be limited to, any injury or damage
to LANDLORD'S personnel (including death resulting anytime therefrom) or
premises. TENANT agrees that the obligations assumed herein shall survive
this Lease.
11.2 TENANT hereby agrees to maintain in full force and effect at all times
during the term of this Lease, at its own expense, for the protection of
TENANT and LANDLORD, as their interest may appear, policies of insurance
issued by a carrier or carriers licensed
26
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to do business in Massachusetts and acceptable to LANDLORD affording the
following coverage:
a) Worker's Compensation - Statutory
Employer's Liability - Not less than $100,000
Comprehensive General - Not less than $1,000,000
Liability Insurance Combined Single Limit
including Blanket, for both bodily injury
Contractual Liability, and property damage
Broad Form Property
11.3 LANDLORD shall procure and maintain full replacement cost insurance with
comprehensive endorsements insuring the Building and all leasehold
improvements installed pursuant to Article 2. TENANT shall insure any
other leasehold improvements installed by TENANT. LANDLORD shall also
procure and maintain commercial general liability insurance.
11.4 The TENANT shall deliver to LANDLORD at least thirty (30) days prior to
the time such insurance is first required to be carried by TENANT,
Certificates of Insurance evidencing the above coverage. Such
Certificates, with the exception of Worker's Compensation, shall name
LANDLORD, its subsidiaries, directors, agents and employees, and
LANDLORD'S property manager (R.M. Bradley & Company, Inc.), as additional
insureds and shall expressly provide that the interest of same therein
shall not be affected by any breach by TENANT of any policy provision for
which such Certificates evidence coverage. All Certificates shall provide
that no less than thirty (30) days prior written notice shall be given
LANDLORD in the event of material alteration to or cancellation of the
coverages evidenced by such Certificates.
11.5 Upon demand, TENANT shall provide LANDLORD, at TENANT'S expense with such
increased amount of insurance coverage, as LANDLORD may require of all
other tenants in the Building. Any increase requested by LANDLORD in the
amount of TENANT'S insurance shall not exceed the amounts and types of
coverages required by Landlords in other first-class high-rise buildings
in Boston for similar risks.
11.6 If, on account of the failure of TENANT to comply with the foregoing
provisions, LANDLORD is adjudged a co-insurer by its insurance carrier,
then any loss or damage LANDLORD shall sustain by reason thereof shall be
borne by TENANT and shall be immediately paid by TENANT upon receipt of a
bill thereof and evidence of such loss.
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11.7 LANDLORD makes no representation that the limits of liability specified
to be carried by TENANT under the terms of this Lease are adequate to
protect TENANT against TENANT'S undertaking under this Article.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 WAIVER OF SUBROGATION
---------------------
The parties agree that all insurance carried by either party with respect
to the Initial Premises, whether or not required by this Lease, if it can
be so written, shall include provisions which either designate the
requesting party as one of the insureds or deny to the insurer
acquisition by subrogation of rights of recovery against the requesting
party to the extent such rights have been waived by the insured party
prior to the occurrence of loss or injury. The requesting party shall be
entitled to have duplicates or certificates of any policies containing
such provisions. Each party hereby waives any rights of recovery against
the other for loss or injury against which the waiving party is protected
by insurance containing provisions denying to the insurer acquisition by
subrogation of rights of recovery, reserving, however, any rights with
respect to any excess of loss or injury over the amount recovered by such
insurance. TENANT shall not acquire as insured under any fire or extended
coverage insurance on the Initial Premises any right to participate in
the adjustment of loss or to receive insurance proceeds and agrees upon
request promptly to endorse any checks or other instruments in payment of
loss in which TENANT is named as payee.
12.2 SUBORDINATION
-------------
This Lease shall at the election of LANDLORD be subject and subordinate
to all mortgages which may now or hereafter affect the real estate of
which the Initial Premises form a part, and to all renewals,
modifications, consolidations, replacements and extensions thereof.
LANDLORD shall obtain a subordination agreement from any holder of any
such mortgage which shall bind and benefit the respective parties and
their successors and provide in substance that (i) such holder shall not
disturb the possession and other rights of TENANT under this Lease so
long as this Lease remains in full force and effect, (ii) in the event of
acquisition of title by such holder, through foreclosure proceedings or
otherwise, such holder shall accept TENANT as TENANT of the Initial
Premises under the terms and conditions of this Lease and shall perform
the obligations of LANDLORD hereunder (but only such as accrue while such
holder is owner of the Initial Premises), and (iii) TENANT shall
recognize such holder or any other person acquiring title to the Initial
Premises as LANDLORD. LANDLORD and TENANT agree to execute and deliver
any appropriate instruments necessary to carry
28
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out the foregoing provisions of this Section 12.2. Any such mortgage to
which this Lease shall be subordinate may contain such other terms,
provisions and conditions as are usual or customary.
12.3 LANDLORD'S REMEDIES CUMULATIVE
------------------------------
The specific remedies to which LANDLORD may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which LANDLORD may be lawfully entitled in
case of any breach or threatened breach by TENANT of any provision of this
Lease. The failure of LANDLORD to insist in any one or more cases upon the
strict performance of any of the provisions of this Lease or to exercise
any option herein contained shall not be construed as a waiver or
relinquishment for the future of such provision or option. Consent,
approval or permission by LANDLORD in any instance where required shall
not waive or render unnecessary like consent, approval or permission in
any subsequent instance. A receipt of rent by LANDLORD or the holder of
any mortgage upon the Initial Premises with knowledge of the breach of any
obligation of TENANT under this Lease shall not be deemed a waiver of such
breach except as to the payment of such rent.
12.4 PARTIAL INVALIDITY
------------------
If any of the terms, provisions or conditions 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 and the application
of such term, provision 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 of the other terms, provisions and conditions of
this Lease shall be valid and enforceable to the fullest extent permitted
by law.
12.5 SUCCESSORS AND ASSIGNS
----------------------
Unless repugnant to the context, the words "LANDLORD" and "TENANT" shall
be construed to mean the original parties and their respective successors
and assigns and those claiming through or under them respectively. The
agreements and conditions contained in this Lease to be performed and
observed on the part of TENANT shall be binding upon TENANT and its
successors and assigns and shall inure to the benefit of LANDLORD and its
successors and assigns, and the agreements and conditions contained in
this Lease to be performed and observed on the part of LANDLORD shall be
binding upon LANDLORD and its successors and assigns and shall inure to
the benefit of TENANT and its permitted successors and assigns. TENANT
agrees that at all times on and after the Commencement Date of this Lease
the sole liability for
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<PAGE>
performance of all obligations of LANDLORD hereunder shall be that of the
owner from time to time of the Initial Premises and that such liability
with respect to each owner shall exist only for breaches of such
obligations as are committed during the period of its ownership. To the
fullest extent permitted by law, TENANT further agrees that Landlord's
liability for any negligence, claims, causes of action, damages arising
hereunder shall be limited to the value of Landlord's interest in
Prudential Center and no other assets of Landlord. The term "owner" shall
not include the holder of any mortgage prior to the taking of possession
by such holder for the purpose of foreclosure of its mortgage.
Except as otherwise specifically provided by statute, no recourse shall
be made on any of TENANT obligations under this Lease or for any claim
based thereon or otherwise in respect thereof against any incorporator of
TENANT, subscriber to TENANT'S capital stock, shareholder, employee,
agent, officer or director, past, present or future, of any corporation
or counsel, which shall be TENANT hereunder of included in the term
"Tenant" or any successor of any such corporation, partnership or
association, or against any principal, disclosed or undisclosed, of any
such corporation, or against any principal, disclosed or undisclosed, of
any affiliate of any party which shall be TENANT or included in the term
"Tenant", whether directly or indirectly or through TENANT or through any
receiver, assignee, agent, trustee in bankruptcy or through any receiver,
assignee, agent, trustee in bankruptcy or through any other person, firm
or corporation, whether by virtue of any constitution, statute or rule of
law or by enforcement of any assessment or penalty or otherwise.
12.6 ARTICLE HEADINGS AND MARGINAL NOTES
-----------------------------------
The headings of Articles and marginal notes are inserted only as a matter
of convenience and for reference and in no way define, limit or describe
the scope or intent of this Lease nor in any way affect it.
12.7 NOTICES
-------
Every notice and demand required or permitted to be given under this
Lease shall be in writing and deemed to have been duly given when mailed
by certified mail, addressed in the case of notice to or demand upon
LANDLORD to it at Prudential Center, Boston, MA 02199, attention Boston
Realty Group Office with a copy to R.M. Bradley & Co., Inc., Suite 450,
Prudential Center, Boston, MA 02199 and in the case of notice to or
demand upon TENANT to it at the Initial Premises with a copy to Curt R.
Feuer, Esq., Kasseler & Feuer, P.C., 101 Arch Street, Boston,
Massachusetts 02110 or to such other address as the party may upon notice
to the other request.
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<PAGE>
12.8 WRITTEN APPROVALS
-----------------
Except as provided in Section 5.3, all approvals required of LANDLORD and
TENANT under this Lease shall be in writing and shall not be unreasonably
withheld or delayed.
12.9 BROKER'S COMMISSION
-------------------
TENANT and LANDLORD represent and warrant to each other that they have
not directly or indirectly dealt, with respect to the leasing of space in
Prudential Center, with any broker other than R.M. Bradley & Co., Inc.
and Meredith & Grew Incorporated and covenant and agree to defend, save
harmless and indemnify each other against any claims for a commission
arising out of the execution and delivery of this Lease or out of any
negotiations between LANDLORD and TENANT with respect to the leasing of
space within Prudential Center, except that TENANT'S indemnification
shall not apply to any claims by R.M. Bradley & Co., Inc. and Meredith &
Grew Incorporated, it being understood that LANDLORD shall pay any
commissions due such brokers. The indemnification provided in this
section shall apply to claims arising out of the acts of the indemnifying
party.
12.10 ENTIRE AGREEMENT
----------------
This instrument contains all the agreements made between the parties
hereto and may not be modified in any other manner than by instrument in
writing executed by the parties or their respective successors in
interest.
12.11 SUBMISSION OF LEASE-NO OPTION
-----------------------------
The submission of this Lease or a summary of some or all of its
provisions for examination does not constitute a reservation of or option
for the Initial Premises or an offer of lease.
12.12 MASSACHUSETTS LAW GOVERNS
-------------------------
This lease shall be construed in accordance with and governed by the Laws
of the Commonwealth of Massachusetts.
12.13 TENANT'S PARKING RIGHTS
-----------------------
TENANT may, so long as this lease is in full force and effect, contract
with the Prudential Center garage operator for up to sixty-four (64)
monthly unassigned parking spaces at such rates as may be charged for
unassigned monthly parking spaces from
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time to time during the term hereof. The rate for such spaces as of
January 1, 1995 is $240 per month. TENANT shall be entitled to lease one
additional space for each 2,000 RSF of Option Space or other space added
to the Initial Premises.
12.14 LEASE SECURITY
--------------
Within ten (10) days of the execution of this Lease, TENANT shall deliver
to LANDLORD an irrevocable standby letter of credit (the Letter of
Credit) in favor of LANDLORD in a face amount equal to 50% of the Lease
Transaction Costs for the Initial Premises of this Lease as hereinafter
defined. The Letter of Credit must (i) be issued by an institution
reasonably acceptable to LANDLORD, (ii) have an initial term of not less
than twelve (12) months and (iii) be acceptable in form and substance to
LANDLORD. Transaction Costs for the purpose of determining the face
amount of the Letter of Credit shall include all costs incurred by
LANDLORD in (i) the negotiation and execution of the Lease, and (ii) the
preparation of the Initial Premises for TENANT'S use and occupancy,
including but not limited to the full Tenant Allowance, real estate
brokerage commissions, any unreimbursed costs incurred by Landlord's
Contract Manager and attorney's fees specifically incurred in connection
with the negotiation and execution of this Lease for the Initial
Premises. Based upon Total Tenant Costs (as defined in Section 2) of
$55.00 per RSF plus brokerage fees, the Initial Face Amount of the Letter
of Credit shall be Four Million Seventy Eight Thousand ($4,078,000.00)
Dollars for the Initial Premises. LANDLORD shall provide TENANT with a
statement of LANDLORD'S Lease Transaction Costs in reasonable detail as
soon as the same are finally determined. If the actual amount of fifty
percent (50%) of Landlord's Transaction Costs are determined to be less
that Four Million Seventy Eight Thousand ($4,078,000.00) Dollars, then
the Letter of Credit shall be reduced to an amount equal to fifty percent
(50%) of the Landlord's Transaction Costs. In the event TENANT (i)
defaults under any of its obligations which results in a sum of money
becoming due to the LANDLORD to cure such default, and/or (ii) fails to
deliver to LANDLORD an extension of the Letter of Credit or replacement
letter of credit at least thirty (30) days before any expiration date of
the Letter of Credit, LANDLORD may, after five (5) days advance written
notice to TENANT, draw upon the Letter of Credit (x) for the amount due
LANDLORD or (y) in the case of the failure to provide an extension or
replacement letter of credit, the face amount of the Letter of Credit. If
LANDLORD draws upon the Letter of Credit to recover a sum of money due
LANDLORD, TENANT shall, within ten (10) days, cause the amount available
under the Letter of Credit to be restored to the amount available prior
to LANDLORD'S drawing. In the event LANDLORD draws on the Letter of
Credit because of TENANT'S failure to timely provide an extension of or
replacement letter of credit, LANDLORD shall thereafter hold the proceeds
of the Letter of Credit as a security deposit without any obligation to
pay interest thereon or place such proceeds in a segregated account. If
LANDLORD thereafter applies any amount of the proceeds of
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the Letter of Credit to cure a default, TENANT shall, within ten (10) days after
notice from LANDLORD of the application of such proceeds, deliver to LANDLORD an
amount of money sufficient to restore the balance of the security deposit to
that existing before LANDLORD'S application. The face amount of the Letter of
Credit shall be reduced by ten (10%) percent each year commencing on the Initial
L.C. Reduction Date (as hereinafter defined) and on each anniversary thereof,
provided each of the conditions set forth below (L.C. Reduction Conditions) are
satisfied at the time of any reduction. The Initial L.C. Reduction Date shall
occur within one hundred twenty (120) days after the end of TENANT'S fiscal year
occurring at least ten (10) months after the Commencement Date.
The following L.C. Reduction Conditions must be satisfied at the time of any
reduction of the Letter of Credit.
1. The Letter of Credit must not have been previously drawn upon by
LANDLORD for any reason.
2. TENANT must not be in default of any material obligation under the
Lease beyond any applicable grace and cure period.
3. Michael Bronner shall own not less than 60% of the capital stock of
TENANT.
4. TENANT shall have delivered to LANDLORD, within ninety (90) days of
the end of TENANT'S fiscal year (1/1 - 12/31) a copy of TENANT'S
financial statements for such fiscal year prepared by a nationally
recognized certified public accounting firm in accordance with GAAP
standards.
5. LANDLORD shall not have delivered a written notice to TENANT and the
issuer of the Letter of Credit within thirty (30) days of receipt of
TENANT'S financial statements for such fiscal year that LANDLORD'S
Annual Review of TENANT'S financial status is unsatisfactory for the
purposes of a Letter of Credit reduction because during the past
fiscal year one or more of the following has occurred:
a. There has been a loss of client contract(s) representing 15% or
more of TENANT'S Base Year
33
<PAGE>
Gross Revenue unless such revenue loss has been replaced by new
contracts. For the purpose of this sub-paragraph, Base Year Gross
Revenue shall mean TENANT'S revenue from all sources for TENANT'S 1994
fiscal year.
b. TENANT'S Operating Margin is less than 15% of Gross Revenue. Gross
Revenue is defined as all revenue from all sources. Operating Margin
is defined as Operating Income divided by gross revenues. Operating
Income is defined as net income or loss plus depreciation, interest
expenses and Principal's Compensation.
c. TENANT'S third party debt service expense exceed 10% of TENANT'S
net income before Principal's Compensation on an annual basis.
d. TENANT has failed to maintain unrestricted cash on hand sufficient
to meet current liabilities becoming due in any calendar month
excluding notes due to shareholders. Notwithstanding the foregoing,
distributions or payments to shareholders at the end of TENANT'S
fiscal year or otherwise made in anticipation of receipt of
receivables within the thirty days following such distribution or
payment shall not result in TENANT'S financial status being
unsatisfactory for the purpose of a Letter of Credit reduction unless
such distributions or payments have resulted in TENANT being in
default of its current liabilities during any calendar month of the
year being reported on. TENANT shall provide LANDLORD at the end of
each fiscal year with a summary report in reasonable detail showing
TENANT'S unrestricted cash on hand and current liabilities for each
calendar month of such fiscal year.
e. For the purpose of the foregoing (a-d), all undefined accounting
terms shall be determined in accordance with Generally Accepted
Accounting Practices.
In any year during the term all the L.C. Reduction Conditions are not satisfied
as of the anniversary of the L.C. Reduction Date for such year, the Letter of
Credit shall not be reduced in such year. If the Letter of Credit is not
reduced in any year, it may be
34
<PAGE>
reduced in subsequent year(s) if the L.C. Reduction Conditions are met
for such year(s) but, in no event shall the Letter of Credit be reduced
by more than 10% in any one year.
At the end of the fixed term of the Lease, LANDLORD shall return the
Letter of Credit or any unapplied proceeds of the Letter of Credit then
held by LANDLORD.
12.15 TENANT'S EXTENSION RIGHTS
-------------------------
If TENANT is not then in default of its obligations hereunder beyond any
applicable grace or cure periods, or if in default, is diligently pursuing
the cure of such default TENANT may, by giving LANDLORD twelve (12) months
advance written notice to LANDLORD, extend the term of this Lease
Agreement for two (2) additional periods of five (5) years each (Extended
Term) on all terms and conditions hereof, except that the rent shall be
95% of the then current fair market rent. The term the current fair
market rent as used herein is intended to take into account all
concessions then being offered to tenants in similar transactions in the
marketplace. In the event LANDLORD and TENANT cannot agree within six (6)
months prior to commencement of either period of the Extended Term as to
the amount of rent to be paid, the LANDLORD shall provide TENANT, within
fifteen (15) days of the end of such six (6) month period, a written
statement setting forth LANDLORD'S position as to the amount of rent for
the ensuing period and containing the name of a qualified Broker nominated
by LANDLORD to determine the rent. TENANT may, within fifteen (15) days of
receipt of LANDLORD'S statement, submit to LANDLORD and the qualified
Broker nominated by LANDLORD a written response setting forth TENANT'S
position as to the rent to be charged and, if TENANT elects to, the name
of a qualified Broker nominated by TENANT, the two qualified Brokers so
nominated shall determine the rent within thirty (30) days of the
nomination of the second qualified Broker. In the event the two Brokers so
named cannot agree upon the rent to be charged within the thirty (30) days
period, they shall jointly promptly select a third qualified Broker who
shall with the other two qualified Brokers determine the rent within
twenty (20) days of the third Broker being named. A decision of any two of
the three qualified Brokers so named shall be binding upon the parties.
The cost of the two or three qualified Brokers shall be shared equally
between LANDLORD and TENANT.
Qualified Brokers for the purpose of this Section shall mean a licensed
Massachusetts Real Estate Broker with at least seven (7) years experience
in commercial brokerage in the downtown Boston and Back Bay markets who
has been a broker in leases totaling 15,000 RSF in Downtown and Back Bay
within two years prior to appointment.
35
<PAGE>
In the event either TENANT or LANDLORD does not nominate a qualified
Broker, the rent shall be determined solely by the other's qualified
Broker and the costs of such qualified Broker shall be borne by the
party who appointed the qualified Broker.
During the Extended Term, until determination of the amount of rent,
TENANT shall pay rent at the rate including escalations as at end of the
then current term subject to adjustment after determination of rent.
12.16 TENANT'S EXPANSION RIGHTS
-------------------------
A. Tenant's Third Year to Expand
-----------------------------
TENANT shall have the option, provided TENANT is not in default
hereunder beyond any grace or cure period, to add the Fourth Floor of
the Building (Third Year Option) to the Initial Premises and Additional
Premises at the end of the third year of the initial term hereof. TENANT
shall advise LANDLORD in writing, no later than the end of the twenty-
fourth month of the term, of TENANT'S exercise of its Third Year Option.
If TENANT exercises its Third Year Option, the Third Year Option Floor
shall be added to the Initial Premises and Additional Premises no later
than January 1, 1999 at the rent set forth on the Lease Cover Sheet and
on all the other terms and conditions of the Lease, except that (i) the
Tenant Design and Construction Allowance for the Third Year Option Floor
shall be twenty ($20.00) per RSF and (ii) the rent for the Third Year
Option Floor shall be abated for the first two months to allow for
construction.
B. Tenant's Fifth Year Option to Expand
------------------------------------
TENANT shall have the option, provided TENANT is not in default
hereunder beyond any grace or cure period, to add one additional floor
to the Initial Premises at the end of the fifth year (Fifth Year Option)
of the initial term. LANDLORD shall notify TENANT in writing no later
than the forty-seventh month of the initial term as to the location of
the Fifth Year Option Floor which shall be contiguous to another floor
then being leased by TENANT. TENANT shall advise LANDLORD, no later than
the end of the forty-eighth month, of TENANT'S exercise of its Fifth
Year Option. If TENANT exercises its Fifth Year Option, the Fifth Year
Option Floor shall be added to the Initial Premises no later than
January 1,2001 upon all the terms and conditions of this Lease except
the rent and other economic terms of the Lease shall be at then current
fair market rates. If LANDLORD and TENANT cannot agree on the fair
market rent and other economic terms for the Fifth Year Option Floor
within sixty (60) days of TENANT'S exercise of its Fifth Year Option,
the then current fair market rent and other economic terms for the Fifth
Year Option Floor shall be determined in accordance with the procedure
set forth in Section 12.15 for determining the rent during the extended
term(s).
36
<PAGE>
C. First Offer
-----------
Subject to rights of existing tenants listed on Exhibit E, TENANT shall
have the right of first offer to lease space becoming available for
leasing in the Building during the initial term hereof at then current
market rates or rates being offered to third parties if less. LANDLORD
shall notify TENANT in writing if and when the space becomes available
for leasing including the terms and conditions that the LANDLORD
proposes to lease such space at. TENANT shall have thirty (30) days from
receipt of LANDLORD'S notice to elect to add all or a portion of such
space to the Initial Premises on the terms and conditions contained in
LANDLORD'S notice to TENANT. If TENANT fails to advise LANDLORD in
writing within such thirty (30) day period of its election to add such
space to the Initial Premises, LANDLORD may thereafter lease such space
to others on the same or different terms.
If TENANT exercises any of the foregoing rights to add space as set out
in a-c above, LANDLORD and TENANT shall enter into a lease amendment
setting forth (i) TENANT'S obligations under Article 3 for all space
added to the Initial Premises, (ii) TENANT'S share after such additions
and (iii) the date such space is to be added to the Initial Premises.
12.17 EXHIBITS
--------
Exhibits AA, A-1-A-3, A-5, A-6, B, C and F are hereby incorporated
herein and made a part hereof.
12.18 TENANT'S SIGNAGE RIGHTS
-----------------------
LANDLORD shall provide to TENANT, at LANDLORD'S cost and expense,
listings on the Building Lobby directory. The number of listings
available to TENANT shall be based upon Tenant's Share set forth on the
Lease Cover Sheet.
TENANT may, at TENANT'S cost and expense, install signage within the
Initial Premises (not visible from the exterior of the Building) and in
the elevator lobbies of all floors fully leased by TENANT. LANDLORD, at
LANDLORD'S cost and expense, shall provide TENANT with space on the
Tenant Directory for each multitenant floor on which TENANT leases
space.
12.19 ADDITIONAL PREMISES
-------------------
LANDLORD shall deliver to TENANT no later than September 1,1996, the
entire Third Floor of the Building (Additional Premises) consisting of
24,309 RSF in "as is" shell condition as described in Exhibit B and
shown on Exhibit A-6, together with the
37
<PAGE>
right to run up to a maximum of three (3) 2" cable conduits from the
Initial Premises to the Additional Premises at locations designated by
LANDLORD without the payment of rents for such conduits. Upon delivery
to TENANT, the Additional Premises shall become a part of the space
leased to TENANT hereunder subject to all the terms and conditions of
this Lease as if the Additional Premises were a part of the Initial
Premises, except as hereinafter specified in this Section 12.19, and
thereafter the term Initial Premises shall be deemed to include the
Additional Premises. LANDLORD shall promptly cause the Additional
Premises to be placed in shell condition as specified in Exhibit B.
LANDLORD shall make available to TENANT upon the terms specified in
Article 2 the same Tenant Allowance as was provided for the Initial
Premises. The Rent Commencement Date for Fixed Rent specified in Section
3.1(a) and Reimbursement Rent (if any there be) shall be ninety (90)
days after the Additional Premises are delivered to TENANT. TENANT'S
obligation to reimburse LANDLORD for (i) increased Operating Expenses,
(ii) Utility Charges determined in the same manner as the 18th Floor of
the Initial Premises; and (iii) Real Estate Taxes with respect to the
Additional Premises, shall commence on the Rent Commencement Date for
the Additional Premises. TENANT shall provide LANDLORD with a Letter of
Credit (the Additional Premises L.C.) in an original face amount of
$772,000.00. The Additional Premises L.C. shall be subject to all the
terms and conditions contained in Section 12.14 except that the
Additional Premises L.C. first annual reduction shall commence on the
first anniversary of the Additional Premises Rent Commencement Date.
Tenant Share shall be increased from 10.44% to 12.42% on the Rent
Commencement Date for the Additional Premises.
IN WITNESS WHEREOF, LANDLORD and TENANT have caused this Lease to be
executed by their duly authorized officers and their respective seals to be
hereto affixed, the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
BY: /s/ Robert J. Walsh
-------------------
Vice President
38
<PAGE>
TENANT:
BRONNER SLOSBERG HUMPHREY, INC.
BY: ^^SIGNATURE ILLEGIBLE^^
-----------------------
39
<PAGE>
[Diagram]
EXHIBIT AA
PRUDENTIAL CENTER, BOSTON, MASS
<PAGE>
[Diagram]
EXHIBIT A-1
BRONNER SLOSBERG HUMPHREY, INC.
18TH FLOOR
THE PRUDENTIAL TOWER BUILDING
<PAGE>
[Diagram]
EXHIBIT A-2
BRONNER SLOSBERG HUMPHREY, INC.
19TH FLOOR
THE PURDENTIAL TOWER BUILDING
<PAGE>
[Diagram]
EXHIBIT A-3
BRONNER SLOSBERG HUMPHREY, INC.
20TH FLOOR
THE PRUDENTIAL TOWER BUILDING
<PAGE>
[Diagram]
EXHIBIT A-4
BRONNER SLOSBERG HUMPHREY, INC.
22ND FLOOR
THE PRUDENTIAL TOWER BUILDING
<PAGE>
[Diagram]
EXHIBIT A-5
BRONNER SLOSBERG HUMPHREY, INC.
23RD FLOOR
THE PRUDENTIAL TOWER BUILDING
<PAGE>
[Diagram]
EXHIBIT A-6
BRONNER SLOSBERG HUMPHREY, INC.
3RD FLOOR
THE PRUDENTIAL TOWER BUILDING
<PAGE>
EXHIBIT B
DESCRIPTION OF SHELL CONDITION
------------------------------
The Premises shall be deemed completed "in shell condition" upon LANDLORD'S
furnishing and installing the following:
WINDOWS: Full Floor Tenant -- Delivered with building standard venetian
blinds and solar reflective film. Building standard blinds are levelor
energy conservation reflective type.
FLOORS: Full Floor Tenant -- Delivered in rough condition, ready to
accept leveling and fill where appropriate. The floors are cellular type
with concrete composite fill on a metal decking. Electrical and telephone
closets delivered with rough concrete floor.
COLUMNS: Full Floor Tenant -- Delivered with unpainted concrete or hard
surface fireproofing on interior columns. The exterior columns shall be
delivered ready to accept finishes.
ELEVATOR LOBBIES: Full Floor Tenant -- Passenger and Service Elevator
Lobbies - Delivered with rough concrete floor and walls ready for
construction.
HVAC INTERIOR SYSTEMS: Full Floor Tenant -- Delivered with VAV boxes (one
pre 5,000 sq. ft. approximate) per floor for Tenant use. Landlord shall
provide the main duct take-offs with fire dampers. Tenant work to include
all duct work "downstream: of the fire damper.
HVAC PERIMETER SYSTEM: Full Floor Tenant -- Existing perimeter HVAC
induction system shall be maintained. The existing thermostats shall be
maintained. Perimeter induction units shall be delivered with covers ready
to accept paint with all required insulation in place.
CEILING: Full Floor Tenant -- Delivered unfinished with exposed non-
asbestos containing fire proofing on structural steel and deck of floor
above.
CODE: Full Floor Tenant -- All building core space (excluding Toilet Rooms)
will be delivered in compliance with code including, but not limited to
A.D.A. and Mass. Architectural Access Board (MABB).
ELECTRIC: Full Floor Tenant -- Premises to be delivered with primary
service utility lines. Electric feeds to be delivered with floor disconnect
switch in place. Tenant to be responsible for all electric wiring
"downstream" of the floor disconnect switch. All primary feeds and switches
to be sized for a maximum power load of 5 Watts/USF of floor space.
<PAGE>
LIFE SAFETY: Full Floor Tenant -- Premises to include, at Landlord's
expense, sprinklers and life safety systems to comply with building
standard systems. In lieu of the above, Tenant may elect to have Landlord
provide a monetary allowance of $1.00/New York USF to be used by the Tenant
to install the Life Safety System.
TOILET ROOMS: Full Floor Tenant -- Tenant to receive $15,000.00 allowance
per restroom for ADA MABB compliance and cosmetic upgrades.
JANITOR'S CLOSET: Full Floor Tenant -- Delivered with tiled floor and
utility sink in operating order.
Landlord and Tenant's representatives shall inspect the Initial Premises
prior to the commencement of the Work described in Article 2 of the Lease to
verify that the Initial Premises are in the condition described above. To the
extent items of work remain to be done to provide the Initial Premises in "Shell
Condition" as described above, Landlord will perform such work within thirty
(30) days of the inspection date.
<PAGE>
EXHIBIT C
ATTACHED TO AND MADE PART OF LEASE
DATED BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, LANDLORD, AND
BRONNER SLOSBERG HUMPHREY INC.
LANDLORD shall furnish at LANDLORD'S own expense the following services:
(1) Daily Services (Monday through Friday, holidays excepted):
a. Empty wastebaskets and ashtrays in office areas;
b. Damp sweep entire tile floor area and vacuum carpet;
c. Clean toilet rooms, fixtures, mirrors and mop toilet room
floors and furnish paper products and soap.
(2) Weekly Services
Dust office area including furniture, tops of files and window sills.
(3) Services Every Month
Spot wash finger markings from door frames and light switch plates.
(4) Other Periodic Services
a. Wash all exterior windows every two months unless weather does
not permit the safe use of LANDLORD'S exterior window washing
equipment;
b. Tile floors (other than ceramic tile) will be cleaned of wax
and rewaxed three (3) times per year; and
c. Clean fluorescent fixtures once a year.
TENANT may obtain special cleaning services on weekends and holidays at
TENANT'S cost and expense by requesting the same of LANDLORD 24 hours in
advance. The scope of such service shall be agreed to between LANDLORD and
TENANT.
<PAGE>
EXHIBIT F
TENANT'S SHARE OF INCREASED OPERATING EXPENSES
TOWER BUILDING
ATTACHED TO AND MADE A PART OF LEASE
DATED BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, LANDLORD
AND BRONNER SLOSBERG HUMPHREY INC.
I. DEFINITIONS
TENANT shall reimburse LANDLORD for Tenant's proportionate share ("Tenant's
Share") of increased "Operating Expenses" (as herein defined) in excess of Base
Operating Expenses as follows:
I A. "Tenant's Share" of the amount of Operating Expenses in excess of
Base Operating Expenses equals 10.44%.
128.031 r.s.f. (Initial Premises Net Rentable Area)
---------------------------------------------------
1,226,539 s.f. (Building Net Rentable Area)
B. Base Operating Expenses equal 1995 Actual Operating Expenses
C. "Operating Expenses" shall mean any and all costs and expenses
adjusted for 100% occupancy [except those listed in subparagraphs (a)
through (e) below] actually paid or incurred by LANDLORD in
connection with the ownership, management, operating, servicing, and
maintenance of the Building, its utility services from the property
line to the Building including, without limitation, the cost and
expense of the following: salaries, wages, medical, surgical and
general welfare and other so-called "fringe" benefits (including
group insurance and retirement benefits) for employees of LANDLORD or
any contractor of LANDLORD engaged in the cleaning, operation,
maintenance or management of the Building, and payroll taxes, and
worker's compensation insurance premiums relating thereto, gas,
steam, fuel oil, water, sewer rental, electricity (exclusive of
Tenants Electrical Usage), utility taxes, rubbish removal, fire,
casualty, liability, rent and other insurance carried by LANDLORD,
repairs, repainting, replacement, building supplies, uniforms, and
cleaning thereof, window cleaning, service contracts with independent
contractors for any of the foregoing (including, but not limited to
elevator and air conditioning maintenance), commercially reasonable
management fees (whether or not paid to any person, firm or
corporation having an interest in or under common ownership with
LANDLORD or any of the persons, firms or corporations comprising
LANDLORD), reasonable legal fees and expenses incurred in
<PAGE>
connection with any application or proceeding brought for reduction
of the assessed valuation of the Building or any part thereof, but
only if brought to have the effect of reducing TENANT'S cost,
auditing fees and all other costs and expenses actually incurred in
connection with the operation, maintenance and management of the
Building and an allocated share of the "Center's Common Area
Expenses" (as herein defined). Included in the foregoing will be the
cost or portion thereof properly allocatable to the property
(amortized over such reasonable period as LANDLORD shall determine
together with the interest on the unamortized balance as the greater
of 10% or the six month Treasury Bill rate for the date upon which
funds for the project are committed) of any capital improvements made
to the Building by the LANDLORD which result in a reduction of
Operating Expenses or made to the Building by the LANDLORD after the
date of this Lease that are required under any governmental law or
regulation that was not applicable to the Building on the date of
this Lease. Operating Expenses shall be computed on an accrual basis
and shall be determined in reasonable detail in accordance with
generally accepted accounting principles consistently applied. They
may be incurred directly or by way of reimbursement, and shall
include taxes applicable thereto. The following shall be excluded in
calculating Operating Expenses:
(a) Depreciation or capital expenditures on the Building or any
part thereof, except as included above;
(b) Expenses incurred directly in leasing or in procuring any
tenants, including advertising, promotion, public relations, sales,
brokers' commissions, and expenses for tenant alterations or
renovating space for new tenants;
(c) Amortization and interest on indebtedness;
(d) Real estate taxes or payments in lieu of real estate taxes
except as provided for in Section 3.4 hereof;
(e) The net amount of any insurance proceeds, reimbursements,
discounts or allowances received by LANDLORD in connection with those
"Operating Expenses" which are included.
(f) Also excluded are the following:
(i) cost of repairs or replacements incurred by
reason of fire or other casualty or by the exercise or the
right of eminent domain;
(ii) advertising and promotional expenditures,
<PAGE>
(iii) legal fees incurred in disputes with tenants,
matters in connection with any underlying lease including, but
not limited to, the conveyance or financing or refinancing
thereof, negotiation of leases with prospective or current
tenants, financing or refinancing of mortgages, disputes with
mortgagees not caused by TENANT and other legal and auditing
fees, other than legal and auditing fees reasonable incurred in
connection with the preparation of statements required pursuant
to additional rent or rental escalation provisions;
(iv) costs incurred in performing work or furnishing
services to or for individual tenants (including TENANT) other
than work or services of a kind and scope which LANDLORD would
be obligated to furnish TENANT without charge if such work were
required in the Demised Initial Premises pursuant to applicable
law or codes as required by the governmental authority having
jurisdiction;
(v) the cost incurred by LANDLORD in performing work
or furnishing any services to or for a tenant of space in the
oBuilding (including TENANT) for which a separate charge is
made, including without limitation, the supply of overtime air-
conditioning, ventilation and heating at LANDLORD'S cost and
expense, regardless of the amount billed or received by
LANDLORD for performing such work or furnishing such service;
(vi) franchise and income taxes of LANDLORD;
(vii) real estate taxes on land and/or Building to the
extent included in this Lease;
(viii) the costs of providing overtime heat and air-
conditioning to tenants of the Building to the extent that the
same are payable by the tenants for whom such services are
provided;
(ix) rent under ground leases (if any)
(x) all costs incurred in connection with or directly
related to the original construction of the Building (as
distinguished from operating expenses and the repair,
maintenance and operations thereof);
(xi) financing and refinancing costs, interest on debt
or amortization payments on any mortgage or mortgages, and
rental under any ground or underlying lease or leases;
(xii) a bad debt loss, rent loss or any reserves
<PAGE>
(xiii) all interest or penalties incurred as a result of
LANDLORD'S failure to pay any costs or taxes as the same shall
become due provided such failure shall not have been caused by
TENANT;
(xiv) any and all costs associated with the operation
of the business of the entity which constitutes LANDLORD;
excluded items shall specifically include, but shall not be
limited to, formation of the entity, costs of defending any
lawsuits with any mortgagee (except as the actions of TENANT
may be in issue), costs of selling, syndication, financing,
mortgaging or hypothecating any of the LANDLORD'S interest in
the Building, costs of any disputes between LANDLORD and its
employees (if any) not engaged in the operation of the
Building, disputes between LANDLORD and managers of the
Building;
(xv) (i) costs of printing and decorating for any
tenant's space; (ii) the cost of providing overtime heat and
air-conditioning to tenants of the Building to the extent that
the same are payable by the tenants for whom such services are
provided; and (iii) rent under ground leases (if any);
(xvi) amounts for which LANDLORD has been reimbursed by
insurance proceeds;
(xvii) costs incurred in renovating or otherwise
improving or decorating or redecorating space for tenants or
other occupants in the Building or vacant space in the Building
or costs related thereto;
(xviii) LANDLORD'S costs of electricity, incremental
air-conditioning and other services sold to tenants for which
LANDLORD is entitled to be reimbursed by tenants (whether or
not actually collected by LANDLORD) as a separate additional
charge or rental;
(xix) any cost or expense incurred as a result of
painting, decorating, carpet shampooing, drapery cleaning and
wall washing within the rentable areas of the Building for a
specific tenant as opposed to that performed for all tenants or
common areas.
D. "Center's Common Area Expenses" is defined as those costs and
expenses incurred for the open areas, public areas and amenities
within the Prudential Center which become a cost center to receive
expenses deemed by the LANDLORD to be chargeable thereto which are
accumulated and prorated against the income-generating elements of
the Center by a formula predicated on a rentable area basis
consistently applied annually. (The portion chargeable
<PAGE>
during 1995 to the Building is 30.5%, subject to change as rentable
areas may change).
E. "Calendar Years is defined as any consecutive twelve (12) month
period commencing January 1st, provided that LANDLORD, upon written
notice to TENANT, may change from time to time to any other
consecutive 12-month period, and in that event Tenant's Share of
Operating Expenses shall be adjusted pro rata.
II. PAYMENT OF TENANT'S SHARE
A. LANDLORD shall on or after January 1 in each year give to Tenant a
statement of Tenant's Estimated Share of Operating Expenses
(Estimate) for the current calendar year. Tenant's Estimated Share of
Operating Expenses shall be the product of Tenant's Share times the
amount by which LANDLORD'S Estimate of Operating Expenses for the
Calendar Year exceed Base Operating Expenses. TENANT shall reimburse
LANDLORD monthly with each rent payment an amount equal to 1/12th of
Tenant's Estimated Share of Operating Expenses. LANDLORD reserves the
right during any year to adjust Tenant's Estimated Share of Operating
Expenses in any year to reflect increases of 5% or more by which
actual Operating Expenses are exceeding Estimated Operating Expenses.
B. LANDLORD shall on or before May 1, in each calendar year provide a
Statement of Operating Expenses (Statement) for the prior calendar
year prepared by an independent Certified Public Accountant which
shall show in reasonable detail all items of Operating Expense for
the prior year and Tenant's Share of such Operating Expenses with the
amount of any difference due to LANDLORD or TENANT between Tenant's
Estimated Share of Operating Expenses and Tenant's Share of Operating
Expense for such year. The amount of any difference due TENANT shall
accompany the Statement when delivered to TENANT. TENANT shall
reimburse LANDLORD the amount of any difference due LANDLORD within
thirty (30) days of receipt of LANDLORD'S Statement.
C. If any part of the original lease term or any extended lease term is
less than a calendar year, the TENANT shall reimburse LANDLORD for
Tenant's Share of Operating Expenses due in accordance with this
Section II hereof as the number of days of the term or extended term
contained in a calendar year bears to 365 days.
D. Upon expiration or termination of the Lease or extensions thereof,
all reimbursements due under this Exhibit shall become due coincident
with rent payments due LANDLORD for the last month of the lease term
or any extended term thereof.
<PAGE>
E. LANDLORD shall notify TENANT of any adjustment of Tenant's Share upon
expiration or termination of Lease which shall be an estimate,
computed by LANDLORD based upon the most recent figures available to
and prepared by LANDLORD. LANDLORD shall notify TENANT after the end
of the calendar year of any overpayment or underpayment resulting
from such calculation of the Tenant's Share of Operating Expenses and
TENANT and LANDLORD shall within thirty (30) days of receipt of said
notice make appropriate payment to adjust overpayment or underpayment
previously made.
F. TENANTS obligation to reimburse LANDLORD for Tenant's Share of
Operating Expenses under this Exhibit and LANDLORD'S and TENANT'S
obligation to make adjustments referred to above shall survive
expiration or termination of this Lease.
III. AVAILABILITY OF RECORDS
A. Within thirty (30) days after receipt by TENANT of LANDLORD'S
Statement of Operating Expenses, TENANT may notify LANDLORD in
writing of any cost items for which TENANT requests to see supporting
data. Promptly upon receipt of such notice, LANDLORD will make
available to TENANT or its agents for examination, at such place in
Metropolitan Boston as LANDLORD may reasonably designate, at TENANT'S
expense, such appropriate accounting books and records of LANDLORD as
shall relate to the items so designated by TENANT. TENANT shall cause
all information so obtained to be held in strict confidence.
Notwithstanding the giving of said notice, TENANT shall make payment
of all amounts indicated in LANDLORD'S Estimate or Statement within
thirty (30) days of said notice.
At any time within sixty (60) days after LANDLORD'S accounting books
and records relating to the designated cost items shall have been
made available to TENANT as aforesaid, TENANT may dispute in writing
any specific, significant (i.e., having an effect of an increase of
over 5%) item or items included by LANDLORD. If such dispute is not
amicably settled between LANDLORD and TENANT within thirty (30) days
after TENANT'S notice thereof, either party may during the next
succeeding thirty (30) days (upon written notice to the other party
accompanied by a copy of its letter of submission setting forth the
items of dispute) refer such disputed item or items to an
independent, nationally-recognized Certified Public Accounting firm
(to be selected by LANDLORD and to be other than the firm that issued
the certification of Estimate or Statement) for decision and the
decision of such accounting firm shall be conclusive and binding upon
LANDLORD and
49
<PAGE>
TENANT. The expenses involved in such determination shall be borne by
the party against whom a decision is rendered by said accounting firm
provided that if more than one item is disputed and a decision shall
be rendered against each party in respect to any item or number of
items so disputed, then the expenses shall be apportioned according to
the amounts decided against each party. Within thirty (30) days after
the rendering of such decision, LANDLORD shall make any adjustments
required thereby to the Estimate or Statement.
<PAGE>
EXHIBIT G
TO LEASE BETWEEN THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA AND
BRONNER SLOSBERG HUMPHREY, INC.
ARTICLE 1 - Definitions
- -----------------------
a. The term "Owner" shall designate The Prudential Insurance Company of
America, Prudential Center, Boston, Mass. 02199.
b. The term "Bradley" shall designate R.M. Bradley & Co., Inc. Manager
for Prudential Center Boston, Mass. 02199. Bradley's contact is Donald
Campbell, (617)-236-3302.
c. The term "Contractor" shall designate the person, firm, or corporation
named as such in the Agreement to construct the improvements on the
18th, 19th, 20th, 21st, 22nd and 23rd Floors of Prudential Tower for
Bronner Slosberg Humphrey, Inc. (Tenant). The term "Contractors"
refers to the several separate firms performing work under separate
contracts.
d. The term "Architect" shall designate Elkus/Manfredi and the term
"Engineer" shall designate R.G. Vanderweil.
e. Whenever in the Specifications or on the Drawings the words "as
required," "satisfactory," and work of like import are used with
reference to the work or its performance and without further
qualification they shall mean as approved as directed, as required by
Bradley and Engineer and acceptable, satisfactory, etc., to Bradley.
The term "approved" or "approval" means written approval of Engineer
and Bradley.
f. The term Tenant shall mean Bronner Slosberg Humphrey, Inc.
g. The term Work shall mean all work involved in preparing the Initial
Premises as defined in the Lease to be performed by Tenant's
Contractor.
h. The term Contract shall mean the contract between Tenant and
Contractor.
51
<PAGE>
ARTICLE 2 - PERFORMANCE BOND
- ----------------------------
Bradley reserves the right to ask for a Performance and Materials Bond
to the full value of the work.
ARTICLE 3 - PAYMENT
- -------------------
a. Prior to the first Requisition for Payment on account of the Contract,
the Contractor shall file with Bradley for approval, a complete
schedule, (hereinafter referred to as the "Schedule of Values"),
showing the value of the various portions of the Work in detail. Each
subdivision or classification of the Work shall be identified by
letter or code number with particular reference to each individual
section of the Specifications and the Contractor shall append a
schedule of the names, addresses (and whether individual, partnership
or corporation) of each Subcontractor and Subordinate Subcontractor
who is to perform all or any portion of each subdivision. The said
Schedule of Values when approved by Bradley shall be used for
computing the amounts of the various partial payments and in
requisitioning any payment on account.
b. Provided all the conditions of the Contract have been complied with by
the Contractor, Bradley each month within twenty-one (21) days after
receipt of the requisition for payment shall make payment on account
of the Contract based on the approved Schedule of Values, not to
exceed 90% of the value of the labor and materials incorporated in the
work as estimated by Bradley up to the first day of that month less
the aggregate of previous payments. Each requisition for payment will
be approved in writing by the Architect and Tenant or its authorized
representative.
c. The final payment (the 10% retainage) shall become due within forty-
three (43) days after completion of the work, provided the work be
then fully completed and the Contract fully performed. Upon receipt of
the Contractor's written notice that the work is ready for final
inspection and acceptance, Bradley and Tenant or its authorized
representative will make inspection and when they find the work
acceptable under the Contract, and the Contract fully performed,
Tenant will issue a final letter over his signature stating that the
work performed as provided for in the Contract has been completed and
is accepted by him under the terms and conditions thereof, and that
the entire balance, found to be due the Contractor and noted in said
final letter, is due and payable. However, before submission of the
final requisition, the Contractor shall submit such guarantees and
warranties as are required by the terms of the Contract and further
prior to the requisition for final payment, the Contractor shall also
deliver to Bradley, in form satisfactory to Bradley, a release of all
claims and an affidavit that his labor, materialmen, and his
subcontractors, if any, have been
<PAGE>
fully paid and that any and all indebtedness of any kind connected
with the work has been paid.
d. Bradley may withhold, or on account of subsequently discovered
evidence, nullify the whole or a part of any certificate to such
extent as may be necessary to protect the Owner and Bradley from loss
on account of:
1. Defective work not remedied.
2. Claims filed on reasonable evidence indicating probable filing of
claims.
3. Failure of the Contractor to make payments properly to
Subcontractors or for material or labor.
4. A reasonable doubt that the Contract can be completed for the
balance then paid.
5. Damage to another Contractor.
6. Defaults of the Contractor in the performance of the terms and/or
conditions of the Contract, or in the performance of any such
terms and/or conditions.
ARTICLE 4 - FILING
- ------------------
a. To prevent mechanics' or materialmen's liens from attaching to the
premises where the work is to be performed, the Contractor covenants
and agrees to look only to the financial responsibility of Bradley for
the payments due under the Contract and shall not file or record the
Contract or notice thereof in the office of the Register of Deeds in
which the job site is located or any other place permitted by law and
further covenants and agrees to bind by Contract each subcontractor
and each materialman with whom the Contractor enters into a written
agreement not to file or record such subcontract or notice thereof as
aforementioned.
b. If any subcontractor or materialman or laborer shall file in the
Suffolk County Land Registration office a stop notice, notice of
intention, lien or other instrument indicating that the said person
has claimed, or intends to claim, a lien on the premises, then and in
any of such events, before requisition shall be payable, Bradley may,
at its sole discretion, require the Contractor to furnish to Bradley a
waiver or release from such person claiming a lien or filing an
intention to claim a lien releasing Bradley for all claims for work
performed or materials furnished, as the case may be, up to the date
of the requisition for which payment is requested. Bradley may further
require the Contractor to
<PAGE>
have any such notice of intention, stop notice or lien discharge or
record before any such requisition shall be payable. If any of the
aforesaid shall be filed subsequent to final payment, the Contractor
shall, at its sole cost, discharge the same forthwith on notice from
Bradley.
ARTICLE 5 - LABOR
- -----------------
a. The Contractor, in order to avoid labor disputes, shall employ such
labor as will, to the satisfaction of Bradley, work in harmony with
other individuals employed by Bradley and shall not use materials or
means which might cause strikes or other disputes by any person
employed in or about the Owner's buildings. A sufficient force of
skilled workmen, acceptable to Bradley shall be employed on this work
at all times.
ARTICLE 6 - COMPLIANCE WITH BRADLEY'S BUSINESS OPERATIONS
- ---------------------------------------------------------
a. The business of Bradley and the numerous tenants will be carried on in
the buildings during the usual business hours of the day. All work
must be accomplished in such a manner so as not to interfere with
these operations.
b. In view of the fact that this building is in operation with all floors
occupied, the Contractor should keep this in mind when planning their
operations.
c. The Contractor shall instruct all his subcontractors and employees;
that they are not to wander through the building and are to confine
their activities strictly to the working area, the elevator car and
toilet room designated for their use and the specific storage area
assigned by Bradley.
d. As soon as possible after the award of the contract, the Contractor,
shall prepare a schedule of construction procedure and receive
approval of same from Engineer before actually commencing work at the
Building.
e. No signs or advertisements will be allowed on the job site. No
photographs of the work shall be taken without prior approval from
Bradley.
ARTICLE 7 - SCAFFOLDING, TOOLS, AND PROTECTION
- ----------------------------------------------
a. The Contractor shall provide all scaffolding, tools, rigging and other
appurtenances for the proper execution of the Contract and, also,
erect and properly maintain at all times all necessary fences, hang-
out warning and danger lights or signs and take all other necessary
precautions for the protection of all persons, property and the work.
<PAGE>
b. The Contractor shall be held responsible for any and all damage to all
portions of the building, inside and outside, due to the execution of
his work and must make good any and all damage without expense to the
Owner or Bradley.
c. Special care shall be given to avoid danger from fire. The Contractor
shall report to Bradley and to the Prudential Building Security
Office, before starting any operation involving welding or burning.
ARTICLE 8 - CONFINEMENT OF APPARATUS AND LIMITS OF WORK
- -------------------------------------------------------
a. The Contractor shall confine all apparatus, the storage of materials
and operations of workmen to limits indicated by law, ordinances,
permits or directions of Engineer and shall not unreasonably encumber
the area of work with materials. To this end, every portion must be
protected and the protection maintained while the work is being
carried on. The Contractor shall not unduly interfere with pedestrian
and vehicular movements, and shall keep the limit of operations within
a minimal area. The area of work, at all times, must be kept clean of
rubbish and surplus materials, tools and debris of every description
must be removed and the area of work at all points be left "broom
clean". The Contractor shall not load, or permit any part of the
structure to be loaded, with a weight that will endanger its safety.
ARTICLE 9 - INTENTIONALLY OMITTED
- ---------------------------------
ARTICLE 10 - OBSERVATION BY ARCHITECT/ENGINEER & BRADLEY
It is understood and agreed by and between the parties hereto that the
quality of work and materials included in the Contract shall be
subject to the approval of Engineer and Bradley's decision as to the
true construction and meaning of all drawings and specifications shall
be final. It is also understood and agreed by and between the parties
that such additional drawings and explanations as may be necessary to
detail and illustrate the work to be done are to be furnished by
Engineer. Contractor shall conform to and abide by the same so far as
they may be consistent with the purpose and intent of the original
drawings and specifications.
ARTICLE 11 - CONTRACTOR'S SUPERVISION
The Contractor shall keep on the project during the progress of the
work, a competent superintendent and any necessary assistants, who are
familiar with the type of work being done and are satisfactory to
Bradley and Engineer. The
<PAGE>
superintendent shall represent the Contractor in his absence and all
directions given to him shall be as binding as if given to the
Contractor.
ARTICLE 12 - INSPECTION
- -----------------------
The Contractor shall provide sufficient, safe and proper facilities at
all times for the inspection of the work by Engineer or Bradley or
their authorized representatives. He shall, within twenty-four (24)
hours after receiving written notice from Engineer to such effect,
proceed to remove from the grounds or buildings all materials
condemned by Bradley whether worked or unworked. He shall also take
down all portions of that work which Bradley or Engineer shall, by
similar written notice, condemn as unsound or improper, or which in
any way fails to conform with the Drawings and Specifications. The
Contractor shall make good on all work damaged or destroyed thereby,
at no additional cost to Bradley.
ARTICLE 13 - INTENTIONALLY OMITTED
- ----------------------------------
ARTICLE 14 - INTENTIONALLY OMITTED
- ----------------------------------
ARTICLE 15 - BRADLEY'S RIGHT TO DO WORK
- ---------------------------------------
If the Contractor shall fail to perform or complete the work in the
manner herein required, whereby damage or injury may result to person
or property, do or fail to do anything whereby safety or proper
construction may be endangered or fail to adhere to the progress
schedule established for said Work, either because of lack of
sufficient material, personnel, or otherwise, or if Contractor shall
breach any covenant, condition, or warrant of the Contract, Contractor
shall be deemed to be in default. If any such breach of performance is
not cured with three (3) days after receipt of written notice from
Bradley, Bradley at its sole option, without prejudice to any other
rights or remedies which it may have, may take any one or more of the
following actions:
1. It may deem said default to be a substantial breach of this
Contract and require Contractor, its employees, and materials and
equipment to be removed from the premises;
2. It may require Tenant to employ another contractor to complete
the Work;
<PAGE>
3. It may, without taking over the Work, furnish or cause to be
furnished the necessary materials and workers to assist
Contractor.
In the event that Bradley takes any or all of the above steps, Contractor
shall reimburse Bradley for the cost of completing the Work. At Bradley's
option, Bradley may deduct the cost thereof from payments then or hereafter
due the Contractor.
ARTICLE 16 - LIABILITY FOR DELAY
- --------------------------------
a. The Contractor agrees that, if he shall delay the progress of the work
so as to cause loss for which Bradley shall become liable, then the
Contractor shall reimburse Bradley for such loss.
ARTICLE 17 - INSURANCE AND INDEMNITY AGAINST CLAIMS
- ---------------------------------------------------
a. The Contractor agrees to indemnify the owner and Bradley against
alleged claims or demands for damages arising from accidents to
employees of either party hereto or to the public, or from claims or
alleged claims of damage to the property of owner or to adjoining
property caused directly or indirectly by said contractor, by any of
his subcontractors or by anyone directly or indirectly employed by
either of them in connection with the performance of the Contract.
The Contractor shall, for the mutual protection and benefit of both
Bradley and Contract work procure, pay for and maintain in full force
and effect, at all times during the performance of the work and until
final acceptance of the work, policies of insurance issued by a
responsible carrier or carriers acceptable to Bradley.
b. Before commencement of work, the Contractor shall furnish Bradley with
a certificate of insurance evidencing coverage for:
1. Worker's Compensation - Statutory.
2. Employer's Liability - $250,000.00.
3. Comprehensive General Liability - including Independent
Contractors' and Owners' Protective, Broad Form Contractual,
Broad Form Property Damage, Personal Injury, Completed Operations
and Products coverages (which shall provide for a period of two
years after final completion and acceptance of the work by
Bradley and deletion if any exclusion pertaining to explosion,
collapse, and underground property damage hazards; in limits of
not less than $5,000,000 combined single limit per occurrence.
<PAGE>
4. Comprehensive Automobile liability including Owned Non-Owned and
Hired Car coverages in limits of at least: $1,00,000 combined
single limit for both bodily injury and property damage.
c. Contractor hereby agrees to deliver to Bradley with ten (10) days of
the date hereof and prior to any equipment or personnel being brought
onto Owner's premises in accordance with the terms of this agreement,
Certificates of Insurance evidencing the above coverages with limits
not less than those specified above. Such Certificates, with the
exception of Worker's Compensation, shall name the Prudential
Insurance Company of America, and R.M. Bradley & Co., Inc., its
subsidiaries directors, officers, agents, and employees as additional
insureds and shall expressly provide that the interest of same therein
shall not be affected by any breach by Contractor of any policy
provision for which such Certificates evidence coverage.
The aforesaid insurance policies shall contain a provision reading
substantially as follows: "The insurance company hereby agrees that it
will give R.M. Bradley & Co., Inc., Prudential Tower, Suite 450, 800
Boylston Street, Prudential Center, Boston, Massachusetts 02199 at
least thirty (30) days prior written notice of any material change in
or cancellation of any of the coverage shown in this certificate."
d. Contractor hereby agrees to indemnify and hold harmless, Owner,
Bradley its subsidiaries, directors, officers, agents, and employees
from and against any and all damage, loss, liability or expense
including, but not limited to attorneys fees and legal costs suffered
by same directly or by reason of any claim, suit, or judgement brought
by or in favor of any person or persons for damage, loss, or expense
due to, but not limited to bodily injury, including death resulting
anytime therefrom, and property damage sustained by such person or
persons which arises out of, is occasioned by or in any way
attributable to the services contracted for herein or otherwise, the
acts or omissions of Contractor, its agents, employees, or
subcontractors. Such damage, loss, or expense shall include but not be
limited to, any injury or damage to Owner and Bradley's personnel or
premises. Contractor agrees that the obligations assumed herein shall
survive this agreement.
e. Contractor hereby agrees that it is Contractor's responsibility to
require and document (to the satisfaction of Bradley) that each
subcontractor acquire and maintain insurance of the type and in the
amounts specified above, with the exception of the Comprehensive
General Liability coverage which shall be at least $2,000,000 combined
single limit.
f. Bradley shall on behalf of the owner, during the process of the Work,
maintain and pay for "all risk" property insurance on same. Such
insurance shall cover
<PAGE>
all Work incorporated in the Project and all materials or equipment on
or about the premises intended for permanent use in the Project or
incidental to construction thereof and included in the total cost of
the Project. If the Contractor desires any other insurance beyond that
provided by Bradley, he may obtain and pay for same. The Contractor
shall be wholly responsible for the safe storage and protection of all
materials (except that covered by said all risk insurance), tools,
equipment, and machinery until work installed is accepted by Bradley
and such materials, tools, equipment, and machinery are removed from
the premises.
ARTICLE 18 - ROYALTIES AND LICENSE FEES
- ---------------------------------------
The Contractor shall pay all royalties and license fees. The
Contractor shall defend all suits or claims for infringement of any
patent rights and shall hold Bradley and Engineer harmless from loss
on account thereof.
ARTICLE 19 - COMPLIANCE WITH LAWS AND ORDINANCES
- ------------------------------------------------
a. The Contractor shall give all notices and comply with all laws,
ordinance rules and regulations bearing on the conduct of the work as
drawn and specified. If the Contractor observes that the drawings and
specifications are at variance therewith, the Contractor shall
promptly notify Engineer and Bradley in writing and any necessary
changes shall be adjusted as provided in the Contract for changes in
the work. If the ordinances, rules and regulations, and without such
notice to Engineer and Bradley, the Contractor shall bear all costs
arising therefrom.
b. Licenses, inspections, and certificates related to the work shall be
secured by the Contractor, at his sole expense.
c. Building permits will be obtained and paid for by the contractor. Upon
completion of the work, the Contractor shall secure and present to
owner a certificate of occupancy from the Inspection Department.
ARTICLE 20 - REMOVAL OF VIOLATIONS
- ----------------------------------
The Contractor shall, at the Contractor's own expense, remove any and
all violations relating to the work specified herein which may be
placed against the property.
ARTICLE 21 - RIGHT TO LET OTHER CONTRACTS
- -----------------------------------------
a. Bradley reserves the right to let other contracts for work joined to
or connected with the work hereinabove mentioned. The Contractor shall
afford other
<PAGE>
contractors reasonable opportunity for the introduction and storage of
their materials and execution of their work and shall properly connect
and coordinate all work with theirs.
b. If any part of the contractor's work depends for proper execution of
results upon the work or any other contractor, the Contractor shall
inspect and promptly report to Bradley any defects in such work that
render it unsuitable for such proper execution and results. The
Contractor's failure to so inspect and report shall constitute an
acceptance of the other contractor's work as fit and proper for the
reception of this Contractor's work, except as to defects which may
develop in the other Contractor's work, except as to defects which may
develop in the other Contractor's work after the execution of this
Contractor's work.
c. To insure the proper execution of subsequent work, the Contractor
shall measure work already in place and shall at once report to
Bradley's representative any discrepancy between the executed work and
the drawings.
ARTICLE 22 - SUBCONTRACTORS
- ---------------------------
The Contractor shall, as soon as practical after the execution of this
agreement, notify Bradley in writing of the names of all
subcontractors proposed for the work. The Contractor shall not employ
any subcontractor without Bradley's prior written approval. Each
subcontractor shall agree to be bound by the Agreement, the General
Conditions, the Drawings and the Specifications of the Contract.
ARTICLE 23 - SHOP DRAWINGS
- --------------------------
a. The Contractor shall at his expense prepare and submit to Engineer for
approval all sketches, layouts, detail drawings, and any other
drawings of any kind as may be required by the Specifications or as
may be required in amplification of the Contract Drawings of all which
are hereinafter referred to as "Shop Drawings."
b. Contractor shall receive directly all Shop Drawings prepared by
Subcontractors and prior to submission to Engineer thoroughly check
all Shop Drawings for complete dimensional accuracy and to insure that
work contiguous with and having bearing on the work shown on the Shop
Drawings is accurately and clearly shown and that all work complies
with the Contract. Shop Drawings, at the time of submission to
Engineer, shall bear evidence that they have been checked and approved
by the Contractor. Any drawings submitted out of accord with this
procedure will not be processed for approval but, rather, will be
returned to the Contractor for checking.
<PAGE>
c. All Shop Drawings shall be submitted by the Contractor to Engineer and
Bradley for approval. Submit two black line prints and one
reproducible print of all Shop Drawings.
d. No Shop Drawing shall be used at the job site for construction
purposes unless it is stamped "APPROVED" OR "APPROVED AS NOTED" by the
Contractor and Bradley and Engineer
ARTICLE 24 - ASSIGNMENTS
- ------------------------
The Contractor shall not assign the Contract, or sublet it as whole
without written consent of Bradley, nor shall the Contractor assign
any monies due or to become due hereunder without previous written
consent of Bradley.
ARTICLE 25 - TAXES
- ------------------
The Contractor shall pay and include in his firm lump-sum all
applicable local, state, federal, and other taxes in connection with
his work, including "Social Security,""Unemployment Insurance," and
"Sales" or "Use" taxes for materials and equipment only. The
Contractor shall furnish Bradley the cost for labor and services upon
which the Massachusetts sales tax apply.
ARTICLE 26 - INTENTIONALLY OMITTED
- ----------------------------------
ARTICLE 27 - OSHA
- -----------------
Occupational Safety and Health Act 1970 - The Contractor shall comply,
and shall bind any subcontractor who enters the Owner's premises, to
comply with the Occupational Safety and Health Act of 1970 and all
regulations and standards issued pursuant thereto. The Contractor
agrees, and shall bind any such subcontractor to agree, to indemnify
and save harmless Bradley for any loss, damage, fine, penalty, or
expense whatsoever that bradley may suffer as a result of the failure
of the Contractor or its subcontractors to comply with the
requirements of the Act or any regulations and standards issued
pursuant thereto.
ARTICLE 28 - EQUAL FACILITIES
- -----------------------------
Before any award of a contract by Bradley the Contractor shall submit
to Bradley in the form approved by the Director of the Office of
Federal Contract
<PAGE>
Compliance, U.S. Department of Labor, a certification that the
prospective Contractor does not and will not maintain any facilities
he provides for his employees in a segregated manner, or permit his
employees to perform their services at any location, under his
control, where segregated facilities are maintained, and that he will
obtain a similar certification from each subcontractor prior to the
award of each nonexempt subcontract.
ARTICLE 29 - TEMPORARY SERVICES
- -------------------------------
a. Bradley shall furnish, at no cost to the Contractor, the actual
electric A.C. current and the water required for the work of the
Contract. Point of supply shall be designated by Engineer.
b. Contractor shall provide and maintain all temporary electric light and
power requirements and all temporary water connection, valves, hose,
and shutoffs. All temporary facilities installed by the Contractor
shall be removed by the Contractor at completion of job.
c. Contractor shall provide and maintain in place and operation all
existing service pipes, conduits and other services which are to
remain and shall immediately restore all such service if damaged.
ARTICLE 30 - WEATHER PROTECTION
- -------------------------------
Contractor shall provide and maintain weather protection necessary to
protect all parts of the building and its contents from damage from
the elements.
ARTICLE 31 - HOUSEKEEPING - CLEAN UP
- ------------------------------------
a. The Contractor shall, at his expense, keep the premises at all times
free from accumulations of waste materials or rubbish caused by his
employees or work and, at the completion of the work, he shall remove
all his rubbish from and about the building and all his tools,
scaffolding and surplus materials and shall leave his work "broom
clean" or its equivalent, unless more exactly specified. In case of
dispute, Bradley may remove the rubbish and charge the cost to the
Contractor, as Bradley's representative shall determine to be just.
b. The Contractor shall, at his expense, restore to operating condition
any sewers, drains, and other facilities which have been used by the
Contractor. All temporary construction and facilities shall be removed
at the completion of the construction or when directed by Bradley's
representative.
<PAGE>
c. The Contractor shall, at his expense, make provision to remove rubbish
from the job site, including adjacent sidewalks, as it accumulates so
that the entire job site is in a clean condition at all times.
d. The Contractor shall, at his expense, clean and remove debris from all
areas where trades requiring clean premises shall begin work or start
operations.
e. The Contractor shall, at his expense, install barriers and/or dust
proof partitions where required by Bradley.
f. Containers are to be located conveniently for disposal of cigarettes
and cigar butts.
ARTICLE 32 - CERTIFICATES
- -------------------------
It is further mutually agreed between the parties hereto that no
certification given or payment made under this Contract, except the
final certificate or final payment, shall be conclusive evidence of
the performance of this Contract, either wholly or in part, and that
no payment or certificate shall be construed to be an acceptance of
defective work or improper materials.
ARTICLE 33 - GUARANTEE
- ----------------------
a. Besides the guarantees required elsewhere, the Contractor shall
guarantee the Work for one (1) year from the date of final payment and
acceptance and in the form required by Bradley in writing. All special
guarantees required by the Contract Documents shall also be in writing
and in the forms required by Bradley, delivered to Bradley before
final payment is made. All Subcontractors and Subordinate
Subcontractors guarantees herein specified shall be underwritten by
the Contractor, who shall obtain and deliver same to Bradley before
the Work will be deemed finished and accepted.
b. The Contractor shall at his expense, upon demand of Bradley, correct
any defect appearing during the period of the guarantee; it being
required that all work be in perfect condition when the period of
guarantee has elapsed.
ARTICLE 34 - CUTTING, FITTING, AND PATCHING
- -------------------------------------------
The Contractor shall verify all conditions and dimensions at the site
and shall do all cutting, fitting, or patching of the work that may be
required to make its several parts come together properly and fit to
receive or be received by work, of other contractors, if any shown
upon or reasonably, implied by, the drawings and specifications for
the completed project, and the contractor shall make good after such
other contractor, if any, as Engineer may direct.
<PAGE>
ARTICLE 35 - LIFE SAFETY SYSTEM
- -------------------------------
a. The contractor's work, welding, burning, grinding, etc., may cause
detectors to activate and automatically summon the Fire Department,
causing disruptions, and a possible false alarm fine.
b. Two working day's notice is required to disarm the system. Contractors
are required to obtain a permit and the services of a Boston Fireman
when burning, welding, etc.
<PAGE>
SCHEDULE 1
BRONNER SLOSBERG HUMPHREY, INC. LEASE
The Initial Premises will be delivered to the Tenant in shell condition as
follows:
18th Floor July 15, 1995
19th Floor July 15, 1995
20th Floor Upon Lease Execution
22nd Floor Upon Lease Execution
23rd Floor Upon Lease Execution
<PAGE>
SCHEDULE 2
TOWER BUILDING HVAC SYSTEM
The Prudential Tower is a fifty-two story office building heated and air
conditioned by constant and variable volume air handling systems. The building
is divided into sections by floors. Each of these sections consists of ten
floors that are served by a mechanical equipment floor. Located on these floors
are the various pumps, air handling equipment and control systems necessary to
condition building air and deliver it to the occupied floors of the Tower. The
12th, 21st, 31st, and 41st mechanical equipment floors service floors 3 through
18, 19 through 28, 29 through 38, through 49 respectively.
The northwest, northeast, southeast, and southwest quadrants of the building
makeup the interior zones. Each of the four zones is serviced by a supply fan
that delivers conditioned air through a system of ducting to ceiling diffusers
on the occupied floors. The area above the suspended ceiling on each of the
floors serves as a plenum from which a return fan in the mechanical room removes
air from the space and through a system of ducts, and returns it to the supply
fans for conditioning and redistribution. Return air is distributed to both
interior and perimeter fan systems.
The north, east, south, and west sides of the building makeup the four perimeter
zones for each of the building sections. A supply fan delivers conditioned air
through a system of ducts to induction units installed at the windows. Air
emitted from induction unit nozzles induces a flow of ambient air through a
heating/cooling coil which then mixes with the conditioned supply air.
The interior and perimeter air handling systems function to clean, and cool the
air during the summer. In winter the air is cleaned and heated. Filters in the
fans and lint screens at perimeter induction units and return air inlets remove
entrained dust from the circulating air. The result is clean conditioned air.
A 3500 - ton chilled water plant supplies primary chilled water to fan systems
and to secondary water systems on the mechanical floors for cooling. The chilled
water system is split into low-rise and high-rise sub-systems. The low-rise
serves floors 18 and below from fan pump units on the sub-basement, basement,
and 12th floor mechanical equipment rooms. The high-rise serves floors above 18
from fan pump units on the 21st, 31st, 41st, and 51st floor mechanical equipment
rooms. The main chilled water plant is located in the sub-basement mechanical
equipment room.
A secondary water system delivers heated or chilled water, depending on seasonal
requirements to perimeter induction unit coils. Ambient and fresh Air is heated
or cooled as it passes over these coils. The flow of secondary water to
the coils is regulated by pneumatically operated thermostats which serve to
satisfy space temperature requirements.
<PAGE>
1. One complete air change every 9 minutes of operation.
2. Minimum outside makeup 10 percent, maximum 90 percent, annualized average
40 percent.
3. Temperature target 72 degrees year around.
4. After business hours hvac available at $150/hr for floor 19, 20, 22 and 23,
floor 18 emanates from different equipment therefore it will be sold
separately, also at $150/hr.
5. Occupied space is adequately pressurized to prevent infiltration of air
(odor etc.) from elevator shaftways, and other floors or service areas.
<PAGE>
section, the rent and other economic terms shall be determined in the manner
provided for in Section 12.15 of the Lease. Space being added to the Premises
pursuant to this section shall be delivered in shell condition.
6. Electric Reimbursement
----------------------
TENANT shall reimburse LANDLORD monthly in arrears for the cost of
electricity used in the First Amendment Spaces in the same manner as the charge
for electrical service is determined and paid for the 18th Floor of the Initial
Premises.
7. TENANT Improvements
-------------------
LANDLORD will deliver the First Amendment space in shell condition with the
Common Areas of the Fifth (5th) Floor repainted. In addition, LANDLORD will
provide TENANT with a Tenant Improvement Allowance for the First Amendment
Spaces equal to $32.50 per RSF to be used for defraying the costs of Tenant
Improvements, moving allowance and other costs in connection with the First
Amendment Spaces. The TENANT Improvement Allowance will be paid in cash with
thirty (30) days of full execution of this Amendment.
In the event TENANT'S cost of preparing the First Amendment Spaces for
TENANT'S use and occupancy exceeds the Tenant Improvement Allowance, LANDLORD
agrees, upon receipt of invoices in reasonable detail demonstrating the amount
of such excess, to increase the amount of the Tenant Improvement Allowance
(Excess Tenant Improvement Allowance) to an amount equal to TENANT'S costs of
preparing the First Amendment Spaces provided, however, that the Excess Tenant
Improvement Allowance shall not exceed $45.00 per RSF under any circumstances.
TENANT shall reimburse LANDLORD for the amount, if any, of the Excess Tenant
Improvement Allowance by the payment Reimbursement Rent throughout the term
sufficient to amortize the Excess Tenant Improvement Allowance with an interest
factor of 10%. LANDLORD AND TENANT agree to enter into a lease amendment
specifying the amount of Reimbursement Rent when amount of Excess Tenant
Improvement allowance is known but no later than sixty days after completion of
the Tenant Improvements. Payments of Reimbursement Rent shall be paid monthly as
provided in Section 3.1 of the Lease. All work in connection with the Tenant
Improvements shall be performed in a good and workmanlike manner in compliance
with all applicable law and regulations as provided in the Lease.
8. Parking
-------
As provided in the Lease, TENANT shall be entitled to lease, at then
current monthly rates, one parking space from the Prudential Center garage
operator for each 2,000 RSF of space leased pursuant to this amendment. The rate
for monthly parking spaces as of January 1, 1996 is $260.00 per month.
3
<PAGE>
9. Additional Lease Security
-------------------------
In accordance with Section 12.14 of the Lease, TENANT has delivered to
Landlord an irrevocable standby letter of credit (the Letter of Credit in the
original face amount of Four Million Seventy Eight Thousand and 00/100
($4,078,000.00) Dollars to secure, amongst other obligations of TENANT under the
Lease, a portion of the Lease Transaction Costs incurred by Landlord in
connection with the Initial Premises. Section 12.14 also provides in part for
the yearly reductions of the Letter of Credit subject to the conditions
contained in Section 12.14.
Landlord and TENANT agree that Landlord may utilize the Letter of Credit as
additional security for TENANT's obligations with respect to up to fifty percent
(50%) of the Transaction Costs to be incurred by Landlord for the First
Amendment Spaces. In order to provide Landlord with sufficient additional
security for the Transaction Costs for the First Amendment Spaces while
preserving Landlord's security for the Initial Premises, Landlord and TENANT
agree that the Letter of Credit reduction procedures in Section 12.14 are hereby
amended to provide that, in lieu of the annual ten percent (10%) reductions
scheduled to commence in the first quarter of calendar 1997, provided the L.C.
Reduction Conditions have been satisfied, the Letter of Credit shall be reduced
in each year starting one year after the Initial Letter of Credit Reduction Date
specified in Section 12.14 (the Amended Initial Letter of Credit Reduction Date)
provided in each instance in the L.C. Reduction Conditions have been satisfied
by the amount shown for each applicable lease year indicated on the schedule set
forth in Exhibit LCR attached to and made a part of this Amendment. Exhibit LCR
as currently calculated assumes Transaction Costs (i.e. Tenant Improvement
Allowance and Brokerage Fees) equal to $40.67 per RSF. If the Transaction Costs
for the First Amendment Spaces exceed $40.67, the parties agree that Exhibit LCR
will have to be recalculated as a part of the lease amendment referred to in the
second paragraph of Section 7 hereof.
TENANT understands that the exercise of its future expansion rights may
require a further modification of the terms regarding the reduction of the
Letter of Credit and or an increase in the Letter of Credit to secure a portion
of Transaction Cost for such space incurred by Landlord.
II. Initial Premises Reimbursement Rent Use of First Amendment
Background
----------
When Landlord and TENANT entered into the Lease, Landlord granted TENANT a
Tenant Improvement Allowance of $45.00 per rentable square foot (RFS) for the
preparation of the Premises leased for TENANT's use and occupancy. The actual
construction costs for the preparation of the Initial Premises leased exceeded
the Tenant Improvement Allowance. Article 2 of the Lease provides that any
excess Tenant Improvement costs up to a cap of $55.00 per RSF would be amortized
over the term of the rate of $.16 per RSF for $1.00 per RSF of costs in excess
of $45.00 per RSF. Landlord has paid $10.00 per RSF in excess of the Tenant
Improvement Allowance in the preparation of the Initial Premises leased for
Tenant's use and occupancy.
4
<PAGE>
1. TENANT acknowledges and agrees that the rent payable under the Lease
will be increased $204,849.60 per year to reimburse Landlord for the cost
incurred in preparing the Initial Premises leased by TENANT. Effective July 1,
1996, the monthly rent payable for the premises leased will be increased by
$17,070.80 per month (Monthly Reimbursement Rent for the Initial Premises) to
amortize the excess Tenant Improvements as provided in the Lease.
2. The lease term commenced December 15, 1995 and will expire on November
30, 2005.
3. TENANT shall reimburse Landlord, within thirty (30) days of Landlord's
invoice, for the Monthly Reimbursement Rent for the Initial Premises for the
period from the Commencement Date through April 30, 1996.
III. Terms
-----
Terms used herein shall have the same meaning as provided in the Lease
unless otherwise indicated.
Except as herein modified and amended, the Lease is ratified and affirmed.
Executed this 21 day of June, 1996
LANDLORD:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ David Raszmann
---------------------------------
TENANT:
BRONNER SLOSBERG HUMPHREY, INC.
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
5
<PAGE>
EXHIBIT F-1
TENANT'S SHARE OF INCREASED OPERATING EXPENSES
TOWER BUILDING
ATTACHED TO AN]) MADE A PART OF
THE FIRST AMENDMENT OF LEASE
BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA. LANDLORD
AND BRONNER SLOSBERG HUMPHREY, INC.
I. Definitions
TENANT shall reimburse LANDLORD for Tenant's proportionate share ("Tenant's
Share") of increased "Operating Expenses" (as herein defined) in excess of Base
Operating Expenses as follows:
I. A. "Tenant's Share" of the amount of Operating Expenses in excess of Base
Operating Expenses for the First Amendment Spaces equals 1.44%.
17,668 r.s.f. (Premises Net Rentable Area)
--------------------------------------------
1,226,539 s.f. (Building Net Rentable Area)
B. Base Operating Expenses equal 1996 Actual Operating Expenses
C. "Operating Expenses" shall mean any and all costs and expenses
adjusted for 100% occupancy [except those listed in subparagraphs (a)
through (e) below] actually paid or incurred by LANDLORD in connection
with the ownership, management, operating, servicing, and maintenance
of the Building, its utility services from the property line to the
Building including, without limitation, the cost and expense of the
following: salaries, wages, medical, surgical and general welfare and
other so-called "fringe" benefits (including group insurance and
retirement benefits) for employees of LANDLORD or any contractor of
LANDLORD engaged in the cleaning, operation, maintenance or management
of the Building, and payroll taxes, and worker's compensation
insurance premiums relating thereto, gas, steam, fuel oil, water,
sewer rental, electricity (exclusive of Tenants Electrical Usage),
utility taxes, rubbish removal, fire, casualty, liability, rent and
other insurance carried by LANDLORD, repairs, repainting, replacement,
building supplies, uniforms, and cleaning thereof, window cleaning,
service contracts with independent contractors for any of the
foregoing (including, but not limited to elevator and air
conditioning maintenance), management fees (whether or not paid to any
person, firm or corporation having an interest in or under common
ownership with LANDLORD or any of the persons, firms or corporations
comprising -LANDLORD), legal fees and expenses incurred in connection
with any application or proceeding brought for reduction of the
assessed valuation of the
<PAGE>
Building or any part thereof, but only if brought to have the effect
of reducing TENANT'S cost, auditing fees and all other costs and
expenses actually incurred in connection with the operation,
maintenance and management of the Building and an allocated share of
the "Center's Common Area Expenses" (as herein defined). Included in
the foregoing will be the cost or portion thereof properly allocatable
to the property (amortized over such reasonable period as LANDLORD
shall determine together with the interest on the unamortized balance
as the greater of 10% or the six month Treasury Bill rate for the date
upon which funds for the project are committed) of any capital
improvements made to the Building by the LANDLORD which result in
appropriate reduction of Operating Expenses or made to the Building by
the LANDLORD after the date of this Lease that are required under any
governmental law or regulation that was not applicable to the Building
on the date of this Lease. Operating Expenses shall be computed on an
accrual basis and shall be determined in reasonable detail in
accordance with generally accepted accounting principles consistently
applied. They may be incurred directly or by way of reimbursement, and
shall include taxes applicable thereto. The following shall be
excluded in calculating Operating Expenses:
(a) Depreciation or capital expenditures on the Building or any
part thereof, except as included above;
(b) Expenses incurred directly in leasing or in procuring any
tenants, including advertising, promotion, public relations, sales,
brokers' commissions, and expenses for tenant alterations or
renovating space for new tenants;
(c) Amortization and interest on indebtedness;
(d) Real estate taxes or payments in lieu of real estate taxes
except as provided for in Section 3.4 hereof;
(e) The net amount of any insurance proceeds, reimbursements,
discounts or allowances received by LANDLORD in connection with those
"Operating Expenses" which are included.
(f) Also excluded are the following:
(i) cost of repairs or replacements incurred by reason of
fire or other casualty or by the exercise or the right of eminent
domain;
(ii) advertising and promotional expenditures;
(iii) legal fees incurred in disputes with tenants, matters
in connection with any underlying lease including, but not
limited to, the conveyance or financing or refinancing thereof,
negotiation of leases with prospective or current tenants,
financing or refinancing of mortgagees, disputes with mortgagees
not caused by TENANT and other
<PAGE>
legal and auditing fees, other than legal and auditing fees
reasonable incurred in connection with the preparation of
statements required pursuant to additional rent or rental
escalation provisions;
(iv) costs incurred in performing work or furnishing
services to or for individual tenants (including TENANT) other
than work or services of a kind and scope which LANDLORD would be
obligated to furnish TENANT without charge if such work were
required in the Demised Premises pursuant to applicable law or
codes as required by the governmental authority having
jurisdiction;
(v) the cost incurred by LANDLORD in performing work or
furnishing any services to or for a tenant of space in the 0
Building (including TENANT) for which a separate charge is made,
including without limitation, the supply of overtime air-
conditioning, ventilation and heating at LANDLORD'S cost and
expense, regardless of the amount billed or received by LANDLORD
for performing such work or furnishing such service;
(vi) franchise and income taxes of LANDLORD;
(vii) real estate taxes on land and/or Building to the
extent included in this Lease;
(viii) the costs of providing overtime heat and air-
conditioning to tenants of the Building to the extent that the
same are payable by the tenants for whom such services are
provided;
(ix) rent under ground leases (if any)
(x) all costs incurred in connection with or directly
related to the original construction of the Building (as
distinguished from operating expenses and the repair, maintenance
and operations thereof);
(xi) financing and refinancing costs, interest on debt or
amortization payments on any mortgage or mortgages, and rental
under any ground or underlying lease or leases;
(xii) a bad debt loss, rent loss or any reserves
(xiii) All interest or penalties incurred as a result of
LANDLORD'S failure to pay any costs or taxes as the same shall
become due provided such failure shall not have been caused by
TENANT;
(xiv) any and all costs associated with the operation of
the business of the entity which constitutes LANDLORD; excluded
items
<PAGE>
shall specifically include, but shall not be limited to,
formation of the entity, costs of defending any lawsuits with any
mortgagee (except as the actions of TENANT may be in issue),
costs of selling, syndication, financing, mortgaging or
hypothecating any of the LANDLORD'S interest in the Building,
costs of any disputes between LANDLORD and its employees (if any)
not engaged in the operation of the Building, disputes between
LANDLORD and managers of the Building;
(xv) (i) costs of printing and decorating for any
tenant's space; (ii) the cost of providing overtime heat and air-
conditioning to tenants of the Building to the extent that the
same are payable by the tenants for whom such services are
provided; and (iii) rent under ground leases (if any);
(xvi) amounts for which LANDLORD has been reimbursed by
insurance proceeds;
(xvii) costs incurred in renovating or otherwise improving
or decorating or redecorating space for tenants or other
occupants in the Building or vacant space in the Building or
costs related thereto;
(xviii) LANDLORD'S costs of electricity, incremental air-
conditioning and other services sold to tenants for which
LANDLORD is entitled to be reimbursed by tenants (whether or not
actually collected by LANDLORD) as a separate additional charge
or rental;
(xix) any cost or expense incurred as a result of
painting, decorating, carpet shampooing, drapery cleaning and
wall washing within the rentable areas of the Building for a
specific tenant as opposed to that performed for all tenants or
common areas.
D. "Center's Common Area Expenses" is defined as those costs and expenses
incurred for the open areas, public areas and amenities within the
Prudential Center which become a cost center to receive expenses deemed by
the LANDLORD to be chargeable thereto which are accumulated and prorated
against the income-generating elements of the Center by a formula
predicated on a rentable area basis consistently applied annually. (The
portion chargeable during 1995 to the Building is 30.5%, subject to change
as rentable areas may change).
E. "Calendar Year" is defined as any consecutive twelve (12) month period
commencing January 1st, provided that LANDLORD, upon written notice to
TENANT, may change from time to time to any other consecutive 12-month
period, and in that event Tenant's Share of Operating Expenses shall be
adjusted pro rata.
<PAGE>
II. PAYMENT OF TENANT'S SHARE
A. LANDLORD shall on or after January 1 in each year give to Tenant a
statement of Tenant's Estimated Share of Operating Expenses (Estimate)
for the current calendar year. Tenant's Estimated Share of Operating
Expenses shall be the product of Tenant's Share times the amount by
which LANDLORD'S Estimate of Operating Expenses for the Calendar Year
exceed Base Operating Expenses. TENANT shall reimburse LANDLORD
monthly with each rent payment an amount equal to 1/12th of Tenant's
Estimated Share of Operating Expenses. LANDLORD reserves the right
during any year to adjust Tenant's Estimated Share of Operating
Expenses in any year to reflect increases of 5% or more by which
actual Operating Expenses are exceeding Estimated Operating Expenses.
B. LANDLORD shall on or before May 1, in each calendar year provide a
Statement of Operating Expenses (Statement) for the prior calendar
year prepared by an independent Certified Public Accountant which
shall show in reasonable detail all items of Operating Expense for the
prior year and Tenant's Share of such Operating Expenses with the
amount of any difference due to LANDLORD or TENANT between Tenant's
Estimated Share of Operating Expenses and Tenant's Share of Operating
Expense for such year. The amount of any difference due TENANT shall
accompany the Statement when delivered to TENANT. TENANT shall
reimburse LANDLORD the amount of any difference due LANDLORD within
thirty (30) days of receipt of LANDLORD'S Statement.
C. If any part of the original lease term or any extended lease term is
less than a calendar year, the TENANT shall reimburse LANDLORD for
Tenant's Share of Operating Expenses due in accordance with this
Section II hereof as the number of days of the term or extended term
contained in a calendar year bears to 365 days.
D. Upon expiration or termination of the Lease or extensions thereof, all
reimbursements due under this Exhibit shall become due coincident with
rent payments due LANDLORD for the last month of the lease term or any
extended term thereof.
E. LANDLORD shall notify TENANT of any adjustment of Tenant's Share upon
expiration or termination of Lease which shall be an estimate,
computed by LANDLORD based upon the most recent figures available to
and prepared by LANDLORD. LANDLORD shall notify TENANT after the end
of the calendar year of any overpayment or underpayment resulting from
such calculation of the Tenant's Share of Operating Expenses and
TENANT and LANDLORD shall within thirty (30) days of receipt of said
notice make appropriate payment to adjust overpayment or underpayment
previously made. F. TENANT'S obligation to reimburse LANDLORD for
Tenant's Share of Operating Expenses under this Exhibit and LANDLORD'S
and TENANT'S
F. TENANT'S obligation to reimburse LANDLORD for Tenant's share of
operating expenses under this Exhibit and LANDLORDS and TENANT'S
<PAGE>
obligation to make adjustments referred to above shall survive
expiration or termination of this Lease.
III. AVAILABILITY OF RECORDS
A. Within thirty (30) days after receipt by TENANT of LANDLORD'S
Statement of Operating Expenses, TENANT may notify LANDLORD in writing
of any cost items for which TENANT requests to see supporting data.
Promptly upon receipt of such notice, LANDLORD will make available to
TENANT or its agents for examination, at such place in Metropolitan
Boston as LANDLORD may reasonably designate, at TENANT'S expense, such
appropriate accounting books and records of LANDLORD as shall relate
to the items so designated by TENANT. TENANT shall cause all
information so obtained to be held in strict confidence.
Notwithstanding the giving of said notice, TENANT shall make payment
of all amounts indicated in LANDLORD'S Estimate or Statement within
thirty (30) days of said notice.
At any time within sixty (60) days after LANDLORD'S accounting books
and records relating to the designated cost items shall have been made
available to TENANT as aforesaid, TENANT may dispute in writing any
specific, significant (i.e., having an effect of an increase of over
5%) item or items included by LANDLORD. If such dispute is not
amicably settled between LANDLORD and TENANT within thirty (30) days
after TENANT'S notice thereof, either party may during the next
succeeding thirty (30) days (upon written notice to the other party
accompanied by a copy of its letter of submission setting forth the
items of dispute) refer such disputed item or items to an independent,
nationally-recognized Certified Public Accounting firm (to be selected
by LANDLORD and to be other than the firm that issued the
certification of Estimate or Statement) for decision and the decision
of such accounting firm shall be conclusive and binding upon LANDLORD
and TENANT. The expenses involved in such determination shall be borne
by the party against whom a decision is rendered by said accounting
firm provided that if more than one item is disputed and a decision
shall be rendered against each party in respect to any item or number
of items so disputed, then the expenses shall be apportioned according
to the amounts decided against each party. Within thirty (30) days
after the rendering of such decision, LANDLORD shall make any
adjustments required thereby to the Estimate or Statement.
<PAGE>
SECOND AMENDMENT OF LEASE
Reference is made to that certain lease dated May 31, 1995, as amended by a
First Amendment of Lease ("First Amendment") dated June 21, 1996, by and between
The Prudential Insurance Company of America, as Landlord, and Bronner, Slosberg,
Humphrey, Inc., as Tenant, leasing space in Prudential Tower, Boston,
Massachusetts, collectively hereinafter the "Lease".
Background. The Lease provides in paragraph number 7 of the First
----------
Amendment, that Tenant may exceed its Tenant Allowance of $32.50 per RSF to a
maximum of $45.00 per RFS with the excess above $32.50 to be amortized with
interest at 10% as Reimbursement Rent as provided for in Sections 2 and 3.1(b)
of the Lease. Tenant has spent $45.00 per RSF for Tenant Improvements on the
First Amendment Spaces on the Fifth Floor of the Building. Landlord and Tenant
desire to further amend the Lease to provide for the payment of Reimbursement
Rent to amortize the $12.50 per RSF excess in Tenant Allowance for the First
Amendment Spaces.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
Landlord and Tenant agree that the Lease is hereby further amended as follows:
1. Tenant agrees to pay commencing in September, 1996 and monthly
thereafter throughout and including November, 2005, the sum of
$3,074.38 as Reimbursement Rent for the First Amendment Spaces. The
payment of Reimbursement Rent for the First Amendment Spaces shall be
made in the same manner and at the same time as in Section 3 of the
Lease. Attached hereto as Schedule 1 is a summary of the payments of
Reimbursement Rent for the 5th Floor (First Amendment Spaces).
2. Defined terms used herein shall have the meaning specified in the
Lease.
3. Except as herein amended, the Lease is ratified and affirmed.
Executed as of September 1, 1996.
LANDLORD
- --------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ David Raszmann
-------------------
David Raszmann
Vice President
TENANT:
- ------
BRONNER, SLOSBERG, HUMPHREY, INC.
BY: /s/ [ILLEGIBLE] ^^
------------------------------
<PAGE>
THIRD AMENDMENT OF LEASE
------------------------
Reference is made to that certain lease dated May 31, 1995 by and between
The Prudential Insurance Company of America as LANDLORD and Bronner Slosberg
Humphrey, Inc., as TENANT, as amended by a First Amendment of Lease dated June
21, 1996, and a Second Amendment of Lease executed as of September 1, 1996,
collectively hereinafter the Lease.
WHEREAS, LANDLORD and TENANT mutually desire to further amend the Lease to
add additional space (the Third Amendment Space) to the Premises.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
LANDLORD and TENANT agree that the Lease is amended as follows:
I. The Lease is hereby amended to add the Twenty-Fifth Floor and Twenty-
Sixth Floor (collectively the Third Amendment Space) to the Premises.
A. TWENTY-FIFTH FLOOR
------------------
1. Effective March 1, 1997, (Twenty-Fifth Floor Commencement
Date) the entire Twenty-Fifth Floor of the Building consisting
of approximately 25,676 RSF is added to the Premises on all
the terms and conditions of the Lease except as provided
herein.
2. The rent for the Twenty-Fifth Floor shall be as follows:
March 1, 1997 - November 30, 2000 at the rate of $30.00 per
RSF; $770,280.00 per year, monthly payment $64,190.00.00
December 1, 2000 - November 30, 2005 at the rate of $33.00 per
RSF, $847,308.00 per year, monthly payment $70,609.00
3. All rent shall be paid monthly as provided in the Lease, in
addition to the rent currently provided for in the Lease.
B. TWENTY-SIXTH FLOOR
------------------
1. Effective September 1, 1997, (Twenty-Sixth Floor Commencement
Date) the entire Twenty-Sixth Floor of the Building consisting
of approximately 25, 676 RSF is added to the Premises on all
terms and conditions of the Lease except as provided herein.
<PAGE>
2. Rent for the Twenty-Sixth Floor shall be as follows:
September 1, 1997 - November 30, 2000 at the rate of $30.00
per RSF $770,280.00 per year, monthly payment $64,190.00
December 1, 2000 - November 30, 2005 - at 33.00 per RSF,
$847,308.00 per year, monthly payment $70,609.00
3. All rent shall be paid monthly as provided in the Lease, in
addition to the rent then currently provided for in the Lease.
4. Tenant has advised Landlord that depending on Tenant's space
needs, Tenant may sublease all or part of the Twenty-Sixth
Floor. Landlord agrees that it will process any request for a
sublease in a timely fashion in accordance with the terms of
the Lease.
C.
1. OPERATING EXPENSES. R.E. TAXES AND ELECTRICAL CHANGES
---------------------------------- ------------------
Commencing on January 1, 1998, TENANT shall reimburse LANDLORD
for Increased Expenses and increased Real Estate taxes for the
Third Amendment Space in excess of the Operating Expenses
incurred by Landlord in 1997 and the Real Estate taxes paid in
1997 as provided in Section 3.2 of the Lease as modified
herein and Exhibit F-3 attached. The budgeted Operating
Expenses and Real Estate taxes for 1996 are $8.25 per RSF and
$4.75 per RSF respectively.
2. SHARE
-----
Tenant's share with respect to Third Amendment Space
consisting of a total of 51,352 RSF will be 4.19%.
3. ELECTRIC REIMBURSEMENT
----------------------
TENANT shall pay directly to Boston Edison Company or other
provider of electrical service to the Third Amendment Space
the cost for electricity used in the Third Amendment Space for
lighting and office receptacles.
D. TENANT IMPROVEMENTS
-------------------
1. LANDLORD will deliver the Third Amendment Space in shell
2
<PAGE>
condition. LANDLORD shall perform the work specified in
Exhibit B attached prior to the Commencement Dates for the
respective floors. In addition, LANDLORD will provide TENANT
with a Tenant Improvement Allowance for the Third Amendment
Space equal to $45.00 per RSF to be used for defraying the
costs of tenant design construction and related expenses in
connection with the Third Amendment Space. LANDLORD'S
contribution to the Tenant allowance shall be limited to a
combined total for both floors of $2,310,840.00 (Total Tenant
Improvement Allowance). The Tenant Improvement Allowance for
each floor will be paid in cash within thirty (30) days of
Landlord's receipt of invoices in reasonable detail for the
Tenant Improvements. Tenant may allocate the amount of the
Total Tenant Improvement Allowance between the Twenty-Fifth
Floor and the Twenty-Sixth Floor as it sees fit, provided in
no event will less than thirty two and 50/100 ($32.50) dollars
per RSF be spent on either floor.
2. In the event TENANT'S cost of preparing the Third Amendment
Space for TENANT'S use and occupancy exceeds the Tenant
Improvement Allowance, LANDLORD agrees, upon receipt of
invoices in reasonable detail demonstrating the amount of such
excess, to increase the amount of the Tenant Improvement
Allowance (Excess Tenant Improvement Allowance) to an amount
equal to TENANT'S costs of preparing the Third Amendment Space
provided, however, that the total amount of Tenant Improvement
Allowance and Excess Tenant Improvement Allowance shall not
exceed $55.00 per RSF under any circumstances. TENANT shall
reimburse LANDLORD for the amount, if any, of the Excess
Tenant Improvement Allowance by the payment of Reimbursement
Rent throughout the term sufficient to amortize the Excess
Tenant Improvement Allowance with an interest factor of 10%.
LANDLORD AND TENANT agree to enter into a lease amendment
specifying the amount of Reimbursement Rent when amount of
Excess Tenant Improvement allowance is known but no later than
sixty days after completion of the Tenant Improvements for the
Twenty-Sixth Floor. Payments of Reimbursement Rent shall be
paid monthly as provided in Section 3.1 of the Lease. All work
in connection with the Tenant Improvements shall be performed
in a good and workmanlike manner in compliance with all
applicable law and regulations as provided in the Lease.
E. PARKING
-------
As provided in the Lease, TENANT shall be entitled to lease,
at then
3
<PAGE>
current monthly rates, up to twenty-six (26) additional
parking spaces from the Prudential Center garage operator in
excess of those currently leased. The rate for monthly parking
spaces as of June 1, 1996 is $250.00 per month.
F. LEASE SECURITY
--------------
1. Twenty-Fifth Floor
------------------
No later than thirty (30) days prior to the commencement of
construction for preparing the Twenty-Fifth Floor for
TENANT use and occupancy, TENANT shall deliver to LANDLORD
an irrevocable standby letter of credit for the Twenty-
Fifth Floor (the "25th Floor L.C.") in favor of LANDLORD in
a face amount equal to 50% of the Transaction Costs
incurred or to be incurred by LANDLORD for the Twenty-Fifth
Floor as hereinafter defined. The 25th Floor L.C. must (i)
be issued by an institution reasonably acceptable to
LANDLORD, (ii) have an initial term of not less than twelve
(12) months and (iii) be acceptable in form and substance
to LANDLORD. Transaction Costs for the purpose of
determining the face amount of the 25th Floor L.C. shall
include all costs incurred by LANDLORD in (i) the
negotiation and execution of this Lease Amendment for the
Twenty-Fifth Floor, and (ii) the preparation of the Twenty-
Fifth Floor for TENANT'S use and occupancy, including but
not limited to all Tenant Allowances for the Twenty-Fifth
Floor, (iii) real estate brokerage commissions, (iv) any
unreimbursed costs incurred by LANDLORD's Contract Manager
and (v) attorney's fees specifically incurred in connection
with the negotiation and execution of this Third Lease
Amendment. Based upon Transaction Costs assuming total
Tenant Improvement Allowances of $55.00 per RSF plus
brokerage fees and attorneys' fees, the Initial Face Amount
of the Letter of Credit shall be One Million Three Hundred
Seventy Five Thousand ($1,375,000) Dollars. LANDLORD shall
provide TENANT with a statement of LANDLORD'S Lease
Transaction Costs in reasonable detail as soon as the same
are finally determined. If the actual amount of fifty
percent (50%) of LANDLORD's Transaction Costs are
determined to be more or less One Million Three Hundred
Seventy Five Thousand ($1,375,000) Dollars, then the 25th
Floor L.C. shall be adjusted to an amount equal to fifty
percent (50%) of the LANDLORD's Transaction Costs.
4
<PAGE>
2. Twenty-Sixth Floor
------------------
No later than thirty (30) days prior to the commencement of
construction for preparing the Twenty-Sixth Floor for
TENANT use and occupancy, TENANT shall deliver to LANDLORD
an irrevocable standby letter of credit for the Twenty-
Sixth Floor (the "26th Floor L.C.") in favor of LANDLORD in
a face amount equal to 50% of the Transaction Costs
incurred or to be incurred by LANDLORD for the Twenty-Sixth
Floor as hereinafter defined. The 26th Floor L.C. must (i)
be issued by an institution reasonably acceptable to
LANDLORD, (ii) have an initial term of not less than twelve
(12) months and (iii) be acceptable in form and substance
to LANDLORD. Transaction Costs for the purpose of
determining the face amount of the 26th Floor L.C. shall
include all costs incurred by LANDLORD in (i) the
negotiation and execution of this Lease Amendment for the
Twenty-Sixth Floor, and (ii) the preparation of the Twenty-
Sixth Floor for TENANT'S use and occupancy, including but
not limited to all Tenant Allowances for the Twenty-Sixth
Floor, (iii) real estate brokerage commissions, (iv) any
unreimbursed costs incurred by LANDLORD's Contract Manager
and (v) attorney's fees specifically incurred in connection
with the negotiation and execution of this Third Lease
Amendment. Based upon Transaction Costs assuming total
Tenant Improvement Allowances of $55.00 per RSF plus
brokerage fees and attorneys' fees, the Initial Face Amount
of the Letter of Credit shall be One Million Three Hundred
Seventy Five Thousand ($1,375,000) Dollars. LANDLORD shall
provide TENANT with a statement of LANDLORD'S Lease
Transaction Costs in reasonable detail as soon as the same
are finally determined. If the actual amount of fifty
percent (50%) of LANDLORD's Transaction Costs are
determined to be more or less One Million Three Hundred
Seventy Five Thousand ($1,375,000) Dollars, then the 26th
Floor L.C. shall be adjusted to an amount equal to fifty
percent (50%) of the LANDLORD's Transaction Costs.
3. Application Third Amendment Security
------------------------------------
Upon delivery to LANDLORD of the 25th Floor L.C. and the
26th Floor L.C. or an amendment increasing the 25th Floor
L.C. in lieu of the 26th Floor L.C. (collectively the
"Third Amendment Security"). LANDLORD shall hold the Third
Amendment Security in accordance with Section 12.14 of the
Lease and shall be
5
<PAGE>
entitled to draw upon the Third Amendment Security pursuant
to and in accordance with Section 12.14 of the Lease. The
Third Amendment Security shall be subject to the reduction
provisions set forth in paragraph number 4 below.
4. Reduction in Third Amendment Security
-------------------------------------
The face amount of the Third Amendment Security shall be
reduced by fourteen (14%) percent each year commencing on
the Initial Third Amendment Security Reduction Date (as
hereinafter defined) and on each anniversary thereof,
provided each of the conditions set forth below (Third
Amendment Security Reduction Conditions) are satisfied at
the time of any reduction. The Initial Third Amendment
Security Reduction Date shall occur within one hundred
twenty (120) days after the end of TENANT'S fiscal year
occurring on or after December 31, 1998.
The following Third Amendment Security Reduction Conditions must be
satisfied at the time of any reduction of the Letter of Credit.
1. The letter(s) of credit representing the Third Amendment Security
must not have been previously drawn upon by LANDLORD for any
reason.
2. TENANT must not be in default of any material obligation under the
Lease beyond any applicable grace and cure period.
3. Michael Bronner shall own not less than 60% of the capital stock of
TENANT.
4. TENANT shall have delivered to LANDLORD, within ninety (90) days of
the end of TENANT'S fiscal year (ILL - 12/31) a copy of TENANT'S
financial statements for such fiscal year prepared by a nationally
recognized certified public accounting firm in accordance with GAAP
standards.
5. LANDLORD SHALL not have delivered a written notice to TENANT within
thirty (30) days of receipt of TENANT'S financial statements for
such fiscal year that LANDLORD'S Annual Review of TENANT'S
financial status is unsatisfactory for the purposes of a Third
Amendment
6
<PAGE>
Security Reduction because during the past fiscal year one or more
of the following has occurred:
a. There has been a loss of client contract(s) representing 15%
or more of TENANT'S Base Year Gross Revenue unless such revenue loss
has been replaced by new contracts. For the purpose of this sub-
paragraph, Base Year Gross Revenue shall mean TENANT'S revenue from
all sources for TENANT'S 1994 fiscal year.
b. TENANT'S Operating Margin is less than 15% of Gross Revenue.
Gross Revenue is defined as all revenue from all sources. Operating
Margin is defined as Operating Income divided by gross revenues.
Operating Income is defined as net income or loss plus
depreciation, interest expenses and Principal's Compensation.
c. TENANT'S third party debt service expense exceed 10% of
TENANT'S net income before Principal's Compensation on an annual
basis.
d. TENANT has failed to maintain unrestricted cash on hand
sufficient to meet current liabilities becoming due in any calendar
month excluding notes due to shareholders. Notwithstanding the
foregoing, distributions or payments to shareholders at the end of
TENANT'S fiscal year or otherwise made in anticipation of receipt
of receivables within the thirty days following such distribution
or payment shall not result in TENANT'S financial status being
unsatisfactory for the purpose of a Letter of Credit reduction
unless such distributions or payments have resulted in TENANT being
in default of its current liabilities during any calendar month of
the year being reported on. TENANT shall provide LANDLORD at the
end of each fiscal year with a summary report in reasonable detail
showing TENANT'S unrestricted cash on hand and current liabilities
for each calendar month of such fiscal year.
e. For the purpose of the foregoing (a-d), all undefined
accounting terms shall be determined in accordance with Generally
Accepted Accounting Practices.
In any year during the term all the Third Amendment Security
Reduction
7
<PAGE>
Conditions are not satisfied as of the anniversary of the Third
Amendment Security Reduction Date for such year, the Third
Amendment Security shall not be reduced in such year. If the Third
Amendment Security is not reduced in any year, it may be reduced in
subsequent year(s) if the Third Amendment Security Reduction
Conditions are met for such year(s) but, in no event shall the
Third Amendment Security be reduced by more than 14% in any one
year.
At the end of the fixed term of the Lease, LANDLORD shall return
the Third Amendment Security or any unapplied proceeds of the Third
Amendment Security then held by LANDLORD.
G. TERMS
-----
Terms used herein shall have the same meaning as provided in the
Lease unless otherwise indicated.
Except as herein modified and amended, the Lease is ratified and affirmed.
Executed this 5th day of November, 1996.
--- --------
LANDLORD:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:/s/ David Raszmann
--------------------------
TENANT:
BRONNER SLOSBERG HUMPHREY, INC.
By:/s/[ILLEGIBLE]
--------------------------
8
<PAGE>
FOURTH AMENDMENT OF LEASE
Reference is made to that certain lease dated May 31, 1995 by and between
The Prudential Insurance Company of America as LANDLORD and Bronner Slosberg
Humphrey, Inc., as TENANT, as amended by a First Amendment of Lease dated
June 21, 1996, and a Second Amendment of Lease executed as of September 1, 1996,
and a Third Amendment of Lease dated November 5, 1996, collectively hereinafter
the Lease.
WHEREAS, LANDLORD and TENANT mutually desire to further amend the Lease to
add additional space (the Fourth Amendment Space) to the Premises and to amend
sections 12.15 and 12.16A of the Lease.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
LANDLORD and TENANT agree that the Lease is amended as follows:
I. FOURTH AMENDMENT SPACE
----------------------
The Lease is hereby amended to add the Fourth Amendment Space consisting of
(i) Twenty-Seventh Floor of the Building to the Premises effective May 1, 1997,
and (ii) a portion of the Fourth Floor (10,106 RSF) on January 1, 1998.
A. TWENTY-SEVENTH FLOOR
---------------------
1. Effective May 1, 1997, (Twenty-Seventh Floor Commencement Date)
the entire Twenty-Seventh Floor of the Building consisting of
approximately 25,676 RSF as outlined in Exhibit A is added to the
Premises on all the terms and conditions of the Lease except as
provided herein.
2. The rent for the Twenty-Seventh Floor shall be as follows:
May 1, 1997 - APRIL 30, 2002 at the rate of $30.00 per RSF;
$770,280.00 per year, monthly payment $64,190.00.00
May 1, 2002 - November 30, 2005 at the rate of $35.00 per RSF,
$898,660.00 per year, monthly payment $74,888.33
3. All rent for the fourth Amendment Space shall be paid monthly as
provided in the Lease, and shall be in addition to the rent
currently provided for in the Lease.
<PAGE>
B. PORTION OF FOURTH FLOOR.
-----------------------
On January 1, 1998, 10,106 RSF (THE "1998 Space") on the
Fourth Floor of the Building as outlined in Exhibit A2
attached, shall be added to the Premises on all the terms and
conditions of the Lease except as provided herein. The rent
for the 1998 Space shall be at the rate of $27.50 per RSF
($277,915.00 per year/$23,159.58 per month). The rent for the
1998 Space shall be in addition to other rent then payable.
The rent for the 1998 Space shall be abated for the period
January 1, 1998 through February 28, 1998.
C. OPERATING EXPENSES, R.E. TAXES AND ELECTRICAL CHARGES AND OTHER
---------------------------------------------------------------
CONDITIONS.
----------
1. Commencing on January 1, 1998, for the Twenty-Seventh Floor
and on March 1, 1998 for the 1998 Space, Tenant shall
reimburse Landlord for Increased Operating Expenses and
increased Real Estate taxes for the Fourth Amendment Space in
excess of the Operating Expenses incurred by Landlord in 1997
and the Real Estate taxes paid in 1997 as provided in
Section 3.2 of the Lease as modified herein and Exhibit F-4
attached. The budgeted Operating Expenses and Real Estate
taxes for 1996 are $8.00 per RSF and $4.75 per RSF
respectively.
2. SHARE - TENANT's share with respect to Fourth Amendment Space
-----
will be 2.09% from May 1, 1997 to January 1, 1998. After
January 1, 1998, Tenant's share for the Fourth Amendment Space
will be 2.92%.
3. ELECTRIC REIMBURSEMENT - TENANT shall pay directly to
------------------------
Boston Edison Company or other provider of electrical service
to the Twenty-Seventh Floor the cost as billed to Tenant for
electricity used in the Twenty-Seventh Floor for lighting and
office receptacles. Tenant shall reimburse Landlord monthly in
arrears within thirty (30) days of receipt of Landlord's
invoice for the cost of electricity consumed in the 1998 Space
as determined by a check meter and Landlord's cost of
electricity from time to time.
4. TENANT IMPROVEMENTS - LANDLORD will deliver the twenty-seventh
-------------------
Floor in shell condition as described in Exhibit C attached
hereto and made a part hereof with the new fireproofing and
sprinkler mains in place. LANDLORD will provide TENANT with a
Tenant Improvement Allowance for the Twenty-Seventh Floor
equal to 40.00 per RSF to be used for defraying the costs of
tenant design,
2
<PAGE>
construction and related expenses in connection with the Tenant
Improvements for the Twenty-Seventh Floor. The Tenant Improvement
Allowance will be paid in cash within thirty (30) days of Landlord's
receipt of invoices in reasonable detail for the Tenant Improvements.
In addition, Landlord will provide Tenant with a $30,000 allowance to
renovate the bathrooms on the 27th floor in accordance with the
Building's bathroom renovation program.
At Tenant's election, notice of which shall be given to Landlord by
May 1, 1997, the 1998 Space shall be delivered to Tenant either
(a) In "As Is" condition, broom clean and clear of all occupants with
asbestos containing material beneath the surface of the interior
columns and the existing tile floor mastic removed and all
surfaces disturbed by such removal restored to pre-removal
condition, all at Landlord's sole expense or;
(b) In shell condition as described in Exhibit C subject to the last
sentence of this sub-section 4.
Landlord shall provide Tenant a Tenant Allowance equal to $20.00 per
RSF. The Tenant Allowance shall be payable as provided in the third
full Paragraph on Page 4 of the Lease. In no event shall the Tenant
Allowance for the 1998 Space exceed $202,120.00. Landlord has
previously (i) installed sprinklers; (ii) refireproofed the Fourth
Floor ceiling, and (iii) renovated the Fourth Floor bathrooms.
5. PARKING - As provided in the Lease, effective on May 1, 1997,
-------
upon the addition of the twenty-seventh Floor, TENANT shall be
entitled to lease, at then current monthly rates, up to thirteen (13)
additional parking spaces from the Prudential Center garage operator
in addition to those currently leased. The rate for monthly parking
spaces as of January 1, 1997 is $260.00 per month. Effective
January 1, 1998. upon the addition of the 1998 Space to the Premises,
Tenant shall be entitled to lease five (5) additional spaces on the
same terms.
D. LEASE SECURITY - FOURTH AMENDMENT SPACE (27TH FLOOR AND 1998 SPACE)
-------------------------------------------------------------------
1. No later than thirty (30) days prior to the commencement of
construction for preparing the twenty-seventh Floor for TENANT use and
occupancy, TENANT shall deliver to LANDLORD an irrevocable standby
letter of credit for the twenty-seventh Floor (the "27th Floor
3
<PAGE>
the 27th Floor L.C. shall include all costs incurred by LANDLORD in
(i) the negotiation and execution of this Lease Amendment for the
Twenty-Seventh Floor, and (ii) the preparation of the Twenty-Seventh
Floor for TENANT'S use and occupancy, including but not limited to all
Tenant Allowances for the Twenty-Seventh Floor, (iii) real estate
brokerage commissions, (iv) any unreimbursed costs incurred by
LANDLORD's Contract Manager and (v) attorney's fees specifically
incurred in connection-with the negotiation and execution of this
Fourth Lease Amendment. Based upon Transaction Costs consisting of
Tenant Improvement Allowances of $40.00 per RSF plus brokerage fees
and attorneys' fees, the Initial Face Amount of the Letter of Credit
shall be Six Hundred Thousand ($600,000) Dollars. LANDLORD shall
provide TENANT with a statement of LANDLORD'S Lease Transaction Costs
in reasonable detail as soon as the same are finally determined. If
the actual amount of LANDLORD's Transaction Costs are determined to be
more or less than One Million Two Hundred Thirty Thousand ($1,230,000)
Dollars, then the 27th Floor L.C. shall be adjusted to an amount equal
to fifty percent (50%) of the LANDLORD's Transaction Costs.
2. Effective January 1, 1998, Tenant shall deliver to Landlord either an
amendment to the Twenty-Seventh Floor LC increasing the then existing
face amount by One Hundred Thirty-Seven Thousand ($137,000) Dollars
representing 50% of the transaction costs for the 1998 Space, or an
additional letter of credit (the "1998 LC") as security for the 1998
Space, which letter of credit shall comply with the requirement of
this Section D except that the amount of the 1998 LC shall be
$137,000.
3. Application Fourth Amendment Security
-------------------------------------
LANDLORD shall hold the Twenty-Seventh Floor LC and the 1998 LC or an
amendment to the Twenty-Seventh Floor LC in lieu of the 1998 LC
collectively the "Fourth Amendment Security" in accordance with
Section 12.14 of the Lease and shall be entitled to draw upon the
Fourth Amendment Security pursuant to and in accordance with Section
12.14 of the Lease. The Fourth Amendment Security shall be subject to
the reduction provisions set forth in paragraph number 4 below.
4. Reduction in Fourth Amendment Security
--------------------------------------
The face amount of the Fourth Amendment Security shall be reduced
4
<PAGE>
by sixteen (16%) percent each year commencing on the Initial Fourth
Amendment Security Reduction Date (as hereinafter defined) and on
each anniversary thereof, provided each of the conditions set forth
below (Fourth Amendment Security Reduction Conditions) are satisfied
at the time of any reduction. The Initial Fourth Amendment Security
Reduction Date shall occur within one hundred twenty (120) days after
the end of TENANT'S fiscal year occurring on or after December 31,
1998. -
The following Fourth Amendment Security Reduction Conditions must be satisfied
at the time of any reduction of the Letter of Credit:
1. The letter(s) of credit representing the Fourth Amendment Security must
not have been previously drawn upon by LANDLORD for any reason.
2. TENANT must not be in default of any material obligation under the Lease
beyond any applicable grace and cure period.
3. Michael Bronner shall own not less than 60% of the capital stock of
TENANT.
4. TENANT shall have delivered to LANDLORD, within ninety (90) days of the
end of TENANT'S fiscal year (1/1 - 12/31) a copy of TENANT'S financial
statements for such fiscal year prepared by a nationally recognized
certified public accounting firm in accordance with GAAP standards.
5. LANDLORD shall not have delivered a written notice to TENANT within
thirty (30) days of receipt of TENANT'S financial statements for such
fiscal year that LANDLORD'S Annual Review of TENANT'S financial status
is unsatisfactory for the purposes of a Fourth Amendment Security
Reduction because during the past fiscal year one or more of the
following has occurred:
a. There has been a loss of client contract(s) representing 15% or more
of TENANT'S Base Year Gross Revenue unless such revenue loss has been
replaced by new contracts. For the purpose of this sub-paragraph, Base Year
Gross Revenue shall mean TENANT'S revenue from all sources for TENANT'S
1994 fiscal year.
5
<PAGE>
b. TENANT'S Operating Margin is less than 15% of Gross Revenue. Gross
Revenue is defined as all revenue from all sources. Operating Margin is
defined as Operating Income divided by gross revenues. Operating Income
is defined as net income or loss plus depreciation, interest expenses
and Principal's Compensation.
c. TENANT'S third party debt service expense exceed 10% of TENANT'S net
income before Principal's Compensation on an annual basis.
d. TENANT has failed to maintain unrestricted cash on hand sufficient to
meet current liabilities becoming due in any calendar month excluding
notes due to shareholders. Notwithstanding the foregoing, distributions
or payments to shareholders at the end of TENANT'S fiscal year or
otherwise made in anticipation of receipt of receivables within the
thirty days following such distribution or payment shall not result in
TENANT'S financial status being unsatisfactory for the purpose of a
Letter of Credit reduction unless such distributions or payments have
resulted in TENANT being in default of its current liabilities during
any calendar month of the year being reported on. TENANT shall provide
LANDLORD at the end of each fiscal year with a summary report in
reasonable detail showing TENANT'S unrestricted cash on hand and current
liabilities for each calendar month of such fiscal year.
e. For the purpose of the foregoing (a-d), all undefined accounting
terms shall be determined in accordance with Generally Accepted
Accounting Practices.
In any year during the term all the Fourth Amendment Security Reduction
Conditions are not satisfied as of the anniversary of the Fourth
Amendment Security Reduction Date for such year. the Fourth Amendment
Security shall not be reduced in such year. If the Fourth Amendment
Security is not reduced in any year, it may be reduced in subsequent
year(s) if the Fourth Amendment Security Reduction Conditions are met
for such year(s) but, in no event shall the Fourth Amendment Security be
reduced by more than 16% in any one year
At the end of the fixed term of the Lease, LANDLORD shall return the
6
<PAGE>
Fourth Amendment Security or any unapplied proceeds of the Fourth
Amendment Security then held by LANDLORD.
II. OTHER AMENDMENTS
----------------
1. Section 12.15. The provisions of Section 12.15 of the Lease are
--------------
hereby amended to change the time period of Advance Notice Tenant
must give Landlord to exercise it right, to extend the Lease from
twelve (12) months advance written notice to eighteen (18) months
advance written notice.
2. Section 12.16A As currently appearing in the Lease is amended to
--------------
recognize that the 1998 Space has been added to the Premises and
no longer is subject to the Option as originally set out in
Section 12.16. Henceforth, the option contained in Section 12.16A
shall read as follows:
"Tenant shall have the option, provided Tenant is not in default
hereunder beyond any grace or cure period, to add the balance of
the Fourth Floor of the Building consisting of approximately
14,609 RSF (Third Year Option) to the Premises on January 1, 1999.
Tenant shall advise Landlord in writing, no later than June 30,
1998, of Tenant's exercise of its Third Year Option. If Tenant
exercises its Third Year Option, the Third Year Option Space shall
be added to the Premises no later than January 1, 1999 at the rent
set forth on the Lease Cover Sheet and on all the other terms and
conditions of the Lease, except that (i) the Tenant Design and
Construction Allowance for the Third Year Option Floor shall be
twenty ($20.00) per RSF and (ii) the rent for the Third Year
Option Floor shall be abated for the first two months to allow for
construction".
G. TERMS
-----
Terms used herein shall have the same meaning as provided in the
Lease unless otherwise indicated.
In the event the balance of the Fourth Floor becomes available prior to
January 1, 1999, Landlord agrees to promptly so advise Tenant and Tenant may add
such space to the Premises on the terms outlined above prior to January 1, 1999,
but shall not be required to do so and Tenant's future rights to such space
shall be unaffected.
Except as herein modified and amended, the Lease is ratified and affirmed.
7
<PAGE>
Executed this 22nd day of January 1997
---- -------
LANDLORD:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:/s/ David Raszmann
---------------------------
TENANT:
BRONNER SLOSBERG HUMPHREY, INC.
By:/s/[ILLEGIBLE]
---------------------------
8
<PAGE>
FOURTH AMENDMENT EXHIBIT A
[DIAGRAM APPEARS HERE]
27TH FLOOR PRUDENTIAL TOWER - RENTAL PLAN
<PAGE>
BRONNER SLOSBERG HUMPHREY
FOURTH AMENDMENT
EXHIBIT A-2
[DIAGRAM APPEARS HERE]
4TH FLOOR PRUDENTIAL TOWER - RENTAL PLAN
<PAGE>
BRONNER SLOSBERG HUMPHREY
FOURTH AMENDMENT EXHIBIT C
DESCRIPTION OF SHELL CONDITION
------------------------------
The Premises shall be deemed completed "in shell condition" upon LANDLORD'S
furnishing and installing the following:
WINDOWS: Full Floor Tenant -- Delivered with building standard venetian
blinds and solar reflective film. Building standard blinds are levelor
energy conservation reflective type.
FLOORS: Full Floor Tenant -- Delivered in rough condition, ready to
accept leveling and fill where appropriate. The floors are cellular type
with concrete composite fill on a metal decking. Electrical and telephone
closets delivered with rough concrete floor.
COLUMNS: Full Floor Tenant -- Delivered with unpainted concrete or hard
surface fireproofing on interior columns. The exterior columns shall be
delivered ready to accept finishes.
ELEVATOR LOBBIES: Full Floor Tenant -- Passenger and Service Elevator
Lobbies - Delivered with rough concrete floor and walls ready for
construction.
HVAC INTERIOR SYSTEMS: Full Floor Tenant -- Delivered with VAV boxes (one
pre 5,000 sq. ft. approximate) per floor for Tenant use. Landlord shall
provide the main duct take-offs with fire dampers. Tenant work to include
all duct work "downstream: of the fire damper.
HVAC PERIMETER SYSTEM: Full Floor Tenant -- Existing perimeter HVAC
induction system shall be maintained. The existing thermostats shall be
maintained. Perimeter induction units shall be delivered with covers ready
to accept paint with all required insulation in place.
CEILING: Full Floor Tenant -- Delivered unfinished with exposed non-
asbestos containing fire proofing on structural steel and deck of floor
above.
CODE: Full Floor Tenant -- All building core space (excluding Toilet Rooms)
will be delivered in compliance with code including, but not limited to
A.D.A. and Mass. Architectural Access Board (MABB).
ELECTRIC: Full Floor Tenant -- Premises to be delivered with primary
service utility lines. Electrical feeds to be delivered with floor
disconnect switch in place. Tenant to be responsible for all electrical
wiring "downstream" of the floor disconnect switch. All primary feeds and
switches to be sized for a maximum power load of 5 Watts/USF of floor
space.
<PAGE>
EXHIBIT F-4
TENANT'S SHARE OF INCREASED OPERATING EXPENSES
TOWER BUILDING
ATTACHED TO AND MADE A PART OF THE THIRD AMENDMENT OF LEASE
BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, LANDLORD
AND BRONNER, SLOSBERG, HUMPHREY, INC., TENANT
DEFINITIONS
TENANT shall reimburse LANDLORD for Tenant's proportionate share ("Tenant's
Share") of increased "Operating Expenses" (as herein defined) in excess of Base
Operating Expenses as follows:
I A. "Tenant's Share" of the amount of Operating Expenses in excess of Base
Operating Expenses equals from May 1, 1997 to December 31, 1997 = 2.09%. After
January 1, 1998 = 2.92%.
<TABLE>
<S> <C>
5/1/97 thru 25.676 r.s.f. (Premises Net Rentable Area) after 1/1/98 35,782 RSF
------------------------------------------ --------------
12.31.97 1,226,539 s.f. (Building Net Rentable Area) 1,226,539 s.f.
</TABLE>
B. Base Operating Expenses equal 1997 Actual Operating Expenses
C. "Operating Expenses" shall mean any and all costs and expenses
adjusted for 100% occupancy [except those listed in subparagraphs
(a) through (e) below] actually paid or incurred by LANDLORD in
connection with the ownership, management, operating, servicing, and
maintenance of the Building, its utility services from the property
line to the Building including, without limitation, the cost and
expense of the following: salaries, wages, medical, surgical and
general welfare and other so-called "fringe" benefits (including
group insurance and retirement benefits) for employees of LANDLORD
or any contractor of LANDLORD engaged in the cleaning, operation,
maintenance or management of the Building, and payroll taxes, and
worker's compensation insurance premiums relating thereto, gas,
steam, fuel oil, water, sewer rental, electricity (exclusive of
Tenants Electrical Usage), utility taxes, rubbish removal, fire,
casualty, liability, rent and other insurance carried by LANDLORD,
repairs, repainting, replacement, building supplies, uniforms, and
cleaning thereof, window cleaning, service contracts with
independent contractors for any of the foregoing (including, but not
limited to elevator and air conditioning maintenance), commercially
reasonable management fees (whether or not paid to any person, firm
or corporation having an interest in or under common ownership with
LANDLORD or any of the persons, firms or corporations comprising
LANDLORD), reasonable legal fees and expenses incurred in connection
with any application or proceeding brought for reduction of the
<PAGE>
assessed valuation of the Building or any part thereof, but only
if brought to have the effect of reducing TENANT'S cost, auditing
fees and all other costs and expenses actually incurred in
connection with the operation, maintenance and management of the
Building and an allocated share of the "Center's Common Area
Expenses" (as herein defined). Included in the foregoing will be
the cost or portion thereof properly allocatable to the property
(amortized over such reasonable period as LANDLORD shall determine
together with the interest on the unamortized balance as the
greater of 10% or the six month Treasury Bill rate for the date
upon which funds for the project are committed) of any capital
improvements made to the Building by the LANDLORD which result in
appropriate reduction of Operating Expenses or made to the
Building by the LANDLORD after the date of this Lease that are
required under any governmental law or regulation that was not
applicable to the Building on the date of this Lease. Operating
Expenses shall be computed on an accrual basis and shall be
determined in reasonable detail in accordance with generally
accepted accounting principles consistently applied. They may be
incurred directly or by way of reimbursement, and shall include
taxes applicable thereto. The following shall be excluded in
calculating Operating Expenses:
(a) Depreciation or capital expenditures on the Building or
any part thereof, except as included above;
(b) Expenses incurred directly in leasing or in procuring any
tenants, including advertising, promotion, public relations,
sales, brokers' commissions, and expenses for tenant alterations
or renovating space for new tenants;
(c) Amortization and interest on indebtedness;
(d) Real estate taxes or payments in lieu of real estate taxes
except as provided for in Section 3.4 hereof;
(e) The net amount of any insurance proceeds, reimbursements,
discounts or allowances received by LANDLORD in connection with
those "Operating Expenses" which are included.
(f) Also excluded are the following:
(i) cost of repairs or replacements incurred by
reason of fire or other casualty or by the exercise or the
right of eminent domain;
(ii) advertising and promotional expenditures;
(iii) legal fees incurred in disputes with tenants,
matters in connection with any underlying lease including, but
not limited to, the conveyance or financing or refinancing
thereof, negotiation of leases
<PAGE>
with prospective or current tenants, financing or refinancing
of mortgages, disputes with mortgagees not caused by TENANT
and other legal and auditing fees, other than legal and
auditing fees reasonable incurred in connection with the
preparation of statements required pursuant to additional rent
or rental escalation provisions;
(iv) costs incurred in performing work or furnishing
services to or for individual tenants (including TENANT) other
than work or services of a kind and scope which LANDLORD would
be obligated to furnish TENANT without charge if such work
were required in the Demised Initial Premises pursuant to
applicable law or codes as required by the governmental
authority having jurisdiction;
(v) the cost incurred by LANDLORD in performing work
or furnishing any services to or for a tenant of space in the
oBuilding (including TENANT) for which a separate charge is
made, including without limitation, the supply of overtime
air-conditioning, ventilation and heating at LANDLORD'S cost
and expense, regardless of the amount billed or received by
LANDLORD for performing such work or furnishing such service;
(vi) franchise and income taxes of LANDLORD;
(vii) real estate taxes on land and/or Building to the
extent included in this Lease;
(viii) the costs of providing overtime heat and air-
conditioning to tenants of the Building to the extent that the
same are payable by the tenants for whom such services are
provided;
(ix) rent under ground leases (if any)
(x) all costs incurred in connection with or
directly related to the original construction of the Building
(as distinguished from operating expenses and the repair,
maintenance and operations thereof);
(xi) financing and refinancing costs, interest on
debt or amortization payments on any mortgage or mortgages,
and rental under any ground or underlying lease or leases;
(xii) a bad debt loss, rent loss or any reserves
(xiii) all interest or penalties incurred as a result of
LANDLORD'S failure to pay any costs or taxes as the same shall
become due provided such failure shall not have been caused by
<PAGE>
TENANT;
(xiv) any and all costs associated with the operation
of the business of the entity which constitutes LANDLORD;
excluded items shall specifically include, but shall not be
limited to, formation of the entity, costs of defending any
lawsuits with any mortgagee (except as the actions of TENANT
may be in issue), costs of selling, syndication, financing,
mortgaging or hypothecating any of the LANDLORD'S interest in
the Building, costs of any disputes between LANDLORD and its
employees (if any) not engaged in the operation of the
Building, disputes between LANDLORD and managers of the
Building;
(xv) (i) costs of painting and decorating for any
tenant's space; (ii) the cost of providing overtime heat and
air-conditioning to tenants of the Building to the extent that
the same are payable by the tenants for whom such services are
provided; and (iii) rent under ground leases (if any);
(xvi) amounts for which LANDLORD has been reimbursed
by insurance proceeds;
(xvii) costs incurred in renovating or otherwise
improving or decorating or redecorating space for tenants or
other occupants in the Building or vacant space in the
Building or costs related thereto;
(xviii) LANDLORD'S costs of electricity, incremental
air-conditioning and other services sold to tenants for which
LANDLORD is entitled to be reimbursed by tenants (whether or
not actually collected by LANDLORD) as a separate additional
charge or rental;
(xix) any cost or expense incurred as a result of
painting, decorating, carpet shampooing, drapery cleaning and
wall washing within the rentable areas of the Building for a
specific tenant as opposed to that performed for all tenants
or common areas.
D. "Center's Common Area Expenses" is defined as those costs and expenses
incurred for the open areas, public areas and amenities within the
Prudential Center which become a cost center to receive expenses
deemed by the LANDLORD to be chargeable thereto which are accumulated
and prorated against the income-generating elements of the Center by a
formula predicated on a rentable area basis consistently applied
annually. (The portion chargeable during 1996 to the Building is
30.5%, subject to change as rentable areas may change).
E. "Calendar Year" is defined as any consecutive twelve (12) month period
<PAGE>
commencing January 1st, provided that LANDLORD, upon written notice to
TENANT, may change from time to time to any other consecutive 12-month
period, and in that event Tenant's Share of Operating Expenses shall
be adjusted pro rata.
II. PAYMENT OF TENANT'S SHARE
A. LANDLORD shall on or after January 1 in each year give to Tenant a
statement of Tenant's Estimated Share of Operating Expenses (Estimate)
for the current calendar year. Tenant's Estimated Share of Operating
Expenses shall be the product of Tenant's Share times the amount by
which LANDLORD'S Estimate of Operating Expenses for the Calendar Year
exceed Base Operating Expenses. TENANT shall reimburse LANDLORD
monthly with each rent payment an amount equal to 1/12th of Tenant's
Estimated Share of Operating Expenses. LANDLORD reserves the right
during any year to adjust Tenant's Estimated Share of Operating
Expenses in any year to reflect increases of 5% or more by which
actual Operating Expenses are exceeding Estimated Operating Expenses.
B. LANDLORD shall on or before May 1, in each calendar year provide a
Statement of Operating Expenses (Statement) for the prior calendar
year prepared by an independent Certified Public Accountant which
shall show in reasonable detail all items of Operating Expense for the
prior year and Tenant's Share of such Operating Expenses with the
amount of any difference due to LANDLORD or TENANT between Tenant's
Estimated Share of Operating Expenses and Tenant's Share of Operating
Expense for such year. The amount of any difference due TENANT shall
accompany the Statement when delivered to TENANT. TENANT shall
reimburse LANDLORD the amount of any difference due LANDLORD within
thirty (30) days of receipt of LANDLORD'S Statement.
C. If any part of the original lease term or any extended lease term is
less than a calendar year, the TENANT shall reimburse LANDLORD for
Tenant's Share of Operating Expenses due in accordance with this
Section II hereof as the number of days of the term or extended term
contained in a calendar year bears to 365 days.
D Upon expiration or termination of the lease or extensions Thereof, all
reimbursements due under this Exhibit shall become due coincident with
rent payments due LANDLORD for the last month of the lease term or any
extended term thereof.
E. LANDLORD shall notify TENANT of any adjustment of Tenant's Share upon
expiration or termination of Lease which shall be an estimate,
computed by LANDLORD based upon the most recent figures available to
and prepared by LANDLORD. LANDLORD shall notify TENANT after the end
of the
<PAGE>
calendar year of any overpayment or underpayment resulting from such
calculation of the Tenant's Share of Operating Expenses and TENANT and
LANDLORD shall within thirty (30) days of receipt of said notice make
appropriate payment to adjust overpayment or underpayment previously
made.
F. TENANT'S obligation to reimburse LANDLORD for Tenant's Share of
Operating Expenses under this Exhibit and LANDLORD'S and TENANT'S
obligation to make adjustments referred to above shall survive
expiration or termination of this Lease.
III. AVAILABILITY OF RECORDS
A. Within thirty (30) days after receipt by TENANT of LANDLORD'S
Statement of Operating Expenses, TENANT may notify LANDLORD in writing
of any cost items for which TENANT requests to see supporting data.
Promptly upon receipt of such notice, LANDLORD will make available to
TENANT or its agents for examination, at such place in Metropolitan
Boston as LANDLORD may reasonably designate, at TENANT'S expense, such
appropriate accounting books and records of LANDLORD as shall relate
to the items so designated by TENANT. TENANT shall cause all
information so obtained to be held in strict confidence.
Notwithstanding the giving of said notice, TENANT shall make payment
of all amounts indicated in LANDLORD'S Estimate or Statement within
thirty (30) days of said notice.
At any time within sixty (60) days after LANDLORD'S accounting books
and records relating to the designated cost items shall have been made
available to TENANT as aforesaid, TENANT may dispute in writing any
specific, significant (i.e., having an effect of an increase of over
5%) item or items included by LANDLORD. If such dispute is not
amicably settled between LANDLORD and TENANT within thirty (30) days
after TENANT'S notice thereof, either party may during the next
succeeding thirty (30) days (upon written notice to the other party
accompanied by a copy of its letter of submission setting forth the
items of dispute) refer such disputed item or items to an independent,
nationally-recognized Certified Public Accounting firm (to be selected
by LANDLORD and to be other than the firm that issued the
certification of Estimate or Statement) for decision and the decision
of such accounting firm shall be conclusive and binding upon LANDLORD
and TENANT. The expenses involved in such determination shall be borne
by the party against whom a decision is rendered by said accounting
firm provided that if more than one item is disputed and a decision
shall be rendered against each party in respect to any item or number
of items so disputed, then the expenses shall be apportioned according
to the amounts decided against each party. Within thirty (30) days
after the rendering of such decision, LANDLORD shall make any
adjustments required thereby to the Estimate or Statement.
<PAGE>
FIFTH AMENDMENT AND
PARTIAL TERMINATION OF LEASE
Reference is made to that certain lease dated May 31, 1995 by and between
The Prudential Insurance Company of America, as LANDLORD, and Bronner Slosberg
Humphrey, Inc.., as TENANT, as amended by a First Amendment of Lease dated June
21, 1996, a Second Amendment of Lease executed as of September 1, 1996, a Third
Amendment of Lease dated November 5, 1996. and a Fourth Amendment of Lease dated
January 22,1997 leasing space in the Prudential Tower (the "Building") in
Boston, Massachusetts, collectively hereinafter the Lease.
WHEREAS LANDLORD and TENANT mutually desire to further amend the Lease to
delete the twenty-sixth and twenty-seventh floors of the Building.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
LANDLORD and TENANT agree that the LEASE is amended as follows:
I. FOURTH AMENDMENT SPACE
----------------------
A. TWENTY SEVENTH FLOOR
--------------------
1. Tenant's lease obligations for the Twenty-Seventh Floor commenced
May 1, 1997; however, Tenant has not occupied the Twenty-Seventh
Floor. Effective June 30, 1997, the Twenty-Seventh Floor of the
building is deleted from the premises. Any rent Tenant has paid
for the Twenty-Seventh Floor shall be credited against Tenant's
rental obligations for other space leased. The Tenant Improvement
Work to prepare the Twenty-Seventh Floor for Tenant's use and
occupancy has not been performed, and Landlord's obligation to
provide Tenant a Tenant Improvement allowance for the Twenty-
Seventh Floor is hereby voided.
2. Tenant has leased the Twenty-Sixth Floor of the Building, but has
not yet taken possession of the Twenty-Sixth Floor. Landlord and
Tenant agree that the Twenty-Sixth Floor is hereby deleted from
the Premises leased and Tenant shall have no responsibility for
the Twenty-Sixth Floor. Landlord's obligation to provide Tenant
with a Tenant improvement allowance for the Twenty-Sixth Floor is
hereby voided.
3. Tenant's obligation to provide Landlord Lease Security is hereby
modified by deleting subsection L.F.2 of the Third Amendment of
Lease, and subsection L.D.1 of the Fourth Amendment of Lease. The
effect of these deletions is to terminate Tenant's obligation to
provide Lease Security for the Twenty-Sixth Floor and Twenty-
Seventh Floor space.
<PAGE>
Tenant's other Lease Security obligations contained in the Lease
as amended are unchanged.
4. Tenant's parking rights are hereby reduced by 26 spaces to
reflect the deletion of the Twenty-Sixth Floor and Twenty-Seventh
Floor from the Lease, leaving a balance of rights to 103 parking
spaces.
5. Tenant's share of increased operating Expenses (Tenants Share")
for the Third Amendment as set forth in subsection I.C.2 of the
Third Amendment is reduced from 4.19% TO 2.09%. Tenant's Share
for the Fourth Amendment as set forth in subsection I.C.2 of the
Fourth Amendment is reduced from 2.92% to .82%.
6. Except as modified and amended, the Lease is ratified and
affirmed.
Executed this 17th day of July, 1997.
---- ----
LANDLORD
The Prudential Insurance Company of America
By: /S/ David Raszmann
______________________________
TENANT
Bronner Slosberg Humphrey, Inc.
By: /s/ [ILLEGIBLE]
______________________________
<PAGE>
SIXTH AMENDMENT AND
PARTIAL TERMINATION OF LEASE
Reference is made to that certain lease dated May 31, 1995 by and between
the Prudential Insurance Company of America, as LANDLORD, and Bronner Slosberg
Humphrey, Inc., as TENANT, as amended by a First Amendment of Lease dated June
21, 1996, a Second Amendment of Lease executed as of September 1, 1996, a Third
Amendment of Lease Dated November 5, 1996, a Fourth Amendment of Lease dated
January 22, 1997, and a Fifth Amendment and Partial Termination of Lease dated
July 11, 1997, leasing space in the Prudential Tower (the "Building") in Boston,
Massachusetts, collectively hereinafter the Lease.
WHEREAS, LANDLORD and TENANT mutually desire to further amend the Lease to
delete the space on the Fourth floor of the Building.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
LANDLORD and TENANT agree that the Lease is amended as follows:
1. Fourth Floor Space. Tenant's lease obligations for 10,106 RSF of space
------------------
on the Fourth Floor (referred to in the Fourth Amendment of Lease and herein as
the 1998 Space) commenced January 1, 1998; however, Tenant has not occupied the
1998 Space. Effective February 28, 1998, the 1998 Space is deleted from the
Premises. The Tenant Improvement Work to prepare the 1998 Space for Tenant's use
and occupancy has not been performed, and Landlord's obligation to provide
Tenant a Tenant Improvement allowance for the 1998 Space is hereby voided.
2. Tenant's obligation to provide Landlord Lease Security for the 1998
Space as provided in Section D-2 of the Fourth Amendment of Lease is hereby
deleted from the Lease. Tenant's other Lease Security obligations contained in
the Lease as amended are unchanged.
3. Tenant's parking rights are hereby reduced by 5 spaces to reflect the
deletion of the 1998 Space from the Lease, leaving a balance of rights to 98
parking spaces.
4. Tenant's share of Increased Operating Expenses ("Tenant's Share") for
the Fourth Amendment as set forth in subsection I.C.2 of the Fourth Amendment as
modified by the Fifth Amendment to .82% representing the 1998 Space is deleted
from the Lease.
5. Except as modified and amended, the Lease is ratified and affirmed.
<PAGE>
Executed this 15th day of May, 1998.
---- ---
LANDLORD
The Prudential Insurance Company of America
By: /S/ David Raszmann
______________________________
TENANT
Bronner Slosberg Humphrey, Inc.
By: /s/ [ILLEGIBLE]
______________________________
2
<PAGE>
EXHIBIT 10.6
SEVENTH AMENDMENT TO LEASE
--------------------------
SEVENTH AMENDMENT TO LEASE dated as of this 29/th/ day of March, 1999, by
and between BP PRUCENTER ACQUISITION, LLC, a Delaware limited liability company
(as successor-in-interest to The Prudential Insurance Company of America)
("Landlord") and BRONNER SLOSBERG HUMPHREY, LLC, a Delaware limited liability
company, as successor-in-interest to Bronner Slosberg Humphrey, Inc. ("Tenant").
RECITALS
--------
By Lease dated May 31, 1995 (as amended by a First Amendment of Lease dated
June 21, 1996, a Second Amendment of Lease dated September 1, 1996, a Third
Amendment of Lease dated November 5, 1996, a Fourth Amendment of Lease dated
January 22, 1997, a Fifth Amendment and Partial Termination of Lease dated July
11, 1997 and a Sixth Amendment and Partial Termination of Lease dated May 15,
1998, the "Lease"), Landlord's predecessor-in-interest did lease to Tenant and
Tenant did hire and lease from Landlord's predecessor-in-interest certain
premises (the "Initial Premises") located in the Tower Building (the
"Building"), Prudential Center, Boston, Massachusetts, which Initial Premises
are described with greater particularity in the Lease.
Tenant has determined to Lease from Landlord an additional 25,676 square
feet of rentable floor area, consisting of the entirety of the twenty-ninth
(29th) floor of the Building, which space is shown on Exhibit A attached hereto
(the "Seventh Amendment Space").
Landlord and Tenant are entering into this instrument to set forth said
leasing of the Seventh Amendment Space, to integrate the Seventh Amendment Space
into the Lease and to amend the Lease.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration in hand this date paid by each of the parties to the
other, the receipt and sufficiency of which are hereby severally acknowledged,
and in further consideration of the mutual promises herein contained, Landlord
and Tenant hereby agree to and with each other as follows:
1. Effective as of the "Seventh Amendment Space Commencement Date" (as
defined in Section 2 hereof) the Seventh Amendment Space shall
constitute a part of the "Premises" (as defined and used in the
Lease), so that the Premises (as defined and used in the Lease) shall
include both the Initial Premises and the Seventh Amendment Space.
2. The Seventh Amendment Space Commencement Date shall be earlier to
occur of (a) the date on which the Seventh Amendment Space is ready
for occupancy as provided below or (b) the date on which Tenant
commences beneficial use of the
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Seventh Amendment Space (Tenant shall be treated as having commenced
beneficial use when it begins to move furniture and equipment into the
Seventh Amendment Space for its regular business operation). The
Seventh Amendment Space shall be deemed to be ready for occupancy at
such time as Landlord shall have completed the "Asbestos Abatement
Work" as described on Exhibit B attached hereto and placed the Seventh
Amendment Space in "shell condition" as described in Exhibit C to the
above-referenced Fourth Amendment of Lease. Landlord shall give Tenant
at least thirty (30) days prior written notice of the date on which
Landlord anticipates that the work to be performed by Landlord
hereunder will be completed and the Seventh Amendment Space deemed
ready for occupancy. Notwithstanding the foregoing, under no
circumstances shall the Seventh Amendment Space Commencement Date be
deemed to occur prior to March 1, 2001 (unless Tenant has commenced
beneficial use of the Seventh Amendment Space prior to that date).
In the event that Landlord shall fail to deliver possession of the
Seventh Amendment Space with the Asbestos Abatement Work complete and
the Seventh Amendment Space in shell condition by July 1, 2001 (as
such date shall automatically be extended for such periods of time as
Landlord is prevented from delivering the Seventh Amendment Space as
contemplated herein by reason of events beyond Landlord's reasonable
control), Tenant shall have the right to terminate the Lease with
respect to the Seventh Amendment Space only, by giving notice to
Landlord of Tenant's desire to do so within thirty (30) days after
such date; and, upon the giving of such notice, the Lease shall
terminate with respect to the Seventh Amendment Space only, without
further liability or obligation on the part of either party, unless
within thirty (30) days after receipt of such termination notice from
Tenant, Landlord shall so deliver the Seventh Amendment Space in the
condition required above. Such right of termination shall be Tenant's
sole and exclusive remedy at law or in equity or otherwise for
Landlord's failure to deliver the Seventh Amendment Space by July 1,
2001.
3. The Term of the Lease for the Seventh Amendment Space shall commence
on the Seventh Amendment Space Commencement Date and (notwithstanding
the fact that the Term of the Lease with respect to the Initial
Premises may have previously expired as set forth in the Lease) shall
expire on the last day of the sixtieth (60th) full calendar month
subsequent to the Seventh Amendment Space Commencement Date (plus the
partial month, if any, following the Seventh Amendment Space
Commencement Date) (the "Seventh Amendment Space Lease Term"), unless
sooner terminated in accordance with the provisions of the Lease as
herein amended, upon all the same terms and conditions contained in
the Lease as herein amended.
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4. Rent for the Seventh Amendment Space from the Seventh Amendment Space
Commencement Date through the expiration of the Seventh Amendment
Space Lease Term shall be payable at the annual rate of $1,347,990.00
(being the product of (i) $52.50 and (ii) the rentable floor area of
the Seventh Amendment Space (being 25,676 square feet)).
5. Commencing on the Seventh Amendment Space Commencement Date, Tenant
shall reimburse Landlord for Increased Operating Expenses (pursuant to
Section 3.2 of the Lease) for the Seventh Amendment Space in excess of
the Operating Expenses incurred by Landlord during calendar year 2000
(being January 1, 2000 through December 31, 2000).
6. Commencing on the Seventh Amendment Space Commencement Date, Tenant
shall reimburse Landlord for increased Real Estate Taxes (pursuant to
Section 3.4 of the Lease) for the Seventh Amendment Space in excess of
the Real Estate Taxes paid by Landlord in fiscal year 2001 (being July
1, 2000 through June 30, 2001).
7. Tenant's Share with respect to the Seventh Amendment Space consisting
of a total of 25,676 rentable square feet will be 2.09%.
8. Landlord shall provide approximately four hundred (400) AMPS of
120/208 volts of electrical power to be used in the Seventh Amendment
Space and shall, at its sole expense, bring such power to the
electrical panel serving the Seventh Amendment Space. Tenant shall pay
for any upgrades to said electric power and shall pay directly to
Boston Edison Company or other provider of electrical service to the
Seventh Amendment Space the cost as billed to Tenant for electricity
used in the Seventh Amendment Space for lighting and office
receptacles. Notwithstanding the foregoing, Landlord reserves the
right, to be exercised upon at least thirty (30) days prior written
notice to Tenant, to install a check meter to measure the consumption
of electricity in the Seventh Amendment Space. If Landlord shall
install a check meter as aforesaid, in lieu of making payment directly
to the utility company, Tenant shall reimburse Landlord monthly in
arrears within thirty (30) days of receipt of Landlord's invoice for
the cost of electricity consumed in the Seventh Amendment Space as
determined by such check meter and Landlord's cost of electricity from
time to time.
9. As provided in the Lease, on the Seventh Amendment Space Commencement
Date, Tenant shall be entitled to lease, at the then current monthly
rates, up to thirteen (13) additional parking spaces from the
Prudential Center garage operator in excess of those currently leased.
The rate for monthly parking spaces as of
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January 1, 1999 is $290.00 per month.
10. (A) Landlord shall provide to Tenant an allowance of $30.00 per
square foot of rentable floor area of the Seventh Amendment Space (the
"Tenant Allowance") which may be applied by Tenant upon written notice
to Landlord to (i) the cost of improvements (including architectural
and engineering fees in connection therewith) in any portion of the
Seventh Amendment Space performed by Tenant in accordance with the
terms of the Lease after Tenant delivers to Landlord paid invoices
indicating the actual cost of such improvements reasonably
satisfactory to Landlord or (ii) the actual costs incurred by Landlord
in connection with any improvement work in the Seventh Amendment Space
in the event Tenant shall elect to have Landlord perform such work. To
the extent that the costs of any such work undertaken by Landlord
exceed the Tenant Allowance, Tenant shall reimburse Landlord, as
Additional Rent, for such excess upon Tenant's authorization for
Landlord to proceed with the work attributable thereto.
If Tenant shall elect for Landlord to perform the improvement work,
Landlord shall use good faith efforts to perform such work at a
commercially reasonable cost.
(B) Notwithstanding the foregoing, Landlord shall be under no
obligation to apply any portion of the Tenant Allowance for any
purposes other than as provided in this Seventh Amendment, nor shall
Landlord be deemed to have assumed any obligations, in whole or in
part, of Tenant to any contractors, subcontractors, suppliers, workmen
or materialmen. In addition, Landlord shall not be obligated to make
any application of any portion of the Tenant Allowance if (i) there
shall be existing any default of Tenant under the Lease (as defined in
Section 8.1) or (ii) there are any liens which are not bonded to the
reasonable satisfaction of the Landlord against Tenant's interest in
the Lease or against the Premises, the Building, or the Prudential
Center arising out of any work performed pursuant to the Lease by
Tenant or any litigation in which Tenant is a party.
11. In accordance with Section 1(F) of the Third Amendment of Lease,
Tenant has delivered to Landlord an irrevocable standby letter of
credit in the original face amount of One Million Three Hundred
Seventy-Five Thousand and 00/100 Dollars ($1,375,000.00) (the "Third
Amendment LC") to secure, among other obligations of Tenant under the
Lease, a portion of the transaction costs incurred by Landlord in
connection with the twenty-fifth (25th) floor of the Building (the
"Twenty-Fifth Floor"). Section 1(F) also provides in part for the
yearly reductions of the Third Amendment LC subject to the conditions
contained in Section 1(F).
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Landlord and Tenant agree that Landlord may utilize the Third
Amendment LC as additional security for Tenant's obligations with
respect to up to fifty percent (50%) of the Transaction Costs (as
hereinafter defined) to be incurred by Landlord for the Seventh
Amendment Space. In order to provide Landlord with sufficient
additional security for the Transaction Costs for the Seventh
Amendment Space while preserving Landlord's security for the Twenty-
Fifth Floor, Landlord and Tenant agree that the Third Amendment LC
reduction procedures in Section 1(F) are hereby amended to provide
that, in lieu of the annual fourteen percent (14%) reduction scheduled
to commence in the first quarter of calendar year 1999, provided the
Third Amendment Security Reduction Conditions (as that term is defined
in the Third Amendment of Lease) have been satisfied, the Third
Amendment LC shall be reduced in each year starting three (3) years
after the Initial Third Amendment Security Reduction Date specified in
Section 1(F) (i.e. during the first quarter of calendar year 2002) in
accordance with the terms and provisions of Section 1(F). For the
purposes of this Seventh Amendment, the term "Transaction Costs" shall
mean all costs incurred by Landlord in (i) the negotiation and
execution of this Seventh Amendment (including, without limitation,
attorneys' fees), (ii) the preparation of the Seventh Amendment Space
for Tenant's use and occupancy, including but not limited to the
Tenant Allowance (but specifically excluding the costs of performing
the Asbestos Abatement Work and placing the Seventh Amendment Space in
shell condition, as described in Section 2 above), (iii) real estate
brokerage commissions and (iv) any unreimbursed costs incurred by
Landlord's Contract Manager. The Transaction Costs for the Seventh
Amendment Space are currently calculated to be approximately $36.00
per rentable square foot of floor area of the Seventh Amendment Space.
Tenant understands that the exercise of its future expansion rights
may require a further modification of the terms regarding the
reduction of the Third Amendment LC and/or an increase in the Third
Amendment LC to secure a portion of Transaction Costs for such space
incurred by Landlord. In addition, in the event that Tenant does not
exercise its option to terminate the Lease with respect to the Seventh
Amendment Space in accordance with Section 12 below and consequently
the Seventh Amendment Space Lease Term shall exceed the Term of the
Lease with respect to the Initial Premises, Landlord shall be entitled
to retain the then-remaining portion of the Third Amendment LC
(subject to further reduction in accordance with the terms and
provisions of Section 1(F) of the Third Amendment of Lease) for the
balance of the Seventh Amendment Space Lease Term.
Notwithstanding anything contained herein or in the Third Amendment to
Lease to the contrary: (i) condition #3 of the Third Amendment
Security Reduction
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Conditions is hereby deleted in its entirety; (ii) the last sentence
of condition #5(b) of the Third Amendment Security Reduction
Conditions is hereby deleted in its entirety and the following
language substituted therefor: "Operating Income is defined as net
income or loss, excluding one time extraneous items related to the
recapitalization that occurred in January 1999, plus depreciation,
interest expenses, amortization, and all Federal, state, local and
foreign income taxes."; and (iii) condition #5(c) of the Third
Amendment Security Reduction Conditions is hereby deleted in its
entirety and the following language substituted therefor: "TENANT'S
third party debt service expense exceeds 25% of TENANT'S net income on
an annual basis."
12. In accordance with Section 12.14 of the Lease (as amended by Section 9
of the First Amendment of Lease), Tenant has delivered to Landlord an
irrevocable standby letter of credit in the original face amount of
Four Million Seventy-Eight Thousand and 00/100 Dollars ($4,078,000.00)
(the "Original LC") to secure, among other things, a portion of the
Lease Transaction Costs incurred by Landlord in connection with the
Initial Premises and the First Amendment Spaces. Section 12.14 (as
amended by Section 9 of the First Amendment of Lease) also provides in
part for yearly reductions of the Original LC subject to the
conditions contained in Section 12.14 and Section 9.
Notwithstanding anything contained in said Section 12.14 and Section 9
to the contrary, Landlord and Tenant hereby agree that: (i) the
Original LC shall be reduced by Eight Hundred Thousand and 00/100
Dollars ($800,000.00) on or about the date of this Seventh Amendment,
which such reduction shall be in lieu of any other reductions to the
Original LC contemplated by or scheduled to take place under the Lease
prior to December 31, 1998; (ii) the Original LC shall be further
reduced by an additional Eight Hundred Thousand and 00/100 Dollars
($800,000.00) during the second quarter of calendar year 1999, which
such reduction shall be in lieu of any other reduction to the Original
LC contemplated by or scheduled to take place under the Lease during
calendar year 1999; and (iii) commencing in the first quarter of
calendar year 2000, and provided that in each instance the L.C.
Reduction Conditions (as that term is defined in the Lease) have been
satisfied, the Original LC shall be reduced in each year by the amount
shown for each applicable lease year on the schedule set forth in
Exhibit LCR attached to and made a part of this Seventh Amendment
(which such Exhibit LCR shall replace and supercede Exhibit LCR
attached to the First Amendment of Lease).
Notwithstanding anything contained herein or in the Lease to the
contrary: (i) condition #3 of the L.C. Reduction Conditions is hereby
deleted in its entirety; (ii) the last sentence of condition #5(b) of
the L.C. Reduction Conditions is hereby deleted in its entirety and
the following language substituted therefor: "Operating Income is
defined as net income or loss, excluding one time extraneous items
related to the recapitalization that occurred in January 1999, plus
depreciation, interest expenses, amortization, and all Federal, state,
local and foreign income taxes."; and (iii)
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condition #5(c) of the L.C. Reduction Conditions is hereby deleted in
its entirety and the following language substituted therefor:
"TENANT'S third party debt service expense exceeds 25% of TENANT'S net
income on an annual basis."
13. By written notice ("Tenant's Termination Notice") given by Tenant to
Landlord at any time during the Seventh Amendment Space Lease Term on
or before the last day of the month which is twelve (12) months prior
to the expiration of the Lease Term with respect to the Initial
Premises, Tenant may elect to cancel and terminate the Lease with
respect to the Seventh Amendment Space effective on the last day of
the Lease Term with respect to the Initial Premises (the "Seventh
Amendment Space Early Termination Date") but not before or after said
date; provided, however, that as a condition precedent to such
cancellation and termination, Tenant must deliver to Landlord together
with Tenant's Termination Notice good funds in an amount equal to
"Tenant's Termination Payment" (as defined below) and provided further
that notwithstanding such termination and as a further condition
precedent thereto, (i) Tenant shall pay to Landlord on a timely basis
all Rent and payments on account of Increased Operating Expenses,
increased Real Estate Taxes, utility charges and all additional rent
and other amounts due from Tenant (including, but not limited to, all
past due amounts thereof) through the Seventh Amendment Space Early
Termination Date (it being acknowledged and agreed that Tenant's
Termination Payment is in addition to such amounts and no credit shall
be given towards the payment of such amount on account of the payment
of Tenant's Termination Payment), (ii) there shall be no default
(beyond any applicable notice and cure period) on the part of Tenant
under the Lease on either the date Tenant gives Tenant's Termination
Notice or on the Seventh Amendment Space Early Termination Date and
(iii) Tenant shall quit and vacate the Seventh Amendment Space as of
the Seventh Amendment Space Early Termination Date and surrender the
same in the condition required by the applicable provisions of the
Lease. In the event that Tenant's share of such Increased Operating
Expenses, increased Real Estate Taxes, utility charges and such other
additional rent and other amounts due through the Seventh Amendment
Space Early Termination Date is not finally determined as of the
Seventh Amendment Space Early Termination Date, Tenant shall make
payment on account as reasonably estimated by Landlord if so requested
by Landlord and in any event Tenant shall make final payment of
amounts due through the Seventh Amendment Space Early Termination Date
within thirty (30) days after final billing therefor by Landlord. The
obligations of Tenant set forth in this Section 12 shall survive the
termination of the Lease. If Tenant shall not give to Landlord
Tenant's Termination Notice as provided in this Section 13 (time being
of the essence), the provisions of this Section 13 shall be deemed
null and void. "Tenant's Termination Payment" shall be equal to the
product of(a) the "Fixed Monthly Amortization Amount" as defined
hereinbelow and (b) the number of
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months that would have remained in the Seventh Amendment Space Lease
Term from and after the Seventh Amendment Space Early Termination Date
but for the giving by Tenant of the Tenant's Termination Notice. The
"Fixed Monthly Amortization Amount" shall equal the monthly payment on
a direct reduction loan basis amortized monthly where (i) the
principal amount is equal to the Tenant Allowance plus the commission
paid by Landlord to the Recognized Broker (as hereinafter defined) in
connection with this Seventh Amendment (the "Broker's Commission"),
(ii) the term is sixty (60) calendar months and (iii) the monthly
interest rate is 0.8333%.
14. Landlord shall have the right, at any time prior to the Seventh
Amendment Space Commencement Date, to substitute for the Seventh
Amendment Space either the twenty-fourth (24th), twenty-sixth (26th)
or twenty-seventh (27th) floor of the Building in accordance with the
following:
a.. Landlord shall give Tenant at least one hundred twenty (120) days
written notice of Landlord's intention to substitute one of the
aforesaid floors for the Seventh Amendment Space.
b. Landlord shall reimburse Tenant for any reasonable costs incurred
by Tenant in readapting Tenant's architectural and engineering
plans to the extent necessary as a result of the substitution of
a different floor of the Building for the original Seventh
Amendment Space described herein.
c. Upon the delivery of the notice described in subsection (a)
above, the new premises shall become the "Seventh Amendment
Space" for the purposes of the Lease as amended by this Seventh
Amendment, and the parties hereto shall execute an amendment to
the Lease setting forth the substitution for the original Seventh
Amendment Space.
d. Notwithstanding the provisions of Section 2 above, in the event
that the new Seventh Amendment Space is to be located on a floor
in the Building on which Asbestos Abatement Work has already been
performed prior to the date of Landlord's notice of substitution,
Landlord shall deliver such space to Tenant in "as is" condition,
broom clean and clear of all occupants. If the new Seventh
Amendment Space is to be located on a floor in the Building in
which Asbestos Abatement Work has not already been performed,
Landlord shall deliver such space after performing the work
described in Section 2.
e. The rentable floor area of the new Seventh Amendment Space shall
not vary by more than five hundred (500) square feet from the
rentable floor
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area of the original Seventh Amendment Space (being 25,676 square
feet). Rent and additional rent for the new Seventh Amendment
Space shall in any event be based on the actual rentable floor
area of such space.
15. Tenant hereby acknowledges and confirms that the indemnity set forth
in Section 11.1 of the Lease shall apply, and always has applied, to
the use or occupancy by Tenant of the Premises in its entirety and to
the acts or omissions of Tenant, its agents, employees or any
contractors brought onto the Premises in its entirety by Tenant.
16. (A) Tenant warrants and represents that Tenant has not dealt with any
broker in connection with the consummation of this Seventh Amendment
other than Meredith & Grew, Incorporated (the "Recognized Broker");
and in the event any claim is made against Landlord relative to
dealings by Tenant with brokers other than the Recognized Broker,
Tenant shall defend the claim against Landlord with counsel of
Tenant's selection first approved by Landlord (which approval will not
be unreasonably withheld) and save harmless and indemnify Landlord on
account of loss, cost or damage which may arise by reason of such
claim.
(B) Landlord warrants and represents that Landlord has not dealt with
any broker in connection with the consummation of this Seventh
Amendment other than the Recognized Broker; and in the event any claim
is made against Tenant relative to dealings by Landlord with brokers
other than the Recognized Broker, Landlord shall defend the claim
against Tenant with counsel of Landlord's selection and save harmless
and indemnify Tenant on account of loss, cost or damage which may
arise by reason of such claim. Landlord shall be responsible for
paying the commission due to the Recognized Broker in connection with
this Seventh Amendment.
17. Except as otherwise expressly provided herein, all capitalized terms
used herein without definition shall have the same meanings as are set
forth in the Lease.
18. Except as herein amended the Lease shall remain unchanged and in full
force and effect. All references to the "Lease" shall be deemed to be
references to the Lease as herein amended.
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??? as a sealed instrument as of the date and year first above written.
LANDLORD:
Cameron
- -------
BP PRUCENTER ACQUISITION, LLC
By: BOSTON PROPERTIES LIMITED PARTNERSHIP, its Manager
By: BOSTON PROPERTIES, INC.,
its general partner
By /s/ Claude B. Hoopes
------------------------
Name Claude B. Hoopes
----------------------
Title Vice President
---------------------
TENANT:
BRONNER SLOSBERG
HUMPHREY LLC
By: BSH Holding, LLC, its manager
By: Bronner Slosberg Humphrey Co., its Manager
-------------------------
By /s/ Meryl K. Beckingham
------------------------
Name Meryl K. Beckingham
----------------------
Title SVP/CFO
----------------------
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EXHIBIT B
---------
1. Overview
--------
A. This agreement consists of providing the work required for selective
demolition, asbestos removal, and replacement fireproofing at the
29/th/ floor Prudential Tower, Prudential Center, Boston,
Massachusetts
2. Description of Work
-------------------
The following is a brief description of the work included under this
agreement.
Work covered by Contract Documents:
1. Selective Demolition:
a.) Removal of carpet
b.) Removal of below ceiling wall partitions
c.) Removal of freight and passenger elevator lobby ceilings
d.) Removal of core storage room ceiling
e.) Removal of travertine wall panels in passenger elevator
lobby
2. Removal of Asbestos and Hazardous Materials:
a.) Removal of all suspended ceiling as acm
b.) Removal of all light fixtures as acm
c.) Removal of light fixtures ballasts as PCB-containing
d.) Removal of all HVAC ductwork and related mechanical
components located above ceiling as acm
e.) Removal of abandoned electrical and communication system
wiring, conduit, etc.
f.) Removal of all insulation on building mechanical systems
located above ceiling as acm
g.) Removal of structural fireproofing as acm (--80% amosite)
h.) Removal of all interior column enclosures and associated
masonry blocks as acm
i.) Removal of all floor tile and associated mastic as acm
using chemical stripping methods
j.) Cleaning of all surfaces
3. Replacements
a.) Replacement of structural fireproofing
4. Firewatch
a.) Provide 24-hour firewatch throughout the Contract Period.
<PAGE>
EXHIBIT LCR
Original LC LC Total LC
Year Balance Reduction Balance
------------------------------------------------
1999 4,078,000 1,600,000 2,478,000
2000 2,478,000 450,000 2,028,000
2001 2,028,000 450,000 1,578,000
2002 1,578,000 450,000 1,128,000
2003 1,128,000 450,000 678,000
2004 678,000 450,000 228,000
2005 228,000 228,000 0
1. Original Standby letter of Credit
2. Straightline declining balance over life of lease
3. Original Standby letter of Credit Balance for lease year.
<PAGE>
EXHIBIT 10.7
EIGHTH AMENDMENT TO LEASE
-------------------------
EIGHTH AMENDMENT TO LEASE dated as of this 30/th/ day of July, 1999, by and
between BP PRUCENTER ACQUISITION, LLC, a Delaware limited liability company (as
successor-in-interest to The Prudential Insurance Company of America)
("Landlord") and BRONNERCOM, LLC, formerly known as BRONNER SLOSBERG HUMPHREY,
LLC, a Delaware limited liability company, as successor-in-interest to Bronner
Slosberg Humphrey, Inc. ("Tenant").
RECITALS
--------
By Lease dated May 31, 1995, as amended by a First Amendment of Lease dated
June 21, 1996, a Second Amendment of Lease dated September 1, 1996, a Third
Amendment of Lease dated November 5, 1996, a Fourth Amendment of Lease dated
January 22,1997, a Fifth Amendment and Partial Termination of Lease dated July
11, 1997, a Sixth Amendment and Partial Termination of Lease dated May 15, 1998
and a Seventh Amendment to Lease dated March 29, 1999 (the "Lease"), Landlord's
predecessor-in-interest did lease to Tenant and Tenant did hire and lease from
Landlord's predecessor-in-interest certain premises (the "Initial Premises")
located in the Tower Building (the "Building"), Prudential Center, Boston,
Massachusetts, which Initial Premises are described with greater particularity
in the Lease.
Tenant has determined to lease from Landlord 2,020 square feet of rentable
floor area on the fifth (5/th/) floor of the Building, pursuant to Paragraph 5
of the First Amendment of Lease and referred to therein as the "Pru Timber
Space", which space is shown hatched on Exhibit A attached hereto (the "Eighth
Amendment Space A").
Tenant has determined to lease from Landlord 1,518 square feet of rentable
floor area on the fifth (5/th/) floor of the Building, pursuant to Paragraph 5
of the First Amendment of Lease and referred to therein as the "Waterhouse"
space, which space is shown cross-hatched on Exhibit A attached hereto (the
"Eighth Amendment Space B").
Landlord and Tenant are entering into this instrument to set forth said
leasing of the Eighth Amendment Space A and the Eighth Amendment Space B, to
integrate the Eighth Amendment Space A and Eighth Amendment Space B into the
Lease and to amend the Lease.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration in hand this date paid by each of the parties to the
other, the receipt and sufficiency of which are hereby severally acknowledged,
and in further consideration of the mutual promises herein contained, Landlord
and Tenant hereby agree to and with each other as follows:
A. EIGHTH AMENDMENT SPACE A
<PAGE>
1. Effective as of the "Eighth Amendment Space A Commencement Date" (as
defined in Section 3 hereof) the Eighth Amendment Space A shall
constitute a part of the "Premises" (as defined and used in the
Lease), so that the Premises (as defined and used in the Lease) shall
include the Initial Premises and the Eighth Amendment Space A.
2. The Eighth Amendment Space A Commencement Date shall be June 1, 1999
(i.e., the date on which Tenant commenced beneficial use of the Eighth
Amendment Space A). The parties acknowledge that, prior to the Eighth
Amendment Space A Commencement Date, Landlord repainted the Eighth
Amendment Space A, shampooed the carpeting therein and delivered the
Eighth Amendment Space A to Tenant vacant, in broom-clean condition
and in a condition which was at least as good as shell condition, as
required by Paragraph 5 of the First Amendment of Lease and that
Tenant has accepted the Eighth Amendment Space A in the condition in
which it was delivered on the Eighth Amendment Space A Commencement
Date. Notwithstanding anything to the contrary herein or in the Lease
contained, Landlord has no obligation to perform any other work in the
Eighth Amendment Space A or to provide to Tenant any allowance in
respect of the Eighth Amendment Space A.
3. The Term of the Lease for the Eighth Amendment Space A shall commence
on the Eighth Amendment Space A Commencement Date and shall expire on
November 30, 2005, unless sooner terminated in accordance with the
provisions of the Lease as herein amended, upon all the same terms and
conditions contained in the Lease as herein amended.
4. Rent for the Eighth Amendment Space A from the Eighth Amendment Space
A Commencement Date through the expiration of the Eighth Amendment
Space A Lease Term shall be payable at the annual rate of $80,800.00
(being the product of (i) $40.00 and (ii) the rentable floor area of
the Eighth Amendment Space A (being 2,020 square feet).
5. Commencing on the Eighth Amendment Space A Commencement Date, Tenant
shall reimburse Landlord for Increased Operating Expenses (pursuant to
Section 3.2 of the Lease) for the Eighth Amendment Space A in excess
of the Operating Expenses incurred by Landlord during calendar year
1999 (being January 1, 1999 through December 31, 1999).
6. Commencing on the Eighth Amendment Space A Commencement Date, Tenant
shall reimburse Landlord for increased Real Estate Taxes (pursuant to
Section 3.4 of the Lease) for the Eighth Amendment Space A in excess
of the Real Estate Taxes paid by Landlord in fiscal year 2000 (being
July 1, 1999
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through June 30, 2000).
7. Tenant's Share with respect to the Eighth Amendment Space A consisting
of a total of 2,020 rentable square feet will be .16%.
8. Tenant shall reimburse Landlord monthly in arrears within thirty (30)
days of receipt of Landlord's invoice for the cost of electricity
consumed in the Eighth Amendment Space A as determined by a check
meter (which check meter is presently installed) and Landlord's cost
of electricity from time to time.
9. Tenant shall not be entitled to any additional parking passes in
connection with Tenant's demise of the Eighth Amendment Space A.
10. Tenant's extension rights set forth in Section 12.15 of the Lease, as
amended by Section II(1) of the Fourth Amendment of Lease, shall apply
to the Eighth Amendment Space A.
11. There shall be no modification of the terms regarding the reduction
and/or increase in the Original LC and/or the Third Amendment LC in
connection with Tenant's demise of the Eighth Amendment Space A.
12. Notwithstanding anything to the contrary herein or in the Lease
contained, if, during the term of the Lease in respect of Eighth
Amendment Space A, Tenant elects to remove the existing carpeting and
install new carpeting in the Eighth Amendment Space A and/or to
replace the original building column enclosures within the Eighth
Amendment Space A (collectively, "Tenant's Space A Work"), Landlord
shall, at Landlord's cost, during the performance of Tenant's Space A
Work, remove the floor tile and mastic from the Eighth Amendment Space
A and, to the extent that the building columns contain asbestos
containing material ("ACM"), remove the ACM from the columns to the
extent required by applicable laws ("Landlord's Space A Removal
Work"). Landlord shall coordinate the Landlord's Space A Removal Work
with Tenant's Space A Work. In no event shall Tenant be entitled to
any diminution in rental value in respect of the Eighth Amendment
Space A on account of the performance of Landlord's Space A Removal
Work.
B. EIGHTH AMENDMENT SPACE B
1. Effective as of the "Eighth Amendment Space B Commencement Date" (as
defined in Section 4 hereof) the Eighth Amendment Space B shall
constitute a part of the part of the "Premises" (as defined and used
in the Lease), so that the Premises (as defined and used in the Lease)
shall include the Initial Premises, the Eighth Amendment Space A and
the Eighth Amendment Space
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B.
2. The Eighth Amendment Space B Commencement Date shall be the earlier to
occur of (a) the date on which the Eighth Amendment Space B is ready
for occupancy as provided below or (b) the date on which Tenant
commences beneficial use of the Eighth Amendment Space B (Tenant shall
be treated as having commenced beneficial use when it begins to move
furniture and equipment into the Eighth Amendment Space B for its
regular business operation). The Eighth Amendment Space B shall be
deemed to be ready for occupancy at such time as Landlord shall, at
Landlord's cost, have completed repainting and recarpeting the Eighth
Amendment Space B using Building standard paint and carpeting and
removal of the floor tiles and mastic from the Eighth Amendment Space
B (the "Eighth Amendment Space B Landlord Work") and delivered the
Eighth Amendment Space B to Tenant vacant and in broom-clean condition
and in a condition which is at least as good as shell condition, as
required by Paragraph 5 of the First Amendment of Lease. Tenant shall,
on or before November 30, 1999, advise Landlord of the color
selections required by Landlord in order to commence the Eighth
Amendment Space B Landlord Work. Landlord shall use reasonable efforts
to complete the Eighth Amendment Space B Landlord Work on or before
February 1, 2000. If the Eighth Amendment Space B is not ready for
occupancy on or before April 1, 2000, then Tenant shall have the
right, upon written notice to Landlord given on or after April 1, 2000
but on or before the date that the Eighth Amendment Space B is ready
for occupancy, to cancel Tenant's exercise of its option to lease the
Eighth Amendment Space B, effective as of the date of such notice. If
Tenant fails timely to make the color selections required by Landlord
in order to commence the Eighth Amendment Space B Landlord Work, then,
notwithstanding anything to the contrary herein contained, (i) the
Eighth Amendment Space B Commencement Date shall be the earlier to
occur of (a) February 1, 2000 or (b) the date on which Tenant
commences beneficial use of the Eighth Amendment Space B, (ii) Tenant
shall have no right to cancel Tenant's exercise of its option to lease
the Eighth Amendment Space B pursuant to the immediately preceding
sentence on account of Landlord's failure to perform the Eighth
Amendment Space B Landlord Work, (iii) Landlord shall complete the
Eighth Amendment Space B Landlord Work promptly after Tenant makes
such color selections and (iv) Landlord shall deliver the Eighth
Amendment Space B to Tenant in the condition and within the time-frame
otherwise required by this Paragraph B.2. If Landlord is required to
perform the Eighth Amendment Space B Landlord Work after the Eighth
Amendment Space B is delivered to Tenant pursuant to the immediately
preceding sentence, Tenant agrees to cooperate with Landlord during
the performance of the Eighth Amendment Space B Work and Tenant shall,
upon billing therefor, as additional rent, reimburse Landlord for any
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overtime or other premium costs incurred by Landlord in connection
with the performance of the Eighth Amendment Space B Work which costs
would not have been incurred by Landlord had Landlord performed the
Eighth Amendment Space B Work prior to delivering the Eighth Amendment
Space B to Tenant.
3. The Term of the Lease for the Eighth Amendment Space B shall commence
on the Eighth Amendment Space B Commencement Date and shall expire on
November 30, 2005, unless sooner terminated in accordance with the
provisions of the Lease as herein amended, upon all the same terms and
conditions contained in the Lease as herein amended.
4. Rent for the Eighth Amendment Space B from the Eighth Amendment Space
B Commencement Date through the expiration of the Eighth Amendment
Space B Lease Term shall be payable at the annual rate of $60,720.00
(being the product of (i) $40.00 and (ii) the rentable floor area of
the Eighth Amendment Space B (being 1,518 square feet).
5. Commencing on the Eighth Amendment Space B Commencement Date, Tenant
shall reimburse Landlord for Increased Operating Expenses (pursuant to
Section 3.2 of the Lease) for the Eighth Amendment Space B in excess
of the Operating Expenses incurred by Landlord during calendar year
1999 (being January 1, 1999 through December 31, 1999).
6. Commencing on the Eighth Amendment Space B Commencement Date, Tenant
shall reimburse Landlord for increased Real Estate Taxes (pursuant to
Section 3.4 of the Lease) for the Eighth Amendment Space B in excess
of the Real Estate Taxes paid by Landlord in fiscal year 2000 (being
July 1, 1999 through June 30, 2000).
7. Tenant's Share with respect to the Eighth Amendment Space B consisting
of a total of 1,518 rentable square feet will be .12%.
8. Tenant shall reimburse Landlord monthly in arrears within thirty (30)
days of receipt of Landlord's invoice for the cost of electricity
consumed in the Eighth Amendment Space B as determined by a check
meter (which check meter is presently installed) and Landlord's cost
of electricity from time to time.
9. Tenant shall not be entitled to any additional parking passes in
connection with Tenant's demise of the Eighth Amendment Space B.
10. Tenant's extension rights set forth in Section 12.15 of the Lease, as
amended by Section II(1) of the Fourth Amendment of Lease, shall apply
to the Eighth
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Amendment Space B.
11. There shall be no modification of the terms regarding the reduction
and/or increase in the Original LC and/or the Third Amendment LC in
connection with Tenant's demise of the Eighth Amendment Space B.
12. Notwithstanding anything to the contrary herein or in the Lease
contained, if, during the term of the Lease in respect of Eighth
Amendment Space B, Tenant elects to replace the original building
column enclosures within the Eighth Amendment Space B (collectively,
"Tenant's Space B Work"), to the extent that the building columns
contain asbestos containing material ("ACM"), Landlord shall, at
Landlord's cost, during the performance of Tenant's Space B Work,
remove the ACM from the columns to the extent required by applicable
laws ("Landlord's Space B Removal Work"). Landlord shall coordinate
the Landlord's Space B Removal Work with Tenant's Space B Work. In no
event shall Tenant be entitled to any diminution in rental value in
respect of the Eighth Amendment Space B on account of the performance
of Landlord's Space B Removal Work.
C. RIGHT OF FIRST OFFER
Subject to the rights of the existing tenant of a portion of the First
Offer Space, as hereinafter defined, and the rights of another tenant in the
Building, MCI Telecommunications Corporation to lease the First Offer Space, all
of which rights are prior to the rights of Tenant under this Paragraph C, and
provided that at the time the First Offer Space first becomes available for
reletting (i) Tenant is not in default, beyond the expiration of applicable
notice and grace periods, of any of its obligations under the Lease, (ii) Tenant
has not assigned the Lease or sublet more than thirty percent (30%) of the
Premises then demised to Tenant (other than an assignment or subletting pursuant
to the last sentence of Section 5.2 of the Lease) and (ii) the Lease is still in
full force and effect, Landlord agrees not to enter into a lease or leases to
relet the First Offer Space or any portion thereof without first giving to
Tenant an opportunity to lease such space as hereinafter set forth. For the
purposes of this Paragraph C, the "First Offer Space" shall be defined as the
balance of the fifth (5/th/) floor of the Building which is not leased to
Tenant, containing 3,298 rentable square feet, substantially as shown on Exhibit
A attached hereto. When such First Offer Space becomes available for reletting,
Landlord shall notify Tenant ("Landlord's Notice") of the availability of such
space and shall advise Tenant of the business terms upon which Landlord is
willing so to lease such space, except that the rent and other economic terms
with respect to the First Offer Space shall be ninety-five percent (95%) of the
then fair market rental and the term of the Lease in respect of the First Offer
Space shall expire on November 30, 2005, unless sooner terminated or extended in
accordance with the provisions of the Lease as herein amended (it being
understood that Tenant's extension rights set forth in Section 12.15 of the
Lease, as amended by Section II(1) of the Fourth Amendment of Lease, shall apply
to the
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First Offer Space). If Tenant wishes to exercise Tenant's right of first offer,
Tenant shall do so, if at all, by giving Landlord written notice of Tenant's
desire to lease such space (Tenant having no right to lease less than the entire
amount of such First Offer Space offered to Tenant) on such terms within ten
(10) business days after receipt of Landlord's Notice to Tenant of the
availability of such space and of such terms. If Tenant shall give such notice,
the same shall constitute an agreement to enter into an amendment to the Lease
to incorporate the entire amount of such First Offer Space into the Premises
demised under the Lease within thirty (30) days after Tenant's notice to
Landlord. If Tenant shall not so exercise such right within such ten (10)
business day period or Landlord and Tenant shall not execute an amendment to the
Lease to incorporate the First Offer Space into the Premises within thirty (30)
days of Tenant's exercise of such right, time being of the essence, Tenant shall
have no further right of first offer hereunder.
D. OTHER TERMS
1. Tenant hereby acknowledges and confirms that the indemnity set forth
in Section 11.1 of the Lease shall apply, and always has applied, to
the use or occupancy by Tenant of the Premises in its entirety and to
the acts or omissions of Tenant, its agents, employees or any
contractors brought onto the Premises in its entirety by Tenant.
2. (A) Tenant warrants and represents that Tenant has not dealt with any
broker in connection with the consummation of this Eighth Amendment
other than Meredith & Grew, Incorporated (the "Recognized Broker");
and in the event any claim is made against Landlord relative to
dealings by Tenant with brokers other than the Recognized Broker,
Tenant shall defend the claim against Landlord with counsel of
Tenant's selection first approved by Landlord (which approval will not
be unreasonably withheld) and save harmless and indemnify Landlord on
account of loss, cost or damage which may arise by reason of such
claim.
(B) Landlord warrants and represents that Landlord has not dealt with
any broker in connection with the consummation of this Eighth
Amendment other than the Recognized Broker; and in the event any claim
is made against Tenant relative to dealings by Landlord with brokers
other than the Recognized Broker, Landlord shall defend the claim
against Tenant with counsel of Landlord's selection and save harmless
and indemnify Tenant on account of loss, cost or damage which may
arise by reason of such claim. Landlord shall be responsible for
paying the commission due to the Recognized Broker in connection with
this Eighth Amendment.
3. Except as otherwise expressly provided herein, all capitalized terms
used herein without definition shall have the same meanings as are set
forth in the
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Lease.
4. Except as herein amended the Lease shall remain unchanged and in full
force and effect. All references to the "Lease" shall be deemed to be
references to the Lease as herein amended.
EXECUTED as a sealed instrument as of the date and year first above
written.
WITNESS: LANDLORD:
____________________________ BP PRUCENTER ACQUISITION, LLC
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, its Manager
By: BOSTON PROPERTIES, INC.,
its general partner
By /s/ Claude B. Hoopes
----------------------
Name Claude B. Hoopes
--------------------
Title Vice President
-------------------
WITNESS: TENANT:
/s/ M. Mosley-Jones BRONNERCOM, LLC
- ------------------------------
By: BSH Holding, LLC, its Manager
By: Bronner Slosberg
Humphrey Co., its
Manager
By /s/ Meryl K. Beckingham
-------------------------
Name Meryl K. Beckingham
-----------------------
Title EVP
----------------------
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<PAGE>
EXHIBIT A
[DIAGRAM]
5TH FLOOR PRUDENTIAL TOWER - RENTAL PLAN
TOTAL FLOOR (New York)
18,834 usable
24,501 rentable
The Prudential Center
<PAGE>
EXHIBIT A
[Diagram]
Bronner Slosberg Humphrey
5th Floor Prudential Tower -- Rental Plan
Total Floor (New York)
18,834 usable
24,501 rentable
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<PAGE>
EXHIBIT 10.8
Fully executed sublease
(35th Floor)
SUBLEASE
--------
THIS SUBLEASE, made as of the 22nd day of December, 1997, between EMI
ENTERTAINMENT WORLD, INC., a Delaware corporation having an office at 1290
Avenue of the Americas, New York, NY 10104 ("Landlord") and BRONNER SLOSBERG
HUMPHREY, INC., a Massachusetts corporation having an office at 800 Boylston
Street, Boston, MA 02199 ("Tenant").
Recital:
-------
A. By Agreement of Lease dated February 28, 1992 (the "Overlease"), 1290
Associates (together with its successor, the "Overlandlord") leased to Landlord
the entire 35th floor in the building known as 1290 Avenue of the Americas, New
York, New York (the "Building"). A copy of the Overlease has been delivered to
Tenant and Tenant, by its execution of this Sublease, acknowledges that it has
received the Overlease and that it understands the terms, covenants and
conditions thereof which are applicable to this Sublease.
B. By Lease Amendment Agreement dated as of May 4, 1993, Landlord and
Overlandlord added to the premises demised by the Overlease the 37th, 38th and
39th floors in the Building and otherwise modified the Overlease by terms which
are not relevant to (and are not incorporated in) this Sublease. The Overlease
has been further modified by additional agreements which are not relevant to
(and which are not incorporated in) this Sublease.
<PAGE>
C. Tenant desires to sublease from Landlord, and Landlord is willing to
sublease to Tenant, the entire 35th floor (the "Demised Premises") in the
Building, on the terms and conditions set forth in this sublease.
Agreement
---------
1. Landlord hereby subleases to Tenant, and Tenant hereby hires and takes
from Landlord, the Demised Premises, to be used and occupied by Tenant for
general and executive offices and for no other purpose, for a term (the "Term")
to commence on the later to occur of January 1, 1998, or the date on which the
Overlandlord's consent (as contemplated by Section 8 hereof) is obtained (the
"Commencement Date") and to terminate on September 29, 2002 (the "Expiration
Date"), unless sooner terminated as herein provided, at an annual fixed rent
(the "Fixed Rent") of Eight Hundred Seventy-Five Thousand Four Hundred Three
($875,403.00) Dollars. So long as Tenant is not in default under this Sublease
beyond any applicable grace period, Tenant shall not be required to pay the
installments of Fixed Rent which would otherwise be due in respect of the first
four full calendar months of the Term. The Fixed Rent shall be payable in equal
monthly installments of Seventy-Two Thousand Nine Hundred Fifty and 25/100
($72,950.25) Dollars each. All monthly installments of Fixed Rent shall be
payable to Landlord in advance on the first day of each and every calendar month
during the Term, except that the rent for the fifth full month of the Term shall
be paid upon the execution and delivery of this lease to Landlord. The Fixed
Rent for any fractional month at the beginning or end of the Term shall be
apportioned.
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2. This lease is a sublease, the Demised Premises being demised to
Landlord by the Overlease. This Sublease is subject and subordinate to the
Overlease, and to any matters to which the Overlease is or shall be subordinate
and, in the event of termination, reentry or dispossess by Overlandlord, it may,
at its option, take over all of the right, title and interest of Landlord, as
sublessor, under this Sublease, and Tenant shall, at Overlandlord's option,
attorn to Overlandlord pursuant to the then executory provisions of this
Sublease, except that Overlandlord shall not be (i) liable for any previous act
or omission of Landlord under this Sublease, (ii) subject to any credit, offset,
claim, counterclaim, demand or defense which Tenant may have against Landlord,
(iii) bound by any previous modification of this Sublease or by any previous
prepayment of more than one (1) month's rent, (iv) bound by any covenant of
Landlord to undertake or complete any construction of the Demised Premises or
any portion thereof, (v) required to account for any security deposit of the
Tenant other than any security deposit actually delivered to Overlandlord by
Landlord, (vi) bound by any obligation to make any payment to Tenant or grant
any credits, except for services, repairs, maintenance and restoration provided
for under this Sublease to be performed after the date of such attornment, (vii)
responsible for any monies owing by Landlord to the credit of Tenant or (viii)
required to remove any person occupying the Demised Premises or any part
thereof. Tenant covenants that it shall so conduct itself and its operations in
and about the Demised Premises as not to cause Landlord to be in default under
the Overlease. Landlord represents that: (i) the Overlease, together with the
amendments thereto which are not incorporated in this Sublease, is in full force
and effect; (ii) Landlord is not in default thereunder; (iii) Landlord has the
full right and authority to enter into this Sublease and to sublet the Demised
Premises to Tenant as provided
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herein; (iv) there are no outstanding claims or demands by the Overlandlord with
respect to tenant improvements made by Landlord; and (v) to the best of
Landlord's knowledge, such tenant improvements (including, without limitation,
any work required to comply with Section 8.01 of the Overlease) have been made
in compliance with the requirements of the Overlease. If Landlord receives any
notice of default under the Overlease which will result in the termination of
this Lease, Landlord will promptly send a copy of such notice to Tenant.
3. The terms, covenants, provisions and conditions of the Overlease are
hereby incorporated herein and shall be binding upon both parties hereto, those
applying to the landlord therein applying, in this Sublease, to the Landlord,
and those applying to the tenant therein applying, in this Sublease, to the
Tenant, with the following exceptions:
(a) The Fixed Rent payable hereunder shall be as provided in
Section 1 hereof. In addition to such Fixed Rent, Tenant shall pay as
Additional Charges all other sums due under this Sublease, within 10
days after the submission of bills therefor (notwithstanding any
different payment period specified in the Overlease).
(b) In Article 3: (i) the "Base Operating Year" shall be
calendar year 1998; the "Base Tax Amount" shall be the average of the
Taxes for (A) the Tax Year commencing on July 1, 1997 and ending on
June 30, 1998 and (B) the Tax Year commencing on July 1, 1998 and
ending on June 30, 1999; references to "Landlord" in subdivisions (e)
and (h) of Section 3.01 shall be deemed to refer to the Overlandlord;
in Section 3.03(a), the words "commencing January 1, 1999" shall be
deemed substituted for the words "in which the Commencement Date
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<PAGE>
occurs" in lines three and four; Landlord will promptly furnish to
Tenant copies of statements received from Overlandlord under Section
3.03(c) and 3.03(d); Section 3.03(e) shall not apply herein, but, at
Tenant's written request and at Tenant's expense, Landlord will
conduct the examination of Overlandlord's Records provided for in said
Section 3.03(e) and will promptly furnish a copy of the examination
report to Tenant (the costs of such examination to be billed to Tenant
as Additional Charges). Landlord will consult with Tenant with respect
to the costs to be incurred in connection with any examination
undertaken at Tenant's request under Section 3.03(e) of the Overlease
and will endeavor to keep such costs at a reasonable level, as if it
were making such examination on its own behalf.
(c) Article 14 of the Overlease shall not apply herein (except
for Section 14.08, which shall apply herein), but Tenant shall pay, as
Additional Charges, all sums payable under said Article 14 in respect
of the Demised Premises and in respect of the Term.
(d) Tenant is to have the benefit of all repairs, restoration,
materials and services to be provided to the Demised Premises and the
Building by the Overlandlord, but Landlord herein shall not be
obligated to make any repairs, alterations or restoration (whether
required for compliance with any laws and requirements of any public
authorities, compliance with any requirements of insurance bodies or
otherwise), to supply any materials or services to the Demised
Premises or to maintain any insurance with respect to the Demised
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<PAGE>
Premises, nor shall Landlord be liable for the failure of others so to
do. Tenant recognizes that the foregoing does not create any direct
obligation of Overlandlord to Tenant, but Landlord agrees, if so
requested by Tenant, to make appropriate demand on the Overlandlord to
provide services and/or repairs to the Demised premises as required by
the Overlease, and Landlord will (i) cooperate with Tenant, at no cost
to Landlord, in seeking to obtain the performance of the Overlandlord
under the Overlease and (ii) use reasonable efforts, without expense
to it, to cause the Overlandlord to perform under the Overlease.
Tenant shall be entitled to up to 2 listings on the building directory
board. Notwithstanding the foregoing, Tenant shall not be responsible,
and Landlord shall be responsible, for compliance with laws and
requirements of public authorities and compliance with requirements of
insurance bodies, to the extent of any violation which may exist on
the date of this Sublease and which, under the terms of the Overlease,
is Landlord's responsibility to perform.
(e) Wherever the Overlease provides for, or conditions any right
upon, a consent or approval to be given by the landlord, or for some
matter to be effected to the satisfaction of the landlord, the consent
or approval or satisfaction of Landlord and of the Overlandlord shall
be required hereunder. Landlord shall not be liable to Tenant by
reason of the failure of the Overlandlord to furnish any such consent
or approval, for any reason whatsoever.
(f) The 20-day periods referred to in Section 22.02(b) of the
Overlease shall be reduced to 10 days, for purposes of this Sublease.
In addition, the 10-
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<PAGE>
day period referred to in Section 11.01 of the Overlease shall be
increased to 20 days for purposes of this Sublease; and the words
"insuring the Building in the case of Landlord, and", in lines two and
three of Section 9.04, shall be deemed deleted, for purposes of this
Section.
(g) Notices to Landlord under this Sublease shall be addressed
to Landlord at:
EMI-Capitol Music Group, North America
1290 Avenue of the Americas
New York, NY 10104
Attn: Chief Financial Officer
with a duplicate original to:
EMI-Capitol Music Group, North America
1290 Avenue of the Americas
New York, NY 10104
Attn: Senior Vice-President -- Facilities Management
(h) The term "Broker", as used in Section 28.01 of the Overlease
shall mean Insignia/Edward S. Gordon Company Incorporated and CB
Commercial Real Estate Group, Inc.
(i) Wherever the Overlease requires the Tenant thereunder to
provide insurance or to give an indemnity for the benefit of the
landlord, the same shall be maintained or given, as the case may be,
for the benefit of Landlord and of Overlandlord.
(j) The following provisions of the Overlease shall not apply
herein: Sections 1.01 through 1.05; Section 2.01(a), except for the
first sentence thereof; Sections 5.04 and 5.05; the last sentence of
Section 8.01; Section 11.01, except
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<PAGE>
for the first sentence thereof; Section 13.02; Section 22.02(e);
Section 29.03; the first two sentences of Section 35.18; and Article
36.
(k) Certain references to "Landlord" in the Overlease shall be
deemed modified, for purposes of this Sublease, as follows: the
references to Landlord in Section 8.02 shall be deemed to refer to
Landlord and to Overlandlord; the reference to Landlord in line three
of Section 9.02 shall be deemed a reference to the Overlandlord;
references to Landlord in Article 10 and in Section 11.06 of the
Overlease shall be deemed references to the Overlandlord; references
to Landlord in the last sentence of Section 13.01 shall be deemed
references to Landlord or the Overlandlord, as the case may be;
references to Landlord in Section 15.06 shall be deemed to refer to
the Overlandlord; references to Landlord in Sections 16.07 and 16.09
shall be deemed to refer to Landlord or the Overlandlord, as the case
may be; the reference to Landlord in the second line of Section 17.01
shall be deemed to refer to Landlord or Overlandlord.
4. Tenant has advised Landlord that Tenant wishes to perform alterations
to the Demised Premises, as outlined on the plan attached hereto as Exhibit A.
If Overlandlord has consented to such alterations, Landlord agrees that its
consent thereto will not be unreasonably withheld or delayed. If such
improvements remain a part of the Demised Premises at the expiration of the
Term, and if Overlandlord does not require that the same be removed, Landlord
will not require Tenant to remove the same.
5. Tenant has inspected and examined all the premises herein demised and
is thoroughly acquainted and familiar with the physical condition thereof.
Landlord has not made
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<PAGE>
and does not make any representations as to the physical condition, expenses,
operation or any other matter or thing affecting or related to said premises.
Tenant hereby expressly acknowledges that no such representations have been
made, and agrees to take the premises "as is", except that Landlord shall
deliver the premises vacant and in broom clean condition on the Commencement
Date. It is understood and agreed that all understandings and agreements
heretofore had between the parties hereto are merged into this Sublease, which
alone fully and completely expresses their agreement, and that this Sublease is
entered into after full investigation, neither party relying upon any statement
or representation, not embodied in this Sublease, made by the other. This
Sublease cannot be changed or terminated orally, but only by an agreement in
writing.
6. (a) Tenant has deposited with Landlord the sum of Six Hundred Fifty-
Six Thousand Five Hundred Fifty-two and 25/100 ($656,552.25) Dollars as security
for the faithful performance and observance by Tenant of the terms, provisions,
covenants and conditions of this Sublease, and it is agreed that in the event
Tenant defaults after notice and the expiration of applicable grace or cure
periods in respect of any of the terms, provisions, covenants and conditions of
this Sublease, including, but not limited to, the payment of fixed or additional
rent, Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rental or any other sum
as to which Tenant is in default or for any sum which Landlord may expend by
reason of Tenant's default after notice and the expiration of applicable grace
or cure periods in respect of any of the terms, provisions, covenants and
conditions of this Sublease, including, but not limited to, any damages or
deficiency accrued before or after summary proceedings or other reentry by
Landlord. In the
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event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this Sublease, the security shall be
returned to Tenant not later than thirty (30) days after the later to occur of
the date fixed as the end of the term of this Sublease and delivery of entire
possession of the Demised Premises to Landlord. Twenty-four (24) months after
the rent commencement date, the security deposit shall be reduced to Four
Hundred Thirty-Seven Thousand Seven Hundred One and 50/100 ($437,701.50)
Dollars. In the event of transfer of the Overlease, Landlord shall transfer the
security to the transferee and upon written notice to Tenant of the name and
address of such transferee, and such transferee's acceptance of the security or
assumption of Landlord's obligations with respect thereto, Landlord shall
thereupon be released by Tenant from all liability for the return of such
security, and Tenant agrees to look solely to the new landlord for the return of
said security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new landlord. Tenant further
covenants and agrees that it will not assign or encumber or attempt to assign or
encumber the monies deposited herein as security and that neither Landlord nor
its successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance. In the event Landlord applies or
retains any portion or all of the security so deposited, Tenant shall, within
ten (10) days after demand therefor, restore the amount so applied or retained
so that at all times the amount deposited shall be the full amount of the
security deposit required under this Sublease at the relevant time. The security
shall be deposited in an interest-bearing account in a bank located in New York
City, selected by Landlord, and interest earned on the account (less the one
percent (1%) administrative fee allowed by law, which may be retained by
Landlord) shall be paid to Tenant annually.
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(b) In lieu of the cash security deposit referred to in paragraph (a)
above, Tenant may deliver to Landlord, and shall maintain in effect at all times
during the term of this Sublease (and through the period which is thirty (30)
days following the later to occur of (i) the stated expiration date of this
Sublease and (ii) delivery of possession of the entire Demised Premises to
Landlord), a clean, unconditional and irrevocable letter of credit, in a form
reasonably acceptable to Landlord, naming Landlord as beneficiary, in the amount
of the cash security deposit required to be maintained under paragraph (a)
above, issued by a banking corporation ("Bank") which is a member of the New
York Clearing House Association or successor thereto and capable of presentment
at a bank office in Manhattan. Such letter of credit shall have an expiration
----------------------------------------------
date no earlier than the first anniversary of the date of issuance thereof and
- ------------------------------------------------------------------------------
it shall be automatically renewed from year-to-year unless terminated by the
- ----------------------------------------------------------------------------
Bank by notice to Landlord given not less than forty-five (45) days prior to the
- --------------------------------------------------------------------------------
then expiration date therefor: or, if such letter of credit is not automatically
- --------------------------------------------------------------------------------
renewable, Tenant shall furnish to Landlord a replacement letter of credit, with
- --------------------------------------------------------------------------------
an expiration date not earlier than the first anniversary of the expiration date
- --------------------------------------------------------------------------------
of the then-existing letter of credit (or October 29, 2002, if earlier). It is
- -----------------------------------------------------------------------
agreed that in the event Tenant defaults in respect of any of the terms,
covenants or provisions of this Sublease, including, but not limited to, the
payment of any rental, and such default continues after notice and beyond the
applicable grace or cure period, if any, or if any letter of credit is
terminated by the Bank and/or is not replaced at least thirty (30) days prior to
its expiration that (i) Landlord shall have the right to require the Bank to
make payment to Landlord of so much of the entire proceeds of the letter of
credit as shall be appropriate, in Landlord's sole discretion, to cure the
default (or the entire proceeds if notice of termination is given as aforesaid
and/or
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<PAGE>
the letter of credit is not replaced as aforesaid), and (ii) Landlord may apply
said sum so paid to it by the Bank to the extent required for the payment of any
rental or any other sum as to which Tenant is in default or for any sum which
Landlord may expend by reason of Tenant's default (and which Landlord would be
entitled to recover from Tenant pursuant to the terms of this Sublease) in
respect of any of the terms, covenants and conditions of this Sublease,
including, but not limited to, any damages or deficiency in the reletting of all
or a portion of the Demised Premises, whether such damages or deficiency accrue
before or after summary proceedings or other re-entry by Landlord, without
thereby waiving any other rights or remedies of Landlord with respect to such
default. If Landlord applies any part of the proceeds of a letter of credit,
Tenant, upon demand, shall deposit with Landlord, within ten (10) days after
demand therefor, the amount so applied or retained (or increase the amount of
the letter of credit) so that the Landlord shall have the full deposit required
under this Sublease on hand at all times during the term of this Sublease. If,
subsequent to a letter of credit being drawn upon, a new letter of credit
meeting all the requirements set forth in this paragraph (b) is delivered to
Landlord, any proceeds of the former letter of credit then held by Landlord as a
security deposit shall be promptly returned to Tenant. If a letter of credit is
drawn upon, any proceeds received by Landlord which are not applied to the
curing the default shall be held by Landlord subject to the provisions of
paragraph (a) above. In the event of an assignment by Landlord of its interest
under this Sublease, Landlord shall transfer the security to the assignee, and
upon written notice to Tenant of the name and address of such assignee, and such
assignee's acceptance of the security, Tenant agrees to look solely to the new
landlord for the return of the security; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the
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<PAGE>
security to a new landlord, provided that the assignee acknowledges acceptance
of the security. Tenant shall have the right to substitute one letter of credit
for another, provided that at all times the letter of credit shall meet the
requirements of this paragraph (b).
7. Terms (whether capitalized or not) which are used or incorporated in
this Sublease, which are not separately defined herein, and which are defined in
the Overlease, shall have the meanings given to them in the Overlease. In the
event of conflict between an express term of this Sublease (i.e., a term set
forth directly in this instrument and not a term incorporated herein) and an
express term of the Overlease, this Sublease shall take precedence and shall
control.
8. This sublease shall not take effect unless and until there has been
obtained the written consent hereto of the Overlandlord (including consent for
any initial work to be performed by Tenant and which requires consent under
Article 11 of the Overlease, provided that plans and specifications for such
work--meeting the requirements of said Article 11--are delivered by Tenant to
Landlord simultaneously with or prior to the delivery of this Sublease), and
Landlord shall not be liable to Tenant by reason of the failure of the
Overlandlord to furnish such consent, for any reason whatsoever. Landlord
agrees, in requesting such consent, to seek the Overlandlord's agreement that
the improvements proposed to be made by Tenant need not be removed at the end of
the Term; however, the failure or refusal of Overlandlord to agree to the same
shall not be a condition of the granting of such consent. If such consent has
not been obtained by February 1, 1998, Tenant may thereafter terminate this
Sublease by notice given at any time prior to the granting of such consent. In
addition, if such consent is refused or if such consent has not been obtained by
March 1, 1998, this Sublease shall automatically be terminated.
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<PAGE>
In the event of termination of this Sublease under either of the preceding two
sentences, Landlord shall return to Tenant all monies paid hereunder, and
neither party shall otherwise have any rights against or obligations to the
other hereunder or with respect to the Demised Premises.
IN WITNESS WHEREOF, the parties hereto have duly executed this sublease as
of the day and year first above written.
EMI ENTERTAINMENT WORLD, INC.
By: /s/ Alan Newman
--------------------------------
Printed Name: Alan Newman
----------------------
Title:
-----------------------------
BRONNER SLOSBERG HUMPHREY, INC.
By: /s/ Robert E. Stoloff
--------------------------------
Printed Name: Robert E. Stoloff
----------------------
Title: SVP . CFO
-----------------------------
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<PAGE>
EXHIBIT 10.9
SUBLEASE
--------
THIS SUBLEASE, made as of the 22/nd/ day of March, 1999, between EMI MUSIC,
INC., a Delaware corporation having an office at 1290 Avenue of the Americas,
New York, New York 10104 ("Landlord") and BRONNER SLOSBERG HUMPHREY, LLC, a
Delaware limited liability company having an office at 800 Boylston Street,
Boston, MA 02199 ("Tenant").
Recital:
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A. By Lease dated November 12, 1987, as amended by Lease Amendment Agreements
dated June 13, 1988 and November 22, 1994 (collectively, the "Overlease"), 810
Associates (together with its successors, the "Overlandlord") leased to
Landlord's predecessor in interest the entire 4th and 8th floors in the building
known as 810 Seventh Avenue, New York, New York (the "Building"). A copy of the
Overlease (with certain dollar figures deleted) has been delivered to Tenant and
Tenant, by its execution of this Sublease, acknowledges that it has received and
reviewed the Overlease.
B. Tenant desires to sublease from Landlord, and Landlord is willing to
sublease to Tenant, a portion of the 8/th/ floor, consisting of approximately
11,703 square feet and located generally as outlined on Exhibit A annexed hereto
(the "Demised Premises") in the Building, on the terms and conditions set forth
in this sublease.
<PAGE>
Agreement
---------
1. Landlord hereby subleases to Tenant, and Tenant hereby hires and takes
from Landlord, the Demised Premises, to be used and occupied by Tenant for
general and executive offices and for no other purpose, for a term (the "Term")
to commence (subject to the following sentence) ten (10) days after the later to
occur of (i) the date on which the Overlandlord's consent (as contemplated by
Section 9 hereof) is received by Tenant and (ii) Landlord's Work (as defined in
Section 4 hereof) has been substantially completed, as certified in writing by
Landlord to Tenant, and vacant possession of the Demised Premises has been
delivered to Tenant (the "Commencement Date") and to terminate at noon on
September 29, 2002 (the "Expiration Date"), unless sooner terminated as herein
provided, at an annual fixed rent (the "Fixed Rent") of Four Hundred Six
Thousand Six Hundred Seventy-Nine and 25/100 ($406,679.25) Dollars. Should
Tenant take possession of the Demised Premises during the ten (10) day period
specified in the preceding sentence, then the Commencement Date shall be
advanced to such date of possession. Tenant shall not be required to pay the
installments of Fixed Rent which would otherwise be due in respect of the first
two full calendar months of the Term. The Fixed Rent shall be payable in equal
monthly installments of Thirty-Three Thousand, Eight Hundred Eighty-Nine and
94/100 ($33,889.94) Dollars each. All monthly installments of Fixed Rent shall
be payable to Landlord in advance on the first day of each and every calendar
month during the Term, except that the rent for the third full month of the Term
shall be paid upon the execution and delivery of this lease to Landlord. The
Fixed Rent for any fractional month at the beginning or end of the Term shall be
apportioned.
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<PAGE>
2. This lease is a sublease, the Demised Premises being demised to
Landlord by the Overlease. This Sublease is subject and subordinate to the
Overlease, and to any matters to which the Overlease is or shall be subordinate
and, in the event of termination, reentry or dispossess by Overlandlord under
the Overlease, it may, at its option, take over all of the right, title and
interest of Landlord, as sublessor, under this Sublease, and in that case Tenant
shall, at Overlandlord's option, attorn to Overlandlord pursuant to the then
executory provisions of this Sublease, except that Overlandlord shall not
(except to the extent that Overlandlord was responsible for an obligation of
Landlord under this Sublease, pursuant to a similar provision of the Overlease
which is incorporated herein) be (i) liable for any previous act or omission of
Landlord under this Sublease, (ii) subject to any credit, offset, claim,
counterclaim, demand or defense which Tenant may have against Landlord, (iii)
bound by any previous modification of this Sublease (unless Overlandlord has
expressly consented thereto in writing) or by any previous prepayment of more
than one (1) month's rent, (iv) bound by any covenant of Landlord to undertake
or complete any construction of the Demised Premises or any portion thereof, (v)
required to account for any security deposit of the Tenant other than any
security deposit actually delivered to Overlandlord by Landlord, (vi) bound by
any obligation to make any payment to Tenant or grant any credits, except for
services, repairs, maintenance and restoration provided for under this Sublease
to be performed after the date of such attornment, (vii) responsible for any
monies owing by Landlord to the credit of Tenant or (viii) required to remove
any person occupying the Demised Premises or any part thereof. The foregoing
shall not release Landlord from any obligations to Tenant under this Sublease.
Tenant covenants that it shall so conduct itself and its operations in and about
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<PAGE>
the Demised Premises as not to cause Landlord to be in default under the
Overlease; provided, however, that this sentence is not intended to deprive
Tenant of any grace period provided for in this Sublease for the curing of
Tenant's defaults. Landlord represents that: (i) the Overlease is in full force
and effect; (ii) a true and correct copy of the Overlease has been delivered to
Tenant; (iii) there are no outstanding notices of default or of termination
which have been received by Landlord from Overlandlord or sent by Landlord to
Overlandlord with respect to the Overlease; (iv) Landlord has not received
notice of any pending foreclosure of Overlandlord's mortgage, nor any official
notice that Tenant is illegally occupying the Demised Premises; (v) Landlord has
the full right and authority to enter into this Sublease and to sublet the
Demised Premises to Tenant as provided herein; (vi) Overlandlord has no right to
terminate the Overlease, other than as expressly provided therein; (vii)
Landlord shall not amend the Overlease so as to adversely affect the rights or
obligations of Tenant under this Sublease in any material respect; and (viii)
Landlord will not voluntarily terminate the Overlease unless, in connection
therewith, Overlandlord agrees to recognize Tenant as its direct tenant under
the terms of this Sublease. If Landlord receives any notice of default under the
Overlease which in Landlord's reasonable judgment is likely to result in the
termination of this Sublease, Landlord will promptly send a copy of such notice
to Tenant.
3. The terms, covenants, provisions and conditions of the Overlease are
hereby incorporated herein and shall be binding upon both parties hereto, those
applying to the landlord therein applying, in this Sublease, to the Landlord,
and those applying to the tenant therein applying, in this Sublease, to the
Tenant, with the following exceptions:
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<PAGE>
(a) The Term, the Demised Premises, and fixed rent payable
hereunder shall be as provided in Section 1 hereof, and not as
provided in the Overlease. In addition to such fixed rent, Tenant
shall pay as additional rent all other sums due under this Sublease,
within 20 days after the submission of bills therefor (notwithstanding
any different payment period specified in the Overlease), except that
monthly estimated payments of Operating Expenses shall be payable with
the fixed rent on the first day of each calendar month. Payments of
additional rent may be made under protest, to the same extent
permitted to Landlord under the Overlease.
(b) The permitted use of the Demised Premises shall be as
provided in Section 1 hereof. Without limiting the foregoing, Tenant
shall not use the Demised Premises or any part thereof for: (i) the
preparation and/or sale of food for on- or off-premises consumption
(other than a microwave oven or coffeemaker, as approved by
Overlandlord, for employees of Tenant); or (ii) use by a foreign or
domestic governmental agency.
(c) Article 5 of the Overlease shall not apply herein; but
Tenant shall pay to Landlord 28.54% of all amounts billed to Landlord
under Article 5 of the Overlease (as modified by the November 22, 1994
Lease Amendment Agreement), except that for purposes of this Sublease
the Base Tax shall be the Taxes payable by Overlandlord for the Tax
Year 1999/2000, and the Base Operating Expenses shall be the average
of the Operating Expenses incurred during the 1999 and 2000
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<PAGE>
Operational Years. Tenant shall not be responsible for any portion of
the Operating Expenses for the 1999 Operational Year. Prior to or
together with each billing under this Paragraph 3(c), Landlord shall
furnish to Tenant a copy of the applicable statement received from the
Overlandlord for Taxes or Operating Expenses (and, with respect to the
first billing hereunder, also a copy of the statement for the Base Tax
or Base Operating Expenses), as the case may be. Tenant recognizes
that Operating Expenses may be billed on an estimated basis commencing
in January, 2000, based on estimated billings received by Landlord
under the Overlease. If Tenant advises Landlord, within thirty (30)
days after Tenant's receipt of a Statement rendered by Overlandlord,
that Tenant has a bona fide dispute with respect to a charge or
---------
charges thereon, Landlord will endeavor in good faith (but at Tenant's
expense) to resolve such dispute under Section 5.10 of the Overlease;
any costs incurred by Landlord in connection therewith and not
reimbursed by Overlandlord may be billed to Tenant from time to time
as additional rent.
(d) Tenant is to have the benefit of all repairs, restoration,
materials and services to be provided to the Demised Premises by the
Overlandlord, but Landlord herein shall not be obligated to make any
repairs, alterations or restoration (whether required for compliance
with any laws and requirements of any public authorities, compliance
with any requirements of insurance bodies or otherwise), to supply any
materials or services to the Demised Premises or to
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<PAGE>
maintain any insurance with respect to the Demised Premises, nor shall
Landlord be liable for the failure of others so to do. Tenant
recognizes that the foregoing does not create any direct obligation of
Overlandlord to Tenant, but Landlord agrees, if so requested by
Tenant, promptly to make appropriate demand on the Overlandlord to
provide services and/or repairs to the Demised Premises as required by
the Overlease. If, despite Landlord's demand therefor, Overlandlord
fails or refuses to provide repairs, restoration, materials or
services to the Demised Premises as required by the Overlease, Tenant
may (on five business days' notice to Landlord) bring an appropriate
action, in Landlord's name but at Tenant's expense, against
Overlandlord to compel the same to be provided; and Landlord will
cooperate with Tenant at Tenant's cost (the "Claim Assertion Right").
(e) Tenant may assign this Sublease or sublet the Demised
Premises, subject to the following express conditions: (i) any
assignment or subletting shall be subject to the consent of Landlord
and Overlandlord, as provided in Article 9 of the Overlease; (ii) any
subletting shall be subject to this Sublease and shall be in form
reasonably satisfactory to Landlord and Overlandlord; (iii) any
assignment or subletting shall comply with (and shall be subject to)
the applicable provisions of Article 9 of the Overlease, including the
rights reserved to the Overlandlord to terminate this Sublease or to
require that this Sublease be assigned to it or that the Demised
Premises be sublet to it. If Overlandlord consents to any assignment
or subletting by Tenant, Landlord's consent thereto shall not be
unreasonably
-7-
<PAGE>
withheld or delayed. The transfer (by one or more transfers) of a
majority of the ownership interests in Tenant shall be deemed to be an
assignment of this Sublease.
(f) Wherever the Overlease provides for, or conditions any right
upon, a consent or approval to be given by the landlord, or for some
matter to be effected to the satisfaction of the landlord, the consent
or approval or satisfaction of Landlord and of the Overlandlord shall
be required hereunder. If such consent or approval or satisfaction has
been obtained from the Overlandlord in any instance, Landlord shall
not unreasonably withhold or delay the same on its part. Landlord
shall not be liable to Tenant by reason of the failure of the
Overlandlord to furnish any such consent or approval, for any reason
whatsoever; however, Landlord will, at Tenant's request and at
Tenant's expense, promptly apply to Overlandlord for such consent or
approval and thereafter pursue such application with reasonable
diligence.
(g) Tenant shall not make any alterations, additions,
installations, substitutions, improvements or decorations in or to the
Demised Premises without Landlord's prior, written approval, which may
be withheld in Landlord's sole discretion. Notwithstanding the
foregoing, Landlord agrees (subject to approval thereof by
Overlandlord) not unreasonably to withhold or delay its consent to
proposed interior, non-structural alterations (including, without
limitation, the installation of new carpeting in, and the redecoration
of, the elevator lobby and reception area). If Tenant is permitted to
make improvements to the Demised
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<PAGE>
Premises, and if the Overlandlord does not require such improvements
to be removed at the expiration of the full term of this Sublease,
then Landlord will not require Tenant to remove the same. Promptly
after taking possession of the Demised Premises, Tenant shall install
appropriate door hardware and exit signage, so as to provide emergency
access from Landlord's adjoining premises to the fire stair located in
the Demised Premises in accordance with applicable codes; Tenant
recognizes that Landlord's employees and visitors must always have
emergency access to such fire stair.
(h) For purposes of this Sublease, the Initial Electricity
Factor shall be $32,183.25. The Initial Electricity Factor shall be
subject to increase with respect to changes in the public utility rate
schedule, surcharges (including a surcharge in the nature of a fuel or
similar adjustment), and/or changes in the service classification of
the Building only to the extent the same become effective after the
Commencement Date of the Term; in support of any such increase,
Landlord shall furnish to Tenant a copy of any documentation received
from the Overlandlord to support a similar increase in the Electricity
Factor under the Overlease. Any other increase in the Initial
Electricity Factor shall be only as determined by Overlandlord in
accordance with Article 16 of the Overlease (and only with respect to
Tenant's utilization of electricity during the Term of this Sublease),
taking into account the various activities of Landlord and Tenant
which may cause either party to consume a disparate amount of the
electricity furnished to the premises demised
-9-
<PAGE>
pursuant to the Overlease. Tenant may contest any such increase (in
Landlord's name but at Tenant's expense) in accordance with Section
16.07 of the Overlease; Landlord will cooperate with Tenant, at
Tenant's cost, in any such contest.
(i) The 30-day periods referred to in Section 25.02(b) of the
Overlease shall be reduced to 20 days, for purposes of this Sublease.
(j) The term "Broker", as used in Section 31.01 of the Overlease
shall mean Insignia/Edward S. Gordon Company Incorporated and CB
Commercial Real Estate Group, Inc. Landlord similarly agrees to hold
Tenant harmless against any claims for a brokerage commission arising
out of any conversations or negotiations had by Landlord with any
broker or finder except Broker.
(k) Notices to Tenant shall be addressed to the attention of
Meryl Beckingham, Chief Financial Officer, with a copy to Goodwin,
Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109-2881,
Attention Lawrence R. Cahill, P.C. Notwithstanding Article 32 of the
Overlease, invoices for rent and other routine communications from
Landlord to Tenant may be delivered in any commercially reasonable
manner.
Notices to Landlord under this Sublease shall be addressed to
Landlord at:
c/o Capitol Records, Inc.
1750 North Vine Street
Hollywood, CA 90028
Attn: Chief Financial Officer
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<PAGE>
with a duplicate original to:
EMI-Capitol Music Group, North America
1290 Avenue of the Americas
New York, NY 10104
Attn: Senior Facilities Manager
(l) Wherever the Overlease, as incorporated herein, requires the
tenant thereunder to provide insurance or to give an indemnity for the
benefit of the landlord, the same shall be maintained or given, as the
case may be, for the benefit of Landlord and of Overlandlord.
(m) The following provisions of the Overlease shall not apply
herein: Sections 1.02, 1.03, 1.06, 1.07, 2.01 and 3.01, Article 4,
except for the first two sentences of Section 4.01; Section 18.04, but
Tenant shall be entitled to three (3) lines on the Building Directory;
Article 35; Sections 2 through 9 and 11 through 14 of the Lease
Amendment Agreement dated June 13, 1988; and Sections 6 through 8 of
the Lease Amendment Agreement dated November 22, 1994.
4. Landlord shall cause the following work ("Landlord's Work") to be
performed, at Landlord's expense, so that the Demised Premises will be separated
from Landlord's other premises: (i) construct a code-compliant wall with proper
fire rating, wherever necessary, where existing walls form the demising line
between the Demised Premises and Landlord's retained premises and along
corridors within Landlord's retained premises; (ii) install a fire-rated
demising wall and door to close the corridor adjoining the lunchroom in
Landlord's retained premises, as shown on Exhibit A; (iii) if required for fire
code compliance, relocate the entrance door from the reception area to the
balance of the Demised Premises approximately 15 feet in a westerly
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<PAGE>
direction, to a location approved by Tenant (such approval not to be
unreasonably withheld); and (iv) install appropriate door hardware on the
entrance door to Landlord's retained premises and exit signage in the area of
such door, so as to provide emergency access from the Demised Premises to the
fire stair located in Landlord's adjoining premises in accordance with
applicable codes. Landlord recognizes that Tenant's employees and visitors must
always have emergency access to such fire stair. Any asbestos abatement required
in connection with the foregoing shall be a part of Landlord's Work. Landlord's
Work shall be commenced promptly after the execution and delivery of this
Sublease and continued to completion with reasonable promptness. Tenant has
advised Landlord that, in lieu of the demising wall and door to be constructed
by Landlord and described in clause (ii) above in this paragraph, Tenant prefers
to construct a code-compliant demising wall and door elsewhere in the Demised
Premises in the general vicinity of Landlord's proposed demising wall and door.
Provided (w) that Tenant gives written notice of its intention to do such work
within 10 days after the date of this Sublease and (x) such work is
substantially completed prior to Tenant's occupancy of the Demised Premises for
the conduct of its business, then (y) Landlord shall not perform the work
described in said clause (ii) and (z) Tenant shall be entitled to a credit
against the next rents payable under this Sublease in the amount of $1,000.
Notwithstanding any other provision of this Sublease, if Tenant elects to
construct such demising wall and door, the following shall apply: the space on
Landlord's side of such wall and door shall be excluded from the Demised
Premises, but the rent and additional rent payable hereunder shall not be
adjusted by reason thereof; and Tenant shall not occupy the Demised
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<PAGE>
Premises for the conduct of its business until the installation of such wall and
door has been substantially completed.
5. Tenant has inspected and examined all the premises herein demised and
is thoroughly acquainted and familiar with the physical condition thereof.
Landlord has not made and does not make any representations as to the physical
condition, expenses, operation or any other matter or thing affecting or related
to said premises. Tenant hereby expressly acknowledges that no such
representations have been made, and agrees to take the premises in their present
"as is" condition, except that (i) Landlord's telephones and other furniture and
furnishings (other than the reception desk and the table now located behind the
reception desk, located in the reception area, which are included as part of the
Demised Premises) shall be removed from the Demised Premises and (ii) Landlord
shall perform Landlord's Work and shall deliver the Demised Premises (with keys
to the front door lock(s)) vacant and in broom clean condition on the
Commencement Date. It is understood and agreed that all understandings and
agreements heretofore had between the parties hereto are merged into this
Sublease, which alone fully and completely expresses their agreement, and that
this Sublease is entered into after full investigation, neither party relying
upon any statement or representation, not embodied in this Sublease, made by the
other. This Sublease cannot be changed or terminated orally, but only by an
agreement in writing.
6. (a) Tenant has deposited with Landlord the sum of One Hundred Thirty-
Five Thousand Five Hundred Fifty-Nine and 76/100 ($135,559.76) Dollars as
security for the faithful performance and observance by Tenant of the terms,
provisions, covenants and conditions of this Sublease, and it is agreed that in
the event Tenant defaults after notice and the expiration of
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<PAGE>
applicable grace or cure periods in respect of any of the terms, provisions,
covenants and conditions of this Sublease, including, but not limited to, the
payment of fixed or additional rent, Landlord may use, apply or retain the whole
or any part of the security so deposited to the extent required for the payment
of any rental or any other sum as to which Tenant is in default or for any sum
which Landlord may expend by reason of Tenant's default after notice and the
expiration of applicable grace or cure periods in respect of any of the terms,
provisions, covenants and conditions of this Sublease, including, but not
limited to, any damages or deficiency accrued before or after summary
proceedings or other reentry by Landlord. In the event that Tenant shall fully
and faithfully comply with all of the terms, provisions, covenants and
conditions of this Sublease, the security shall be returned to Tenant not later
than thirty (30) days after the later to occur of the date fixed as the end of
the term of this Sublease and delivery of entire possession of the Demised
Premises to Landlord. One year after Tenant commences to be obligated for the
payment of Fixed Rent under this Sublease, the security deposit shall be reduced
to Sixty-Seven Thousand Seven Hundred Seventy-Nine and 88/100 ($67,779.88)
Dollars, and any cash security deposit in excess of such amount then held by
Landlord shall promptly be returned to Tenant. In the event of transfer of
Landlord's interest in the Overlease, Landlord shall transfer the security to
the transferee and upon written notice to Tenant of the name and address of such
transferee, and upon such transferee's acceptance of the security or assumption
of Landlord's obligations with respect thereto, Landlord shall thereupon be
released by Tenant from all liability for the return of such security (to the
extent so delivered), and Tenant agrees to look solely to the new landlord for
the return of said security (to the extent so delivered), and it is agreed that
the provisions
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<PAGE>
hereof shall apply to every transfer or assignment made of the security to a new
landlord. Tenant further covenants and agrees that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. In the event Landlord applies or retains any portion or all of the
security so deposited, Tenant shall, within twenty (20) days after demand
therefor, restore the amount so applied or retained so that at all times the
amount deposited shall be the full amount of the security deposit required under
this Sublease at the relevant time. The security shall be deposited in an
interest-bearing account in a bank located in New York City, selected by
Landlord, and interest earned on the account (less the one percent (1 %)
administrative fee allowed by law, which may be retained by Landlord) shall be
paid to Tenant annually. Landlord will advise Tenant of the name and address of
the bank where the security is deposited.
(b) In lieu of the cash security deposit referred to in paragraph (a)
above, Tenant may deliver to Landlord, and shall maintain in effect at all times
during the term of this Sublease (and through the period which is thirty (30)
days following the later to occur of (i) the stated expiration date of this
Sublease and (ii) delivery of possession of the entire Demised Premises to
Landlord), a clean, unconditional and irrevocable letter of credit, in a form
reasonably acceptable to Landlord, naming Landlord as beneficiary, in the amount
of the cash security deposit required to be maintained under paragraph (a)
above, issued by a banking corporation ("Bank") which is a member of the New
York Clearing House Association or successor thereto and capable of presentment
at a bank office in Manhattan. Each of the following (whether or not a member
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<PAGE>
of the New York Clearing House) shall constitute a Bank for the purposes of this
paragraph: Fleet National Bank. Such letter of credit shall have an expiration
date no earlier than the first anniversary of the date of issuance thereof and
it shall be automatically renewed from year-to-year unless terminated by the
Bank by notice to Landlord given not less than forty-five (45) days prior to the
then expiration date therefor; or, if such letter of credit is not automatically
renewable, Tenant shall furnish to Landlord a replacement letter of credit, with
an expiration date not earlier than the first anniversary of the expiration date
of the then-existing letter of credit (or October 29, 2002, if earlier). It is
agreed that in the event Tenant defaults in respect of any of the terms,
covenants or provisions of this Sublease, including, but not limited to, the
payment of any rental, and such default continues after notice and beyond the
applicable grace or cure period, if any, or if any letter of credit is
terminated by the Bank and/or is not replaced at least thirty (30) days prior to
its expiration that (i) Landlord shall have the right to require the Bank to
make payment to Landlord of so much of the entire proceeds of the letter of
credit as shall be appropriate, in Landlord's sole discretion, to cure the
default (or the entire proceeds if notice of termination is given as aforesaid
and/or the letter of credit is not replaced as aforesaid), and (ii) Landlord may
apply said sum so paid to it by the Bank to the extent required for the payment
of any rental or any other sum as to which Tenant is in default or for any sum
which Landlord may expend by reason of Tenant's default (and which Landlord
would be entitled to recover from Tenant pursuant to the terms of this Sublease)
in respect of any of the terms, covenants and conditions of this Sublease,
including, but not limited to, any damages or deficiency in the reletting of all
or a portion of the Demised Premises, whether such damages or deficiency accrue
before or after
-16-
<PAGE>
summary proceedings or other re-entry by Landlord, without thereby waiving any
other rights or remedies of Landlord with respect to such default. If Landlord
applies any part of the proceeds of a letter of credit, Tenant, upon demand,
shall deposit with Landlord, within twenty (20) days after demand therefor, the
amount so applied or retained (or increase the amount of the letter of credit)
so that the Landlord shall have the full deposit required under this Sublease on
hand at all times during the term of this Sublease. If, subsequent to a letter
of credit being drawn upon, a new letter of credit meeting all the requirements
set forth in this paragraph (b) is delivered to Landlord, any proceeds of the
former letter of credit then held by Landlord as a cash security deposit shall
be promptly returned to Tenant. If a letter of credit is drawn upon, any
proceeds received by Landlord which are not applied to the curing the default
shall be held by Landlord subject to the provisions of paragraph (a) above. In
the event of an assignment by Landlord of its interest under this Sublease,
Landlord shall transfer the security to the assignee, and upon written notice to
Tenant of the name and address of such assignee, and such assignee's acceptance
of the security, Tenant agrees to look solely to the new landlord for the return
of the security (to the extent so delivered); and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new landlord, provided that the assignee acknowledges acceptance
of the security. Tenant shall have the right to substitute one letter of credit
for another, provided that at all times the letter of credit shall meet the
requirements of this paragraph (b).
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<PAGE>
7. Terms (whether capitalized or not) which are used or incorporated in
this Sublease, which are not separately defined herein, and which are defined in
the Overlease, shall have the meanings given to them in the Overlease. In the
event of conflict or inconsistency between an express term of this Sublease
(i.e., a term set forth directly in this instrument and not a term incorporated
- -----
herein) and an express term of the Overlease, this Sublease shall take
precedence and shall control.
8. Tenant recognizes that the principal access to Landlord's retained
premises on the 8th floor is through the elevator lobby and reception area which
are part of the Demised Premises, and Tenant agrees that Landlord or its
successor may use such areas (including the lavatories located therein) at all
times, in common with Tenant, for the limited purpose of gaining access to
Landlord's retained premises and for normal lavatory use; provided, however,
that the use of such areas shall be subject to the following restrictions: (i)
Landlord's employees and visitors shall not loiter in the reception area, the
elevator lobby or the lavatories; (ii) Landlord's employees and visitors shall
not keep any furniture in such areas, and shall not utilize either the reception
desk or other furniture of Tenant therein or the services of Tenant's
receptionist or other personnel ; and (iii) Landlord shall be responsible for,
and shall promptly repair, any damage caused by Landlord's employees or visitors
in such areas. Tenant also recognizes and agrees that Landlord may maintain the
access/security telephone and identification-card reader located adjacent to the
entry door to Landlord's retained premises. Tenant also recognizes that the
telephone closet located by the fire stair in the Demised Premises contains
wiring and equipment owned and/or serviced by the telephone company and
necessary for the operating of Landlord's telephone
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<PAGE>
system; Tenant also may utilize such telephone closet for same purpose. Landlord
and Tenant agree as follows with respect to such telephone closet: the closet
shall be kept locked at all times when not being serviced, and keys shall be
retained by authorized representatives of Landlord and Tenant; access to the
telephone closet shall be limited to telephone company personnel and to
authorized representatives of Landlord or Tenant; neither party shall disturb
the telephone wiring or equipment of the other party located therein.
9. This Sublease shall not take effect unless and until there has been
obtained the written consent hereto of the Overlandlord. Landlord shall not be
liable to Tenant by reason of the failure of the Overlandlord to furnish such
consent, for any reason whatsoever. Landlord will make application to
Overlandlord for such consent promptly after the execution and delivery of this
Sublease. If such consent has not been obtained and such delivery made within
forty-five (45) days after the date of delivery of this Sublease (signed by
Landlord and Tenant) to Tenant, this Sublease shall automatically be terminated,
Landlord shall return to Tenant all monies paid hereunder, and neither party
shall otherwise have any rights against or obligations to the other hereunder or
with respect to the Demised Premises. Tenant agrees that a consent substantially
in the form attached to this Sublease as Exhibit C is acceptable. If
Overlandlord's consent is in a different form and if such consent imposes
obligations on Tenant which are materially greater than Tenant's obligations
under this Sublease, then Tenant may terminate this Sublease by notice given
within two business days after Tenant has received a copy of such consent, with
the same effect as if this Sublease were automatically terminated as provided
above in this Section. Time shall be of the essence as to the giving of such
notice; and Overlandlord's consent shall
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<PAGE>
conclusively be deemed accepted unless Tenant is entitled to give a notice of
termination under this Section and does so within such two-day period.
10. The submission by Landlord of this Sublease shall have no binding
force or effect and shall confer no rights nor impose any obligations, including
brokerage obligations, on either party. Neither party shall be bound by this
Sublease unless and until both Landlord and Tenant shall have executed this
Sublease and originals thereof shall have been delivered to the respective
parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this Sublease as
of the day and year first above written.
EMI MUSIC, INC. BRONNER SLOSBERG HUMPHREY, LLC
By: /s/ Justin Morris By: /s/ M. K. Beckingham
------------------------------ ------------------------------
Printed Name: JUSTIN MORRIS Printed Name: M. K. BECKINGHAM
-------------------- --------------------
Title: CFO CAPITOL RECORDS Title: CFO
--------------------------- ---------------------------
By : /s/ Alasdair McMullan
-----------------------------
Printed Name: ALASDAIR McMULLAN
--------------------
Title: Secretary
---------------------------
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<PAGE>
[DIAGRAM}
Exhibit A
EMI-CAPITOL MUSIC
810 7th AVE/8TH FLOOR
NY, NY
<PAGE>
EXHIBIT C
---------
[Form of Owner/Landlord Consent]
March ___, 1999
Re: Sublease dated March __, 1999 between EMI Music, Inc.
(Sublessor) and Bronner Slosberg Humphrey, LLC
(Sublessee) at 810 Seventh Avenue
In accordance with your request, Landlord hereby grants its consent (the
"Consent") to the execution and delivery of the sublease (the "Sublease") dated
March __, 1999, between EMI Music, Inc. (Tenant), as sublessor and Bronner
Slosberg Humphrey LLC (the "Subtenant") as sublessee, of a portion of the eighth
(8/th/) floor (the "Sublet Space"), subject to the following terms and
conditions:
1. This Consent shall not be assignable.
2. Nothing herein contained shall be deemed or construed to modify, waive,
impair or affect any of the provisions, covenants, agreements, terms or
conditions contained in the Lease (except as may be herein expressly
provided), or to waive any breach thereof, or any right of Landlord against
Tenant, or to enlarge or increase Landlord's obligations under the Lease,
and all provisions, covenants, agreements, terms and conditions contained
in the Lease, are (except as expressly herein modified, waived, impaired or
affected) hereby ratified and confirmed as being in full force and effect.
3. Notwithstanding any subletting provided for herein, Tenant shall be and
remain fully liable for payment of the rent, additional rent due and all
other sums to become due under the Lease and for the performance of all the
covenants, agreements, terms, provisions and conditions contained in the
Lease on the part of Tenant to be performed and all acts and omissions of
Subtenant or anyone claiming under or through Subtenant which shall be in
violation of any of the covenants, agreements, terms, provisions and
conditions contained in the Lease, shall be deemed to be a violation by
Tenant.
C-1
<PAGE>
4. The Sublease shall be subject and subordinate at all times to the Lease, to
all of the provisions, covenants, agreements, terms and conditions
contained in the Lease and in this Consent, and to the matters to which the
Lease and this Consent are or shall be subject and subordinate, and
Subtenant shall not do or permit anything to be done which may or shall
violate any of said provisions, covenants, agreements, terms and conditions
and matters.
5. Notwithstanding anything contained in the Sublease to the contrary, this
Consent shall not be deemed or construed as a consent by Landlord to, or as
permitting, any other or further subletting by Tenant or anyone claiming
under or through Tenant (including without limitation, Subtenant) , and no
other or further sublease of the premises demised by the Lease or any part
thereof or any assignment of the Lease or the Sublease shall be made by
Tenant or anyone claiming under or through Tenant (including without
limitation, Subtenant) without Landlord's prior written consent in each
instance.
6. In the event of termination, re-entry or dispossess by Landlord under the
Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublessor, and under the Sublease, and Subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of the Sublease, except that Landlord shall not (i) be
liable for any previous act of omission of Tenant under the Sublease, (ii)
be subject to any offset which theretofore accrued or may thereafter accrue
to Subtenant against Tenant, or (iii) be bound by any previous modification
of the Sublease or by any previous prepayment of more than one (1) month's
rent.
7. INTENTIONALLY OMITTED.
8. Notwithstanding any provision of the Sublease to the contrary, the term of
the Sublease (including any extension or renewal thereof, if any) shall
expire and terminate at least one (1) day prior to the expiration date of
the Lease.
9. INTENTIONALLY OMITTED.
10. Except as otherwise provided in paragraph 5 of this consent, nothing
contained herein or in the Sublease shall or shall be deemed to create any
landlord-tenant relationship between Landlord and Subtenant.
11. Tenant and Subtenant each warrant and represent to Landlord that it dealt
with no other brokers in connection with this transaction, other than
Insignia/Edward S. Gordon Company, Inc. and CB Commercial Real Estate
Group, Inc. ("Brokers"). Tenant and Subtenant, jointly and severally, shall
indemnify and hold Landlord harmless against any fees, charges or
commissions whether due to Brokers or any other party and any and all
losses, costs or damages arising out of or in connection with any claims of
any other brokers or party by reason of said brokers or party, having had
any conversations or dealings with Tenant and/or Subtenant in connection
with this transaction and do hereby, jointly and severally, indemnify and
hold Landlord harmless
C-2
<PAGE>
against the same and, jointly and severally, agree to reimburse Landlord
for losses, costs or any damages arising out of or in connection with such
claims, including, without limitation, reasonable legal fees and
disbursements and any other costs of defending against such claims.
12. Tenant and Subtenant each acknowledge that they understand that there are
general tenant guidelines for the Building covering construction,
maintenance, repair or other work. Tenant and Subtenant each agree that all
repairs , renovations , alterations , installations , additions and
improvements and other activities within the scope of the general tenant
guidelines for the Building (including, without limitation, electrical and
communications systems and fireproofing) effected by or on behalf of Tenant
and/or Subtenant in the Sublet Space shall be conducted in accordance with
and pursuant to the aforesaid tenant guidelines, as well as any applicable
governmental requirements and regulations. Tenant and Subtenant each agree
that it is their responsibility to ensure that Tenant and Subtenant and
those working for them and/or either of them comply with the aforesaid
tenant guidelines as well as any other applicable governmental requirements
and regulations.
13. In the event of any inconsistency between the terms and conditions of this
Consent and the terms and conditions of the Sublease, the terms and
conditions of this Consent shall govern.
Notwithstanding anything to the contrary contained herein, Landlord's Consent to
the Sublease and any provisions contained herein shall not be deemed a waiver by
Landlord of any default by Tenant or any rights of Landlord in connection
therewith.
C-3
<PAGE>
EXECUTION COPY
__ OF 4
1290 PARTNERS, L.P.
c/o Victor Capital Group, L.P.
605 Third Avenue
New York, New York 10016
April __, 1999
Warner Music Group, Inc.
75 Rockefeller Plaza
New York, NY 10019
Bronner Slosberg Humphrey, LLC
1290 Avenue of the Americas
New York, New York
RE: CONSENT TO SUBLEASE
"Building": 1290 Avenue of the Americas, New York, New York
"Premises": Described on Exhibit A attached hereto
"Sublet Space": Portion of the fourth (4th) floor
"Landlord": 1290 Partners, L.P.
"Tenant": Warner Music Group Inc.
"Subtenant": Bronner Slosberg Humphrey, LLC
"Lease": Agreement of Lease dated as of August 6, 1979, as amended
by a First Amendment of Lease dated as of March 17, 1981,
Second Amendment of Lease dated as of September 29, 1981,
Partial Surrender Agreement dated as of October 30, 1984,
Third Amendment of Lease dated as of April 19, 1989,
Fourth Amendment of Lease dated as of September 14, 1990,
and a Fifth Amendment of Lease dated as of July 28, 1998,
a Sixth Amendment of Lease dated as of September 23,
1998,
<PAGE>
and as same may be further amended, modified, extended or
restated from time to time
"Sublease": Sublease Agreement dated as of April __, 1999 and annexed
hereto, as same may be amended, modified, extended or
restated from time to time, as may be permitted hereunder
Gentlemen :
You have requested our consent to the Sublease. Such consent is hereby
granted on the terms and conditions, and in reliance upon the representations
and warranties, set forth in this letter (this "Agreement").
1. Tenant represents and warrants that as of the date hereof (a) the
Lease is in full force and effect; (b) the Lease has not been assigned,
encumbered, modified, extended or supplemented; (c) Tenant knows of no defense
or counterclaim to the enforcement of the Lease; (d) Tenant is not entitled to
any reduction, offset or abatement of the rent payable under the Lease; and (e)
a true and complete copy of the Sublease is attached hereto, and the Sublease
constitutes the complete agreement between Tenant and Subtenant with respect to
the subject matter thereof.
2. The Sublease shall be subject and subordinate to the Lease and
all of its provisions. Neither Tenant nor Subtenant shall take, permit or suffer
any action which would violate the provisions of the Lease or this Agreement.
3. Landlord's obligations to Tenant are governed only by the Lease
and this Agreement and Landlord's obligations to Subtenant are only as set forth
in Paragraph 6 of this Agreement. Landlord shall not be bound or estopped by any
provision of the Sublease, including any provision purporting to impose any
obligations upon Landlord (except as provided in Paragraph 6 of this Agreement).
Nothing contained herein shall be construed as a consent to, approval of, or
ratification by Landlord of, any of the particular provisions of the Sublease or
any plan or drawing referred to or contained therein (except as may be expressly
provided herein). Landlord has not reviewed or approved any provision of the
Sublease.
4. If Tenant or Subtenant violates any of the terms of this
Agreement, or if any representation by Tenant or Subtenant in this Agreement is
untrue in any material respect, or if Subtenant takes any action which would
constitute a default under the Lease, then Landlord may declare the Lease to be
in default and avail itself of all remedies provided at law or equity or in the
Lease with respect to defaults.
2
<PAGE>
5. Subject to the provisions of Paragraph 6 of this Agreement, if
the Lease is terminated prior to the stated expiration date provided in the
Lease, the Sublease shall likewise terminate on the date of such termination. In
connection with such termination, Subtenant, at its sole expense, shall
surrender the Sublet Space to Landlord in the manner provided for in the Lease,
including the removal of all its personal property from the Sublet Space and
from any part of the Building to which it is not otherwise entitled to
occupancy, and repair all resulting damage to the Sublet Space and the Building.
Except as otherwise provided in the Lease, Landlord shall have the right to
retain any property and personal effects which remain in the Sublet Space or the
Building on the date of termination of the Sublease, without any obligation or
liability to Tenant or Subtenant, and to retain any net proceeds realized from
the sale thereof, without waiving Landlord's rights with respect to any default
by Tenant under the Lease or Subtenant under the foregoing provisions of this
paragraph and the provisions of the Lease and Sublease. If Subtenant shall fail
to vacate and surrender the Sublet Space in accordance with the provisions of
this paragraph, Landlord shall be entitled to all of the rights and remedies
which are available to a landlord against a tenant holding over after the
expiration of a term, and any such holding over shall be deemed a default under
the Lease. In addition, Subtenant agrees that it will not seek, and it expressly
waives any right to seek, any stay of the prosecution of, or the execution of
any judgement awarded in, any action by Landlord to recover possession of the
Sublet Space. Subtenant may not vacate the Sublet Space on a Sunday or holiday.
If the Sublease terminates on a Sunday or holiday, Subtenant must comply with
this paragraph by the end of the preceding Saturday or business day. This
paragraph shall survive the earlier termination of the Lease and Sublease.
6. If the Lease is terminated before the stated expiration date of
the Sublease, and if Landlord or any other party then entitled to possession of
the Sublet Space so demands, Subtenant shall attorn to Landlord or any such
party upon the then executory terms of the Sublease for the remainder of the
stated term of the Sublease, provided that, so long as such attornment is
demanded, Landlord or such other party shall recognize Subtenant's occupancy
rights provided further that such party's obligations to Subtenant shall be
governed by the terms of the Lease and this Agreement. The party to whom
Subtenant attorns shall, under such circumstances, agree not to disturb
Subtenant in its use and enjoyment of the Sublet Space, provided Subtenant
performs all of its obligations under the Sublease. Such party shall not be
required to honor or credit Subtenant for (i) any payments of rent made to
Tenant for more than one month in advance or for any other payment owing by, or
on deposit with, Tenant for the credit of Subtenant, (ii) any obligation to
perform any work or make any payment to Subtenant pursuant to a work letter, the
Sublease or otherwise (other than repair or maintenance work with respect to the
Sublet Space required of the lessor under the Lease), (iii) any security
deposits not in Landlord's actual
3
<PAGE>
possession, (iv) any obligation of, or liability resulting from any act or
omission of, Tenant, (v) any amendment of the Sublease not expressly consented
to by Landlord, or (vi) any defenses, abatements, reductions, counterclaims or
offsets assertable against Tenant. This provision is self-operative upon demand
for attornment, whether or not, as a matter of law, the Sublease may terminate
upon the expiration or termination of the term of the Lease. Subtenant, however,
agrees to give Landlord or such other party, on request, an instrument
acknowledging an attornment according to these terms. No attornment pursuant to
this paragraph shall be deemed a waiver or impairment of Landlord's rights under
the Lease to pursue any remedy not inconsistent with the attornment. In the
event of such election by Landlord or such other party, (i) Tenant shall deliver
to Landlord or such other party any security deposit which Tenant is then
holding under the Sublease and (ii) Subtenant shall reimburse Landlord or such
other party for any costs that may be incurred by it in connection with such
attornment, including reasonable legal fees and disbursements.
7. Tenant and Subtenant each agrees:
(i) None of Landlord's shareholders, partners, directors,
officers, agents or employees, directly or indirectly, shall be liable for
Landlord's performance under the Lease or this Agreement;
(ii) Landlord's liability with respect to this Agreement
shall be limited to the value of Landlord's interest in the Land and the
Building (as defined in the Lease);
(iii) it will not seek to satisfy any judgement against
Landlord out of the assets of any person or entity other than Landlord (but only
to the extent provided in clause (ii) above); and
(iv) the obligations of Landlord under this Agreement and
the Lease shall not be binding upon Landlord after the sale, conveyance,
assignment or transfer by Landlord of its interest in the Land and the Building,
and Tenant and Subtenant shall look solely to the transferee for the
satisfaction of such obligations. Any such transferee shall be deemed to have
assumed all of Landlord's obligations under this Agreement.
8. Tenant and Subtenant each represents and warrants that no rent or
other consideration is being paid or is payable to Tenant by Subtenant for the
right to use or occupy the Sublet Space or for the use, sale or rental of
Tenant's fixtures, leasehold improvements, equipment, furniture or other
personal property (the "Personal Property"), except as expressly provided for in
the Sublease. If such rent or other consideration including any rent or
consideration received in connection with
4
<PAGE>
the Personal Property exceeds the pro-rata portion of the Fixed Rent and
Additional Charges payable pursuant to the Lease, Tenant shall comply with
Section 38.08 of the Lease and pay to Landlord one hundred percent (100%) of
such excess in accordance with the provisions of the Lease.
9. Landlord represents and warrants that (i) the Lease is unmodified
except as provided herein and in full force and effect, (ii) Fixed Rent and
Additional Charges have been paid through the date hereof, and (iii) to the best
knowledge of the undersigned, except as provided in clause (ii) above, Tenant is
not in default of its obligations under the Lease and no event has occurred
which with the giving of notice or passage of time, or both, would constitute
such a default.
10. The Lease and this Agreement constitute the entire agreement of
the parties with respect to Landlord's consent to the Sublease. This Agreement
may not be changed except in writing signed by the party to be charged.
11. All statements, notices and other communications given pursuant
to this Agreement must be in writing and must be delivered personally with
receipt acknowledged, or sent by a nationally recognized reputable overnight
courier (against a receipt of delivery), or by registered mail, return receipt
requested, addressed to the parties at their addresses set forth above, or, if
to Subtenant, at the Building, or at such other address as any party may
designate upon not less than 10 days prior notice given in accordance with this
paragraph. Any such communication shall be deemed delivered when personally
delivered, or on the date received or rejected as indicated by the receipt if
sent by overnight courier or by the return receipt if sent by mail.
12. This Agreement shall be construed and governed by New York law.
13. Landlord's rights and remedies under this Agreement shall be in
addition to every other right or remedy available to it under the Lease, at law,
in equity or otherwise and Landlord shall be able to assert its rights and
remedies at the same time as, before, or after its assertion of any other right
or remedy to which it is entitled without in any way diminishing such other
rights or remedies. The invalidity or unenforceability of any provision of this
Agreement shall not impair the validity and enforceability of any other
provision of this Agreement.
14. This Agreement shall bind and inure to the benefit of the parties
and their respective successors and assigns, except as provided in Paragraph
7(iv) above and except that it shall not inure to the benefit of any successor
or assign of
5
<PAGE>
Tenant or Subtenant whose status was acquired in violation of the Lease or this
Agreement.
15. Each of the persons executing this Agreement on behalf of
Landlord, Tenant and Subtenant represents that he or she is duly authorized to
execute and deliver this Agreement on behalf of Landlord, Tenant and Subtenant,
as the case may be, and that each of Landlord, Tenant and Subtenant has full
power and authority to enter into this Agreement.
16. Tenant and Subtenant, jointly and severally, indemnify Landlord
against, and hold it harmless from, all costs, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of any claims for
brokerage commissions, finders fees or other compensation in connection with the
Sublease or procuring possession of the Sublet Space. Tenant and Subtenant, at
their sole expense, may defend any such claim with counsel reasonably acceptable
to Landlord and settle any such claim at their expense, but only Landlord may
approve the text of any stipulation, settlement agreement, consent order,
judgement or decree entered into on its behalf. The provisions of this paragraph
16 shall survive the expiration or sooner termination of the Lease or Sublease.
17. Subtenant indemnifies Landlord against, and holds it harmless
from any and all losses, costs, expenses, claims and liabilities including, but
not limited to, reasonable counsel fees, arising from the use, occupancy,
conduct or management of the Sublet Space by Subtenant, or its agents,
employees, contractors, representatives, invitees or visitors, or Subtenant's
business activities therein (unless caused solely by Landlord or Landlord's
employees' or contractors' negligence or wrongful act). If any proceeding is
brought against Landlord by reason of any such claim, Subtenant shall be
responsible for Landlord's costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred in connection therewith. If
any action or proceeding is brought against Landlord by reason of any such
claim, Subtenant, upon written notice from Landlord, shall, at Subtenant's sole
cost and expense, as the case may be, resist or defend such action or proceeding
using counsel reasonably approved by Landlord, but may not settle any such claim
without Landlord's prior written approval. The provisions of this paragraph 17
shall survive the expiration or earlier termination of the term of the Sublease
or the Lease. The indemnity and any right granted to Landlord pursuant to this
paragraph shall be in addition to, and not in limitation of, Landlord's rights
under the Lease.
18. Landlord's consent to the Sublease does not include consent to
any modification, supplement or amendment of the Sublease, or to any assignment
of the Sublease or sub-subletting of the Sublet Space, or to any additional
subleasing of the Sublet Space or any other portion of the Premises, each of
which requires
6
<PAGE>
Landlord's prior written consent (except that Tenant may terminate the Sublease
without Landlord's prior consent). If Tenant or Subtenant desires Landlord's
consent to any such other action it must specifically and separately request
such consent. Tenant shall give Landlord prompt written notice if the Sublease
terminates prior to its stated term.
19. Neither the execution and delivery of this Agreement or the
Sublease, nor any acceptance of rent or other consideration from Subtenant by
Landlord or Landlord's agent shall operate to waive, modify, impair, release or
in any manner affect Tenant's liability or obligations under the Lease or
Subtenant's liability or obligations under the Sublease.
20. If there shall be any conflict or inconsistency between the
terms, covenants and conditions of this Agreement or the Lease and the Sublease,
then the terms, covenants and conditions of this Agreement or the Lease shall
prevail. If there shall be any conflict or inconsistency between this Agreement
and the Lease such conflict or inconsistency shall be determined for the benefit
of, and by, Landlord.
21. Each of the parties hereby irrevocably and unconditionally waives
its right to a jury trial in any cause of action arising out of, or relating to,
this Agreement.
22. Tenant agrees to pay, upon demand, Landlord's reasonable out-of-
pocket fees and disbursements incurred in connection with and related to the
preparation and execution of this Agreement.
23. This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all such counterparts shall together constitute
one and the same instrument.
Please acknowledge your agreement to the terms and conditions of this
Agreement by signing the copy of this Agreement enclosed herewith and returning
it to the Landlord.
7
<PAGE>
You may consider Landlord's consent to be effective upon your receipt
of a fully executed copy of this Agreement.
Very truly yours,
1290 PARTNERS, L.P.
By: 1290 GP Corp., general partner
By: ______________________________
Name:
Title:
Agreed to:
WARNER MUSIC GROUP INC.
By: ______________________________
Name:
Title:
BRONNER SLOSBERG HUMPHREY, LLC
By: /s/ Meryl K. Beckingham
------------------------------
Name: Meryl K. Beckingham
Title: EVP/Chief Financial Officer
8
<PAGE>
[DIAGRAM APPEARS HERE]
Floor Plan of Sublet Space
1299 AVENUE OF THE AMERICA, 4TH FLR.
<PAGE>
EXHIBIT 10.10
SUBLEASE
WARNER MUSIC GROUP INC.,
as Sublandlord
and
BRONNER SLOSBERG HUMPHREY, LLC,
as Subtenant
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
1. SUBLEASING OF SPACE................................................. 1
2. CONDITION OF SPACE.................................................. 1
3. TERM OF SUBLEASE.................................................... 2
4. PRIME LANDLORD'S CONSENT............................................ 2
5. RENT................................................................ 2
6. USE................................................................. 6
7 SUBORDINATION TO AND INCORPORATION OF THE PRIME LEASE............... 6
8. ATTORNMENT.......................................................... 8
9. QUIET ENJOYMENT..................................................... 9
10. REPRESENTATIONS, WARRANTIES AND COVENANTS........................... 9
11. SERVICES AND REPAIRS................................................ 10
12. ENFORCEMENT OF PRIME LEASE.......................................... 11
13. ASSIGNMENT, SUBLETTING AND ENCUMBRANCES............................. 11
14. INDEMNIFICATION..................................................... 15
15. ALTERATIONS......................................................... 16
16. INSURANCE........................................................... 16
17. DESTRUCTION BY FIRE OR OTHER CASUALTY; CONDEMNATION................. 17
18. SECURITY............................................................ 18
19. BROKER.............................................................. 18
20. NOTICES............................................................. 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
21. NO WAIVERS........................................................... 19
22. CONSENT.............................................................. 19
23. INITIAL ALTERATIONS.................................................. 20
24. ENTIRE AGREEMENT, MISCELLANEOUS...................................... 22
</TABLE>
Schedule A Floor Plan
Exhibit B Furniture
ii
<PAGE>
AGREEMENT OF SUBLEASE, made as of the 29/th/ day of April, 1999,
between WARNER MUSIC GROUP INC. ("Sublandlord"), a Delaware corporation having
an office at 75 Rockefeller Plaza, New York, New York 10019, and BRONNER
SLOSBERG HUMPHREY, LLC ("Subtenant") a Delaware limited liability company having
its principal office at The Prudential Tower, 800 Boylston Street, Boston,
Massachusetts 02199.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS by Agreement of Lease dated as of August 6, 1979 between the
predecessor-in-interest to Sublandlord and the predecessor-in-interest to 1290
Partners, L.P. (the "Prime Landlord"), as amended by a First Lease Amendment
Agreement dated as of March 17, 1981, a Second Lease Amendment Agreement dated
as of September 29, 1981, a Partial Surrender Agreement dated as of October 30,
1984, a Third Lease Amendment Agreement of Lease dated as of April 19, 1989, an
Acceptance Notice dated April 28, 1989, a Fourth Lease Amendment dated as of
September 14, 1990, a Fifth Amendment of Lease dated as of July 28, 1998 and a
Sixth Amendment of Lease dated as of September 23, 1998, redacted copies of
which have been initialed and delivered to each other by Sublandlord and
Subtenant (collectively, the "Prime Lease"), Prime Landlord's predecessor-in-
interest leased to the predecessor-in-interest of Sublandlord certain premises
(the "Prime Lease Premises") more particularly described in the Prime Lease in
the building (the "Building") located at 1290 Avenue of the Americas, New York,
New York 10104; and
WHEREAS, Sublandlord desires to sublease to Subtenant, and Subtenant
desires to hire from Sublandlord, a portion of the Prime Lease Premises
consisting of a portion of the fourth (4th) floor of the Building, as more
particularly described in Schedule A annexed hereto (the area so sublet being
hereinafter referred to as the "Space"), on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is agreed as follows:
1. SUBLEASING OF SPACE. Sublandlord hereby subleases to Subtenant
-------------------
and Subtenant hereby hires from Sublandlord the Space.
2. CONDITION OF SPACE. On the Commencement Date (as hereinafter
------------------
defined), Sublandlord shall deliver the Space, and Subtenant agrees to accept
the Space, vacant (other than the furniture described in Section 24J hereof),
broom clean, and in its "as is" condition other than the Sublandlord's Work, as
of the date hereof. Sublandlord shall not be obligated to perform any work or
furnish any materials in, to or about the Space in order to prepare the Space
for use or occupancy
<PAGE>
2
by Subtenant other than ("Sublandlord's Work") the construction of demising
walls (the "Demising Wall") as indicated on Schedule A. Sublandlord covenants
that it will complete Sublandlord's Work no later than June 15, 1999. Subtenant
agrees that in executing this Sublease, it has not relied upon any statements,
representations, covenants or warranties made by Sublandlord or any person
acting on behalf of Sublandlord other than those, if any, expressly set forth in
this Sublease and on such investigations, examinations and inspections as
Subtenant has chosen to make or has made.
3. TERM OF SUBLEASE. The term ("Term") of this Sublease shall
----------------
commence on the later of (the "Commencement Date") (x) June 1, 1999, (y) the
date which Sublandlord gives Subtenant notice that it has received the Consent
(as defined herein), and (z) one (1) Business Day after completion of
Sublandlord's Work and, unless sooner terminated as herein provided, shall
expire on September 29, 2004 (the "Expiration Date"). As used herein, the term
"Business Days" shall mean all days except Saturdays, Sundays, and days on which
banks located within the State of New York are required or permitted to be
closed.
4. PRIME LANDLORD'S CONSENT. This Sublease is subject to and
------------------------
conditioned upon Sublandlord obtaining the written consent of Prime Landlord
to this Sublease, to the extent required under the Prime Lease, which consent
will not impose any obligations on Subtenant (unless expressly consented to in
writing by Subtenant) which are materially greater than the obligations under
this Sublease (the "Consent"). Sublandlord shall promptly request such Consent,
and Subtenant shall cooperate with Sublandlord, at no cost or expense to
Subtenant, to obtain such Consent and Subtenant shall provide all information
concerning Subtenant that Prime Landlord shall reasonably request. If such
consent is refused or if Prime Landlord shall otherwise fail to grant such
Consent within 45 days after the date hereof, then either party may, by written
notice to the other, given at any time prior to the granting of such consent,
terminate and cancel this Sublease, whereupon Sublandlord shall refund to
Subtenant any rent and security deposit paid hereunder. Upon the making of such
refunds, neither party hereto shall have any further obligation to the other
under this Sublease, except to the extent that any provisions of this
Sublease expressly survive the termination of this Sublease.
5. RENT.
----
A. Subtenant covenants and agrees to pay to Sublandlord, in
lawful money of the United States, fixed rent ("Fixed Rent") from the date
which is two (2) months (the "Free Rent Period") following the Commencement
Date through and including the Expiration Date, at the annual rate of FIVE
HUNDRED NINETY ONE THOUSAND NINETY SIX AND 00/100 ($591,096.00.) DOLLARS per
annum, in monthly installments of FORTY NINE THOUSAND TWO HUNDRED FIFTY EIGHT
AND 00/100 DOLLARS ($49,258.00) Dollars. The first monthly
<PAGE>
3
installment of Fixed Rent payable under this Sublease shall be paid on execution
of this Sublease.
B. In addition to the Fixed Rent set forth above, Subtenant
covenants and agrees to pay, from and after the Commencement Date, the following
amounts as additional rent hereunder ("Additional Rent"). Sublandlord shall bill
Subtenant for each item of Additional Rent promptly after Sublandlord receives
the corresponding bill from the Prime Landlord, and Subtenant shall pay each
amount so billed within ten (10) days after being billed therefor. The
Additional Rent items to be paid by Subtenant are as follows:
(i) 16.8344% ("Subtenant's Percentage") of all amounts
billed by Prime Landlord pursuant to Article 5 of the Prime Lease for the period
from and after the Commencement Date through and including the Expiration Date,
including estimated as well as actual bills as calculated and in the manner
provided in the Prime Lease; provided, however, that Subtenant shall be
responsible for such amounts only to the extent that they exceed Subtenant's
Percentage of the amounts payable by Sublandlord under Article 5 of the Prime
Lease for the twelve-month period commencing January 1, 1999 to December 31,
1999 (the "Operating Expense Base Amount") as if the Space was part of the Prime
Lease Premises for all of such period ("Operating Expense Excess"). In the event
the Sublandlord adds or deletes space from the Prime Lease Premises then
Subtenant's Percentage and the Operating Expense Base Amount will each be
proportionately adjusted. Sublandlord will submit each statement from Prime
Landlord made pursuant to Article 4 or Article 5 of the Prime Lease to Subtenant
with respect to the billing hereunder, also a copy of the statement for the
Operating Expense Base Amount or the Tax Base Amount, as the case may be.
Without making a representation with respect thereto, the parties solely for the
purpose of determining Subtenant's Percentage have agreed that the Prime Lease
Premises on the date hereof contains 79,801 square feet and the Space 13,434
square feet.
(ii) Subtenant's Percentage of amounts billed by Prime
Landlord pursuant to Article 4 of the Prime Lease described in the first whereas
clause of this Sublease for the period from and after the Commencement Date
through and including the Expiration Date, including estimated and actual bills
as calculated and in the manner provided in the Prime Lease; provided, however,
that Subtenant shall be responsible for such amounts only to the extent that
they exceed Subtenant's Percentage of the amounts payable by Sublandlord under
Article 4 of the Prime Lease for the amount (the "Tax Base Amount") equal to the
average of the Taxes (as such term is defined in the Prime Lease) for the fiscal
tax years of (i) July 1, 1998 to June 30, 1999, and (ii) July 1, 1999 to June
30, 2000, as if the Space was part of the Prime Lease Premises for all of such
tax years ("Tax Excess"). In the event the Sublandlord adds or deletes space
from the Prime Lease Premises then Subtenant's Percentage and the Tax Base
Amount will each be proportionately adjusted. Notwithstanding the foregoing,
Subtenant shall not be responsible for any
<PAGE>
4
amounts billed by Prime Landlord pursuant to Article 4 of the Prime Lease as
modified by any of the Amendments to the Prime Lease described in the first
whereas clause of this Sublease for the 1999 calender year.
(iii) All electrical charges with respect to the
Space from and after the Commencement Date, as follows:
(a) Electric energy to the Space shall be
supplied by individual submetering and Sublandlord shall have no
obligation to furnish or supply to Subtenant or the Space any
electric energy of any kind or nature whatsoever. Subtenant shall
pay Sublandlord, on demand, from time to time, but no more
frequently than monthly, for its consumption and demand of
electricity at the Space, based upon Sublandlord's actual cost
for submetered electricity for the Space, which costs include,
without limitation, fuel adjustments, sales, utility or other
taxes or other charges imposed in connection therewith, and the
ten percent (10%) administrative fee paid by Sublandlord to Prime
Landlord to the extent such fee is actually paid by Sublandlord
to Prime Landlord. Sublandlord will install, at its expense
concurrently or after Prime Landlord's installation submeters
required to be installed under the Prime Lease, a submeter to
measure the electricity used by Subtenant at the Space. If
Sublandlord has not installed the submeter required hereunder on
or prior to the Commencement Date, Subtenant shall pay
Sublandlord for the electricity consumed at the Space on a per
square foot basis at the rate and in the manner then in effect
under the Prime Lease. Sublandlord will exercise commercially
reasonable efforts to cause the Prime Landlord to install the
submeter promptly.
(b) If the Prime Landlord changes the
method or the fee by which electricity is furnished to the Space
pursuant to the terms of the Prime Lease, Subtenant's method of
paying for electricity shall be correspondingly changed under
this Sublease. If pursuant to the terms of the Prime Lease, the
Prime Landlord ceases furnishing electricity to the Space
Subtenant shall, at its own cost and expense, perform the
obligations of the Sublandlord with respect thereto, including
but not limited to installing and maintaining the necessary
meters, risers and wiring.
(iv) If Sublandlord shall be charged with
respect to the Space for any other sums or charges pursuant to the provisions
of the Prime Lease, including, without limitation, for overtime or other extra
services requested by Subtenant, then Subtenant shall be liable for all such
sums and charges if directly allocable to the Space, such portion thereof as is
fairly attributable to the Space, or Subtenant's Percentage thereof if
attributable to the entire Prime Lease Premises as
<PAGE>
5
Additional Rent under this Sublease and such sums shall be due and payable by
Subtenant to Sublandlord within the latter of ten (10) days after demand or
three (3) Business Days prior to the date such payment is due to the Prime
Landlord. The foregoing shall not be deemed to require Subtenant to make
payments in respect of charges incurred by Sublandlord by reason of the acts of
Sublandlord or any other sublessee.
C. (i) Fixed Rent and recurring monthly installments, if any,
of Additional Rent shall be due and payable, without prior demand therefor, in
equal monthly installments in advance, three (3) Business Days prior to the
first (1st) day of each month during the Term. If the Commencement Date shall be
other than the first day of a month or the expiration of the Term is other than
the last day of a month, the monthly installments of Fixed Rent and Additional
Rent payable hereunder for any such month shall be prorated on a per diem basis
--- ----
based on the actual number of days in such month.
(ii) If Sublandlord shall receive a refund of any amounts
from the Prime Landlord with respect to the Space (but only for years following
the year(s) upon which the Operating Expense Base Amount and Tax Base Amount
under this Sublease shall be calculated) pursuant to the terms of the Prime
Lease, Sublandlord shall promptly notify Subtenant and refund to Subtenant the
portion thereof, if any, which shall have been paid by Subtenant hereunder less
Subtenant's Percentage of any costs Sublandlord incurred in obtaining such
refund, including without limitation any audit or consultant costs.
(iii) All of the amounts payable by Subtenant pursuant to
this Sublease, including, without limitation, Fixed Rent, Additional Rent, and
all other costs, charges, sums and deposits by Subtenant hereunder
(collectively, "Rental"), shall constitute rent under this Sublease and shall be
payable 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 to
Sublandlord, by check drawn on a bank or trust company which is a member of the
New York Clearing House Association and sent to Sublandlord or its designee at
such address as Sublandlord shall from time to time direct in writing.
(iv) Subtenant shall promptly pay the Rental as and when
the same shall become due and payable without setoff, offset or deduction of any
kind whatsoever and, in the event of Subtenant's failure to pay same when due,
Sublandlord shall have all of the rights and remedies provided for in the Prime
Lease or at law or in equity in the case of nonpayment of Rental. Subtenant's
obligation to pay Rental shall survive the expiration or sooner termination of
this Sublease.
(v) If any Rental shall not be paid within ten (10) days
after the same is due hereunder, such unpaid Rental shall bear interest at a
rate which is four (4%) percent in excess of the prime or base reference lending
rate from
<PAGE>
6
time to time quoted by the New York office of Chase Manhattan Bank USA, N.A. (or
any successor thereto) from the date on which such Rental was originally due
until the date when paid.
D. If any Rental shall become uncollectible, reduced or
required to be refunded because of any law, ordinance, rule or regulation of any
governmental authority, Subtenant shall enter into such agreements and take such
other steps as Sublandlord may reasonably request and as may be legally
permissible to permit Sublandlord to collect the maximum Rental which from time
to time during the continuance of such legal rent restriction may be legally
permissible (but not in excess of the amounts reserved therefor under this
Sublease). Upon the termination of such legal rent restriction, whether during
the Term or after the Expiration Date, (i) Rental shall be payable in accordance
with the amounts reserved herein for the periods following such termination and
(ii) Subtenant shall pay to Sublandlord, to the maximum extent legally
permissible, an amount equal to (a) the Rental that would have been paid
pursuant to this Sublease but for such legal rent restriction, less (b) the
Rental actually paid by Subtenant during the period such legal rent restriction
was in effect.
6. USE. Subtenant shall use and occupy the Space for general and
---
administrative office use and for no other purpose. Subtenant agrees not to
permit the use of the Space for any purpose prohibited by the Prime Lease.
7. SUBORDINATION TO AND INCORPORATION OF THE PRIME LEASE.
-----------------------------------------------------
A. This Sublease and all of Subtenant's rights hereunder
are and shall remain in all respects subject and subordinate to (i) all of the
terms, conditions and provisions of the Prime Lease not explicitly excluded
pursuant to Section 7(C) below, (ii) any and all amendments or modifications to
the Prime Lease or supplemental agreements relating thereto hereafter made
between the Prime Landlord and Sublandlord which do not in any material respect
adversely affect any rights granted to Subtenant hereunder and (iii) any and all
matters to which the tenancy of Sublandlord, as tenant under the Prime Lease, is
or may be subordinate. The foregoing provisions shall be self-operative and no
further instrument of subordination shall be necessary to effectuate such
provisions.
B. Except as otherwise expressly provided in this Sublease,
Subtenant assumes and shall keep, observe and perform every term, provision,
covenant and condition on Sublandlord's part pertaining to the Space which is
required to be kept, observed and performed pursuant to the Prime Lease and
which arises or accrues during the Term of this Sublease.
C. Except as otherwise expressly provided in this Sublease, the
terms, provisions, and conditions contained in the Prime Lease are incorporated
in
<PAGE>
7
this Sublease by reference, and are made a part hereof as if herein set forth at
length, Sublandlord being substituted for the "Landlord" under the Prime Lease,
Subtenant being substituted for the "Tenant" under the Prime Lease, and Space
being substituted for "Premises" under the Prime Lease. The parties agree that
the following provisions of the Prime Lease are not so incorporated herein by
reference:
1.01-1.04, Sections 3.01, 3.02, 3.03 and 3.04,
Rider 4A, Sections 4.01(b), and (e);
Articles 5, 6, 7 and 9 (except for those provisions
which require Prime Landlord's consent to a further
sub-subletting or assignment by Subtenant), Section
18.06;
Articles 22, 23, 31, 32, 38 and 39;
Exhibits A, B, and C;
First Lease Amendment Agreement in its entirety;
Second Lease Amendment Agreement in its entirety;
Third Lease Amendment Agreement - Articles I, II, III
and IV(b)(ii), Section 5.01E, Section 5.01(v) and (vi),
Articles VII, XV, XVI, XIX, XXI and XXII, Exhibit A;
Fourth Lease Amendment in its entirety;
Fifth Lease Amendment in its entirety;
Sixth Amendment of Lease Article 2, Sections 4.1, 4.13,
Articles 6 and 7; Section 9.1, Exhibit A, Schedule 1.
The Acceptance Notice in its entirety;
D. The time limits set forth in the Prime Lease for the
giving of notices, making demands, performance of any act, condition or
covenant, or the exercise of any right, remedy or option, are changed for the
purposes of incorporation into this Sublease, by lengthening or shortening the
same in each instance, as appropriate, so that notices may be given, demands
made, or any act, condition or covenant performed, or any right, remedy or
option hereunder exercised, by sublandlord or Subtenant, as the case may be (and
each party covenants that it will do so), within three (3) Business Days prior
to the expiration of the time limit, taking into account the maximum grace
period, if any, relating thereto contained in the Prime Lease. Each party shall
promptly deliver to the other party copies of all
<PAGE>
8
notices, requests or demands which relate to the Space or the use or occupancy
thereof after receipt of same from the Prime Landlord. In the case of any time
limit described above which is one or two days after the giving of the notice
applicable thereto, such notice shall be delivered personally as provided in
Article 20 hereof. With respect to any request for overtime services, Subtenant
may make such request in Sublandlord's name directly to the Prime Landlord,
provided such request is made in accordance with the terms of the Prime Lease
and a duplicate copy of such request is simultaneously given to Sublandlord.
E. Sublandlord shall have the same rights and remedies with
respect to a breach of this Sublease by Subtenant as the Prime Landlord has with
respect to a breach of the Prime Lease, as if the same were more fully set forth
at length herein, and Sublandlord shall have, with respect to Subtenant, this
Sublease and the Space, all of the rights, powers, privileges and immunities as
are had by the Prime Landlord under the Prime Lease. Sublandlord herein shall
not be responsible for any breach of the Prime Lease by the Prime Landlord or
any non-performance or non-compliance with any provision thereof by the Prime
Landlord, but Sublandlord shall comply with the provisions of Articles 11 and 12
hereof.
F. Provided Subtenant is not in default under this Sublease
beyond applicable periods of notice and grace, Sublandlord covenants and agrees
not to voluntarily cancel or surrender the Prime Lease, except for a termination
permitted under Articles 22 and 23 of the Prime Lease, or consent to any
modification, amendment or supplement to the Prime Lease which will materially
deprive Subtenant of its rights under this Sublease, without the prior written
consent of Subtenant. If the Prime Lease is terminated for any reason
whatsoever, whether by operation of law or otherwise, except through the default
of Sublandlord, Sublandlord shall not be liable in any manner whatsoever for
such termination. Sublandlord shall promptly forward to Subtenant any default or
termination notice with respect to the Prime Lease received by Sublandlord and
this Sublease shall terminate in the event of any such termination of the Prime
Lease. A termination of the Prime Lease due to the default of the Sublandlord,
other than a default caused by Subtenant under this Sublease, shall be
considered a voluntary cancellation or surrender of the Prime Lease under this
paragraph. If Sublandlord receives any notice of default under the Prime Lease
which could result in the termination of the Prime Lease, Sublandlord will
promptly send a copy of such notice to Subtenant.
8. ATTORNMENT. If the Prime Lease and Sublandlord's leasehold
----------
interest in the Space shall be terminated, other than by condemnation or sale in
lieu thereof, Subtenant shall, if so requested in writing by Prime Landlord,
attorn to Prime Landlord and shall, during the term of this Sublease, perform
all of the terms, covenants and conditions of this Sublease on the part of
Subtenant to be performed, provided that the Prime Landlord agrees in writing
not to disturb Subtenants rights to the Space on the terms outlined in this
Sublease. In the event of any such attornment, Prime Landlord shall not be (a)
liable for any act or omission or
<PAGE>
9
default of any prior sublessor (including, without limitation, Sublandlord); (b)
subject to any offsets or defenses which Subtenant might have against any prior
sublessor (including without limitation, Sublandlord); or (c) bound by any rent
or additional rent which Subtenant might have paid for more than one month in
advance to any prior sublessor (including, without limitation, Sublandlord); (d)
bound by any amendment or modification of this Sublease made without Prime
Landlord's consent; (e) responsible for any monies owing by Sublandlord to the
credit of Subtenant; (f) bound by any covenant to undertake or complete any
construction of the Space or any portion thereof; (g) required to account for
any security deposit other than any security deposit actually delivered to the
Prime Landlord; (h) bound by any obligation to make any payment to Subtenant or
grant or be subject to any credits, except for services, repairs, maintenance
and restoration provided for under this Sublease to be performed after the date
of attornment, it being expressly understood, however, that the Prime Landlord
shall not be bound by an obligation to make payment to Subtenant with respect
to construction performed by or on behalf of Subtenant at the Space; or (i)
required to remove any person occupying the Space or any part thereof. The
foregoing shall be self-operative without the necessity of the execution of any
further instruments but Subtenant agrees, upon the demand of Prime Landlord, to
execute, acknowledge and deliver any instrument or instruments confirming such
attornment.
9. QUIET ENJOYMENT. Sublandlord covenants that as long as Subtenant
---------------
shall pay the Rental due hereunder and shall duly perform all the terms,
covenants and conditions of this Sublease on its part to be performed and
observed, Subtenant shall peaceably and quietly have, hold and enjoy the Space
during the term hereof without molestation or hindrance by Sublandlord, subject
to the terms, provisions and conditions of the Prime Lease and this Sublease.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
A. Sublandlord represents and warrants to Subtenant as follows
as of the date of execution and delivery of this Sublease:
(i) the Prime Lease is in full force and effect in
accordance with, and subject to, all of the terms, covenants, conditions and
agreements contained therein;
(ii) the Prime Lease has not been modified, amended or
supplemented, except as set forth in the first Whereas clause hereof;
(iii) Sublandlord has not received any written notice of
any default by the Sublandlord under the Prime Lease, which default remains
uncured;
(iv) Sublandlord holds the entire tenant's interest in the
Space under the Prime Lease, free and clear of any liens, claims, mortgages,
<PAGE>
10
charges or encumbrances, subleases and occupancies (other than this Sublease and
the Prime Lease), other than matters to which the tenancy of the Sublandlord, as
tenant under the Prime Lease, is or may be subordinate;
(v) Sublandlord has full right, power and authority
to enter into this Sublease;
(vi) A true and correct copy of the Prime Lease has
been delivered to Subtenant, and such copy is complete, except for the redacted
provisions noted in Section 7.C hereof;
(vii) Sublandlord has not received notice of any
pending foreclosure of Prime Landlord's mortgage, nor any notice that
Sublandlord is illegally operating the Prime Lease Premises; and
(viii) To the best of the knowledge of Subtenant's New
York Director of Property Management, after reasonable inquiry without engaging
any outside experts or independently reviewing any government records, there is
no asbestos in the Space except for certain vinyl asbestos floor tiling located
under the carpeting.
B. Subtenant hereby warrants and represents to Sublandlord
that: Subtenant has full right, power and authority to enter into this Sublease.
11. SERVICES AND REPAIRS. Notwithstanding anything to the
--------------------
contrary herein set forth, Subtenant agrees that Sublandlord shall have no
obligation to render or supply any services to Subtenant, including, without
limitation (a) the furnishing of electrical energy, heat, ventilation, water,
air conditioning, elevator service, cleaning, window washing, or rubbish
removal services, (b) making any alterations, repairs or restorations, (c)
complying with any laws or requirements of any governmental authorities, or (d)
taking any action that Prime Landlord has agreed to provide, make, comply with,
or take, or cause to be provided, made, complied with, or taken under the Prime
Lease (collectively "Services and Repairs"). Subtenant hereby agrees that
Subtenant shall look solely to Prime Landlord for the performance of any and all
of such Services and Repairs, subject to the terms and conditions of this
Sublease. Sublandlord hereby grants to Subtenant Sublandlord's rights under the
Prime Lease to receive from the Prime Landlord Services and Repairs to the
extent that Sublandlord is entitled (i) to receive same under the Prime Lease
and (ii) to grant same to Subtenant. Sublandlord shall in no event be liable to
Subtenant nor shall the obligations of Subtenant hereunder be impaired or the
performance thereof excused because of any failure or delay on the Prime
Landlord's part in furnishing Services and Repairs, unless such failure or delay
results from Sublandlord's default under the Prime Lease (which default is not
resulting from or attributable to any corresponding default of Subtenant under
this Sublease).
<PAGE>
11
12. ENFORCEMENT OF PRIME LEASE. If the Prime Landlord shall default
--------------------------
in any of its obligations to Sublandlord with respect to the Space, Sublandlord
shall not, except as and to the extent hereinafter set forth, be obligated to
bring any action or proceeding or to take any steps to enforce Sublandlord's
rights against Prime Landlord other than, upon the written request of Subtenant,
making a demand upon the Prime Landlord to perform its obligations under the
Prime Lease with respect to the Space. If following the making of such demand
and the expiration of any applicable grace period granted to the Prime Landlord
under the Prime Lease, the Prime Landlord shall fail to perform its obligations
under the Prime Lease, then Subtenant shall have the rights to take such action
in its own name. If (a) any such action against the Prime Landlord in
Subtenant's name is barred by reason of lack of privity, non-assignability or
otherwise, and (b) the failure of Prime Landlord to perform its obligations
under the Prime Lease has, or may have, a materially adverse effect upon the
Space or Subtenant's permitted use thereof, then subject to and upon the
following terms, Subtenant may bring such action in Sublandlord's name and
Sublandlord shall execute all documents reasonably required in connection
therewith, provided (i) the same is without cost and expense to Sublandlord,
(ii) Subtenant shall provide the indemnification to Sublandlord required
pursuant to Article 14 hereof, (iii) Subtenant is not in default hereunder
beyond the expiration of any applicable notice and/or cure period, and (iv)
Subtenant shall furnish to Sublandlord a cash deposit or other security in
amount, form and substance reasonably satisfactory to Sublandlord securing
Sublandlord against all liability for damages, interest, penalties and expenses
(including reasonable attorneys' fees and expenses) resulting from or incurred
in connection with such contest.
13. ASSIGNMENT, SUBLETTING AND ENCUMBRANCES.
---------------------------------------
A. Without the prior written consent of Sublandlord, which
Sublandlord's consent shall not be unreasonably withheld, and, to the extent
required under the Prime Lease, of Prime Landlord, Subtenant shall not (i)
assign this Sublease (by operation of law or otherwise), (ii) sublease all or
any part of the Space, (iii) mortgage, pledge, hypothecate or otherwise encumber
its interest in this Sublease or the Space or any interest therein, or (iv)
grant any concession, license or otherwise permit the Space to be used or
occupied by anyone other than Subtenant. Any assignment, sublease, mortgage,
pledge, hypothecation or other encumbrance of or under this Sublease shall be
invalid and without force and effect without such prior written consent.
B. Any sale, transfer or hypothecation of the shares or other
equity interest in Subtenant, and any merger or consolidation of Subtenant with
any other business entity, shall constitute an assignment of this Sublease if
and to the extent that any such transaction, if entered into by Sublandlord,
would constitute an assignment under the terms of the Prime Lease. In addition,
and without limiting the generality of the foregoing, the sale transfer,
assignment or hypothecation of (i) a total of 50% or more of the issued and
outstanding common stock of Subtenant, if
<PAGE>
12
Subtenant is a corporation, or (ii) 50% of the beneficial or equitable interest
in the economic benefits of the profits and losses of Subtenant, if Subtenant is
a joint venture, partnership or other business entity, however accomplished and
whether in a single transaction or in a series of related or unrelated
transactions, shall be deemed an assignment of this Sublease.
C. Any assignment of this Sublease, if consented to by
Sublandlord, shall be subject to and conditioned upon compliance with the
following terms and conditions:
(i) By written instrument of assignment and assumption,
the assignee shall assume and agree to perform and to comply with all of the
terms, conditions and agreements of this Sublease on the part of Subtenant to be
kept, performed and observed and to become jointly and severally liable with the
assignor for such performance and compliance;
(ii) A duplicate original of such instrument, in form
satisfactory to Sublandlord, duly acknowledged and executed by the assignor and
the assignee, shall be delivered to Sublandlord within five (5) days following
the date of execution thereof; and
(iii) The assignor shall assign or transfer all of its
right, title, interest and claim to any security deposited hereunder to the
assignee.
D. Any subletting of the Space or any part thereof, if
consented to by Sublandlord, shall be subject to and conditioned upon compliance
with the following terms and conditions:
(i) The sublease shall provide that it is subject and
subordinate to all of the provisions of this Sublease and all of the rights of
Sublandlord hereunder;
(ii) The sublease shall expressly provide that the
sublessee shall use and occupy the Space only for the permitted purposes set
forth herein and for no other purpose whatsoever; and
(iii) A duplicate original of the sublease, duly executed by
sublessor and sublessee, shall be delivered to Sublandlord within five (5) days
following the date of its execution.
E. If this Sublease is assigned, or if the Space or any part
thereof is sublet or occupied by one other than Subtenant, whether or not
Sublandlord shall have been granted any required consent, Sublandlord may, after
default by Subtenant, collect rent and other charges from such assignee,
Subtenant or other occupant, and apply the net amount collected to Rental and
other charges herein
<PAGE>
13
reserved, but no such assignment, subletting, occupancy or collection shall be
deemed to be a waiver of the requirements of this Article 13 or an acceptance of
the assignee, subtenant or other occupant as subtenant under this Sublease. The
consent by Sublandlord to an assignment or subletting shall not in any way be
construed to relieve Subtenant from obtaining consent to any further assignment
or subletting. No assignment or subletting shall, in any way, release, relieve
or modify the liability of Subtenant under this Sublease and Subtenant shall be
and remain liable under all of the terms, conditions, and covenants hereof.
F. If Subtenant shall at any time request the consent of
Sublandlord to any proposed assignment of this Sublease or subletting of all or
any portion of the Space, Subtenant shall pay on demand the reasonable costs and
expenses incurred by Sublandlord and Prime Landlord, including, without
limitation, architect, engineer and reasonable attorneys' fees and
disbursements, and a reasonable administrative fee for review and/or preparation
of documents in connection with any proposed or actual assignment of this
Sublease or subletting of the Space or any part thereof.
G. Without limiting the generality of this Article 13,
Subtenant may not assign its rights hereunder or further sublet the Space in
whole or in part, without Prime Landlord's consent in accordance with the Prime
Lease and without complying with all of the terms and conditions of the Prime
Lease, which for this purposes shall be deemed to be appropriately modified to
take into account that the transaction in question is an assignment of the
Sublease or a further subletting of the Space, as the case may be.
H. (a) The transfer of any stock, partnership or other
ownership interests of Subtenant (other than the transfer of control of
Subtenant by one entity which controls Subtenant or by several entities which
are Affiliates or are acting under an agreement and collectively control
Subtenant) shall not constitute an assignment of this Sublease if such stock,
partnership or other ownership interests are listed on a national securities
exchange (as defined in the Securities Exchange Act of 1934, as amended) or is
traded in the "over the counter" market with quotations reported by the National
Association of Securities Dealers; and further provided, that any conversion of
--- ------- --------
the form of entity of Subtenant (however accomplished) which does not directly
or indirectly transfer control of Subtenant, reduce the tangible net worth of
Subtenant or reduce its liability for its obligations under this Sublease shall
not constitute an assignment of this Sublease, provided, that the converted
--------
entity assumes by written instrument all of Subtenant's obligations under this
Sublease and such conversion is for a valid business purpose and not to avoid
any obligations under this Sublease.
(b) Notwithstanding the provisions of this section to the
contrary, without the consent of Sublandlord, this Sublease may be assigned
(actually or deemed assigned) or the entire Space may be sublet for
substantially the
<PAGE>
14
balance of the term to (i) an entity created by merger, reorganization
(including by dissolution, stock transfer or change of classes of stock) or
recapitalization of or with Subtenant, either directly or indirectly or (ii) a
purchaser of all or substantially all of Subtenant's assets, provided, that in
--------
each case that (A) Sublandlord shall have received a notice of such assignment
or sublet from Subtenant prior thereto, (B) in the case of an assignment, the
assignee assumes by written instrument all of Subtenant's obligations under this
Sublease (but, in the case of clause (i) the same shall only be necessary if
----------
Subtenant shall not be the surviving entity), (C) such assignment or
sub-sublease is for a valid business purpose and not to avoid any obligations
under this Sublease, (D) the assignee's or sub-subtenant's reputation and
character is consistent with the other tenants in first class midtown Manhattan
office buildings and (E) such assignee or sub-subtenant shall be, immediately
after giving effect to such assignment or sub-sublease, tangible net worth equal
to or greater than Subtenant's net worth immediately prior to such transaction
described in clause (i) or (ii) provided that Subtenant has not reduced its net
worth immediately prior to such transaction.
(C) Notwithstanding any provision in this Sublease to the
contrary, (but subject to compliance with clause (b) hereof), without the
consent of Sublandlord, Subtenant may assign (by actual assignment and not by
deemed assignment which deemed assignment may be governed by clause (b) hereof)
this Sublease or sublet all or any part of the Space to an Affiliate of
Subtenant; provided, that (i) Sublandlord shall have received a notice of such
--------
assignment or sub-sublease from Subtenant identifying the rentable square feet
intended to be occupied by such Affiliate, the configuration of such space, and
the identity of the Affiliate; (ii) in the case of any such assignment, (A) the
assignment is for a valid business purpose and not to avoid any obligations
under this Sublease, and (B) the assignee assumes by written instrument all of
Subtenant's obligations under this Sublease; and (iii) the occupancy of such
space by an Affiliate will not further reduce the number of subtenants
Sublandlord is permitted to have in the Prime Lease Premises pursuant to Section
38.05 of the Prime Lease. If requested by Subtenant Sublandlord will request
that Prime Landlord approve that the subletting or permitted use of the Space by
Affiliates shall not reduce the number of subtenants permitted under Section
38.05 of the Prime Lease. "Affiliate" means, as to any designated person or
---------
entity, any other person or entity which controls, is controlled by, or is under
common control with, such designated person or entity. "Control" (and with
-------
correlative meaning, "controlled by" and "under common control with") means
actual control or ownership or voting control, directly or indirectly, of 50% or
more of the voting stock, partnership interests or other beneficial ownership
interests of the entity in question.
I. No assignment or other transfer of this Sublease and
the term and estate hereby granted, and no subletting of all or any portion of
the Space (in each case whether or not Sublandlord's consent is required
thereto) shall relieve Subtenant of its liability under this Sublease or of the
obligation to obtain Sublandlord's prior consent to any further assignment,
other transfer or subletting.
<PAGE>
15
Prior to any assignment or subletting under subsection H hereof, Subtenant must
first obtain the consent of the Prime Landlord if required under the Prime
Lease.
14. INDEMNIFICATION.
---------------
A. Sublandlord, Prime Landlord and the employees, agents,
contractors, licensees and invitees (collectively "Agents") of each
(collectively, "Indemnified Parties"), shall not be liable to Subtenant or its
Agents for, and against, any and all suits, claims, demands, liability, damages,
costs and expenses of every kind and nature including, without limiting the
generality of the foregoing, attorneys' fees and expenses, court costs,
penalties and fines, incurred in connection with or arising out of the following
to the extent not caused by the gross negligence of the Indemnified Parties or
matters occurring outside the Space without the fault of Subtenant or its
Agents:
(i) any injury or damage to any person happening on or
about the Space, or for any injury or damage to the Space, or to any property of
Subtenant, Sublandlord (which personal property, if any, Sublandlord has
notified Subtenant of in writing) or of any other person, firm, association or
corporation on or about the Space;
(ii) [intentionally omitted];
(iii) the exercise by Subtenant or any person claiming
through or under Subtenant of any rights against Prime Landlord granted to
Subtenant hereunder;
(iv) any holdover beyond the Term of this Sublease where
damages are incurred by Sublandlord resulting from a claim of the Prime Landlord
in connection with such holdover;
(v) any wrongful willful acts or omissions or negligence
of Subtenant or any person claiming through or under Subtenant, or the Agents of
Subtenant or any such person, in or about the Space or the Building; or
(vi) any proceeding, action or dispute that Sublandlord or
Subtenant may institute or be party to pursuant to Article 12 of this Sublease,
except to the extent that any such proceeding, action or dispute shall determine
that Prime Landlord's failure or refusal to provide Services or Repairs is
justified because of Sublandlord's negligence, misconduct or breach of this
Sublease or the Prime Lease, not resulting from Subtenant's acts or omissions.
B. The provisions of this Article 14 shall survive the
expiration or earlier termination of this Sublease.
<PAGE>
16
15. ALTERATIONS. Subtenant shall make no alterations, installations,
-----------
additions or improvements (collectively, "Alterations") in or about the Space
without the prior written consent of Sublandlord in each instance. Any
Alterations consented to by Sublandlord shall be performed by Subtenant at its
sole cost and expense and in compliance with all of the provisions of the Prime
Lease, including the provisions requiring Prime Landlord's prior written
consent, and also in compliance with other reasonable requirements of
Sublandlord and Prime Landlord. Subtenant shall be permitted to make
non-structural Alterations to the Space, subject to the prior written consent of
Prime Landlord in accordance with the Prime Lease and Sublandlord's prior
written consent, which consent as to Sublandlord shall not be unreasonably
withheld. Sublandlord shall use diligent good faith efforts which efforts shall
not require the expenditure of money or commencing litigation, to obtain Prime
Landlord's consent to Alterations proposed by Subtenant which comply with
Sections 13.01(a) through (d) of the Prime Lease.
16. INSURANCE.
---------
A. Subtenant, at Subtenant's sole expense, shall maintain for the
benefit of Sublandlord and Prime Landlord such policies of insurance (and in
such form) as are required by the Prime Lease with respect to the Space. The
insurers issuing all such insurance shall be reasonably satisfactory to
Sublandlord and shall have an A.M. Best Rating of A-VIII or better and shall be
licensed to do business in the State of New York. At a minimum such insurance
shall include commercial general liability insurance, including products and
completed operations and contractual liability coverage with limits of not less
than $5,000,000 per occurrence, with Sublandlord and Prime Landlord listed as
additional insureds, and all risk property insurance covering the subtenants
furniture, fixtures and any other property located in the Space that is owned by
Subtenant. Prior to the commencement of the Term, Subtenant will deliver to
Sublandlord certificates evidencing all coverage maintained in connection with
this agreement, and evidencing that Sublandlord and Prime Landlord have been
added as additional insureds to the commercial general liability insurance. Each
certificate will show that coverage cannot be cancelled or changed without
thirty (30) days prior notice to the certificate holder.
B. Nothing contained in this Sublease shall relieve Subtenant from
any liability as a result of damage from fire or other casualty, but 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. To the extent that such insurance is in force and collectible and to
the extent permitted by law, Sublandlord and Subtenant each hereby releases and
waives all right to recovery against the other or anyone claiming through or
under the other by way of subrogation or otherwise, and Subtenant also releases
and waives all right to recover against Prime Landlord. The foregoing release
and waiver shall be in force only if the insurance policies of Sublandlord and
Subtenant provide that such release or
<PAGE>
17
waiver does not invalidate the insurance; each party agrees to use its best
efforts to include such a provision in its applicable insurance policies. If the
inclusion of said provision would involve an additional expense, either party,
at its sole expense, may require such provision to be inserted in the other's
policy.
17. DESTRUCTION BY FIRE OR OTHER CASUALTY; CONDEMNATION.
---------------------------------------------------
A. If the Space or the Building are partially or totally
damaged or destroyed by fire or other casualty, Subtenant shall have no right to
terminate this Sublease and this Sublease shall not be terminated by reason of
such casualty unless the Prime Lease is terminated by Sublandlord or the Prime
Landlord pursuant to the provisions of the Prime Lease. Sublandlord shall give
Subtenant prompt notice of any such termination. Notwithstanding the foregoing,
if more than 50% percent of the Space is damaged or destroyed, Sublandlord may
terminate this Sublease by giving Subtenant notice of its election to terminate
this Sublease within sixty (60) days after the date of such casualty. Any
termination provided for in this paragraph shall be effective on a date
specified in such notice, which date shall be not less than three (3) or more
than thirty (30) days after such notice is given.
B. If Sublandlord receives an abatement of Rental relating
to the Space due to either damage by a casualty or a taking, then Subtenant
shall receive an equivalent abatement of Rental under this Sublease.
C. If the Prime Lease is terminated as a result of a
taking of all or any portion of the Building by condemnation (or deed in lieu
thereof), this Sublease shall likewise terminate. In such event, Subtenant shall
have no claim to any share of the award, except to file a claim for the value of
its fixtures or for moving expenses. In that event, Sublandlord agrees to and
does hereby assign to Subtenant the right to claim for all additions,
improvements, fixtures, etc. (trade fixtures) installed or paid for by
Sublandlord including without limitation those made using the Sublandlord's
Contribution (as defined in Section 23 hereof) and Subtenant agrees to make
claim for all said trade fixtures, in its name, in addition to or as part of a
claim for trade fixtures installed or paid for by Subtenant, and Sublandlord and
Subtenant agree to share in the award or settlement in accordance with the
amounts awarded or paid for items installed by each, including interest; or, in
the event the award or settlement is in a single amount, then each shall share
in the award or settlement in the proportion that the total of each of the
parties' installations bears to the whole as determined by claimants' trade
fixture appraiser in the appraisal submitted in the condemnation proceeding.
Sublandlord and Subtenant shall pay the expenses of the litigation or settlement
in proportion to their shares of the award or payment. In the event Subtenant
does not or is unable to claim for trade fixtures, Sublandlord may make a claim
in the name of Subtenant, as agent for Subtenant, and Subtenant does hereby
assign the award or payment to Sublandlord for the purpose of collecting the
award or payment to be distributed in the same manner as described
<PAGE>
18
above. The foregoing shall be self-operative without the necessity of the
execution of any further instruments.
D. Subtenant waives the provisions of Section 227 of the
New York Real Property Law, which is superseded by the provisions of this
Article 17.
18. SECURITY.
--------
A. Subtenant has deposited with Sublandlord $147,774.00 as
security for the full and punctual performance by Subtenant of all of the terms
and conditions of this Sublease. In the event Subtenant defaults in the
performance of any of the terms of this Sublease after notice and the expiration
of all applicable grace or cure period, Sublandlord may apply the whole or any
part of the security so deposited to the extent required for the payment of (i)
any Fixed Rent and/or Additional Rent or any other sums as to which Subtenant is
in default or (ii) any sum which Sublandlord may expend or may be required to
expend by reason of Subtenant's default including, without limitation, any
damages or deficiency in the reletting of the Space, whether accruing before or
after summary proceedings or other re-entry by Sublandlord. Upon each such
application, Subtenant shall, on demand, pay to Sublandlord the sum so applied
which shall be added to the security deposit so that the same shall be restored
to the amount first set forth above.
B. If Subtenant shall fully and faithfully comply with all of
Subtenant's covenants and obligations under this Sublease, the security or any
balance thereof to which Subtenant is entitled, less a one percent (1%) per
annum administrative fee, shall be returned or paid over to Subtenant within
thirty (30) days after the Expiration Date and after delivery to Sublandlord
of entire possession of the Space.
19. BROKER. Each party warrants and represents to the other party
------
hereto that it has not dealt with any brokers in connection with this Sublease
other than Cushman & Wakefield, Inc. ("C&W") and CB Richard Ellis, Inc./1/
-
("CB") collectively, the "Brokers"). Sublandlord shall be responsible for the
commission due to C&W in connection with this Sublease, pursuant to a separate
agreement. C&W pursuant to a separate written agreement will be responsible for
any commission due CB./2/ Each party hereby indemnifies and holds the other
-
party hereto harmless from any and all loss, damage, claim, liability, cost or
expense (including, but not limited to, reasonable attorneys' fees, expenses and
court costs) arising out of or in connection with any breach of the foregoing
warranty and representation. The
____________________
/1/ Confirm.
-
/2/ Confirm.
-
<PAGE>
19
provisions of this Article shall survive the expiration or earlier termination
of this Sublease.
20. NOTICES. All notices, consents, approvals or other
-------
communications (collectively a "Notice") required to be given under this
Sublease or pursuant to law shall be in writing and, unless otherwise required
by law, shall be either personally delivered (against a receipt), or sent by
reputable overnight courier service, or given by registered or certified mail,
return receipt requested, postage prepaid, addressed to the party which is to
receive such Notice (attention: Senior Vice President, Real Estate, in the case
of Notices to Sublandlord, and attention: Meryl Beckingham, Chief Financial
Officer in the case of Notices to Subtenant) at its address herein set forth or
such other address as either may designate by Notice to the other. Copies of all
notices to Sublandlord will be sent concurrently to Warner Music Group Inc., 75
Rockefeller Plaza, New York, New York 10019. Attn: Executive Vice President and
General Counsel. Copies of all notices to Subtenant will be sent concurrently to
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109, Attn:
Lawrence R. Cahill, P.C. Any Notice given pursuant hereto shall be deemed to
have been received on delivery, if personally delivered or delivered by
reputable overnight courier service, or three (3) Business Days after the
mailing thereof if mailed in accordance with the terms hereof, such mailing to
be effected by depositing the Notice in any post office, branch post office or
official depository regularly maintained by the United States Postal Service.
Rejection of delivery, being deemed delivery.
21. NO WAIVERS. Failure by either party in any instance to
----------
insist upon the strict performance of any one or more of the obligations of the
other party under this Sublease, or to exercise any election herein contained,
shall in no manner be or be deemed to be a waiver by such party of any defaults
or breaches hereunder or of any of its rights and remedies by reason of such
defaults or breaches, or a waiver or relinquishment for the future of the
requirement of strict performance of any and all of the defaulting party's
obligations hereunder. Further, no payment by Subtenant or receipt by
Sublandlord of a lesser amount than the correct amount of Rental due hereunder
shall be deemed to be other than a payment on account, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed to effect or evidence an accord and satisfaction, and Sublandlord may
accept any checks or payments as made without prejudice to Sublandlord's right
to recover the balance or pursue any other remedy in this Sublease or otherwise
provided at law or in equity.
22. CONSENT.
-------
A. Whenever in this Sublease it is provided that either
party will not unreasonably withhold its consent to any matter, such party shall
also be deemed to have agreed not to unreasonably delay such consent.
Sublandlord shall not be deemed to have unreasonably withheld or delayed its
consent to any matter if
<PAGE>
20
Prime Landlord's consent to the matter requested is required by the Prime Lease
and if Prime Landlord shall have withheld or delayed its consent to such matter.
The foregoing provisions shall not be deemed a waiver of Subtenant's rights
herein with respect to any default by Prime Landlord in the performance of any
of its obligations affecting the Space under the Prime Lease.
B. If either party shall request the other's consent and such
consent is withheld or delayed, such party shall not be entitled to any damages
by reason thereof, it being intended that the sole remedy therefor shall be an
action for specific performance or injunction and that such remedy shall only be
available where a party has agreed herein not to unreasonably withhold or delay
such consent or where, as a matter of law, such consent may not be unreasonably
withheld or delayed.
23. INITIAL ALTERATIONS.
-------------------
A. Subject to the terms and conditions set forth below in this
Sublease, including, without limitation, Section 15, and in the Prime Lease, and
provided no event of default shall have occurred, Sublandlord shall reimburse
Subtenant up to a maximum amount of $134,340.00 ("Sublandlord's Contribution")
for costs incurred by Subtenant in connection with the Alterations preparing the
Space for use or occupancy by Subtenant ("Initial Alterations") (Subtenant may
use up to $13,434.00 of Sublandlord's Contribution for so-called "soft costs,"
including, without limitation, architectural, engineering, expediting and other
consulting fees and all necessary building department permits and approvals).
Subtenant shall submit to Sublandlord a copy of the budget and plans and
specifications of the Initial Alterations prior to the commencement thereof.
Sublandlord shall disburse from time to time, but not more often than once in
any thirty (30) day period, within twenty (20) Business Days after receipt of
Subtenant's request therefor, that portion of Sublandlord's Contribution up to
but not more than ninety percent (90%) of the amount set forth in Subtenant's
requisition; provided however, that no advance shall be made if, and for so long
as, Subtenant shall be in monetary default under this Sublease or non-monetary
default under this Sublease beyond any applicable notice and cure period.
Notwithstanding any provision in this Section to the contrary, Sublandlord has
advised Subtenant that Sublandlord will be seeking to be reimbursed by the Prime
Landlord for all or part of the Sublandlord contribution under the terms of the
Prime Lease, and that Sublandlord will not be required to make any distribution
to Subtenant of the Sublandlord Contribution if the Prime Landlord has not made
the corresponding distribution to Sublandlord, unless Prime Landlord's refusal
to make such distribution arises out of Sublandlord's default under the Prime
Lease which was not caused by Subtenant's default under this Sublease.
Sublandlord agrees to promptly submit each of Subtenant's request to the Prime
Landlord. Notwithstanding the foregoing, but provided that Subtenant is not in
default hereunder and complies with all the terms and conditions hereinafter set
forth in this Section, all distributions to be made to Subtenant under this
Section shall be made no later than the latter of
<PAGE>
21
60 days after the Commencement Date or 30 days after Subtenant's final
submission. No advance shall be made until receipt of a request therefor from
Subtenant, and the submission by Subtenant of the following:
(i) A certificate signed by Subtenant and Subtenant's architect dated
not more than ten (10) days prior to such request setting forth (a) the sum then
justly due to contractors, subcontractors, materialmen, engineers, architects
and other persons who have rendered services or furnished materials in
connection with the Initial Alterations, (b) a brief description of such
services and materials and the amounts paid or to be paid from such requisition
to each of such persons in respect thereof, (c) that the work described in the
certificate has been completed substantially in accordance with the final plans
therefor previously approved by Sublandlord and the estimated costs to complete
the Initial Alterations (this statement need not be made by Subtenant, only by
Subtenant's architect), (d) that there has not been filed with respect to the
Space or the Building or any part thereof or any improvements thereon, any
vendor's, mechanic's, laborer's, materialmen's or other like liens arising out
of the Initial Alterations which has not been discharged of record, (e) that
Subtenant has complied with all of the conditions set forth in this Sublease and
the Prime Lease applicable to Alterations, and (f) the cost to complete the
Initial Alterations does not exceed the remaining undisbursed amount of the
Sublandlord's Contribution, less any holdbacks unless Subtenant has posted cash
with Sublandlord or other form of security reasonably satisfactory to
Sublandlord to cover any shortfall between the cost to complete the Alteration
and the balance of Sublandlord's Contribution, less any holdbacks (statements
(d) and (e) need not be made by Subtenant's architect, only by Subtenant). Upon
request of Subtenant, Sublandlord shall directly make payments of Sublandlord's
Contribution to Subtenant's contractors;
(ii) Partial lien waivers, paid receipts or such other proof of
payment as Sublandlord shall reasonably require for all work done and materials
supplied prior to the current requisition (and which were to have been paid for
by Subtenant).
B. Anything in this Article 23 to the contrary notwithstanding,
Sublandlord shall not be required to expend the final ten percent (10%) of
Sublandlord's Contribution until it has received from Subtenant's architect all
certificates of final approval required by any governmental or
quasi-governmental body in respect of the Initial Alterations. In addition,
following completion of alterations or improvements by Subtenant, Subtenant
shall cause Subtenant's architect to obtain and such architect shall be
responsible for obtaining final approval of alterations or improvements by
Subtenant from the New York City Department of Buildings and other regulatory
bodies having jurisdiction. In addition, Subtenant shall be required to sign a
written statement in form satisfactory to Sublandlord acknowledging the total
cost of the Initial Alterations.
<PAGE>
22
C. Sublandlord shall have the right, upon reasonable
notice and at reasonable hours, to enter the Space from time to time with a
representative of Subtenant for the purpose of verifying that the portion of the
Initial Alterations covered by Subtenant's Request has been performed in
accordance with said plans and specifications, or to otherwise inspect any or
all aspects of the Initial Alterations.
24. ENTIRE AGREEMENT, MISCELLANEOUS.
-------------------------------
A. This Sublease shall be governed by and construed in
accordance with the law of the State of New York without regard to the conflicts
of law principles thereof.
B. The section headings in this Sublease and in the
parentheticals contained in Subsection 7.C hereof are inserted only as a matter
of convenience for reference and are not to be given any effect in construing
this Sublease.
C. If any of the provisions of this Sublease or the
application thereof to any person or circumstance shall, to any extent, be held
to be invalid or unenforceable, the remainder of this Sublease shall not be
affected thereby and shall be valid and enforceable to the fullest extent
permitted by law.
D. All of the terms and provisions of this Sublease shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
E. All prior negotiations and agreements relating to this
Sublease and the Space are merged into this Sublease. This Sublease may not be
amended, modified or terminated, in whole or in part, nor may any of the
provisions be waived, except by a written instrument executed by the party
against whom enforcement of such amendment, modification, termination or waiver
is sought and unless the same is permitted under the terms and provisions of the
Prime Lease.
F. This Sublease shall have no binding force and effect
and shall not confer any rights or impose any obligations upon either party
unless and until both parties have executed it and Sublandlord shall have
obtained Prime Landlord's written consent to this Sublease and delivered to
Subtenant an executed copy of such consent. Under no circumstances shall the
submission of this Sublease in draft form by or to either party be deemed to
constitute an offer for the subleasing of the Space.
G. This Sublease and all the obligations of Subtenant to
pay Rental and perform all of its other covenants and agreements hereunder shall
in no way be affected, impaired, delayed or excused because Sublandlord or Prime
Landlord are unable to fulfill any of their respective obligations hereunder,
either
<PAGE>
23
explicit or implicit, if Sublandlord or Prime Landlord is prevented or delayed
from so doing by reason of strikes or labor trouble or by accident, adjustment
of insurance or by any cause whatsoever reasonably beyond Sublandlord's or Prime
Landlord's control.
H. Each and every right and remedy of Sublandlord under this
Sublease shall be cumulative and in addition to every other right and remedy
herein contained or now or hereafter existing at law or in equity, by statute or
otherwise.
I. At any time and from time to time Subtenant shall, within
ten (10) Business Days after a written request by Sublandlord, execute,
acknowledge and deliver to Sublandlord a written statement certifying (i) that
this Sublease has not been modified and is in full force and effect or, if
modified, that this Sublease is in full force and effect as modified, and
specifying such modifications, (ii) the dates to which the Fixed Rent and
Additional Rent and other charges have been paid, (iii) that to the best of
Subtenant's knowledge, no default exists under this Sublease or, if any do
exist, the nature of such default and (iv) as to such other matters as
Sublandlord may reasonably request.
J. Sublandlord agrees to permit Subtenant to use and dispose of
the furniture and equipment (the "Furniture") described on Exhibit B attached
hereto and located in the Space as of the date hereof. Subtenant represents and
warrants that it has made a thorough examination and inspection of the
Furniture. Sublandlord makes no representation or warranty as to the present or
future condition of the Furniture. Subtenant agrees that it will accept the
Furniture in its "as is" condition on the Commencement Date. On the Expiration
Date, earlier termination hereof, or re-entry by Sublandlord or Prime landlord
upon the Space, Subtenant shall remove all of the Furniture from the Space and
dispose of the Furniture at Subtenant's sole cost and expense.
K. Subject to any costs or consents imposed under the Prime
Lease for adding or deleting listings or approval or installation of plaques or
signage, Subtenant may utilize Subtenant's Percentage of the directory listings
and plaques in the elevators allocated to Sublandlord under the Prime Lease.
Sublandlord shall also not unreasonably withhold its consent to Subtenant
signage on the exterior door leading into the Space.
<PAGE>
24
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease
as of the day and year first written above.
Sublandlord:
WARNER MUSIC GROUP INC.
By: /s/ Jerome M. Gold
------------------------------------
Name: Jerome M. Gold
Title:
Subtenant:
BRONNER SLOSBERG HUMPHREY, LLC
By: /s/ Meryl K. Beckingham
------------------------------------
Name: Meryl K. Beckingham
Title: SVP/Chief Financial Officer
Subtenant Federal Identification
No. 04-27/2533
-------------------
<PAGE>
SCHEDULE A
----------
Floor Plan
<PAGE>
[FLOOR PLAN APPEARS HERE]
1290 AVENUE OF THE AMERICAS, 4TH FLR.
<PAGE>
EXHIBIT B
---------
Furniture
<PAGE>
EXHIBIT 10.11
AGREEMENT OF SUBLEASE
between
BILL COMMUNICATIONS, INC.
Sublandlord
and
BRONNERCOM, LLC
Subtenant
Premises:
--------
Entire Rentable Areas of the
2/nd/, 3/rd/, 4/th/, 5/th/, 11/th/ and 12/th/ Floors
and Portion of Basement Area
345 Park Avenue South
New York, New York
SILLER WILK LLP
747 Third Avenue
New York, New York 10017
(212) 421-2233
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Subleasing of Premises................................................. 1
Term................................................................... 2
Fixed Rent; Additional Rent and Electricity............................ 3
Subordination to and Incorporation of the Lease........................ 9
Alterations............................................................ 11
Covenants with Respect to the Lease.................................... 12
Services and Repairs................................................... 13
Consents............................................................... 15
Termination of Lease................................................... 16
Sublease, Not Assignment............................................... 16
Damage, Destruction, Fire and other Casualty; Condemnation............. 16
No Waivers............................................................. 16
Notices................................................................ 17
Indemnity.............................................................. 17
Broker................................................................. 19
Delivery of the Premises............................................... 19
Consent of Owner to this Sublease...................................... 21
Assignment, Subletting and Mortgaging.................................. 21
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Security Deposit....................................................... 22
Insurance.............................................................. 24
Default................................................................ 24
Miscellaneous.......................................................... 25
EXHIBIT A.............................................................. 28
EXHIBIT B.............................................................. 29
EXHIBIT C.............................................................. 31
</TABLE>
<PAGE>
AGREEMENT OF SUBLEASE, made as of the 15/th/ day of November 1999,
between BILL COMMUNICATIONS, INC., a New York corporation, having an office
and place of business at 345 Park Avenue South, New York, New York 10010
("Sublandlord") and BRONNERCOM, LLC, a Delaware limited liability company
having an office at The Prudential Tower, 800 Boylston Street, Boston, MA 02199
("Subtenant") .
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, by Agreement of Lease, dated July 17, 1992, as modified by
Agreement dated August 31, 1998 and as further modified by Extension of Term,
Additional Space and Modification Agreement dated September 18, 1998
("Modification Agreement") and as further modified by Amendment of Lease dated
November ____, 1999 (the Amendment)(the lease, as modified and amended is
collectively referred to as the "Lease") 345 Park Avenue South/Armory Inc.,
predecessor-in-interest to RFR Holding, LLC. ("Owner"), as landlord, leased to
Sublandlord, as tenant certain premises consisting of the entire rentable areas
of the 2/nd/, 3/rd/, 4/th/, 5/th/, 11/th/ and 12/th/ floors and a portion of the
basement of the building known as 345 Park Avenue South, New York, NY (the
"Building"); and
WHEREAS, Sublandlord desires to sublease to Subtenant, and Subtenant
desires to hire from Sublandlord, the entire premises leased to Sublandlord
pursuant to the Lease (which premises are as shown on Exhibit A annexed hereto
and made a part hereof, and such premises are also as shown on various exhibits
to the Lease, being hereinafter referred to as the "Premises") on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is mutually agreed as follows:
1. Subleasing of Premises. Sublandlord hereby subleases to
----------------------
Subtenant, and Subtenant hereby hires from Sublandlord, the Premises, upon and
subject to the terms and conditions hereinafter set forth.
2. Term.
----
2.1. The term (the "Term") of this Sublease with respect to the
portion of the basement, and the 2/nd/, 3/rd/, 4/th/ and 5/th/ floors shall
commence (the "2 To 5
<PAGE>
Commencement Date") on the date Sublandlord delivers exclusive possession
of the basement, 2/nd/, 3/rd/, 4/th/ and 5/th/ floors (the "2 To 5
Premises") to the Subtenant in accordance with Section 16.1 of this
Sublease. The Term with respect to the 11/th/ and 12/th/ floors shall
commence (the "11 & 12 Commencement Date") on the date Sublandlord delivers
exclusive possession of the 11/th/ and 12/th/ floors (the "11 & 12
Premises") to Subtenant in accordance with Section 16.2 of this Sublease.
The Term of this Sublease shall terminate on March 30, 2011 (the
"Expiration Date"), at 12:00 noon, or on such earlier date upon which the
Term shall expire or be canceled or terminated pursuant to any of the
conditions or covenants of this Sublease or pursuant to law. Promptly
following the 2 To 5 Commencement Date and the 11 & 12 Commencement Date,
Sublandlord and Subtenant shall enter into an agreement confirming each
such commencement date; provided, however, that failure to execute and
deliver such agreements shall not affect the validity of such commencement
dates.
3. Fixed Rent: Additional Rent and Electricity.
-------------------------------------------
3.1. 2 to 5 Premises. Subtenant shall pay to Sublandlord, commencing
---------------
on the 2 To 5 Commencement Date and on the first day of each and every
month thereafter, in currency which at the time of payment is legal tender
for public and private debts in the United States of America, as fixed rent
during the Term, as follows:
(i) for the period commencing on the 2 To 5 Commencement Date and
ending on the day immediately preceding the fourth anniversary of the 2 To
5 Commencement Date, the sum of $3,043,388.00 per annum, payable in equal
monthly installments of $253,615.70;
(ii) for the period commencing on the fourth anniversary of the 2 To
5 Commencement Date and ending on the day immediately preceding the eighth
anniversary of the 2 To 5 Commencement Date, the sum of $3,396,316.00 per
annum, payable in equal monthly installments of $283,026.33;
(iii) for the period commencing on the eighth anniversary of the 2 To
5 Commencement Date and ending on the Expiration Date, the sum of
$3,749,244.00 per annum, payable in equal monthly installments of
$312,437.00.
-2-
<PAGE>
3.2. 11 & 12 Premises. In addition to the fixed rent set forth in
----------------
Section 3.1. Subtenant shall also pay to Sublandlord, commencing on the 11
& 12 Commencement Date, the fixed rent during the term as follows:
(i) for the period commencing on the 11&12 Commencement Date and
ending on the day preceding the fourth anniversary of the 11&12
Commencement Date the sum of $1,588,176.00 per annum, payable in equal
monthly installments of $132,348.00;
(ii) for the period commencing on the fourth anniversary of the 11 &
12 Commencement Date and ending on the day immediately preceding the eighth
anniversary of the 11 & 12 Commencement Date, the sum of $1,764,640.00 per
annum, payable in equal monthly installments of $147,053.33;
(iii) for the period commencing on the eighth anniversary of the 11 &
12 Commencement Date and ending on the Expiration Date the sum of
$1,941,104.00 per annum, payable in equal monthly installments of
$161,758.67.
(The fixed rent set forth in Sections 3.2 and 3.3 shall be known
collectively as the "Fixed Rent").
3.3. (i) For each Tax Year (hereinafter defined) during the Term,
Subtenant shall pay to Sublandlord as and for additional rent an amount
(the "Sublease Tax Payment") equal to the amount by which Taxes (as defined
--------------------
in Lease) payable by Sublandlord for such Tax Year, as computed by Owner
pursuant to a Escalation Statement (as such term is defined in the Lease)
delivered to Sublandlord in accordance with the Lease, exceeds the Taxes
payable by Sublandlord for the Tax Year commencing July 1, 2000 and ending
June 30, 2001, (hereinafter referred to as the "Sublease Base Taxes").
-------------------
(ii) Within seven (7) days after receipt from Owner of a Escalation
Statement, Sublandlord shall render to Subtenant a written statement or
statements (a "Sublease Tax Statement"), together with a reproduced copy of
----------------------
the Escalation Statement received from Owner for the current or next
succeeding Tax Year (if theretofore issued by Owner), showing (i) the date
of receipt from Owner of the Escalation Statement, (ii) a comparison of the
Real Estate Taxes payable by Sublandlord for the Tax Year with the Sublease
Base Taxes and (iii) the amount of the Sublease Tax Payment resulting from
such comparison. Subtenant shall pay to Sublandlord, in twelve (12) equal
monthly installments, in advance, monthly
-3-
<PAGE>
together with the monthly payments of Fixed Rent due hereunder, one-twelfth (1/
12th) of the Sublease Tax Payment shown on the Sublease Tax Statement, except
that if at the time Sublandlord delivers a Sublease Tax Statement to Subtenant,
the Sublease Tax Payment shall have accrued for a period prior to the delivery
of the Sublease Tax Statement, Subtenant shall pay such accrued portion of the
Sublease Tax Payment in full on the later of fifteen (15) days after receipt of
such Sublease Tax Statement or five (5) days prior to the date same is due under
the Lease. In addition, if the aggregate amount of Sublandlord's installment
payments for Real Estate Taxes have been insufficient to discharge Sublandlord's
obligations for Real Estate Taxes then owed, then Subtenant shall pay the
additional sums required to pay such deficiency that is attributable to Sublease
Tax Payments due hereunder no later than fifteen (15) days after receipt of a
request for such additional payment from Sublandlord together with a computation
of the amount owed by Subtenant and all underlying documentation, if any,
received by Sublandlord from Owner. If Sublandlord shall be required to pay any
Real Estate Taxes on any other date or dates than as presently required by the
Lease, then the due date of the installments of the Sublease Tax Payment shall
be correspondingly accelerated or revised so that the Sublease Tax Payment (or
the applicable installment thereof) is due five (5) days prior to the date the
corresponding payment is due to Owner. Except as provided in Section 3.9 hereof,
Sublandlord`s failure to render a Sublease Tax Statement during or with
respect to any Tax Year shall not prejudice Sublandlord's right to render a
Sublease Tax Statement during or with respect to any subsequent Tax Year, and
shall not eliminate or reduce Subtenant's obligation to make Sublease Tax
Payments pursuant to this Section 3.3 for such Tax Year.
(iii) The Sublease Tax Payment shall be prorated for any partial Tax
Year in which the Term shall commence or end. If, at any time during a Tax Year,
Sublandlord receives a revised Escalation Statement from Owner, Sublandlord
shall deliver a Sublease Tax Statement to Subtenant, revised to correspond with
such revised Owner's Statement and Subtenant shall, within the later of fifteen
(15) days thereafter or five (5) days prior to the date same is due under the
Lease, pay to Sublandlord an amount equal to the amount of any underpayment of
the Sublease Tax Payment with respect to such Tax Year and, in the event of an
overpayment, Sublandlord shall either pay to Subtenant or, at Sublandlord's
election, credit against the next installments of Fixed Rent and payments of
additional rent, the amount of Subtenant's overpayment.
(iv) Only Owner shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation of the Building. Should Owner be
-4-
<PAGE>
successful in any such reduction proceedings and obtain a rebate for any Tax
Year for which Subtenant has paid installments of the Sublease Tax Payment,
Sublandlord shall either pay to Subtenant, or at Sublandlord's election, credit
against the next installments of the Fixed Rent and payments of additional rent
payable under this Sublease, an amount equal to any such rebate for which
Sublandlord shall receive a credit from Owner together with a computation of the
amount owed by Subtenant and all underlying documentation, if any, received by
Sublandlord from Owner.
(v) "Tax Year" shall mean each Tax Year as set forth in the Lease.
--------
(vi) Provided Subtenant is not in default of this Sublease and has
received Sublandlord's prior written consent, which consent Sublandlord agrees
shall not be unreasonably withheld or delayed, if Sublandlord fails to file a
Protest under Section 3.10 of the Lease, for any tax year for which Sublandlord
is entitled to file such Protest, Subtenant shall have the right to file such
Protest on behalf of Sublandlord in accordance with the terms and conditions of
Section 3.10 of the Lease. Such Protest shall be at the sole cost and expense of
Subtenant and Subtenant shall keep Sublandlord informed of its actions and shall
not take any action which might give rise to a default under the Lease.
Sublandlord shall reasonably cooperate with Subtenant in connection with such
Protest. Subtenant shall indemnify and hold harmless Sublandlord from and
against any and all liability, fines, suits, demands, cost, and expenses of any
kind or nature, including, without limitation, reasonable attorneys' fees and
disbursements incurred in connection with, arising out of or relating to any
Protest filed by Subtenant pursuant to Section 3.10 of the Lease .
3.4. (i) For each calendar year during the Term subsequent to the
calendar year ending on December 31, 2000 (a "Lease Year"), Subtenant shall pay
----------
to Sublandlord an amount (the "Expense Payment") equal to of the amount by which
---------------
Tenant's Proportionate Operating Share, as defined in the Lease, of Operating
Expenses (as such term is defined in the Lease) exceeds Tenant's Proportionate
Operating Share for calendar year 2000.
(ii) Within fifteen (15) days after receipt by Owner, Sublandlord may
furnish to Subtenant a written statement (an "Estimate Statement") setting forth
------------------
Sublandlord's estimate of the Expense Payment for such Lease Year (the
"Estimated Payment"), which Estimate Statement shall be based upon and
-----------------
accompanied by the Escalation Statement estimating the Expense Payment for such
-5-
<PAGE>
Lease Year, if any, received by Sublandlord from Owner. Subtenant shall pay to
Sublandlord on the first day of each month during each Lease Year an amount
equal to one-twelfth (1/12th) of the Estimated Payment. If Sublandlord furnishes
an Estimate Statement for a Lease Year subsequent to the commencement thereof,
then (i) until the first day of the month following the month in which the
Estimate Statement is furnished to Subtenant, Subtenant shall continue to pay to
Sublandlord prior to the first day of each month an amount equal to the monthly
sum payable by Subtenant to Sublandlord with respect to the next previous Lease
Year; (ii) promptly after the Estimate Statement is furnished to Subtenant,
Sublandlord shall give notice to Subtenant stating whether the amount previously
paid by Subtenant to Sublandlord for the current Lease Year was greater or less
that the installments of the Estimated Payments to be paid for the current Lease
Year, and (a) if there shall be a deficiency, Subtenant shall pay the amount
thereof within fifteen (15) days after demand therefor, or (b) if there shall
have been an overpayment, Sublandlord shall either pay to Subtenant or, at
Sublandlord's option, credit against the next installments of the Fixed Rent and
payments of additional rent payable under this Sublease, the amount of
Subtenant's overpayment; and (iii) on the first day of the month following the
month in which the Estimate Statement is furnished to Subtenant, and monthly
thereafter throughout the remainder of the Lease Year, Subtenant shall pay to
Sublandlord an amount equal to one-twelfth (1/12th) of the Estimated Payment
shown on the most recent Estimated Statement. If and to the extent a revised
Estimate Statement is furnished by Owner to Sublandlord, Sublandlord may furnish
to Subtenant a revised Estimate Statement; if a revised Estimate Statement is
furnished to Subtenant, the Estimated Payment for such Lease Year shall be
adjusted in the same manner as provided in the preceding sentence.
(iii) At any time during or after each Lease Year, Sublandlord shall
furnish to Subtenant an annual statement or statements (the "Annual Statement")
----------------
setting forth the items constituting the Operating Expenses during such Lease
Year, which Annual Statement shall be prepared based upon and accompanied by the
Escalation Statement or statement of Operating Expenses received by Sublandlord
from Owner. If the Annual Statement shows that the Estimated Payment (or other
payments) for such Lease Year exceeded the Expense Payment which should have
been paid for such Lease Year, Sublandlord shall either pay within fifteen (15)
days to Subtenant or, at Sublandlord's option, credit against the next
installments of Fixed Rent and payments of additional rent payable under this
Sublease, the amount of such excess; if the Annual Statement for such Lease Year
shows that the Estimated Payment for such Lease Year was less than the Expense
Payment (or other payments) which should have been paid for such Lease Year,
Subtenant shall
-6-
<PAGE>
pay the amount of such deficiency within fifteen (15) days after receipt of the
Annual Statement.
(iv) Each Annual Statement shall be conclusive and binding upon
Subtenant unless, within forty-five (45) days after receipt thereof, Subtenant
shall notify Sublandlord that it disputes the correctness of the Annual
Statement, specifying in reasonable detail the manner in which the Annual
Statement is claimed to be incorrect. If such notice is sent, provided Subtenant
shall pay to Sublandlord the amount shown to be due to Sublandlord on the
disputed Annual Statement, Sublandlord agrees to use commercially reasonable
efforts to enforce its rights under the Lease to dispute the correctness of the
Escalation Statement or statements of Operating Expenses delivered by Owner to
Sublandlord provided the cost of such dispute shall be paid by Subtenant as
additional rent. Subtenant agrees to indemnify and hold Sublandlord harmless
from and against any and all claims, costs, expenses and liabilities in
connection therewith, including, without limitation, reasonable attorneys` fees
and disbursements. If Owner shall revise the Escalation Statements disputed by
Subtenant, Sublandlord shall deliver to Subtenant a revised Annual Statement,
and an appropriate payment or credit by Sublandlord, or payment by Subtenant, as
the case may be made in accordance with the terms of Section 3.4(iii) hereof.
Notwithstanding the foregoing, if permitted by the Owner, Subtenant may, in its
own name or in the name of Sublandlord if required under the terms of the Lease
and at Subtenant's sole cost and expense, dispute the correctness of an
Escalation Statement pursuant to Section 3.09 of the Lease. Subtenant agrees to
keep Sublandlord fully informed of any such dispute and that its indemnity set
forth in this Section 3.4(iv) shall also cover any and all claims, costs,
expenses and liabilities incurred by Sublandlord in connection with Subtenant's
dispute of an Escalation Statement pursuant to the provisions of Section 3.09 of
the Lease.
3.5. (i) Subtenant shall pay to Sublandlord, as additional rent,
within three (3) business days after demand, (i) all payments required to be
made by Sublandlord for the supply of electric current and payable by
Sublandlord with respect to the Premises pursuant to Section 4.01 of the Lease
and Sections 2(b)(iv), 4(b) and 10(b) of the Modification Agreement, (ii) any
and all other costs, charges or expenses including, without limitation, any
interest or late charges incurred by Sublandlord as a result of Subtenant not
paying any sums hereunder to Sublandlord when the same are due and payable
hereunder, as determined under the provisions of the Lease, which are
attributable to, or incurred in connection with, Subtenant's use and occupancy
of the Premises and the provision of services and electric energy thereto.
Notwithstanding the foregoing, if permitted by Owner, Subtenant may pay
-7-
<PAGE>
Owner directly for the supply of electric current to the Premises provided that
Subtenant sends a copy of each electric bill and evidence of payment no later
than the date payment is due Landlord and further provided that Subtenant does
not default more than two (2) times in the payment for electric service.
(ii) Subtenant shall make no alterations to the electric system in the
Premises without obtaining Sublandlord's consent and complying with all
provisions of the Lease. Provided Subtenant has complied with all provisions of
the Lease (including obtaining Owner's consent, if required), Sublandlord shall
not unreasonably withhold or delay its consent to such alterations.
(iii) Sublandlord shall not be liable in any way to Subtenant for any
failure or defect in the supply or character of electric current furnished to
the Premises. Subtenant covenants and agrees that at all times its connected
electrical load shall not cause a default under the Lease nor exceed the
electrical capacity available to the Premises.
3.6. Any sums due and payable to Sublandlord under this Article 3 shall be
deemed to be, and collectible as, additional rent. If Subtenant shall fail to
timely pay when due any installment of Fixed Rent or additional rent, Subtenant
shall also pay to Sublandlord a late charge and/or interest to the extent
Sublandlord would be required to pay a late charge and/or interest to Owner
under the terms of the Lease. The payment of such late charge and interest shall
be in addition to all other rights and remedies available to Sublandlord in the
case of non-payment of Fixed Rent.
3.7. All Fixed Rent, additional rent, and all other costs, charges and
sums payable by Subtenant hereunder (collectively, "Rental"), shall constitute
------
rent under this Sublease, and shall be payable to Sublandlord at its address as
set forth above, unless Sublandlord shall otherwise so direct in writing.
3.8. Subtenant shall promptly pay the Rental as and when the same shall
become due and payable without set-off, offset or deduction of any kind
whatsoever, except as expressly set forth herein, and, in the event of
Subtenant's failure to pay the same when due (subject to grace periods provided
herein), Sublandlord shall have all of the rights and remedies provided for
herein or at law or in equity, in the case of non-payment of rent.
3.9. Sublandlord's failure during the Term to prepare and deliver any
statements or bills required to be delivered to Subtenant hereunder, or
Sublandlord's
-8-
<PAGE>
failure to make a demand under any provisions of this Sublease shall not in any
way be deemed to be a waiver of, or cause Sublandlord to forfeit or surrender
its rights to collect any additional rent which may have become due pursuant to
this Article 3 during the Term except to the extent Owner has waived its right
to obligate Tenant to pay the corresponding amount of additional rent from
Sublandlord under Section 3.08 of the Lease. Subtenant's liability for Fixed
Rent and additional rent due under this Article 3 accruing during the Term, and
Sublandlord's obligation to refund overpayments of or adjustments to Fixed Rent
or additional rent paid to it by Subtenant, shall survive the expiration or
sooner termination of this Sublease.
3.10. Notwithstanding anything contained in this Sublease to the contrary
(i) Subtenant shall not be liable for the payment of any charges, fees or other
costs imposed by Owner on Sublandlord under the Lease unless and to the extent
related to Subtenant's occupancy of the Premises or caused by Subtenant's
actions or omissions under this Sublease, and (ii) Subtenant shall have no
obligation to make any payment to Sublandlord or Owner relating to any charges
accruing under the Lease (whether denominated as rent, rental, additional rent
or otherwise) for any period prior to the Term of this Sublease.
3.11. If either the 2 To 5 Commencement Date or 11 & 12 Commencement Date
does not occur on the first day of a calendar month, the Fixed Rent and any
Additional Rent payable hereunder shall be prorated for such partial month on
the basis of the actual number of days of such month.
3.12. Anything herein to the contrary notwithstanding, provided Subtenant
is not in default of this Sublease following any required notice and the
expiration of any applicable cure period, Subtenant shall receive an abatement
of Fixed Rent in the amount of $132,348 per month for each of the first three
(3) months following the 11 & 12 Commencement Date.
4. Subordination to and Incorporation of the Lease.
-----------------------------------------------
4.1. This Sublease is in all respects subject and subordinate to the terms
and conditions of the Lease and to all matters to which the Lease is subject and
subordinate. Subtenant shall indemnify Sublandlord for, and shall hold it
harmless from and against, any and all losses, damages, penalties, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and disbursements, which may be sustained or incurred by Sublandlord by reason
of
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<PAGE>
Subtenant's failure to keep, observe or perform any of the terms, provisions,
covenants, conditions and obligations on Sublandlord's part to be kept, observed
or performed under the Lease to the extent same shall have been incorporated
herein, or otherwise arising out of or with respect to Subtenant's use and
occupancy of the Premises from and after the Commencement Date.
4.2. Except as otherwise expressly provided in, or otherwise inconsistent
with, this Sublease, or to the extent not applicable to the Premises, the terms,
provisions, covenants, stipulations, conditions, rights, obligations, remedies
and agreements contained in the Lease are incorporated in this Sublease by
reference, and are made a part hereof as if herein set forth at length, and (i)
as if the word "Lease" or "lease" or words of similar import, wherever the same
appear in the Lease, were construed to mean this "Sublease", (ii) Sublandlord
shall be substituted for all references to the "Landlord' under the Lease, (iii)
Subtenant shall be substituted for the "Tenant" under the Lease, and (iv)
Premises shall be substituted for "Demised Premises" under the Lease, except
that the following provisions of the Lease and any references to such provisions
shall be deemed deleted therefrom and shall have no force and effect as between
Sublandlord and Subtenant:
Sections 1.01, 2.01, 3.10 (second paragraph), 8.03(i),
8.04, 24.01, 25.06(a)(i) and (iii), 25.06(b), (c) and
(d), Articles 42, 44, 47.01, Schedules C, E, F, H, M,
O and P of the original lease dated July 17, 1992
between Owner and Sublandlord; Sections 2(a), 2(b)(v),
3(b) through 3(g), 4(a), 5, 6(a), (b), 7, 10(a), 11,
12(b)(i)(and any references to a specific monetary
amount), 13, 14, 15, 16, 18, 19, 20(e) of the
Modification Agreement.
4.3. If any of the express provisions of this Sublease shall conflict with
any of the provisions of the Lease incorporated by reference, such conflict
shall be resolved in every instance in favor of the express provisions of the
Sublease.
4.4. Subtenant may peaceably and quietly enjoy the Premises subject and
subordinate to the terms of this Sublease and to the terms of the Lease, to the
extent incorporated herein.
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<PAGE>
4.5. Anything herein to the contrary notwithstanding, Sublandlord shall
have no obligation to reimburse Subtenant for any costs under Section 4.03 of
the Original Lease unless and until Sublandlord actually receives payment of
such costs from Owner pursuant to said Section 4.03. In addition, Subtenant
shall not be entitled to offset any costs or expenses under said Section 4.03
unless Sublandlord has received payment from the Owner and failed to remit such
payment to Subtenant.
4.6. Anything herein to the contrary notwithstanding, to the extent
Sublandlord shall actually receive any rent abatement under Section 9(c), (d)
and (e) of the Modification Agreement, Subtenant shall be entitled to receive a
corresponding rent abatement under this Sublease. Thus, for example, if under
Section 9(d), Subtenant receives an abatement equal to one and one-half days,
for each day after February 28, 2001 that the 11th and 12th Floors Adjustment
Date does not occur, which abatement is actually received by Sublandlord under
the terms of the Lease, Subtenant shall receive a corresponding abatement for
the same period of one and one-half days of Fixed Rent for the 11 & 12 Premises
for each day that the 11th and 12th Floors Adjustment Date has not occurred
under Section 16.2 of this Sublease. Notwithstanding the foregoing, if Owner has
given Sublandlord a notice under Section 9(f) of the Modification Agreement that
Owner intends to terminate its obligation to add the 11th and 12th Floors Added
Space to the Premises demised under the Lease, Sublandlord shall not agree to
waive the penalties (i.e., the rent abatements) under Subparagraph (c) and (d)
unless advised by Subtenant within the time required by the Modification
Agreement (in which case Subtenant shall not be entitled to any abatement
hereunder). If Subtenant fails to advise Sublandlord to waive such penalties
then, upon the effective date of Landlord's notice of termination, Sublandlord
shall have no obligation to deliver the 11 & 12 Premises to Subtenant and
Subtenant shall have no rights or obligations with respect to the 11 & 12
Premises.
5. Alterations
-----------
5.1. Subtenant shall not make any alterations, installations,
improvements, additions or other physical changes in or about the Premises,
("Subtenant Alterations") without first obtaining the consent of Sublandlord and
---------------------
Owner with respect thereto, if (and to the extent) Sublandlord is required under
the Lease to obtain consent from Owner. Sublandlord agrees to cooperate with
Subtenant, at no cost to Sublandlord, in order to obtain consent from Owner. Any
Subtenant Alterations shall be performed by Subtenant, at Subtenant's sole cost
and expense,
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in accordance with the applicable provisions of the Lease. Sublandlord agrees
not to unreasonably withhold or delay consent with respect to any Subtenant
Alterations to the extent Owner's consent is obtained with respect thereto.
5.2 Anything herein to the contrary notwithstanding, Sublandlord's
consent shall not be required with respect to any Subtenant Alterations
(although Subtenant shall give Sublandlord not less than ten (10) days prior
written notice of such Subtenant Alterations) to the extent Subtenant
Alterations do not affect any areas outside of the Premises and do not affect
any structural portions of the Building or the Premises provided that such
Subtenant Alterations (i) shall cost less than $100,000.00 (exclusive of purely
decorative changes such as painting and carpeting) provided however, that for
purposes of this subsection, in the event that a number of discrete changes,
alterations or additions are reasonably determined to be part of a single plan
of change, alterations or additions with respect to the Premises, then the cost
of all such changes, alterations or additions shall be aggregated; (ii) shall
not interfere with or affect to any material degree any mechanical, electrical,
sanitary or utility system of the Building or of the Premises; (iii) shall
comply with all applicable provisions of the Lease, including, without
limitations, Article 6; and (iv) Owner's consent is obtained. Subtenant shall be
obligated to restore the Premises to the condition existing immediately prior to
the commencement of any Subtenant Alterations unless Sublandlord has no
corresponding obligation to restore such portion of the Premises affected by
such Subtenant Alterations under the terms of the Lease. Notwithstanding the
foregoing, Subtenant shall also remove any Specialty Alterations (as hereinafter
defined) and restore the Premises whether or not such restoration is required
under the terms of the Lease if Sublandlord advises Subtenant at any time that
Sublandlord shall be resuming occupancy of the Premises (following the occupancy
of Subtenant) and prior to the Expiration Date. If Sublandlord so advises
Subtenant then Subtenant shall also remove any Specialty Alterations and restore
the Premises as required herein. For purposes hereof, Specialty Alterations
means any Subtenant Alterations consisting of kitchens, executive bathrooms,
computer installations, vaults, internal staircases, vertical and horizontal
transportation systems, and any other alterations of a similar character; any
alterations which are inconsistent with a first class office tenant in a first
class office building in midtown Manhattan; and any Subtenant Alterations which
affect any structural portions of the Building or Premises.
5.3 Sublandlord agrees to respond to any request made by Subtenant for
approval of any Subtenant Alterations within ten (10) business days after
receipt by Sublandlord of all plans, specifications and other documentation
which are required
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to be delivered to Owner under the terms of the Lease. If Sublandlord fails to
respond to Subtenant's request within said ten (10) business day period, then
Sublandlord's consent shall be deemed granted, provided that a notice
accompanying Subtenant's request for approval of Subtenant's Alterations
expressly and conspicuously advises Sublandlord that Sublandlord's failure to
respond within a ten (10) business day period shall be deemed consent under
Section 5.3 of the Sublease.
6. Covenants with Respect to the Lease.
-----------------------------------
6.1. Subtenant shall not do anything that would constitute a default under
the Lease or omit to do anything that Subtenant is obligated to do under the
terms of this Sublease so as to cause a default under the Lease.
6.2. The time limits set forth in the Lease for the giving of notices,
making demands, performance of any act, condition or covenant, or the exercise
of any right, remedy or option, are changed for the purpose of this Sublease, by
lengthening or shortening the same in each instance, as appropriate, so that
notices may be given, demands made, or any act, condition or covenant performed,
or any right, remedy or option hereunder exercised, by Sublandlord or Subtenant,
as the case may be, (and each party covenants that it will do so) within three
(3) days prior to the expiration of the time limit (unless such time period is
ten (10) days or less, in which case such three (3) day time period shall be
reduced to two (2) days), taking into account the maximum grace period, if any,
relating thereto contained in the Lease. Each party shall promptly deliver to
the other party copies of all notices, requests or demands which relate to the
Premises or the use or occupancy thereof after receipt of same from Owner.
6.3. Sublandlord represents and warrants to Subtenant that (i) Sublandlord
has a valid and subsisting leasehold estate under the Lease, (ii) the Lease is
in full force and effect, (iii) Sublandlord has not delivered or received
written notice of default under the Lease which remains uncured, (iv) to the
best of Sublandlord's knowledge, there are no defaults or state of facts with
which the giving of notice or passage of time would constitute a default of
Owner or Sublandlord thereunder, (v) attached to this Sublease as Exhibit B is a
true and complete copy of the Lease except as indicated thereon for the rental
amount and other financial portions thereof which have been redacted.
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<PAGE>
6.4. Sublandlord shall not amend or modify the Lease as the Lease may
relate to the Premises, to the detriment of Subtenant or in derogation of the
rights of Subtenant hereunder, without the prior written consent of Subtenant.
Not less than five (5) business days prior to the effective date of any such
Amendment, Sublandlord shall notify Subtenant of all amendments to the Lease and
provide to Subtenant a copy of such amendments of the Lease (with economic terms
of such amendments redacted, if so desired by Sublandlord).
6.5. Sublandlord and Subtenant represent and warrant to each other that
(i) each has the power, right and authority to make this Sublease and to perform
their respective obligations hereunder, and (ii) no petition in bankruptcy or
similar proceeding under is pending or to either party's best knowledge,
threatened against, or contemplated by, either.
6.6 Sublandlord covenants and agrees that except to the extent such
default is a consequence of or arises out of Subtenant's default under this
Sublease, Sublandlord shall not do anything that would constitute a default
under the Lease or omit to do anything that Sublandlord is obligated to do under
the terms of this Sublease so as to cause a default under the Lease. Sublandlord
shall indemnify Subtenant for and shall hold it harmless from and against any
losses, damages, penalties, liabilities, cost and expenses, including, without
limitations, reasonable attorneys fees and disbursements which, may be sustained
or incurred by Subtenant by reasons of Sublandlord's failure to comply with the
foregoing covenant.
7. Services and Repairs. Notwithstanding anything to the contrary
--------------------
contained in this Sublease or in the Lease, Subtenant shall be required to
maintain and repair the Premises in accordance with the terms of the Lease to
fulfill all of Sublandlord's obligations under the Lease with regard to the
Premises and Sublandlord shall not be required to provide any of the services
that Owner has agreed to provide, whether or not specified in the Lease (or
required by law), or furnish the electricity to the Premises that Owner has
agreed to furnish pursuant to the Lease (or required by law), or to otherwise
repair or maintain the Premises and the Personal Property (as hereinafter
defined), or make any of the repairs or restorations that Owner has agreed to
make pursuant to the Lease (or required by law), or comply with any laws or
requirements of any governmental authorities, or take any other action that
Owner has agreed to provide, furnish, make, comply with, or take, or cause to be
provided, furnished, made, complied with or taken under the Lease but Subtenant
shall have the benefit of all services, electricity, repairs, restorations, or
actions to be provided or taken by Owner thereunder and
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<PAGE>
Sublandlord agrees to use diligent efforts, at Subtenant's sole cost and
expense, to obtain the same from Owner (provided, however, that Sublandlord
shall not be obligated to use such efforts or take any action which might give
rise to a default under the Lease), and Subtenant shall rely upon, and look
solely to, Owner for the provision, furnishing or making thereof or compliance
therewith. A default by Owner under the Lease shall not excuse Subtenant's
performance under this Sublease except to the extent Sublandlord is excused from
performance under the Lease. If Owner shall default in the performance of any of
its obligations under the Lease, including its obligation to pay the
Construction Allowance under Section 12(b) of the Modification Agreement,
Sublandlord shall, upon request and at the expense of Subtenant, timely
institute and diligently prosecute any action or proceeding reasonably requested
by Subtenant in order to have Owner make such repairs, furnish such electricity,
provide such services or comply with any other obligation of Owner under the
Lease or as required by law. In addition, Subtenant shall have the right to
prosecute such action or proceeding in the name of Sublandlord, provided that
Subtenant shall keep Sublandlord informed of its actions and shall not take any
action which might give rise to a default under the Lease. Subtenant shall
indemnify and hold harmless Sublandlord from and against any and all such claims
arising from or in connection with such request, action or proceeding. This
indemnity and hold harmless agreement shall include indemnity from and against
any and all liability, fines, suits, demands, costs and expenses of any kind or
nature, including, without limitation, reasonable attorneys' fees and
disbursements, incurred in connection with any such claim, action or proceeding
brought by Sublandlord or Subtenant pursuant to this Article 7. Subtenant shall
not make any claim against Sublandlord for any damage which may arise, nor shall
Subtenant's obligations hereunder be diminished, by reason of (i) the failure of
Owner to keep, observe or perform any of its obligations pursuant to the Lease,
unless such failure is due to Sublandlord's default under this Sublease,
negligence or misconduct, or (ii) the acts or omissions of Owner, its agents,
contractors, servants, employees, invitees or licensees. The provisions of this
Article 7 shall survive the expiration or earlier termination of the Term
hereof.
8. Consents.
--------
8.1 Whenever Sublandlord has expressly agreed under the term of this
Sublease not to unreasonably withhold its consent or approval hereunder and the
consent or approval of Owner, the lessor under a superior lease, or the
mortgagee under a mortgage, as the case may be, is also required to consent
pursuant to the terms of the Lease, if Owner, the lessor under a superior lease,
or the mortgagee
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<PAGE>
under a mortgage shall withhold its consent or approval for any reason
whatsoever, Sublandlord shall not be deemed to be acting unreasonably to the
extent Sublandlord withholds its consent based upon the withholding of consent
by Owner, or such lessor or mortgagee. Sublandlord agrees that it shall promptly
after receipt thereof from Subtenant, convey all requests for the consent or
approval of Owner to Owner and Sublandlord shall use reasonable efforts
thereafter to secure such consents or approvals. If Owner shall withhold its
consent or approval in connection with this Sublease or the Premises in any
instance where, under the Lease, the consent or approval of Owner may not be
unreasonably withheld, Sublandlord, upon the request and at the expense of
Subtenant, shall either (i) timely institute and diligently prosecute any action
or proceeding which Subtenant, in its reasonable judgment, deems meritorious, in
order to dispute such action by Owner, or (ii) permit Subtenant, to the extent
allowable under the Lease, to institute and prosecute such action or proceeding
in the name of Sublandlord, provided that Subtenant shall keep Sublandlord
informed of its actions and shall not take any action which might give rise to a
default under the Lease.
8.2 If Subtenant shall request Sublandlord's consent and Sublandlord has
expressly agreed, under the terms of this Sublease, that neither its consent nor
its approval shall be unreasonably withheld, and Sublandlord shall fail or
refuse to give such consent or approval, and Subtenant shall dispute the
reasonableness of Sublandlord's refusal to give its consent or approval, such
dispute shall be finally determined by a court of competent jurisdiction or by
Arbitration under Article 38 of the Lease (except that such Arbitration shall be
conducted by a single arbitrator in accordance with the "expedited arbitration"
procedures). If the determination shall be adverse to Sublandlord, Sublandlord,
nevertheless, shall not be liable to Subtenant for a breach of Sublandlord's
covenant not to unreasonably withhold such consent or approval, and Subtenant's
sole remedy in such event shall be the granting of consent or approval by
Sublandlord with respect to such request under this Sublease. Notwithstanding
the foregoing, nothing herein shall be construed to exculpate Sublandlord from
liability based upon a final, non-appealable finding by a court of competent
jurisdiction that Sublandlord acted in bad faith in withholding such consent.
9. Termination of Lease. If the Lease is terminated by Owner pursuant to
--------------------
the terms thereof with respect to all or any portion of the Premises prior to
the Expiration Date for any reason whatsoever, including, without limitation, by
reason of casualty or condemnation, this Sublease shall thereupon terminate with
respect to any corresponding portion of the Premises, and (unless such
termination of the
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<PAGE>
Lease shall be as a result of Sublandlord's default thereunder or a voluntary
surrender of the Premises, other than a surrender of the Premises permitted
under the Lease with respect to a termination of the Lease by reason of casualty
to or condemnation of the Premises or the Building) Sublandlord shall not be
liable to Subtenant by reason thereof. In the event of such termination,
Sublandlord shall return to Subtenant that portion of the Fixed Rent and/or
additional rent paid in advance by Subtenant with respect to such portion of the
Premises, if any, prorated as of the date of such termination.
10. Sublease, Not Assignment. Notwithstanding anything contained herein,
------------------------
this Sublease shall be deemed to be a sublease of the Premises and not an
assignment, in whole or in part, of Sublandlord's interest in the Lease.
11. Damage, Destruction, Fire and other Casualty; Condemnation.
----------------------------------------------------------
Notwithstanding any contrary provision of this Sublease or the provisions of the
Lease herein incorporated by reference, Subtenant shall not have the right to
terminate this Sublease as to all or any part of the Premises, or be entitled to
an abatement of Rent, additional rent or any other item of Rental, by reason of
a casualty or condemnation affecting the Premises unless Sublandlord is entitled
to terminate the Lease or is entitled to a corresponding abatement with respect
to its corresponding obligation under the Lease. If Sublandlord is entitled to
terminate the Lease for all or any portion of the Premises by reason of casualty
or condemnation, Subtenant may terminate this Sublease as to any corresponding
part of the Premises by written notice to Sublandlord given at least five (5)
business days prior to the date(s) Sublandlord is required to give notice to
Owner of such termination under the terms of the Lease. Sublandlord agrees that
it shall not exercise any right to terminate the Lease by reason of a casualty
or condemnation without the consent of Subtenant, which consent Subtenant agrees
shall not be unreasonably withheld.
12. No Waivers. Failure by either party hereto in any instance to insist
----------
upon the strict performance of any one or more of the obligations of the other
under this Sublease, or to exercise any election herein contained, shall in no
manner be or be deemed to be a waiver by such party of any of such other party's
defaults or breaches hereunder or of any of the first party's rights and
remedies by reason of such defaults or breaches, or a waiver or relinquishment
for the future of the requirement of strict performance of any and all of such
other party's obligations hereunder. Further, no payment by Subtenant or receipt
by Sublandlord of a lesser amount than the correct amount or manner of payment
of Rental due hereunder
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<PAGE>
shall be deemed to be other than a payment on account, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed to effect or evidence an accord and satisfaction, and Sublandlord may
accept any checks or payments as made without prejudice to Sublandlord's right
to recover the balance or pursue any other remedy in this Sublease or otherwise
provided at law or equity.
13. Notices. Any notice, statement, demand, consent, approval, advice or
-------
other communication required or permitted to be given, rendered or made by
either party to the other, pursuant to this Sublease or pursuant to any
applicable law or requirement of public authority (collectively,
"Communications") shall be in writing and shall be deemed to have been properly
--------------
given, rendered or made only if sent in accordance with Section 31.01 of the
Lease addressed (i) to Subtenant at its address first above written, Attention:
Meryl Beckingham, with a copy to Mintz, Levin Cohn Ferris Glovsky and Popeo,
P.C., One Financial Center, Boston, MA 02111, Attn: Stuart A. Offner, Esq. and
(ii) to Sublandlord at its address first above written, with a copy to VNU USA,
Inc., 1515 Broadway, New York, New York 10036, Attn: Rosalee Lovett, Chief
Financial Officer and Siller Wilk LLP, 747 Third Avenue, New York, New York
10017, Attention: Robert P. Reichman, Esq. All such communications shall be
deemed to have been given, rendered or made when delivered and receipted by the
party to whom addressed, in the case of personal delivery, or upon receipt, as
evidenced by the date of receipt noted on the return receipt, or upon the
rejection thereof, in the case of mailing. Either party may, by notice as
aforesaid actually received, designate a different address or addresses for
communications intended for it.
14. Indemnity.
---------
14.1 Subtenant shall not do or permit any act or thing to be done upon the
Premises which may subject Sublandlord to any liability or responsibility for
injury, damages to persons or property or to any liability by reason of any
violation of any requirement of law, and shall exercise such control over the
Premises as to fully protect Sublandlord against any such liability. Subtenant
shall indemnify and save harmless Sublandlord, the Parties (hereinafter defined)
and the employees, agents and contractors of any of the foregoing (collectively,
the "Indemnitees") from and against (a) all claims of whatever nature against
-----------
the Indemnitees arising from any act, omission or negligence of Subtenant, its
contractors, licensees, agents, servants, employees, invitees or visitors, (b)
all claims against the Indemnitees arising from any accident, injury or damage
whatsoever caused to any person or to
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<PAGE>
the property of any person and occurring during the Term in or about the
Premises, and (c) all claims against the Indemnitees arising from any accident,
injury or damage occurring outside of the Premises but anywhere within or about
the Building, where such accident, injury or damage results or is claimed to
have resulted from an act, omission or negligence of Subtenant or Subtenant's
contractors, licensees, agents, servants, employees, invitees or visitors. This
indemnity and hold harmless agreement shall include indemnity from and against
any and all liability, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitation, attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof.
14.2 Sublandlord shall indemnify and save harmless Subtenant, its
employees, agents and contractors (collectively, the "Indemnitees") from and
against all claims of whatever nature against the Indemnitees arising from any
act, omission or negligence of Sublandlord, its agents or employees. This
indemnity and hold harmless agreement shall include indemnity from and against
any and all liability, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitations, attorneys fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon
and the defense thereof.
14.3 If any claim, action or proceeding is made or brought against an
indemnified party under Sections 14.1 or 14.2, above, which claim, action or
proceeding the indemnifying party shall be obligated to indemnify the
indemnified party against pursuant to the terms of this Lease, then, upon demand
by the indemnified party, the indemnifying party at its sole cost and expense,
shall resist or defend such claim, action or proceeding in the indemnified
party's name, if necessary, by such attorneys as the indemnified party shall
approve, which approval shall not be unreasonably withheld. Attorneys for the
indemnified party's insurer are hereby deemed approved for purposes of this
Section 14.3. Notwithstanding the foregoing, the indemnified party may retain
its own attorneys to defend or assist in defending any claim, action or
proceeding involving potential liability of Fifty Thousand Dollars ($50,000) or
more, and the indemnifying party shall pay the reasonable fees and disbursements
of such attorneys. The provisions of this Article 14 shall survive the
expiration or earlier termination of the Term hereof.
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<PAGE>
15. Broker. Each party hereto covenants, warrants and represents to the
------
other party that it has had no dealings, conversations or negotiations with any
broker other than Cushman & Wakefield, Inc. ("C&W") and Insignia/ESG ("ESG")
concerning the execution and delivery of this Sublease. Each party hereto agrees
to indemnify and hold harmless the other party against and from any claims for
any brokerage commissions and all costs, expenses and liabilities in connection
therewith, including, without limitation, reasonable attorneys' fees and
disbursements, arising out of its respective representations and warranties
contained in this Article 15 being untrue. Sublandlord shall pay any brokerage
commissions due C&W and Subtenant shall pay any brokerage commission due ESG
pursuant to separate agreements between Sublandlord and C&W and Subtenant and
ESG. The provisions of this Article 15 shall survive the expiration or earlier
termination of the Term hereof.
16. Delivery of the Premises.
------------------------
16.1 Sublandlord shall deliver the 2 To 5 Premises to Subtenant in a
broom-clean condition but otherwise in its condition as exists on the date
hereof "as is" on July 1, 2000 (the "Delivery Date"), reasonable wear and tear
between the date hereof and the Delivery Date excepted. Notwithstanding the
foregoing, if Sublandlord in good faith determines that premises at 770
Broadway, New York, New York, into which Sublandlord is moving upon vacating the
Premises shall not be ready for Sublandlord's occupancy on or before the
Delivery Date, then Sublandlord may, adjourn the Delivery Date for a period of
time not exceeding ninety (90) days and designated in a written notice given by
Sublandlord to Subtenant on or before twenty (20) days prior to the Delivery
Date. Sublandlord has not made and does not make any representations or
warranties as to the physical condition of the 2 To 5 Premises, the use to which
the 2 To 5 Premises may be put, or any other matter or thing affecting or
relating to the 2 To 5 Premises, except as specifically set forth in this
Sublease. Sublandlord shall have no obligations whatsoever to alter, improve,
decorate or otherwise prepare the 2 To 5 Premises for Subtenant's occupancy
except as set forth in this Sublease.
16.2 Sublandlord shall deliver the 11 & 12 Premises to Subtenant on the
11/th/ and 12/th/ Floors Adjustment Date (as defined in the Modification
Agreement) in the condition required under the Lease, subject to any
modification that may be made in Landlord's consent to this Sublease.
Sublandlord does not make any representations warranties as to the physical
conditions of the 11 & 12 Premises, the use to which the 11 & 12 Premises may be
put, or any other matter or thing
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<PAGE>
affecting or relating to the 11 & 12 Premises, except as specifically set forth
in this Sublease. Sublandlord shall have no obligation whatsoever to alter,
improve, decorate or otherwise prepare the 11 & 12 Premises for Subtenant's
occupancy except as set forth herein. Anything herein to the contrary
notwithstanding, Sublandlord shall use diligent efforts to cause Owner to
perform certain work in the 11 & 12 Premises as set forth in Section 12(a) of
the Modification Agreement, ("Owner's Work"). Subtenant agrees that Owner's Work
may be performed following the 11 & 12 Commencement Date and Subtenant shall
provide Owner with reasonable access to the 11 & 12 Premises for the purpose of
permitting Owner to perform Owner's Work provided that the performance of
Owner's Work does not unreasonably interfere with any work being performed by
Subtenant in the 11 & 12 Premises. Sublandlord agrees that Subtenant may
exercise Sublandlord's right under Section 12(a)(iv) of the Modification
Agreement to increase the tonnage of the air-conditioning units for the 11 & 12
Premises. Sublandlord agrees to promptly forward to Subtenant any notice
received by Sublandlord from Owner pursuant to said Section 12(a)(iv). If
Subtenant exercises the option set forth in said subsection to increase the
tonnage of the air-conditioning units, any cost and expenses which Sublandlord
is required to pay to Owner shall be payable on demand by Subtenant to
Sublandlord as additional rent hereunder.
16.3 So long as Subtenant shall not be in default of this Sublease after
the giving of any required notice and the expiration of any applicable cure
period, Sublandlord agrees to reimburse Subtenant in an amount (the
"Construction Allowance") equal to the lesser of: (i) $661,740.00 or (ii) the
cost incurred by Subtenant for any leasehold improvements or other construction
work to the 11 & 12 Premises, but only to the extent such improvements or other
construction work is reimbursable to Sublandlord by Owner pursuant to the term
of the Modification Agreement. The parties hereto agree that the Construction
Allowance shall be paid in accordance with the terms and conditions of Section
12(b) of the Modification Agreement, and Sublandlord shall have no obligation to
reimburse Subtenant for any portion of the Construction Allowance until and
unless Sublandlord has received from Owner the corresponding payment pursuant to
said Section 12(b) of the Modification Agreement. Subtenant agrees that in order
for it to be reimbursed for the Construction Allowance, it must submit to
Sublandlord the documentation, statements, lien waivers and other information
required to be submitted to Owner under Section 12(b) of the Modification
Agreement and failure to provide such documentation or comply with the terms of
said Section 12(b) shall result in a denial of payment of the Construction
Allowance to Subtenant. The Sublandlord agrees that promptly upon receipt of
such documentation as required by the Modification
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<PAGE>
Agreement, it shall promptly submit the same to Owner and request reimbursement
in accordance with the terms and conditions of the Modification Agreement.
However, Sublandlord shall only be acting as a conduit for such payments from
the Owner and other than using diligent efforts (at Subtenant's sole cost and
expense to obtain reimbursement for the Construction Allowance from Owner)
Subtenant shall rely upon and look solely to Owner for the payment of the
Construction Allowance and Sublandlord shall have no liability with respect to
thereto.
17. Consent of Owner to this Sublease.
---------------------------------
17.1 Subtenant hereby acknowledges and agrees that this Sublease is
subject to and conditioned upon Sublandlord obtaining ^^^ consent (the
"Consent") of Owner (which shall include the consent ^^^ sublease and the
-------
Amendment by the holder of the mortgage on the Building) sub ^^^ ly in the form
annexed hereto as Exhibit C. Promptly following the execu ^^^ and delivery
hereof, Sublandlord shall submit this Sublease to Owner. ^^^^^^^^^^^^^^^^ agrees
that it shall cooperate in good faith with Sublandlord and shall comply with any
reasonable requests made of Subtenant by Sublandlord or Owner in the procurement
of the Consent. Sublandlord shall use reasonable efforts to obtain Owner's
consent provided that in no event shall Sublandlord be obligated to make any
payment to Owner in order to obtain the Consent or the consent to any provision
hereof, other than as expressly set forth in the Lease.
17.2 If Owner shall not have executed and delivered the Consent on or
before forty-five (45) days from the date hereof, either party shall have the
right to cancel this Sublease on fifteen (15) days written notice to the other
(the "Cancellation Notice") and with the giving of such notice, this Sublease
shall be deemed canceled and no further force or effect and neither party shall
have any liability or obligation to the other in respect thereof.
Notwithstanding the foregoing, if within fifteen (15) days after the giving of
the Cancellation Notice, the Consent by Owner is received, then the Cancellation
Notice shall be deemed null and void and the Sublease shall continue in full
force and effect.
18. Assignment, Subletting and Mortgaging.
-------------------------------------
18.1 Subtenant shall not assign, sell, transfer (whether by operation or
law or otherwise), pledge, mortgage or otherwise encumber this Sublease or any
portion of its interest in the Premises, nor sublet all or any portion of the
Premises or permit any other person or entity to use or occupy all or any
portion of the
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<PAGE>
Premises, without the prior written consent of Sublandlord and Owner and with
compliance of all terms of the Lease. Notwithstanding the foregoing, provided
the consent of the Owner is obtained and Subtenant has complied with all terms
of the Lease, Sublandlord agrees not to unreasonably withhold or delay consent
to an assignment of this Sublease or a further sublet of the Premises. Anything
herein to the contrary notwithstanding, provided Subtenant has obtained the
prior written consent of Owner, Subtenant may enter into one (1) sub-sublease
for a portion of the Premises without Sublandlord's consent provided all of the
following conditions are satisfied: (i) Sublandlord shall be given a copy of the
sub-sublease no later than ten (10) days prior to the effective date of its
term, (ii) the premises to be sublet shall be commercially regular in shape and
shall not be less than 10,000 rentable square feet and no more than the entire
rentable area of a floor of the Premises, (iii) such sub-sublease contains a
term not in excess of five (5) years and is executed and unconditionally
delivered no later than one (1) year from the date hereof and (iv) such sub-
sublease shall comply with and shall be subject to all terms and conditions of
the Lease.
18.2 If this Sublease be assigned, or if the Premises or any part thereof
be sublet (whether or not Sublandlord and Owner shall have consented thereto),
Sublandlord, after default by Subtenant in its obligations hereunder, may
collect rent from the assignee or subtenant and apply the net amount collected
to the Rental herein reserved, but no such assignment or subletting shall be
deemed a waiver of the covenant set forth in this Article 18, or the acceptance
of the assignee or subtenant as a tenant, or a release of Subtenant from the
further performance and observance by Subtenant of the covenants, obligations
and agreements on the part of Subtenant to be performed or observed herein. The
consent by Sublandlord or Owner to an assignment, sale, pledge, transfer,
mortgage or subletting shall not in any way be construed to relieve Subtenant
from obtaining the express consent in writing, to the extent required by this
Sublease or the Lease, of Sublandlord and Owner to any further assignment, sale,
pledge, transfer, mortgage or subletting.
19. Security Deposit.
----------------
19.1 Subtenant shall deposit with Sublandlord on the signing of this
Sublease the sum of Five Million Ninety-Eight Thousand Five Hundred Seventy-Two
Dollars and 44/100 ($5,098,572.00), or at Subtenant's option, a "clean,"
unconditional, irrevocable and transferable letter of credit (the "Letter of
---------
Credit") in the same amount, reasonably satisfactory to Sublandlord, issued by
- ------
and drawn on a bank reasonably satisfactory to Sublandlord with an office in and
which
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<PAGE>
regularly conducts business in the City of New York or is a member of the New
York Clearing House Association, for the account of Sublandlord, for a term of
not less than one (1) year, as security for the faithful performance and
observance by Subtenant of the terms, covenants, conditions and provisions of
this Sublease, including, without limitation, the surrender of possession of the
Premises to Sublandlord as herein provided. If a default shall occur and be
continuing beyond any applicable cure period, Sublandlord may apply the whole or
any part of the security so deposited, or present the Letter of Credit for
payment and apply the whole or any part of the proceeds thereof, as the case may
be, to the extent required for the payment of any or all of the following: (i)
the payment of Rental as to which Subtenant is in default, (ii) any sum which
Sublandlord may expend or be required to expend by reason of Subtenant's default
in respect of any of the terms, covenants and conditions of this Sublease,
including, without limitation, any damage, liability or expense (including,
without limitation, reasonable attorneys' fees and disbursements) incurred or
suffered by Sublandlord, and (iii) any damage or deficiency incurred or suffered
by Sublandlord in the reletting of the Premises, whether such damages or
deficiency accrue or accrues before or after summary proceedings or other re-
entry by Sublandlord. If Sublandlord applies or retains any part of the proceeds
of the Letter of Credit or the security so deposited, as the case may be,
Subtenant, within five (5) days after demand, shall deposit with Sublandlord the
amount so applied or retained so that Sublandlord shall have the full deposit on
hand at all times during the Term. If Subtenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
Sublease, the Letter of Credit or the security (together with all interest
earned thereon), as the case may be, shall be returned to Subtenant after the
Expiration Date and after delivery of possession of the Premises to Sublandlord
in the condition required by this Sublease. Subtenant shall not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and neither Sublandlord nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Subtenant shall renew any Letter of Credit from time to time, at least thirty
(30) days prior to the expiration thereof, and deliver to Sublandlord a new
Letter of Credit or an endorsement to the Letter of Credit, and any other
evidence required by Sublandlord that the Letter of Credit has been renewed for
a period of at least one (1) year. If Subtenant shall fail to renew the Letter
of Credit as aforesaid, Sublandlord may present the Letter of Credit for payment
and retain the proceeds thereof as security in lieu of the Letter of Credit. If
Subtenant does not deliver a Letter of Credit then the security deposited by
Subtenant with Sublandlord will be held in an interest bearing account
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<PAGE>
and the party entitled to the security will also be entitled to the interest
earned thereon.
19.2 Anything herein to the contrary notwithstanding, provided Subtenant
is not in default of any term, covenant or condition of this Sublease, subject
to Subtenant's satisfaction of the Net Worth requirements (as hereinafter
defined), [x] on the fifth (5th) anniversary of the 11 & 12 Commencement Date,
the amount of the Letter of Credit may be reduced to the amount of $3,440,637.00
and [y] on the sixth (6/th/) anniversary of the 11 & 12 Commencement Date, the
Letter of Credit may be reduced to $2,845,174.00. For purposes hereof, Subtenant
shall be deemed to have satisfied the Net Worth requirements if Subtenant's Net
Worth determined in accordance with generally accepted accounting principles and
as reflected on Subtenant's audited financial statement for the most recently
ended fiscal period of one year, Subtenant's Net Worth, as submitted to
Sublandlord, is equal to or greater than the Net Worth of Subtenant on the date
of the Sublease. Anything herein to the contrary notwithstanding, Subtenant
shall not be permitted to reduce the amount of the Letter of Credit as set forth
herein, if Subtenant at any time fails to actually occupy at least 88,232
rentable square feet of the Premises.
20. Insurance. During the term of this Sublease, Subtenant, at its sole
---------
cost and expense, shall provide and maintain insurance in conformity with the
provisions of Article 9 of the Lease applicable to the Premises. Subtenant shall
cause Sublandlord, Owner, any other party which Owner may request under the
Lease to be included as additional named insureds in said policy or policies
which shall contain provisions, that it or they will not be cancelable except
upon not less than thirty (30) days' prior written notice to all insureds and
that the act or omission of one insured will not invalidate the policy as to the
other insureds. Subtenant shall furnish to Sublandlord a certificate or
certificates of insurance or other reasonable satisfactory evidence confirming
that such insurance is in effect at or before the Commencement Date and, on
request, at reasonable intervals thereafter.
21. Default. In the event Subtenant defaults in the performance of any of
-------
the terms, covenants and conditions of this Sublease beyond any required notice
and applicable grace period set forth herein or in the Lease, Sublandlord shall
be entitled to exercise any and all of the rights and remedies to which it is
entitled by law and also any and all of the rights and remedies specifically
provided for in the Lease, which are hereby incorporated herein and made a part
hereof with the same force and effect as if herein specifically set forth in
full, and that wherever in the
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<PAGE>
Lease rights and remedies are given to the Owner, the same shall be deemed given
to Sublandlord.
22. Miscellaneous.
-------------
22.1 This Sublease contains the entire agreement between the parties and
all prior negotiations and agreements are merged in this Sublease. Any agreement
hereafter made shall be ineffective to change, modify or discharge this Sublease
in whole or in part unless such agreement is in writing and signed by the
parties hereto. No provision of this Sublease shall be deemed to have been
waived by Sublandlord or Subtenant unless such waiver be in writing and signed
by Sublandlord or Subtenant, as the case may be. The covenants and agreements
contained in this Sublease shall bind and inure to the benefit of Sublandlord
and Subtenant and their respective permitted successors and assigns.
22.2 In the event that any provision of this Sublease shall be held to be
invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Sublease shall be unaffected
thereby.
22.3 The paragraph headings appearing herein are for purposes of
convenience only and are not deemed to be a part of this Sublease.
22.4 Capitalized terms used herein shall have the same meanings as are
ascribed to them in the Lease, unless otherwise expressly defined herein.
22.5 This Sublease is offered to Subtenant for signature with the express
understanding and agreement that this Sublease shall not be binding upon either
party unless and until both parties shall have executed and Sublandlord has
delivered a fully executed copy of this Sublease to Subtenant.
22.6 Neither the partners comprising Sublandlord (if Sublandlord is a
partnership), nor the shareholders, partners, directors or officers of
Sublandlord or any of the foregoing (collectively, the "Parties") shall be
-------
liable for the performance of Sublandlord's obligations under this Sublease.
Subtenant shall look solely to Sublandlord to enforce Sublandlord's obligations
hereunder and shall not seek damages against any of the Parties. Subtenant shall
look only to the assets of Sublandlord for the satisfaction of Subtenant's
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Sublandlord in the event of any default by Sublandlord
hereunder, and no property or assets of
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<PAGE>
the Parties shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Subtenant's remedies under or with respect to this
Sublease, the relationship of Sublandlord and Subtenant hereunder or Subtenant's
use or occupancy of the Premises.
22.7 Neither the partners comprising Subtenant (if Subtenant is a
partnership), nor the shareholders, partners, directors or officers of Subtenant
or any of the foregoing (collectively, the "Parties") shall be liable for the
-------
performance of Subtenant's obligations under this Sublease. Sublandlord shall
look solely to Subtenant to enforce any of Subtenant's obligations hereunder and
shall not seek damages against any of the Parties. Sublandlord shall look only
to the assets of Subtenant for the satisfaction of Sublandlord's remedies for
the collection of a judgment (or other judicial process) requiring the payment
of money by Subtenant in the event of any default by Subtenant hereunder, and no
property or assets of the Parties shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Sublandlord's remedies under or
with respect to this Sublease, the relationship of Subtenant and Sublandlord
hereunder or Sublandlord's use or occupancy of the Premises.
22.8 This Sublease shall be governed by, and construed in accordance with,
the laws of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement of Sublease as of the day and year first above written.
BILL COMMUNICATIONS, INC.,
Sublandlord
By: /s/ Joseph Forey
-----------------------------
Name: Joseph Forey
Title: CFO
BRONNERCOM, LLC,
Subtenant
By: /s/ David Kenny
-----------------------------
Name: David Kenny
Title: CEO
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<PAGE>
EXHIBIT 10.12
SUB-SUBLEASE AGREEMENT
----------------------
THIS SUB-SUBLEASE AGREEMENT ("Sublease") is made and entered into as
of this 5 day of June 1998, by and between STRATEGIC INTERACTIVE GROUP, INC.
("Sublessor") and ALLEGIANCE, TELECOM, INC., a Delaware corporation
("Sublessee").
RECITALS
--------
This Sublease is made with regard to the following facts:
A. Tesseract Corporation ("Tesseract") is the Tenant under the
Office Lease dated November 22, 1991 with Mosten Management Company,
Inc., as Landlord ("Landlord"), pursuant to which Tesseract leased
the 19th, 20th and 21st floors of 475 Sansome Street, San Francisco,
California (hereinafter the "Master Lease"). A copy of the Master
Lease is attached hereto as Exhibit A. The Master Lease has been
---------
amended by that certain letter agreement dated August 13, 1997, by and
among Landlord, Tesseract and Sublessor. A copy of such letter
agreement is attached hereto as Exhibit B. The term "Master Lease"
---------
shall include Exhibit B.
---------
B. Sublessor is the sublessee under the Sublease Agreement dated
August 21, 1997, in which Tesseract is the sublessor, and pursuant to
which Sublessor subleased the entire 20th floor of 475 Sansome Street,
San Francisco, California, from Tesseract Corporation. A copy of the
Sublease Agreement is attached hereto as Exhibit C and is hereinafter
---------
referred to as the "SIG Sublease."
C. Sublessee desires to sub-sublease from Sublessor the portion
of the 20th floor of 475 Sansome Street, San Francisco, California,
which is marked by cross hatching on the diagram attached to this
Sublease as Exhibit D (the "Subleased Space"), and Sublessor has
---------
agreed to sub-sublease the Subleased Space to Sublessee on the terms,
covenants and conditions stated in this Sublease.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by the parties, Sublessor and Sublessee
(collectively, the "Parties") agree as follows:
1
<PAGE>
1. PROVISIONS CONSTITUTING SUBLEASE.
--------------------------------
This Sublease is subject to all of the terms and conditions of the
Master Lease, except Paragraphs 2, 3(a), 3(b), 9, 26, 42, 43, 44, 45, 46, 47,
48, 49, 50, and 52, and Exhibit C, and the SIG Sublease, except Paragraphs 4, 5,
6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21, and Exhibit "C",
and Sublessee shall perform the obligations of Tesseract and Sublessor under the
Master Lease and SIG Sublease, to the limited extent said terms and conditions
are applicable to the Subleased Space.
Except as otherwise provided herein with respect to the Sublessee,
each party hereto agrees to perform and comply with the terms, provisions,
covenants and conditions of the Master Lease and the SIG Sublease, and not to do
or permit anything to be done which would result in a default under the Master
Lease or the SIG Sublease to the extent binding on such party, or cause the
Master Lease or the SIG Sublease to be terminated or forfeited.
Any insurance carried by Landlord, Sublessor, or Sublessee with
respect to the Subleased Space and property therein or occurrences thereon
shall, if it can be so written without additional premium, or with an additional
premium which the requesting party agrees to pay, include a clause or
endorsement denying to the insurer right of subrogation against that party to
the extent rights have been waived by the insured prior to occurrence of injury
or loss. Each party, notwithstanding any provisions of this Sublease to the
contrary, hereby waives any rights of recovery against the other for property or
claims covered by insurance containing such a clause or endorsement to the
extent of the indemnification received thereunder.
Notwithstanding any provision of the Master Lease or the Sublease to
the contrary, Sublessor shall be and remain liable for all of its obligations
under the SIG Sublease.
Sublessee recognizes that Sublessor is not in a position to render any
of the services or to perform any of the obligations required of Landlord by the
terms of the Master Lease. Sublessee agrees that performance by Sublessor of its
obligations under this Sublease is conditioned on performance by the Landlord of
its corresponding obligations under the Master Lease, and Sublessor will not be
liable to Sublessee for any default of the Landlord under the Master Lease.
Notwithstanding the above provisions, Sublessor will use diligent commercially
reasonable efforts to enforce Tesseract's and Landlord's obligations under the
SIG Sublease and the Master Lease respectively.
2
<PAGE>
Sublessee will not have any claim against Sublessor based on the
Landlord's failure or refusal to comply with any of the provisions of the Master
Lease unless that failure or refusal is a result of any act or omission of
Sublessor or any employee, agent or contractor of Sublessor. Despite the
Landlord's failure or refusal to comply with any of those provisions of the
Master Lease, this Sublease will remain in full force and effect and Sublessee
will pay the base rent and all other charges provided for in this Sublease
without any abatement, deduction or setoff. However, Sublessee will receive its
prorata share of any rent abatement in the event of a condemnation or casualty
affecting the use of the Subleased Space, to the extent the Subleased Space is
rendered unusable by Sublessee in the conduct of its business. In the event
Sublessor receives the benefit of any other rent abatement under the SIG
Sublease, Sublessee will receive its share of such abatement to the extent that
the event giving rise to the abatement affects the Subleased Space.
Sublessor represents and warrants that as of the date of this
Sublease, (a) the SIG Sublease is unmodified and in full force and effect, (b)
to the best of Sublessor's actual knowledge, the Sublessor has no offsets,
defenses or counterclaims against Tesseract under the SIG Sublease, (c) there is
no default or event of default by Sublessor or Tesseract under the SIG Sublease
or any event which with the giving of notice and/or the passage of time, or
both, would constitute a default or event of default by Sublessor or Tesseract
under the SIG Sublease, (d) to the best of Sublessor's actual knowledge without
inquiry, there is no default or event of default by Tesseract under the Master
Lease, or any event which with the giving of notice and/or the passage of time,
or both, would constitute a default or event of default by Tesseract under the
Master Lease, and (e) Sublessor has not encumbered its interest in the SIG
Sublease. Sublessor further represents and warrants to the best of Sublessor's
actual knowledge without inquiry that as of the date of this Sublease, (a) the
Master Lease is unmodified and in full force and effect and (b) there is no
default or event of default by Landlord or Tesseract under the Master Lease or
any event which with the giving of notice and/or the passage of time, or both,
would constitute a default or event of default by Landlord or Tesseract under
the Master Lease.
2. SUBLEASED SPACE.
---------------
Sublessor hereby sublets to Sublessee and Sublessee hereby sublets
from Sublessor the Subleased Space, subject to the terms, covenants and
conditions contained in this Sublease, together with the non-exclusive right,
if any, to use the Common Areas of the Building. The Parties agree that the
Subleased Space is to consist of approximately 8,059 rentable square feet.
3
<PAGE>
The actual rentable area of the Subleased Space shall be determined by
Sublessor's architect promptly after Sublessor has completed construction of the
demising walls which will separate the Subleased Space from Sublessor's
premises. The rentable area of the Subleased Space shall be calculated and
certified to Sublessor and Sublessee by Sublessor's architect pursuant to the
Standard Method for Measuring Floor Area in Office Buildings (ANSI/BOMA Z65.l,
1996). "Rentable Square Feet" and "Rentable Footage" shall have the same meaning
as the term "Rentable Area." Promptly after Sublessor has received its
architect's calculation of the rentable area of the Subleased Space, Sublessor
shall send Sublessee a copy of the calculation. If the architect's calculation
reflects that the rentable area of the Subleased Space consists of more or less
than 8,059 rentable square feet, then Sublessor shall promptly prepare an
amendment to this Sublease to reflect the Rentable Area of the Subleased Space,
to make the necessary adjustments to the rent and Sublessee's percentage share
of Operating Costs and Property Taxes, and Sublessor and Sublessee shall execute
the amendment.
3. TERM.
----
The term of this Sublease shall commence on July 1, 1998 (the
"Commencement Date") and end on April 30, 2002 (the "Expiration Date"), unless
sooner terminated as provided herein. If Sublessor for any reason cannot
deliver possession of the Subleased Space to Sublessee on the Commencement Date,
this Sublease shall not be void or voidable nor shall Sublessor be liable to
Sublessee for any damage resulting therefrom. Notwithstanding the foregoing, if
possession of the Subleased Space has not been delivered to Sublessee by August
1, 1998, Sublessee, at its option, at any time thereafter but prior to the
delivery of possession may terminate this Sublease by notice to Sublessor, and
Sublessor and Sublessee shall thereupon be released from all obligations under
this Sublease. No delay in delivery of possession shall operate to extend the
term hereof.
4. RENT.
----
Sublessee shall pay to Sublessor, without deduction, set off, prior
notice or demand, as rent during the term of the Sublease, the sum of $23,84l.21
per month, payable monthly in advance in lawful money of the United States of
America on the first day of each month for the period starting with the
Commencement Date through the Expiration Date, unless sooner terminated. In the
event that pursuant to the procedure set forth in paragraph 2 above the rentable
area of the Subleased Space is determined to be different than 8,059 rentable
square feet, then (a) the rent hereunder shall be appropriately adjusted using
an annual rental rate of $35.50 per rentable square foot, and (b) Sublessee's
prorata share of increases in Building
4
<PAGE>
Operating Expenses and Taxes shall be appropriately adjusted. The revised rent
and revised prorata share percentage figure shall be incorporated in the
amendment to this Sublease which is to be prepared by Sublessor in accordance
with paragraph 2 above. In the event that any month during the term of this
Sublease shall be less than a full month, the rent payable hereunder shall be
prorated for such month based upon the number of days this Sublease shall be in
effect during such month.
Payment of rent and any other obligations under the Sublease shall be
delivered to Sublessor's address for notices under the Sublease on or before the
first day of each calendar month during the term. Sublessee agrees that, in the
event Sublessee fails to pay any sum of money due hereunder within the
applicable grace period, if any, Sublessor shall be entitled to collect late
charges and interest as set forth in paragraphs 3(d) and 3(e) of the Master
Lease.
5. TENANT IMPROVEMENTS.
-------------------
Prior to delivery of the Subleased Space to Sublessee, Sublessor, at
its expense, shall install demising walls between Sublessor's premises and the
Subleased Space in a good and workmanlike manner in accordance with all
applicable laws, so that the two areas are physically separated. On Sublessee's
side of the demising walls the demising walls shall be painted by Sublessor so
as to reasonably match the existing painted surfaces adjacent to the walls.
With the exception of the work described in the two immediately preceding
sentences, Sublessee acknowledges that the Subleased Space shall be delivered to
Sublessee in its existing "As Is" condition. Sublessee agrees that any and all
additional and subsequent improvement work in the Subleased Space must first be
approved in writing by Landlord and Tesseract and consented to by Sublessor.
6. BASE YEAR AND OPERATING EXPENSE ADJUSTMENT.
------------------------------------------
For purposes of this Sublease, the "Base Year" shall be calendar year
1998. Sublessee agrees to pay Sublessor, at the same time and in the same manner
which Tesseract is required to pay Landlord Escalation Rent under paragraph 4 of
the Master Lease, Sublessee's prorata share of increases in Building Operating
Expenses and property Taxes over the Base Year. Sublessee's prorata share is
2.59% of the Building square footage. Sublessor agrees to submit for Sublessee's
review all documentation provided by Tesseract and Landlord regarding Operating
Expenses and adjustments. Upon the written request of Sublessee to Sublessor,
Sublessor agrees to exercise any rights it may have to audit Landlord's
Operating Expenses and Taxes and to share the results with Sublessee. If only
Sublessee desires that Sublessor exercise such audit rights as it may have,
5
<PAGE>
Sublessee shall pay the entire cost of any such audit upon written demand from
Sublessor. If both Sublessor and Sublessee desire to have Sublessor exercise
such audit rights as it may have, then the cost of such audit shall be paid
fifty percent (50%) by Sublessor and fifty percent (50%) by Sublessee upon
written demand from Sublessor. Any utility expenses passed on by Landlord for
operating equipment such as HVAC outside of business hours or normal usage as
these costs pertain to the Subleased Space shall be passed on to Sublessee to
the extent such additional services were used or requested by Sublessee.
Sublessor shall be entitled to reasonably estimate Sublessee's share of any such
costs.
7. DEPOSIT.
-------
Sublessee has deposited with Sublessor the sum of $47,682.42 (the
"Deposit"). The Deposit shall be held by Sublessor as security for the faithful
performance by Sublessee of all of the provisions of this Sublease to be
performed or observed by Sublessee. If Sublessee fails to pay rent or other
charges due hereunder after giving effect to any applicable cure period, or
otherwise defaults with respect to any provision of this Sublease, Sublessor may
use, apply or retain all or any portion of the Deposit for the payment of any
rent or other charge in default or the payment of any other sum to which
Sublessor has become obligated by reason of Sublessee's default, or to
compensate Sublessor for any actual loss or damage which Sublessor may suffer
thereby. If Sublessor so uses or applies all or any portion of the Deposit, then
within ten (10) business days after demand thereof or Sublessee shall deposit
cash with Sublessor in an amount sufficient to restore the Deposit to the full
amount thereof, and Sublessee's failure to do so shall be a material breach of
this Sublease. Sublessor shall not be required to keep the Deposit separate from
its general accounts. The Deposit, or so much thereof as has not theretofore
been applied by Sublessor, shall be returned, without payment of interest or
other increment for its use, to Sublessee (or, at, Sublessor's option, to the
last assignee, if any, of Sublessee s interest hereunder) at the expiration of
the term hereof, and after Sublessee has vacated the Subleased Space. No trust
relationship is created herein between Sublessor and Sublessee with respect to
the Deposit.
8. OPTION TO RENEW.
---------------
Sublessee shall have no option to renew or extend the term of this
Sublease.
6
<PAGE>
9. USE.
---
Lessee shall use the Subleased Space for general office purposes and
for no other purpose without the prior written consent of Sublessor.
Sublessee's business shall be established and conducted throughout the
term hereof in a first class manner. Sublessee shall not use the Subleased Space
for, or carry on, or permit to be carried on, any offensive, noisy or dangerous
trade, business, manufacture or occupation, nor permit any auction sale to be
held or conducted on or about the Subleased Space. Sublessee shall not do or
suffer anything to be done upon the Subleased Space which will cause structural
injury to the Subleased Space, or the building of which the same form a part.
The Subleased Space shall not be overloaded and no machinery, apparatus or other
appliance shall be used or operated in or upon the Subleased Space which will
injure, vibrate or shake the Subleased Space or the building of which it is
part. No use shall be made of the Subleased Space which will in any way impair
the efficient operation of the sprinkler system (if any) within the building
containing the Subleased Space. No musical instrument of any sort, or any noise
making device will be operated or allowed upon the Subleased Space for any
purpose. No use will be made of the Subleased Space which will increase the
existing rate of insurance upon the building in which the Subleased Space is
located, or cause a cancellation of any insurance policy covering the building
or any part thereof.
If any act on the part of Sublessee or use of the Subleased Space by
Sublessee shall cause, directly or indirectly, any increase of Sublessor's
insurance expense, said additional expense shall be paid by Sublessee to
Sublessor upon demand. No such payment by Sublessee shall limit Sublessor in the
exercise of any other rights or remedies, or constitute a waiver of Sublessor's
right to require Sublessee to discontinue such act or use.
10. ENTRY BY SUBLESSOR.
------------------
Sublessor reserves the reasonable right to inspect Sublessee's
Subleased Space during normal business hours and with prior notice to Sublessee.
11. REPAIR AND MAINTENANCE.
----------------------
Sublessee shall use the Subleased Space and any other items which are
made available by Sublessor to Sublessee during the term of this Sublease in a
normal and business-like manner and keep the same in good order, condition and
repair, excluding normal wear and tear and casualty damage not attributable to
7
<PAGE>
Sublessee. Sublessee shall return the Subleased Space and such items at the end
of the term to Sublessor in the same condition as on the Commencement Date,
excluding normal wear and tear and casualty damage not attributable to
Sublessee.
12. ALTERATIONS.
-----------
Any and all alteration to the Subleased Space must be reviewed and
approved by Sublessor, Landlord and Tesseract prior to any such alteration being
performed. Landlord's approval is subject to the standards set forth in the
Master Lease. Sublessor agrees that it shall not unreasonably withhold or delay
its consent to any requested alterations, provided that Landlord consents to the
requested alterations. Sublessee is responsible for any Landlord-assessed costs
for alterations incurred at Sublessee's sole option, including any costs of the
removal of such alterations at the end of this Sublease as mandated by
Landlord.
13. CONDEMNATION PROCEEDS.
---------------------
Despite anything contained in the Master Lease to the contrary, as
between Sublessor and Sublessee only, in the event of condemnation of the
Subleased Space all condemnation awards received by Sublessor under the Master
Lease will be deemed to be the property of Sublessor, and Sublessor will have no
obligation to restore the Subleased Space. The foregoing shall not, however,
preclude the Sublessee from bringing a separate proceeding to recover the value
of any improvements or alterations made by the Sublessee, moving expenses and
the value of the unexpired term of this Sublease, provided that such recovery
does not diminish any award to Sublessor.
14. TIME LIMITS.
-----------
The time limits provided for in the provisions of the Master Lease for
the giving of notice, making of demands, payment of any amount, performance of
any act, condition or covenant, or the exercise of any right, remedy or option,
are amended for the purposes of this Sublease, by shortening the same in each
instance by five (5) days, so that notices may be given, demands made, or
payments made, or any act, condition or covenant performed, or any right, remedy
or option hereunder exercised, by Sublessor or Sublessee, as the case may be,
within the time limit relating thereto contained in the Master Lease. If the
Master Lease allows only five (5) days or less for Sublessor to perform any act,
or to undertake to perform such act, or to correct any failure relating to the
Subleased Space or this Sublease, then Sublessee shall nevertheless be allowed
three (3) days to perform such act, undertake such act and/or correct such
failure.
8
<PAGE>
15. BROKERS.
-------
Sublessor and Sublessee warrant that Cushman & Wakefield acted as
Sublessor's only broker and that Partners National Real Estate Group, Inc. acted
as Sublessee's only broker. Sublessor shall pay Partners National Real Estate
Group, Inc. a real estate brokerage commission equal to $1.00 per rentable
square foot per year of the term of the Sublease, which shall be paid one-half
(1/2) upon mutual execution of this Sublease and one-half (1/2) upon occupancy
of the Subleased Space by Sublessee. Sublessee and Sublessor agree to indemnify
and hold each other harmless from and against any claims by any other broker,
agent or other person claiming a commission or other form of compensation by
virtue of having dealt with the indemnifying party with regard to this
subleasing transaction. The provisions of this paragraph shall survive the
termination of this Sublease.
16. QUIET ENJOYMENT. So long as Sublessee is not in default beyond any
---------------
applicable cure period under this Sublease, Sublessee's peaceful and quiet
enjoyment of the Subleased Space shall not be disturbed on account of any act or
omission of Sublessor. The covenant of quiet enjoyment in the preceding sentence
specifically excludes any disturbance of Sublessee's possession of the Subleased
Space for any reason other than those set forth in the preceding sentence.
17. NOTICES OF DEFAULT.
------------------
Sublessor agrees to notify Sublessee of any event of default by
Sublessee hereunder, by Sublessor under the SIG Sublease, or Tesseract under the
Master Lease, within five (5) business days of Sublessor's receipt of a notice
of default.
18. PARKING.
-------
Subject to all applicable restrictions placed upon Sublessor by
Landlord in the Master Lease, Sublessee shall be entitled to park three (3)
automobiles in the Building's parking garage in valet parking spaces from time
to time designated by Sublessor, subject to all of the rules and regulations
applicable to such parking as are promulgated by Landlord and the Garage
Operator (the "Operator") and to any restrictions or regulations at any time
imposed by the City and County of San Francisco on Landlord's ability to offer
such parking. The rental rate for such parking shall be equal to the rate from
time to time charged by the Operator and Landlord to the public for comparable
parking privileges in the Building and shall be paid directly by Sublessee to
the Operator as directed in the Operator's sole discretion.
9
<PAGE>
19. RIGHT TO ASSIGN OR SUBLEASE.
---------------------------
Subject to obtaining Landlord's and Tesseract's prior written consent,
to the extent required by the terms of the Master Lease and the SIG Sublease, as
the case may be, Sublessee shall have the right, with notice to Sublessor but
without Sublessor's consent, to assign this Sublease or to sublease the
Subleased Space to any entity controlled or under common control with Sublessee,
or to a corporation with which Lessee has merged or consolidated, or to any
corporation or other entity which acquires substantially all of Sublessee's
assets as a going concern. Except as provided in the preceding sentence,
Sublessee shall have no right to assign this Sublease or to further sublet all
or any portion of the Subleased Space.
20. ADDRESSES FOR NOTICES.
---------------------
All notices of any kind required under the provisions of this Sublease
shall be mailed, postage prepaid by certified or registered mail, return receipt
requested, or by a nationally recognized overnight delivery service, addressed
as follows:
If to Sublessor: Strategic Interactive Group, Inc.
Attn: Kathleen O'Meara, Vice President
Director of Finance and Operations
The Prudential Tower
800 Boylston Street
Boston, MA 02199
If to Sublessee: Allegiance Telecom, Inc.
Attn: Patricia E. Koide
4 Westbrook Corporate Center, Suite 400
Westchester, IL 60154
with a copy to:
Swidler & Berlin, Chartered
Attn: Jeffrey Scharff
3000 K Street, N.W.
Washington, D.C. 20007
21. GENERAL PROVISIONS.
------------------
21.1. Severability. If any provision of this Sublease or the
------------
application of any provision of this Sublease to any person or circumstance is,
to any extent, held to be invalid or unenforceable, the remainder of this
Sublease or the application of that provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, will not be
affected, and each provision of this Sublease will be valid and be enforced to
the fullest extent permitted by law.
10
<PAGE>
21.2. Entire Agreement; Waiver. This Sublease constitutes the final,
------------------------
complete and exclusive statement between the parties to this Sublease pertaining
to the Subleased Space, supersedes all prior and contemporaneous understandings
or agreements of the parties, and is binding on and inures to the benefit of
their respective heirs, representatives, successors, and assigns. No party has
been induced to enter into this Sublease by, nor is any party relying on, any
representation or warranty outside those expressly set forth in this Sublease.
Any agreement made after the date of this Sublease is ineffective to modify,
waive, release, terminate, or effect an abandonment of this Sublease, in whole
or in part, unless that agreement is in writing, is signed by the parties to
this Sublease.
21.3. Captions. Captions to the sections in this Sublease are included
--------
for convenience only and do not modify any of the terms of this Sublease.
21.4. Further Assurances. Each party to this Sublease will at its own
------------------
cost and expense execute and deliver such further documents and instruments and
will take such other actions as may be reasonably required or appropriate to
evidence or carry out the intent and purposes of this Sublease.
21.5. Governing Law. This Sublease will be governed by and in all
-------------
respects construed in accordance with the laws of the State of California.
21.6. Consent of Landlord and Tesseract Corporation. The Landlord's
---------------------------------------------
and Tesseract Corporation's written consent to this Sublease is a condition
subsequent to the validity of this Sublease.
21.7. Capitalized Terms. All terms spelled with initial capital
-----------------
letters in this Sublease that are not expressly defined in this Sublease will
have the respective meanings given such terms in the Master Lease.
21.8. Word Usage. Unless the context clearly requires otherwise, (a)
----------
the plural and singular numbers will each be deemed to include the other; (b)
the masculine, feminine, and neuter genders will each be deemed to include the
others; (c) "shall," "will," "must," "agrees," and "covenants" are each
11
<PAGE>
mandatory; (d) "may" is permissive; (e) "or" is not exclusive; and (f)
"includes" and "including" are not limiting.
21.9. Amendment to SIG Sublease and Master Lease.
------------------------------------------
(a) Sublessor covenants and agrees that it will not amend or
modify the SIG Sublease, to the extent that such amendment or modification
affects this Sublease or the Subleased Space, without notice to and the prior
written consent of Sublessee.
(b) Sublessor will use reasonable efforts to prevent any amendment
or modification to the Master Lease, to the extent such amendment or
modification affects this Sublease or the Subleased Space. Sublessor agrees to
give notice to Sublessee of any proposed amendment or modification to the Master
Lease which Sublessor receives.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sub-
Sublease Agreement as of the date first set forth above.
SUBLESSOR:
STRATEGIC INTERACTIVE GROUP,
INC.
By: Kathleen O. O'Meara
-----------------------------------------------
Its VP, Director of Finance & Operations 6/5/99
--------------------------------------------
SUBLESSEE:
ALLEGIANCE TELECOM, INC.,
a Delaware corporation
By: /s/ Patricia E. Koide
-----------------------------------------------
Its Sr VP
--------------------------------------------
By: /s/ [ILLEGIBLE]^^
-----------------------------------------------
Its Secretary
--------------------------------------------
12
<PAGE>
Consent of Landlord:
The undersigned, Landlord under the Master Lease, hereby consents to
the subletting of the Subleased Space on the terms and conditions contained in
this Sublease. This consent shall apply only to this Sublease and shall not be
deemed to be a consent to any other sublease.
Landlord represents and warrants (a) the Master Lease is unmodified
and in full force and effect, and (b) there is no default or event of default by
Landlord or Tesseract under the Master Lease or any event which with the giving
of notice and/or the passage of time, or both, would constitute a default or
event of default by Landlord or Tesseract under the Master Lease.
MOSTEN MANAGEMENT COMPANY, INC.
a Delaware corporation
By: /s/ Stephen J. Spey
-----------------------------
STEPHEN J. SPEY
Its VICE PRESIDENT
--------------------------
Dated: 6/22 1998
------------,
Consent of Tesseract:
Tesseract, as sublessor to Strategic Interactive Group, Inc., hereby
consents to the subletting of the Subleased Space on the terms and conditions
contained in this Sublease. This consent shall apply only to this Sublease and
shall not be deemed to be a consent to any other sublease.
Tesseract covenants and agrees for the benefit of Strategic
Interactive Group, Inc. and Allegiance Telecom, Inc. that it will not amend or
modify the Master Lease or the SIG Sublease, to the extent that any such
amendment or modification affects this Sublease or the Subleased Space, without
notice to and the prior written consent of Allegiance Telecom, Inc.
Tesseract represents and warrants (a) the Master Lease and the SIG
Sublease are unmodified and in full force and effect, (b) Tesseract has no
offsets, defenses or counterclaims against Landlord under the Master Lease, (c)
there is no default or event of default by Landlord or Tesseract under the
Master Lease or any event which with the giving of notice and/or the passage of
time, or both, would constitute a, default or event of default by Landlord or
Tesseract under the Master Lease, (d) there is no default or event of default by
Strategic Interactive Group, Inc. or Tesseract under the SIG Sublease or any
event which with the giving of notice and/or the passage of time, or both, would
13
<PAGE>
constitute a default or event of default by Strategic Interactive Group, Inc. or
Tesseract under the SIG Sublease, and (e) Tesseract has not encumbered its
interest in the Master Lease.
TESSERACT CORPORATION,
a California corporation
By:/s/ Lee G. Larson
---------------------------
Its Mgr., Real Estate
------------------------
Dated: 6/16 1998
------------,
14
<PAGE>
TERMINATION OF SUB-SUBLEASE AGREEMENT
-------------------------------------
THIS TERMINATION OF SUB-SUBLEASE AGREEMENT (this "Agreement") is made
and entered into as of December 7, 1999, by and between BRONNERCOM, LLC, a
Delaware limited liability company ("Sublessor"), and ALLEGIANCE TELECOM, INC.,
a Delaware corporation ("Sublessee").
RECITALS
--------
A. Sublessor's predecessor-in-interest, Strategic Interactive Group,
Inc., as sublessor, and Sublessee have entered into that certain Sub-Sublease
Agreement dated June 5, 1998 (the "Sublease"), with respect to certain office
premises on a portion of the 20th floor of 475 Sansome Street, San Francisco,
California, which are more particularly described in the Sublease (the
"Subleased Space"). Terms used herein that are defined in the Sublease shall
have the meanings therein defined.
B. The date of expiration of the term of the Sublease is April 30,
2002.
C. Sublessor and Sublessee desire to terminate the Sublease on the
conditions specified in this Agreement.
NOW, THEREFORE, in consideration of the recitals and covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sublessor and Sublessee hereby
agree as follows:
1
<PAGE>
AGREEMENT
---------
1. Termination of Sublease. Notwithstanding anything contained in
-----------------------
the Sublease to the contrary, effective as of 11:59 p.m. on May 15, 2000 (the
"Effective Date"), (a) the term of the Sublease shall terminate and expire and
the Sublease shall be terminated; (b) Sublessee shall vacate and surrender
possession of the Subleased Space to Sublessor in broom-clean condition and
otherwise in the condition required by the Sublease; (c) Sublessee shall deliver
the keys to the Subleased Space to Sublessor and Sublessor shall accept the
surrender of the Subleased Space in such condition; and (d) Sublessee shall
remove any vehicles parked in the Building pursuant to the provisions of
paragraph 18 of the Sublease. Conditioned upon the surrender of the Subleased
Space on the Effective Date in the condition required hereby, Sublessor and
Sublessee shall be released from all obligations under the Sublease which have
not accrued as of the Effective Date, provided that all agreements in the
Sublease to indemnify or hold harmless shall survive with respect to matters
occurring prior to the Effective Date.
2. Sublessee's Right to Advance Effective Date. Sublessee shall
-------------------------------------------
have the right to advance the Effective Date by giving Sublessor not less than
thirty (30) days prior written notice specifying a date prior to May 15, 2000
which Sublessee desires to become the Effective Date. In the event Sublessee
gives Sublessor notice advancing the Effective Date, the date
2
<PAGE>
specified in such notice shall thereafter become the Effective Date for all
purposes under this Agreement, and the former Effective Date of May 15, 2000
shall thereafter be of no further force or effect.
3. Liquidated Damages. Sublessor and Sublessee acknowledge and agree
------------------
that Sublessor plans to occupy the Subleased Space immediately after Sublessee
vacates the Subleased Space and therefore it is extremely important to Sublessor
that Sublessee vacate the Subleased Space by no later than the Effective Date.
IN THE EVENT SUBLESSEE FAILS TO VACATE THE SUBLEASED SPACE IN THE CONDITION
REQUIRED BY THIS AGREEMENT BY NO LATER THAN THE EFFECTIVE DATE, THEN, IN LIEU OF
RENT UNDER THE SUBLEASE, SUBLESSEE SHALL PAY SUBLESSOR THE SUM OF TWO THOUSAND
DOLLARS ($2,000.00) PER DAY AS STIPULATED, FIXED, AGREED AND LIQUIDATED DAMAGES
(AND NOT AS A PENALTY) FOR EACH DAY AFTER THE EFFECTIVE DATE UNTIL SUBLESSEE HAS
FULLY COMPLIED WITH ITS OBLIGATIONS IN THE FIRST SENTENCE OF THIS PARAGRAPH 3.
THE PARTIES ACKNOWLEDGE THAT SUBLESSOR'S ACTUAL DAMAGE DUE TO SUCH FAILURE WOULD
BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING
THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE AMOUNT OF THE LIQUIDATED
DAMAGES SPECIFIED HEREIN CONSTITUTES A REASONABLE ESTIMATE OF THE DAMAGE WHICH
WOULD BE SUFFERED BY SUBLESSOR AS A RESULT OF
3
<PAGE>
SUBLESSEE'S FAILURE TO VACATE THE SUBLEASED SPACE IN THE CONDITION REQUIRED BY
THIS AGREEMENT BY NO LATER THAN THE EFFECTIVE DATE.
Sublessor's Initials: M.K.B. Sublessee's Initials: P.K.
------ ----
4. Force Majeure. If Sublessee's ability to vacate the Subleased
-------------
Space and move into the new premises which Sublessee has leased at 505 Sansome
Street, 20th floor, San Francisco, California (the "New Premises") is made
impossible by any prevention, delay, or stoppage due to strikes, lockouts, labor
disputes, acts of God, inability to obtain services, labor or materials or
reasonable substitutes for those items, governmental actions, civil commotions,
fire or others casualty, and other causes beyond the reasonable control of
Sublessee (collectively, "Force Majeure") then, notwithstanding anything to the
contrary in this Agreement, the Effective Date shall be extended one day for
each day Sublessee cannot vacate the Subleased Space and move into the New
Premises due to Force Majeure, provided, however, in no event shall the
Effective Date be extended by Force Majeure for more than one hundred eighty
(180) days. Force Majeure shall not include failure by the New Premises landlord
or the landlord's contractor to complete improvements in the New Premises,
unless such failure is due to Force Majeure. Within five (5) days of Sublessee's
learning of Force Majeure which will extend the Effective Date, Sublessee shall
give Sublessor notice of the cause of Force Majeure and the
4
<PAGE>
anticipated time of such extension, and shall thereafter also give Sublessor
notice promptly after Sublessee has determined the actual date on which
Sublessee will vacate the Subleased Space as a result of the extension of the
Effective Date by Force Majeure.
5. Payment of Rent and Other Sums. Sublessee shall pay to Sublessor
------------------------------
when due all rent and other sums due under the Sublease through and including
the Effective Date.
6. Deposit. Sublessor and Sublessee hereby acknowledge that
-------
pursuant to the provisions of paragraph 7 of the Sublease, Sublessor holds the
sum of $47,682.42 (the "Deposit") as security for the faithful performance by
Sublessee of all provisions of the Sublease to be performed or observed by
Sublessee. Provided that through the Effective Date Sublessee has fully
performed and observed all of the provisions of this Agreement which Sublessee
is required to perform or observe, Sublessor shall promptly return the Deposit
to Sublessee in accordance with the provisions of paragraph 7 of the Sublessee,
less any amounts which Sublessor is entitled to retain under the Sublease or
paragraph 3 of this Agreement.
7. Sublessor's Right to Recover Possession. In the event that
---------------------------------------
Sublessee has not vacated the Subleased Space by the Effective Date, as such
date may be advanced or extended as provided in this Agreement, Sublessor shall
have the immediate right to commence appropriate legal proceedings to recover
possession of the Subleased Space and to recover legal fees and
5
<PAGE>
costs incurred by Sublessor in doing so.
8. Complete Agreement. This Agreement represents the final
------------------
expression, and the complete and exclusive statement, of all of the oral and
written agreements, conditions, promises and covenants between Sublessor and
Sublessee with respect to the subject matter hereof, and this Agreement
supersedes all prior or contemporaneous oral and written agreements and
understandings between Sublessor and Sublessee with respect to the subject
matter covered hereby, including the Sublease. This Agreement may only be
amended by an agreement in writing signed by both Sublessor and Sublessee.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this
Termination of Sub-Sublease Agreement as of the date first above written.
SUBLESSOR: SUBLESSEE:
BRONNERCOM, LLC, ALLEGIANCE TELECOM, INC.,
a Delaware limited a Delaware corporation
liability company
By: /s/ M.K. Beckingham By: /s/ Patricia E. Koide
---------------------- ---------------------------
Name: /s/ M.K. Beckingham Name: Patricia E. Koide
-------------------- ------------------------
Title: EVP & CFO Title: Senior Vice President
------------------- ------------------------
Date: 12/7 Date: 12/7, 1999
-------------, 1999 ------------------------
By: /s/ Mark B. Tresnowski
---------------------------
Name: Mark B. Tresnowki
------------------------
Title: Senior Vice President
------------------------
& Corporate General
------------------------
Counsel
------------------------
Date: 12/7, 1999
------------------------
6
<PAGE>
EXHIBIT 10.13
SUBLEASE AGREEMENT
------------------
1. PARTIES
This SUBLEASE AGREEMENT ("Sublease") is entered into on this 21st of August
1997 by and between Tesseract Corporation ("Sublessor"), Strategic Interactive
Group, Inc. ("Sublessee"), and Bronner Slosberg Humphrey Inc. ("Parent"), as the
guarantor for Sublessee, as a sublease under the lease dated November 22, 1991,
entered into by Mosten Management Company, Inc., as Landlord, and Tesseract
Corporation as Tenant, attached as Exhibit A (the "Master Lease").
In consideration of mutual covenants set forth herein and for other good
and valuable consideration, Sublessor and Sublessee (collectively, the
"Parties") agree as follows:
2. PROVISIONS CONSTITUTING SUBLEASE
This sublease is subject to all of the terms and conditions of the Master
Lease in Exhibit A and Sublessee shall perform the obligations of Sublessor and
Tenant in said lease, to the extent said terms and conditions are applicable to
the premises subleased pursuant to this sublease.
Each party hereto agrees to perform and comply with the terms, provisions,
covenants and conditions of the Master Lease, and not to do or permit anything
to be done which would result in a default under the Master Lease, or cause the
Lease to be terminated or forfeited.
Each party hereto agrees not to breach or violate any of the terms,
covenants and conditions contained in the Master Lease.
Sublessor represents and covenants that Sublessor is not currently in
default of the Master Lease.
Any insurance carried by Landlord, Sublessor, or Sublessee with respect to
the Premises and property therein or occurrences thereon shall, if it can be so
written without additional premium, or with an additional premium which the
requesting party agrees to pay, include a clause or endorsement denying to the
insurer right of subrogation against that party to the extent rights have been
waived by the insured prior to occurrence of injury or loss. Each party,
notwithstanding any provisions of this Sublease to the contrary, hereby waives
any rights of recovery against the other for property covered by insurance
containing such clause or endorsement to the extent of the indemnification
received thereunder.
Notwithstanding any provision of the Master Lease or the Sublease to the
contrary, Sublessor shall remain primarily liable for all of its obligations
under the Master Lease.
<PAGE>
3. PREMISES
Sublessor hereby sublets to Sublessee and Sublessee hereby sublets from
Sublessor the leased premises of 19,430 rentable square feet (the "Premises"),
representing the entire 20th Floor of 475 Sansome Street, as shown on Exhibit B
from the Commencement Date of this Sublease until April 30, 2002.
4. TERM
The term of this sublease shall commence on the Commencement Date and end
on the 30th day of April 2002.
Commencement Date shall occur no later than 45 days following mutual
execution of this Sublease and Landlord consent. At the option of Sublessee,
Commencement Date can occur sooner than the 45 day period if Sublessee notifies
Sublessor in writing of the date of taking occupancy.
5. RENTAL
Sublessee shall pay to Sublessor, without deduction, set off, prior notice
or demand, as rental, the sum of $48,575.00 per month, payable in advance in
lawful money of the United States of America on the first day of each month for
the period starting with the Commencement Date through April 2002. Should the
Commencement Date be earlier than October 1, 1997, Sublessee shall pay the
prorata rent for the period starting with the Commencement date through October
1, 1997.
Payment for rent and any other obligations under the Sublease shall be
delivered to Sublessor's offices on or before the first day of each calendar
month. Sublessee agrees, in the event of default by Sublessee, Sublessor is
entitled to all rights and remedies as defined in paragraphs 3d and 3e of the
Master Lease to cure any such default.
6. TENANT IMPROVEMENTS
Sublessor delivers the Premises to Sublessee in "as-is" condition with the
exception of walls which shall be spackled and painted where necessary and the
carpets which shall be shampooed. Subleases agrees that any and all additional
and subsequent improvement work in the Premises be approved in writing by
Landlord and consented to by Sublessor; such consent will not be unreasonably
withheld or delayed.
Sublessee shall be responsible for any and all modifications to the
existing data and voice wiring and the security access to the Premises.
Sublessor shall assist with any coordination with Sublessee's representatives
where modifications and/or additions to the existing are installed by
Sublessee.
<PAGE>
7. BASE YEAR AND OPERATING EXPENSE ADJUSTMENT
For purposes of this Sublease the "Base Year" shall be calendar year 1998.
Sublessee agrees to pay Sublessor, upon demand, Sublessee's prorata share of
increases in Building Operating Costs and Property Taxes over the Base Year.
Sublessee's percentage equals 6.25% of the Building square footage. Any utility
expenses passed on by Landlord for operating equipment such as HVAC outside of
business hours or normal usage as these costs pertain to the Premises shall be
passed on to Sublessee.
8. DEPOSIT
A security deposit of $ 48,575.00 shall be provided to Sublessor by Sublessee
on or before the Commencement Date.
9. FURNITURE
Sublessee agrees to purchase from Sublessor certain workstation and freestanding
furniture items as listed in Exhibit C for the sum of $ 70,000.00 due and
payable on the Commencement Date.
10. GUARANTEE
Bronner Slosberg Humphrey Inc., ("Parent"), the parent corporation of Sublessee
joins in this Lease Agreement for the purpose of guaranteeing the duties and
obligations of Sublessee. En the event of a default by Sublessee under this
Sublease Agreement and such default is not cured within five (5) days of
written notice provided by Sublessor to Sublessee, Sublessor will send written
notice of default to Parent. Parent shall immediately cure such default. If such
default is not cured within five(5) days, Sublessor shall have full recourse
against Parent for all actual damages sustained by Sublessor under the terms of
this Sublease.
11. RIGHT OF FIRST OPTION/ADDITIONAL SPACE
Sublessor is actively subleasing space on the 19th Floor and Sublessee shall
have a First Right of Refusal on the entire remaining available space on
the 19th, approximately 5,700 rentable square feet. When Sublessor has agreed in
writing with a prospective tenant ("Prospect") on terms of a sublease on said
space, Sublessor shall provide Sublessee written notice of its intent to enter
into said sublease including a document of evidence of terms and rent payments
agreed upon. From the date of this notice, Sublessee shall have five (5) working
days to respond in writing that it intends to enter into a sublease under the
same terms and conditions as agreed to by Sublessor and Prospect. Unless
Sublessor receives Sublessee's response within five (5) working days, the First
Right of Refusal shall be considered expired.
12. OPTION TO RENEW
At the end of this sublease agreement or Master Lease ("Master Lease Expiration
Date"), Sublessee shall have no options to extend.
<PAGE>
13. USE
Lessee shall use the Premises for general office purposes and for no other
purpose without the prior written consent of Sublessor.
Sublessee's business shall be established and conducted throughout the term
hereof in a first class manner. Sublessee shall not use the Premises for, or
carry on, or permit to be carried on, any offensive, noisy or dangerous trade,
business, manufacture or occupation nor permit any auction sale to be held or
conducted on or about the Premises. Sublessee shall not do or suffer anything to
be done upon the Premises which will cause structural injury to the premises or
the building of which the same form a part. The Premises shall not be overloaded
and no machinery, apparatus or other appliance shall be used or operated in or
upon the premises which will injure, vibrate or shake the Premises or the
building of which it is part. No use shall be made of the Premises which will in
any way impair the efficient operation of the sprinkler system (if any) within
the building containing the Premises. No musical instrument of any sort, or any
noise making devise will be operated or allowed upon the premises for the
purpose which will increase the existing rate of insurance upon the building in
which the Premises are located, or cause a cancellation of any insurance policy
covering the building or any part thereof.
If any act on the part of Sublessee or use of the Premises by Sublessee
shall cause, directly or indirectly, any increase of Sublessor's insurance
expense, said additional expense shall be paid by Sublessee to Sublessor upon
demand. No such payment by Sublessee shall limit Sublessor in the exercise of
any other rights or remedies, or constitute a waiver of Sublessor's right to
require Sublessee to discontinue such act or use.
14. ENTRY BY SUBLESSOR
Sublessor reserves the reasonable right to inspect Sublessee's Premises
during business hours and with prior notice to Sublessee.
15. REPAIR AND MAINTENANCE
Sublessee shall use the Premises and any other items which are made
available by Sublessor to Sublessee during the term of this Sublease in a normal
and business-like manner. Sublessee shall return the Premises and such items at
the end of the term to Sublessor in the same condition as on the Commencement
Date, excluding normal wear and tear.
16. ALTERATIONS
Any and all alteration to the Premises shall be reviewed and approved by
Sublessor prior to any such alteration being performed. Such approval shall not
be unreasonably withheld or delayed. Sublessee is responsible for any Landlord-
assessed
<PAGE>
costs for alterations incurred at Sublessee's sole option, including any costs
at the end of this Sublease as mandated by Landlord.
17. BROKERS
Sublessor and Sublessee warrant that Cushman & Wakefield acted as
Sublessor's only broker and that TRI Commercial acted as Sublessee's only
broker. Sublessor shall provide TRI Commercial with a real estate brokerage
commission equal to $1.00 per rentable square foot per year payable on the
Commencement Date. The same schedule shall remain in effect for any additional
space Sublessee leases from Sublessor at 475 Sansome Street.
18. CONFLICT WITH MASTER LEASE
Any and all conflicts between the Master Lease and this Sublease shall be
resolved per the Master Lease.
19. NOTICES OF DEFAULT
Sublessor agrees to notify Sublessee of any event of default by Sublessee
within five (5) days of default or notice of default received by Sublessor from
Landlord. If Sublessee's default remains uncured for five (5) days from date of
notice, Sublessor shall notify Parent of such default.
20. PARKING
Unless Subleases is in default hereunder, and subject to any and all
restrictions placed upon Sublessor by Landlord in the Master Lease, Sublessee
shall be entitled to park six (6) automobiles in the Building's parking garage,
subject to all of the rules and regulations applicable to such parking as are
promulgated by Landlord and the Garage Operator (the "Operator") and to any
restrictions or regulations at any time imposed by the City and County of San
Francisco on Landlord's ability to offer such parking. The rental rate for such
parking shall be equal to the rate from time to time charged by the Operator or
Landlord to the public for comparable parking privileges in the building and
shall be paid directly by Sublessee to the Operator as directed in the
Operator's sole discretion.
21. RIGHT TO SUBLEASE
Pursuant to the Letter Agreement dated August 13, 1997 by and between
Mosten Management Company, Inc. ("Landlord"), Tesseract Corporation
("Sublessor"), Strategic Interactive group, Inc. ("Sublessee"), and Bronner
Slosberg Humphrey Inc. ("Parent"), Sublessee shall be entitled to sublease or
assign all or a portion of the Premises (including any additional premises
Sublessee may sublease from Sublessor at 475 Sansome Street during the term of
the Sublease) with the consent of Landlord and Sublessor, which shall not be
unreasonably withheld or delayed.
<PAGE>
22. ADDRESS FOR NOTICES
Sublessor's address for notices: Tesseract Corporation
President's Office
475 Sansome Street, 21st Floor
San Francisco, Ca 94111
Sublessee's address for notices: Strategic Interactive Group, Inc.
Attn: Kathleen O'Meara, Vice-President
Director of Finance & Operations
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Parent's address for notices: Bronner Slosberg Humphrey Inc.
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Sublessor: Sublessee: Parent:
/s/ [ILLEGIBLE]^^ /s/ [ILLEGIBLE]^^
- ------------------ ------------------ -----------------
9/21/97
- ------------------ ------------------ -----------------
- ------------------ ------------------ -----------------
The undersigned, Landlord under the Master Lease, hereby consents to the
subletting of Premises on the terms and conditions contained in this sublease.
This consent shall apply only to this sublease and shall not be deemed to be a
consent to any other sublease.
Landlord:
- -------------------------
- -------------------------
<PAGE>
EXHIBIT "C"
Strategic Interactive Group
Furniture Proposal
Everything is standard except where noted on the floor plan.
68 Steelcase Workstations
- -------------------------
. Inside Cubes: Standard with 3 drawer file cabinet
. Window Cubes: Standard with 2 drawer file cabinet
10 Manager Offices: Standard Setup, black cabinet, 3 shelf bookcase
- ------------------
3 Corner Offices: 1. 2 oval table, 1 round table, 1-4 drawer file cabinet
- ----------------
2. 2 oval table, 1 round table, 1-4 drawer file cabinet
3. Wooden executive furniture, bookcase, 1-4 drawer cabinet,
6 chairs, 1 conference table
Reception: Reception Desk, Sectional chairs
Training Room: 8 two drawer file cabinets, 6 round tables, 4 computer tables
3 oval tables - located north side
Computer Room: patch panels for RJ45 ethernet on 20th floor
100 Herman Miller chairs
Conference Room 20A: Conference table (16' long x 54" wide), 14 streamline
chairs
Conference Room 20B: Conference table (9' long x 42" wide), 6 streamline
chairs
<PAGE>
EXHIBIT "B"
[DIAGRAM APPEARS HERE]
<PAGE>
[LETTERHEAD OF TRI COMMERCIAL APPEARS HERE]
August 13, 1997
Mr. Mark Terziani
Mr. Kelly Beardaley
Cushman & Wakefield of California, Inc.
555 California Street, 26/th/ Floor
San Francisco, CA 54104
RE: Letter Agreement
Dear Mark and Kelly:
Per your request, we have prepared the following Letter Agreement which will
modify the Assignment and Subletting provision of the Master Lease between
Mosten Management Company, Inc., and Tesseract Corporation as that Master Lease
pertains to the proposed sublease between Tesseract Corporation (Sublessor) and
Strategic Interactive Group (Sublessee). The change shall be incorporated into
the referenced proposed sublease.
The agreement is as follows:
Section 26(e) as found on page 28 of the Master lease dated November 22, 1991 by
and between Mosten Management Company, Inc., and Tesseract Corporation is hereby
deleted and without legal effect as it pertains to the rights and duties of
Mosten Management Company, Inc., U.B.S. Asset Management and Tesseract
Corporation in the sublease document dated August 21, 1997 between Strategic
Interactive Group (Sublessee) and Tesseract Corporation.
The sublease agreement dated 8/21/97 by and between Tesseract Corporation
(Sublessor) and Strategic Interactive Group (Sublessee) for space at 475 Sansome
Street shall include the following paragraph:
"Pursuant to the Letter Agreement dated August 11, 1997 by and between
Mosten Management Company, Inc. (Landlord), Tesseract Corporation
(Tenant/Sublessor) and Strategic Interactive Group (Sublessee), Sublessee
shall be entitled to sublease or assign all or a portion of the subleased
premises (including any additional premises sublessee may sublease from
Sublessor at 475 Sansome Street during the term of the sublease) with the
consent of Mosten Management Company, Inc., and Tesseract Corporation which
shall not be unreasonably withheld or delayed.
It is further agreed and understood that this consent does not constitute
Mosten Management Company, Inc.'s official and final consent to the
proposed sublease."
<PAGE>
Mr. Mark Terzian
Mr. Kelly Beardsley
August 13, 1997
Page 2
AGREED AND ACCEPTED:
Mosten Management Company, Inc. Strategic Interactive Group
By:/s/ [ILLEGIBLE]^^ By: /s/ [ILLEGIBLE]^^
---------------------------- ------------------------------
Dated: 8/18/97 Dated: 8/18/97
------------------------- ---------------------------
Tesseract Corporation
By: /s/ [ILLEGIBLE]^^
-----------------------------
Dated: 8/19/97
--------------------------
Thank you for your attention to this matter.
Sincerely,
/s/ John Chamberlain
John W. Chamberlain
Executive Vice President
JWC/mz
cc: Kathleen O'Meara
Mr. Steven E. Humphrey
Mr. James Adams
Ms. Suzanne Ganser
<PAGE>
CONSENT TO SUBLEASE
-------------------
The undersigned, MOSTEN MANAGEMENT COMPANY, INC., a Delaware corporation,
the landlord ("Landlord") under that certain Office Lease, dated November 22,
1991, (the "Master Lease") hereby consents to that certain Sublease, dated
August 11, 1997 by and between Tesseract Corporation ("Sublessor") and Strategic
Interactive Group ("Subtenant"), of the Premises described in the Master Lease.
Nothing contained in this Consent shall or shall be deemed in any way to:
1. Constitute a waiver, amendment or modification of any term or condition
of the Master Lease, including, without limitation, the restrictions in the
Master Lease against further assignment or subletting by the Subtenant;
2. Create a contractual or other direct relationship between Subtenant and
Landlord;
3. In any way limit the obligations of Sublessor or the rights of Landlord
under the Master Lease;
4. Constitute approval or acceptance by landlordof any terms or conditions
contained in the Sublease; or
5. Constitute Landlord's consent to any future or additional subleases of
any portion of the Premises covered by the Master Lease.
A copy of the Sublease to which this Consent applies is attached to this
Consent as Exhibit A.
---------
This consent was executed as of this 22 day of August 1997.
MOSTEN MANAGEMENT COMPANY, INC.
a Delaware corporation
By /s/[ILLEGIBLE]
---------------------------------------------
Its ____________________________________________
<PAGE>
EXHIBIT 10.14
136 EAST SOUTH TEMPLE LEASE
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
1. Date: August 23, 1999
2. Landlord: M & S Balanced Property Fund, L.P., a California limited
partnership
3. Tenant: Bronner Com, LLC, a Delaware limited liability company
4. Property: The real property legally described on Exhibit B attached hereto
---------
5. Building: That certain office building which is known as 136 East South
Temple, Salt Lake City, Utah, located on the Property
6. Premises: Three thousand five hundred eighty-five (3,585) rentable square
feet located on the eighteenth (18th) floor of the Building,
designated as Suite No. 1850, as outlined on the floor plan
attached hereto as Exhibit A.
---------
7. Initial Term: Sixty (60) months
8. Estimated
Delivery Date: October 1, 1999
9. Delivery Deadline: November 1, 1999
10. Commencement
Date: October 1, 1999
11. Expiration Date: September 30, 2004
12. Base Rental Rate:
</TABLE>
Months Annual Base Rental Rate
------ -----------------------
1 - 12 $15.50 per rentable square foot
13 - 24 $16.00 per rentable square foot
25 - 36 $16.50 per rentable square foot
37 - 48 $17.00 per rentable square foot
49 - 60 $17.50 per rentable square foot
BLI-i
<PAGE>
<TABLE>
Base Rent:
Months Monthly Base Rent
------ -----------------
<S> <C>
1-12 $4,631
13-24 $4,780
25-36 $4,929
37-48 $5,079
49-60 $5,228
13. Security Deposit: $5,228
14. Base Year: 1999
15. Tenant's The ratio which the rentable area of the Premises bears to the
Proportionate Share: rentable area of the Building, which is agreed to be 1.65%
(3,585/216,976)
16. Tenant Improvement
Allowance: $71,700 ($20 per rentable square foot)
17. Space Plan
Deadline: Not Applicable
18. Working Drawing Deadline: Not Applicable
19. Landlord's Broker: CB Richard Ellis, Inc.
20. Tenant's Broker: Cottonwood Realty Services, LLC
21. Parking Spaces: 5 unreserved spaces in the Building, and an additional 5
unreserved spaces within a two block radius of the Building
pursuant to Article 24.
-----------
22. Current Parking Sixty-Five Dollars ($65.00) per space per month, subject to
Space Rent: change in accordance with the terms of Section 24 of this Lease
----------
23. Early Termination One day after the date which is 36 months after the
Date: Commencement Date
24. Early Termination One day after the date which is 30 months after the
Notice Date: Commencement Date
</TABLE>
BLI-ii
<PAGE>
The foregoing basic lease information (the "Basic Lease Information") is
incorporated in and made a part of the Lease, dated as of the date written
above, by and between Landlord and Tenant, to which this Basic Lease Information
is attached. If there is any conflict between the Basic Lease Information and
the Lease, the Lease shall control.
LANDLORD: M & S BALANCED PROPERTY FUND, L.P.,
a California limited partnership
By: MSBMS, a California corporation, GENERAL
PARTNER
By: /S/ [ILLEGIBLE]^^
-----------------------------
Its: President
----------------------------
Date: Sep. 20 , 1999
-------------------
Address:
Wood Island, Fourth Floor
80 East Sir Francis Drake Boulevard
Larkspur, California 94939
Att'n: President
TENANT: BRONNER COM, LLC,
a Delaware limited liability company
By: /s/ [ILLEGIBLE]^^
---------------------------------
Its: EVP
--------------------------------
By: /S/ Meryl K. Beckingham
---------------------------------
Its: CFO & EVP
--------------------------------
Date: 8/23/99
-------------------------------
Address:
The Prudential Tower
800 Boylston Street
Boston, MA 02199
BLI-iii
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Premises................................................. 1
2. Term..................................................... 1
3. Acceptance of Premises................................... 2
4. Base Rent................................................ 2
5. Additional Rent.......................................... 3
6. Security Deposit......................................... 6
7. Uses; Hazardous Substances............................... 7
8. Maintenance and Repairs.................................. 8
9. Alterations.............................................. 8
10. Tenant's Property........................................ 10
11. Entry by Landlord........................................ 10
12. Liens and Insolvency..................................... 11
13. Indemnification.......................................... 11
14. Damage to Tenant's Property.............................. 11
15. Eminent Domain........................................... 11
16. Tenant's Insurance....................................... 12
17. Damage or Destruction.................................... 14
18. Waiver of Subrogation.................................... 15
19. Assignment or Subletting................................. 15
20. Subordination............................................ 18
21. Estoppel Certificate..................................... 18
22. Services................................................. 19
23. Signs and Advertising.................................... 19
24. Parking.................................................. 20
25. Rules and Regulations.................................... 20
26. Time..................................................... 20
27. Quiet Enjoyment.......................................... 20
28. Defaults and Remedies.................................... 20
29. Transfer of Landlord's Interest.......................... 22
30. Right to Perform......................................... 22
31. Improvements............................................. 23
32. Notices.................................................. 23
i
<PAGE>
Page
----
33. Attorneys' Fees........................................ 24
34. Holding Over........................................... 24
35. Surrender of Premises.................................. 24
36. Non-Waiver............................................. 24
37. Mortgagee Protection................................... 24
38. Building Planning...................................... 24
39. Changes to the Property................................ 25
40. Option to Terminate.................................... 25
41. General Provisions..................................... 25
ii
<PAGE>
136 EAST SOUTH TEMPLE LEASE
THIS LEASE is entered into by and between Landlord and Tenant, as specified
in the Basic Lease Information, which is incorporated herein by reference, as of
the date shown in Paragraph 1 of the Basic Lease Information.
-----------
1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises (as defined in Paragraph 6 of the Basic Lease Information)
-----------
upon and subject to the terms, covenants and conditions herein set forth. 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 for which Tenant is
responsible and that this Lease is entered into upon the condition of such
performance.
2. TERM.
a. INITIAL TERM. Except as otherwise provided herein, the term of this
------------
Lease shall be the Initial Term as set forth in Paragraph 7 of the Basic Lease
-----------
Information, commencing on the earlier to occur of (i) Tenant's commencement of
regular business operations in the Premises or (ii) the Commencement Date (as it
may be extended pursuant to Section 2.b below), and ending as of the Expiration
-----------
Date, as set forth in Paragraph 10 and Paragraph 11, respectively, of the Basic
------------- ------------
Lease Information. The Initial Term, together with any extension term as to
which a right has been properly exercised, shall be referred to as the "Term."
Notwithstanding the foregoing, if for any reason the Commencement Date occurs
pursuant to the terms of this Lease on a day other than the first day of a
calendar month, the period commencing on the Commencement Date and ending on the
last day of the calendar month in which the Commencement Date occurs shall be an
initial stub period which shall be added to the Initial Term and Tenant shall
pay all rent and other charges with respect to such stub period (on a prorated
basis as referenced in Section 4a) at the same rate applicable to the first full
----------
calendar month of this Lease. Following such stub period and commencing as of
the first day of the first full calendar month following the month in which the
Commencement Date occurs, Tenant shall commence the payment of rent and other
charges payable hereunder as if the Initial Term had actually commenced on such
date. The use of the stub period described above is intended to provide for ease
of administration and calculation of all amounts owed hereunder, since all
rental adjustments will be determined as of the first day of a calendar month
and the Term of the Lease will end as of the last day of a calendar month
(unless earlier terminated pursuant to the terms hereof).
b. DELIVERY OF PREMISES. Landlord shall substantially complete the
-------- -- --------
improvements to the Premises to be provided by Landlord pursuant to Section 31,
----------
and deliver the Premises to Tenant on or before the Estimated Delivery Date
specified in Paragraph 8 of the Basic Lease Information, subject to extension as
----------
provided in this Section 2. If there is any delay in substantial completion of
---------
the improvements to the Premises due to (i) Tenant's failure to submit the Space
Plan or approve the Working Drawings (as such terms are defined in Section 31)
----------
within the periods specified in Section 31, (ii) Tenant's changes to the Space
----------
Plan or the Final Plans, (iii) any failure by Tenant to pay Excess Construction
Costs (as defined in Section 31 below), (iv) any work performed by Tenant in the
----------
Premises which interferes with the performance or delays the progress of
Landlord's Work, or (v) any other delay to the extent requested or caused by
Tenant (collectively, "Tenant's Delay"), the Estimated Delivery Date and the
Delivery Deadline (as specified in Paragraph 9 of the Basic Lease Information)
-----------
shall
1
<PAGE>
each be extended by one day for each day of Tenant's Delay. If the improvements
in the Premises are not substantially complete on or before the Estimated
Delivery Date, this Lease shall remain in full force and effect, provided that
if such failure is not due to Tenant's Delay, the Commencement Date and the
Expiration Date shall be extended to reflect the delay occasioned by such
failure, and provided further, that in the event the improvements to the
Premises are not substantially complete by the Delivery Deadline, Tenant may
thereupon terminate this Lease by written notice to Landlord before the date
that is ten (10) days thereafter, in which event Landlord shall have no other or
further liability or obligation hereunder to Tenant. Landlord shall have no
liability to Tenant due to delay in completing the Premises. No Base Rent (as
defined in Section 4) or additional rent shall accrue prior to the Commencement
---------
Date. If any delay in substantially completing the improvements to the Premises
is occasioned by Tenant's Delay, the Term will commence as of the Commencement
Date. "Substantially Complete" means that the improvements to the Premises have
been completed in accordance with the Final Plans, even though minor details,
adjustments or punch list items that do not materially interfere with Tenant's
use or occupancy of the Premises for normal business operations may remain to be
completed. Landlord will use commercially reasonable efforts to complete all
punchlist items within thirty (30) days, or as soon as reasonably possible-
following the date the Premises are Substantially Complete.
c. CONFIRMATION OF LEASE TERM. When the Commencement Date and the
--------------- ----------
Expiration Date have been ascertained, the parties shall promptly complete and
execute a Confirmation of Lease Term in the form of Exhibit C attached hereto.
---------
3. ACCEPTANCE OF PREMISES. Landlord shall have no obligation whatsoever to
construct leasehold improvements for Tenant or to repair or refurbish the
Premises, except as specifically set forth in Section 31 of this Lease. Landlord
----------
or Landlord's agents have made no representations or promises with respect to
the Building (as defined in Paragraph 5 of the Basic Lease Information), the
-----------
Premises or this Lease except as expressly set forth herein. The taking of
possession of the Premises by Tenant shall be conclusive evidence that Tenant
accepts the same "AS IS" and that the Premises and the Building are suited for
the use intended by Tenant and were in good and satisfactory condition at the
time such possession was taken. Tenant represents and warrants to Landlord that
(a) its sole intended use of the Premises is for general office use which has no
requirements other than those which are typical to office use, including but not
limited to, special security requirements, (b) it does not intend to use the
Premises for any other purpose, and (c) prior to executing this Lease it has
made such investigations as it deems appropriate with respect to the suitability
of the Premises for its intended use and has determined that the Premises is
suitable for such intended use.
4. Base RENT.
a. BASE RENT PAYMENTS. Tenant agrees to pay Landlord each month, as base
--------- --------
monthly rent, the Base Rent as set forth in Paragraph 12 of the Basic Lease
------------
Information. Each monthly installment of Base Rent shall be payable in advance
on the first day of each calendar month during the Term, except that the first
month's installment shall be paid upon the execution hereof. If the Term
commences or ends on a day other than the first day of a calendar month, then
the rent for the months in which this Lease commences or ends shall be prorated
(and paid at the beginning of each such month) in the proportion that the number
of days this Lease is in effect during such month bears to the total number of
days in such month, and such partial month's installment shall be paid no later
than the commencement of the subject month. In addition to the Base Rent, Tenant
agrees to pay as additional rent the
2
<PAGE>
amount of additional rent and rent adjustments and other charges required by
this Lease. All rent shall be paid to Landlord, without prior demand and without
any deduction or offset, in lawful money of the United States of America, at the
address of Landlord designated on the signature page of the Basic Lease
Information or to such other person or at such other place as Landlord may from
time to time designate in writing.
b. Late Charge. If Tenant fails to pay any installment of Base Rent,
-----------
additional rent or other charges within five (5) days after the same are due, or
fails to make any other payment for which Tenant is obligated under this Lease,
then Tenant shall pay to Landlord a late charge equal to five percent (5%) of
the amount so payable. Tenant acknowledges that late payments will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which costs are extremely difficult and impracticable to calculate. The parties
agree that the late charge described above represents a fair and reasonable
estimate of the extra costs incurred by Landlord as a result of such late
payment. Such late charge shall not be deemed a consent by Landlord to any late
payment, nor a waiver of Landlord's right to insist upon timely payments at any
time, nor a waiver of any remedies to which Landlord is entitled hereunder. In
addition, all amounts payable by Tenant to Landlord hereunder, exclusive of the
late charge described above, if not paid within five (5) days after such amounts
are due, shall bear interest from the due date until paid at the greater of (i)
eighteen percent (18%) per annum, or (ii) maximum rate allowable by law.
5. ADDITIONAL RENT. In addition to the Base Rent provided in Section 4 of this
---------
Lease, Tenant shall pay Tenant's Proportionate Share as specified in Paragraph
---------
15 of the Basic Lease Information, of the increase in Actual Operating Costs for
- --
each Operating Year over the Base Amount (as such terms are defined below).
Tenant's Proportionate Share of the Building may change based on remeasurement
or adjustment of the area of the Building or the Premises. In addition, whenever
additional space is added to the Premises, Tenant's Proportionate Share of the
Building shall increase accordingly.
a. Estimated Operating Costs. After the close of each Operating Year
-------------------------
(except the Base Year) during the Term, Landlord shall furnish Tenant a written
statement of the "Estimated Operating Costs" for such Operating Year, and a
corresponding calculation of additional rent, which shall be one-twelfth (1/12)
of Tenant's Proportionate Share of the amount, if any, by which the Estimated
Operating Costs exceed the Base Amount. Such additional amount shall be added to
the monthly installment of Base Rent payable by Tenant under this Lease for each
month during such Operating Year.
b. Actual Operating Costs. After the close of each Operating Year (except
----------------------
the Base Year) during the Term, Landlord shall deliver to Tenant a written
statement setting forth the Actual Operating Costs during the preceding
Operating Year. If such costs for any Operating Year exceed the Estimated
Operating Costs paid by Tenant to Landlord pursuant to Section 5.a, Tenant shall
-----------
pay the amount of such excess to Landlord as additional rent within thirty (30)
days after receipt by Tenant of such statement. If such statement shows such
costs to be less than the amount paid by Tenant to Landlord pursuant to Section
-------
5.a, then the amount of such overpayment shall be paid by Landlord to Tenant
- ---
within thirty (30) days following the date of such statement or, at Tenant's
election, credited by Landlord to the payment of rent next due.
c. Determinations. The determination of Actual Operating Costs and
--------------
Estimated Operating Costs shall be made by Landlord in its reasonable
discretion, subject to Tenant's audit rights set forth in Section 5.f below. Any
-----------
payments pursuant to this Section 5 shall be
---------
3
<PAGE>
additional rent payable by Tenant hereunder, and in the event of nonpayment
thereof, Landlord shall have the same rights with respect to such nonpayment as
it has with respect to any other nonpayment of rent hereunder.
d. End of Term. If this Lease shall terminate on a day other than the last
-----------
day of an Operating Year, the amount of any adjustment between Estimated
Operating Costs and Actual Operating Costs with respect to the Operating Year in
which such termination occurs shall be prorated on the basis which the number of
days from the commencement of such Operating Year, to and including such
termination date, bears to three hundred sixty-five (365); and any amount
payable by Landlord to Tenant or Tenant to Landlord with respect to such
adjustment shall be payable within thirty (30) days after delivery of the
statement of Actual Operating Costs with respect to such Operating Year.
e. Definitions. The following terms shall have the respective meanings
-----------
hereinafter specified:
(1) "Base Amount" shall mean an amount equal to Actual Operating Costs
for the Base Year (as defined in Paragraph 14 of the Basic Lease
------------
Information).
(2) "Operating Year" shall mean a calendar year commencing January 1
and ending December 31.
(i) "Operating Costs" shall mean all expenses paid or incurred by
Landlord for maintaining, owning, operating and repairing the Property
(as defined in Paragraph 4 of the Basic Lease Information) and the
-----------
Building, and the personal property used in conjunction therewith,
including, but not limited to expenses incurred or paid for: Property
Taxes (as hereinafter defined); utilities for the Property, including
but not limited to electricity, power, gas, steam, oil or other fuel,
water, sewer, lighting, heating, air conditioning and ventilating;
permits, licenses and certificates necessary to operate, manage and
lease the Property for office purposes; insurance Landlord deems
appropriate to carry or is required to carry by any mortgagee under
any mortgage encumbering the Building or any portion thereof or
interest therein or encumbering any of Landlord's or a property
manager's personal property used in the operation of the Building;
supplies, tools, equipment and materials used in the operation, repair
and maintenance of the Property; accounting, legal, inspection,
consulting, concierge and other services; equipment rental (or
installment equipment purchase or equipment financing agreements);
management agreements (including the cost of any management fee
actually paid thereunder and the fair rental value of any office space
provided thereunder, up to customary and reasonable amounts in
comparable buildings in the Salt Lake City area); wages, salaries and
other compensation and benefits (including the fair value of any
parking privileges provided) for all persons engaged in the operation,
maintenance or security of the Property, and employer's Social
Security taxes, unemployment taxes or insurance, and any other taxes
which may be levied on such wages, salaries, compensation and
benefits; payments under any easement, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the
sharing of costs in any planned development or similar arrangement;
operation, repair, and maintenance of all systems and equipment and
components thereof (including replacement of components); janitorial
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service; alarm and security service; window cleaning; trash removal;
elevator maintenance; cleaning of walks, parking facilities and
building walls; replacement of wall and floor coverings, ceiling tiles
and fixtures in lobbies, corridors, restrooms and other common or
public areas or facilities; maintenance and replacement of shrubs,
trees, grass, sod and other landscape items, irrigation systems,
drainage facilities, fences, curbs, and walkways; re-paving and re-
striping parking facilities; and roof repairs (excluding capital
repairs or replacement). Notwithstanding the foregoing, Operating
Costs shall not include depreciation, interest and amortization on
mortgages or other debt costs or ground lease payments, if any; legal
fees in connection with leasing, tenant disputes or enforcement of
leases; real estate brokers' leasing commissions; improvements or
alterations to tenant spaces; the cost of providing any service
directly to and to be paid directly by, any tenant; costs of any items
to the extent Landlord receives reimbursement from insurance proceeds
or from a third party (such proceeds to be deducted from Operating
Costs in the year in which received); and capital expenditures except
those capital expenditures made in good faith primarily to reduce
Operating Costs, or to comply with any laws or other governmental
requirements enacted or becoming effective after the date of this
Lease, or for replacements (as opposed to additions or new
improvements) of non-structural items located in the common areas of
the Property required to keep such areas in good condition, which
capital expenditures (together with reasonable financing charges)
shall be amortized for purposes of this Lease over the shorter of (i)
their useful lives, or (ii) three (3) years. In addition, Operating
Costs shall not include, for purposes of this Lease, (i) all items and
services for which Tenant or any other Tenant in the Building
reimburses Landlord or which Landlord provides selectively to one or
more tenant (other than Tenant) without reimbursement, (ii) the wages
of any employee to the extent that his time is devoted to properties
other than the Building, and (iii) the cost of Landlord's general
corporate overhead.
(3) "Estimated Operating Costs" shall mean Landlord's estimate of
Operating Costs for the following Operating Year, adjusted as if ninety-five
percent (95%) of the total rentable area of the Building had been occupied for
the entire Operating Year.
(4) "Actual Operating Costs" shall mean the actual Operating Costs for
any Operating Year, adjusted as if ninety-five percent (95%) of the total
rentable area of the Building had been occupied for the entire Operating Year.
(5) "Property Taxes" shall mean all real and personal property taxes
and assessments imposed by any governmental authority or agency on the Building
and the Property (including a pro rata portion of any taxes levied on any common
areas); any assessments levied in lieu of such taxes; any non-progressive tax on
or measured by gross rents received from the rental of space in the Building;
and any other costs levied or assessed by, or at the direction of, any federal,
state, or local government authority in connection with the use or occupancy of
the Building or the Premises or the parking facilities serving the Building and
the Premises; any tax on this transaction or any document to which Tenant is a
party creating or transferring an interest in the Premises, and any actual
expenses reasonably incurred, including the reasonable cost of attorneys or
experts, incurred by Landlord in seeking reduction by the taxing authority of
the above-referenced taxes, less any tax refunds obtained as a result of an
application for
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review thereof; but shall not include any net income, franchise, estate or
inheritance taxes.
f. Right to Audit. Landlord agrees to maintain accurate books and records
--------------
of the Operating Costs for each Operating Year (or partial Operating year)
throughout the Term and for a period of three (3) years thereafter. Once per
calendar year, within thirty (30) days after Tenant's request, Landlord shall
provide a written response to any questions that Tenant may have concerning the
calculation of the Actual Operating Costs for the immediately preceding
Operating Year. In the event of any reasonable good faith dispute or uncertainty
as to said amounts, Tenant shall have the right, at its own expense, to conduct
an audit of Landlord's books and records relating to the determination of
Operating Costs, upon reasonable prior written notice, during normal business
hours for the immediately preceding Operating Year of the Term. In addition,
Tenant shall have a one-time-only right to audit Operating Costs for the Base
Year. Notwithstanding any such dispute or uncertainty, Tenant shall pay Base
Rent and all additional rent in accordance with the terms of this Lease. If
Tenant, reasonably and in good faith, challenges Landlord's computations of the
Actual Operating Costs for the immediately preceding Operating Year, Tenant
shall notify Landlord in writing of its objections. If Tenant's audit indicates
that Tenant has been overcharged for the Actual Operating Costs, Landlord shall
revise its records and billings accordingly; provided, however, that if Landlord
disputes the findings of Tenant's audit, then Landlord and Tenant shall mutually
agree upon a nationally recognized firm of certified public accountants which
shall conduct an independent audit (and which shall not be compensated on a
contingency fee basis), and the findings of such firm shall be binding on the
parties hereto. Within thirty (30) days after resolution of such dispute, the
party which owes money to the other shall remit the sum owed. Subject to the
following, Tenant shall be responsible for the cost of its own audit and also
for the cost of any audit by an independent accounting firm; provided, however,
that notwithstanding the foregoing, if Tenant's audit, or if an audit was
conducted by an independent accounting firm then the independent audit,
determines that Tenant has been overcharged by seven and one-half percent
(7 1/2%) or more for the Actual Operating Costs for the immediately preceding
Operating Year of the Term, then Landlord shall pay for or reimburse Tenant for
the reasonable cost of Tenant's audit, and, if an audit by an independent
accounting firm was also conducted in accordance with the foregoing provisions
of this Section 5. Landlord shall also pay for the cost of such independent
---------
audit. If the audit determines that Tenant has been overcharged by an amount
less than 5%, Landlord and Tenant will each pay for its own auditor and shall
split the cost of any independent auditor making such determination.
6. SECURITY DEPOSIT. Tenant has deposited with Landlord the Security Deposit
specified in Paragraph 13 of the Basic Lease Information. Said sum shall be held
------------
by Landlord as security for the faithful performance by Tenant of all of
Tenant's obligations under this Lease. If Tenant defaults with respect to any
provision hereof, including but not limited to the provisions relating to the
payment of rent, Landlord may (but shall not be required to) use, apply or
retain all or part of the Security Deposit for the payment of any rent or any
other sum in default, or for the payment of any other amount which Landlord may
incur by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default. If any
portion of the deposit is so used or applied, Tenant shall, upon demand,
immediately deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount. Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep the
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform all of its obligations under this Lease, the Security Deposit or any
balance thereof shall
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be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interests hereunder) at the expiration of the Term, provided that
Landlord may retain all or a portion of the Security Deposit in an amount
determined by Landlord in good faith as necessary to cover any amounts owed by
Tenant for Actual Operating Costs during the Term (it being agreed that if any
amount is so retained Landlord will deliver a reasonable explanation of the
amounts so withheld).
7. USES; HAZARDOUS SUBSTANCES.
a. Use. Tenant agrees that it will use the Premises solely for general
---
office purposes, and for no other business or purpose. Tenant, at its sole cost
and expense, shall promptly comply with all local, state or federal laws,
statutes, ordinances and governmental rules, regulations or requirements now in
force or which may hereinafter be in force, including, without limitation, the
Americans with Disabilities Act, 42 U.S.C. (S) 12101 et seq. and any
governmental regulations relating thereto (the "ADA"), including any required
alterations for purposes of "public accommodations" under such statute,
provided, however, Landlord agrees to remedy any violations of the ADA occurring
- -----------------
within the common areas of the Building or the Property, except to the extent
the violation results from Tenant's particular use or operation of its Premises.
Tenant shall not use or permit the Premises to be used in any manner nor do any
act which would increase the existing rate of insurance on the Building or cause
the cancellation of any insurance policy covering the Building, nor shall Tenant
permit to be kept, used or sold, in or about the Premises, any article which may
be prohibited by the standard form of fire insurance policy, unless Tenant
obtains an endorsement to the policy allowing such activity. Tenant shall not
during the Term (i) commit or allow to be committed any waste upon the Premises,
or any public or private nuisance in or around the Building or the Property,
(ii) allow any sale by auction upon the Premises, (iii) place any loads upon the
floor, walls, or ceiling of the Premises which endanger the Building, (iv) use
any apparatus, machinery or device in or about the Premises which will cause any
substantial noise or vibration or in any manner damage the Building, (v) place
any harmful liquids in the drainage system or in the soils surrounding the
Building, or (vi) disturb or unreasonably interfere with other tenants of the
Building. If any of Tenant's office machines or equipment disturbs the quiet
enjoyment of any other tenant in the Building, then Tenant shall provide
adequate insulation, or take such other action as may be necessary to eliminate
the disturbance, all at Tenant's sole cost and expense. Landlord will respond
promptly to Tenant's request for clarification of the Building's floor load and
sound/vibration requirements based upon actual information provided to Landlord
regarding equipment Tenant wishes to install.
b. Hazardous Materials. Tenant shall not generate, use, manufacture, keep,
-------------------
store, refine, release, discharge or dispose of any substance or material that
is described as a toxic or hazardous substance, waste or material or a pollutant
or contaminant by any federal, state or local law, ordinance, rule or regulation
now or hereafter in force, as amended from time to time, in any way relating to
or regulating human health or safety or industrial hygiene or environmental
conditions or pollution or contamination, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S)
9601, et seq., the Solid Waste Disposal Act, 42 U.S.C. (S) 6901, et seq.,
including, without limitation, PCBs, petroleum products, asbestos and asbestos-
containing materials (collectively, "Hazardous Substances"), on, under or near
the Premises or the Building, except that Tenant may use Hazardous Substances on
the Premises that are incidental to general office use, such as photocopier
toner, provided such use is in compliance with laws and prudent business
practices. Tenant shall not cause or permit any waste material or refuse to be
dumped upon or
7
<PAGE>
remain upon any part of the Property outside the Premises, nor shall Tenant
cause or allow any materials, supplies, equipment, finished products or semi-
finished products or articles of any nature to be stored upon or remain upon the
Property outside the Premises. Tenant agrees to indemnify Landlord against and
hold Landlord harmless from any and all loss, cost, liability, claim, damage,
and expense including, without limitation, reasonable attorneys' fees and
disbursements, to the extent incurred in connection with or arising from the
generation. use, manufacture, storage, disposal or release of any Hazardous
Substances by Tenant or any person claiming through or under Tenant or any
contractor, agent, employee, visitor, assign or licensee of Tenant, on or about
the Property throughout the Term.
8. MAINTENANCE AND REPAIRS.
a. Landlord's Obligations. Landlord shall maintain and keep in good repair
----------------------
the foundations, exterior walls, structural portions of the roof and other
structural portions of the Building, and shall maintain the electrical,
plumbing, heating and ventilating equipment in the Building, except such
portions thereof as may be specially installed for Tenant or otherwise altered
by Tenant in connection with Tenant's work or otherwise; and except that all
damage or injury to the Premises, the Building or the equipment and improvements
therein caused by any act, neglect, misuse or omission of any duty by Tenant or
by any persons who may be in or upon the Premises or the Building with the
express or implied consent of Tenant shall be paid by Tenant. Landlord shall not
be liable for any failure to make any such repairs or to perform any maintenance
unless such failure shall persist for an unreasonable time after written notice
of the need of such repairs or maintenance is given by Tenant to Landlord.
Tenant hereby waives and releases its right to make repairs at Landlord's
expense under any law, statute or ordinance now or hereafter in effect. Landlord
makes no warranty as to the quality, continuity or availability of the
telecommunications services in the Building, and Tenant hereby waives any claim
against Landlord for any actual or consequential damages (including damages for
loss of business) if Tenant's telecommunications services in any way are
interrupted, damaged or rendered less effective, except to the extent caused by
the gross negligence or willful misconduct of Landlord, its agents or employees.
b. Tenant's Obligations. Tenant shall at its expense maintain, repair and
--------------------
replace all portions of the Premises and the equipment or fixtures relating
thereto, except to the extent specified in Section 8.a, above, at all times in
-----------
good condition and repair, all in accordance with the laws of the State of Utah
and all health, fire, police and other ordinances, regulations and directives of
governmental agencies having jurisdiction over such matters. Tenant shall
replace at Tenant's sole expense any glass that may be broken in the Premises,
and elsewhere in the Building if done through any fault or negligence of Tenant
or any agent, employee, contractor, or invitee of Tenant, with glass of the same
size, specifications and quality, with signs thereon, if required. At the
expiration of the Term, Tenant shall surrender the Premises in good condition,
normal wear and tear and damage by fire or other casualty excepted, and will
clean all walls, floors, suspended ceilings and carpeting therein. Tenant shall
indemnify Landlord for any loss or liability resulting from any delay by Tenant
in surrendering the Premises to Landlord as provided herein.
9. ALTERATIONS.
a. Landlord's Consent. Tenant shall not make any alterations, additions or
------------------
improvements (collectively, "Alterations") in or to the Premises or make changes
to locks on doors or add, disturb or in any way change any plumbing or wiring
without obtaining the prior
8
<PAGE>
written consent of Landlord, which consent shall not be unreasonably withheld
provided that the Alterations do not affect the Building's structure, safety,
systems or aesthetics or cause the release of Hazardous Substances.
Notwithstanding the foregoing, Tenant may make Alterations to the Premises, so
long as the Alterations (i) do not exceed a cost of $10,000 in the aggregate,
(ii) are non-structural in nature, (iii) do not affect the Building or any
building system including electrical, telephone cable or otherwise) or any other
Tenant in the building and (iv) Tenant notifies Landlord of the scope of the
intended improvements prior to commencing any work with respect thereto.
b. Performance of Work. All Alterations shall be made at Tenant's sole
-------------------
expense and by contractors or mechanics approved by Landlord, shall be made at
such times and in such manner as Landlord may from time to time designate, and
shall become the property of Landlord without its obligation to pay therefor.
All work with respect to any Alterations shall be performed in a good and
workmanlike manner, shall be of a quality equal to or exceeding the then
existing construction standards for the Building and must be of a type, and the
floors and ceilings must be finished in a manner, customary for general office
use and other uses common to first-class office buildings in the vicinity.
Alterations shall be diligently prosecuted to completion to the end that the
Premises shall be at all times a complete unit except during the period
necessarily required for such work. All Alterations shall be made strictly in
accordance with all laws, regulations and ordinances relating thereto, and no
interior improvements installed in the Premises may be removed unless the same
are promptly replaced with interior improvements of the same or better quality.
Landlord hereby reserves the right to require any contractor or mechanic working
in the Premises to provide lien waivers and liability insurance covering the
Alterations to the Premises and to require Tenant to secure, at Tenant's sole
cost and expense, completion and lien indemnity bonds satisfactory to Landlord,
and/or to require such other instruments as may be reasonably requested by
Landlord. Tenant shall give Landlord ten (10) days written notice prior to the
commencement of any Alterations and shall allow Landlord to enter the Premises
and post appropriate notices to avoid liability to contractors or material
suppliers for payment for any Alterations. All Alterations shall remain in and
be surrendered with the Premises as a part thereof at the termination of this
Lease, without disturbance, molestation or injury, provided that Landlord may
require any Alterations to be removed upon termination of this Lease provided
that Tenant shall not be obligated to remove Alterations requiring Landlord's
consent unless Landlord specified at the time of approving such Alteration that
removal would be required at Landlord's request. In such event, all expenses to
restore said space to normal building standards shall be borne by Tenant.
c. Landlord's Expenses: Administrative Fee. Tenant shall pay to Landlord,
---------------------------------------
as additional rent, any actual and reasonable out-of-pocket costs incurred by
Landlord in connection with the review, approval and supervision of the
Alterations and for any additional Building services provided to Tenant or to
the Premises in connection with any such alterations, additions or improvements
which are beyond the normal services provided to occupants of the Building.
Tenant shall also pay to Landlord an administration fee equal to ten percent
(10%) of the cost of the work to compensate Landlord for the administrative
costs incurred in the review, approval and supervision of the Alterations. Under
no circumstances shall Landlord be liable to Tenant for any damage, loss, cost
or expense incurred by Tenant on account of Tenant's plans and specifications,
Tenant's contractors or subcontractors, or Tenant's design of any work,
construction of any work or delay in completion of any work.
9
<PAGE>
10. TENANT'S PROPERTY.
a. Removal Upon Expiration of Lease. All articles of personal property and
--------------------------------
all business and trade fixtures, machinery and equipment, furniture and movable
partitions owned by Tenant or installed by Tenant at its expense in the Premises
shall be and remain the property of Tenant and may be removed by Tenant at any
time during the Term, subject to the other requirements of this Lease. If Tenant
shall fail to remove all of such property from the Premises at the expiration of
the Term or within ten (10) days after any earlier termination of this Lease for
any cause whatsoever, Landlord may, at its option, after two (2) days' written
notice to Tenant, remove the same in any manner that Landlord shall choose, and
store such property without liability to Tenant for loss thereof. In such event,
Tenant agrees to pay Landlord upon demand any and all expenses incurred in such
removal, including court costs and attorneys' fees and storage charges on such
property for any length of time that the same shall be in Landlord's possession.
Landlord may, at its option, without further notice, sell said property or any
of the same, at private sale and without legal process, for such price as
Landlord may obtain and apply the proceeds of such sale to any amounts due under
this Lease from Tenant to Landlord and to the expense incident to the removal
and sale of said property.
b. Personal Property Taxes. Tenant shall be liable for and shall pay, at
-----------------------
least ten (10) days before delinquency, all taxes levied against any personal
property or trade fixtures placed by Tenant in or about the Premises. If any
such taxes on Tenant's personal property or trade fixtures are levied against
Landlord or Landlord's property or if the assessed value of the Premises or
Landlord's obligations are increased by a value placed upon such personal
property or trade fixtures of Tenant and if Landlord, after at least ten (10)
days written notice to Tenant, pays the taxes or obligations based upon Tenant's
personal property or trade fixtures, which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant, Tenant shall, upon demand, repay to Landlord the taxes or obligations
so levied against Landlord, or the portion of such taxes or obligations
resulting from such increase in the assessment.
11. ENTRY BY LANDLORD. After reasonable notice (except in emergencies, where no
such notice shall be required), Landlord, its authorized agents, contractors and
representatives shall at any and all times have the right to enter the Premises
(i) to inspect the same, (ii) to supply janitorial service and any other service
to be provided by Landlord to Tenant hereunder, (iii) to show the Premises to
prospective purchasers, (iv) to show the Premises to prospective tenants during
the last 6 months of the Initial Term, and any renewals thereof, and to
prospective tenants at any time if Tenant has vacated the Premises or defaulted
in its obligations hereunder, (v) to post notices required by law or necessary
for Tenant's safety or security, (vi) to alter, improve or repair the Premises
or any other portion of the Building, all without being deemed guilty of any
eviction of Tenant and without abatement of rent. Landlord may, in order to
carry out such purposes, erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, provided that
Landlord will exercise commercially reasonable efforts not to interfere with the
normal business operations of Tenant. Landlord shall at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord shall have the right to use any and all means which
Landlord may deem proper to open said doors in an emergency in order to obtain
entry to the Premises. Any entry to the Premises obtained by Landlord pursuant
to the terms hereof shall not be deemed to be a forcible or unlawful entry into
the Premises, or an eviction of Tenant from the Premises or any portion thereof,
and Tenant hereby waives any claim for damages for any
10
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injury or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss in, upon and
about the Premises.
12. LIENS AND INSOLVENCY. Tenant shall keep the Premises and the Building free
from any liens or encumbrances of any kind or nature arising out of any work
performed, materials ordered or obligations incurred by or on behalf of Tenant.
If Tenant becomes insolvent, makes an assignment for the benefit of creditors,
or if legal proceedings are instituted seeking to have Tenant adjudicated
bankrupt, reorganized or rearranged under the bankruptcy laws of the United
States, or if this Lease shall, by operation of law or otherwise, pass to any
person or persons or entity other than Tenant, Landlord may, at its option,
terminate this Lease, which termination shall reserve unto Landlord all of the
rights and remedies available under Sections 28 and 30 hereof, and Landlord may
----------- --
accept rent from such trustee, assignee or receiver without waiving or
forfeiting said right of termination.
13. INDEMNIFICATION. Tenant shall indemnify, defend and hold Landlord harmless
from all losses, liabilities, costs, expenses and claims arising from (a)
Tenant's use of the Premises or the conduct of its business or any activity,
work, or thing done, permitted or suffered by Tenant in or about the Premises,
(b) any breach or default in the performance of any obligation to be performed
by Tenant under the terms of this Lease, (c) any act, neglect, fault or omission
of Tenant or of its agents, employees, invitees or guests and (d) all costs,
attorneys' fees, expenses and liabilities incurred in or about such claims or
any action or proceeding brought thereon to the extent that such losses are not
caused by Landlord's gross negligence or willful misconduct or breach or default
of Landlord's obligations hereunder. In case any action or proceeding shall be
brought against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall defend the same at Tenant's expense by counsel approved in
writing by Landlord. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of and waives all claims against Landlord with
respect to damage to property or injury to persons in, upon or about the
Premises from any cause whatsoever except that which is caused by Landlord's
gross negligence or willful misconduct or by the failure of Landlord to observe
any of the terms and conditions of this Lease where such failure has persisted
for an unreasonable period of time after written notice to Landlord of such
failure.
14. DAMAGE TO TENANT'S PROPERTY. Notwithstanding anything to the contrary in
this Lease, Landlord or its agents shall not be liable for (a) any damage to any
property entrusted to employees of the Building or its property managers, (b)
loss or damage to any property by theft or otherwise, (c) any injury 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 work therein or from the roof, street or
sub-surface or from any other place or resulting from dampness or any other
cause whatsoever, or (d) any damage or loss to the business or occupation of
Tenant arising from the acts or neglect of other tenants or occupants of, or
invitees to, the Building. Tenant shall give prompt notice to Landlord in case
of fire or accident in the Premises or in the Building or of defects therein or
in the fixtures or equipment.
15. EMINENT DOMAIN.
a. Complete Taking. If the whole of the Property, the Building or the
---------------
Premises or so much thereof shall be taken by condemnation or in any other
manner for any public or quasi-public use or purpose so that a reasonable amount
of reconstruction will not result in the Premises being suitable for Tenant's
continued occupancy, this Lease and the term and estate
11
<PAGE>
hereby granted shall terminate as of the date that possession of the Property,
the Building or the Premises is so taken (herein called "Date of the Taking"),
and the Base Rent and other sums payable hereunder shall be prorated and
adjusted as of such termination date. Landlord shall notify Tenant in writing
within thirty (30) days of a final condemnation order, specifying whether the
Lease will terminate under the terms of the provision.
b. Partial Taking. If only a part of the Building, the Property or the
--------------
Premises shall be so taken and the remaining part thereof after reconstruction
is suited for Tenant's continued occupancy, this Lease shall be unaffected by
such taking, except that Landlord may, at its option, terminate this Lease by
giving Tenant notice to that effect within sixty (60) days after the Date of the
Taking if a portion of the Building is affected by any such taking. In such
event, this Lease shall terminate on the date that such notice from the Landlord
to Tenant shall be given, and the Base Rent and other sums payable hereunder
shall be prorated and adjusted as of such termination date. Upon a partial
taking after which this Lease continues in force as to any part of the Premises,
the Base Rent and other sums payable hereunder shall be adjusted according to
the rentable area remaining.
c. Award. Landlord shall be entitled to receive the entire award or
-----
payment in connection with any taking without deduction therefrom for any estate
vested in Tenant by this Lease, and Tenant shall receive no part of such award,
including any award for the "leasehold bonus value" of this Lease. Tenant hereby
expressly assigns to Landlord all of its right, title and interest in and to
every such award or payment. Notwithstanding the foregoing, so long as
Landlord's award is not affected thereby, Tenant may pursue a separate award for
loss of its personal property and relocation expenses.
d. Waiver. Except as may be otherwise provided herein, Tenant hereby
------
waives and releases any right to terminate this Lease under any law, statute or
ordinance now or hereafter in effect relative to eminent domain, condemnation or
takings.
16. TENANT'S INSURANCE. Tenant shall, during the entire term of this Lease and
any other period of occupancy, at its sole cost and expense, keep in full force
and effect the following insurance:
a. All-Risk Insurance. Standard form property insurance insuring against
------------------
the perils of fire, vandalism, malicious mischief, cause of loss-special form
("All-Risk"), sprinkler leakage, earthquake sprinkler leakage and earthquake
coverage. This insurance policy shall be upon all trade fixtures and other
property owned by Tenant, for which Tenant is legally liable and/or that was
installed at Tenant's expense, and which is located in the Building including,
without limitation, furniture, fittings, installations, fixtures and any other
personal property, in an amount not less than the full replacement cost thereof.
If there shall be a dispute as to the amount which comprises full replacement
cost, the decision of Landlord or any mortgagees of Landlord shall be
conclusive. This insurance policy shall also insure the direct or indirect loss
of Tenant's earnings attributable to Tenant's inability to use fully or obtain
access to the Premises or the Building in the amount as will properly reimburse
Tenant for a period of one (1) year following such loss of use or access. Such
policy shall name Landlord and any mortgagees of Landlord as additional insured
parties, as their respective interests may appear.
b. Liability Insurance. Commercial General Liability Insurance insuring
-------------------
Tenant against any liability arising out of the lease, use, occupancy, or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be in the amount of Five Million Dollars
12
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($5,000,000) Combined Single Limit for injury to or death of one or more persons
in an occurrence, and for damage to tangible property (including loss of use) in
an occurrence, with an Additional Insured --Landlord's Endorsement. The policy
shall insure the hazards of premises and operations, independent contractors,
contractual liability (covering the indemnity contained in Section 13 hereof)
----------
and shall (i) name Landlord as an additional insured, (ii) contain a cross-
liability provision, (iii) contain a provision that "the insurance provided the
landlord hereunder shall be primary and noncontributing with any other insurance
available to the landlord," and (iv) include fire legal liability coverage in
the amount of One Million Dollars ($1,000,000).
c. Workers' Compensation Insurance. Workers' Compensation and Employer's
-------------------------------
Liability Insurance (as required by state law).
d. Boiler and Machinery Insurance. If Tenant installs any boiler, pressure
------------------------------
object, machinery, fire suppression system, supplemental air conditioning or
other mechanical equipment within the Premises, Tenant shall also obtain and
maintain at Tenant's expense, boiler and machinery insurance covering loss
arising from the use of such equipment.
e. Other Insurance. Any other form or forms of insurance as Tenant or
---------------
Landlord or any mortgagees of Landlord may reasonably require from time to time
in form, amounts and for insurance risks against which a prudent tenant would
protect itself.
All such policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies qualified to issue insurance in the
State of Utah and holding a General Policyholder's Rating of "A" and a Financial
Size Rating of "X" or better, as set forth in the most current issue of Best's
Key Rating Guide. Such insurance shall provide that it is primary insurance, and
not contributory with any other insurance in force for or on behalf of Landlord.
Within ten (10) days after the execution of this Lease, Tenant shall deliver to
Landlord copies of policies or certificates and endorsements evidencing the
existence of the amounts and forms of coverage satisfactory to Landlord. No such
policy shall be cancelable or reducible in coverage except after thirty (30)
days prior written notice to Landlord. Tenant shall, at least thirty (30) days
prior to the expiration of such policies, furnish Landlord with renewals or
"binders" thereof, or upon five (5) days written notice to Tenant, Landlord may
order such insurance and charge the cost thereof to Tenant as additional rent,
if Tenant fails to so notify Landlord. If Landlord obtains any insurance that is
the responsibility of Tenant under this Section 16, Landlord shall deliver to
----------
Tenant a written statement setting forth the cost of any such insurance and
showing in reasonable detail the manner in which it has been computed.
f. Landlord's Insurance. Throughout the term of this Lease, Landlord shall
--------------------
maintain with respect to the Building commercial general liability insurance and
"all risk" property insurance, with commercially reasonable coverage amounts.
Landlord further covenants that its insurance coverage shall be consistent with
the coverage carried by owners of buildings of comparable size, type and quality
in Salt Lake City, Utah and surrounding areas.
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17. DAMAGE OR DESTRUCTION. If the Building and/or the Premises are damaged by
fire or other perils covered by insurance carried by Landlord, Landlord shall
have the following rights and obligations:
a. Repair and Restoration.
----------------------
(1) If the Building and/or the Premises are damaged or destroyed by
any such peril, to the extent the cost to repair exceeds twenty-five
percent (25%) of the then full replacement value thereof or the damage
thereto is such that the Building and/or the Premises cannot reasonably be
repaired, reconstructed and restored within six (6) months from the date of
such damage or destruction, Landlord shall, at its sole option, as soon as
reasonably possible thereafter, either (i) commence or cause the
commencement of the repair, reconstruction and restoration of the Building
and/or the Premises and prosecute or cause the same to be prosecuted
diligently to completion, in which event this Lease shall remain in full
force and effect; or (ii) within sixty (60) days after such damage or
destruction, elect not to so repair, reconstruct or restore the Building
and/or the Premises, in which event this Lease shall terminate. In either
event, Landlord shall give Tenant written notice of its intention within
said sixty (60) day period. If Landlord elects not to restore the Building
and/or the Premises, this Lease shall be deemed to have terminated as of
the date of such damage or destruction.
(2) If the Building and/or the Premises are partially damaged or
destroyed by any such peril, to the extent the cost to repair is twenty-
five percent (25%) or less of the then full replacement value thereof, and
if the damage thereto is such that the Building and/or the Premises
reasonably may be repaired, reconstructed or restored within a period of
six (6) months from the date of such damage or destruction, then Landlord
shall commence or cause the commencement of and diligently complete or
cause the completion of the work of repair, reconstruction and restoration
of the Building and/or the Premises and this Lease shall continue in full
force and effect.
b. Uninsured Casualties. If damage or destruction of the Building and/or
--------------------
the Premises is due to any cause not covered by collectible insurance carried by
Landlord at the time of such damage or destruction, Landlord may elect to
terminate this Lease. If the repairing or restoring of the damage is delayed or
prevented for longer than six (6) months after the occurrence of such damage or
destruction by reason of acts of God, war, governmental restrictions, inability
to procure the necessary labor or materials, or other cause beyond the control
of Landlord may elect to be relieved of its obligation to make such repairs or
restoration and terminate this Lease. Further, Landlord shall not have any
obligation to repair, reconstruct or restore the Premises and may terminate this
Lease when the damage resulting from any casualty covered under this Section 17
----------
occurs during the last twelve (12) months of the Term to such an extent that
more than thirty percent (30%) of the floor area of the Premises is rendered
untenantable for a period of more than sixty (60) days.
c. Tenant's Termination Right. If the work of repair, reconstruction and
--------------------------
restoration in connection with damage or destruction of the Building and/or
Premises initially affects more than thirty percent (30%) of the floor area of
the Premises and shall require a period longer than nine (9) months to complete,
then Tenant may elect to terminate this Lease, provided that Tenant shall give
written notice to Landlord of its intention within sixty (60) days after the
date it is advised of such repair period.
14
<PAGE>
d. Termination of Lease. Upon any termination of this Lease under any of
--------------------
the provisions of this Section 17, Landlord and Tenant shall each be released
----------
without further obligation to the other from the date possession of the Premises
is surrendered to Landlord or such other date as is mutually agreed upon by
Landlord and Tenant except for payments or other obligations which have
theretofore accrued and are then unpaid or unperformed.
e. Base Rent Abatement. In the event of repair, reconstruction and
-------------------
restoration by or through Landlord as herein provided, the Rent payable under
this Lease shall be abated proportionately to the degree to which Tenant's use
of the Premises is impaired during the period of such repair, reconstruction or
restoration (i.e. Tenant cannot use and does not use the Premises for its
business operations). Tenant shall not be entitled to any compensation or
damages for loss of the use of the whole or any part of the Premises and/or any
inconvenience or annoyance occasioned by such damage, repair, reconstruction or
restoration, nor shall Tenant be entitled to any insurance proceeds, including
those in excess of the amount required by Landlord for such repair,
reconstruction or restoration. Tenant shall not be released from any of its
obligations under this Lease due to damage or destruction of the Building and/or
the Premises except to the extent and upon the conditions expressly stated in
this Section 17.
----------
f. Extent of Repair Obligation. If Landlord is obligated to or elects to
---------------------------
repair or restore as herein provided, Landlord shall be obligated to make repair
or restoration only of those portions of the Building and the Premises which
were originally provided at Landlord's expense, and the repair and restoration
of items not provided at Landlord's expense shall be the obligation of Tenant.
18. WAIVER OF SUBROGATION. Whether any loss or damage to or within the Building
and/or the Premises is due to the negligence of either of the parties hereto,
their agents or employees, or any other cause, Landlord and Tenant do each
herewith and hereby release and relieve the other from responsibility for, and
waive their entire claim of recovery, for (a) any loss or damage to the real or
personal property of the other located anywhere in the Building and including
the Building itself, arising out of or incident to the occurrence of any of the
perils which are covered by the fire insurance policy, with extended coverage
endorsement, in common use in Salt Lake City, Utah; or (b) loss resulting from
business interruption at the Premises, arising out of or incident to the
occurrence of any of the perils which are covered by the business interruption
insurance policy in common use in Salt Lake City, Utah. To the extent that such
risks under (a) and (b) are, in fact, covered by insurance, each party shall
cause its insurance carriers to consent to such waiver and to waive all rights
of subrogation against the other party. Notwithstanding the foregoing, no such
release shall be effective unless the aforesaid insurance policy or policies
shall expressly permit such a release or contain a waiver of the carrier's right
to be subrogated.
19. ASSIGNMENT OR SUBLETTING.
a. Landlord's Consent. Without the express written consent of Landlord,
------------------
Tenant shall not directly or indirectly, voluntarily or by operation of law,
sell, assign, encumber, pledge, or otherwise transfer or hypothecate all of its
interest in or rights with respect to the Premises (collectively, "Assignment"),
or permit all or any portion of the Premises to be occupied by anyone other than
Tenant or sublet all or any portion of the Premises or transfer a portion of its
interest in or rights with respect to the Premises (collectively, "Sublease").
Notwithstanding anything in this Section 19 to the contrary, Tenant (but not any
----------
of its permitted successors or assigns) shall have the right, without obtaining
Landlord's consent, to enter into (i) an
15
<PAGE>
Assignment or Sublease of all or a portion of the Premises with an Affiliate of
Tenant, on the condition that Tenant delivers to Landlord fifteen (15) days
prior written notice containing the name of the Affiliate and the manner in
which it is affiliated with Tenant, the most recent audited financial statements
of the Affiliate, and the commencement and termination dates of the Sublease or
Assignment, or (ii) an Assignment of all of the Premises with an entity
resulting directly from a merger or consolidation with Tenant or an entity
purchasing or succeeding to substantially all of the assets of Tenant on the
condition that (1) Tenant delivers to Landlord fifteen (15) days prior written
notice containing the name of the proposed assignee, the commencement and
termination dates of the Assignment, together with the most recent financial
statement or other equivalent financial information reasonably available to
Tenant concerning the proposed assignee, and (2) the net worth and
creditworthiness of the proposed assignee is at least comparable to that of
Tenant (a "Merged Entity"). For purposes of this Section 19, the term
----------
"Affiliate" shall mean a corporation or entity which controls, is controlled by,
or is under common control with Tenant, that has a net worth equivalent or
greater than Tenant's, as reasonably determined by Landlord, based on its review
of the financial statements of the such corporation or entity.
b. Notice to Landlord. If Tenant desires to enter into an Assignment or a
------------------
Sublease, Tenant shall give notice to Landlord of its intention to do so (the
"Transfer Notice"), containing (i) the name of the proposed assignee or
subtenant (collectively, "Transferee"), (ii) the nature of the proposed
Transferee's business to be carried on in the Premises, (iii) the material terms
of the proposed Assignment or Sublease, including, without limitation, the
commencement and expiration dates thereof and the rent payable thereunder, (iv)
the portion of the Premises proposed to be subleased (the "Transfer Space"), and
(v) the most recent financial statement or other equivalent financial
information reasonably available to Tenant concerning the proposed Transferee.
Within ten (10) days after Landlord's receipt of the Transfer Notice, Landlord
shall, by notice to Tenant, elect to (1) terminate this Lease as to the Transfer
Space, with a proportionate reduction in Base Rent and Tenant's Proportionate
Share of Operating Costs, effective upon the date the proposed Sublease or
Assignment would actually have commenced (determined by taking into account all
relevant factors), or (2) consent to the Sublease or Assignment, or (i)
disapprove the Sublease or Assignment; provided, however, that, if Landlord does
not make an election under (1) above, Landlord agrees not to unreasonably
withhold its consent to the Sublease or Assignment. Landlord's consent shall not
be deemed to have been unreasonably withheld if the proposed sublessee or
assignee is a new concern with no previous business history or if the proposed
sublessee or assignee intends to use the Premises (x) for executive suites or
any other use inconsistent with Section 7 or the operation of a first-class
---------
office building or (y) in a manner which would increase the use of, or the
possibility of disturbance of, Hazardous Substances on the Property. Landlord's
failure to make such election within fifteen (15) days after Landlord's receipt
of the Transfer Notice shall be deemed to be Landlord's disapproval of the
proposed Sublease or Assignment.
16
<PAGE>
c. Permitted Transfers. If Landlord consents to any Sublease or
-------------------
Assignment as set forth in Section 19.b:
------------
(1) Tenant may thereafter, within ninety (90) days after Landlord's
consent, enter into such Assignment or Sublease, but only with the party
and upon substantially the same terms as set forth in the Transfer Notice,
and Tenant shall promptly send to Landlord a copy of the fully executed
Assignment or Sublease;
(2) In the case of a Sublease, Tenant shall pay to Landlord monthly,
together with monthly installments of rent hereunder, fifty percent (50%)
of any sums payable to Tenant in connection with such Sublease in excess of
the proportionate amount (on a rentable square footage basis) of Base Rent
payable by Tenant under this Lease for the space covered by such Sublease
less any actual and reasonable expenses incurred by Tenant in connection
----
with such subleasing, such as brokers' fees, improvement costs and
advertising costs, but excluding down time;
(3) In the case of an Assignment, Tenant shall pay to Landlord, as
and when received fifty percent (50%), any transfer or assignment fee,
purchase price or other consideration received by Tenant in connection with
the Assignment attributable to the value of this Lease;
(4) Any Sublease or Assignment shall be subject to all of the
provisions of this Lease, and Landlord's consent to any Sublease or
Assignment shall not be construed as a consent to any terms thereof which
conflict with any of the provisions of this Lease except to the extent that
Landlord specifically agrees in writing to be bound by such conflicting
terms; and
(5) No Transferee, other than an Affiliate or Merged Entity, shall
have the right to exercise any right or option under this Lease to lease
additional space, extend the Term, or terminate this Lease under any
circumstance.
d. Continuing Liability. Tenant shall not be relieved of any obligation
--------------------
to be performed by Tenant under this Lease, including the obligation to obtain
Landlord's consent to any other Assignment or Sublease, regardless of whether
Landlord consented to any Assignment or Sublease. Any Assignment or Sublease
that fails to comply with this Section 19 shall be void and, at the option of
----------
Landlord, shall constitute an Event of Default by Tenant under this Lease. The
acceptance of Base Rent or other sums by Landlord from a proposed Transferee
shall not constitute Landlord's consent to such Assignment or Sublease.
e. Assumption by Transferee. Each Transferee, including an Affiliate or
------------------------
Merged Entity, under an Assignment shall assume all obligations of Tenant under
this Lease and shall be and remain liable jointly and severally with Tenant for
the payment of Base Rent, additional rent and other charges, and for the
performance of all other provisions of this Lease. Each Transferee, including an
Affiliate or Merged Entity, under a Sublease, other than Landlord, shall be
subject to this Lease. No Assignment shall be binding on Landlord unless
Landlord shall receive a counterpart of the Assignment and an instrument in
recordable form that contains a covenant of assumption by the Transferee,
including an Affiliate or Merged Entity, reasonably satisfactory in substance
and form to Landlord and consistent with the requirements of this Section 19 but
----------
the failure of the Transferee to execute such instrument shall not release the
Transferee from its liability as set forth above. Tenant shall reimburse
Landlord, within fifteen
17
<PAGE>
(15) days after Tenant's receipt of an invoice therefor, for any costs that
Landlord may actually and reasonably incur in connection with any proposed
Assignment or Sublease, including Landlord's reasonable attorneys' fees and the
costs of investigating the acceptability of any proposed Transferee.
f. Default: Waiver. Any Assignment or Sublease in violation of this
---------------
Section 19 shall be void and, at the option of Landlord, shall constitute a
- ----------
material default by Tenant under this Lease. The acceptance of rent or
additional charges by Landlord from a purported assignee or sublessee shall not
constitute a waiver by Landlord of the provisions of this Section 19.
----------
g. Change in Control. Any sale or other transfer, including by
-----------------
consolidation, merger or reorganization, of a majority of the voting stock of
Tenant, if Tenant is a corporation (other than a sale of the majority of the
stock of a publicly traded company in normal open market transactions), or any
sale or other transfer of a majority of or a controlling interest in the
partnership interests in Tenant, if Tenant is a partnership, or any sale or
other transfer of a majority of or a controlling interest in the membership
interests in Tenant, if Tenant is a limited liability company, or any sale or
other transfer of a majority of the beneficial interests in Tenant or of any
controlling interest in Tenant, if Tenant is a trust or other type of entity,
shall be an Assignment for purposes of this Section 19. As used in this Section
---------- -------
19, the term "Tenant" shall also mean any entity which has guaranteed Tenant's
- --
obligations under this Lease or any entity which directly or indirectly owns a
majority of the voting stock or partnership or limited liability company or
other beneficial interest of Tenant, and the prohibition hereof shall be
applicable to any sales or transfers of the stock or partnership or limited
liability company or other beneficial interest of said guarantor or majority
owner.
20. Subordination. Tenant agrees, subject to the terms of this Section 20, that
----------
this Lease is and shall be subordinate to any mortgage, deed of trust, ground
lease, underlying lease or other prior lien (hereinafter "Prior Lien") that may
heretofore or hereafter be placed upon the Property and the Building, and all
renewals, replacements and extensions thereof. If any Prior Lien holder wishes
to have this Lease prior to its Prior Lien, then and in such event, upon such
Prior Lien holder's notifying Tenant to that effect, this Lease shall be deemed
prior to the Prior Lien. If any ground lease or underlying lease terminates for
any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the tenant of the successor in interest to
Landlord, provided that such successor in interest recognizes the interest of
Tenant under this Lease and agrees not to disturb Tenant's rights hereunder if
no default under this Lease then exists. Within fifteen (15) days of
presentation, Tenant shall execute any documents which any such Prior Lien
holder may require to effectuate the provisions of this Section 20 provided that
----------
such documents are in commercially reasonable and generally customary form..
Landlord agrees, notwithstanding and without modification of the foregoing, that
it will use commercially reasonable efforts to obtain from the existing lender
for the Building the lender's standard form of subordination, non-disturbance
and attornment agreement. Tenant shall pay the costs and expenses incurred by
Landlord to obtain for Tenant this agreement from the lender, including any
processing fees or costs charged by the lender.
21. Estoppel Certificate. Tenant will, upon ten (10) days prior request by
Landlord, execute, acknowledge and deliver to Landlord a statement in writing
executed by Tenant; substantially in the form of Exhibit D, attached hereto,
---------
certifying, the date of this Lease, that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that this Lease is in
full force and effect as modified, and setting forth such modifications) and the
date to
18
<PAGE>
which the Base Rent and additional rent and other sums payable hereunder have
been paid, and either stating that to the knowledge of Tenant no default exists
hereunder on the part of Landlord or Tenant or specifying each such default of
which Tenant may have knowledge and such other matters as may be reasonably
requested by Landlord. The parties agree and intend that any such statement by
Tenant may be relied upon by any prospective purchaser or mortgagee of the
Building. Tenant's failure to timely deliver such a statement shall be deemed to
be an acknowledgment by Tenant that this Lease is in full force and effect
without modification (except as set forth by Landlord), there are no uncured
defaults under this Lease by Landlord and no more than one monthly installment
of Base Rent and additional rent and other sums payable hereunder have been paid
in advance.
22. SERVICES. Landlord shall maintain the public and common areas of the
Property and the Building, such as lobbies, stairs, corridors and restrooms, in
good order and condition except for damage provided, however, to the extent
damage results or repairs are required due to the negligence or willful
misconduct of Tenant, its agents, employees, or contractors, such repairs shall
be made at Tenant's sole cost and expense. Landlord shall furnish the Premises
with electricity for lighting and operation of low power usage office machines
and elevator service at all times during the Term. Landlord shall furnish the
Premises with heating or normal office air conditioning between the hours of
7:00 a.m. and 6:00 p.m., Monday through Friday, and 8:00 a.m. and 1:00 p.m. on
Saturdays, except for legal holidays. Air conditioning units and electricity
therefor or special air conditioning requirements, such as for any computer
centers, and after-hours heating and air conditioning shall be at Tenant's
expense (the current charge for after hours heating and air conditioning is
$15.00 per hour, which is subject to change at Landlord's sole discretion).
Landlord shall also provide lighting replacement for Landlord-furnished
lighting, toilet room supplies, window washing with reasonable frequency and
customary janitorial service. Landlord shall not be liable to Tenant for any
loss or damage caused by or resulting from any variation, interruption or
failure of said services due to any cause whatsoever; and no temporary
interruption or failure of such services incident to the making of repairs,
Alterations or improvements due to accident or strike or conditions or events
not under Landlord's control shall be deemed an eviction of Tenant or relieve
Tenant from any of Tenant's obligations hereunder.
23. SIGNS AND ADVERTISING. Landlord will provide Tenant, at Landlord's sole
cost and expense, with Building standard signage (as such standard is
established from time to time by Landlord) on the Building directory in the
lobby of the Building. Tenant shall not erect or install or otherwise utilize
signs, lights, symbols, canopies, awnings, window coverings or other advertising
or decorative matter (collectively, "Signs") on the windows, walls and exterior
doors or otherwise visible from the exterior of the Premises without first (a)
submitting its plans to Landlord and obtaining Landlord's written approval
thereof and (b) obtaining any required approval of any applicable governmental
authority. All Signs approved by Landlord shall be professionally designed and
constructed in a first-class workmanlike manner. Landlord shall have the right
to promulgate from time to time additional reasonable rules, regulations and
policies relating to the style and type of said advertising and decorative
matter which may be used by any occupant, including Tenant, in the Building, and
may change or amend such rules and regulations from time to time as in its
discretion it deems advisable. Tenant agrees to abide by such rules, regulations
and policies. At the expiration or earlier termination of this Lease, all such
signs, lights, symbols, canopies, awnings or other advertising or decorative
matter attached to or painted by Tenant upon the Premises, whether on the
exterior or interior thereof, shall be removed by Tenant at its own expense, and
Tenant shall repair any damage or injury to
19
<PAGE>
the Premises, and correct any unsightly condition, caused by the maintenance and
removal thereof.
24. PARKING. Subject to the rules and regulations of Salt Lake City, Tenant
shall have the right to rent the Parking Spaces specified in Paragraph 21 of the
------------
Basic Lease Information during the term of the Lease at the prevailing market
rent, as established from time to time by Landlord, which is currently equal to
the Current Parking Space Rent specified in Paragraph 22 of the Basic lease
------------
Information. Tenant's parking space rent shall not be adjusted more than once
per calendar year during the Initial Term. Tenant's use of the Parking Spaces is
subject to the rules and regulations applicable to the parking areas, including,
without limitation, hours of operation and the prohibition on parking in spaces
assigned to persons other than Tenant. Such rent shall be paid at the same times
as the Base Rent and shall constitute additional rent under this Lease. To the
extent any of the Parking Spaces are reserved spaces, Landlord shall have the
right, upon three (3) days written notice, to relocate such Parking Spaces to
other spaces in the parking areas. Tenant, upon not less than thirty (30) days
prior written notice to Landlord, shall have the right to reduce the number
and/or types of parking spaces to be provided to Tenant. It is further
acknowledged that the location of the off-site parking spaces may be designated
by Landlord from time to time so long as they are within the 2-block radius
specified.
25. RULES AND REGULATIONS. Tenant agrees to observe and be bound by the Rules
and Regulations applicable to the Building and the Property, a copy of which is
attached hereto as Exhibit E. Landlord reserves the right to amend said Rules
---------
and Regulations as Landlord in its judgment may from time to time deem to be
necessary or desirable for the safety, care and cleanliness of the Premises, the
Building or the Property and the preservation of good order therein, and Tenant
agrees to comply therewith. To the extent the Rules and Regulations conflict
with this Lease, this Lease shall control.
26. TIME. Time is of the essence of this Lease.
27. QUIET ENJOYMENT. Landlord covenants to control its activities and personnel
such that if and so long as Tenant pays the rent and performs the covenants
contained in this Lease, Tenant shall hold and enjoy the Premises peaceably and
quietly, subject to the provisions of this Lease.
28. DEFAULTS AND REMEDIES.
a. Defaults. The occurrence of any one or more of the following events
--------
shall constitute a default hereunder by Tenant (each an "Event of Default"):
(1) The vacation or abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any
absence by Tenant from the Premises for ten (10) business days or longer
with no intent to continue business operations therein.
(2) The failure by Tenant to make any payment of Base Rent,
additional rent, other charges or any other payment required to be made by
Tenant hereunder, as and when due, where such failure shall continue for a
period of three (3) days after written notice thereof from Landlord to
Tenant; provided, however, that any such notice shall be
20
<PAGE>
in lieu of, and not in addition to, any notice required under Utah Code
Annotated sec. 78-36-3 regarding unlawful detainer actions.
(3) The failure by Tenant to observe or perform any of the express or
implied covenants or provisions of this Lease to be observed or performed
by Tenant, other than as specified in subsections 28.b(1) or 28.b(2) above,
------------------ ------
where such failure shall continue for a period of fifteen (15) days after
written notice thereof from Landlord to Tenant. Any such notice shall be in
lieu of, and not in addition to, any notice required under Utah Code
Annotated sec. 78-36-3 regarding unlawful detainer actions. If the nature
of Tenant's default (other than a default specified in subsections 28.b(1)
------------------
or 28.b(2) above) is such that more than ten (10) days are reasonably
------
required for its cure, then Tenant shall not be deemed to be in default if
Tenant shall commence such cure within said fifteen (15) day period and
thereafter diligently prosecute such cure to completion, and such
completion shall occur not later than ninety (90) days from the date of
such notice from Landlord.
(4) Any of the following: (i) The making by Tenant of any general
assignment for the benefit of creditors; (ii) the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant, the same is dismissed
within sixty (60) days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within sixty (60) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease where such
seizure is not discharged within sixty (60) days.
b. Remedies. If an Event of Default exists, in addition to any other
--------
remedies available to Landlord at law or in equity, Landlord shall have the
following rights and remedies:
(1) The right to terminate Tenant's right to possession of the
Premises and to present value (assuming an interest rate of eight percent
(8%) or such other amount prescribed by law, if any) of rents and other
charges due over the remainder of the Term as liquidated damages due from
Tenant to Landlord, less, the amount of rental loss for the same period
that the Tenant proves could be reasonably avoided;
(2) The right to continue this Lease in effect and to enforce all of
its rights and remedies under this Lease, including the right to recover
Base Rent, additional rent and other charges as they become due, for so
long as Landlord does not terminate Tenant's right to possession. Acts of
maintenance or preservation, efforts to relet the Premises or the
appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's
right to possession;
(3) The right to enter the Premises and remove therefrom all persons
and property, store such property in a public warehouse or elsewhere at the
cost of and for the account of Tenant, and sell such property and apply the
proceeds therefrom pursuant to applicable Utah law;
21
<PAGE>
(4) The right to take steps necessary or appropriate to have a
receiver appointed for Tenant in order to take possession of the Premises
and apply any rental collected and exercise all other rights and remedies
granted to Landlord;
(5) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law; and
(6) If an Event of Default occurs prior to the expiration of the
Initial Term, the right to recover the full amount of the unamortized
portion of the Tenant Improvement Allowance and any free rent granted by
Landlord.
c. Reentry. If an Event of Default exists, Landlord shall also have the
-------
right, with or without terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. Neither the re-entry or taking possession of the Premises by Landlord
pursuant to this Section 28.c, nor the service by Landlord of any notice
------------
pursuant to the forcible entry and detainer statutes of the State of Utah and
the surrender of the Premises pursuant to such notice, shall be construed as an
election to terminate this Lease unless a written notice of such intention is
given to Tenant or unless the termination thereof is decreed by a court of
competent jurisdiction.
d. Remedies Cumulative: Waiver. All rights, options and remedies of
---------------------------
Landlord contained in this Lease or provided by law or in equity shall be
construed and held to be cumulative, and no one of them shall be exclusive of
the other except to the extent the remedies conflict with one another directly
and cannot be exercised together at the same time. No waiver of any default
hereunder shall be implied from any acceptance by Landlord of any Base Rent,
additional rent or other charges due hereunder or any omission by Landlord to
take any action on account of such default, and no express waiver shall affect
any default other than as specified in said waiver. The consent or approval of
Landlord to or of any act by Tenant requiring Landlord's consent or approval
shall not be deemed to waive or render unnecessary Landlord's consent or
approval to or of any subsequent similar acts by Tenant.
29. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer or transfers
of Landlord's interest in the Property or the Building, other than a transfer
for security purposes only, Tenant agrees that Landlord shall be automatically
relieved of any and all obligations and liabilities on the part of Landlord
accruing from and after the date of such transfer and Tenant agrees to attorn to
the transferee provided that such transferee has assumed Landlord's obligations
under this Lease effective as of the date of any such transfer.
30. RIGHT TO PERFORM. If Tenant shall fail to pay any sum of money, other than
Base Rent required to be paid by it hereunder, or shall fail to perform any
other act on its part to be performed hereunder, and such failure shall continue
for ten (10) business days after written notice thereof by Landlord, Landlord
may, but shall not be obligated so to do, and without waiving or releasing
Tenant from any obligations of Tenant, make any such payment or perform any such
other act on Tenant's part to be made or performed as provided in this Lease.
Tenant shall reimburse Landlord for all costs incurred in connection with such
payment or performance immediately upon demand.
22
<PAGE>
31. Improvements.
a. Tenant Improvement Allowance. Landlord shall cause its contractor to
----------------------------
complete Landlord's Work, and the Tenant Improvement Allowance shall be used for
the payment of Construction Costs (as hereinafter defined), provided, however,
-------- -------
Landlord shall in no circumstances be obligated to expend more than $71,700 in
constructing such improvements (the "Tenant Improvement Allowance"). In order to
complete Landlord's Work, it is estimated that the actual cost of construction
will exceed the Tenant Improvement Allowance by $11,615.40 (the "Additional
Charges"), which sum Tenant shall deliver to Landlord upon execution of this
Lease. Tenant shall not receive any credit or other benefit for any unused
portion of the Tenant Improvement Allowance. Tenant shall pay or reimburse
Landlord within five (5) days after Landlord's request for any increased costs
in excess of the Tenant Improvement Allowance and Additional Charges
(collectively, "Excess Construction Costs") incurred by Landlord as a result of
(i) Tenant's changes to the Space Plan or the Final Plans, or any changes to the
work reflected in the bid attached hereto as Exhibit G, (ii) any failure by
---------
Tenant to pay Excess Construction Costs, (iii) any work performed by Tenant in
the Premises, or (iv) any other Tenant's Delay.
b. Plans and Drawings. Tenant and Landlord have approved the space plan
------------------
for the Premises (the "Space Plan"), attached hereto as Exhibit F and the
---------
Working Drawings attached hereto as Exhibit G. The Working Drawings as approved
---------
by Tenant are referred to as the "Final Plans". Landlord shall obtain all
permits and approvals and construct or modify the improvements to the Premises
in accordance with the Final Plans, in a first-class workmanlike manner, and
charge the Tenant Improvement Allowance for an amount equal to the costs
incurred by Landlord in constructing the improvements, including, without
limitation, Landlord's actual cost of the work performed and materials provided,
architectural fees, engineering fees, mechanical costs, structural costs,
electrical costs, construction management fees (which construction management
fees shall not exceed $1,792.50), permit fees, out-of-pocket expenses, and any
increased costs incurred by Landlord as a result of any changes to the Final
Plans requested by Tenant or any Tenant's Delay (collectively, "Construction
Costs").
c. Substantial Completion. Landlord shall substantially complete the
----------------------
improvements and deliver the Premises to Tenant on or before the Delivery
Deadline. Landlord shall use reasonable efforts to notify Tenant of the
projected date of substantial completion of the Premises at least fifteen (15)
days prior thereto.
32. Notices. All notices under this Lease shall be in writing to Landlord at
the same place rent payments are made (with a copy sent to Maier & Siebel, Wood
Island, Fourth Floor, 80 E. Sir Francis Drake Blvd., Larkspur, California 94939,
Attention: President), and to Tenant at the Premises and additional copies to
Bronner Corn, LLC, The Prudential Tower, 800 Boylston Street, Boston, MA 02199,
Attn: Meryl Beckingham, and to Goodwin Procter & Hoar LLP, Exchange Place,
Boston, MA, Attn: Jeffrey Hadden, P.C.., or such addresses as may hereafter be
designated by either party in writing. Any such notices shall be either sent by
certified mail, return receipt requested, in which case notice shall be deemed
delivered three business days after timely deposit, postage prepaid in the U.S.
Mail; sent by a nationally recognized overnight courier, in which case notice
shall be deemed delivered one business day after timely deposit with such
courier; or personally delivered, in which case notice shall be deemed delivered
upon receipt.
23
<PAGE>
33. Attorneys' Fees. If either party places the enforcement of this Lease or
any part hereof, or the collection of any Base Rent, additional rent or other
charges due or to become due hereunder, or recovery of the possession of the
Premises, in the hands of an attorney, or files suit upon the same, the non-
prevailing (or defaulting) party shall pay the other party's reasonable
attorneys' fees and court costs, including paralegal fees and any attorneys'
fees and court costs in connection with any appeals and any bankruptcy or
insolvency proceedings involving Tenant or this Lease. If Landlord is named as a
defendant in any suit brought against Tenant in connection with or arising out
of Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and
expenses in such suit, including its reasonable attorneys' fees. Any such
attorneys' fees and other expenses incurred by either party in enforcing a
judgment in its favor under this Lease shall be recoverable separately from and
in addition to any other amount included in such judgment, and such attorneys'
fees obligation is intended to be severable from the other provisions of this
Lease and to survive and not be merged into any such judgment.
34. Holding Over. If Tenant holds over after the expiration or earlier
termination of the Term without the express consent of Landlord, Tenant shall
become a tenant at sufferance only, at a rental rate equal to one hundred fifty
percent (150%) of the Base Rent, additional rent and other charges in effect
upon the date of such expiration (subject to adjustment as provided in Section 5
---------
hereof and prorated on a daily basis), and otherwise subject to the terms,
covenants and conditions herein specified, so far as applicable. Acceptance by
Landlord of rent after such expiration or earlier termination shall not result
in a renewal of this Lease. If Tenant fails to surrender the Premises upon the
expiration of this Lease despite demand to do so by Landlord, Tenant shall
indemnify, defend and hold Landlord harmless from all loss or liability,
including without limitation, any claim made by any succeeding tenant founded on
or resulting from such failure to surrender.
35. Surrender of Premises. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation hereof, shall not work a merger, and shall, at
the option of Landlord, operate as an assignment to it of any subleases or
subtenancies.
36. Non-Waiver. Neither the acceptance of rent nor any other act or omission of
Landlord at any time or times after the happening of any event authorizing the
cancellation or forfeiture of this Lease shall operate as a waiver of any past
or future violation, breach or failure to keep or perform any covenant,
agreement, term or condition hereof, or deprive Landlord of its right to cancel
or forfeit this Lease, upon the notice required by law, at any time that cause
for cancellation or forfeiture may exist, or be construed so as to at any future
time stop Landlord from promptly exercising any other option, right or remedy
that it may have under any term or provision of this Lease.
37. Mortgagee Protection. In the event of any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any beneficiary of a
deed of trust or mortgagee under a mortgage covering the Property or the
Building whose address shall have been furnished to Tenant, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default, including
time to obtain possession of the Property or the Building by power of sale or a
judicial foreclosure, if such should prove necessary to effect a cure.
38. Building Planning. If Landlord requires the Premises for use in conjunction
with another suite or other reasons connected with the Building planning
program, upon notifying Tenant in writing, Landlord shall have the right to move
Tenant to other similar space in the Building (which space shall have a similar
view, location and finishes as the Premises) at
24
<PAGE>
Landlord's sole cost and expense, including the cost of providing Tenant with
replacement business cards, brochures and stationery reflecting such change.
Landlord shall also pay the Tenant's actual costs of moving to the new space,
including the costs of rewiring and connecting Tenant's cabling (such as for
Tenant's computers and telephones). Tenant shall also be permitted to conduct
its move over a weekend. The terms and conditions of the original Lease shall
remain in full force and effect with respect to any new space, save and
excepting that a revised Exhibit A shall become part of this Lease and shall
---------
reflect the location of the new space. However, if the new space does not meet
with Tenant's approval, Tenant shall have the right to cancel this Lease upon
giving Landlord notice within ten (10) days of receipt of Landlord's
notification. Such cancellation shall not be effective for thirty (30) days
after such notice from Tenant and Landlord may, at its option, reinstate this
Lease by giving Tenant notice within five (5) days after Landlord's receipt of
notice from Tenant that Tenant may keep the original Premises.
39. Changes to the Property. Landlord reserves the right at any time to make
changes, alterations, reductions and additions to the Property other than the
Premises, including the construction of other buildings or improvements in the
Property, the leasing of space to restaurant uses, the building of additional
stories on any building, without any liability or responsibility to Tenant so
long as Tenant's rights to the Premises and reasonable access thereto is not
materially adversely affected. Landlord will not block ingress and egress to the
Premises.
40. Option to Terminate. Tenant (but not any permitted successor or assign)
shall have the right to terminate this Lease in its entirety, provided that
Tenant delivers a written notice of termination to Landlord prior to the Early
Termination Notice Date as specified in Paragraph 24 of the Basic Lease
------------
Information, which notice shall be irrevocable. The termination shall be
effective as of the later to occur of (a) the Early Termination Date as
specified in Paragraph 23 of the Basic Lease Information or (b) Landlord's
------------
receipt of the Termination Fee (as defined below) in good funds. If Tenant
elects to terminate this Lease hereunder, Tenant shall pay Landlord, in addition
to all sums payable for the period prior to such termination of the Lease, a fee
(the "Termination Fee") equal to the sum of (i) the unamortized cost of the
Improvements to the Premises provided or paid for by Landlord and not otherwise
reimbursed by Tenant, (ii) the unamortized leasing commissions paid or payable
by Landlord in connection with this Lease and (iii) two months of then current
rent, all of which costs and commissions shall be amortized on a straight-line
basis over the Term at an interest rate of twelve percent (12%) per annum. Upon
Landlord's determination of the aggregate cost of the improvements to the
Premises provided by Landlord and the leasing commissions payable by Landlord in
connection with this Lease, Landlord shall inform Tenant in writing of such
costs. Notwithstanding the foregoing, if Tenant is in default under this Lease
either at the time Tenant delivers the termination notice or at any time
thereafter prior to the effective date of the termination, Landlord shall have,
in addition to all of Landlord's other rights and remedies under this Lease, the
right to terminate Tenant's right to terminate this Lease hereunder and to
cancel unilaterally Tenant's exercise of its right to terminate this Lease
hereunder, in which event the Expiration Date of this Lease shall be and remain
the then scheduled Expiration Date.
41. General Provisions.
a. Entire Agreement. This Lease contains all of the agreements of the
----------------
parties, and there are no verbal or other agreements which modify or affect this
Lease. This Lease
25
<PAGE>
supersedes any and all prior agreements made or executed by or on behalf of the
parties hereto regarding the Premises.
b. Terms and Headings. The words "Landlord" and "Tenant" include the
------------------
plural as well as the singular, and words used in any gender include all
genders. The titles to sections of this Lease are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part
hereof.
c. Successors and Assigns. All of the covenants, agreements, terms and
----------------------
conditions contained in this Lease shall inure to and be binding upon Landlord
and Tenant and their respective successors in interest and assigns.
d. No Brokers. Each party represents and warrants to the other party
----------
that it has not engaged any broker, finder or other person, except for the
respective Broker (as defined in Paragraph 19 and Paragraph 20 of the Basic
------------ ------------
Lease Information) who would be entitled to any commission or fees in respect
of the negotiation, execution or delivery of this Lease and each party shall
indemnify, defend and hold harmless the other party against any loss, cost,
liability or expense incurred by such party as a result of any claim asserted
by any such broker, finder or other person, except for Tenant's Broker or
Landlord's Broker on the basis of any arrangements or agreements made or
alleged to have been made by or on behalf of such party. Landlord shall have
no obligation to pay Tenant's Broker any leasing commissions but Tenant's
Broker may be compensated by Landlord's Broker pursuant to the terms of a
separate written agreement between Landlord's Broker and Tenant's Broker. The
provisions of this section shall not apply to brokers with whom Landlord has
an express written broker agreement. Landlord shall be responsible for paying
all leasing commissions due Landlord's Broker in connection with this Lease.
e. Liability of Landlord. Landlord's obligations and liability to Tenant
---------------------
under this Lease shall be limited solely to Landlord's interest in the
Building, and neither Landlord nor any of the partners in Landlord, nor any
officer, director, shareholder or partner of or in Landlord or any partners in
Landlord shall have or incur any personal liability whatsoever with respect to
this Lease.
f. Severability. 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 the remaining provisions hereof shall nevertheless remain
in full force and effect.
g. Force Majeure. Except as may be otherwise specifically provided
-------------
herein, time periods for Landlord's or Tenant's performance under any provisions
of this Lease not involving the payment of money shall be extended for periods
of time during which the non-performing party's performance is prevented due to
circumstances beyond the party's control, including, without limitation,
strikes, embargoes, governmental regulations, acts of God, war or other strife.
Tenant hereby waives and releases its right to terminate this Lease under any
law, statute or ordinance now or hereafter in effect.
h. [Intentionally omitted]
i. Examination of Lease. Submission of this instrument for examination
--------------------
or signature by Tenant does not constitute a reservation of or option to
lease, and it is not effective as a lease or otherwise until execution by and
delivery to both Landlord and Tenant.
26
<PAGE>
j. Modification for Lender. If, in connection with Landlord's obtaining
-----------------------
construction, interim or permanent financing for the Building, the lender shall
request reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or materially adversely affect the leasehold interest hereby created
or Tenant's rights hereunder.
k. Recording. Neither Landlord nor Tenant shall-record this Lease nor a
---------
short form memorandum hereof without the consent of the other.
l. Applicable Laws. This Lease shall be governed by and construed
---------------
pursuant to the laws of the State of Utah.
m. Survival of Obligations. All provisions of this Lease which require
------------------------
the payment of money or the delivery of property after the termination of this
Lease or require Landlord or Tenant to indemnify, defend or hold the other party
harmless shall survive the termination of this Lease.
n. Appendices and Riders. The following appendices and riders are
---------------------
attached hereto and by this reference made a part of this Lease:
Exhibit A Floor Plan of the Premises
---------
Exhibit B Description of the Real Property
---------
Exhibit C Confirmation of Lease Term
---------
Exhibit D Form of Tenant Estoppel Certificate
---------
Exhibit E Rules and Regulations
---------
Exhibit F Space Plan
---------
Exhibit G Working Drawings and Tenant Improvement Work
---------
o. Authority. Each individual executing this Lease represents that it has
---------
all requisite power and authority to execute and deliver this Lease on behalf of
the entity for which it is signing, and by his or her signature, will bind such
party to the terms of this Lease.
p. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first above written.
LANDLORD: M & S BALANCED PROPERTY FUND, L.P.
a California limited partnership
By: MSBMS, a California corporation,
General Partner
By: /s/ [ILLEGIBLE]
------------------------------------
Its: President
------------------------------------
Date: Sept 20 , 1999
------------
TENANT: BRONNER COM, LLC,
a Delaware limited I liability company
By: /s/ [ILLEGIBLE]
-------------------------------------------
Its: EVP
-------------------------------------------
By: /s/ M.K. Beckingham
-------------------------------------------
Its: EVP & CFO
-------------------------------------------
Date: 8/23/99 , 1999
------------
28
<PAGE>
EXHIBIT A
Floor Plan Of The Premises
18th Floor Plan
June 24, 1999
136 East South Temple
[CHART HERE]
A-1
<PAGE>
EXHIBIT B
Description Of The Real Property
Legal Description
All that certain real property located at 136 East South Temple Street, in
the City of Salt Lake City. County of Salt Lake, State of Utah, described as
follows:
Beginning at the Northeast corner of Lot 6, Block 74, Plat "A" Salt Lake City
Survey, and running thence South 166 feet; thence West 82.5 feet; thence North 1
foot; thence West 82.5 feet; thence North 80.5 feet; thence East 7 feet; thence
North 84.5 feet; thence East 158 feet to the point of beginning.
B-1
<PAGE>
EXHIBIT C
Confirmation Of Lease Term
This Confirmation is made as of _________________,199_,between M & S
BALANCED PROPERTY FUND, L.P., a California limited partnership ("Landlord") and
BRONNER COM, LLC, a Delaware limited liability company ("Tenant").
Landlord and Tenant have entered into that certain 136 East South Temple
Lease (the "Lease") dated _______________,1999, in which Landlord leased to
Tenant and Tenant leased from Landlord certain premises consisting of
approximately 3,585 rentable square feet, situated on the 18th floor of the
office building located at 136 East South Temple, Salt Lake City, Utah.
Pursuant to Section 2 of the Lease, Landlord and Tenant hereby confirm the
---------
Commencement Date and Expiration Date of the term of the Lease as follows:
______________________ is the Commencement Date of the term of the Lease.
______________________ is the Expiration Date of the term of the Lease.
LANDLORD: M & S BALANCED PROPERTY FUND, L.P.,
a California limited partnership
By: MSBMS, a California corporation,
GENERAL PARTNER
By: ________________________________
Its:________________________________
TENANT: BRONNER COM, LLC,
a Delaware limited liability company
By: _____________________________________
Its:_____________________________________
By: _____________________________________
Its:_____________________________________
C-1
<PAGE>
EXHIBIT D
Form Of Tenant Estoppel Certificate
TENANT ESTOPPEL CERTIFICATE
---------------------------
Tenant: Bronner Com, LLC, a Delaware limited liability company
Premises Address: 136 East South Temple, Salt Lake City, Utah (the "Property")
Suite: ______ Area: 3,585 Sq. Ft. (Rentable)
Date of Lease: August 23, 1999
Date(s) of Lease Amendment(s): _________________________________________
Commencement Date: _____________________________________________________
Expiration Date: _______________________________________________________
Current Base Monthly Rental: $__________________________________________
Base Monthly Rental Increases: _________________________________________
Operating Expense and Tax Base Year(s): $_______________________________
Percentage Share of Operating Expenses and Taxes: __________%
Current Monthly Payments of Operating Expenses and Taxes: $_____________
Security Deposit: ______________________________________________________
Guarantor: None
The undersigned, as Tenant under the Lease of the above-referenced premises
("Premises") executed by M&S Balanced Property Fund, L.P. ("Landlord"), as
Landlord, and Tenant on the above-referenced date, does hereby represent,
certify and covenant to ___________________ ("Buyer") ("Lender"), and its
assignees, as follows:
1. Lease. The copy of the Lease, including all addenda and amendments thereto,
-----
attached hereto as Exhibit A is a true and correct copy of the Lease which is in
------- -
full force and effect and which has not been further amended, supplemented or
changed by letter agreement or otherwise.
2. Completion of Premises / No Disputes. Tenant has accepted possession of all
------------------------------------
of the premises and all conditions to be satisfied by Landlord under the Lease
have been satisfied pursuant to the terms of the Lease, including but not
limited to, completion of construction of any required improvements to the
Premises except those listed below.
_________________________________________________________________________
_________________________________________________________________________
3. No Defaults / Claims. Neither Tenant nor Landlord is in default under any
--------------------
terms of the Lease nor has any event occurred which with the passage of time
(after notice, if any, required by the Lease) would become an event of default
under the Lease. Tenant has no disputes, claims, counterclaims, defenses or
setoffs against Landlord or liens against the Property arising
D-1
<PAGE>
from the Lease. Tenant is not entitled to any concessions, rebate, allowance or
free rent for any period after this certification, not is Landlord obligated to
construct or install any additional improvements in the Premises except those
listed below
_________________________________________________________________________
_________________________________________________________________________
4. No Advance Payments: Security Deposit. No rent or other amount payable
-------------------------------------
under the Lease has been paid in advance by Tenant except the current month's
rent. Landlord has no obligation to segregate the security deposit (if any) or
to pay interest thereon.
5. No Extension, Purchase or Termination Rights. Tenant has no option and no
--------------------------------------------
right of first refusal to purchase the Property or any interest therein and no
right to cancel or terminate the Lease or extend the term of the Lease.
6. No Sublease / Assignment. Tenant has not entered in any sublease,
------------------------
assignment or other agreement transferring any of its interest in the Lease or
the Premises.
7. No Notice. Tenant has not received notice of any assignment, hypothecation,
---------
mortgage, or pledge of Landlord's interest in the Lease or the rents or other
amounts payable thereunder, nor any violation of any federal, state, county or
municipal laws, regulations or orders related to the use or condition of the
Premises or the Property except those listed below:
_________________________________________________________________________
_________________________________________________________________________
8. Hazardous Materials. No Hazardous Material has been used, treated, stored
-------------------
or disposed of on the Premises by Tenant. Tenant does not have any permits or
identification numbers issued by the United States Environmental Protection
Agency or by any state, county or municipal agencies with respect to its
operations on the Premises, except those listed below. For the purposes hereof,
-------------------------
the term "Hazardous Material" shall mean any substance, chemical, waste or other
material which is listed, defined or otherwise identified as "hazardous" or
"toxic" under any federal, state, local or administrative agency ordinance or
law or any regulation, order, rule or requirement adopted thereunder, as well as
any petroleum, petroleum product or by-product, crude oil, natural gas liquids,
liquefied natural gas, or synthetic gas usable as fuel, and "source", "special
nuclear" and "by-product" material as defined in the Atomic Energy Act of 1985,
42 U.S.C. (S) 3011 et seq.
_________________________________________________________________________
_________________________________________________________________________
9. No Modification of Lease. From the date of this Certificate through
------------------------
_____________, no modification or amendment to the Lease, forgiveness of payment
of rent or other amount due under the Lease, grant of extension or option, or
prepayment of rents more than one month in advance may be made except with the
written consent of Buyer.
10. Reliance: Buyers Rights. Tenant recognizes and acknowledges it is making
-----------------------
these representations to Buyer with the intent that Buyer or its assignees will
rely on Tenant's representations in connection with Buyer's acquisition of the
Property. All rent payments under the Lease shall continue to be paid to
Landlord in accordance with the terms of the Lease until Tenant is notified
otherwise in writing. As of the effective date of the purchase of the Property
by Buyer, Tenant will recognize Buyer as landlord under the Lease. Tenant
further acknowledges and agrees that Buyer and its successors and assigns
(including any entity
D-2
<PAGE>
holding a Deed of Trust at any time after the date of this Certificate) shall
have the right to rely on the information contained in this Certificate.
11. Binding. The provisions hereof shall be binding upon and inure to the
-------
benefit of the successors, assigns, personal representatives and heirs of Tenant
and Buyer.
12. Due Execution and Authorization. The undersigned, and the person(s)
-------------------------------
executing this Certificate on behalf of the undersigned, are duly authorized to
execute this Certificate on behalf of Tenant and to bind Tenant thereto.
TENANT:
BRONNER COM, LLC,
a Delaware limited liability company
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
D-3
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
1. Tenant shall have access to the Building and the Premises at all times
during the Term, except to the extent otherwise necessary for emergencies,
maintenance or repairs, which maintenance and repairs shall be accomplished with
as little interference to Tenant as commercially reasonable. 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, or such other hours as Landlord shall determine
from time to time, access to the Property and/or to the passageways, entrances,
exits, shipping areas, halls, corridors, elevators or stairways and other areas
in the Property may be restricted and access gained by use of a key to the
outside doors of the Property, or pursuant to such security procedures Landlord
may from time to time impose. All such areas, and all roofs, are not for use of
the general public, and Landlord shall in all cases retain the right to control
and prevent access thereto by all persons whose presence in the judgment of
Landlord shall be prejudicial to the safety, character, reputation and interests
of the Property and its tenants, provided, however, that nothing herein
contained shall be construed to prevent such access to persons with whom Tenant
deals in the normal course of Tenant's business unless such persons are engaged
in activities which are illegal or violate these Rules. No Tenant and no
employee or invitee of Tenant shall enter into areas reserved for the exclusive
use of Landlord, its employees or invitees. Tenant shall keep doors to corridors
and lobbies closed except when persons are entering or leaving.
2. Tenant shall not paint, display, inscribe, maintain or affix any sign,
placard, picture, advertisement, name, notice, lettering or direction on any
part of the outside or inside of the Property, or on any part of the inside of
the Premises which can be seen from the outside of the Premises, without the
prior consent of Landlord, and then only such name or names or matter and in
such color, size, style, character and material as may be first approved by
Landlord in writing. Landlord shall prescribe the suite number and
identification sign for the Premises (which shall be prepared and installed by
Landlord at Tenant's expense). Landlord reserves the right to remove at Tenant's
expense all matter not so installed or approved without notice to Tenant.
3. Tenant shall not in any manner use the name of the Property for any
purpose other than that of the business address of the Tenant, or use any
picture or likeness of the Property, in any letterheads, envelopes, circulars,
notices, advertisements, containers or wrapping material without Landlord's
express consent in writing.
4. Tenant shall not place anything or allow anything to be placed in the
Premises near the glass of any door, partition, wall or window which may be
unsightly from outside the Premises, and Tenant shall not place or permit to be
placed any article of any kind on any window ledge or on the exterior walls.
Blinds, shades, awnings or other forms of inside or outside window ventilators
or similar devices, shall not be placed in or about the outside windows in the
Premises except to the extent, if any, that the character, shape, color,
material and make thereof are first approved by Landlord.
5. Furniture, freight and other large or heavy articles, and all other
deliveries may be brought into the Property only at times and in the manner
designated by Landlord, and always at Tenant's sole responsibility and risk.
Landlord may impose reasonable charges for use of freight elevators after or
before normal business hours. All damage done to the Property
E-1
<PAGE>
by moving or maintaining such furniture, freight or articles shall be repaired
by Landlord at Tenant's expense. Landlord may inspect items brought into the
Property or Premises with respect to weight or dangerous nature. Landlord may
require that all furniture, equipment, cartons and similar articles removed from
the Premises or the Property be listed and a removal permit therefor first be
obtained from Landlord. Tenant shall not take or permit to be taken in or out of
other entrances or elevators of the Property any item normally taken, or which
Landlord otherwise reasonably requires to be taken, in or out through service
doors or on freight elevators. Tenant shall not allow anything to remain in or
obstruct in any way, any lobby, corridor, sidewalk, passageway, entrance, exit,
hall, stairway, shipping area, or other such area. Tenant shall move all
supplies, furniture and equipment as soon as received directly to the Premises,
and shall move all such items and waste (other than waste customarily removed by
Property employees) that are at any time being taken from the Premises directly
to the areas designated for disposal. Any handcarts used at the Property shall
have rubber wheels.
6. Tenant shall not overload any floor or part thereof in the Premises,
or Property, including any public corridors or elevators therein bringing in or
removing any large or heavy articles, and Landlord may direct and control the
location of safes and all other heavy articles and require supplementary
supports at Tenant's expense of such material and dimensions as Landlord may
deem necessary to properly distribute the weight.
7. Tenant shall not attach or permit to be attached additional locks or
similar devices to any door or window, change existing locks or the mechanism
thereof, or make or permit to be made any keys for any door other than those
provided by Landlord. If more than two keys for one lock are desired, Landlord
will provide them upon payment therefor by Tenant. Tenant, upon termination of
its tenancy, shall deliver to Landlord all keys of offices, rooms and toilet
rooms which have been furnished Tenant or which Tenant shall have had made, and
in the event of loss of any keys so furnished shall pay Landlord therefor.
8. If Tenant desires signal, communication, alarm or other utility or
similar service connections installed or changed, Tenant shall not install or
change the same without the prior approval of Landlord, and then only under
Landlord's direction at Tenant's expense. Tenant shall not install in the
Premises any equipment which requires more electric current than Landlord is
required to provide under this Lease, without Landlord's prior approval, and
Tenant shall ascertain from Landlord the maximum amount of load or demand for or
use of electrical current which can safely be permitted in the Premises, taking
into account the capacity of electric wiring in the Property and the Premises
and the needs of tenants of the Property, and shall not in any event connect a
greater load than such safe capacity.
9. Tenant shall not obtain for use upon the Premises janitor and other
similar services, except from Persons approved by Landlord. Any Person engaged
by Tenant to provide janitor or other services shall be subject to direction by
the manager or security personnel of the Property.
10. The toilet rooms, urinals, washbowls and other such 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 Tenant who, or whose employees or invitees, shall have
caused it. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and cleanliness
in and around the building.
E-2
<PAGE>
11. The janitorial closets, utility closets, telephone closets, broom
closets, electrical closets, storage closets, and other such closets, rooms and
areas shall be used only for the purposes and in the manner designated by
Landlord, and may not be used by tenants, or their contractors, agents,
employees, or other parties, without Landlord's prior written consent.
12. Landlord reserves the right to exclude or expel from the Property any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules. Tenant shall not at any time manufacture, sell, use or give away,
any spirituous, fermented, intoxicating or alcoholic liquors on the Premises,
nor permit any of the same to occur (except in connection with occasional social
or business events conducted in the Premises which do not violate any laws nor
bother or annoy any other tenants). Tenant shall not at any time sell, purchase
or give away food in any form by or to any of Tenant's agents or employees or
any other parties on the Premises, nor permit any of the same to occur (other
than in lunchrooms or kitchens for employees as may be permitted or installed by
Landlord, which does not violate any laws or bother or annoy any other tenant).
13. Tenant shall not make any room-to-room canvass to solicit business or
information or to distribute any article or material to or from other tenants or
occupants of the Property and shall not exhibit, sell or offer to sell, use,
rent or exchange any products or services in or from the Premises unless
ordinarily embraced within the Tenant's use of the Premises specified in the
Lease.
14. Tenant shall not waste electricity, water, heat or air conditioning or
other utilities or services, and agrees to cooperate fully with Landlord to
ensure the most effective and energy-efficient operation of the Property and
shall not allow the adjustment (except by Landlord's authorized Property
personnel) of any controls. Tenant shall keep corridor doors closed and shall
not open any windows, except that if the air circulation shall not be in
operation, windows which are openable may be opened with Landlord's consent. As
a condition to claiming any deficiency in the air-conditioning or ventilation
services provided by Landlord, Tenant shall close any blinds or drapes in the
Premises to prevent or minimize direct sunlight.
15. Tenant shall conduct no auction, fire or "going out of business" sale
or bankruptcy sale in or from the Premises, and such prohibition shall apply to
Tenant's creditors.
16. Tenant shall cooperate and comply with any reasonable safety or
security programs, including fire drills and air raid drills, and the
appointment of "fire wardens" developed by Landlord for the Property, or
required by law. Before leaving the Premises unattended, Tenant shall close and
securely lock all doors or other means of entry to the Premises and shut off all
lights and water faucets in the Premises (except heat to the extent necessary to
prevent the freezing or bursting of pipes).
17. Tenant will comply with all municipal, county, state, federal or other
governmental laws, statutes, codes, regulations and other requirements,
including without limitation, environmental health, safety and police
requirements and regulations respecting the Premises, now or hereinafter in
force, at its sole cost, and will not use the Premises for any immoral purposes.
18. Tenant shall not (i) carry on any business, activity or service except
those ordinarily embraced within the permitted use of the Premises specified in
the Lease and more
E-3
<PAGE>
particularly, but without limiting the generality of the foregoing, shall not
(ii) install or operate any internal combustion engine, boiler, machinery,
refrigerating, heating or air conditioning equipment in or about the Premises,
(iii) use the Premises for housing, lodging or sleeping purposes or for the
washing of clothes, (iv) place any radio or television antennae other than
inside of the Premises, (v) operate or permit to be operated any musical or
sound producing instrument or device which may be heard outside the Premises,
(vi) use any source of power other than electricity, (vii) operate any
electrical or other device from which may emanate electrical or other waves
which may interfere with or impair radio, television, microwave, or other
broadcasting or reception from or in the Property or elsewhere, (viii) bring or
permit any bicycle or- other vehicle, or dog (except in the company of a blind
person or except where specifically permitted) or other animal or bird in the
Property, (ix) make or permit objectionable noise or odor to emanate from the
Premises, (x) do anything in or about the Premises tending to create or maintain
a nuisance or do any act tending to injure the reputation of the Property, (xi)
throw or permit to be thrown or dropped any article from any window or other
opening in the Property, (xii) use or permit upon the Premises anything that
will invalidate or increase the rate of insurance on any policies of insurance
now or hereafter carried on the Property or violate the certificates of
occupancy issued for the Premises or the Property, (xiii) use the Premises for
any purpose, or permit upon the Premises anything, that may be dangerous to
persons or property (including but not limited to flammable oils, fluids,
paints, chemicals, firearms or any explosive articles or materials), (xiv) do or
permit anything to be done upon the Premises in any way tending to disturb any
other tenant at the Property or the occupants of neighboring property nor (xv)
at any time go upon the roof of the building without prior approval from
Landlord.
19. The following Rules shall apply regarding the parking area:
(i) Parking shall be available in areas designated generally for
tenant parking, for such daily or monthly charges as Landlord may establish
from time to time. In all cases, parking for Tenant and its employees and
visitors shall be on a "first come, first served," unassigned basis, with
Landlord and other tenants at the Property, and their employees and
visitors, and other Persons to whom Landlord shall grant the right or who
shall otherwise have the right to use the same, all subject to these Rules,
as the same may be amended or supplemented, and applied on a non-
discriminatory basis. Notwithstanding the foregoing to the contrary,
Landlord reserves the right to assign specific spaces, and to reserve
spaces for visitors, small cars, handicapped individuals, and other
tenants, visitors of tenants or other Persons, and Tenant and its employees
and visitors shall not park in any such assigned or reserved spaces.
Landlord may restrict or prohibit full size vans and other large vehicles.
Landlord shall set aside a portion of the parking areas near the Building
entrance for parking by visitors of the tenants, including Tenant's
visitors.
(ii) In case of any violation of these provisions, Landlord may refuse
to permit the violator to park, and may remove the vehicle owned or driven
by the violator from the Property without liability whatsoever, at such
violator's risk and expense. Landlord reserves the right to close all or a
portion of the parking areas or facilities in order to make repairs or
perform maintenance services, or to alter, modify, re-stripe or renovate
the same, or if required by casualty, strike, condemnation, act of God, law
or governmental requirement, or any other reason beyond Landlord's
reasonable control. In the event access is denied for any reason, any
monthly parking charges shall be abated to the extent access is denied, as
Tenant's sole recourse. Tenant acknowledges that such parking areas or
facilities may be operated by an independent contractor not
E-4
<PAGE>
affiliated with Landlord, and Tenant acknowledges that in such event,
Landlord shall have no liability for claims arising through acts or
omissions of such independent contractor, if such contractor is reputable.
(iii) The parking areas shall be accessible twenty-four (24) hours a
day, provided that access may be controlled by a cardkey system; cars must
be parked entirely within the stall lines, and only small cars may be
parked in areas reserved for small cars; all directional signs and arrows
must be observed; the speed limit shall be 5 miles per hour; spaces
reserved for handicapped parking must be used only by vehicles properly
designated; every parker is required to park and lock his own car; washing,
waxing, cleaning or servicing of any vehicle is prohibited; parking spaces
may be used only for parking automobiles; parking is prohibited in areas:
(a) not striped or designated for parking, (b) aisles, (c) where "no
parking" signs are posted, (d) on ramps, and (e) loading areas and other
specially designated areas. Delivery trucks and vehicles shall use only
those areas designated therefor.
20. The directory of the building will be provided for the display of the
name and location of tenants only, and Landlord reserves the right to exclude
any other names therefrom. Any additional name that Tenant shall desire to be
placed upon the directory must first be approved by Landlord, and if so
approved, a charge will be made therefor.
21. Landlord may waive any one or more of these Rules for the benefit of a
particular tenant, but no such waiver by Landlord shall be construed as a waiver
of these Rules in favor of any other tenant nor prevent Landlord from thereafter
enforcing any such Rules against any or all of the tenants of the building.
22. Tenant assumes any and all responsibility for protecting the premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
23. Landlord reserves the right to make such other and reasonable rules as
in its sole and absolute discretion may from time to time be needed for the
safety, care, efficiency, cleanliness, management and operation of the building,
and for the preservation of good order therein.
E-5
<PAGE>
EXHIBIT F
Space Plan
18th Floor Plan
[CHART HERE]
F-1
<PAGE>
EXHIBIT G
Working Drawings and Tenant Improvement Work
. WORKING DRAWINGS
----------------
The Working Drawings prepared by Samuel J. Brady dated August 4, 1999,
attached hereto as pages G-3 through G-13
. TENANT IMPROVEMENT WORK
-----------------------
Attached hereto as page G-2
G-1
<PAGE>
Project: 136 East South Temple
- ------------------------------------
Tenant: Bronner, Slosberg, Humphrey
- ------------------------------------
Rentable Area: 3,585
- ------------------------------------
Usable Area: 3,132
- ------------------------------------
<TABLE>
<CAPTION>
T.I. Cost per Owner's
---- -------- -------
Cost R.S.F. Cost
---- ------ ----
<S> <C> <C> <C>
Construction Cost:
Rcon Const. $77,046 $21.49
- ------------------------------------
- ------------------------------------
- ------------------------------------
--------- -------- --------
Total Contractor Cost: $77,046 $21.49 $ -
Construction Contingency @ 3% $ 2,311
--------- -------- --------
Space Planning/Working Drawings
estimated cost per square foot $0.60 $ 2,151
--------- -------- --------
Reimbursables (est): $ -
--------- -------- --------
Other: $ -
--------- -------- --------
Keying: $ -
--------- -------- --------
Window Treatment: $ -
--------- -------- --------
Signage: $ -
--------- -------- --------
Sub total: $81,508 $ -
--------- -------- --------
CM Fee($0.50/rsf) $ 1,793
--------- -------- --------
Total: $83,301 $23.24 $ -
========= ======== ========
</TABLE>
Notes:
Deficiencies:
G-2
<PAGE>
136 East South Temple
Suite 1810
General Notes
[DIAGRAM APPEARS HERE]
G-3
<PAGE>
136 East South Temple
Suite 1810
Specifications
[DIAGRAM]
G-4
<PAGE>
136 East South Temple
Suite 1810
Demolition Plan
[DIAGRAM APPEARS HERE]
G-5
<PAGE>
136 East South Temple
Suite 1810
Floor Plan
[DIAGRAM APPEARS HERE]
G-6
<PAGE>
136 East South Temple
Suite 1810
Dimension Plan
[DIAGRAM APPEARS HERE]
G-7
<PAGE>
136 East South Temple
Suite 1810
Existing Ceiling Plan
[DIAGRAM APPEARS HERE]
G-8
<PAGE>
136 East South Temple
Suite 1810
Power Plan
[DIAGRAM APPEARS HERE]
G-9
<PAGE>
136 East South Temple
Suite 1810
Door Schedule / Details
[DIAGRAM APPEARS HERE]
G-10
<PAGE>
136 East South Temple
Suite 1810
Details
[DIAGRAM APPEARS HERE]
G-11
<PAGE>
136 East South Temple
Suite 1810
Interior Elevators
[DIAGRAM APPEARS HERE]
G-12
<PAGE>
136 East South Temple
Suite 1810
Interior Elevators
[DIAGRAM APPEARS HERE]
<PAGE>
EXHIBIT 10.15
DATED 20th May 1999
certified a true copy this day of
ArnheimTite&Lewis
(1) FORWARD PUBLISHING LIMITED
(2) BRONNER SLOSBERG HUMPHREY (UK)
INC
==================================================
AGREEMENT FOR LEASE
- relating to -
First Floor 84-86 Regents Street London
==================================================
OLSWANG
90 Long Acre
London WC2E 9TT
Tel: 0171-208 8888
Fax: 0171-208 8800
email: [email protected]
<PAGE>
CONTENTS
Clause Page
1. DEFINITIONS .............................................................1
2. CONDITIONAL AGREEMENT ...................................................2
3. LEASE AND TITLE .........................................................3
4. TENANT'S WORKS ..........................................................3
5. ACCESS PENDING GRANT OF LEASE ...........................................4
6. ALIENATION NON-MERGER ...................................................5
7. DETERMINATION ...........................................................5
8. NOTICES .................................................................5
9. DISPUTES AND CERTIFICATES ...............................................5
10. EXCLUSION OF SECURITY OF TENURE .........................................6
11. STANDARD CONDITIONS .....................................................6
<PAGE>
THIS AGREEMENT is made the 20th day of May 1999
BETWEEN:
(1) FORWARD PUBLISHING LIMITED whose registered office is at 5 Elstree Gate
Elstree Way Borehamwood Hertfordshire WD6 1JD ("Landlord") and
(2) BRONNER SLOSBERG HUMPHREY (UK) INC whose registered office is at 1
Embankment Place (c/o Price Waterhouse Coopers) London WC2 6NN ("Tenant")
IT IS AGREED as follows:
1. DEFINITIONS
In this Agreement the following words and expressions shall have the
following meanings unless the context requires otherwise:
[GRAPHIC]
"Conditions" means the following:
1. The obtaining of the Superior Landlord's consent to the underlease
such consent to be in the form of a licence to underlet
2. The obtaining of the Superior Landlord's consent to the Tenant's
Works such consent to be in the form of a licence for alterations
"Condition Date" the date upon which the Conditions are satisfied
"Lease" the lease of the Premises to be granted by the Landlord to the
Tenant as hereinafter provided which shall:
(i) grant a term of years from the Lease Completion Date until 14
December 2004
(ii) reserve an initial rent first reserved of ONE HUNDRED AND EIGHTY
FOUR THOUSAND AND FIFTEEN POUNDS ((pound)184,015) per annum such
rent to commence and be payable from the Lease Completion Date
[GRAPHIC]
<PAGE>
(iii) reserve the further or additional rents as therein provided which
shall be payable from the Lease Completion Date
(iv) be in the form of the draft lease attached hereto subject only to
such amendments as circumstances shall require and shall be agreed
by the Landlord and the Tenant and
(v) be engrossed (original and counterpart) by the Landlord's
solicitors
"Lease Completion Date" the date 5 working days after the Conditions Date
or 2 working days after the service on the Tenant of the Court Order
referred to in clause 10 hereof whichever is the later
"Necessary Consents" shall mean all permissions consents licences
certificates or permits in legally effectual form necessary to carry out
and complete the Tenant's Works (save that of the Superior Landlord)
"Premises" the premises known as First Floor 84-86 Regents Street London
as the same are more particularly described in the Lease
"Rent Deposit Deed" the rent deposit deed to be completed by the Landlord
and Tenant a copy of which is attached hereto
"Superior Landlord" shall include the Landlord's lessor and several
superior lessors holding an interest in reversion in respect of the
Premises
"Tenant's Works" such works as the Tenant shall wish to carry out to the
Premises (subject to the obtaining of all Necessary Consents and of the
approval of the Landlord pursuant to the Lease as if the same had been
granted) details of such works [ILLEGIBLE] within the "Request for
Construction Modifications at 84/86 Regent Street London" - dated 16 April
1999 and the plan numbered "Fin-2a" copies of which are attached hereto
2. CONDITIONAL AGREEMENT
2.1.1 This Agreement is conditional upon the satisfaction of the
Conditions
2.1.2 If the Conditions are not satisfied by the date which is 3 months
after the date hereof (or such longer period as may be agreed
between the Landlord and the
<PAGE>
Tenant) then either party may rescind this Agreement by notice in
writing to the other at any time thereafter but prior to the
Conditions being satisfied and the Tenant shall return the
Premises in the same state and condition as at the date hereof
to the Landlord's reasonable satisfaction carrying out and
bearing the cost of any necessary reinstatement
2.2 The Landlord shall use reasonable endeavours at the equal cost to
the Landlord and the Tenant to procure the satisfaction of the
Conditions as soon as possible after the date hereof
2.3 The remaining provisions of this Agreement shall apply upon the
Conditions being satisfied
3. LEASE AND TITLE
3.1 On the Lease Completion Date:
3.1.1 the Lease shall be completed and the Tenant shall
execute a counterpart thereof
3.1.2 the Rent Deposit Deed shall be completed
3.2 The Tenant shall not raise any objection or make any enquiry or
requisition in respect of the Landlord's title
3.3 On completion of the Lease vacant possession of the Premises shall
be given to the Tenant
4. TENANT'S WORKS
4.1 The Tenant shall forthwith at its own cost prepare in triplicate
and submit to the Landlord for approval drawings and a
specification of the Tenant's Works and immediately upon such
approval being obtained the Tenant shall apply for and use its
best endeavours to obtain any applicable Necessary Consents and
provide the Landlord with copies thereof
<PAGE>
Rider 1.
4.1
4.2 From the date hereof the Tenant shall have access to the Premises
for the purpose of carrying out the Tenant's Works but the Tenant
shall indemnify the Landlord from any loss (including
consequential loss and increased financing charges) damage costs
and expenses suffered by the Landlord resulting from the carrying
out of the Tenant's Works
4.3 Subject as aforesaid if the Tenant commences the Tenant's Works it
shall thereafter proceed diligently with the Tenant's Works
4.4 If the Tenant commences the Tenant's Works it shall carry out the
Tenant's Works in a good and workmanlike manner in accordance with
the approved drawings and specification and any applicable
Necessary Consents and to the reasonable satisfaction of the
Landlord
4.5 On completion of the Lease the parties hereto and the Superior
Landlord shall complete a licence by deed authorising the Tenant's
Works in a form to be provided by the Superior Landlord and agreed
between the parties and the Superior Landlord all acting
reasonably
1
<PAGE>
5. ACCESS PENDING GRANT OF LEASE
5.1 If the Tenant shall enter the Premises prior to the grant of the
Lease the Tenant shall:
5.1.1 occupy as a licensee only
5.1.2 pay to the Landlord:
5.1.2.1 from the date hereof a licence fee at the same
yearly rate and payable at and in the same
manner as the initial yearly rent to be
reserved by the Lease and
5.1.2.2 from the date hereof any insurance premiums
service charge and other monies in respect of
the Premises which would be payable by the
Tenant if the Lease had then been granted (all
such payments being treated as a discharge for
the payment of any rent insurance premium and
service charge that would otherwise have been
due under the Lease in respect of the same
period) and subject to the variations agreed
between the parties hereto contained within
the side letter dated 20th May 1999
5.1.3 be subject to the same exceptions reservations covenants
and conditions and to the other provisions contained in
the Lease so far as they are not inconsistent with this
Agreement and so that the Landlord shall have and be
entitled to all remedies by distress action or otherwise
for recovering rent in arrear and for any breach of any
of the covenants or agreements on the part of the Tenant
as if the Lease had been actually granted but nothing in
this sub-clause shall vary or affect the application of
the next succeeding sub-clause
5.2 Pending completion of the Lease this Agreement shall not be deemed
to operate as a demise of the Premises nor shall the Tenant have
or be entitled to any estate right title or interest in the
Premises
<PAGE>
6. ALIENATION NON-MERGER
6.1 The Tenant shall not assign mortgage charge or otherwise deal with
its interest under this Agreement or any part thereof and shall
itself take up and complete the Lease
6.2 Notwithstanding the grant of the Lease all the obligations of the
parties hereunder shall continue in full force and effect except
so far as they have actually been complied with or incorporated in
the Lease until all the terms and conditions hereof have been
completely fulfilled
7. DETERMINATION
7.1 The Landlord may determine this Agreement forthwith by giving
notice to the Tenant to that effect if the Tenant shall have
failed to pay any instalment of the licence fee insurance premium
or service charge within 21 days after it shall have become due
under the provisions of this Agreement or if the Tenant shall have
committed any material breach of its obligations under this
Agreement or there shall occur any of the events described in
Clause 5.1 of the Lease
7.2 The determination of this Agreement in any such event shall be
without prejudice to any other rights or remedies of the Landlord
against the Tenant for the breach nonobservance or non-performance
of the Tenant's obligations under this Agreement
8. NOTICES
Any notice served under or in connection with this Agreement shall
be properly served if it complies with either the provisions of
Section 196 of the Law of Property Act 1925 or Section 23 of the
Landlord and Tenant Act 1927 (as amended in each case by the
Recorded Delivery Service Act 1962)
9. DISPUTES AND CERTIFICATES
Subject to any express provisions of this Agreement to the
contrary any disputes or differences arising as between the
parties hereto as to their respective rights duties or obligations
or as to any other matter or thing in any way arising out of or
connected
<PAGE>
with the subject matter of this Agreement shall be referred for
determination by a single duly qualified expert to be agreed upon
by the parties in dispute or failing agreement nominated (on the
application of any such party in dispute) by the President for the
time being of the Law Society
10. EXCLUSION OF SECURITY OF TENURE
On or as soon as practicable after the date hereof the parties
shall by their solicitors apply for an order from the court
pursuant to Section 38 of the Landlord and Tenant Act 1954 (as
amended) for the exclusion of the provisions of Sections 24 to 28
(inclusive) of the said Landlord and Tenant Act 1954 in relation
to the Lease
11. STANDARD CONDITIONS
The Standard Conditions of Sale (Third Edition) shall be
incorporated in this Agreement insofar as they are applicable to
the grant of a new lease and are not varied by or inconsistent
herewith
AS WITNESS the hands of the parties hereto the day and year first before
written
<PAGE>
ADD Inc
80 Prospect Street
Cambridge MA
02139
617.661.0165
fax 617.661.7118
email [email protected]
http://www.addarch.com
ADD Inc is an employee owned company
Cambridge - San Francisco
16 April 1999
REQUEST FOR CONSTRUCTION MODIFICATIONS AT 84/86 REGENT STREET, LONDON
BRONNER SLOSBERG & HUMPHREY - PROPOSED LONDON OFFICE
The following description outlines the existing space at 84/86 Regent Street,
London and the request for interior modifications:
A. Existing Conditions
o The existing facilities are on the first floor with portered
entrance from 84/86 Regent's Street, and deliveries access from 19
Glasshouse Street, at the rear of the building. The premises have a
frontage on both these streets and glazed elevations to two
lightwells. The office is on 2 split levels.
o The building is a concrete/steel frame structure, with exposed beams
'parcelling' the floor plate. The floor is generally boarded
throughout, with exception to the open plan area on the rear
elevation, currently carpeted in seagrass over a concreted/tiled
floor and the entrance area carpeted in a large floor mat.
o Internal partitions are 75/100 plaster boarded from floor boards to
structural soffit, with glazed areas to the main meeting room
(rooml0l) and to an office on the rear Portion facing the North
lightwell (room 119). A number of rooms are divided by low level
plasterboard screens. Internal doors have vision panels.
o All glazing, with exception to the mail room (room 17), is single
glazed with secondary glazing on the internal face of the wall. The
frontage glazing is full height, with roller blinds. All the
lightwell glazing is security shuttered within the glazing void. All
the secondary glazing is sliding.
o General office lighting is twin batten 300x1500 pendant luminaries,
with CAT 2 louvers. A number of the fittings combine as emergency
lighting. The main board room (room 101) and the kitchen (room 109)
are lit by tungsten lamps.
<PAGE>
ADD Inc
Bronner Slosberg & Humphrey
16 April 1999
Page 2
o The office is heated with a hot water system, with perimeter
radiators. Cooling is by individually controlled Air-conditioning
units suspended in the general open plan spaces, plus one in the
main board room (rooml0l). The plant for these is located on the
North Lightwell, with the pipework entering the office at high level
on the main North Lightwell wall on two locations, running on trays
broadly in the 'H' configuration of the office floor plate.
o Surface trunking for data, telephone and power in all the general
office areas, with additional power points in plasterboard
walls/screens. Floor boxes (rooms 103 & 119). The riser cupboard is
located by the rear access doors.
o Fire extinguishers are located by each entrance and in the comms
room. The smoke detectors and electronic alarms are spread out in
the whole office. The entrance doors and the comms room are alarmed.
B. Proposed Interior Alterations
o Location of a small corporate sign within the elevators at both the
Regent Street and Glasshouse Street entry points.
o Level 1 entry lobby from Regent Street, location to have corporate
signage stating "Bronner Slosberg and Humphrey" position on lobby
wall.
o Upon entry to the space from the Regent Street entrance at level 1,
location of the new built in coat closet constructed from
plasterboard and sliding doors to match existing.
o Demolition of half height partition within existing reception area
and facilities area.
o Construction of new full height and half height gypsum partition
walls to define new reception area.
o Location of new full height glazed screen to the rear of reception
desk for location of new corporate signage.
o Adjacent to south light well construction of three new offices /
quiet rooms. Constructed from full height partitions, full height
glazed partitions and doors to match existing.
o Within open office area adjacent to north light well construction of
additional low height partitions for printer and copier stations.
<PAGE>
ADD Inc
Bronner Slosberg & Humphrey
16 April 1999
Page 3
o At the Glasshouse Street end on the north light well side the
existing partially enclosed area to be fully enclosed utilizing the
existing glazed and full height partitions. An additional office and
quiet room to be constructed using full height and glazed partitions
and doors to match existing
o The entire space will be provided with new free standing
workstations with internal data and telecommunication management.
o All new enclosed areas will be provided with additional ceiling
mounted light fixtures.
o Screwing down loose floor boards, replacing splintered/cracked
boards.
o The entire floor space to be carpeted utilizing a carpet tile.
o The entire space to be repainted in a colour scheme suitable for the
corporate image of Bronner Slosberg and Humphrey. This painting will
be limited to all walls and partitions.
o Additional air conditioning units to be located within the space to
accommodate the proposed revised floor layout. These units are
anticipated to match existing.
o Data and telecommunication fit out of the Comms room 102, which will
consist primarily of free standing equipment, plus additional power
supply.
o Additional power/data/telephone located throughout the space to
accommodate the proposed layout.
o Relocation/addition of Fire Alarms and Smoke Detectors to comply
with building and fire codes.
o No changes will be made to any existing external window openings.
The proposed interiors layout drawings No. SCHM - 2 is attached and forms part
of this documentation.
Should additional information or clarifications be required regarding the
proposed layout or materials, please do not hesitate to contact the architects
ADD Inc and Collado @ AJSP.
This document has been prepared by:
ADD Inc Cambridge, MA, USA and Collado @ AJSP, London, UK
<PAGE>
BRONNER
SLOSBERG
HUMPHREY
London Regents St.
Office
[GRAPHIC]
<PAGE>
[ILLEGIBLE] Regent Street, London W.1. PLAN NO. 1 - Basement
[ILLEGIBLE] LAND REGISTRY GENERAL MAP
LONDON SHEET VII.72. SECTION C.
GREATER LONDON PLAN 1
Scale 1/1056
CITY OF WESTMINSTER
[GRAPHIC]
<PAGE>
[ILLEGIBLE] Regent Street, London W.1. PLAN NO. 2 - Ground Floor
[ILLEGIBLE] LAND REGISTRY GENERAL MAP
LONDON SHEET VII.72. SECTION C.
GREATER LONDON PLAN 2
Scale 1/1056
CITY OF WESTMINSTER
[GRAPHIC]
<PAGE>
[ILLEGIBLE] Regent Street, London W.1. PLAN NO. 3 - Upper Floors
[ILLEGIBLE] LAND REGISTRY GENERAL MAP
LONDON SHEET VII.72. SECTION C.
GREATER LONDON PLAN 3
Scale 1/1056
CITY OF WESTMINSTER
[GRAPHIC]
<PAGE>
DATED 3rd November 1999
certified a true copy this day of
ArnheimTite&Lewis
(1) FORWARD PUBLISHING LIMITED
(2) BRONNERCOM (UK), INC
==================================================
RENT DEPOSIT DEED
- for -
First Floor 84 and 86 Regent Street and
19 and 21 Glasshouse Street London W1
==================================================
OLSWANG
90 Long Acre
London WC2E 9TT
Tel: 0171-208 8888
Fax: 0171-208 8800
email: [email protected]
<PAGE>
THIS DEED is made the 3rd day of November 1999
BETWEEN:
(1) FORWARD PUBLISHING LIMITED whose registered office is at 5 Elstree Gate
Elstree Way Borehamwood Hertfordshire WD6 TD ("Landlord" which expression
shall include its successors in title) and
(2) BRONNERCOM (UK), LIMITED whose registered office is at 1 Embankment Place
(c/o Price Waterhouse Coopers London WC2 6NN ("Tenant")
WHEREAS this Deed is supplemental to and in consideration of the grant by the
Landlord to the Tenant of the lease ("Lease") described in the Schedule hereto
WITNESSES as follows:
1. On the date hereof the Tenant shall pay to the Landlord the sum of SIXTY
ONE THOUSAND THREE HUNDRED AND THIRTY EIGHT POUNDS 33 PENCE
((pound)61,338.33) together with VAT thereon which the Landlord or its
solicitors shall credit to a bank deposit account ("Account") to be
opened at a United Kingdom clearing bank to be operated solely by the
Landlord or its solicitors
2. The Account shall be operated and payments made therefrom as follows:
2.1 If the Tenant shall fail to make payment to the Landlord of any rent or
other monies properly due to the Landlord under the terms of the Lease
or of any amount becoming payable to the Landlord as a result of any
breach by the Tenant of any covenant on its part contained in the Lease
in either case by the date on which the same became due and/or payable
(as the case may be) then the Landlord may withdraw from the Account for
payment to the Landlord an amount equal to the amount in respect of
which the Tenant shall have made default
2.2 Immediately following such withdrawal the Tenant shall (if so required
by the Landlord) pay to the Landlord for the credit of the Account an
amount equal to the
1
<PAGE>
sum so withdrawn to the intent that the balance of monies standing to
the credit of the Account shall at all times equal the amount specified
in Clause 1 hereof
2.3 The Tenant shall be paid from the Account the following:
2.3.1 Any interest earned by the Account within 21 days of the
interest being credited to the Account subject to any deduction
of tax at source required by law
2.3.2 The balance standing to the credit of the Account (including
interest) within 14 days after the first to occur of the
following:
2.3.2.1 The date of expiration or sooner determination of the
term granted by the Lease
2.3.2.2 The date of lawful assignment by the Tenant of the Lease
PROVIDED THAT no sums shall be so paid to the Tenant at any of the
aforesaid dates if the Tenant has not discharged all liability (actual
or prospective) of the Tenant to the Landlord under the terms of the
Lease and/or if the Landlord is otherwise entitled to have recourse to
the Account under the terms of Clause 2.1 hereof
3. The provisions of this Deed are in addition to (and not in substitution
for) the provisions for re-entry and forfeiture contained in the Lease
and all other rights or remedies available to the Landlord at law or
arising out of the Lease all of which provisions rights and remedies
shall continue to have full force and effect in all respects and nothing
in this Deed shall entitle the Tenant to withhold or delay payment of
any rents reserved by or other monies payable by the Tenant under the
Lease after the dates upon which they shall respectively fall due
4. The conditions for re-entry contained in the Lease shall be exercisable
as well on the breach of any covenant or obligation herein contained as
on the happening of any of the events mentioned in the Lease
2
<PAGE>
5. The Tenant charges all monies standing to the credit of the Account
including all interest accruing thereto with payment to the Landlord in
satisfaction of all sums and liabilities arising pursuant to Clause 2
hereof
6. The Tenant agrees with the Landlord that if the Landlord shall dispose
of its interest in the reversion immediately expectant on the term
granted by the Lease and shall obtain from its successors in title to
such reversion a covenant with the Tenant to perform and observe all the
terms and conditions of this Deed the Landlord shall from the date of
such covenant be released from all such terms and conditions and be
under no further liability to the Tenant in respect thereof
IN WITNESS whereof the parties hereto have caused their Common Seals to be
hereunto affixed the day and year first before written
3
<PAGE>
THE SCHEDULE
The Lease
Date Premises Term Rent
3/11/1999 First Floor 84 and Term of years from (pound)184,015
86 Regent Street and 3rd November 1999 (being (pound)32.50
19 and 21 Glasshouse until 14 December per square foot for
Street London W1 2004 the First Floor Area
totalling 5,662 sq
ft)
4
<PAGE>
THE COMMON SEAL of )
FORWARD PUBLISHING LIMITED )
was hereunto affixed in the presence of: )
Director /s/ [ILLEGIBLE]
Authorised Signatory /s/ J.M. Quade
5
<PAGE>
SIGNED by
/s/ [ILLEGIBLE]
for and on behalf of the Landlord
<PAGE>
DATED 3rd November 1999
certified a true copy this day of
ArnheimTite&Lewis
(1) FORWARD PUBLISHING LIMITED
(2) BRONNERCOM (UK), INC
==================================================
UNDERLEASE
- relating to -
84 and 86 Regent Street and
19 and 21 Glasshouse Street London W1
==================================================
OLSWANG
90 Long Acre
London WC2E 9TT
Tel: 0171-208 8888
Fax: 0171-208 8800
<PAGE>
CONTENTS
Clause Page
1. DEFINITIONS AND INTERPRETATION ........................................ 1
2. DEMISE ................................................................ 3
3. TENANT'S COVENANTS .................................................... 5
3.1 To Pay Rent .................................................... 5
3.2 To Pay Rates ................................................... 5
3.3 To Pay Utility Charges ......................................... 5
3.4 To Pay Service Charges ......................................... 5
3.5 Not to Commit Waste ............................................ 6
3.6 To Repair ...................................................... 6
3.7 To Decorate .................................................... 6
3.8 To Permit the Landlord to Enter ................................ 7
3.9 Disputes ....................................................... 8
3.10 Not to Overload ................................................ 8
3.11 Permitted User ................................................. 9
3.12 Alterations .................................................... 10
3.13 Not to Obstruct ................................................ 10
3.14 Signage ........................................................ 12
3.15 Alienation ..................................................... 12
3.16 Registration ................................................... 14
3.17 To Pay Fees .................................................... 15
3.18 To Comply with Statutory Requirements etc ...................... 15
3.19 To Transmit and Give Notices ................................... 18
3.20 Sale or Reletting Notices ...................................... 18
3.21 To Pay Costs ................................................... 19
3.22 To Indemnify ................................................... 19
3.23 To Yield Up .................................................... 20
3.24 To Pay Interest ................................................ 20
3.25 To Indemnify Landlord .......................................... 21
4. LANDLORD'S COVENANTS .................................................. 21
4.1 Quiet Enjoyment ................................................ 21
4.2 To Pay Rents ................................................... 21
4.3 To Observe Headlease ........................................... 21
4.4 To Provide Services ............................................ 22
5. PROVISOS .............................................................. 23
5.1 For Re-entry ................................................... 23
5.2 Landlord not Liable ............................................ 24
5.3 No Easements Granted ........................................... 24
5.4 Suspension of Rent and Frustration ............................. 25
5.5 Occupiers Liability and Defective Premises ..................... 26
5.6 Disputes ....................................................... 26
5.7 Notices ........................................................ 26
5.8 VAT ............................................................ 26
5.9 New Lease ...................................................... 27
6. EXCLUSION ............................................................. 27
7. OPTION TO DETERMINE ................................................... 27
<PAGE>
THE FIRST SCHEDULE
The Demised Premises .................................................. 28
THE SECOND SCHEDULE
Rights Granted ........................................................ 30
THE THIRD SCHEDULE
Rights Reserved ....................................................... 31
THE FOURTH SCHEDULE
Service Charge ........................................................ 32
<PAGE>
THIS UNDERLEASE is made the 3rd day of November 1999 [GRAPHIC]
BETWEEN:
(1) FORWARD PUBLISHING LIMITED having its registered office at 5 Elstree
Gate Elstree Way Borehamwood Hertfordshire WD6 1TD ("Landlord") and
(2) BRONNERCOM (UK), INC having its registered office at 1 Embankment Place
(c/o Price Waterhouse Coopers) London WC2 6NN ("Tenant")
WITNESSETH as follows:
1. DEFINITIONS AND INTERPRETATION
In this Underlease the following words and expressions shall have the
following meanings unless the context requires otherwise:
1.1 The expression "Landlord" shall include the persons for the time being
entitled to the reversion immediately expectant on the termination of
the term hereby granted and the expression "Superior Lessor" shall
include the Landlord's lessor and the several superior lessors holding
an interest in reversion in respect of the Demised Premises
1.2 The expression "Tenant" shall include the Tenant's successors in title
and permitted assigns
1.3 The expression "Term" means the term of years hereby created
1.4 The expression "Demised Premises" means the premises described in Plan 1
of the First Schedule hereto and the expression "Building" means the
messuages and buildings known as numbers 84 and 86 Regent Street and 19
and 21 Glasshouse Street London W1 shown for identification purposes
only edged blue on Plans numbered 1 2 and 3 annexed hereto
1
<PAGE>
[ILLEGIBLE] Regent Street, London W.1. PLAN NO. 1 - Basement
[ILLEGIBLE] LAND REGISTRY GENERAL MAP
LONDON SHEET VII.72. SECTION C.
GREATER LONDON PLAN 1
Scale 1/1056
CITY OF WESTMINSTER
[GRAPHIC]
<PAGE>
[ILLEGIBLE] LAND REGISTRY GENERAL MAP
LONDON SHEET VII.72. SECTION C.
GREATER LONDON PLAN 2
Scale 1/1056
CITY OF WESTMINSTER
[GRAPHIC]
<PAGE>
[ILLEGIBLE] LAND REGISTRY GENERAL MAP
LONDON SHEET VII.72. SECTION C.
GREATER LONDON PLAN 3
Scale 1/1056
CITY OF WESTMINSTER
[GRAPHIC]
<PAGE>
1.5 The expression "Planning Acts" means the Town and Country Planning Act
1990 and any future legislation of a similar character and any statutory
addition thereto or modification or re-enactment thereof for the time
being in force and any order instrument plan regulation permission or
direction made or issued thereunder or deriving validity therefrom
1.6 The expression "Service(s)" shall mean any or all (as the case may be)
of the services mentioned in the Fourth Schedule hereto
1.7 The expression "Service Charge" means a fair proportion of the cost
incurred by the Landlord or paid to the Superior Lessor by the Landlord
for the provision of the Services and other matters described in the
Fourth Schedule as assessed in accordance with the provisions of the
Fourth Schedule
1.8 The expression "Insured Risks" means fire lightning storm tempest
explosion accident aircraft articles dropped therefrom and any other
risk from time to time insured by the Landlord or any superior lessor
1.9 The expression "1995 Act" means the Landlord and Tenant (Covenants) Act
1995
1.10 The expression "Permitted Hours" means the hours between 7 a.m. and 7
p.m. on Mondays to Fridays and between 8 a.m. and 2 p.m. on Saturdays
1.11 The expression "Headlease" means the underlease under which the Landlord
holds the Demised Premises dated 20 August 1998 made between (1)
Wimgrove Developments Limited and (2) Forward Publishing Limited
1.12 Words importing the masculine gender only shall include the feminine
gender and vice versa
1.13 Words importing the singular number only shall include the plural number
and vice versa and where there are two or more persons included in the
expression "Tenant" covenants contained in these presents which are
expressed to be made by the Tenant shall be deemed to be made by such
persons jointly and severally
2
<PAGE>
1.14 Words importing persons shall include corporations and vice versa
1.15 The Landlord shall in exercise of any rights of entry in this Underlease
other than in circumstances where the Tenant is in default and the
Landlord is exercising its right for that reason (in which circumstances
the provisions of sub-clause 1.15.1 only will apply):
1.15.1 act in a reasonable manner and make good to the reasonable
satisfaction of the Tenant all damage caused to the Demised
Premises or any part or parts thereof and damage to any of the
Tenant's fixtures and fittings and stock
1.15.2 give due consideration to alternative methods of execution of
any works which do not involve entry upon the Demised Premises
and employ any such alternative methods which are practicable
economic reasonable and suitable
1.15.3 cause as little disturbance as reasonably possible to the
Tenant's business and comply with all the Tenant's reasonable
and proper requirements
1.15.4 for the purpose of construction or alterations on any adjoining
premises pay compensation for any loss of trade and damage
caused to the Tenant as a result thereof subject to the Tenant
mitigating any such loss or damage
2. DEMISE
In consideration of the rents hereinafter reserved and of the covenants
on the part of the Tenant hereinafter reserved and contained the
Landlord HEREBY DEMISES unto the Tenant all that the Demised Premises
together with the easements and other rights contained or referred to in
the Second Schedule hereto EXCEPT AND RESERVING unto the Landlord and
the Superior Lessor and any other person entitled thereto as mentioned
in the Third Schedule hereto TO HOLD the Demised Premises subject to all
easements quasi easements rights in
3
<PAGE>
the nature of easements and privileges to which the Demised Premises are
or may be subject for a term expiring on 14 December 2004 from and
including the date hereof yielding and paying therefor
2.1 During the Term and so in proportion for any less time than a year first
the yearly rent of ONE HUNDRED AND EIGHTY FOUR THOUSAND AND FIFTEEN
POUNDS ((pound)184,015) (being (pound)32.50 per sq ft) to be paid in
advance by equal monthly payments in advance on the 25 day of each month
clear of all deductions whatsoever the first of such payments to be made
on the date hereof in respect of the period from that date up to and
including the day immediately preceding the 25 day of the month next
following
2.2 By way of further or additional rent from time to time a sum or sums of
money equal to a fair and reasonable proportion reasonably and properly
attributable to the Demised Premises of the aggregate of:
2.2.1 Any amount which the Landlord may from time to time pay or be
called upon under the terms of the Headlease to repay to the
Superior Lessor in respect of the insurance of the Building
against the Insured Risks and
2.2.2 The premium from time to time expended by the Landlord for
insurance against three years loss of the rent payable under
this Underlease
Such further or additional rent to be paid within 14 days after the
expenditure and written notification to the Tenant thereof
2.3 By way of further or additional rent the Service Charge
2.4 By way of further or additional rent any Value Added Tax (or any
substituted or similar tax) which is now or may become payable in
respect of any rent fees and other sums due hereunder
2.5 By way of further or additional rent interest as hereinafter provided
4
<PAGE>
3. TENANT'S COVENANTS
The Tenant to the intent that the obligations hereby created shall
continue throughout the term hereby covenants with the Landlord as
follows:
3.1 To Pay Rent
To pay the rents hereinbefore reserved without deduction at the times
and in the manner aforesaid
3.2 To Pay Rates
To bear pay and discharge all existing and future Uniform Business Rates
rates and Water Rates (or any substituted or similar rates) taxes duties
charges assessments impositions and outgoings whatsoever which now are
or may at any time hereafter during the term be charged levied assessed
or imposed upon or in respect of the Demised Premises or any part
thereof or upon the owner or occupier in respect thereof excluding any
payable by the Landlord occasioned by receipt of the rents or by any
disposition of dealing with or ownership of any interest reversionary to
the interest created by this Underlease and a fair proportion reasonably
and properly attributable to the Demised Premises (as reasonably
determined by the Landlord's surveyor) of any such rates taxes
assessments impositions and outgoings levied imposed or charged on the
Demised Premises in common with other premises
3.3 To Pay Utility Charges
To pay for all charges for gas electricity telecommunications and any
other supplies and services consumed on the Demised Premises and the
hire of meters in respect thereof
3.4 To Pay Service Charges
To pay the Service Charge in accordance with the provisions of the
Fourth Schedule together with any Value Added Tax payable thereon
5
<PAGE>
3.5 Not to Commit Waste
Not to commit any waste or spoil on the Demised Premises
3.6 To Repair
At all times during the Term to repair and keep in good and substantial
repair and condition Provided that the Tenant will not be obliged to put
the Demised Premises in any better state than at the date hereof the
whole of the Demised Premises and each and every part thereof (damage or
destruction due to any risks against which the Landlord or the Superior
Lessor shall have insured excepted save to the extent any of the
insurance money in respect thereof shall have been rendered
irrecoverable by any act of default of the Tenant or any person deriving
title from the Tenant or any licensee or invitee of the Tenant or such
other person) and to renew and replace from time to time all Landlord's
fixtures and fittings which may be beyond repair at any time during the
Term
3.7 To Decorate
3.7.1 In the year 2002 and in the last year of the Term howsoever
determined (but not twice in any period of two years) to paint
french polish or otherwise treat as the case may be all the
inside wood and iron work usually or requiring to be painted
french polished or otherwise treated of the Demised Premises and
all additions and features thereto with two coats of good oil
paint or good quality polish or other suitable material of good
quality in a proper and workmanlike manner and afterwards grain
marble and varnish the parts (if any) usually grained marled and
varnished and also wash distemper paint as aforesaid or re-paper
as appropriate the ceilings and walls in the usual manner and to
wash down all tiles faiences glazed bricks and similar washable
surfaces
3.7.2 To keep the Demised Premises in a clean and tidy condition and
regularly to remove therefrom all waste or offensive materials
and articles and not
6
<PAGE>
to deposit or permit to be deposited any such materials or
articles upon any other part of the Building except such parts
(if any) as shall from time to time be provided for the deposit
of such materials and articles
3.7.3 To clean at least once every month the inside and outside of all
windows and window frames of the Demised Premises and all the
glass (if any) in the doors thereof
3.8 To Permit the Landlord to Enter
3.8.1 To permit the Landlord and the Superior Lessor and their
respective agents at all reasonable times during the Term with
or without workmen on giving reasonable notice (except in cases
of emergency) to the Tenant to enter upon the Demised Premises
for the purpose of ascertaining that the covenants and
conditions herein contained have been duly observed and
performed and for the Superior Lessor to view the state of
repair and condition thereof and to take a schedule of the
Landlord's fixtures and of any dilapidations pursuant to the
Headlease and to exercise the rights hereinbefore excepted and
reserved to the Landlord and the Superior Lessor
3.8.2 In case of default by the Tenant in diligently proceeding to
carry out its obligations as to repair hereunder within two
calendar months or sooner if requisite after the service of a
notice requesting it to do so to permit the Superior Lessor or
the Landlord well and substantially to commence and thereafter
diligently proceed to repair and make good all defects and wants
of reparation for which the Landlord is liable pursuant to the
Headlease and to permit the Superior Lessor entry for the same
purposes and the Tenant shall repay to the Landlord on demand
the expenses thereby reasonably incurred by the Superior Lessor
or the Landlord to the extent performance is the responsibility
of the Tenant hereunder or a fair proportion thereof as
determined by the Landlord's surveyor (whose decision shall be
final)
7
<PAGE>
3.8.3 To permit the Landlord and the Superior Lessor and their
respective agents and all persons authorised by them at all
reasonable times with or without workmen on giving reasonable
notice (except in cases of emergency) to the Tenant to enter and
remain upon the Demised Premises with all necessary appliances
for the purpose of repairing or rebuilding and executing
alterations painting redecoration or other works to adjoining or
neighbouring premises and for the purpose of repairing cleaning
or maintaining any sewers water courses drains gutters water
pipes electric wires or gas pipes or other conveniences in or
under the Demised Premises or the Building in connection with or
for the accommodation of any adjoining or neighbouring property
the Landlord or the Superior Lessor or such persons as aforesaid
making good all damage caused thereby to the Demised Premises
3.9 Disputes
In case any dispute or controversy shall at any time arise between the
Tenant and the tenants or occupiers of any property adjoining or
contiguous to the Building the same shall be settled by the Superior
Lessor or the several Superior Lessors (as the case may be) or their
respective surveyors (if they shall think fit) in such manner as they
shall by any writing direct in that behalf to which determination the
Tenant shall from time to time submit provided that such determination
is not inconsistent with the terms hereof
3.10 Not to Overload
3.10.1 Not to place or keep or permit to be placed or kept in the
Demised Premises any heavy articles in such position or in such
quantity or weight or otherwise in such manner howsoever as to
overload or cause damage to or be in the opinion of the Landlord
likely to overload or cause damage to the Demised Premises nor
to use any part of the roofs or ceilings of the Demised Premises
in such a manner as to subject them to any unreasonable strain
8
<PAGE>
3.10.2 To take all such measures as may be necessary to ensure that any
effluent discharged into the drains and sewers which belong to
or are used for the Demised Premises in common with other
premises will not be corrosive or in any way harmful to the said
drains or sewers or cause any obstruction or deposit therein
3.11 Permitted User
3.11.1 Not to use permit or suffer the Demised Premises or any part
thereof to be used otherwise than as offices
3.11.2 Not to carry on upon or use or permit the Demised Premises to be
used for any noisy noxious offensive or dangerous trade art
manufacture or business or occupation or for any illegal or
immoral purpose nor to do or suffer to be done on the Demised
Premises any act matter or thing whatsoever which in the
reasonable opinion of the Landlord is or may be or tend to
become an annoyance nuisance damage disturbance inconvenience or
in any other way prejudicial to the Landlord or to the owners or
occupiers of any adjoining or neighbouring premises and there
will not at any time during the Term be exercised or carried on
in or upon the Demised Premises or any part thereof the trade or
business of a public house inn tavern or beer shop and the
Demised Premises will not be used for the sale of wines beers or
spirits or other intoxicating liquors or for any of the
following trades or businesses namely: tripe boiler tripe seller
cheesemonger poulterer fishmonger slaughterman butcher baker
soap boiler tallow chandler tallow melter sugar baker household
broker dealer in old iron working cutler chimney sweep coach or
motor vehicle vendor maker or repairer whitesmith blacksmith
coppersmith jeweller silversmith working brazier working tinman
farrier plumber dyer railway or carriers' parcels' office motor
garage or petrol store and no clothing or other article shall be
put out on the Demised Premises for the purposes of drying or
bleaching and no part of the Demised Premises shall be used as
9
<PAGE>
or for an asylum for lunatics or idiots hospital or other
charitable institution or school club or society or place of
public amusement and no steam engine gas engine or electrical
engine or machinery of any kind other than normal office
machinery or any external post wires or works for telegraphic or
telephonic communications shall be erected or set up in or upon
any part of the Demised Premises
3.11.3 Not to permit any sale by auction or public exhibition or public
show or spectacle or political meeting to take place on the
Demised Premises
3.12 Alterations
3.12.1 Not to make any alteration or addition or carry out any works to
the Demised Premises any of which may in any way affect the
structure of the Building nor to merge unite or annex the
Demised Premises or any part thereof with or to any adjoining or
neighbouring premises or erect any new building or structure on
the Demised Premises nor to make any structural alterations or
additions to the Demised Premises
3.12.2 Not to cut remove divide alter maim or injure the Demised
Premises or any part thereof nor carry out alterations to the
electrical installation of and in the Demised Premises
3.12.3 Not without the prior written consent of the Landlord to make
any non-structural alterations or additions to the Demised
Premises or any part thereof
3.13 Not to Obstruct
3.13.1 Not by building or otherwise to stop up or darken any window or
light in the Demised Premises or to stop up or obstruct any
access of light enjoyed to any premises the estate or interest
in possession or reversion whereof now or hereafter may be
vested in the Landlord or the Superior Lessor nor permit any new
wayleave easement right privilege or
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encroachment to be made or acquired into against or upon the
Demised Premises and in case any such easement right privilege
or encroachment shall be made or acquired or attempted to be
made or acquired to give immediate notice thereof to the
Landlord and to permit the Landlord and the Superior Lessor and
their respective agents to enter upon the Demised Premises for
the purpose of ascertaining the nature of any such easement
right or privilege or encroachment and at the request and cost
of the Landlord or the Superior Lessor to adopt such means as
may be reasonably required or deemed proper for preventing any
such encroachment or the acquisition of any such easement right
privilege or encroachment
3.13.2 Not to give to any third party any acknowledgement that the
Tenant enjoys the access of light to any of the windows or
openings in the Demised Premises by the consent of such third
party nor to pay to such third party any sum of money or to
enter into any agreement with such third party to abstain from
obstructing the access of light to any windows or openings and
in the event of any of the owners or occupiers of adjacent land
or buildings doing or threatening to do anything which obstructs
the access of the light to any of the said windows or openings
to notify the same forthwith to the Landlord and to permit the
Landlord or the Superior Lessor to bring such proceedings as
they or either of them may think fit in the name of the Tenant
against any of the owners or occupiers of the adjacent land in
respect of the obstruction of the access of light to any of the
windows or openings in the Demised Premises
3.13.3 Not any time during the Term to bring any action or make any
claim or demand on account of any injury to or diminution of
light or air to the Demised Premises or any windows or apertures
thereof in consequence of the erection of any building or the
alteration of any building on any land adjacent neighbouring or
opposite to the Demised Premises for which the Landlord or the
Superior Lessor shall have given consent or for which the
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Landlord or Superior Lessor may give consent pursuant to any
powers reserved by these presents or in respect of any easement
right or privilege granted or to be granted by the Landlord or
Superior Lessor for the benefit of any building erected or to be
erected on any land adjacent neighbouring or opposite to the
Demised Premises and (if required) to concur with the Landlord
or the Superior Lessor at the expense of the Landlord or the
Superior Lessor in any consent given or any grant made as
hereinbefore mentioned
3.14 Signage
Not without the written consent of the Landlord and the Superior Lessor
(such consents not to be unreasonably withheld) at any time during the
term to affix or exhibit or permit to be affixed or exhibited in or upon
any exterior part of the Demised Premises or upon or to the exterior of
the windows thereof any bill placard lettering advertisement flash light
or any other sign
3.15 Alienation
3.15.1 Not to assign part with or share possession of or grant licences
in respect of part only of the Demised Premises (as distinct
from the whole thereof) or to charge part or the whole of the
Demised Premises
3.15.2 Not to assign the whole of the Demised Premises without the
prior consent of the Landlord and the Superior Lessor such
consent not to be unreasonably withheld or delayed subject to
the provisions of sub-clause 3.15.3 and provided that the
provisions of sub-clause 3.15.4 are complied with
3.15.3 For the purposes of Section 19(1A) of the Landlord and Tenant
Act 1927 (as amended by the 1995 Act) and in addition to any
other condition or requirement which the Landlord may lawfully
impose the Landlord may withhold its consent to an assignment of
the Demised Premises if there
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are any arrears of rent or other monies whatsoever due and
payable or if there is any other material breach of the
obligations on the part of the Tenant contained in this
Underlease at the time of the grant of the Landlord's consent
3.15.4 For the purposes of sub-section 19(1A) of the Landlord and
Tenant Act 1927 (as amended by the 1995 Act) and in addition to
any other condition or requirement which the Landlord may
lawfully impose the consent of the Landlord to an assignment of
the Demised Premises may be granted subject to any one or more
of the following conditions
3.15.4.1 That prior to or contemporaneously with (but in
either case to have effect from) such assignment the
Tenant and the proposed assignee enter into an
authorised guarantee agreement (as provided for in
Section 16 of the 1995 Act) and licence to assign in
such form as the Landlord shall reasonably require
3.15.4.2 That any guarantor of the Tenant's obligations under
this Underlease shall have guaranteed to the Landlord
that the Tenant will comply with the terms and
conditions of the authorised guarantee agreement
referred to in the immediately preceding sub-clause
in such form as the Landlord shall reasonably require
3.15.4.3 That prior to or contemporaneously with (but in
either case to have effect from) such assignment or
transfer if the Landlord acting reasonably or the
Superior Lessor acting reasonably so requires a
guarantor or guarantors first approved in writing by
the Landlord and the Superior Lessor (which approval
shall not be unreasonably withheld or delayed) shall
(if more than one jointly and severally) enter into
covenants with the
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Landlord in such terms as the Landlord shall
reasonably require
3.15.4.4 That before the Landlord grants its consent to the
assignment or transfer the Tenant pays all costs fees
and expenses (including professional fees
disbursements and Value Added Tax) reasonably and
properly incurred by the Landlord in connection with
the Tenant's application for consent (including any
reasonably and properly incurred fees relating to the
consent of the Superior Lessor and including any
legal and surveyors or other professional fees
lawfully demanded by the Superior Lessor in
connection therewith)
3.15.4.5 That before the Landlord grants its consent to the
assignment any consent lawfully and properly required
from any superior landlord or mortgagee has been
obtained
3.15.4.6 The Landlord may waive in whole or in part any of the
circumstances or conditions set out in sub-clauses
3.15.3 and 3.15.4
3.15.5 Not to underlet part or whole of the Demised Premises
3.16 Registration
Within 21 days after the date of any assignment of these presents or the
grant of any underlease or sub-underlease of the Demised Premises or any
assignment of such an underlease or sub-underlease or any devolution of
the Term of any such underlease or sub-underlease as aforesaid by will
or intestacy assent or operation of law to leave or cause to be left
(without any demand by any person) with the Solicitor of the Landlord
for registration two certified copies of the deed document or instrument
effecting or evidencing such disposition as aforesaid and to pay the
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Landlord's Solicitors reasonable fees in respect of each deed document
or instrument for the registration thereof
3.17 To Pay Fees
To pay on demand all costs and expenses (including Solicitor's costs and
Surveyor's fees) reasonably incurred by the Landlord or the Superior
Lessor for the purposes of or incidental to the preparation and service
of any notice under Section 146 of the Law of Property Act 1925 in
respect of any breach of any of the covenants herein on the part of the
Tenant or incurred in proceedings under Section 146 of that Act or of
any statutory modification or re-enactment thereof notwithstanding in
any such case that forfeiture may be avoided otherwise than by relief
granted by the Court
3.18 To Comply with Statutory Requirements etc
3.18.1 To execute all such works and do all such things as are or may
under or in pursuance of any Act of Parliament (including but
without prejudice to the generality of the foregoing The Offices
Shops and Railway Premises Act 1963 and the Factories Act 1961
and Health and Safety at Work Act 1974) already or hereafter to
be passed be directed or required to be done or executed at any
time during the Term upon or in respect of the Demised Premises
or any part thereof or any additions or improvements thereto or
the Tenant's occupation and use thereof whether by the owner or
the occupier thereof or the employment or residence therein of
any person or persons or any fixtures machinery plant or
chattels for the time being affixed thereto and at all times
during the Term to conform in all respects with the provisions
of any general or local Act of Parliament and of any regulations
rules or orders made thereunder and to comply with any
directions notices or instructions which may be served or
communicated by any competent authority and not do or omit or
permit to be done or omitted on the Demised Premises or any part
thereof any act or thing whereby the Landlord or the Superior
Lessor may become
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liable to pay any penalty imposed or to bear the whole or any
part of any expenses incurred under any such direction notice
instruction requirement Act or regulation rule or order as
aforesaid and to indemnify the Landlord and the Superior lessor
in respect thereof
3.18.2 To bear and pay on demand all costs and expenses (including
Solicitor's and other legal costs fees of managing agents or
Surveyor's and other professional fees) reasonably incurred by
or imposed or charged upon the Landlord or the Superior Lessor
or for which the Landlord or the Superior Lessor shall be held
responsible (whether as Landlord or owner or occupier of the
Demised Premises) in respect of or incidental to or arising out
of any notice or any requirement of any local or other competent
authority or otherwise relating to the Demised Premises and made
under or pursuant to any Act of Parliament or any regulation as
aforesaid
3.18.3 In relation to the Planning Acts:
3.18.3.1 At all times during the term to comply in all
respects with the Planning Acts and keep the Landlord
and the Superior Lessor indemnified in respect
thereof
3.18.3.2 During the Term and so often as occasion shall
require at the expense in all respects of the Tenant
to obtain all such permissions licences consents and
approvals as may be required for the carrying out by
the Tenant of any operations on the Demised Premises
or for the institution or continuance or renewal by
the Tenant thereon of any use thereof which may
constitute development within the meaning of the
Planning Acts or any step related thereto but so that
the Tenant shall not make any application for
planning permission or give any notice to any
authority of an intention to commence to carry out
any development or any step related thereto without
the previous written consent of the Landlord
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and the Superior Lessor (such consents not to be
unreasonably withheld) and so that the Tenant shall
(if and insofar as it is lawful for the parties
hereto to make such an arrangement) indemnify the
Landlord and the Superior Lessor against all charges
payable in respect of any such application and shall
also pay to the Landlord all professional fees and
expenses reasonably incurred by the Landlord or the
Superior Lessor in connection therewith and the
Tenant shall within ten working days after the grant
or refusal of such application provide to the
Landlord without charge full particulars in writing
thereof and supply copies thereof for retention by
the Landlord and the Superior Lessor
3.18.3.3 Without prejudice to the provisions of Clause 3.12
hereof not to implement any planning permission
licence consent or approval until the same has been
submitted to and approved in writing by the Landlord
and the Superior Lessor (such approvals not to be
unreasonably withheld)
3.18.3.4 Unless the Landlord or the Superior Lessor shall
otherwise direct to carry out before the expiration
or sooner determination of the term (howsoever the
same may be determined) any works stipulated to be
carried out to the Demised Premises by a date
subsequent to the expiration or sooner determination
of the term as a condition of any planning permission
which may have been granted to the Tenant
3.18.3.5 Within 10 working days after receiving notice of the
same to give full particulars to the Landlord of any
notice or order or proposal for a notice or order
made given or issued to the Tenant by any competent
authority under or by virtue of the
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Planning Acts and if so required by the Landlord to
produce such notice order or proposal to the Landlord
3.18.3.6 At the request of the Landlord or the Superior Lessor
to make or join with the Landlord or the Superior
Lessor in making such objection or representation
against or in respect of any notice or order or
proposal for a notice or order as aforesaid as the
Landlord (acting reasonably) or the Superior Lessor
shall deem expedient
3.18.3.7 If called upon so to do to produce to the Landlord
and the Superior Lessor or their respective Surveyors
all such plans documents and other evidence as the
Landlord or the Superior Lessor may reasonably
require in order to satisfy themselves that the
provisions of this Clause have been complied with
3.19 To Transmit and Give Notices
Upon receipt of any notice order requisition direction or other thing or
upon the happening of any occurrence which may be capable of adversely
affecting the interest of the Landlord or the Superior Lessor in the
Demised Premises forthwith on becoming aware thereof to deliver full
particulars thereof to the Landlord
3.20 Sale or Reletting Notices
To permit the Landlord and the Superior Lessor and their respective
agents at any time during the last six months of the Term to fix and
retain in a conspicuous and reasonable place or places on the exterior
of the Demised Premises but not so as to obscure the windows thereof a
notice or notices that the same are to let or at any time during the
Term so to fix and retain a notice or notices that the same are for sale
and not to take down or obscure any such notice and to permit all
persons authorised in writing by the Landlord or the Superior Lessor or
their agents to
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view the Demised Premises at reasonable hours in the daytime without
interruption
3.21 To Pay Costs
To pay on demand the Landlord's and the Superior Lessor's reasonable
legal expenses and agents' and Surveyor's fees (including disbursements
and stamp duties) on all licences and the duplicate copies thereof
resulting from all applications by the Tenant for any consent or
approval of the Landlord or the Superior Lessor or their respective
agents or Surveyors required by these presents including charges fees
and disbursements actually and reasonably incurred in cases where
consent is refused or the application is withdrawn for any reason
whatsoever
3.22 To Indemnify
To indemnify and keep indemnified the Landlord and the Superior Lessor
in respect of:
3.22.1 All actions proceedings costs claims and demands which may
properly be made by any adjoining owner tenant or occupier
whatsoever by reason of any breach by the Tenant of its
repairing obligations contained herein (not resulting from the
occurrence of any of the Insured Risks) or in the execution of
any alterations or additions to the Demised Premises by the
Tenant or any interference or alleged interference by the Tenant
or obstruction by the Tenant of any right or alleged right of
light air drainage or other right or alleged right now existing
for the benefit of the Demised Premises or any adjoining or
neighbouring property or any stoppage of drains used by the
Tenant in common with the owner or occupier of any adjoining or
neighbouring property
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3.22.2 All liability which may be incurred by the Landlord or the
Superior Lessor in respect of any of the matters referred to in
sub-clause 3.23.1 of this Clause 3
3.23 To Yield Up
At the expiration or sooner determination of the Term (howsoever the
same may be determined) quietly to yield up unto the Landlord the
Demised Premises with the fixtures and fittings thereto and additions
thereto in good and substantial repair and condition and decorated and
in all respects in accordance with the covenants on the part of the
Tenant herein contained together with all improvements and additions
which now are or may at any time thereafter be in or about the Demised
Premises (except any Tenant's or trade fixtures and fittings) unless
required by the Landlord giving at least six months written notice to
the Tenant to remove the same and reinstate the Demised Premises to its
previous condition as at the date hereof and to remove every moulding
sign writing or printing of the name and the business of the Tenant or
other occupiers from the Demised Premises and to make good all damage
caused to the Demised Premises by the removal of the Tenant's fixtures
fittings furniture and effects to the Landlord's reasonable satisfaction
and to leave the Demised Premises in a clean and tidy condition
3.24 To Pay Interest
To pay interest at 3% above the base rate for the time being of National
Westminster Bank Plc (or such rate as shall be reasonably equivalent
thereto if such rates shall no longer exist) as well before as after any
judgement upon any rent or other sums remaining unpaid for a period of
fourteen days after the sum shall have become due hereunder such
interest to be paid in respect of the period from the date upon which
any such rent or other sums become due until the date of actual payment
thereof
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3.25 To Indemnify Landlord
So far as such provisions relate to the Demised Premises and observance
is not the responsibility of the Landlord hereunder to indemnify the
Landlord in respect of any breach or non observance by the Tenant of any
of the provisions of an underlease dated 22 February 1957 made between
Hope Brothers Limited of the one part and Thomas De La Rue and Company
Limited of the other part and of the Headlease (copies whereof have been
supplied to the Tenant prior to the date hereof) insofar as breach or
non observance thereof exposes or might expose the Landlord to any
liability whether to the Superior Lessor or otherwise
4. LANDLORD'S COVENANTS
The Landlord hereby covenants with the Tenant:
4.1 Quiet Enjoyment
That the Tenant paying the rents hereby reserved and performing and
observing the several covenants conditions agreements and provisions
herein contained and on the Tenant's part to be performed and observed
shall and may hold and enjoy the Demised Premises during the term
without any lawful interruption by the Landlord or any person rightfully
claiming through it
4.2 To Pay Rents
To pay the rents reserved by the Headlease under which the Landlord
holds the Demised Premises and to observe and perform all the covenants
agreements and provisions on the lessee's part contained in the said
Headlease except insofar as the Tenant is liable to observe and perform
the same hereunder
4.3 To Observe Headlease
To use its reasonable endeavours to secure the observance and
performance of the covenants on the part of the lessor contained in the
Headlease under which the Landlord holds the Demised Premises
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4.4 To Provide Services
To procure the provision of the Services save that the Landlord shall
not be liable for:
4.4.1 Any interruption of any of the Services to enable inspection
maintenance or other necessary works to be carried out (provided
that the Landlord restores the Service as soon as reasonably
practicable)
4.4.2 Any failure of any of the Services owing to breakdown damage
weather interruption of fuel or other supply or any other cause
outside the Landlord's reasonable control (provided that the
Landlord restores the Service as soon as reasonably practicable)
Provided That any such interruption or failure could not
reasonably have been prevented or shortened by the exercise of
proper care attention diligence and skill by the Landlord or
those undertaking the Services on behalf of the Landlord and the
Landlord uses and continues to use its reasonable endeavours to
restore the Services in question
4.4.3 The removal of or failure to provide any of the Services which
the Landlord reasonably considers no longer appropriate and
which removal or failure complies with the principles of good
estate management provided that this sub-clause 4.4.3 shall not
be construed as relieving the Landlord from its obligations to
observe and perform all the covenants agreements and provisions
on the lessee's part contained in the Headlease under which the
Landlord holds the Demised Premises as detailed in Clause 4.2
4.4.4 The act neglect or default of any employee agent or contractor
of the Landlord or of any other person intended to provide any
of the Services provided that this sub-clause 4.4.4 shall not be
construed as relieving the Landlord from liability for breach by
the Landlord of any covenants on the part of the Landlord
contained in this Underlease
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4.4.5 To provide during the Permitted Hours central heating to the
Demised Premises for the period 1 October in each year to 30
April in the following year to such temperatures as the Landlord
may from time to time reasonably consider adequate and to
provide cold water and (during the Permitted Hours) hot water to
the wash basins in the toilets in the Demised Premises
5. PROVISOS
It is hereby agreed and declared between the parties as follows:
5.1 For Re-entry
If and whenever during the term the rents hereby reserved or any part
thereof shall at any time be in arrears or unpaid for 21 days after the
same shall have become due (whether lawfully demanded or not) or if
there shall be any breach or non-performance or non-observance of any of
the covenants agreements or conditions on the part of the Tenant herein
contained or if the Tenant shall enter into liquidation (not being for
the purpose of and followed by an amalgamation or reconstruction) or if
the Tenant being an individual shall become bankrupt or have a receiving
order made against him or enter into any arrangement or composition for
the benefit of his creditors or permit any execution to be levied on the
Demised Premises then and in any such case it shall be lawful for the
Landlord or any person duly authorised by it in that behalf at any time
thereafter into and upon the Demised Premises or any part thereof in the
name of the whole to re-enter and thereupon and thenceforth the Term
shall absolutely cease and determine but without prejudice to any rights
or remedies which may then have accrued to the Landlord in respect of
the non-payment of the said rents or any breach or nonperformance or
non-observance of any of the covenants conditions and agreements herein
reserved and contained
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5.2 Landlord not Liable
5.2.1 Subject to proper performance of its obligations hereunder the
Landlord shall not be liable for any injury or damage caused to
any person or property by the state or condition of the Demised
Premises or the fixtures and fittings in or about the same or
the use thereof whether arising by accident or by reason of any
negligence or other act or omission of the Tenant or of any
person or persons employed by it (but not in any event being the
occurrence of any insured risk) arising from a breach of the
Tenant's obligations and covenants hereunder or arising from the
actions of the Tenant or occupiers of the Demised Premises under
the Tenant's control
5.2.2 Nothing herein shall render the Landlord or the Tenant liable in
respect of any of the covenants conditions or provisions
hereinbefore contained if and so far only as the performance or
observance of such covenants conditions and provisions or any
one or more of them shall thereafter become a contravention of
or otherwise impossible or illegal under or by virtue of the
Planning Acts but subject as aforesaid the Term and the rents
payable to the Landlord in respect thereof shall not determine
by reason only of any changes modifications or restrictions of
user of the Demised Premises or obligations or requirements (if
any) hereafter to be made or imposed under or by virtue of the
said Acts
5.3 No Easements Granted
Nothing herein contained shall by implication of law or otherwise
operate or be deemed to confer upon the Tenant any easement right or
privilege whatsoever over or against any adjoining or neighbouring
property (other than the remainder of the Building) which now belongs or
hereafter shall belong to the Landlord or the Superior Lessor either for
an estate in fee simple or for a term of years which would or might
restrict or prejudicially affect the future rebuilding alteration or
development of such adjoining or neighbouring property and the Landlord
and the
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Superior Lessor shall have the right at any time to make such alteration
to or to pull down and rebuild or redevelop any adjoining or
neighbouring property (other than the remainder of the Building) as they
may deem fit without obtaining any consent from or making any
compensation to the Tenant on account thereof
5.4 Suspension of Rent and Frustration
5.4.1 If the Demised Premises or any part thereof shall at any time be
destroyed or so damaged by an insured risk as to be unfit for
occupation or use or the Building or any part thereof shall at
any time be destroyed or so damaged by an insured risk so as to
render the Demised Premises or any part thereof unfit for
occupation or use or inaccessible then the rent hereby reserved
or a fair and just proportion thereof according to the nature
and extent of the damage sustained shall from and after such
destruction or damage and until the Demised Premises or the
Building have been rebuilt or reinstated and made fit for
occupation and use and accessible or for a period of three years
(whichever shall be the shorter) be suspended and cease to be
payable provided that any dispute as to the amount or length of
such suspension shall be determined by an independent surveyor
(acting as an expert) appointed by the President of the Royal
Institution of Chartered Surveyors on the application of either
party
5.4.2 If upon the expiry of a period of three years commencing on the
date of the damage or destruction to the Demised Premises or the
Building the Demised Premises and the Building have not been
rebuilt or reinstated and made fit for occupation and use and
the Demised Premises have not been rendered accessible the
Tenant or Landlord may by notice served at anytime within six
months of the expiry of such period determine this Underlease
and upon service of such notice the term will absolutely cease
but without prejudice to any rights and remedies that may have
accrued to
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either party against the other in respect of any antecedent
claim or breach of covenant
5.5 Occupiers Liability and Defective Premises
The Landlord shall not be liable to any person other than the Tenant to
perform any of the covenants herein contained whether express or implied
insofar as such covenants impose obligations going beyond the common
duty of care imposed by the Occupiers Liability Act 1957 or the
Defective Premises Act 1972 or any amending Act
5.6 Disputes
Save as otherwise herein provided all disputes or differences which may
arise touching the provisions hereof or the operation or construction
hereof or the rights or liabilities of the parties hereunder shall be
referred to arbitration by a single arbitrator under the provisions of
the Arbitration Act 1996
5.7 Notices
Any notice under this Underlease shall be in writing and shall be
sufficiently served sent by recorded delivery to the registered office
(if any) or (if there is none) the last known address in Great Britain
or Ireland (whether the Republic of Ireland or Northern Ireland) of the
person to be served. Any notice so sent by post shall be deemed to have
been duly served at the expiration of forty eight hours after the time
of posting unless the same shall have been returned through the Post
Office undelivered
5.8 VAT
Where any party to this Underlease makes a taxable supply under or in
connection with this Underlease to any other party to this Underlease
then the party receiving the taxable supply shall in addition to
receiving the taxable supply pay Value Added Tax on such supply at the
appropriate rate
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5.9 New Lease
This Underlease is a new lease for the purposes of the 1995 Act
6. EXCLUSION
It is hereby agreed and declared that pursuant to any order (number MY9
69495) of the Mayor's and City of London Court made on 19th July 1999
Sections 24 to 28 (inclusive) of the Landlord and Tenant Act 1954 shall
not apply to this Lease
7. OPTION TO DETERMINE
7.1 The Tenant may determine this Underlease at any time after 3rd May 2000
by giving to the Landlord not less than six months' prior written notice
("Notice") of such determination and if such notice is given and if the
Tenant shall up to the expiry of the Notice have paid the rent first
reserved in accordance with this Lease and fully complied with clause
3.23 of this Lease then on the expiry of the Notice this Lease shall
absolutely determine and be of no further effect but such determination
shall be without prejudice to the rights of either party in respect of
any antecedent claim or breaches of covenant or condition hereunder
7.2 The Landlord may determine this Underlease at any time after 3rd May
2000 by giving to the Tenant not less than six months' prior written
notice and if such notice is given then on expiry of that notice this
Lease shall absolutely determine and be of no further effect but such
determination shall be without prejudice to the rights of either party
in respect of any antecedent claim or breaches of covenant or condition
hereunder
EXECUTED as a Deed by the parties on the date which first appears in this
Underlease
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THE FIRST SCHEDULE
The Demised Premises
All those premises comprising (being approximately 5.662 sq ft) the first floor
of the Building as the same are registered with other parts of the Building at
HM Land Registry with Good Leasehold Title under Title number NGL 348493 and are
delineated and edged pink on plan number 4 annexed hereto together with all
fixtures and fittings in the nature of Landlords fixtures and fittings together
also with the appurtenances thereto but excluding:
1. the structure of the walls bounding such premises
2. all load bearing walls and pillars within such premises
3. all structural floor slabs within such premises
4. all conducting media within such premises not serving the same
5. all structural parts of the Building
But including:
1. the plaster and other finishes on the inner sides of the walls bounding
such premises and on all internal surfaces of all load bearing walls and
pillars wholly within such premises
2. all ceiling finishes and other finishes applied to the floor immediately
above such premises and to any floor slabs within such premises but shall
not extend to anything above them
3. all floors floor screeds and other finishes applied to the floor slab
immediately below such premises but shall not extend to anything below
them
4. all doors windows and roof lights of such premises together with the
frames glass and furniture thereof
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5. the whole of all non-load bearing walls or partitions wholly within such
premises
6. all conducting media within such premises and which exclusively serve the
same
29
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[GRAPHIC]
ADIA HOUSE 1st FLOOR
NOTE!
DO NOT SCALE
FOR IDENTIFICATION PURPOSES ONLY
Plan 4
<PAGE>
THE SECOND SCHEDULE
Rights Granted
1. The free passage and running of water soil gas electricity and other
services (so far as the Landlord can grant the same) in common with the
Landlord and all others similarly entitled through all the pipes wires
lines and conduits and other conducting media conveying the same in over
and under the remainder of the Building and the right for the Tenant with
or without workmen and others at all reasonable times (and in case of
emergency at any time) to enter upon such other parts of the Building for
the purpose of carrying out any repairs or alterations to any such pipes
wires lines conduits and other conducting media as exclusively serve the
Demised Premises the Tenant making good all damage to such other parts as
is thereby occasioned but reserving unto the Landlord and the Superior
Lessor the free passage of water and soil from any other building or land
of the Landlord or the Superior Lessor through the channel sewers etc
detailed in paragraph 1 of the Third Schedule
2. A right of way at all times for the purpose of obtaining access and egress
from the Demised Premises over the staircases passage ways lifts fire
escapes and other common areas forming part of the Building
3. The right (so far as the Landlord can grant the same) to subjacent and
lateral support from any premises of the Landlord or the Superior Lessor
actually affording the same at the date of this Underlease
4. The right to enter upon any neighbouring or adjoining premises in the
Building falling within the Headlease for the purposes of complying with
the covenants on the part of the Tenant herein contained or making any
authorised alterations or additions to the Demised Premises in accordance
with the reasonable requirements of the Landlord
30
<PAGE>
THE THIRD SCHEDULE
Rights Reserved
1. The free and uninterrupted use (in common with the Tenant and all others
for the time being thereto entitled) of all water and soil pipes drains
gas pipes electricity wires and other pipes mains wires and apparatus now
or for the time being passing under over within or through the Demised
Premises and serving the remainder of the Building or any other buildings
or lands of the Landlord or the Superior Lessor
2. The right to execute such works and erections upon and to use the
remainder of the Building or any other buildings or lands of the Landlord
or the Superior Lessor contiguous or near to the Demised Premises as the
Landlord or Superior Lessor shall think fit notwithstanding that the
access of light and air to the Demised Premises may thereby be interfered
with
3. The right of support shelter and protection for the remainder of the
Building and any other buildings or lands of the Landlord or the Superior
Lessor contiguous or near to the Demised Premises
4. The right to enter upon the Demised Premises for any and all of the
purposes mentioned in the Underlease
5. The rights granted to the Transferee by a Deed of Transfer and Surrender
dated 30 March 1972 a copy of which is annexed hereto
31
<PAGE>
DUPLICATE
[GRAPHIC]
H.M. LAND REGISTRY
LAND REGISTRATION ACTS 1925 to 1966
ADMINISTRATIVE AREA: GREATER LONDON
PLACE: CITY OF WESTMINSTER
TITLE NUMBER: LN.147700
PROPERTY: 84 and 86 REGENT STREET AND
19 and 21 GLASSHOUSE STREET
DATED 30th March 1972.
1. IN consideration of ONE HUNDRED THOUSAND POUNDS ((pound)100,000) (the receipt
whereof is hereby acknowledged) and of the release and of the covenants
hereinafter contained WE, THE DE LA RUE COMPANY LIMITED (formerly known as
Thomas De La Rue & Company Limited) whose Registered Office is at 84/86 Regent
Street London W.1. (hereinafter called "the Transferor") as Beneficial Owner
HEREBY TRANSFER AND SURRENDER unto TEE SCOTCH HOUSE LIMITED whose Registered
Office is at 18/22 Haymarket London S.W.1. (hereinafter called "the Transferee")
ALL THOSE parts of the basement of the premises comprised in the Registered
Leases more particularly delineated and edged green on the plan annexed hereto
including the staircase leading from the Glasshouse Street entrance to the said
premises to the basement (hereinafter called "the Surrendered premises") and
being part of the premises comprised in the Registered Leases for the residue of
the
<PAGE>
terms granted by the Registered Leases TO THE INTENT that the said terms so far
as they concern the Surrendered Premises may merge and be extinguished in the
reversion immediately expectant thereon which is registered under Title Number
LN.125565 of which the Transferee is the Registered Proprietor Together with the
following rights for the Transferee and its successors in title namely
(a) the right in case of emergency only to use the area shown coloured
yellow on the said plan from the staircase to the entrance doors leading
to Regent Street and
(b) the right to the use of the area shown coloured yellow hatched black
on the said plan for the purpose of gaining, access to the Surrendered
premises from the entrance to the premises comprised in the Registered
Leases in Glasshouse Street But Reserving unto the Transferor and its
successors in title
(a) the right to pass and repass over and along the staircase and passage
way shown coloured pink on the said plan for the purpose of gaining access
to those parts of the said basement shown coloured blue on the said plan
still comprised in the Registered Leases and
(b) the free and uninterrupted use (in common with the Transferee and all
others for the time being entitled) of all water and soil pipes drains gas
pipes electricity wires and other pipes mains
<PAGE>
[GRAPHIC]
- --------------------------------------------------------------------------------
AMENDMENTS
- --------------------------------------------------------------------------------
DESCRIPTION DATE
- --------------------------------------------------------------------------------
A. SERVICE AREA LAYOUT [ILLEGIBLE]
- --------------------------------------------------------------------------------
B. STAIRCASE [ILLEGIBLE] [ILLEGIBLE]
- --------------------------------------------------------------------------------
C. SERVICE LAYOUT [ILLEGIBLE]
- --------------------------------------------------------------------------------
D. REVISED STAIRCASES [ILLEGIBLE]
- --------------------------------------------------------------------------------
E.
- --------------------------------------------------------------------------------
F.
- --------------------------------------------------------------------------------
G.
- --------------------------------------------------------------------------------
H.
- --------------------------------------------------------------------------------
I.
- --------------------------------------------------------------------------------
J.
- --------------------------------------------------------------------------------
K.
- --------------------------------------------------------------------------------
L.
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
LOCATION & PROJECT.
SCOTCH HOUSE
84/86 REGENT STREET
LONDON W.1.
- --------------------------------------------------------------------------------
DRAWING TITLE.
PROPOSED ALTERATIONS
[ILLEGIBLE]
- --------------------------------------------------------------------------------
SCALE. DRAWN BY.
[ILLEGIBLE] [ILLEGIBLE]
- --------------------------------------------------------------------------------
DATE. CHECKED BY.
24TH DEC '71
- --------------------------------------------------------------------------------
GREAT UNIVERSAL STORES LTD.
CENTRAL ESTATE DEPARTMENT
UNIVERSAL HOUSE
261-6 TOTTENHAM COURT RD LONDON
[ILLEGIBLE]
- --------------------------------------------------------------------------------
TELEPHONE NO. 01-638-4080
- --------------------------------------------------------------------------------
NOTE.
1. ALL DIMENSIONS HERE SHOWN MUST BE CHECKED ON SITE
- --------------------------------------------------------------------------------
<PAGE>
3. IT IS HEREBY AGREED AND DECLARED by and between the parties hereto that the
Registered Leases shall henceforth be varied in manner following that is to
say:-
(a) by the substitution of "four-sixths" for "five-sixths" in sub-clause
(a) of Clause 1
(b) by the substitution of "four-sixths" for "five-sixths" as the
proportion of the amount which the Transferee may be called upon to pay
under the terms of the said Leases comprised in Title Number LN.125565 as
mentioned in the Registered Leases payable by the Transferor as the rent
thirdly reserved by the Registered Leases
(c) by the substitution of "thirty-five per cent" for "twenty-eight and
three-quarters per cent" in sub-clause (a) of Clause 2 (xxiv) (iii) of the
Registered Leases
(d) Clause 2 (xxiv) (i) of the Registered Leases shall from the date
hereof apply to the supply by the Transferor to the Surrendered premises
of the said hot water supply (as defined by Clause 2(xxiv)(i) of the
Registered Leases) as well as to the premises coloured blue on the plan
marked 'B' attached to the Registered Leases
4. THE Transferee hereby releases and discharges the Transferor from all
liability claims and demands in respect of all breaches of any of the covenants
contained in or otherwise arising under the Registered Leases in so far only as
they relate to the Surrendered premises
<PAGE>
wires and apparatus now or for the time being passing over under within or
through the Surrendered premises and serving the premises remaining
comprised in the Registered Leases
2. THE Transferee hereby covenants with the Transferor as follows namely
(a) At its own expense by the First day of May One thousand nine hundred
and seventy two to execute the works detailed in the Schedule hereto to the
reasonable satisfaction of the Transferor's Surveyor
(b) Not at any time during the term granted by the Registered Leases to
use the Surrendered premises as a place of public entertainment cinema (other
than the existing cinema for the Transferee's own use) theatre club betting shop
restaurant or cafe (except a restaurant cafe or canteen for the Transferee's
customers or staff) but to use the Surrendered premises as a retail shop
showroom or warehouse or for the purpose of storage with ancillary offices
(c) Not at any time during the terms granted by the Registered Leases to
keep or permit to be kept any goods of any objectionable or dangerous nature in
the Surrendered premises and that if the insurance premium in respect of the
Transferor's Insurance of the building known as 84/86 Regent Street and 19/21
Glasshouse Street London W.1. shall be increased by virtue of the nature of the
goods so kept or stored in the Surrendered premises the Transferee will pay all
such increase and
<PAGE>
the parties hereto that the rents reserved by the Registered Leases shall
continue to be payable by the Transferor and (except as hereby varied) that all
the covenants and conditions and the provisos for re-entry therein contained
shall continue in full force in relation to the premises remaining subject to
the Registered Leases as if such premises had alone been comprised in the
Registered Leases
6. THE Transferee hereby applies to the Registrar to make the necessary entries
and cancellations on the Registers of Titles Numbered LN.147700 and LN.125565 in
order to give effect to the Surrender herein contained
THE SCHEDULE above referred to
1. The removal of the existing staircase leading from the ground floor to the
basement at the Regent Street entrance to the premises comprised in the
Registered Leases and the construction of a new staircase at the position
indicated by the letter 'A' on the said plan attached hereto such new staircase
to be fully enclosed at ground floor level but with a panic door at the top
2. The construction of a shutter security door over the staircase leading to the
upper floors of the premises comprised in the Registered Leases at the position
indicated by the letter 'B' on the plan attached hereto
3. The provision by the Transferee of four Stratford Fire Resisting Safes Type
Number 5321D and their installation in the room indicated on the plan attached
<PAGE>
hereto as "the new strongroom"
[GRAPHIC] (THE COMMON SEAL of THE DE
(LA RUE COMPANY LIMITED was
(hereunto affixed in the
(presence of:-
/s/ [ILLEGIBLE]
Director
/s/ [ILLEGIBLE]
Secretary
[GRAPHIC] (THE COMMON SEAL of THE
(SCOTCH HOUSE LIMITED was
(hereunto affixed in the
(presence of:-
Directors /s/ [ILLEGIBLE]
/s/ [ILLEGIBLE]
Secretary /s/ [ILLEGIBLE]
<PAGE>
THE FOURTH SCHEDULE
Service Charge
1. In this Schedule the following words and expressions shall have the
following meanings unless the context requires otherwise:
"Account Date" 31 December in each year or such other date as the
Landlord may stipulate and as the case may be the date of determination
of the term
"Account Period" the period from and including the commencement of the
term or an Account Date (as the case may be) up to and including the day
before the next Account Date
"Account Statement" a statement certified by a qualified surveyor or
accountant setting out the relevant Account Period the Total Expenditure
for that period the Service Charge Proportion the Advance Service Charge
paid and the balance of Service Charge due from or any refund due to the
Tenant for the relevant Account Period
"Advance Service Charge" a payment on account of the Service Charge being
such sum as the Landlord may reasonably demand having regard to actual
and anticipated Costs
"Building" that part of the Building comprised in and demised by the
Headlease
"Costs" the aggregate cost actually and properly incurred by the Landlord
in providing the Services or managing the Building including (but not
limited to):
(i) rates taxes and outgoings payable in respect of the Retained
Property (or any part of it) Excluding any payable by the Landlord
occasioned by receipt of rents or by any disposition of dealing
with or ownership of any interest reversionary to the interest
created by this Underlease or of the Building
32
<PAGE>
(ii) the cost of all fuel supplies used for the provision of the
Services
(iii) the cost of employing staff (whether directly or not) necessary to
provide the Services including (but not limited to) insurance
pension and welfare contributions provision of clothing tools
equipment and non-residential accommodation reasonably provided
(such accommodation if within the Building to be valued by a
qualified surveyor at a notional rent equivalent to the open
market rent)
(iv) the cost of the reasonable and proper provision maintenance and
renewal (for the purposes of repair) of all equipment and supplies
required to provide the Services
(v) the cost of all maintenance rental and other contracts entered
into in connection with the provision of the Services
(vi) all reasonable and proper contributions to roads service media
walls and other facilities available to or enjoyed by the Building
in common with any other property
(vii) the reasonable and properly incurred fees of all managing agents
retained in connection with the provision of the Services and the
management of the Building and the collection of rent and Service
Charge payments (or a reasonable charge where the Landlord carries
out such tasks itself)
(viii) the reasonable and properly incurred cost of preparing and
auditing the Service Charge accounts
(ix) the reasonable and properly incurred cost of obtaining
professional advice required in respect of the management of the
Building and the provision of the Services
(x) any value added tax as charged on the Costs save insofar as
recoverable by the Landlord
33
<PAGE>
(xi) the reasonable and properly incurred cost of complying with or
reasonably contesting the requirements of any Authority in
relation to the Retained Property or the provision of the Services
(xii) any payment made by the Landlord to the Superior Lessor under
Clause 2 after the word "THIRDLY" in the Headlease Provided That
there shall be excluded from the Costs any fees charges or
expenses whatsoever incurred in connection with:
(i) conducting of any rent review with any tenant in the
Building
(ii) the enforcement of covenants of the other tenants or
occupiers of the Building
(iii) the letting or reletting or disposal of other parts of the
Building
(iv) the initial cost of providing any of the items referred to
in the definition of "Costs" and "Services"
(v) any costs or expenses arising from damage by any of the
Insured Risks
(vi) any costs in respect of any part of the Building for which
any other tenant is wholly responsible or which are
attributable to or arise in respect of Lettable Premises
(vii) the capital costs of any enhancement (but not repair) of
any part of the Building
"Service Charge Proportion" such proportion reasonably and properly
attributable to the Demised Premises as the Landlord shall reasonably and
properly determine as attributable to the Demised Premises from time to
time
"Retained Property" all parts of the Building which are not Lettable
Premises
34
<PAGE>
"Lettable Premises" the parts of the Building which are let to or
intended to be let to or are otherwise exclusively occupied or intended
to be exclusively occupied by a third party for a consideration or which
are occupied by the Landlord
"Services" all Services reasonably and properly appropriate to the
management and maintenance of the Building in accordance with the good
standards of current estate management including:
(i) decorating cleaning inspection maintenance and repair of the
Building (including replacement of parts (where necessary for the
purposes of repair) where appropriate) excluding the Lettable
Premises
(ii) cleaning and lighting of the Retained Property and refuse disposal
(iii) redecorating and re-equipping the Retained Property and providing
and maintaining all reasonable decorative features (including
planting and seasonal decoration)
(iv) maintaining any facilities for the amenity of the Building
including (but not limited to) heating and ventilation security
and fire safety systems and lifts which are required from time to
time as a matter of legal obligation provided such facilities are
capable of being enjoyed by the occupier of the Demised Premises
and are for the benefit of the tenants at the Building and are in
keeping with the principles of good estate management
(v) all compliance with the lawful requirements or recommendations of
any Authority or any insurer
(vi) insurance of the Retained Property (insofar as not covered by the
insurance effected by the Superior Lessor) and such other
insurance in relation to the management of the Building as the
Landlord may reasonably consider prudent
35
<PAGE>
"Total Expenditure" the aggregate costs reasonably and properly incurred
by the Landlord during the relevant Account Period net of any sums
received (otherwise than by way of a service charge) which are properly
applicable towards the cost of providing the Services
2. The Tenant covenants with the Landlord to pay to the Landlord by equal
instalments in advance on each quarter day during the term the Advance
Service Charge
3. As soon as practicable after each Account Date the Landlord will submit
to the Tenant an Account Statement for the Account Period ending on the
relevant Account Date
4. If the Account Statement shall show a balance of Service Charge due from
the Tenant for the Account Period the Tenant shall pay such balance to
the Landlord within 14 days of receipt of the Account Statement
5. If the Account Statement shall show that a refund is due to the Tenant
that refund shall be set off against the Advance Service Charge for the
next Account Period or any other sums due to the Landlord under the terms
of this Lease and if the Lease shall determine then any refund remaining
due to the Tenant shall be paid by the Landlord to the Tenant within 14
days of delivery of the Account statement or any other sums due to the
Landlord under the terms of this Lease
6. The provisions of this Schedule shall continue to have effect after the
date of determination of the term but only in respect of Service Charge
expenditure incurred in relation to the term
36
<PAGE>
THE COMMON SEAL of FORWARD )
PUBLISHING LIMITED was hereunto )
affixed in the presence of: )
Director /s/ [ILLEGIBLE]
Secretary /s/ J.M. Quade
37
<PAGE>
EXHIBIT 10.16
CREDIT AGREEMENT
DATED AS OF JANUARY 6, 1999
AMONG
BRONNER SLOSBERG HUMPHREY, LLC
and
STRATEGIC INTERACTIVE GROUP, LLC,
as Borrowers,
THE LENDERS LISTED HEREIN,
as Lenders,
BANKERS TRUST COMPANY,
as Administrative Agent,
FLEET NATIONAL BANK,
as Documentation Agent
and
BANKBOSTON, N.A.,
as Syndication Agent
ARRANGED BY:
BT ALEX.BROWN INCORPORATED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS.......................................................................... 2
1.1 Certain Defined Terms................................................................ 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement... 29
1.3 Other Definitional Provisions and Rules of Construction ............................. 29
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS........................................... 29
2.1 Commitments; Making of Loans; the Register; Notes.................................... 29
2.2 Interest on the Loans................................................................ 37
2.3 Fees................................................................................. 41
2.4 Repayments, Prepayments and Reductions in Commitments; General Provisions Regarding
Payments............................................................................. 42
2.5 Use of Proceeds...................................................................... 49
2.6 Special Provisions Governing Eurodollar Rate Loans................................... 50
2.7 Increased Costs; Taxes; Capital Adequacy............................................. 52
2.8 Obligation of Lenders and Issuing Lenders to Mitigate; Replacement of Lender......... 56
SECTION 3. LETTERS OF CREDIT.................................................................... 58
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein........ 58
3 2 Letter of Credit Fees................................................................ 60
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit................... 61
3.4 Obligations Absolute................................................................. 63
3.5 Indemnification; Nature of Issuing Lenders' Duties................................... 64
3.6 Increased Costs and Taxes Relating to Letters of Credit.............................. 65
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT............................................ 66
4.1 Conditions to Term Loans and Initial Revolving Loans and Swing Line Loans............ 67
4.2 Conditions to All Loans.............................................................. 72
4.3 Conditions to Letters of Credit...................................................... 73
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES............................................. 74
</TABLE>
i
<PAGE>
BRONNER SLOSBERG HUMPHREY, LLC
STRATEGIC INTERACTIVE GROUP, LLC
CREDIT AGREEMENT
Document Tab No.
- -------- -------
CREDIT AGREEMENT...................................................... 1
EXHIBITS TO CREDIT AGREEMENT
I FORM OF NOTICE OF BORROWING................................. 2
II FORM OF NOTICE OF CONVERSION/CONTINUATION................... 3
III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT............ 4
IV FORM OF TERM NOTE........................................... 5
V FORM OF REVOLVING NOTE...................................... 6
VI FORM OF SWING LINE NOTE..................................... 7
VII FORM OF COMPLIANCE CERTIFICATE.............................. 8
VIII FORM OF OPINION OF COMPANY COUNSEL.......................... 9
IX FORM OF OPINION OF O'MELVENY & MYERS LLP.................... 10
X FORM OF ASSIGNMENT AGREEMENT................................ 11
XI FORM OF CERTIFICATE RE NON-BANK STATUS...................... 12
XII FORM OF FINANCIAL CONDITION CERTIFICATE..................... 13
XIII FORM OF COLLATERAL ACCOUNT AGREEMENT........................ 14
XIV FORM OF COMPANY PLEDGE AGREEMENT............................ 15
XV FORM OF COMPANY SECURITY AGREEMENT.......................... 16
XVI FORM OF SUBSIDIARY GUARANTY................................. 17
XVII FORM OF SUBSIDIARY PLEDGE AGREEMENT......................... 18
XVIII FORM OF SUBSIDIARY SECURITY AGREEMENT....................... 19
XIX FORM OF HOLDINGS GUARANTY................................... 20
XX FORM OF HOLDINGS PLEDGE AGREEMENT........................... 21
SCHEDULES............................................................. 22
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5.1 No Change................................................. 74
5.2 Existence; Compliance with Law............................ 74
5.3 Corporate Power; Authorization; Enforceable Obligations... 74
5.4 No Legal Bar.............................................. 75
5.5 No Material Litigation.................................... 75
5.6 No Default................................................ 75
5.7 Ownership of Property, Liens.............................. 76
5.8 Intellectual Property..................................... 76
5.9 No Burdensome Restrictions................................ 76
5.10 Taxes..................................................... 77
5 11 Federal Regulations....................................... 77
5.12 ERISA..................................................... 77
5.13 Investment Company Act; Other Regulations................. 78
5.14 Environmental Protection.................................. 78
5.15 Accuracy of Information................................... 80
5 16 Security Documents........................................ 80
5.17 Subsidiaries.............................................. 81
5.18 Financial Condition....................................... 82
5.19 Certain Fees.............................................. 83
5.20 Employee Matters.......................................... 83
5.21 Solvency.................................................. 83
5.22 Related Agreements........................................ 83
5.23 Year 2000................................................. 83
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS........................... 83
6.1 Financial Statements and Other Reports.................... 84
6.2 Corporate Existence, etc.................................. 89
6.3 Payment of Taxes and Claims; Tax Consolidation............ 89
6.4 Maintenance of Properties; Insurance...................... 90
6.5 Inspection Rights; Lender Meeting......................... 90
6.6 Compliance with Laws, etc................................. 91
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
6.7 Environmental Disclosure and Inspection; Remedial Action Regarding Hazardous Materials...................... 91
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Subsidiaries and
Future Subsidiaries; Auxiliary Pledge Agreements; Collateral................................................ 92
6.9 Conforming Leasehold Interests; Matters Relating to Additional Real Property Collateral..................... 93
6.10 Interest Rate Protection.................................................................................... 95
6.11 Deposit Accounts and Cash Management Systems................................................................ 95
6 12 BSH Agent Subsidiary........................................................................................ 96
6.13 Year 2000................................................................................................... 96
SECTION 7. COMPANY'S NEGATIVE COVENANTS................................................................................ 96
7.1 Indebtedness................................................................................................ 96
7 2 Liens and Related Matters................................................................................... 97
7 3 Investments; Joint Ventures................................................................................. 98
7 4 Contingent Obligations...................................................................................... 99
7 5 Restricted Junior Payments.................................................................................. 99
7.6 Financial Covenants......................................................................................... 100
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions............................................ 102
7.8 Consolidated Capital Expenditures........................................................................... 103
7.9 Sales and Lease-Backs....................................................................................... 103
7.10 Sale or Discount of Receivables............................................................................. 104
7.11 Transactions with Shareholders and Affiliates............................................................... 104
7.12 Disposal of Subsidiary Stock................................................................................ 104
7.13 Conduct of Business......................................................................................... 104
7.14 Amendments or Waivers of Certain Related Agreements; Amendments of Documents Relating to Subordinated
Indebtedness................................................................................................ 105
7.15 Fiscal Year................................................................................................. 105
SECTION 8. EVENTS OF DEFAULT........................................................................................... 105
8.1 Failure to Make Payments When Due........................................................................... 105
8.2 Default in Other Agreements................................................................................. 106
8.3 Breach of Certain Covenants................................................................................. 106
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
8.4 Breach of Warranty......................................................... 106
8.5 Other Defaults Under Loan Documents........................................ 106
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc....................... 106
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc......................... 107
8.8 Judgments and Attachments.................................................. 107
8.9 Dissolution................................................................ 107
8.10 Employee Benefit Plans..................................................... 107
8.11 Change in Control.......................................................... 108
8.12 Invalidity of Guaranties; Failure of Security; Repudiation of
Obligations................................................................ 108
8.13 Failure to Consummate Reorganization....................................... 108
8.14 Conduct of Business By Holdings............................................ 108
SECTION 9 AGENTS..................................................................... 110
9.1 Appointment................................................................ 110
9.2 Powers and Duties, General Immunity........................................ 111
9.3 Representations and Warranties; No Responsibility For Appraisal
of Creditworthiness........................................................ 112
9.4 Right to Indemnity......................................................... 112
9.5 Successor Administrative Agent and Swing Line Lender....................... 113
9.6 Collateral Documents and Guaranties........................................ 113
SECTION 10. MISCELLANEOUS.............................................................. 114
10.1 Assignments and Participations in Loans and Letters of Credit.............. 114
10.2 Expenses................................................................... 117
10.3 Indemnity.................................................................. 118
10.4 Set-Off; Security Interest in Deposit Accounts............................. 119
10.5 Ratable Sharing............................................................ 119
10.6 Amendments and Waivers..................................................... 120
10.7 Independence of Covenants.................................................. 121
10.8 Notices.................................................................... 122
10.9 Survival of Representations, Warranties and Agreements..................... 122
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative...................... 122
</TABLE>
iv
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
10.11 Marshalling; Payments Set Aside.......................................... 122
10.12 Severability............................................................. 123
10.13 Obligations Several; Independent Nature of Lenders' Rights............... 123
10.14 Headings................................................................. 123
10.15 Applicable Law........................................................... 123
10.16 Successors and Assigns................................................... 123
10.17 Consent to Jurisdiction and Service of Process........................... 124
10.18 Waiver of Jury Trial..................................................... 124
10.19 Confidentiality.......................................................... 125
10.20 Counterparts; Effectiveness.............................................. 125
Signature pages..................................................................... S-1
</TABLE>
v
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT
IV FORM OF TERM NOTE
V FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF COMPLIANCE CERTIFICATE
VIII FORM OF OPINION OF COMPANY COUNSEL
IX FORM OF OPINION OF O'MELVENY & MYERS LLP
X FORM OF ASSIGNMENT AGREEMENT
XI FORM OF CERTIFICATE RE NON-BANK STATUS
XII FORM OF FINANCIAL CONDITION CERTIFICATE
XIII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIV FORM OF COMPANY PLEDGE AGREEMENT
XV FORM OF COMPANY SECURITY AGREEMENT
XVI FORM OF SUBSIDIARY GUARANTY
XVII FORM OF SUBSIDIARY PLEDGE AGREEMENT
XVIII FORM OF SUBSIDIARY SECURITY AGREEMENT
XIX FORM OF HOLDINGS GUARANTY
XX FORM OF HOLDINGS PLEDGE AGREEMENT
vi
<PAGE>
SCHEDULES
1.1 1998 CONSOLIDATED ADJUSTED EBITDA
1.2 TERMS OF MANAGEMENT NOTES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1C CORPORATE AND CAPITAL STRUCTURE; OWNERSHIP; MANAGEMENT
5.7 REAL PROPERTY
5.12 CERTAIN EMPLOYEE BENEFIT PLANS
5.17 SUBSIDIARIES OF COMPANY
5.18 FINANCIAL CONDITION
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS/EXISTING LETTERS OF CREDIT
vii
<PAGE>
"Holdings" means (i) prior to the consummation of the Reorganization each
of BSH Holdings and SIG Holdings and (ii) after the consummation of the
Reorganization, BSH Holdings.
"Holdings Guaranty" means the Holdings Guaranty executed and delivered by
Holdings on the Closing Date, substantially in the form of Exhibit XIX annexed
-----------
hereto, as such Holdings Guaranty may thereafter be amended, supplemented or
otherwise modified from time to time.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement executed
and delivered by Holdings on the Closing Date, substantially in the form of
Exhibit XX annexed hereto, as such Holdings Pledge Agreement may thereafter be
- ----------
amended, supplemented or otherwise modified from time to time.
"Indebtedness", as applied to any Person, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
(X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all
other cases, Investments, and in neither case constitute Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Information Systems and Equipment" means all computer hardware, firmware
and software, as well as other information processing systems, or any equipment
containing embedded microchips, whether directly owned, licensed, leased,
operated or otherwise controlled by the Company or any of its Subsidiaries,
including through third-party service providers, and which, in whole or in part,
are used, operated, relied upon or integral to, the Company's or any of its
Subsidiaries' conduct of their business.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Company and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Company and its Subsidiaries, taken as a whole; provided that
--------
patents, trademarks, tradenames, copyrights, technology, know-how and processes
considered to be work product performed for or acquired on behalf of customers
of Company or its Subsidiaries or which have been assigned or are required to be
assigned to such customer shall not be deemed Intellectual Property.
15
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"Interest Payment Date" means (i) with respect to any Base Rate Loan, each
March 15, June 15, September 15 and December 15 of each year, commencing on the
first such date to occur after the Closing Date, and (ii) with respect to any
Eurodollar Rate Loan, the last day of each Interest Period applicable to such
Loan; provided that in the case of each Interest Period of longer than three
--------
months "Interest Payment Date" shall also include the date that is three months
after the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement to which Company or any of its Subsidiaries is a party.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter, and any successor statute.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Company or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person (including any Subsidiary of Company), (ii) any
direct or indirect redemption, retirement, purchase or other acquisition for
value, by any Subsidiary of Company from any Person other than Company or any of
its wholly-owned domestic Subsidiaries, of any equity Securities of such
Subsidiary, (iii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Company or any of its Subsidiaries to any other Person (other than a wholly-
owned domestic Subsidiary of Company), including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business, or (iv)
Interest Rate Agreements or Currency Agreements not constituting Hedge
Agreements. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
----
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"IP Collateral" means, collectively, the Intellectual Property Collateral
under the Company Security Agreement and the Subsidiary Security Agreement.
"Issuing Lender" means, with respect to any Letter of Credit, the Lender
which agrees or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii), or which has issued any Existing
Letters of Credit.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
--------
that in no event shall any Subsidiary of any Person be considered to be a Joint
Venture to which such Person is a party.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease,
16
<PAGE>
satisfactory in form and substance to Administrative Agent, pursuant to which
such lessor agrees, for the benefit of Administrative Agent, (i) that without
any further consent of such lessor or any further action on the part of the Loan
Party holding such Leasehold Property, such Leasehold Property may be encumbered
pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure
sale or in a transfer in lieu of such a sale (and to a subsequent third party
assignee if Administrative Agent, any Lender, or an Affiliate of either so
acquires such Leasehold Property), (ii) that such lessor shall not terminate
such lease as a result of a default by such Loan Party thereunder without first
giving Administrative Agent notice of such default and at least 60 days (or, if
such default cannot reasonably be cured by Administrative Agent within such
period, such longer period as may reasonably be required) to cure such default,
and (iii) to such other matters relating to such Leasehold Property as
Administrative Agent may reasonably request.
"Leasehold Property" means any leasehold interest of any Loan Party as
lessee under any lease of real property.
"Lender" and "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of this Agreement, together with their successors and
permitted assigns pursuant to subsection 10.1, and-the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires; provided that
--------
the term "Lenders", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.
"Letter of Credit" or "Letters of Credit" means Standby Letters of Credit
issued or to be issued by Issuing Lenders for the account of Company pursuant to
subsection 3.1 and the Existing Letters of Credit.
"Letter of Credit Usage" means, as at any date of determination, the sum of
(i) the maximum aggregate amount which is or at any time thereafter may become
available for drawing under all Letters of Credit then outstanding plus (ii) the
----
aggregate amount of all drawings under Letters of Credit honored by Issuing
Lenders and not theretofore reimbursed by Company.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Term Loans, Revolving Loans or
Swing Line Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of Credit
(and any applications for, or reimbursement agreements or other documents or
certificates executed by Company in favor of an Issuing Lender relating to, the
Letters of Credit), the Guaranties and the Collateral Documents.
"Loan Party" means each of Holdings, Company and any of Company's
Subsidiaries from time to time executing a Loan Document, and "Loan Parties"
means all such Persons, collectively.
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"Management Contracts" means the Employment Agreements entered into by and
between the Company and each of the members of Company's senior management
substantial in the form attached to the Recapitalization Agreement as Annex E
and the Noncompetition and Nonsolicitation Agreement.
"Management Notes" means subordinated notes issued by Company in exchange
for interests in the Trusts (or successor entities of the Trusts) owned by a
member of Company's management which notes are in accordance with the terms and
provisions contained in Schedule 1.2 annexed hereto.
"Margin Determination Certificate" means an Officers' Certificate of
Company delivered pursuant to subsection 6.1(iv) setting forth in reasonable
detail the Consolidate Leverage Ratio for the four-Fiscal Quarter period ending
as of the last day of the Fiscal Quarter immediately preceding the Fiscal
Quarter during which such Officers' Certificate is delivered.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and its Subsidiaries, taken as a whole or (ii) the
impairment in any material respect of the ability of any Loan Party to perform,
or of Administrative Agent or Lenders to enforce, the Obligations; provided that
--------
(i) any payments required to be made by Company as a result of a determination
by a Governmental Authority relating to or resulting from the Section 338(h)(10)
Election (as defined in the Recapitalization Agreement) or the transactions
described in the Recapitalization Agreement or (ii) to the extent disclosed in
the Disclosure Memorandum to the Recapitalization Agreement, any payments
required to be made under the Internal Revenue Service Employee Plan Compliance
Resolution System to rectify the operational errors with regard to the
BSH Employee Savings Plan, shall not, in and of itself, constitute a Material
Adverse Effect.
"Material Contract" means any contract or other arrangement to which
Company or any of its Subsidiaries is a party (other than the Loan Documents)
for which breach, nonperformance, cancellation or failure to renew could have a
Material Adverse Effect; provided that any contracts between Company or any of
--------
its Subsidiaries and a client of Company or any of its Subsidiaries shall only
be deemed a Material Contract if such client generates $5,000,000 or more of
annual revenue for Company or any of its Subsidiaries; provided further that if
-------- -------
Company or its Subsidiaries has contracts with more than one division of a
company which is a client, the revenue generated by all divisions of such
company shall be aggregated for the purposes of determining the materiality of
those contracts.
"Material Leasehold Property" means a Leasehold Property reasonably
determined by Administrative Agent to be of material value as Collateral or of
material importance to the operations of Company or any of its Subsidiaries.
"Material Subsidiary" means any Subsidiary of Company that (i) owns 5% or
more of the assets of Company and its Subsidiaries, measured on a consolidated
basis, or (ii) accounts for 5% or more of Consolidated Net Income.
18
<PAGE>
"Mortgage" means (i) a security instrument (whether designated as a deed of
trust or a mortgage or by any similar title) executed and delivered by any Loan
Party, in such form as may be approved by Administrative Agent in its sole
discretion, in each case with such changes thereto as may be recommended by
Administrative Agent's local counsel based on local laws or customary local
mortgage or deed of trust practices, or (ii) at Administrative Agent's option,
in the case of an Additional Mortgaged Property (as defined in subsection 6.9),
an amendment to an existing Mortgage, in form satisfactory to Administrative
Agent, adding such Additional Mortgaged Property to the Real Property Assets
encumbered by such existing Mortgage, in either case as such security instrument
or amendment may be amended, supplemented or otherwise modified from time to
time. "Mortgages" means all such instruments and any Additional Mortgages (as
defined in subsection 6.9), collectively.
"Mortgaged Property" means an Additional Mortgaged Property (as defined in
subsection 6.9).
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of any reasonable fees and expenses
incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of such
Asset Sale (or receipt of Cash by way of such a deferred prepayment) as a result
of any gain recognized in connection with such Asset Sale and (ii) payment of
the outstanding principal amount of, premium or penalty, if any, and interest on
any Indebtedness (other than the Loans) that is secured by a Lien on the stock
or assets in question and that is required to be repaid under the terms thereof
as a result of such Asset Sale.
"Net Insurance/Condemnation Proceeds" means any Cash payments or proceeds
received by Company or any of its Subsidiaries (i) under any business
interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs incurred by Company or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Company or such Subsidiary in respect thereof.
"New Investor Group" means Hehelman & Friedman Capital Partners III, L.P.,
H&F Orchard Partners III, L.P., H&F International Partners III, L.P., and any
other investors designated by H&F and reasonably satisfactory to Administrative
Agent.
"Noncompetition and Nonsolicitation Agreement" means that certain
Noncompetition. Nonsolicitation and Confidentiality Agreement dated as of
January 6, 1999 by and among BSH, Positano Partners Ltd. and Michael E. Bronner
substantially in the form attached to the Recapitalization Agreement as Annex G.
19
<PAGE>
"Notes" means one or more of the Term Notes, Revolving Notes or Swing Line
Note or any combination thereof.
"Notice of Borrowing" means a notice substantially in the form of Exhibit I
---------
annexed hereto delivered by Company to Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in the
form of Exhibit II annexed hereto delivered by Company to Administrative Agent
----------
pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"Obligations" means all obligations of every nature of each Loan Party
from time to time owed to Administrative Agent, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any limited liability company,
a certificate executed on behalf of such corporation by its chairman of the
board (if an officer), chief executive officer or its president or one of its
vice presidents and by its chief financial officer or its treasurer; provided
--------
that every Officers' Certificate with respect to the compliance with a condition
precedent to the making of any Loans hereunder shall include (i) a statement
that the officer or officers making or giving such Officers' Certificate have
read such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.
"Operating Lease" means, as applied to any Person, any lease (including
leases that may be terminated by the lessee at any time) of any property
(whether real, personal or mixed) that is not a Capital Lease other than any
such lease under which that Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to Section 412 of the Internal Revenue Code or Section
302 of ERISA.
"Permitted Acquisition" means any acquisition of a Person's capital stock
or other equity interests for a consideration consisting of equity interests of
Holdings or Trusts (or any successor entities of the Trusts) or Cash contributed
by H&F for such purposes; provided that such acquired Person is in the same or
--------
related line of business as Company and its Subsidiaries.
"Permitted Encumbrances" means the following types of Liens (excluding any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in connection
with any Environmental Claim, and any such Lien expressly prohibited by any
applicable terms of any of the Collateral Documents):
20
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(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by
subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in each
case incurred in the ordinary course of business (a) for amounts not yet
overdue or (b) for amounts that are overdue and that (in the case of any
such amounts overdue for a period in excess of 5 days) are being contested
in good faith by appropriate proceedings, so long as (1) such reserves or
other appropriate provisions, if any, as shall be required by GAAP shall
have been made for any such contested amounts, and (2) in the case of a
Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the
Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance with
any applicable terms of the Collateral Documents and not interfering in any
material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries or resulting in a material diminution in the value
of any Collateral as security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct of
the business of Company or any of its Subsidiaries or result in a material
diminution in the value of any Collateral as security for the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any
lease permitted under this Agreement, (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b),
so long as the holder of such restriction or encumbrance agrees to
recognize the rights of such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
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<PAGE>
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property;
(xi) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business of
Company and its Subsidiaries; and
(xii) licenses of patents, trademarks and other intellectual property
rights granted by Company or any of its Subsidiaries in the ordinary course
of business and not interfering in any material respect with the ordinary
conduct of the business of Company or such Subsidiary.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"Pledged Collateral" means, collectively, the "Pledged Collateral" as
defined in the Holdings Pledge Agreement, the Company Pledge Agreement, the
Subsidiary Pledge Agreements and the Auxiliary Pledge Agreements.
"Potential Event of Default" means a condition or event that, after notice
or lapse of time or both, would constitute an Event of Default.
"Prime Rate" means the rate that BTCo announces from time to time as its
prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo or any other Lender may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
"Pro Rata Share" means, with respect to a Lender (i) with respect to all
payments, computations and other matters relating to the Term Loan Commitment or
the Term Loan of any Lender, the percentage obtained by dividing (x) the Term
--------
Loan Exposure of that Lender by (y) the Term Loan Exposure of all Lenders, (ii)
--
with respect to all payments, computations and other matters relating to the
Revolving Loan Commitment or the Revolving Loans of any Lender or any Letter of
Credit issued or participations in any Swing Line Loans purchased or deemed
purchased by any Lender, the percentage obtained by dividing (x) the Revolving
--------
Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all
--
Lenders, and (iii) for all other purposes with respect to each Lender, the
percentage obtained by dividing (x) the sum of the Term Loan Exposure of that
--------
Lender plus the Revolving Loan Exposure of that Lender by (y) the sum of the
---- --
aggregate Term Loan Exposure of all Lenders plus the aggregate Revolving Loan
----
Exposure of all Lenders, as such percentage may be adjusted by assignments
permitted
22
<PAGE>
pursuant to subsection 10.1. The initial Pro Rata Share of each Lender for
purposes of each of clauses (i) and (ii) of the preceding sentence is set forth
opposite the name of that Lender in Schedule 2.l annexed hereto.
------------
"PTO" means the United States Patent and Trademark Office or any successor
or substitute office in which filings are necessary or, in the opinion of
Administrative Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"Real Property Asset" means, at any time of determination, any interest
then owned by any Loan Party in any real property.
"Recapitalization" means the transactions contemplated by the
Recapitalization Agreement.
"Recapitalization Agreement" means that certain Recapitalization Agreement
among BSH Trust, SIG Trust, Hellman and Freedman Capital Partners III, L.P., H&F
Orchard Partners III, L.P, H&F International Partners III, L.P., and Positano
Partners dated November 28, 1998 in the form delivered to the Administrative
Agent and Lenders prior to their execution of this Agreement and as such may be
amended from time to time thereafter to the extent permitted under subsection 7.
14A.
"Recorded Leasehold Interest" means a Leasehold Property with respect to
which a Record Document (as hereinafter defined) has been recorded in all places
necessary or desirable, in Administrative Agent's reasonable judgment, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected real property. For purposes of this definition,
the term "Record Document" means, with respect to any Leasehold Property, (a)
the lease evidencing such Leasehold Property or a memorandum thereof, executed
and acknowledged by the owner of the affected real property, as lessor, or (b)
if such Leasehold Property was acquired or subleased from the holder of a
Recorded Leasehold Interest, the applicable assignment or sublease document,
executed and acknowledged by such holder, in each case in form sufficient to
give such constructive notice upon recordation and otherwise in form reasonably
satisfactory to Administrative Agent.
"Reference Lenders" means BTCo.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(iii).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in subsection
3.3B.
"Related Agreements" means, collectively, the Recapitalization Agreement,
Management Contracts, Governance Agreement and the definitive documents to be
entered into to effect the Reorganization.
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<PAGE>
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), including the movement
of any Hazardous Materials through the air, soil, surface water or groundwater.
"Reorganization" has the meaning assigned to that term in the recitals to
this Agreement.
"Request for Issuance of Letter of Credit" means a notice substantially in
the form of Exhibit III annexed hereto delivered by Company to Administrative
-----------
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"Requisite Lenders" means Lenders having or holding more than 50% of the
sum of the aggregate Term Loan Exposure of all Lenders plus the aggregate
----
Revolving Loan Exposure of all Lenders.
"Restricted Junior Payment" means (i) any distribution, direct or indirect,
on account of any membership interests of Company now or hereafter outstanding,
except a distribution payable solely in membership interests of that class of
membership interests payable solely to holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any membership interests of
Company now or hereafter outstanding, (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire membership interests of Company now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness.
"Revolving Lender" means any Lender who is committed to make Revolving
Loans to Company.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(ii), and "Revolving Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means December 31, 2004.
"Revolving Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's Revolving Loan Commitment and (ii) after the termination of the
Revolving Loan Commitments, the sum of(a) the aggregate outstanding principal
amount of the Revolving Loans of that Lender plus (b) in the event that Lender
----
is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (in each case net of any participations
purchased or deemed purchased by other Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
----
participations purchased or deemed purchased by that Lender in any outstanding
Letters of Credit or any unreimbursed drawings under any Letters of Credit plus
----
(d) in the case of Swing Line Lender, the aggregate outstanding principal amount
of all Swing Line Loans (net of any participations therein
24
<PAGE>
purchased or deemed purchased by other Lenders) plus (e) the aggregate amount of
----
all participations purchased or deemed purchased by that Lender in any
outstanding Swing Line Loans.
"Revolving Loans" means the Loans made by Lenders to Company pursuant to
subsection 2.1A(ii).
"Revolving Notes" means (i) the promissory notes of Company issued pursuant
to subsection 2.1E(i)(b) on the Closing Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Revolving Loan Commitments and Revolving
Loans of any Lenders, in each case substantially in the form of Exhibit V
---------
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"Rollover Holders" has the meaning assigned to that term in the Recitals to
this Agreement.
"Rollover Interests" has the meaning assigned to that term in the Recitals
to this Agreement.
"Securities" means any stock, shares, membership interests, partnership
interests, voting trust certificates, certificates of interest or participation
in any profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participations
in temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"SIG" has the meaning assigned to that term in the introduction to this
Agreement.
"SIG Holdings" means SIG Holding LLC, a Delaware limited liability
company.
"SIG Trust" means Strategic Interactive Group Co., a Massachusetts
business trust.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any
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time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) Indebtedness of Company or
any of its Subsidiaries in respect of industrial revenue or development bonds or
financings, (ii) workers' compensation liabilities of Company or any of its
Subsidiaries, (iii) the obligations of third party insurers of Company or any of
its Subsidiaries arising by virtue of the laws of any jurisdiction requiring
third party insurers, (iv) obligations with respect to Capital Leases or
Operating Leases of Company or any of its Subsidiaries, and (v) performance,
payment, deposit or surety obligations of Company or any of its Subsidiaries, in
any case if required by law or governmental rule or regulation or in accordance
with custom and practice in the industry; provided that Standby Letters of
--------
Credit may not be issued for the purpose of supporting (a) trade payables or (b)
any Indebtedness constituting "antecedent debt" (as that term is used in Section
547 of the Bankruptcy Code).
"Start-Up Losses" means, for Fiscal Year 1999, losses of Company or any of
its Subsidiaries resulting from the operations of Company or any of its
Subsidiaries in London, England.
"Subordinated Indebtedness" means (i) the Management Notes and (ii) any
Indebtedness of Company subordinated in right of payment to the Obligations
pursuant to documentation containing maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material terms
in form and substance satisfactory to Administrative Agent and Requisite
Leaders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Subsidiary Guarantor" means any Subsidiary of Company other than a BSH
Agent Subsidiary that executes and delivers a counterpart of the Subsidiary
Guaranty on the Closing Date or from time to time thereafter pursuant to
subsection 6.8.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered
by existing Subsidiaries of Company on the Closing Date and to be executed and
delivered by additional Subsidiaries of Company other than a BSH Agent
Subsidiary from time to time thereafter in accordance with subsection 6.8,
substantially in the form of Exhibit XVI annexed hereto, as such Subsidiary
-----------
Guaranty may hereafter be amended, supplemented or otherwise modified from time
to time.
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"Subsidiary Pledge Agreement" means each such Subsidiary Pledge Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by any additional Subsidiary Guarantor from time to
time thereafter in accordance with subsection 6.8, in each case substantially in
the form of Exhibit XVII annexed hereto, as such Subsidiary Pledge Agreement may
------------
be amended, supplemented or otherwise modified from time to time, and
"Subsidiary Pledge Agreements" means all such Subsidiary Pledge Agreements,
collectively.
"Subsidiary Security Agreement" means each Subsidiary Security Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by an existing Subsidiary Guarantor from time to time
thereafter in accordance with subsection 6.8, in each case substantially in the
form of Exhibit XVIII annexed hereto, as such Subsidiary Security Agreement may
-------------
be amended, supplemented or otherwise modified from time to time, and
"Subsidiary Security Agreements" means all such Subsidiary Security Agreements.
collectively.
"Supermajority Lenders" of any Class means those Lenders which would
constitute the Requisite Lenders under, and as defined in, this Agreement if (x)
all outstanding Obligations of the other Class under this Agreement were repaid
in full and all Commitments thereto were terminated and (y) the percentage "50%"
contained therein were changed to "66-2/3%".
"Supplemental Collateral Agent" has the meaning assigned to that term in
subsection 9.ID.
"Swing Line Lender" means BTCo, or any Person serving as a successor
Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender to
make Swing Line Loans to Company pursuant to subsection 2.1A(iii).
"Swing Line Loans" means the Loans made by Swing Line Lender to Company
pursuant to subsection 2.1A(iii).
"Swing Line Note" means (i) the promissory note of Company issued pursuant
to subsection 2.1E(ii) on the Closing Date and (ii) any promissory note issued
by Company to any successor Administrative Agent and Swing Line Lender pursuant
to the last sentence of subsection 9.5B, in each case substantially in the form
of Exhibit VI annexed hereto, as it may be amended, supplemented or otherwise
----------
modified from time to time.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by any
Governmental Authority, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "Tax on the overall net income" of a Person
--------
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person is organized or in which that Person's principal office (and/or, in
the case of a Lender, its lending office) is located or in which that Person
(and/or, in the case
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of a Lender, its lending office) is deemed to be doing business (each such
jurisdiction, a "Home Jurisdiction") on all or part of the net income, profits
or gains (whether worldwide, or only insofar as such income, profits or gains
are considered to arise in or to relate to a particular jurisdiction, or
otherwise) of that Person (and/or, in the case of a Lender, its lending office)
or a franchise tax imposed by a Home Jurisdiction of such Person.
"Term Loan Commitment" means the commitment of a Lender to make a Term
Loan to Company pursuant to subsection 2.1A(i), and "Term Loan Commitments"
means such commitments of all Lenders in the aggregate.
"Term Loan Exposure" means, with respect to any Lender as of any date of
determination (i) prior to the funding of the Term Loans, that Lender's Term
Loan Commitment and (ii) after the funding of the Term Loans, the outstanding
principal amount of the Term Loan of that Lender.
"Term Loan Lender" means any Lender who is committed to make Term Loans
to Company.
"Term Loans" means the Loans made by Lenders to Company pursuant to
subsection 2.1A(i).
"Term Notes" means (i) the promissory notes of Company issued pursuant to
subsection 2.IE(i)(a) on the Closing Date and (ii) any promissory notes issued
by Company pursuant to the last sentence of subsection 10.1B(i) in connection
with assignments of the Term Loan Commitments or Term Loans of any Lenders, in
each case substantially in the form of Exhibit IV annexed hereto, as they may be
----------
amended, supplemented or otherwise modified from time to time.
"Title Company" means any title insurance company reasonably satisfactory
to Administrative Agent.
"Total Utilization of Revolving Loan Commitments" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans plus (ii) the aggregate principal amount of all outstanding
----
Swing Line Loans plus (iii) the Letter of Credit Usage.
----
"Transaction Costs" means the fees, costs and expenses payable by Company
on or before the Closing Date in connection with the transactions contemplated
by the Loan Documents and the Related Agreements.
"Trusts" means (i) prior to the consummation of the Reorganization, each of
BSH Trust and SIG Trust and (ii) after the consummation of the Reorganization,
BSH Trust.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"Vendors" has the meaning assigned to that term in the definition of BSH
Agent Subsidiary.
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"Year 2000 Compliant" means that all Information Systems and Equipment
accurately process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same and multi-century dates, or between the 1999 and 2000, taking into account
all leap years, including the fact that the year 2000 is a year, and further,
that when used in combination with, or interfacing with, other Information
Systems and Equipment, shall accurately accept, release and exchange date data,
and shall in material respects continue to function in the same manner as it
performs today and shall otherwise impair the accuracy or functionality of
Information Systems and Equipment.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
------------------------------------------------------------------------
Agreement.
- ---------
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii)
of subsection 6.1 shall be prepared in accordance GAAP as in effect at the time
of such preparation (and delivered together with the reconciliation statements
provided for in subsection 6.1(v)). Calculations in connection with the
definitions covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 5.3
1.3 Other Definitional Provisions and Rules of Construction.
-------------------------------------------------------
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; the Register; Notes.
-------------------------------------------------
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Company herein set forth,
each Lender hereby severally agrees to make the Loans described in subsections
2.1A(i) and 2.1A(ii) and Swing Line Lender hereby agrees to make the Loans
described in subsection 2.1A(iii).
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(i) Term Loans. Each Term Loan Lender severally agrees to lend to
----------
Company on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Term Loan Commitments to be used for the
purposes identified in subsection 2.5A. The Term Loans are the joint and
several obligations of the Borrowers. The amount of each Term Loan Lender's
Term Loan Commitment is set forth opposite its name on Schedule 2.1 annexed
hereto and the aggregate amount of the Term Loan Commitments is
$73,399,090; provided that the Term Loan Commitments of Term Loan Lenders
--------
shall be adjusted to give effect to any assignments of the Term Loan
Commitments pursuant to subsection 10.lB. Each Term Loan Lender's Term
Loan Commitment shall expire immediately and without further action on
January 31, 1999 if the Term Loans are not made on or before that date.
Company may make only one borrowing under the Term Loan Commitments.
Amounts borrowed under this subsection 2.1A(i) and subsequently repaid or
prepaid may not be reborrowed.
(ii) Revolving Loans. Each Revolving Lender severally agrees, subject
---------------
to the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Company from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The Revolving Loans are the joint and several obligations
of the Borrowers. The original amount of each Revolving Lender's Revolving
Loan Commitment is set forth opposite its name on Schedule 2.1 annexed
hereto and the aggregate original amount of the Revolving Loan Commitments
is $20,000,000; provided that the Revolving Loan Commitments of Lenders
--------
shall be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; and provided, further that the
--------
amount of the Revolving Loan Commitments shall be reduced from time to
time by the amount of any reductions thereto made pursuant to subsections
2.4B(ii) and 2.4B(iii). Each Revolving Lender's Revolving Loan Commitment
shall expire on the Revolving Loan Commitment Termination Date and all
Revolving Loans and all other amounts owed hereunder with respect to the
Revolving Loans and the Revolving Loan Commitments shall be paid in full no
later than that date; provided that each Revolving Lender's Revolving Loan
--------
Commitment shall expire immediately and without further action on January
31, 1999 if the Term Loans and any initial Revolving Loans are not made on
or before that date. Amounts borrowed under this subsection 2.1A(ii) may be
repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Anything contained in this Agreement to the contrary notwithstanding,
the Revolving Loans and the Revolving Loan Commitments shall be
subject to the following limitations in the amounts and during the
periods indicated:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect; and
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(b) for 30 consecutive days during each consecutive twelve-
month period, the sum of the aggregate outstanding principal amount of
all Revolving Loans plus the aggregate outstanding principal amount of
all Swing Line Loans shall not exceed $8,000,000.
(iii) Swing Line Loans. Swing Line Lender hereby agrees, subject to
----------------
the limitations set forth below with respect to the maximum amount of Swing
Line Loans permitted to be outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Company from time to time
during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date by making Swing Line Loans to Company in an
aggregate amount not exceeding the amount of the Swing Line Loan Commitment
to be used for the purposes identified in subsection 2.5B, notwithstanding
the fact that such Swing Line Loans, when aggregated with Swing Line
Lender's outstanding, Revolving Loans and Swing Line Lender's Pro Rata
Share of the Letter of Credit Usage then in effect, may exceed Swing Line
Lender's Revolving Loan Commitment. The Swing Line Loans are the joint and
several obligations of the Borrowers. The original amount of the Swing Line
Loan Commitment is $3,500,000; provided that any reduction of the Revolving
--------
Loan Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which
reduces the aggregate Revolving Loan Commitments to an amount less than the
then current amount of the Swing Line Loan Commitment shall result in an
automatic corresponding reduction of the Swing Line Loan Commitment to the
amount of the Revolving Loan Commitments, as so reduced, without any
further action on the part of Company, Administrative Agent or Swing Line
Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Swing Line Loans and all other amounts
owed hereunder with respect to the Swing Line Loans shall be paid in full
no later than that date; provided that the Swing Line Loan Commitment shall
--------
expire immediately and without further action on January 31, 1999 if the
Term Loans and any initial Revolving Loans are not made on or before that
date. Outstanding Swing Line Loans shall be converted to Revolving Loans
five Business Days after the Funding Date of such Swing Line Loan. Amounts
borrowed under this subsection 2.1A(iii) may be repaid and reborrowed to
but excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary notwithstanding, the Swing
Line Loans and the Swing Line Loan Commitment shall be subject to the following
limitations in the amounts and during the periods indicated:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect; and
(b) for 30 consecutive days during each consecutive twelve-
month period, the sum of the aggregate outstanding principal amount of
all Revolving Loans plus the aggregate outstanding principal amount of
all Swing Line Loans shall not exceed $8,000,000.
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With respect to any Swing Line Loans which have not been voluntarily prepaid by
Company pursuant to subsection 2.4B(i), Swing Line Lender may, at any time in
its sole and absolute discretion, deliver to Administrative Agent (with a copy
to Company), no later than 10:00 A.M. (New York City time) on the first Business
Day in advance of the proposed Funding Date, a notice (which shall be deemed to
be a Notice of Borrowing given by Company) requesting Revolving Lenders to make
Revolving Loans that are Base Rate Loans on such Funding Date in an amount equal
to the amount of such Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date such notice is given which Swing Line Lender requests
Revolving Lenders to prepay. Anything contained in this Agreement to the
contrary notwithstanding, (i) the proceeds of such Revolving Loans made by
Revolving Lenders other than Swing Line Lender shall be immediately delivered by
Administrative Agent to Swing Line Lender (and not to Company) and applied to
repay a corresponding portion of the Refunded Swing Line Loans and (ii) on the
day such Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a
Revolving Loan made by Swing Line Lender, and such portion of the Swing Line
Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans
and shall no longer be due under the Swing Line Note of Swing Line Lender but
shall instead constitute part of Swing Line Lender's outstanding Revolving Loans
and shall be due under the Revolving Note of Swing Line Lender. Company hereby
authorizes Administrative Agent and Swing Line Lender to charge Company's
accounts with Administrative Agent and Swing Line Lender (up to the amount
available in each such account) in order to immediately pay Swing Line Lender
the amount of the Refunded Swing Line Loans to the extent the proceeds of such
Revolving Loans made by Lenders, including the Revolving Loan deemed to be made
by Swing Line Lender, are not sufficient to repay in full the Refunded Swing
Line Loans. If any portion of any such amount paid (or deemed to be paid) to
Swing Line Lender should be recovered by or on behalf of Company from Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or otherwise,
the loss of the amount so recovered shall be ratably shared among all Revolving
Lenders in the manner contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the request of Swing
Line Lender as provided in the immediately preceding paragraph in an amount
sufficient to repay any amounts owed to Swing Line Lender in respect of any
outstanding Swing Line Loans or (b) the Revolving Loan Commitments are
terminated at a time when any Swing Line Loans are outstanding, each Revolving
Lender shall be deemed to, and hereby agrees to, have purchased a participation
in such outstanding Swing Line Loans in an amount equal to its Pro Rata Share
(calculated, in the case of the foregoing clause (b), immediately prior to such
termination of the Revolving Loan Commitments) of the unpaid amount of such
Swing Line Loans together with accrued interest thereon. Upon one Business Day's
notice from Swing Line Lender, each Revolving Lender shall deliver to Swing Line
Lender an amount equal to its respective participation in same day funds at the
Funding and Payment Office. In order to further evidence such participation (and
without prejudice to the effectiveness of the participation provisions set forth
above), each Revolving Lender agrees to enter into a separate participation
agreement at the request of Swing Line Lender in form and substance reasonably
satisfactory to Swing Line Lender. In the event any Revolving Lender fails to
make available to Swing Line Lender the amount of such Revolving Lender's
participation as provided in this paragraph, Swing Line Lender shall be entitled
to recover such amount on demand from such Revolving Lender together with
interest thereon at the rate customarily used by Swing Line Lender for the
correction of errors among banks for
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<PAGE>
three Business Days and thereafter at the Base Rate. In the event Swing Line
Lender receives a payment of any amount in which other Revolving Lenders have
purchased participations as provided in this paragraph, Swing Line Lender shall
promptly distribute to each such other Lender its Pro Rata Share of such
payment.
Anything contained herein to the contrary notwithstanding, each Revolving
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and each
Revolving Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be absolute and
unconditional and shall not be affected by any circumstance, including (a) any
set-off, counterclaim, recoupment, defense or other right which such Lender may
have against Swing Line Lender, Company or any other Person for any reason
whatsoever; (b) the occurrence or continuation of an Event of Default or a
Potential Event of Default; (c) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise, or prospects of Company
or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that such
--------
obligations of each Revolving Lender are subject to the condition that (X) Swing
Line Lender believed in good faith that all conditions under Section 4 to the
making of the applicable Refunded Swing Line Loans or other unpaid Swing Line
Loans, as the case may be, were satisfied at the time such Refunded Swing Line
Loans or unpaid Swing Line Loans were made or (Y) the satisfaction of any such
condition not satisfied had been waived in accordance with subsection 10.6 prior
to or at the time such Refunded Swing Line Loans or other unpaid Swing Line
Loans were made.
B. Borrowing Mechanics. Term Loans or Revolving Loans made on any Funding
Date (other than Revolving Loans made pursuant to a request by Swing Line Lender
pursuant to subsection 2.1A(iii) for the purpose of repaying any Refunded Swing
Line Loans or Revolving Loans made pursuant to subsection 3.3B for the purpose
of reimbursing any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it) shall be in an aggregate minimum amount of $250,000 and
integral multiples of $100,000 in excess of that amount; provided that Term
--------
Loans or Revolving Loans made on any Funding Date as Eurodollar Rate Loans with
a particular Interest Period shall be in an aggregate minimum amount of
$1,000,000 and integral multiples of $500,000 in excess of that amount. Swing
Line Loans made on any Funding Date shall be in an aggregate minimum amount of
$500,000 and integral multiples of S250,000 in excess of that amount. Whenever
Company desires that Lenders make Term Loans or Revolving Loans it shall deliver
to Administrative Agent a Notice of Borrowing no later than 10:00 A.M. (New York
City time) at least three Business Days in advance of the proposed Funding Date
(in the case of a Eurodollar Rate Loan) or at least one Business Day in advance
of the proposed Funding Date (in the case of a Base Rate Loan). Whenever Company
desires that Swing Line Lender make a Swing Line Loan, it shall deliver to
Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York
City time) on the proposed Funding Date. The Notice of Borrowing shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the amount
and type of Loans requested, (iii) in the case of Swing Line Loans and any Loans
made on the Closing Date or within a period of 30 days after the Closing Date,
that such Loans shall be Base Rate Loans unless approved by Administrative
Agent, (iv) in the case of Revolving Loans not made on the Closing Date or
within a period of 30 days after the Closing Date, whether such Loans shall be
Base Rate Loans or Eurodollar Rate Loans, and (v) in the case of any Loans
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<PAGE>
requested to be made as Eurodollar Rate Loans, the initial Interest Period
requested therefor. Term Loans and Revolving Loans may be continued as or
converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided
in subsection 2.2D. In lieu of delivering the above-described Notice of
Borrowing, Company may give Administrative Agent telephonic notice by the
required time of any proposed borrowing under this subsection 2.1B; provided
--------
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt (and in any event on
the day following Administrative Agent's receipt) by Administrative Agent of a
Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu
thereof), Administrative Agent shall notify each Lender or Swing Line Lender, as
the case may be, of the proposed borrowing. Each Lender shall make the amount of
its Loan available to Administrative Agent not later than 12:00 Noon (New York
City time) on the applicable Funding Date, and Swing Line Lender shall make the
amount of its Swing Line Loan available to Administrative Agent not later than
2:00 P.M.(New York City time) on the applicable Funding Date, in each case in
same day funds in Dollars, at the Funding and Payment Office. Except as provided
in subsection 2.1A(iii) or subsection 3.3B with respect to Revolving Loans used
to repay Refunded Swing Line Loans or to reimburse any Issuing Lender for the
amount of a drawing under a Letter of Credit issued by it, upon satisfaction or
waiver of the conditions precedent specified in subsections 4.1 (in the case of
Loans made on the Closing Date) and 4.2 (in the case of all Loans),
Administrative Agent shall make the proceeds of such Loans available to Company
on the applicable Funding Date by
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<PAGE>
causing an amount of same day funds in Dollars equal to the proceeds of all such
Loans received by Administrative Agent from Lenders or Swing Line Lender, as the
case may be, to be credited to the account of Company as directed by its Notice
of Borrowing.
Unless Administrative Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
subsection 2.lC shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) Administrative Agent shall maintain, at its address referred to in
subsection 10.8, a register for the recordation of the names and addresses
of Lenders and the Commitments and Loans of each Lender from time to time
(the "Register"). The Register shall be available for inspection by Company
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) Administrative Agent shall record in the Register the Term Loan
Commitment and Revolving Loan Commitment and the Term Loan and Revolving
Loans from time to time of each Lender, the Swing Line Loan Commitment and
the Swing Line Loans from time to time of Swing Line Lender, and each
repayment or prepayment in respect of the principal amount of the Term Loan
or Revolving Loans of each Lender or the Swing Line Loans of Swing Line
Lender. Any such recordation shall be conclusive and binding on Company and
each Lender, absent manifest error; provided that failure to make any such
--------
recordation, or any error in such recordation, shall not affect any
Lender's Commitments or Company's Obligations in respect of any applicable
Loans.
(iii) Each Lender shall record on its internal records (including the
Notes held by such Lender) the amount of the Term Loan and each Revolving
Loan made by it and each payment in respect thereof. Any such recordation
shall be conclusive and binding on Company, absent manifest error; provided
--------
that failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitments or
35
<PAGE>
Company's Obligations in respect of any applicable Loans; and provided,
--------
further that in the event of any inconsistency between the Register and any
Lender's records, the recordations in the Register shall govern.
(iv) Company, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii). Prior to such recordation, all amounts owed with respect to
the applicable Commitment or Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and
binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.
(v) Company hereby designates BTCo to serve as Company's agent solely
for purposes of maintaining the Register as provided in this subsection
2.1D, and Company hereby agrees that, to the extent BTCo serves in such
capacity, BTCo and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection
10.3.
E. Notes. Company shall execute and deliver on the Closing Date (i) to
each Term Loan Lender (or to Administrative Agent for that Lender) a Term Note
substantially in the form of Exhibit IV annexed hereto to evidence that Term
Loan Lender's Term Loan, in the principal amount of that Term Loan Lender's Term
Loan and with other appropriate insertions, and (ii) to each Revolving Lender
(or to Administrative Agent for that Lender) a Revolving Note substantially in
the form of Exhibit V annexed hereto to evidence that Revolving Lender's
Revolving Loans, in the principal amount of that Revolving Lender's Revolving
Loan Commitment and with other appropriate insertions, and (iii) to Swing Line
Lender (or to Administrative Agent for Swing Line Lender) a Swing Line Note
substantially in the form of Exhibit VI annexed hereto to evidence Swing Line
Lender's Swing Line Loans, in the principal amount of the Swing Line Loan
Commitment and with other appropriate insertions.
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent as provided in subsection 10.1B(ii). Any request,
authority or consent of any person or entity who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, assignee or transferee of that
Note or of any Note or Notes issued in exchange therefor.
F. Joint and Several Obligations. Each of the Borrowers hereby agrees and
acknowledges that the Obligations in respect of the Term Loans, Revolving Loans,
Swing Line Loans and Letters of Credit and fees with respect thereto are the
joint and several obligations of each Borrower and that the liability of each
Borrower with respect to such Obligation shall not
36
<PAGE>
be affected or impaired by (a) the dissolution or termination of, or any
increase, decrease or change in personnel of, any other Borrower, (b) the
insolvency or business failure of, or any assignment for the benefit of
creditors by, or the commencement of any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceedings by or against, any
other Borrower or (c) the appointment of a receiver for, or the attachment,
restraint of or making or levying of any order of court or legal process
affecting, the property of any other Borrower; provided that each Borrower
--------
hereby agrees that such Borrower shall not borrow amounts in excess of an amount
which would render such Borrower insolvent. If any payment is made by a Borrower
(a "Funding Borrower") in discharging any of the Obligations of the other
Borrower, that Funding Borrower shall be entitled to a contribution from the
other Borrower for all payments, damages and expenses incurred by that Funding
Borrower in discharging the Obligations. Each Borrower agrees that a separate
action or actions may be brought and prosecuted against any other Borrower and
whether or not any other Borrower is joined in any such action or actions.
2.2 Interest on the Loans.
---------------------
A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7,
each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate. Subject to the provisions of subsection 2.7, each
Swing Line Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate. The applicable basis for determining
the rate of interest with respect to any Term Loan or any Revolving Loan shall
be selected by Company initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.lB, and the basis for determining
the interest rate with respect to any Term Loan or any Revolving Loan may be
changed from time to time pursuant to subsection 2.2D; provided that for the
--------
first 30 days following the Closing Date any Term Loan or Revolving Loan shall
bear interest at a rate determined by reference to the Base Rate unless
otherwise approved by Administrative Agent. If on any day a Term Loan or
Revolving Loan is outstanding with respect to which notice has not been
delivered to Agent in accordance with the terms of this Agreement specifying the
applicable basis for determining the rate of interest, then for that day that
Loan shall bear interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the Term
Loans and the Revolving Loans shall bear interest through maturity as
follows:
(a) If a Base Rate Loan, then at the sum of the Base Rate plus
the Base Rate margin (the "Applicable Base Rate Margin") set forth in
the table below opposite the Consolidated Leverage Ratio for the four-
Fiscal Quarter period for which the applicable Margin Determination
Certificate is being delivered pursuant to subsection 6.1(iv); or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Eurodollar Rate margin (the "Applicable
Eurodollar Rate Margin") set forth in the table below opposite the
Consolidated Leverage Ratio
37
<PAGE>
for the four-Fiscal Quarter period for which the applicable Margin
Determination Certificate is being delivered pursuant to subsection 6.
1(iv):
<TABLE>
<CAPTION>
Applicable Applicable
Eurodollar Rate Base Rate
Consolidated Leverage Ratio Margin Margin
---------------------------- ---------------- -----------
<S> <C> <C>
Greater than or equal to: 3.75:1.00 3.00% 2.00%
Greater than or equal to: 3.25:1.00
But less than: 3.75:1.00 2.75% 1.75%
Greater than or equal to: 2.75:1.00
But less than: 3.25:1.00 2.50% 1.50%
Greater than or equal to: 2.25:1.00
But less than: 2.75:1.00 2.25% 1.25%
Greater than or equal to: 1.75:1.00
But less than: 2.25:1.00 2.00% 1.00%
Greater than or equal to: 1.25:1.00
But less than: 1.75:1.00 1.75% 0.75%
Less than: 1.25:1.00 1.50% 0.50%
</TABLE>
Upon delivery of a Margin Determination Certificate by Company to Administrative
Agent pursuant to subsection 6.1(iv), the Applicable Base Rate Margin and the
Applicable Eurodollar Rate Margin shall automatically be adjusted in accordance
with such Margin Determination Certificate, such adjustment to become effective
on the next succeeding Business Day following the receipt by Administrative
Agent of such Margin Determination Certificate; provided that until the delivery
--------
of the first Margin Determination Certificate after the six month anniversary of
the Closing Date, the Applicable Eurodollar Rate Margin shall be 3.00% per annum
and the Applicable Base Rate Margin shall be 2.00% per annum; provided further
-------- -------
that at any time a Margin Determination Certificate is not delivered at the time
required pursuant to subsection 6.1 (iv), from the time such Margin
Determination Certificate was required to be delivered until delivery of such
Margin Determination Certificate, the Applicable Eurodollar Rate Margin shall be
3.00% per annum and the Applicable Base Rate Margin shall be 2.00% per annum;
provided further that if a Margin Determination Certificate erroneously
- -------- -------
indicates an applicable margin more favorable to Company than would be afforded
by the actual calculation of the Consolidated Leverage Ratio, Company shall
promptly pay such additional interest and letter of credit fees as shall correct
for such error.
(ii) Subject to the provisions of subsections 2.2E and 2.7, the Swing
Line Loans shall bear interest through maturity at the sum of the Base Rate
plus the Applicable Base Rate Margin less the commitment fee percentage
provided for in subsection 2.3A.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan,
38
<PAGE>
which Interest Period shall be, at Company's option, either a one, two, three or
six month period; provided that:
--------
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Term
Loans shall extend beyond December 31, 2004 and no Interest Period with
respect to any portion of the Revolving Loans shall extend beyond the
Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term
Loans shall extend beyond a date on which Company is required to make a
scheduled payment of principal of the Term Loans unless the sum of (a) the
aggregate principal amount of Term Loans that are Base Rate Loans plus (b)
the aggregate principal amount of Term Loans that are Eurodollar Rate Loans
with Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Term Loans on such date;
(vii) there shall be no more than seven Interest Periods outstanding
at any time; and
(viii) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any
--------
39
<PAGE>
Revolving Loans that are Base Rate Loans are prepaid pursuant to subsection
2.4B(i), interest accrued on such Swing Line Loans or Revolving Loans through
the date of such prepayment shall be payable on the next succeeding Interest
Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection 2.6,
Company shall have the option (i) to convert at any time all or any part of its
outstanding Term Loans or Revolving Loans equal to $1,000,000 and integral
multiples of $500,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of $500,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
--------
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Administrative
Agent no later than 10:00 A.M. (New York City time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, provided that no Loans shall be
--------
converted to Eurodollar Rate Loans prior to the 30th day after the Closing Date
unless otherwise approved by Administrative Agent, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date. Upon receipt of
written or telephonic notice of any proposed conversion/continuation under this
subsection 2.2D, Administrative Agent shall promptly transmit such notice by
telefacsimile or telephone to each Lender.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate
40
<PAGE>
Determination Date, and Company shall be bound to effect a conversion or
continuation in accordance therewith.
E. Default Rate. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration
--------
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed on the
basis of a 360-day year, in each case for the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
--------
day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
----
A. Commitment Fees. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the sum of the aggregate
principal amount of outstanding Revolving Loans (but not including any
outstanding Swing Line Loans) plus the Letter of Credit Usage multiplied by
---------- --
0.50%; provided that if the Consolidated Leverage Ratio for the four Fiscal
--------
Quarter period for which the applicable Margin Determination Certificate has
been delivered pursuant to subsection 6.1(iv) is less than or equal to
1.75:1.00, the commitment fee percentage shall be 0.375% per annum; such
commitment fees to be calculated on the basis of a 360-day year and the actual
number of days elapsed and to be payable quarterly in arrears on March 15, June
15, September 15 and December 15 of each year, commencing on the first such
date to occur after the Closing Date, and on the Revolving Loan Commitment
Termination Date; provided that for the first six months after the Closing Date
--------
the applicable commitment fee percentage shall be
41
<PAGE>
0.50% per annum. Upon delivery of the Margin Determination Certificate by
Company to Administrative Agent. pursuant to subsection 6.1(iv), the applicable
commitment fee percentage shall automatically be adjusted in accordance with
such Margin Determination Certificate, such adjustment to become effective on
the next succeeding Business Day following the receipt by Administrative Agent
of such Margin Determination Certificate; provided that in the event that
--------
Company fails to deliver a Margin Determination Certificate timely in accordance
with the provisions of subsection 6.1(iv), from the time such a Margin
Determination Certificate is actually delivered, the applicable commitment fee
percentage shall be the maximum percentage amount set forth above per annum.
B. Other Fees. Company agrees to pay to Arranger and Administrative Agent
such other fees in the amounts and at the times separately agreed upon between
Company and Administrative Agent and Arranger.
2.4 Repayments, Prepayments and Reductions in Commitments; General Provisions
-------------------------------------------------------------------------
Regarding Payments.
- ------------------
A. Scheduled Payments of Term Loans. Company shall make principal payments
on the Term Loans in installments on the dates and in the amounts set forth
below:
Date Scheduled Repayment
September 30, 1999 $2,466,636.33
December 31, 1999 2,466,636.33
June 30, 2000 2,466,636.33
September 30, 2000 2,466,636.33
December 31, 2000 2,466,636.33
June 30, 2001 3,425,290.87
September 30, 2001 3,425,290.87
December 31, 2001 3,425,290.87
June 30, 2002 4,403,945.50
September 30, 2002 4,403,945.50
December 31, 2002 4,403,945.50
June 30, 2003 5,382,599.93
September 30, 2003 5,382,599.93
December 31, 2003 5,382,599.93
June 30, 2004 7,176,799.91
September 30, 2004 7,176,799.91
December 31, 2004 7,176,799.91
provided that the scheduled installments of principal of the Term Loans set
--------
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the Term Loans in accordance with subsection 2.4B(iv); and
provided, further that the Term Loans and all other amounts owed hereunder
-------- -------
with respect to the Term Loans shall be paid in full no later than December
31, 2004, and the final installment payable by Company in respect of the
Term Loans on such date shall be in an amount, if such amount is different
from that specified above, sufficient to repay all amounts owing by Company
under this Agreement with respect to the Term Loans.
42
<PAGE>
B. Prepayments and Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments.
---------------------
(a) Company may, upon written or telephonic notice to
Administrative Agent on or prior to 12:00 Noon (New York City time) on
the date of prepayment, which notice, if telephonic, shall be promptly
confirmed in writing at any time and from time to time prepay any
Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount. Company may, upon not less than one
Business Day's prior written or telephonic notice, in the case of Base
Rate Loans, and three Business Days' prior written or telephonic
notice, in the case of Eurodollar Rate Loans, in each case given to
Administrative Agent by 12:00 Noon (New York City time) on the date
required and, if given by telephone, promptly confirmed in writing to
Agent (which original written or telephonic notice Administrative
Agent will promptly transmit by telefacsimile or telephone to each
Lender), at any time and from time to time prepay any Term Loans or
Revolving Loans on any Business Day in whole or in part in an
aggregate minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of that amount; provided, however, that a
--------
Eurodollar Rate Loan may only be prepaid on the expiration of the
Interest Period applicable thereto. Notice of prepayment having been
given as aforesaid, the principal amount of the Loans specified in
such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as
specified in subsection 2.4B(iv).
(b) In the event Company is entitled to replace a non-consenting
Lender pursuant to subsection 10.6B, Company shall have the right,
upon five Business Days' written notice to Administrative Agent (which
notice Administrative Agent shall promptly transmit to each of the
Lenders), to prepay all Loans, together with accrued and unpaid
interest, fees and other amounts owing to such Lender (including
without limitation amounts owing to such Lender pursuant to subsection
2.6D) in accordance with subsection 10.6B so long as (1) in the case
of the prepayment of the Revolving Loans of any Lender pursuant to
this subsection 2.4B(i)(b), the Revolving Loan Commitment of such
Lender is terminated concurrently with such prepayment pursuant to
subsection 2.4B(ii)(b) (at which time Schedule 2.1 shall be deemed
------------
modified to reflect the changed Revolving Loan Commitments), and (2)
in the case of the prepayment of the Loans of any Lender, the consents
required by subsection 10.6B in connection with the prepayment
pursuant to this subsection 2.4B(i)(b) shall have been obtained, and
at such time, such Lender shall no longer constitute a "Lender" for
purposes of this Agreement, except with respect to indemnifications
under this Agreement (including, without limitation, subsections 2.6D,
2.7, 3.6, 10.2 and 10.3), which shall survive as to such Lender.
43
<PAGE>
(ii) Voluntary Reductions of Revolving Loan Commitments.
--------------------------------------------------
(a) Company may, upon not less than three Business Days' prior
written or telephonic notice confirmed in writing to Administrative
Agent (which original written or telephonic notice Administrative
Agent will promptly transmit by telefacsimile or telephone to each
Lender), at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, the Revolving
Loan Commitments in an amount up to the amount by which the Revolving
Loan Commitments exceed the Total Utilization of Revolving Loan
Commitments at the time of such proposed termination or reduction;
provided that any such partial reduction of the Revolving Loan
--------
Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $500,000 in excess of that amount. Company's
notice to Administrative Agent shall designate the date (which shall
be a Business Day) of such termination or reduction and the amount of
any partial reduction, and such termination or reduction of the
Revolving Loan Commitments shall be effective on the date specified in
Company's notice and shall reduce the Revolving Loan Commitment of
each Lender proportionately to its Pro Rata Share.
(b) In the event Company is entitled to replace a non-consenting
Lender pursuant to subsection 10.6B, Company shall have the right, upon
five Business Days' written notice to Administrative Agent (which
notice Administrative Agent shall promptly transmit to each of the
Lenders), to terminate the entire Revolving Loan Commitment of such
Lender so long as (1) all Loans, together with accrued and unpaid
interest, fees and other amounts owing to such Lender are repaid,
including without limitation amounts owing to such Lender pursuant to
subsection 2.6D, pursuant to subsection 2.4B(i)(b) concurrently with
the effectiveness of such termination (at which time Schedule 2.1 shall
------------
be deemed modified to reflect such changed Revolving Loan Commitments),
and (2) the consents required by subsection 10.6B in connection with
the prepayment pursuant to subsection 2.4B(i)(b) shall have been
obtained, and at such time, such Lender shall no longer constitute a
"Lender" for purposes of this Agreement, except with respect to
indemnifications under this Agreement (including, without limitation,
subsections 2.6D, 2.7, 3.6, 10.2 and 10.3), which shall survive as to
such Lender.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
----------------------------------------------------------------
Commitments. The Loans shall be prepaid and/or the Revolving Loan
-----------
Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments and/or reductions to be
applied as set forth below or as more specifically provided in subsection
2.4B(iv):
(a) Prepayments and Reductions From Net Asset Sale Proceeds. No
-------------------------------------------------------
later than the first Business Day following the date of receipt by
Company or any of its Subsidiaries of any Net Asset Sale Proceeds in
respect of any Asset Sale, Company shall prepay the Loans and/or the
Revolving Loan Commitments shall
44
<PAGE>
be permanently reduced in an aggregate amount equal to such Net Asset
Sale Proceeds.
(b) Prepayments and Reductions from Net Insurance/ Condemnation
-----------------------------------------------------------
Proceeds. No later than the first Business Day following the date of
--------
receipt by Administrative Agent or by Company or any of its
Subsidiaries of any Net Insurance/Condemnation Proceeds that are
required to be applied to prepay the Loans and/or reduce the Revolving
Loan Commitments pursuant to the provisions of subsection 6.4B,
Company shall prepay the Loans and/or the Revolving Loan Commitments
shall be permanently reduced in an aggregate amount equal to the
amount of such Net Insurance/Condemnation Proceeds; provided, however,
--------
that no such prepayment shall be required to the extent (i) under the
terms of any lease or other agreement existing on the date hereof such
Net Insurance/Condemnation Proceeds are required to be used to
replace, rebuild or repair the asset so damaged, destroyed or taken or
(ii) Company or the applicable Subsidiary determines to utilize such
Net Insurance/Condemnation Proceeds to replace, rebuild or repair the
asset damaged, destroyed or taken, and in each case referred to in
clauses (i) and (ii) above, Company or such Subsidiary so utilizes Net
Insurance/Condemnation Proceeds within 180 days of the receipt
thereof.
(c) Prepayments and Reductions Due to Issuance of Equity
----------------------------------------------------
Securities. On the date of receipt by Company of the Cash proceeds
----------
(any such proceeds, net of underwriting discounts and commissions and
other reasonable costs and expenses associated therewith, including
reasonable legal fees and expenses, being "Net Equity Securities
Proceeds") from the issuance of any equity Securities of Holdings or
Company after the Closing Date (other than proceeds from equity
interests in Holdings or Company issued to officers and employees of
Company and its Subsidiaries pursuant to option plans or similar plans
or agreements adopted by Holdings' or Company's Board of Directors, as
the case may be), Company shall prepay the Loans and/or the Revolving
Loan Commitments shall be permanently reduced in an aggregate amount
equal to 50% of such Net Equity Securities Proceeds; provided that,
--------
(i) if the most current Margin Determination Certificate indicates
that the Consolidated Leverage Ratio is less than 2.50:1.00 then such
percentage shall be reduced to 0%; (ii) Net Equity Securities Proceeds
received from H&F to fund any payments required to be made by Company
as a result of a determination by a Governmental Authority resulting
from or relating to the Section 338(h)(10) Election (as defined in the
Recapitalization Agreement) or the transactions described in the
Recapitalization Agreement shall be excluded from the provisions of
this subsection 2.4B(iii)(c) and (iii) Net Equity Securities Proceeds
used to make Permitted Acquisitions shall be excluded from the
provisions of this subsection 2.4B(iii)(c).
(d) Prepayments and Reductions Due to Issuance of Debt
--------------------------------------------------
Securities. On the date of receipt by Company of the Cash proceeds
----------
(any such proceeds, net of underwriting discounts and commissions and
other reasonable costs and expenses associated therewith, including
reasonable legal fees and expenses, being "Net Debt Securities
Proceeds") from the issuance of debt Securities of
45
<PAGE>
Company after the Closing Date, Company shall prepay the Loans and/or
the Revolving Loan Commitments shall be permanently reduced in an
aggregate amount equal to 100% of such Net Debt Securities Proceeds;
provided that Net Debt Securities Proceeds received from the issuance
--------
of Indebtedness permitted by subsection 7.1 shall be excluded from the
provisions of this subsection 2.4B(iii)(d).
(e) Prepayments and Reductions from Consolidated Excess Cash
--------------------------------------------------------
Flow. In the event that there shall be Consolidated Excess Cash Flow
----
for any Fiscal Year (commencing with Fiscal Year 1999), Company shall,
no later than 90 days after the end of such Fiscal Year, prepay the
Loans and/or the Revolving Loan Commitments shall be permanently
reduced in an aggregate amount equal to 75% of such Consolidated
Excess Cash Flow; provided that, if the most current Margin
--------
Determination Certificate indicates that the Consolidated Leverage
Ratio is less than 2.50:1.00 then such percentage shall be reduced to
0%.
(f) Calculations of Net Proceeds Amounts: Additional Prepayments
------------------------------------------------------------
and Reductions Based on Subsequent Calculations. Concurrently with any
-----------------------------------------------
prepayment of the Loans and/or reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(e), Company shall
deliver to Administrative Agent an Officers' Certificate demonstrating
the calculation of the amount (the "Net Proceeds Amount") of the
applicable Net Asset Sale Proceeds or Net Insurance/Condemnation
Proceeds, Net Debt Securities Proceeds or Net Equity Securities
Proceeds (as such terms are defined in subsections 2.4B(iii)(c) and
(d)), or the applicable Consolidated Excess Cash Flow, as the case may
be, that gave rise to such prepayment and/or reduction. In the event
that Company shall subsequently determine that the actual Net Proceeds
Amount was greater than the amount set forth in such Officers'
Certificate, Company shall promptly make an additional prepayment of
the Loans (and/or, if applicable, the Revolving Loan Commitments shall
be permanently reduced) in an amount equal to the amount of such
excess, and Company shall concurrently therewith deliver to
Administrative Agent an Officers' Certificate demonstrating the
derivation of the additional Net Proceeds Amount resulting in such
excess.
(g) Prepayments Due to Reductions or Restrictions of Revolving
----------------------------------------------------------
Loan Commitments. Company shall from time to time prepay first the
----------------
Swing Line Loans and second the Revolving Loans to the extent
necessary (1) so that the Total Utilization of Revolving Loan
Commitments shall not at any time exceed the Revolving Loan
Commitments then in effect and (2) to give effect to the limitations
set forth in clause (b) of the second paragraph of subsection 2.
1A(ii) and clause (b) of the second paragraph of subsection 2.1
A(iii).
(iv) Application of Prepayments.
--------------------------
(a) Application of Voluntary Prepayments by Type of Loans and
---------------------------------------------------------
Order of Maturity. Any voluntary prepayments pursuant to subsection
-----------------
2.4B(i) shall be applied as specified by Company in the applicable
notice of prepayment;
46
<PAGE>
provided that in the event Company fails to specify the Loans to which
--------
any such prepayment shall be applied, such prepayment shall be applied
first to repay outstanding Swing Line Loans to the full extent
thereof, second to repay outstanding Revolving Loans to the full
extent thereof, and third to repay outstanding Term Loans to the full
extent thereof. Any voluntary prepayments of the Term Loans pursuant
to subsection 2.4B(i) shall be applied to reduce the scheduled
installments of principal of the Term Loans set forth in subsection
2.4A(i) on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof).
(b) Application of Mandatory Prepayments by Type of Loans. Any
-----------------------------------------------------
amount (the "Applied Amount") required to be applied as a mandatory
prepayment of the Loans and/or a reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(f) shall be applied
first to prepay the Term Loans to the full extent thereof, second, to
the extent of any remaining portion of the Applied Amount, to prepay
the Swing Line Loans to the full extent thereof and to permanently
reduce the Revolving Loan Commitments by the amount of such
prepayment, third, to the extent of any remaining portion of the
Applied Amount, to prepay the Revolving Loans to the full extent
thereof and to further permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, and fourth, to the
extent of any remaining portion of the Applied Amount, to further
permanently reduce the Revolving Loan Commitments to the full extent
thereof.
(c) Application of Mandatory Prepayments of Term Loans by Order
-----------------------------------------------------------
of Maturity. Any mandatory prepayments of the Term Loans pursuant to
-----------
subsection 2.4B(iii) shall be applied on a pro rata basis (in
accordance with the respective outstanding principal amounts thereof)
to each scheduled installment of principal of the Term Loans set forth
in subsection 2.4A(i) that is unpaid at the time of such prepayment.
(d) Application of Prepayments to Base Rate Loans and Eurodollar
------------------------------------------------------------
Rate Loans. Considering Term Loans and Revolving Loans being prepaid
----------
separately, any prepayment thereof shall be applied first to Base Rate
Loans to the full extent thereof before application to Eurodollar Rate
Loans, in each case in a manner which minimizes the amount of any
payments required to be made by Company pursuant to subsection 2.6D.
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of principal,
--------------------------
interest, fees and other Obligations hereunder and under the Notes shall be
made in Dollars in same day funds, without defense, setoff or counterclaim,
free of any restriction or condition, and delivered to Administrative Agent
not later than 12:00 Noon (New York City time) on the date due at the
Funding and Payment Office for the account of Lenders; funds received by
Administrative Agent after that time on such due date shall be deemed to
have been paid by Company on the next succeeding Business Day. Company
47
<PAGE>
hereby authorizes Administrative Agent to charge its accounts with
Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts for
that purpose).
(ii) Application of Payments to Principal and Interest. Except as
-------------------------------------------------
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments in respect of Term Loans and Revolving Loans shall be apportioned
among all outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute (and in any event shall distribute one day
following Administrative Agent's receipt) to each Lender, at its primary
address set forth below its name on the appropriate signature page hereof
or at such other address as such Lender may request, its Pro Rata Share of
all such payments received by Administrative Agent and the commitment fees
of such Lender when received by Administrative Agent pursuant to subsection
2.3. Notwithstanding the foregoing provisions of this subsection 2.4C(iii),
if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
-------------------
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
--------
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
D. Application of Proceeds of Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Collateral. Except as provided in
-------------------------------------
subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, all proceeds received by Administrative Agent in respect of any
sale of, collection from, or other
48
<PAGE>
realization upon all or any part of the Collateral under any Collateral
Document may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time
thereafter) applied in full or in part by Administrative Agent against, the
applicable Secured Obligations (as defined in such Collateral Document) in
the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Administrative
Agent in connection with the exercise of any right or remedy under
such Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such Secured Obligations for the ratable benefit
of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received
----------------------------------------
by Administrative Agent under any of the Guaranties shall be applied
promptly from time to time by Administrative Agent in the following order
of priority:
(a) To the payment of the costs and expenses of any collection or
other realization under such Guaranty, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to the
payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to the
payment to Holdings or the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
2.5 Use of Proceeds.
---------------
A. Term Loans. The proceeds of the Term Loans, together with an aggregate
of not less than $148,300,000 in equity interests of the Trusts purchased by the
New Investor Group or
49
<PAGE>
contributed as Rollover Interests by the Rollover Holders, shall be applied (i)
to purchase or redeem the Trusts' equity interests, options and stock
appreciation rights for a maximum aggregate consideration, including Rollover
Interests, of not more than $187,100,000, (ii) to refinance the existing
Indebtedness of Company in an aggregate amount of approximately $22,200,000 and
(iii) to pay Transaction Costs of approximately $6,000,000.
B. Revolving Loans; Swing Line Loans. In addition to the purpose specified
in subsection 2.5A, the proceeds of the Revolving Loans and any Swing Line Loans
shall be applied by Company for working capital requirements and general
corporate purposes of the Company and its Subsidiaries, including for the
avoidance of doubt, to make any payments required as a result of a determination
by a Governmental Authority relating to or resulting from the Section 338(h)(10)
Election (as defined in the Recapitalization Agreement) or the transactions
described in the Recapitalization Agreement and to make any payments required to
be made under the Internal Revenue Service Employee Plan Compliance Resolution
System to rectify operational errors with regard to the BSH Employee Savings
Plan.
C. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
10.00 A.M. (New York City time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the Eurodollar market adequate and fair means do not
exist for ascertaining the interest rate applicable to such Loans on the basis
provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent
shall on such date give notice (by telefacsimile or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist and (ii) any Notice of Borrowing
50
<PAGE>
or Notice of Conversion/Continuation given by Company with respect to the Loans
in respect of which such determination was made shall be deemed to be rescinded
by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this Agreement which
materially and adversely affect the Eurodollar market or the position of such
Lender in that market, then, and in any such event, such Lender shall be an
"Affected Lender" and it shall on that day give notice (by telefacsimile or by
telephone confirmed in writing) to Company and Administrative Agent of such
determination (which notice Administrative Agent shall promptly transmit to each
other Lender). Thereafter (a) the obligation of the Affected Lender to make
Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until
such notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or
convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected
Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the
"Affected Loans") shall be terminated at the earlier to occur of the expiration
of the Interest Period then in effect with respect to the Affected Loans or when
required by law, and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Notwithstanding the foregoing,
to the extent a determination by an Affected Lender as described above relates
to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice
of Borrowing or a Notice of Conversion/Continuation, Company shall have the
option, subject to the provisions of subsection 2.6D, to rescind such Notice of
Borrowing or Notice of Conversion/Continuation as to all Lenders by giving
notice (by telefacsimile or by telephone confirmed in writing) to Administrative
Agent of such rescission on the date on which the Affected Lender gives notice
of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender
(which request shall set forth in reasonable detail the basis for requesting
such amounts), for all reasonable losses, expenses and liabilities (including
any interest paid by that Lender to lenders of funds borrowed by it to make or
carry its Eurodollar Rate Loans and any loss, expense or liability sustained by
that Lender in connection with the liquidation or re-employment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any
51
<PAGE>
Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment (including any prepayment pursuant to subsection 2.4B(i))
or other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Company, or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of
all amounts payable to a Lender under this subsection 2.6 and under subsection
2.7A shall be made as though that Lender had actually funded each of its
relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
- --------
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and during
the continuation of a Potential Event of Default or an Event of Default, (i)
Company may not elect to have a Loan be made or maintained as, or converted to,
a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs: Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof; or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
52
<PAGE>
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of;
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto in an amount deemed by such Lender (in its sole discretion) to
be material; then, in any such case, Company shall promptly pay to such Lender,
upon receipt of the statement referred to in the next sentence, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender in its sole discretion shall
determine) as may be necessary to compensate such Lender for any such increased
cost or reduction in amounts received or receivable hereunder. Such Lender shall
deliver to Company (with a copy to Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Lender under this subsection 2.7A, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under
-----------------------------
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from or to which
a payment is made by or on behalf of Company.
(ii) Grossing-up of Payments. If Company or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by Company to Administrative Agent or any
Lender under any of the Loan Documents:
53
<PAGE>
(a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Company
becomes aware of it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on Administrative Agent or such Lender, as the case may be)
on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required by
clause (b) above to pay, Company shall deliver to Administrative Agent
evidence satisfactory to the Administrative Agent of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
- --------
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any applicable law, treaty or
governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof imposing any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the applicable rate (including an increase from a zero rate to a
positive rate) of such deduction, withholding or payment from that in effect at
the date of this Agreement or at the date of such Assignment Agreement, as the
case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Company, on or prior to the Closing Date (in the
case of each Lender listed on the signature pages hereof) or on or
prior to the date of the Assignment Agreement pursuant to which it
becomes a Lender (in the case of each other Lender), and at such other
times as may be necessary in the determination of Company or
Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue
54
<PAGE>
Service Form 1001 or 4224 (or any successor forms), properly completed
and duly executed by such Lender, together with any other certificate
or statement of exemption required under the Internal Revenue Code or
the regulations issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of principal,
interest, fees or other amounts payable under any of the Loan
Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to
clause (1) above, a Certificate re Non-Bank Status together with two
original copies of Internal Revenue Service Form W-8 (or any successor
form), properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required under
the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to any payments to
such Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall promptly (I) deliver to Administrative Agent for
transmission to Company two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case may
be, properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
payments to such Lender under the Loan Documents or (2) notify
Administrative Agent and Company of its inability to deliver any such
forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such
Lender shall have failed to satisfy the requirements of clause (a) or
(b)(1) of this subsection 2.7B(iii); provided that if such Lender
--------
shall have satisfied the requirements of subsection 2.7B(iii)(a) on
the Closing Date (in the case of each Lender listed on the signature
pages hereof) or on the date of the Assignment Agreement pursuant to
which it became a Lender (in the case of each other Lender), nothing
in this subsection 2.7B(iii)(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to clause (c) of
subsection 2.7B(ii) in the event that, as a result of any change in
any applicable law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or application
thereof; such Lender is no longer properly entitled to deliver forms,
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certificates or other evidence at a subsequent date establishing the
fact that such Lender is not subject to withholding as described in
subsection 2.7B(iii)(a).
(iv) If Administrative Agent or any Lender shall become aware that it
is entitled to receive a refund in respect of Taxes as to which Company has
paid additional or increased amounts pursuant to this Section 2.7, it shall
promptly notify Company of the availability of such refund and shall apply
for such refund. If Administrative Agent or any Lender receives a refund in
respect of Taxes as to which Company has paid additional or increased
amounts pursuant to this Section 2.7, it shall promptly notify Company of
such refund and repay such refund to Company.
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy) and
in an amount deemed by such Lender (in its sole discretion) to be material, then
from time to time, within five Business Days after receipt by Company from such
Lender of the statement referred to in the next sentence, Company shall pay to
such Lender such additional amount or amounts as will compensate such Lender or
such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate; Replacement of
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Lender.
- ------
A. Mitigation. Each Lender and Issuing Lender agrees that, as promptly as
practicable after the officer of such Lender or Issuing Lender responsible for
administering the Loans or Letters of Credit of such Lender or Issuing Lender,
as the case may be, becomes aware of the occurrence of an event or the existence
of a condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender or Issuing Lender to receive payments under subsection
2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the
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circumstances which would cause such Lender to be an Affected Lender would cease
to exist or the additional amounts which would otherwise be required to be paid
to such Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6
would be materially reduced and if, as determined by such Lender or Issuing
Lender in its sole discretion, the making, issuing, funding or maintaining of
such Commitments or Loans or Letters of Credit through such other lending or
letter of credit office or in accordance with such other measures, as the case
may be, would not otherwise materially adversely affect such Commitments or
Loans or Letters of Credit or the interests of such Lender or Issuing Lender;
provided that such Lender or Issuing Lender will not be obligated to utilize
- --------
such other lending or letter of credit office pursuant to this subsection 2.8
unless Company agrees to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described in clause (i) above. A certificate as to the amount of any
such expenses payable by Company pursuant to this subsection 2.8 (setting forth
in reasonable detail the basis for requesting such amount) submitted by such
Lender or Issuing Lender to Company (with a copy to Administrative Agent) shall
be conclusive absent manifest error.
B. Replacement of Lender. If Company receives a notice pursuant to
subsection 2.7A, 2.7C or 3.6, is required to pay any additional amounts pursuant
to subsection 2.7B or in the event a Lender has not consented to a proposed
change, waiver, discharge or termination with respect to this Agreement which
has been approved by the Requisite Lenders as provided in subsection 10.6,
Company shall have the right, if no Potential Event of Default or Event of
Default then exists, to replace such Lender (a "Replaced Lender") with one or
more Eligible Assignees (collectively, the "Replacement Lender") acceptable to
Administrative Agent; provided that (i) at the time of any replacement pursuant
--------
to this subsection 2.8, the Replacement Lender shall enter into one or more
Assignment Agreements pursuant to subsection 10.1B (and with all fees payable
pursuant to such subsection 10.1B to be paid by the Replacement Lender) pursuant
to which the Replacement Lender shall acquire all of the outstanding Loans and
Commitments of, and in each case participations in Letters of Credit and Swing
Line Loans by, the Replaced Lender and, in connection therewith, shall pay to
(x) the Replaced Lender in respect thereof an amount equal to the sum of (A) an
amount equal to the principal of, and all accrued interest on, all outstanding
Loans of the Replaced Lender, (B) an amount equal to all unpaid drawings with
respect to Letters of Credit that have been funded by (and not reimbursed to)
such Replaced Lender, together with all then unpaid interest with respect
thereto at such time and (C) an amount equal to all accrued, but theretofore
unpaid, fees owing to the Replaced Lender with respect thereto, (y) the
appropriate Issuing Lender an amount equal to such Replaced Lender's Pro Rata
Share of any unpaid drawings with respect to Letters of Credit (which at such
time remains an unpaid drawing) issued by it to the extent such amount was not
theretofore funded by such Replaced Lender, and (z) Swing Line Lender an amount
equal to such Replaced Lender's Pro Rata Share of any Refunded Swing Line Loans
to the extent such amount was not theretofore funded by such Replaced Lender,
and (ii) all obligations (including without limitation all such amounts, if any,
owing under subsection 2.6D) of Company owing to the Replaced Lender (other than
those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid), shall be
paid in full to such Replaced Lender concurrently with such replacement. Upon
the execution of the respective Assignment Agreements, recordation of such
assignment in the Register by Administrative Agent pursuant to subsection 2.1D,
the payment of amounts referred to in clauses (i) and (ii) above and delivery to
the Replacement Lender of the appropriate Note or Notes
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executed by Company, the Replacement Lender shall become a Lender hereunder and
the Replaced Lender shall cease to constitute a Lender hereunder except with
respect to indemnification provisions under this Agreement which by the terms of
this Agreement survive the termination of this Agreement, which indemnification
provisions shall survive as to such Replaced Lender. Notwithstanding anything to
the contrary contained above, no Issuing Lender may be replaced hereunder at any
time while it has Letters of Credit outstanding hereunder unless arrangements
satisfactory to such Issuing Lender (including the furnishing of a Standby
Letter of Credit in form and substance, and issued by an issuer, satisfactory to
such Issuing Lender or the furnishing of cash collateral in amounts and pursuant
to arrangements satisfactory to such Issuing Lender) have been made with respect
to such outstanding Letters of Credit.
SECTION 3. LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
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Therein.
- -------
A. Letters of Credit. In addition to Company requesting that Revolving
Lenders make Revolving Loans pursuant to subsection 2.1A(ii) and that Swing
Line Lender make Swing Line Loans pursuant to subsection 2.1A(iii), Company may
request, in accordance with the provisions of this subsection 3.1, from time to
time during the period from the Closing Date to the 30th day prior to the
Revolving Loan Commitment Termination Date, that one or more Lenders issue
Letters of Credit for the account of Company for the purposes specified in the
definitions of Standby Letters of Credit. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
Company herein set forth, any one or more Lenders may, but (except as provided
in subsection 3.1B(ii)) shall not be obligated to, issue such Letters of Credit
in accordance with the provisions of this subsection 3.1; provided that Company
--------
shall not request that any Lender issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $10,000,000;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) ten days prior to the Revolving Loan Commitment
Termination Date and (b) the date which is one year from the date of
issuance of such Standby Letter of Credit; provided that the immediately
--------
preceding clause (b) shall not prevent any Issuing Lender from agreeing
that a Standby Letter of Credit will automatically be extended for one or
more successive periods not to exceed one year each unless such Issuing
Lender elects not to extend for any such additional period; and provided,
--------
further that such Issuing Lender shall elect not to extend such Standby
Letter of Credit if it has knowledge that an Event of Default has occurred
and is continuing (and has not been waived in accordance with subsection
10.6) at the time such Issuing Lender must elect whether or not to allow
such extension;
(iv) any Letter of Credit denominated in a currency other than
Dollars; or
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(v) any Letter of Credit without presentation of sight drafts.
Notwithstanding the foregoing, in the event an automatic extension of an
Existing Letter of Credit would result in a final expiration date that is later
than the Revolving Loan Commitment Termination Date, Company shall, in
accordance with the terms of such Existing Letter of Credit, give notice to the
Issuing Bank not to extend such Existing Letter of Credit and Issuing Lender
shall not extend such Existing Letter of Credit.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance of a
------------------
Letter of Credit, it shall deliver to Administrative Agent either an
original or a facsimile (provided that an original be delivered to
--------
Administrative Agent the day following Administrative Agent's receipt of
the facsimile) Request for Issuance of Letter of Credit in the form of
Exhibit III annexed hereto no later than 12:00 Noon (New York City time) at
least three Business Days, or in such shorter period as may be agreed to by
the Issuing Lender in any particular instance, in advance of the proposed
date of issuance. The Request for Issuance of Letter of Credit shall
specify (a) the proposed date of issuance (which shall be a Business Day),
(b) the face amount of the Letter of Credit, (c) the expiration date of the
Letter of Credit, (d) the name and address of the beneficiary, and (e)
either the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any
documents to be presented by the beneficiary which, if presented by the
beneficiary prior to the expiration date of the Letter of Credit, would
require the Issuing Lender to make payment under the Letter of Credit;
provided that the Issuing Lender, in its reasonable discretion, may require
--------
changes in the text of the proposed Letter of Credit or any such documents.
Company shall notify the applicable Issuing Lender (and Administrative
Agent, if Administrative Agent is not such Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which Company is
required to certify in the applicable Request for Issuance of Letter of Credit
is no longer true and correct as of the proposed date of issuance of such Letter
of Credit, and upon the issuance of any Letter of Credit Company shall be deemed
to have re-certified, as of the date of such issuance, as to the matters to
which Company is required to certify in the applicable Request for Issuance of
Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by Administrative
-------------------------------
Agent of a Request for Issuance of Letter of Credit pursuant to subsection
3.lB(i) requesting the issuance of a Letter of Credit, in the event
Administrative Agent elects to issue such Letter of Credit, Administrative
Agent shall promptly so notify Company, and Administrative Agent shall be
the Issuing Lender with respect thereto. In the event that Administrative
Agent, in its sole discretion, elects not to issue such Letter of Credit,
Administrative Agent shall promptly so notify Company, whereupon Company
may request any other Lender to issue such Letter of Credit by delivering
to such Lender a copy of the applicable Request for Issuance of Letter of
Credit. Any Lender so requested to issue such Letter of Credit shall
promptly notify Company and Administrative Agent whether or not, in its
sole discretion, it has elected to issue such Letter of Credit, and any
such Lender which so elects to issue such Letter of Credit shall be the
Issuing Lender
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<PAGE>
with respect thereto. In the event that all other Lenders shall have
declined to issue such Letter of Credit, notwithstanding the prior election
of Administrative Agent not to issue such Letter of Credit, Administrative
Agent shall be obligated to issue such Letter of Credit and shall be the
Issuing Lender with respect thereto, notwithstanding the fact that the
Letter of Credit Usage with respect to such Letter of Credit and with
respect to all other Letters of Credit issued by Administrative Agent, when
aggregated with Administrative Agent's outstanding Revolving Loans and
Swing Line Loans, may exceed Administrative Agent's Revolving Loan
Commitment then in effect. Notwithstanding the foregoing, Fleet shall be
the Issuing Lender for all Existing Letters of Credit.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
----------------------------
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures.
(iv) Notification to Lenders. Upon the issuance of or amendment to
-----------------------
any Letter of Credit the applicable Issuing Lender shall promptly notify
Administrative Agent and each other Lender of such issuance or amendment.
The notice to the Administrative Agent shall be accompanied by a copy of
such Letter of Credit or amendment and in the event a Lender requests a
copy of such issuance or amendment such copies will be provided by the
Administrative Agent. The Administrative Agent shall notify each Lender of
the amount of such Lender's respective participation in such Letter of
Credit, determined in accordance with subsection 3.1C.
(v) Reports to Lenders. Within l5 days after the end of each
------------------
calendar quarter ending after the Closing Date, so long as any Letter of
Credit shall have been outstanding during such calendar quarter, each
Issuing Lender shall deliver to each other Lender a report setting forth
for such calendar quarter the daily aggregate amount available to be drawn
under the Letters of Credit issued by such Issuing Lender that were
outstanding during such calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit. Immediately
upon the issuance of each Letter of Credit, each Revolving Lender shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Lender a participation in such Letter of Credit and any drawings honored
thereunder in an amount equal to such Revolving Lender's Pro Rata Share of the
maximum amount which is or at any time may become available to be drawn
thereunder. Upon satisfaction of the conditions set forth in subsection 4.1, the
Existing Letters of Credit shall, effective as of the Closing Date, become
Letters of Credit under this Agreement to the same extent as if initially issued
hereunder and each Revolving Lender shall be deemed to have irrevocably
purchased from the Issuing Lender(s) of such Existing Letters of Credit a
participation in such Letters of Credit and drawings thereunder in an amount
equal to such Revolving Lender's Pro Rata Share of the maximum amount which is
or at any time may become available to be drawn thereunder. All such Existing
Letters of Credit which become Letters of Credit under this Agreement shall be
fully secured by the Collateral commencing on the Closing Date to the same
extent as if initially issued hereunder on such date.
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3.2 Letter of Credit Fees.
---------------------
Company agrees to pay the following amounts with respect to Letters of
Credit issued hereunder:
(i) with respect to each Standby Letter of Credit, (a) a fronting
fee, payable directly to the applicable Issuing Lender for its own account,
equal to 0.25% per annum of the daily amount available to be drawn under
such Standby Letter of Credit; provided that in any event, the minimum
--------
fronting fee for any Standby Letter of Credit shall be $500 and (b) a
letter of credit fee, payable to Administrative Agent for the account of
Lenders, equal to the Applicable Eurodollar Rate Margin set forth in
subsection 2.2A hereof for Eurodollar Rate Loans multiplied by the daily
amount available from time to time to be drawn under such Standby Letter of
Credit, each such fronting fee or letter of credit fee to be payable in
arrears on and to (but excluding) each March 15, June l5, September 15 and
December 15 of each year and computed on the basis of a 360-day year for
the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clauses (i) and (ii) above),
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance with such Issuing Lender's
standard schedule for such charges in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clause (i) of this subsection
3.2, the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination. Promptly
upon receipt by Administrative Agent of any amount described in clause (i)(b) or
(ii)(b) of this subsection 3.2, Administrative Agent shall distribute to each
Revolving Lender its Pro Rata Share of such amount. With respect to Existing
Letters of Credit, the fees described in clauses (i) and (ii) above shall accrue
from and including the Closing Date.
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit.
------------------------------------------------------------------
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "Reimbursement Date") in an amount in Dollars and in same day funds
equal to the amount of such drawing; provided that, anything contained in this
--------
Agreement to the contrary notwithstanding, (i) unless Company shall have
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notified Administrative Agent and such Issuing Lender prior to 10:00 A.M. (New
York City time) on the date such drawing is that Company intends to reimburse
such Issuing Lender for the amount of such drawing with funds other than the
proceeds of Revolving Loans, Company shall be deemed to have given a timely
Notice of Borrowing to Administrative Agent requesting Revolving Lenders to make
Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount
in Dollars equal to the amount of such drawing and (ii) subject to satisfaction
or waiver of the conditions specified in subsection 4.2B, Lenders shall, on the
Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount
of such drawing, the proceeds of which shall be applied directly by
Administrative Agent to reimburse such Issuing Lender for the amount of such
drawing; and provided, further that if for any reason proceeds of Revolving
-------- -------
Loans are not received by such Issuing Lender on the Reimbursement Date in an
amount equal to the amount of such drawing, Company shall reimburse such Issuing
Lender, on demand, in an amount in same day funds equal to the excess of the
amount of such drawing over the aggregate amount of such Revolving Loans, if
any, which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Revolving Lender from its obligation to make Revolving Loans on the
terms and conditions set forth in this Agreement, and Company shall retain any
and all rights it may have against any Revolving Lender resulting from the
failure of such Revolving Lender to make such Revolving Loans under this
subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of
Credit.
(i) Payment by Lenders. In the event that Company shall fail for any
------------------
reason to reimburse any Issuing Lender as provided in subsection 3.3B in an
amount equal to the amount of any drawing honored by such Issuing Lender
under a Letter of Credit issued by it, such Issuing Lender shall promptly
notify each other Revolving Lender of the unreimbursed amount of such
drawing and of such other Lender's respective participation therein based
on such Revolving Lender's Pro Rata Share. Each Revolving Lender shall make
available to such Issuing Lender an amount equal to its respective
participation, in Dollars and in same day funds, at the office of such
Issuing Lender specified in such notice, not later than 12:00 Noon (New
York City time) on the first business day (under the laws of the
jurisdiction in which such office of such Issuing Lender is located) after
the date notified by such Issuing Lender. In the event that any Revolving
Lender fails to make available to such Issuing Lender on such business day
the amount of such Revolving Lender's participation in such Letter of
Credit as provided in this subsection 3.3C, such Issuing Lender shall be
entitled to recover such amount on demand from such Revolving Lender
together with interest thereon at the rate customarily used by such Issuing
Lender for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Revolving Lender to recover from any
Issuing Lender any amounts made available by such Revolving Lender to such
Issuing Lender pursuant to this subsection 3.3C in the event that it is
determined by the final judgment of a court of competent jurisdiction that
the payment with respect to a Letter of Credit by such Issuing Lender in
respect of which payment was made by such Revolving Lender constituted
gross negligence or willful misconduct on the part of such Issuing
Lender.
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(ii) Distribution to Lenders of Reimbursements Received From Company.
---------------------------------------------------------------
In the event any Issuing Lender shall have been reimbursed by other
Revolving Lenders pursuant to subsection 3.3C(i) for all or any portion of
any drawing honored by such Issuing Lender under a Letter of Credit issued
by it, such Issuing Lender shall distribute to each other Revolving Lender
which has paid all amounts payable by it under subsection 3.3C(i) with
respect to such honored drawing such other Revolving Lender's Pro Rata
Share of all payments subsequently received by such Issuing Lender from
Company in reimbursement of such honored drawing when such payments are
received. Any such distribution shall be made to a Lender at its primary
address set forth below its name on the appropriate signature page hereof
or at such other address as such Revolving Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to each
------------------------------
Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by such Issuing Lender in
respect of each such drawing from the date such drawing is honored to but
excluding the date such amount is reimbursed by Company (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B) at a rate equal to (a) for the period from the date of such drawing
to but excluding the Reimbursement Date, the rate then in effect under this
Agreement with respect to Revolving Loans that are Base Rate Loans and (b)
thereafter, a rate which is 2% per annum in excess of the rate of interest
otherwise payable under this Agreement with respect to Revolving Loans that
are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i)
shall be computed on the basis of a 360-day year for the actual number of
days elapsed in the period during which it accrues and shall be payable on
demand or, if no demand is made, on the date on which the related drawing
under a Letter of Credit is reimbursed, in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
---------------------------------------------------
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing under a Letter of Credit
issued by it, (a) such Issuing Lender shall distribute to each other
Revolving Lender, out of the interest received by such Issuing Lender in
respect of the period from the date of such drawing to but excluding the
date on which such Issuing Lender is reimbursed for the amount of such
drawing (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B), the amount that such other Revolving
Lender would have been entitled to receive in respect of the letter of
credit fee that would have been payable in respect of such Letter of Credit
for such period pursuant to subsection 3.2 if no drawing had been honored
under such Letter of Credit, and (b) in the event such Issuing Lender shall
have been reimbursed by other Revolving Lenders pursuant to subsection
3.3C(i) for all or any portion of such drawing, such Issuing Lender shall
distribute to each other Lender which has paid all amounts payable by it
under subsection 3.3C(i) with respect to such drawing such other Revolving
Lender's Pro Rata Share of any interest received by such Issuing Lender in
respect of that portion of such drawing so reimbursed by other Revolving
Lenders for the period from the date on which such Issuing Lender was so
reimbursed by other Revolving Lenders to but excluding the date on which
such portion of such drawing
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is reimbursed by Company. Any such distribution shall be made to a
Revolving Lender at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request.
3.4 Obligations Absolute.
--------------------
The obligation of Company to reimburse each Issuing Lender for drawings
made under the Letters of Credit issued by it and to repay any Revolving Loans
made by Revolving Lenders pursuant to subsection 3.3B and the obligations of
Revolving Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company or any Revolving Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for
whom any such transferee may be acting), any Issuing Lender or other
Revolving Lender or any other Person or, in the case of a Revolving Lender,
against Company, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including
any underlying transaction between Company or one of its Subsidiaries and
the beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
- --------
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
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3.5 Indemnification: Nature of Issuing Lenders' Duties.
--------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Lender shall not be responsible (absent a determination
of a court of competent jurisdiction of gross negligence or willful misconduct
by Issuing Lender) for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) failure of the beneficiary of any such Letter of Credit to comply
fully with any conditions required in order to draw upon such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of such Issuing Lender, including any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Lender
for any liability arising solely out
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of the gross negligence or willful misconduct of such Issuing Lender, as
determined by a final judgment of a court of competent jurisdiction or out of a
wrongful dishonor by Issuing Lender of a proper demand for payment made under
any Letter of Credit.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
Subject to the provisions of subsection 2.7B (which shall be controlling
with respect to the matters covered thereby), in the event that any Issuing
Lender or Lender shall determine (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto) that any
law, treaty or governmental rule, regulation or order, or any change therein or
in the interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by any Issuing Lender or
Lender with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than any
Tax on the overall net income of such Issuing Lender or Lender) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by any Issuing Lender or participations
therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto (in an amount deemed by such Issuing Lender (in its sole discretion) to
be material); then, in any case, Company shall promptly pay to such Issuing
Lender or Lender, upon receipt of the statement referred to in the next
sentence, such additional amount or amounts as may be necessary to compensate
such Issuing Lender or Lender for any such increased cost or reduction in
amounts received or receivable hereunder. Such Issuing Lender or Lender shall
deliver to Company a written statement, setting forth in reasonable detail the
basis for calculating the additional amounts owed to such Issuing Lender or
Lender under this subsection 3.6, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
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SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters of
Credit hereunder are subject to, and the existing Letters of Credit shall
become Letters of Credit under this Agreement upon the satisfaction of the
following conditions.
4.1 Conditions to Term Loans and Initial Revolving Loans and Swing Line Loans.
-------------------------------------------------------------------------
The obligations of Lenders to make the Term Loans and any Revolving Loans
and Swing Line Loans to be made on the Closing Date are, in addition to the
conditions precedent specified in subsection 4.2, subject to prior or
concurrent satisfaction of the following conditions:
A. Loan Party Documents. On or before the Closing Date, Company shall,
and shall cause each other Loan Party to, deliver to Lenders (or to
Administrative Agent for Lenders with sufficient originally executed copies,
where appropriate, for each Lender and its counsel) the following with respect
to Company or such Loan Party, as the case may be, each, unless otherwise
noted, dated the Closing Date:
(i) Certified copies of the Certificate or Articles of Incorporation
or other organizational documents of such Person, together with a good
standing certificate from the Secretary of State of its jurisdiction of
incorporation and each other state in which such Person is qualified as a
foreign corporation to do business and, to the extent generally available,
a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority
of each of such jurisdictions, each dated a recent date prior to the
Closing Date;
(ii) Copies of the Bylaws or other organizational documents of such
Person, certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary;
(iii) Resolutions of the members of such Person approving and
authorizing the execution, delivery and performance of the Loan Documents
and Related Agreements to which it is a party, certified as of the Closing
Date by the corporate secretary or an assistant secretary of such Person as
being in full force and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such Person is
a party; and
(vi) Such other documents as Administrative Agent may reasonably
request.
B. No Material Adverse Effect. Since December 31, 1997, no Material
Adverse Effect (in the sole opinion of Administrative Agent) shall have
occurred.
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C. Corporate and Capital Structure, Ownership, Management, Etc.
(i) Corporate Structure. The corporate organizational structure of
-------------------
the Trusts, Holdings and their respective Subsidiaries, both before and
after giving effect to the Recapitalization and the Reorganization, shall
be as set forth on Schedule 4.1C annexed hereto.
(ii) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of the Trusts, Holdings and their respective Subsidiaries, both
before and after giving effect to the Recapitalization and the
Reorganization, shall be as set forth on Schedule 4.1C annexed hereto.
(iii) Management; Employment Contracts. The management structure of
--------------------------------
the Trusts, Holdings and their respective Subsidiaries, after giving effect
to the Recapitalization and the Reorganization, shall be as set forth on
Schedule 4.1C annexed hereto, and Administrative Agent shall have received
executed copies of all employment contracts with each of Jean Alexander,
Meryl Beckingham, Kathleen Biro, Robert Cosinuke, Reuben Hendell, John
Hoholik, Betsy Karp, David Kenny, Harvey Kipnes, Ruben Pinchanski, Clare
Robinson, Malcolm Speed and Michael Ward in the form attached as Annex E to
the Recapitalization Agreement and the Non-Competition, Nonsolicitation and
Confidentiality Agreement by and among BSH, Positano Partners Ltd. and
Michael E. Bronner in the form attached as Annex G to the Recapitalization
Agreement.
D. Proceeds of Equity Capitalization of the Trusts. On or before the
Closing Date, the New Investor Group shall have purchased equity interests in
and the Rollover Holders shall have contributed Rollover Interests to the Trusts
in an aggregate amount of not less than $l48,300,000, in accordance with the
terms and conditions of the Recapitalization Agreement.
E. Satisfaction With Recapitalization and Reorganization; Financing.
Administrative Agent shall have received evidence satisfactory to it that (i)
the final structure of the Recapitalization and the Reorganization and (ii) the
sources and uses of proceeds to consummate the transactions contemplated by the
Loan Documents and the Related Agreements are in accordance with the
Recapitalization Agreement.
F. Related Agreements. Administrative Agent shall have received a fully
executed copy or photocopy of each Related Agreement in the form attached to the
Recapitalization Agreement, including any revised Disclosure Memorandum
delivered in connection with the Recapitalization Agreement, and any documents
executed in connection therewith, and each Related Agreement shall be in full
force and effect and no provision thereof shall have been modified or waived in
any respect determined by the Administrative Agent to be material, in each case
without the consent of the Administrative Agent.
G. Matters Relating to Existing Indebtedness of Company and its
Subsidiaries.
(i) Termination of Existing Credit Agreement and Related Liens. On
----------------------------------------------------------
the Closing Date, Company shall have (a) repaid in full all Indebtedness
outstanding under the Existing Credit Agreement (the aggregate principal
amount of which Indebtedness
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shall not exceed $27,100,000), (b) terminated any commitments to lend or
make other extensions of credit thereunder, (c) delivered to Administrative
Agent all documents or instruments necessary to release all Liens securing
Indebtedness or other obligations of Company thereunder, and (d) made
arrangements satisfactory to Administrative Agent with respect to the
cancellation of any letters of credit (other than the Existing Letters of
Credit) outstanding thereunder or the issuance of Letters of Credit to
support the obligations of Company with respect thereto. No existing
Indebtedness of the Company shall remain outstanding except as permitted by
subsection 7.1.
(ii) Existing Letters of Credit. On the Closing Date, the Existing
--------------------------
Letters of Credit shall have become Letters of Credit under this Agreement.
Company shall have furnished to Administrative Agent copies of all Existing
Letters of Credit and all amendments thereto. Company shall have paid to
the Lenders with respect to such Existing Letters of Credit all fees and
other amounts owing with respect thereto but excluding the Closing Date.
H. Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Recapitalization and the other
transactions contemplated by the Loan Documents and the Related Agreements, and
the continued operation of the business conducted by Company in substantially
the same manner as conducted prior to the consummation of the Recapitalization
and the Reorganization, and each of the foregoing shall be in full force and
effect, in each case other than those the failure to obtain or maintain which,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. All applicable waiting periods shall have
expired without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
Recapitalization and the Reorganization or the financing thereof. No action,
request for stay, petition for review or rehearing reconsideration, or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable agency to take action to set aside its consent on its own motion
shall have expired.
I. Consummation of the Recapitalization.
(i) All conditions to the Recapitalization set forth in Articles 10
and l1 of the Recapitalization Agreement shall have been satisfied or the
fulfillment of any such conditions shall have been waived with the consent
of Administrative Agent and Requisite Lenders;
(ii) the Recapitalization shall have become effective in accordance
with the terms of the Recapitalization Agreement;
(iii) Transaction Costs shall not exceed $6,000,000, and
Administrative Agent shall have received evidence to its satisfaction to
such effect; and
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(iv) Agent shall have received an Officers' Certificate of Company to
the effect set forth in clauses (i)-(iii) above and stating that Company
will proceed to consummate the Recapitalization immediately upon the making
of the initial Loans.
J. Security Interests in Personal and Mixed Property. Administrative
Agent shall have received evidence satisfactory to it that Holdings, Company
and Subsidiary Guarantors shall have taken or caused to be taken all such
actions, executed and delivered or caused to be executed and delivered all such
agreements, documents and instruments, and made or caused to be made all such
filings and recordings (other than the filing or recording of items described
in clauses (iii), (iv) and (v) below) that may be necessary or, in the opinion
of Administrative Agent, desirable in order to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and (upon such filing
and recording) perfected First Priority security interest in the entire
personal and mixed property Collateral. Such actions shall include the
following:
(i) Schedules to Collateral Documents. Delivery to Administrative
---------------------------------
Agent of accurate and complete schedules to all of the applicable
Collateral Documents.
(ii) Stock Certificates and Instruments. Delivery to Administrative
----------------------------------
Agent of (a) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Agent) representing all capital stock
or other equity interests pledged pursuant to the Holdings Pledge
Agreement, the Company Pledge Agreement, the Subsidiary Pledge Agreements
and the Auxiliary Pledge Agreements and (b) all promissory notes or other
instruments (duly endorsed, where appropriate, in a manner satisfactory to
Administrative Agent) evidencing any Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery to Agent
--------------------------------------------
of (a) the results of a recent search, by a Person satisfactory to
Administrative Agent, of all effective UCC financing statements and fixture
filings and all judgment and tax lien filings which may have been made with
respect to any personal or mixed property of any Loan Party, together with
copies of all such filings disclosed by such search, and (b) UCC
termination statements duly executed by all applicable Persons for filing
in all applicable jurisdictions as may be necessary to terminate any
effective UCC financing statements or fixture filings disclosed in such
search (other than any such financing statements or fixture filings in
respect of Liens permitted to remain outstanding pursuant to the terms of
this Agreement).
(iv) UCC Financing Statements and Fixture Filings. Delivery to
--------------------------------------------
Administrative Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with respect
to all personal and mixed property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of
Administrative Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Collateral Documents;
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(v) PTO Cover Sheets, Etc. Delivery to Administrative Agent of all
---------------------
cover sheets or other documents or instruments required to be filed with
the PTO in order to create or perfect Liens in respect of any IP
Collateral.
K. Financial Statements; Pro Forma Balance Sheet. On or before the Closing
Date, Lenders shall have received from Company (i) audited financial statements
of Company and its Subsidiaries for Fiscal Years 1995, 1996 and 1997, consisting
of balance sheets and the related consolidated and consolidating statements of
income, stockholders' equity and cash flows for such Fiscal Years, (ii)
unaudited financial statements of Company and its Subsidiaries for the nine-
month fiscal period ended September 30, 1998, consisting of a balance sheet and
the related consolidated and consolidating statements of income, stockholders'
equity and cash flows, all in reasonable detail and certified by the chief
financial officer of Company that they fairly present the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments, (iii) pro forma balance
sheet of Company and its Subsidiaries as at November 30, 1998, prepared in
accordance with GAAP and reflecting the consummation of the Recapitalization and
the Reorganization, the related financings and the other transactions
contemplated by the Loan Documents and the Related Agreements, which pro forma
financial statements shall be in form and substance satisfactory to Lenders, and
(iv) projected financial statements (including balance sheets and statements of
operations, stockholders' equity and cash flows) of the Company and its
Subsidiaries, for the six-year period after the Closing Date to be in form and
substance satisfactory to Administrative Agent and Lenders.
L. Solvency Assurances. On the Closing Date, Administrative Agent and
Lenders shall have received a Financial Condition Certificate executed by the
Chief Financial Officer of Company dated the Closing Date, substantially in the
form of Exhibit XIII annexed hereto and with appropriate attachments, in each
case demonstrating that, after giving effect to the consummation of the
Recapitalization, the related financings and the other transactions contemplated
by the Loan Documents and the Related Agreements, Company will be Solvent.
M. Evidence of Insurance. Administrative Agent shall have received a
certificate from Company's insurance broker or other evidence satisfactory to it
that all insurance required to be maintained pursuant to subsection 6.4 is in
full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under subsection 6.4.
N. Opinions of Counsel to Loan Parties. Lenders and their respective
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of Goodwin Proctor & Hoar and Wachtell, Lipton, Rosen
& Katz, counsel for Loan Parties, in form and substance reasonably satisfactory
to Administrative Agent and its counsel, dated as of the Closing Date and
setting forth substantially the matters in the opinions designated in Exhibit
VIII annexed hereto and as to such other matters as Administrative Agent acting
on behalf of Lenders may reasonably request and (ii) evidence satisfactory to
Administrative Agent that Company has requested such counsel to deliver such
opinions to Lenders.
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O. Opinions of Administrative Agent's Counsel. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, counsel to Administrative Agent, dated as of the Closing
Date, substantially in the form of Exhibit IX annexed hereto and as to such
other matters as Administrative Agent acting on behalf of Lenders may reasonably
request.
P. Opinions of Counsel Delivered Under Related Agreements. Administrative
Agent and its counsel shall have received copies of each of the opinions of
counsel delivered to the parties under the Related Agreements, together with a
letter from each such counsel (to the extent not inconsistent with such
counsel's established internal policies) authorizing Lenders to rely upon such
opinion to the same extent as though it were addressed to Lenders.
Q. Fees. Company shall have paid to Administrative Agent, for distribution
(as appropriate) to Administrative Agent and Lenders, the fees payable on the
Closing Date referred to in subsection 2.3.
R. Representations and Warranties; Performance of Agreements. Company
shall have delivered to Administrative Agent an Officers' Certificate, in form
and substance satisfactory to Administrative Agent, to the effect that the
representations and warranties in Section 5 hereof are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date (or, to the extent such
representations and warranties specifically relate to an earlier date, that such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date) and that Company shall have performed
in all material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before the
Closing Date except as otherwise disclosed to and agreed to in writing by
Administrative Agent and Requisite Lenders.
S. Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in
form and substance to Administrative Agent and such counsel, and Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent may reasonably
request.
4.2 Conditions to All Loans.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed
Notice of Borrowing, in each case signed by the chief executive officer, the
chief financial officer or the treasurer of Company or by any executive officer
of Company designated by any of the above-described officers on behalf of
Company in a writing delivered to Administrative Agent.
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B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete
in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) Each Loan Party shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement provides
shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including Regulation T, Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing pursuant to subsection 5.5 or 6.1(x) prior to the
making of the last preceding Loans (or, in the case of the initial Loans,
prior to the execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either
event, in the opinion of Administrative Agent or of Requisite Lenders,
would be expected to have a Material Adverse Effect; and no injunction or
other restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of; or to recover any damages or obtain
relief as a result of; the transactions contemplated by this Agreement or
the making of Loans hereunder.
4.3 Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
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B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Request for Issuance of Letter of
Credit, in each case signed by the chief executive officer, the chief financial
officer or the treasurer of Company or by any executive officer of Company
designated by any of the above-described officers on behalf of Company in a
writing delivered to Administrative Agent, together with all other information
specified in subsection 3.1B(i) and such other documents or information as the
applicable Issuing Lender may reasonably require in connection with the issuance
of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lenders to issue Letters of Credit and to induce other
Lenders to purchase participations therein, Company represents and warrants to
each Lender, on the date of this Agreement, on each Funding Date and on the date
of issuance of each Letter of Credit, that the following statements are true,
correct and complete:
5.1 No Change.
---------
Since December 31, 1997, (a) there has been no development or event which
in the aggregate has had or could reasonably be expected to have a Material
Adverse Effect, and (b) except as permitted by subsection 7.5 or as disclosed in
the Disclosure Memorandum to the Recapitalization Agreement or the
Recapitalization Agreement, during the period from December 31, 1997, to and
including the date hereof, neither Company nor any of its Subsidiaries has
directly or indirectly declared, ordered, paid or made, or set apart any sum or
property for any Restricted Junior Payment or agreed to do so.
5.2 Existence; Compliance with Law.
------------------------------
Each Loan Party (a) is duly organized and validly existing under the laws
of the jurisdiction of its organization and, where applicable and except where
the failure to be so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, is in good standing under the laws
of the jurisdiction of its organization, (b) has the power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
and (c) is duly qualified as a foreign organization and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified and/or in good standing could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
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5.3 Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
Each Loan Party has the power and authority, and the legal right, to make,
deliver and perform the Loan Documents and Related Agreements to which it is a
party and to borrow hereunder and has taken all necessary action to authorize
the borrowings on the terms and conditions of this Agreement and any Notes and
to authorize the execution, delivery and performance of the Loan Documents to
which it is a party. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
such Loan Party is a party except for those set forth in Schedule 4.15, Schedule
4.19 and Schedule 12.8 to the Recapitalization Agreement, filings required by
federal or state securities laws, filings under the Hart-Scott-Rodino Antitrust
Improvement Act, filings required in connection with the perfection of security
interests granted pursuant to the Loan Documents, and such other registrations,
consents, approvals, notices or other actions which have been or will be made,
obtained, given or taken on or before the Closing Date or which the failure to
obtain or take could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Each Loan Document will be duly executed
and delivered on behalf of such Loan Party to which it is a party. Each Loan
Document, when executed and delivered will constitute, a legal, valid and
binding obligation of such Loan Party to which it is a party enforceable against
such Loan Party in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
5.4 No Legal Bar.
------------
The execution, delivery and performance by each Loan Party of the Loan
Documents and the Related Agreements to which it is a party and the consummation
of the transactions contemplated by the Loan Documents and such Related
Agreements do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Holdings or any of its
Subsidiaries, the organizational documents of Holdings or any of its
Subsidiaries or any order, judgment or decree of any court or other agency of
government binding on Holdings or any of its Subsidiaries, (ii) conflict with,
result in a breach of or constitute (with due notice of lapse of time or both) a
default under any Contractual Obligation of Holdings or any of its Subsidiaries,
except for such breaches, conflicts and defaults which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of Holdings or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of Administrative Agent
on behalf of Lenders), or (iv) require any approval of stockholders or members
or any approval or consent of any Person under any Contractual Obligations of
Holdings or any of its Subsidiaries, except for such approvals or consents which
will be obtained on or before the Closing Date and disclosed in writing to
Lenders or which the failure to obtain could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect.
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5.5 No Material Litigation.
----------------------
No litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of Company or any of its
Subsidiaries, threatened by or against Company or any of its Subsidiaries or
against any of its or their respective properties or revenues (a) with respect
to any of the Loan Documents or any of the transactions contemplated hereby or
thereby or (b) which could reasonably be expected to have a Material Adverse
Effect.
5.6 No Default.
----------
Neither Company nor any of its Subsidiaries is in default under or with
respect to any of its Contractual Obligations in any respect which could
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect. No Potential Event of Default or Event of Default has occurred
and is continuing.
5.7 Ownership of Property; Liens.
----------------------------
As of the date hereof; neither the Company nor any of its Subsidiaries owns
any real property. To the extent Company or any of its Subsidiaries acquires an
ownership interest in any real property after the Closing Date, Company and each
of its Subsidiaries will have good record and marketable title in fee simple to
all such owned real property, except as permitted by subsection 7.2. Company and
each of its Subsidiaries has a valid leasehold interest or occupancy rights with
respect to leasehold interests in real or personal property and none of such
real property is subject to any Lien, except as permitted by subsection 7.2.
Company and each of its Subsidiaries has such title to their respective personal
property and assets, tangible and intangible, as is necessary to conduct their
respective businesses in the same manner as such businesses have been conducted
and none of such property is subject to any Lien, except as permitted by
subsection 7.2. As of the Closing Date, Schedule 5.7 annexed hereto contains a
------------
true, accurate and complete list of all leases, subleases or assignments of
leases (together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property Asset of any Loan Party,
regardless of whether such Loan Party is the landlord or tenant (whether
directly or as an assignee or successor in interest) under such lease, sublease
or assignment. Except as specified in Schedule 5.7 annexed hereto, each
------------
agreement listed in the immediately preceding sentence is in full force and
effect and Company does not have knowledge of any default that has occurred and
is continuing thereunder, and each such agreement constitutes the legally valid
and binding obligation of each applicable Loan Party, enforceable against such
Loan Party in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles.
5.8 Intellectual Property.
---------------------
Company and each of its Subsidiaries owns, or is licensed to use, all
Intellectual Property except for those the failure to own or license which could
not reasonably be expected to have a Material Adverse Effect. No claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any
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such Intellectual Property, nor does Company know of any valid basis for any
such claim, except for any such claims which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. The use of such
Intellectual Property by Company and its Subsidiaries does not infringe on the
rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.9 No Burdensome Restrictions.
--------------------------
No provision of law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries or Contractual Obligation of such Company or
any of its Subsidiaries could reasonably be expected to have a Material Adverse
Effect.
5.10 Taxes.
-----
Company and each of its Subsidiaries has filed or caused to be filed all
tax returns which, to the knowledge of Company, are required to be filed and has
paid all taxes shown to be due and payable on said returns or, to the extent due
and payable, on any assessments made against it or any of its property and, to
the extent due and payable, all other taxes, fees or other charges imposed on it
or any of its property by any Governmental Authority (other than the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of Company or its Subsidiaries, as the case may be, and
other than, in the case of jurisdictions outside the United States, where
failures to timely and properly file or pay could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect and other
than taxes, assessments and other governmental charges, if any, relating to or
resulting from the Section 338(h)(10) Election (as defined in the
Recapitalization Agreement), or the transactions described in the
Recapitalization Agreement; except as permitted by subsection 7.2, no tax Lien
has been filed, and, to the knowledge of Company no claim is being asserted,
with respect to any such tax, fee or other charge (other than, in the case of
jurisdictions outside the United States, such Liens, taxes, fees and other
charges as could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect).
5.11 Federal Regulations.
-------------------
No part of the proceeds of any Loans will be used for "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. If requested by any
Lender or the Administrative Agent, Company will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation U.
5.12 ERISA.
-----
On and as of the Closing Date, no Company Employee Benefit Plan is or was a
Pension Plan or a Multiemployer Plan. Except as set forth on Schedule 5.12 and
except for such exceptions which could not reasonably be expected in the
aggregate to have a Material Adverse Effect: (i) no ERISA Event has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Employee Benefit Plan, or is
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reasonably expected to occur; (ii) Company and each of its Subsidiaries are in
compliance with all applicable provisions and requirements of ERISA and the
regulations and published interpretations thereunder with respect to each
Company Employee Benefit Plan and have performed all their obligations under
each Company Employee Benefit Plan; (iii) each Company Employee Benefit Plan
which is intended to qualify under Section 401(a) of the Internal Revenue Code
is so qualified; and (iv) except to the extent required under Section 4980B of
the Internal Revenue Code or other applicable law or individual contract, no
Company Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employee of
Company, any of its Subsidiaries or any of their respective ERISA Affiliates. As
of the most recent valuation date for any Pension Plan, and excluding for
purposes of such computation all Pension Plans with respect to which assets
exceed benefit liabilities (as defined in Section 4001(a)(16) of ERISA), the
sum of:
(i) the unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA) individually or in the aggregate for all Company
Pension Plans; and
(ii) the liability that the Company or its Subsidiaries could
reasonably be expected to incur as the result of such unfunded benefit
liabilities, individually or in the aggregate, for all Pension Plans other
than Company Pension Plans (assuming amortization of such unfunded benefit
liabilities over ten years);
does not exceed $1,000,000. As of the most recent valuation date for which an
actuarial report has been received and based on information available pursuant
to Section 4221(e) of ERISA, the sum of:
(i) the potential liability of Company and its Subsidiaries for a
complete withdrawal from all Multiemployer Plans (within the meaning of
Section 4203 of ERISA) to which the Company or any of its Subsidiaries
contribute, and
(ii) the liability that the Company or its Subsidiaries could
reasonably be expected to incur as a result of the complete withdrawal from
all Multiemployer Plans to which neither the Company nor any of its
Subsidiaries contribute, after considering the financial condition of the
all of the ERISA Affiliates most closely related to the contributing
employer(s);
does not exceed $1,000,000. No Multiemployer Plan is in reorganization or
insolvent.
5.13 Investment Company Act; Other Regulations.
-----------------------------------------
Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Company is not subject to regulation under any Federal or State
statute or regulation (other than Regulation X of the Board of Governors of the
Federal Reserve System) which limits its ability to incur Indebtedness.
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5.14 Environmental Protection.
------------------------
Except for such exceptions as in the aggregate could not reasonably be
expected to have a Material Adverse Effect:
(i) the operations of Company and each of its Subsidiaries
(including, without limitation, all operations and condition at or in the
Facilities) comply with all Environmental Laws;
(ii) Company and each of its Subsidiaries have obtained all
Governmental Authorizations under Environmental Laws necessary to their
respective operations, and all such Governmental Authorizations are in good
standing, and Company and each of its Subsidiaries are in compliance with
the terms and conditions of such Governmental Authorizations;
(iii) neither Company nor any of its Subsidiaries has received (a) any
notice or claim to the effect that it is or may be liable to any Person as
a result of the Release or threatened Release of any Hazardous Materials or
(b) any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. (S) 9604) or comparable state laws, and, to the best of Company's
knowledge, none of the operations of Company or any of its Subsidiaries is
the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to any Release or threatened Release
of any Hazardous Materials at any Facility or at any other location;
(iv) none of the operations of Company or any of its Subsidiaries is
the subject of any pending judicial or administrative proceeding alleging
the violation of or liability under any Environmental Laws;
(v) (a) neither Company nor any of its Subsidiaries nor any of their
respective Facilities which are owned by Company or any of its Subsidiaries
or operations are subject to any outstanding written order or agreement
with any governmental authority of private party relating to (x) any
Environmental Laws or (y) any Environmental Claims and (b) neither Company
nor any of its Subsidiaries nor any of their respective Facilities which
are leased by Company or its Subsidiaries are, to its knowledge, subject to
any outstanding written order or agreement with any governmental authority
or private party relating to (x) any Environmental Laws or (y) any
Environmental Claims;
(vi) neither Company nor any of its Subsidiaries has, to its
knowledge, any contingent liability in connection with any Release of any
Hazardous Materials by Company or any of its Subsidiaries;
(vii) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any predecessor of Company or any of its Subsidiaries
has filed any notice under any Environmental Law indicating past or present
treatment or Release of Hazardous Materials at any Facility (other than
hazardous waste manifested in the ordinary course of business), and none of
Company's or any of its Subsidiaries'
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<PAGE>
operations involves the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or
any state equivalent;
(viii) (a) no Hazardous Materials exist on, under or about any
Facility which is owned by Company or any of its Subsidiaries in a manner
that has a reasonable possibility of giving rise to an Environmental Claim,
(b) to the knowledge of Company or any of its Subsidiaries, no Hazardous
Materials exist on, under or about any Facility which is leased by Company
or any of its Subsidiaries and (c) neither Company nor any of its
Subsidiaries has filed any notice or report of a Release of any Hazardous
Materials that has a reasonable possibility of giving rise to an
Environmental Claim;
(ix) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any of their respective predecessors has disposed of
any Hazardous Materials in a manner that has a reasonable possibility of
giving rise to an Environmental Claim;
(x) (a) no underground storage tanks or surface impoundments are on
or at any Facility which is owned by Company or any of its Subsidiaries,
and (b) to the knowledge of Company or any of its Subsidiaries, no
underground storage tanks or surface impoundments are on or at any Facility
which is leased by Company or any of its Subsidiaries; and
(xi) (a) no Lien in favor of any Person relating to any
Environmental Claim has been filed or has been attached to any Facility
which is owned by Company or any of its Subsidiaries, and (b) to the
knowledge of Company or any of its Subsidiaries, no Lien in favor of any
Person relating to any Environmental Claim has been filed or has been
attached to any Facility which is leased by Company or any of its
Subsidiaries.
5.15 Accuracy of Information.
-----------------------
No statement or information contained in this Agreement, any other Loan
Document, or any other document, certificate or written statement furnished to
the Administrative Agent or the Lenders or any of them (including, without
limitation, the Related Agreements), by or on behalf of any Loan Party for use
in connection with the transactions contemplated by this Agreement or the other
Loan Documents (including, without limitation, any financial information
furnished pursuant to subsection 4.1N, taken as a whole), contained as of the
date such statement, information, document or certificate was so furnished any
untrue statement of a material fact or taking such documents, certificates or
written statements as a whole, omitted to state a material fact necessary in
order to make the statements contained herein or therein in light of the
circumstances in which it was made not misleading. The projections and pro forma
financial information contained in the materials referenced above are based upon
good faith estimates and assumptions believed by management of Company to be
reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein. There is no
fact known to any Loan Party that could reasonably be expected to have a
Material Adverse Effect that has not been expressly disclosed herein, in the
other Loan Documents, or in such other documents, certificates and statements
furnished to the Administrative Agent for the benefit of the Lenders (including,
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without limitation, the Related Agreements) for use in connection with the
transactions contemplated hereby and by the other Loan Documents.
5.16 Security Documents.
------------------
A. Each of the Holdings Pledge Agreement, the Company Pledge Agreement,
the Subsidiary Pledge Agreements and the Auxiliary Pledge Agreements is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Pledged
Collateral, and proceeds thereof and, when the stock certificates or evidences
of other equity interests representing the Pledged Collateral are delivered to
the Administrative Agent, each such Holdings Pledge Agreement, Company Pledge
Agreement, the Subsidiary Pledge Agreements and the Auxiliary Pledge Agreements
shall constitute a fully perfected first priority Lien on, and security interest
in, all right, title and interest of the pledgor in respect thereof in such
Pledged Collateral and the proceeds thereof in favor of the Administrative Agent
for the benefit of the Lenders, in each case (except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally) prior and superior in right to any other
Person.
B. Each of the Company Security Agreement and Subsidiary Security
Agreements is effective to create in favor of the Administrative Agent, for the
benefit of the Lenders, a legal, valid and enforceable security interest in the
Collateral and proceeds thereof, when financing statements in appropriate form
are filed, except as set forth in such Company Security Agreement and Subsidiary
Security Agreement, such Company Security Agreement, constitutes a fully
perfected Lien on, and security interest in, all right, title and interest of
the Company and such Subsidiary in such Collateral and, to the extent provided
therein, the proceeds thereof in favor of the Administrative Agent for the
benefit of the Lenders, in each case (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally) prior and superior in right to any other Person,
other than with respect to Liens expressly permitted by subsection 7.2.
C. No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for
either (i) the pledge or grant by any Loan Party of the Liens purported to be
created in favor of Administrative Agent pursuant to any of the Collateral
Documents or (ii) the exercise by Administrative Agent of any rights or remedies
in respect of any Collateral (whether specifically granted or created pursuant
to any of the Collateral Documents or created or provided for by applicable
law), except for filings or recordings contemplated by subsection 5.17B and
except as may be required, in connection with the disposition of any Pledged
Collateral, by laws generally affecting the offering and sale of securities.
D. Except such as may have been filed in favor of Administrative Agent and
as contemplated by subsection 5.16B, (i) no effective UCC financing statement,
fixture filing or other instrument similar in effect covering all or any part of
the Collateral is on file in any filing or recording office and (ii) no
effective filing covering all or any part of the IP Collateral is on file in the
PTO.
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E. The pledge of the Pledged Collateral pursuant to the Collateral
Documents does not violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
F. All information supplied to Administrative Agent by or on behalf of any
Loan Party with respect to any of the Collateral (in each case taken as a whole
with respect to any particular Collateral) is accurate and complete in all
material respects.
5.17 Subsidiaries.
------------
All of the Subsidiaries of Company are identified in Schedule 5.17 annexed
-------------
hereto, as said Schedule 5.17 may be supplemented from time to time pursuant to
-------------
the provisions of subsection 6.1(xvii). The capital stock or other equity
interests of each of the Subsidiaries of Company identified in Schedule 5.17
-------------
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock or other equity interests
constitutes Margin Stock. Each of the Subsidiaries of Company identified in
Schedule 5.17 annexed hereto (as so supplemented) is a corporation duly
- -------------
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as proposed to be conducted, and is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or a lack of
such corporate power and authority, individually or in the aggregate has not had
and will not have a Material Adverse Effect. Schedule 5.17 annexed hereto (as
-------------
so supplemented) correctly sets forth, the ownership interest of Company and
each of its Subsidiaries in each of the Subsidiaries of Company identified
therein.
5.18 Financial Condition.
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
balance sheet of Company and its Subsidiaries as at December 31, 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
of Company and its Subsidiaries for the Fiscal Year then ended, (ii) the
unaudited consolidated balance sheet of Company and its Subsidiaries as at
September 30, 1998 and the related unaudited consolidated statements of income,
stockholders' equity cash flows of Company and its Subsidiaries for the nine
months then ended (iii) pro forma balance sheet of Company and its Subsidiaries
as at the Closing Date, reflecting the consummation of the Recapitalization and
the Reorganization, the related financings and the other transactions
contemplated by the Loan Documents and the Related Agreements, and (iv)
projected financial statements (including balance sheets and statements of
operations, stockholders' equity and cash flows) of the Company and its
Subsidiaries, for the six-year period after the Closing Date. The statements
referred to in clauses (i) through (iii) were prepared in conformity with GAAP
and fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and
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normal year-end adjustments. Except as set forth in Schedule 5.18 and except for
taxes, assessments and other governmental charges, if any, relating to or
resulting from, the Section 338(h)(10) Election (as defined in the
Recapitalization Agreement) or the transactions described in the
Recapitalization Agreement, Company does not, as of the Closing Date, have any
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment that is not reflected in the
foregoing financial statements or the notes thereto and which in any such case
is material in relation to the business operations, properties, assets,
condition (financial or otherwise) or prospects of Company or any of its
Subsidiaries.
5.19 Certain Fees.
------------
Other than as disclosed in the Recapitalization Agreement, no broker's or
finder's fee or commission will be payable with respect to this Agreement or any
of the transactions contemplated hereby, and Company hereby indemnifies Lenders
against, and agrees that it will hold Lenders harmless from, any claim, demand
or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
5.20 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.21 Solvency.
--------
Each Loan Party is and, upon the incurrence of any Obligations by such Loan
Party on any date on which this representation is made, will be, Solvent.
5.22 Related Agreements.
------------------
A. Delivery of Related Agreements. Company has delivered to Lenders
complete and correct copies of each Related Agreement and of all exhibits and
schedules thereto.
B. Warranties of Company. Subject to the qualifications set forth therein,
each of the representations and warranties given by Company to H&F in the
Recapitalization Agreement is true and correct in all material respects as of
the date hereof and will be true and correct in all material respects as of the
Closing Date.
5.23 Year 2000.
---------
All Information Systems and Equipment are either Year 2000 Compliant, or
any reprogramming, remediation, or any other corrective action, including the
internal testing of all such Information Systems and Equipment will be completed
by June 30, 1999. Further, to the extent that such reprogramming/remediation and
testing action is required, the cost thereof, as well as the cost of the
reasonably foreseeable consequences of failure to become Year 2000 Compliant, to
the Company and its Subsidiaries (including, without limitation, reprogramming
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errors and the failure of other systems or equipment) will not result in an
Event of Default or a Material Adverse Effect.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 Financial Statements and Other Reports.
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent and Lenders:
(i) Monthly Financials: as soon as available and in any event
------------------
within 30 days after the end of each month ending after the Closing Date,
(a) the consolidated balance sheet of Company and its Subsidiaries as at
the end of such month and the related consolidated statements of income
and cash flows of Company and its Subsidiaries for such month and for the
period from the beginning of the then current Fiscal Year to the end of
such month, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the Financial Plan for the current
Fiscal Year, to the extent prepared on a monthly basis, all in reasonable
detail and certified by the chief financial officer of Company that they
fairly present, in all material respects, the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the material changes, if any, in operations of
Company and its Subsidiaries from the Financial Plan for the current
Fiscal Year in the form prepared for presentation to senior management for
such month and for the period from the beginning of the then current
Fiscal Year to the end of such month;
(ii) Quarterly Financials: as soon as available and in any event
--------------------
within 45 days after the end of each Fiscal Quarter, (a) the consolidated
balance sheet of Company and its Subsidiaries as at the end of such Fiscal
Quarter and the related consolidated statements of income and cash flows
of Company and its Subsidiaries for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the Financial Plan for the current
Fiscal Year, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present, in all material respects, the
financial condition of Company and its Subsidiaries as at the dates
indicated
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and the results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the material changes,
if any, in the operations of Company and its Subsidiaries from the
Financial Plan for the current Fiscal Year in the form prepared for
presentation to senior management for such Fiscal Quarter and for the
period from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter;
(iii) Year-End Financials: as soon as available and in any event
-------------------
within 90 days after the end of each Fiscal Year, (a) the consolidated
balance sheet of Company and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures from
the Financial Plan for the Fiscal Year covered by such financial
statements, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present, in all material respects, the
financial condition of Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, (b) a narrative report describing the changes in the
operations of Company and its Subsidiaries from the operations of Company
and its Subsidiaries reflected in the financial statements delivered
pursuant to subdivisions (i) and (ii) above for the current Fiscal Year in
the form prepared for presentation to senior management for such Fiscal
Year, and (c) in the case of such consolidated financial statements, a
report thereon of PriceWaterhouseCoopers or other independent certified
public accountants of recognized national standing selected by Company and
satisfactory to Administrative Agent, which report shall be unqualified,
shall express no doubts about the ability of Company and its Subsidiaries
to continue as a going concern, and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Company and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(iv) Officers' and Compliance Certificates: together with each
-------------------------------------
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (i), (ii) and (iii) above, (a) an Officers' Certificate of
Company stating (x) that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of Company
and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do
not have knowledge of the existence as at the date of such Officers'
Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action Company has taken, is taking and proposes to take with
respect thereto and (y) that the Company does not as at the date of such
Officer's Certificate, have any Contingent Obligation, contingent
liability or unusual forward or long-term commitment arising from any
amendments to
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the Management Contracts that is not reflected in the financial statements
being delivered or the notes thereto and which in any such case is
material in relation to the business operations, properties, assets,
condition (financial or otherwise) or prospects of Company or any of its
Subsidiaries; (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable accounting
periods with the restrictions contained in Section 7, in each case to the
extent compliance with such restrictions is required to be tested at the
end of the applicable accounting period; and (c) a Margin Determination
Certificate demonstrating in reasonable detail the Consolidated Leverage
Ratio for the four consecutive fiscal quarters ending on the last day of
the accounting period covered by such financial statements.
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.18, the
consolidated financial statements of Company and its Subsidiaries
delivered pursuant to subdivisions (i), (ii), (iii) or (xiii) of this
subsection 6.1 will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles and policies been
made, then (a) together with the first delivery of financial statements
pursuant to subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1
following such change, consolidated financial statements of Company and
its Subsidiaries for (y) the current Fiscal Year to the effective date of
such change and (z) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro
forma basis as if such change had been in effect during such periods, and
(b) together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.l following
such change, a written statement of the chief accounting officer or chief
financial officer of Company setting forth the differences (including any
differences that would affect any calculations relating to the financial
covenants set forth in subsection 7.6) which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, (x) the comment letter submitted by such
accountants to management and (y) a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, (b) stating whether, in connection with their audit examination,
any condition or event that constitutes an Event of Default or Potential
Event of Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
--------
reason of any failure to obtain knowledge of any such Event of Default or
Potential Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to
believe either or both that the information contained in the certificates
delivered therewith pursuant to subdivision (iv) above is not correct or
that the matters set forth in the Compliance Certificate delivered
therewith pursuant to clause (b) of
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subdivision (iv) above for the applicable Fiscal Year are not stated in
accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders or by any Subsidiary of Company to its security holders
other than Company or another Subsidiary of Company, (b) all regular and
periodic reports and all registration statements (other than on Form S-8
or a similar form) and prospectuses, if any, filed by Company or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally
by Company or any of its Subsidiaries to the public concerning material
developments in the business of Company or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
-----------------------
Company obtaining knowledge (a) of any condition or event that constitutes
an Event of Default or Potential Event of Default, or becoming aware that
any Lender has given any notice (other than to Administrative Agent) or
taken any other action with respect to a claimed Event of Default or
Potential Event of Default, (b) that any Person has given any notice to
Company or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 8.2, (c) of any condition or event that would be required to be
disclosed in a current report filed by Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Company were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature
and period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of such
claimed Event of Default, Potential Event of Default, default, event or
condition, and what action Company has taken, is taking and proposes to
take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
-------------------------------
officer of Company obtaining knowledge of (X) the institution of; or non-
frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting Company or any of its Subsidiaries or any property of Company
or any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Company to Lenders or (Y) any material development
in any Proceeding that, in any case:
(a) could reasonably be expected to have a Material Adverse
Effect; or
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<PAGE>
(b) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of
each Fiscal Quarter, a schedule of all Proceedings involving an
alleged liability of, or claims against or affecting, Company or any
of its Subsidiaries equal to or greater than $500,000, and promptly
after request by Administrative Agent such other information as may be
reasonably requested by Administrative Agent to enable Administrative
Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: promptly upon the Company becoming aware of
------------
the occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Company, any of its
Subsidiaries or any of their respective ERISA Affiliates has taken, is
taking or proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service, the Department
of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a)
-------------
each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Company, or any of its Subsidiaries with respect to each
Company Pension Plan; (b) all notices received by Company or (if obtained
by the Company) any of its Subsidiaries or any of their respective ERISA
Affiliates from a Multiemployer Plan sponsor, the Internal Revenue Service
or the PBGC concerning an ERISA Event; and (c) copies of such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no
---------------
later than 30 days after the beginning of each Fiscal Year, a consolidated
plan and financial forecast for such Fiscal Year and the next succeeding
Fiscal Year (the "Financial Plan" for such Fiscal Year), including (a)
forecasted consolidated balance sheet and forecasted consolidated
statements of income and cash flows of Company and its Subsidiaries for
such Fiscal Year, together with a pro forma Compliance Certificate for
such Fiscal Year and an explanation of the assumptions on which such
forecasts are based, (b) forecasted consolidated statements of income and
cash flows of Company and its Subsidiaries for each month of such Fiscal
Year, together with an explanation of the assumptions on which such
forecasts are based, (c) the amount of forecasted unallocated overhead for
such Fiscal Year, and (d) such other information and projections as any
Lender may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by the
---------
last day of each Fiscal Year, a report in form and substance satisfactory
to Administrative Agent outlining all material insurance coverage
maintained as of the date of such report by Company and its Subsidiaries
and all material insurance coverage planned to be maintained by Company
and its Subsidiaries in the immediately succeeding Fiscal Year;
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(xv) Members: with reasonable promptness, written notice of any
-------
change in the members of Company;
(xvi) New Subsidiaries: promptly upon any Person becoming a
----------------
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company
and (b) all of the data required to be set forth in Schedule 5.18 annexed
-------------
hereto with respect to all Subsidiaries of Company (it being understood
that such written notice shall be deemed to supplement Schedule 5.18
-------------
annexed hereto for all purposes of this Agreement);
(xvii) Material Contracts: promptly, and in any event within ten
------------------
Business Days after any Material Contract of Company or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Company or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto, and on
January 31 of a given year a written statement to the extent that the
annual revenue generated by a company which is a client of the Company or
any of its Subsidiaries for the Company or any of its Subsidiaries has
decreased by $5,000,000 or more during the prior year as compared with the
revenue of such client in the prior preceding year;
(xviii) UCC Search Report: As promptly as practicable after the date
-----------------
of delivery to Administrative Agent of any UCC financing statement
executed by any Loan Party pursuant to subsection 4.IJ(iv) or 6.8A,
copies of completed UCC searches evidencing the proper filing, recording
and indexing of all such UCC financing statement and listing all other
effective financing statements that name such Loan Party as debtor,
together with copies of all such other financing statements not previously
delivered to Administrative Agent by or on behalf of Company or such Loan
Party;
(xix) as promptly, and in any event, within ten Business Days of
compliance with subsections 2.1A(ii)(b) and 2.1A(iii)(b), notice of such
compliance.
(xx) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by any Lender.
6.2 Corporate Existence, etc.
------------------------
Except as permitted under subsection 7.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business; provided, however that neither Company nor any of its Subsidiaries
-------- -------
shall be required to preserve any such right or franchise if the Board of
Directors or members of Company or such Subsidiary, as applicable shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of Company or such Subsidiary, as the case may be, and that the
loss thereof is not disadvantageous in any material respect to Company, such
Subsidiary or Lenders.
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6.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, except for taxes, assessments and
other governmental charges, if any, relating to or resulting from the Section
338(h)(10) Election (as defined in the Recapitalization Agreement) or the
transactions described in the Recapitalization Agreement which taxes,
assessments and other governmental charges, if any, shall be paid promptly after
a final determination by a Governmental Authority that such amounts are owing,
and all claims (including claims for labor, services, materials and supplies)
for sums that have become due and payable and that by law have or may become a
material Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
--------
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
(1) such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (2) in the case of a
charge or claim which has or may become a Lien against any of the Collateral,
such contest proceedings conclusively operate to stay the sale of any portion of
the Collateral to satisfy such charge or claim.
B. Company will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than BSH Trust, SIG Trust, BSH Holdings, SIG Holdings, Company or any of
its Subsidiaries).
6.4 Maintenance of Properties; Insurance.
------------------------------------
A. Maintenance of Properties. Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Company and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
B. Insurance. Company will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Company and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Each such policy of insurance
shall (a) name Administrative Agent for the benefit of Lenders as an additional
insured thereunder as its interests may appear and (b) in the case of each
business interruption and casualty insurance policy, contain a loss payable
clause or endorsement, satisfactory in form and substance to Administrative
Agent, that names Administrative Agent for the benefit of Lenders as the loss
payee thereunder for any covered loss in excess of $500,000 and provides for at
least 30 days prior written notice to Administrative Agent of any modification
or cancellation of such policy.
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6.5 Inspection Rights; Lender Meeting.
---------------------------------
A. Inspection Rights. Company shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by any Lender
to visit and inspect any of the properties of Company or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Company may, if it so chooses, be present at or participate in
--------
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may reasonably be requested.
B. Lender Meeting. Company will, upon the request of Administrative
Agent or Requisite Lenders, participate in a meeting of Administrative Agent and
Lenders once during each Fiscal Year to be held at Company's corporate offices
(or at such other location as may be agreed to by Company and Administrative
Agent) at such time as may be agreed to by Company and Administrative Agent.
6.6 Compliance with Laws, etc.
-------------------------
Company shall comply, and shall cause each of its Subsidiaries and all
other Persons on or occupying any Facilities to comply, with the requirements of
all applicable laws, rules, regulations and orders of any Governmental Authority
(including all Environmental Laws), noncompliance with which could reasonably be
expected to cause, individually or in the aggregate, a Material Adverse Effect.
6.7 Environmental Disclosure and Inspection; Remedial Action Regarding
------------------------------------------------------------------
Hazardous Materials.
- -------------------
A. Company shall, and shall cause each of its Subsidiaries to, exercise
all due diligence in order to comply with all Environmental Laws and cause (i)
their respective employees, agents, contractors and subcontractors and (ii) all
other Persons on or occupying any real property owned by Company or any of its
Subsidiaries or with respect to which Company or any of its Subsidiaries is
lessor to comply with all Environmental Laws.
B. Company shall promptly advise Administrative Agent and Lenders in
writing and in reasonable detail of any of the following which, individually or
in the aggregate, has a reasonable possibility of giving rise to a Material
Adverse Effect (i) any Release of any Hazardous Materials made by Company or any
of its Subsidiaries required to be reported to any federal, state or local
governmental or regulatory agency under any applicable Environmental Laws, (ii)
any Release of any Hazardous Materials made by a Person other than Company or
any of Company's Subsidiaries required to be reported to any federal, state or
local governmental or regulatory agency under any applicable Environmental Laws
to the extent Company or any of its Subsidiaries has received written notice of
such Release, (iii) any and all written communications of the Company or any of
its Subsidiaries with respect to any Environmental Claims or with respect to any
Release of Hazardous Materials required to be reported to any federal, state or
local governmental or regulatory agency, (iv) any and all written communications
of any Person other than the Company or any of its Subsidiaries with respect to
any Environmental Claims or
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with respect to any Release of Hazardous Materials required to be reported to
any federal, state or local governmental or regulatory agency to the extent
Company or any of its Subsidiaries has received written notice of such
communications, (v) any remedial action taken by Company or, to the extent
Company or any of its Subsidiaries has received written notice, any other Person
in response to (x) any Hazardous Materials on, under or about any Facility, the
existence of which has a reasonable possibility of resulting in an Environmental
Claim, or (y) any Environmental Claim, (vi) the discovery by Company or any of
its Subsidiaries of any occurrence or condition on any real property adjoining
or in the vicinity of any Facility which is owned by Company or any of its
Subsidiaries that could cause such Facility or any part thereof to be subject to
any restrictions on the ownership, occupancy, transferability or use thereof
under any Environmental Laws, (vii) to the extent Company or any of its
Subsidiaries has received written notice of any occurrence or condition on any
real property adjoining or in the vicinity of any Facility which is leased by
Company or any of it Subsidiaries that could cause such Facility or any part
thereof to be subject to any restrictions on the ownership, occupancy,
transferability or use thereof under any Environmental Laws, and (viii) any
request for information from any governmental agency that suggests such agency
is investigating whether Company or any of its Subsidiaries may be potentially
responsible for a Release of Hazardous Materials.
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
-----------------------------------------------------------------
Documents by Certain Subsidiaries and Future Subsidiaries: Auxiliary Pledge
- ---------------------------------------------------------------------------
Agreements; Collateral.
- ----------------------
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Subsidiary of Company after
the date hereof, with the exception of a BSH Agent Subsidiary, Company will
promptly notify Administrative Agent of that fact and cause such Subsidiary, if
it is a Domestic Subsidiary, to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty and Subsidiary Security Agreement and to
take all such further actions and execute all such further documents and
instruments (including actions, documents and instruments comparable to those
described in subsection 4.1J) as may be necessary or, in the opinion of
Administrative Agent, desirable to create in favor of Administrative Agent, for
the benefit of Lenders, a valid and perfected First Priority Lien on all of the
personal and mixed property assets of such Subsidiary described in the
applicable forms of Collateral Documents. With respect to any such Subsidiary
which is a Domestic Subsidiary, Company shall also deliver to Administrative
Agent a Subsidiary Pledge Agreement, granting to Administrative Agent on behalf
of Lenders a First Priority Lien in 100% of the capital stock or other equity
interests of such Domestic Subsidiary, and with respect to any such Subsidiary
which is a Foreign Subsidiary, if Company or a Domestic Subsidiary owns the
capital stock or other equity interests of such Foreign Subsidiary, Company
shall deliver to Administrative Agent an Auxiliary Pledge Agreement granting to
Administrative Agent on behalf of Lenders a First Priority Lien in 65% of the
capital stock or other equity interests of such Foreign Subsidiary, and, in each
case, Company shall take, or cause to be taken, all such other actions as
Administrative Agent shall deem necessary or desirable to perfect such security
interest.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Company shall
deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation
or other organizational documents, together with a good standing certificate
from the Secretary of State of the jurisdiction of its incorporation
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and each other state in which such Person is qualified as a foreign corporation
to do business if such Subsidiary is a Domestic Subsidiary and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes from the appropriate taxing
authority of each such jurisdictions if such Subsidiary is a Domestic
Subsidiary, each to be dated a recent date prior to their delivery to
Administrative Agent, (ii) a copy of such Subsidiary's Bylaws or other
organizational documents, certified by its corporate secretary or an assistant
secretary as of a recent date prior to their delivery to Administrative Agent,
(iii) a certificate executed by the secretary or an assistant secretary of such
Subsidiary as to (a) the fact that the attached resolutions of the Board of
Directors of such Subsidiary approving and authorizing the execution, delivery
and performance of such Loan Documents are in full force and effect and have not
been modified or amended and (b) the incumbency and signatures of the officers
of such Subsidiary Guarantor executing such Loan Documents, and (iv) a favorable
opinion of counsel to such Subsidiary Guarantor, in form and substance
satisfactory to Agents and their respective counsel, as to (a) the due
organization and good standing of such Subsidiary, (b) the due authorization,
execution and delivery by such Subsidiary of such Loan Documents, (c) the
enforceability of such Loan Documents against such Subsidiary, (d) such other
matters (including matters relating to the creation and perfection of Liens in
any Collateral pursuant to such Loan Documents) as Agents may reasonably
request, all of the foregoing to be satisfactory in form and substance to Agents
and their respective counsel.
6.9 Conforming Leasehold Interests: Matters Relating to Additional Real
-------------------------------------------------------------------
Property Collateral.
- -------------------
A. Conforming Leasehold Interests. If Company or any of its Subsidiaries
acquires any Leasehold Property after the Closing Date, Company shall, or shall
cause such Subsidiary to, use its reasonable good faith best efforts (without
requiring Company or such Subsidiary to relinquish any material rights or incur
any material obligations or to expend more than a nominal amount of money
excluding reasonable attorneys' fees incurred by (i) the landlord under the
applicable lease, (ii) Administrative Agent and (iii) Company or such
Subsidiary) to cause such Leasehold Property to be a Conforming Leasehold
Interest.
B. Additional Mortgages, Etc. From and after the Closing Date, in the
event that (i) Company or any Subsidiary Guarantor acquires any fee interest in
real property or any Material Leasehold Property or (ii) at the time any Person
becomes a Subsidiary Guarantor, such Person owns or holds any fee interest in
real property or any Material Leasehold Property, in either case excluding any
such Real Property Asset the encumbrancing of which requires the consent of any
applicable lessor or (in the case of clause (ii) above) then-existing senior
lienholder, where Company and its Subsidiaries are unable to obtain such
lessor's or senior lienholder's consent (any such non-excluded Real Property
Asset described in the foregoing clause (i) or (ii) being an "Additional
Mortgaged Property"), Company or such Subsidiary Guarantor shall deliver to
Administrative Agent, as soon as practicable after such Person acquires such
Additional Mortgaged Property or becomes a Subsidiary Guarantor, as the case may
be, the following:
(i) Additional Mortgage. A fully executed and notarized Mortgage
-------------------
(an "Additional Mortgage"), duly recorded in all appropriate places in all
applicable
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jurisdictions, encumbering the interest of such Loan Party in such
Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to
-------------------
such Loan Party, in form and substance satisfactory to Administrative
Agent and its counsel, as to the due authorization, execution and delivery
by such Loan Party of such Additional Mortgage and such other matters as
Administrative Agent may reasonably request, and (b) if required by
Administrative Agent, an opinion of counsel (which counsel shall be
reasonably satisfactory to Administrative Agent) in the state in which
such Additional Mortgaged Property is located with respect to the
enforceability of such Additional Mortgage and such other matters
(including any matters governed by the laws of such state regarding
personal property security interests in respect of any Collateral) as
Administrative Agent may reasonably request, in each case in form and
substance reasonably satisfactory to Administrative Agent;
(iii) Landlord Consent and Estoppel; Recorded Leasehold Interest.
----------------------------------------------------------
In the case of an Additional Mortgaged Property consisting of a Material
Leasehold Property, (a) a Landlord Consent and Estoppel and (b) evidence
that such Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Administrative Agent, an
---------------
ALTA mortgagee title insurance policy or an unconditional commitment
therefor (an "Additional Mortgage Policy") issued by the Title Company
with respect to such Additional Mortgaged Property, in an amount
satisfactory to Administrative Agent, insuring fee simple title to, or a
valid leasehold interest in, such Additional Mortgaged Property vested in
such Loan Party and assuring Administrative Agent that such Additional
Mortgage creates a valid and enforceable First Priority mortgage Lien on
such Additional Mortgaged Property, subject only to a standard suryey
exception, which Additional Mortgage Policy (1) shall include an
endorsement for mechanics' liens, for future advances under this Agreement
and for any other matters reasonably requested by Administrative Agent and
(2) shall provide for affirmative insurance and such reinsurance as
Administrative Agent may reasonably request, all of the foregoing in form
and substance reasonably satisfactory to Administrative Agent; and (b)
evidence satisfactory to Administrative Agent that such Loan Party has (i)
delivered to the Title Company all certificates and affidavits required by
the Title Company in connection with the issuance of the Additional
Mortgage Policy and (ii) paid to the Title Company or to the appropriate
governmental authorities all expenses and premiums of the Title Company in
connection with the issuance of the Additional Mortgage Policy and all
recording and stamp taxes (including mortgage recording and intangible
taxes) payable in connection with recording the Additional Mortgage in the
appropriate real estate records;
(v) Title Report. If no Additional Mortgage Policy is required
------------
with respect to such Additional Mortgaged Property, a title report issued
by the Title Company with respect thereto, dated not more than 30 days
prior to the date such Additional Mortgage is to be recorded and
satisfactory in form and substance to Administrative Agent;
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(vi) Copies of Documents Relating to Title Exceptions. Copies of
------------------------------------------------
all recorded documents listed as exceptions to title or otherwise referred
to in the Additional Mortgage Policy or title report delivered pursuant to
clause (iv) or (v) above;
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
-------------------------------------------
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (1) whether such Additional Mortgaged Property
is a Flood Hazard Property, and (2) if so, whether the community in which
such Flood Hazard Property is located is participating in the National
Flood Insurance Program, (b) if such Additional Mortgaged Property is a
Flood Hazard Property, such Loan Party's written acknowledgement of
receipt of written notification from Administrative Agent (1) that such
Additional Mortgaged Property is a Flood Hazard Property and (2) as to
whether the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, and (c) in the
event such Additional Mortgaged Property is a Flood Hazard Property that
is located in a community that participates in the National Flood
Insurance Program, evidence that Company has obtained flood insurance in
respect of such Flood Hazard Property to the extent required under the
applicable regulations of the Board of Governors of the Federal Reserve
System; and
(viii) Environmental Audit. If required by Administrative Agent,
-------------------
reports and other information, in form, scope and substance satisfactory
to Administrative Agent and prepared by environmental consultants
satisfactory to Administrative Agent, concerning any environmental hazards
or liabilities to which Company or any of its Subsidiaries may be subject
with respect to such Additional Mortgaged Property.
C. Real Estate Appraisals. Company shall, and shall cause each of its
Subsidiaries to, permit an independent real estate appraiser satisfactory to
Administrative Agent, upon reasonable notice, to visit and inspect any
Additional Mortgaged Property for the purpose of preparing an appraisal of such
Additional Mortgaged Property satisfying the requirements of any applicable laws
and regulations (in each case to the extent required under such laws and
regulations as determined by Administrative Agent in its discretion).
6.10 Interest Rate Protection. By the date which is 90 days after the Closing
------------------------
Date until the two year anniversary after the Closing Date, Company shall
maintain in effect one or more Interest Rate Agreements with respect to the
Loans, in an aggregate notional principal amount of not less than 50% of the
aggregate principal amount of the Term Loan outstanding on the Closing Date,
which Interest Rate Agreements shall have the effect of establishing a maximum
interest rate of not more than 10% per annum with respect to such notional
principal amount, each such Interest Rate Agreement to be in form and substance
satisfactory to Administrative Agent and with a term of not less than two years
after the Closing Date.
6.11 Deposit Accounts and Cash Management Systems.
--------------------------------------------
Company shall, and shall cause each of its Subsidiaries to, use and
maintain its Deposit Accounts and cash management systems in a manner reasonably
satisfactory to Administrative Agent. Company shall not permit any of such
Deposit Accounts with any Person other than Administrative Agent or any other
Lenders at any time to have a principal balance in excess of
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$500,000 unless Company or such Subsidiary, as the case may be, has (i)
delivered to Administrative Agent an agreement, satisfactory in form and
substance to Administrative Agent and executed by such Person, pursuant to which
such Person confirms and acknowledges Administrative Agent's security interest
in, and sole dominion and control over, such Deposit Account and waives its
rights to set-off with respect to amounts in such Deposit Account and (ii) taken
all other steps necessary or, in the opinion of Administrative Agent, desirable
to ensure that Administrative Agent has sole dominion and control over such
Deposit Account; provided that if Company or such Subsidiary is unable to obtain
--------
such agreement from such Person Company shall, or shall cause such Subsidiary
to, within 30 days after receiving a written request by Administrative Agent to
do so, transfer all amounts in the applicable Deposit Account to a Deposit
Account maintained with a Person from which Company or such Subsidiary has
obtained such an agreement. Company shall not permit the aggregate amount on
deposit in all Deposit Accounts of Company and of its Subsidiaries with any
Person other than Administrative Agent or any other Lenders at any time to
exceed $500,000.
6.12 BSH Agent Subsidiary.
--------------------
At the request of Administrative Agent, any Client or any Media Production
Vendor, Company shall establish a BSH Agent Subsidiary, such BSH Agent
Subsidiary to be subject to the provisions contained in this Agreement.
Notwithstanding any provision contained in this Agreement or in any of the other
Loan Documents, no BSH Agent Subsidiary shall be required to grant to
Administrative Agent a Lien in its personal and mixed property assets nor shall
such BSH Agent Subsidiary be required to guaranty the Obligations.
6.13 Year 2000.
---------
The Company will ensure that its Information Systems and Equipment are at
all times after June 30, 1999 Year 2000 Compliant, except insofar as the failure
to do so will not result in a Material Adverse Effect, and shall notify the
Administrative Agent promptly upon detecting any failure of the Information
Systems and Equipment to be Year 2000 Compliant. In addition, Company shall
provide the Administrative Agent and any Lender with such information about its
Year 2000 computer readiness (including, without limitation, information as to
contingency plans, budgets and testing results) as the Administrative Agent or
such Lender shall reasonably request.
SECTION 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
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7.1 Indebtedness.
------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company may become and remain liable with respect to
Indebtedness in respect of (a) Capital Leases and (b) tenant improvement
loans with respect to improvements made to the premises occupied by Company
pursuant to the lease between Company and Prudential Insurance Company of
America dated May 31, 1995, as amended, in an aggregate principal amount
not to exceed $1,601,544;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned
Subsidiary of Company may become and remain liable with respect to
Indebtedness to Company or any other wholly-owned Subsidiary of Company;
provided that (a) all such intercompany Indebtedness shall be evidenced by
--------
promissory notes, (b) all such intercompany Indebtedness owed by Company to
any of its Subsidiaries shall be subordinated in right of payment to the
payment in full of the Obligations pursuant to the terms of the applicable
promissory notes or an intercompany subordination agreement, and (c) any
payment by any Subsidiary of Company under any guaranty of the Obligations
shall result in a pro tanto reduction of the amount of any intercompany
Indebtedness owed by such Subsidiary to Company or to any of its
Subsidiaries for whose benefit such payment is made; provided, further
-------- -------
Indebtedness of any BSH Agent Subsidiary shall at no time exceed the amount
required to finance the working capital needs of such BSH Agent Subsidiary;
(v) Company may become and remain liable with respect to
Indebtedness in respect of the Management Notes;
(vi) Acquired Indebtedness of the Company or any Subsidiary of
Company not exceeding $3,000,000 at any one time outstanding; provided that
--------
(a) the transaction pursuant to which such Acquired Indebtedness becomes
Acquired Indebtedness is a transaction permitted under subsection 7.3, (b)
the principal amount of such Acquired Indebtedness is not increased, (c)
the maturity of Indebtedness is not shortened, and (d) such Indebtedness is
not secured by any Lien on any property other than that which secured it
before such event; and
(vii) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding.
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For avoidance of doubt, deferred compensation obligations of Company or any
of its Subsidiaries shall not constitute Indebtedness under this Agreement.
7.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in Schedule 7.2 annexed hereto;
(iv) Liens securing Indebtedness permitted under subsection 7.1(vi)
so long as such Liens cover only property which was subject to Liens
securing such Indebtedness before such Indebtedness became Acquired
Indebtedness;
(v) Liens securing Indebtedness permitted under subsection 7.l(iii);
and
(vi) Other Liens securing Indebtedness in an aggregate amount not to
exceed $5,000,000 at any time outstanding.
B. Equitable Lien in Favor of Lenders. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
--------
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as provided herein, Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends
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or make any other distributions on any of such Subsidiary's capital stock or
membership interests owned by Company or any other Subsidiary of Company, (ii)
repay or prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to Company
or any other Subsidiary of Company.
7.3 Investments; Joint Ventures.
---------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may make intercompany loans to the
extent permitted under subsection 7.1(iv);
(iii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted by subsection 7.8;
(iv) Company and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7.3 annexed hereto;
(v) Company and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time $1,000,000; provided that
--------
if the Consolidated Leverage Ratio for the four Fiscal Quarter period for
which the applicable Margin Determination Certificate has been delivered
pursuant to subsection 6.1(iv) is less than or equal to 2.50: 1.00, Company
and its Subsidiaries may make other Investments in an aggregate amount not
to exceed at any time $10,000,000; provided further that the aggregate
-------- -------
amount of any one Investment or series of related Investments shall not
exceed $5,000,000;
(vi) Company and its Subsidiaries may make Permitted Acquisitions;
and
(vii) Company and its Subsidiaries may continue to own their existing
Investments in their respective Subsidiaries as of the Closing Date and
may make additional Investments in their respective wholly-owned
Subsidiaries.
7.4 Contingent Obligations.
----------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of the Subsidiary Guaranty;
(ii) Company may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit; provided that no Loan Party
--------
shall have granted
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<PAGE>
any Lien securing obligations (including reimbursement obligations relating
to any Existing Letters of Credit) other than pursuant to the Loan
Documents;
(iii) Company may become and remain liable with respect to Contingent
Obligations under Hedge Agreements entered into with a Lender; and
(iv) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $1,000,000.
7.5 Restricted Junior Payments.
--------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that (i) Company may issue Management Notes;
--------
(ii) Company may pay Cash interest or make Cash payments of principal on the
Management Notes and may purchase for Cash a member of Company's management's
interests in the Trusts (or successor entities of the Trusts) in an aggregate
amount for all such payments or purchases not to exceed $10,000,000 provided
--------
that such Cash Restricted Junior Payments shall not exceed (A) $1,000,000 in the
aggregate for any one Fiscal Year so long as the Consolidated Leverage Ratio for
the four Fiscal Quarter period for which the most recent Margin Determination
Certificate has been delivered pursuant to subsection 6.1(iv) exceeds 2.50:1.00
or (B) $2,000,000 in the aggregate for any one Fiscal Year so long as
Consolidated Leverage Ratio is less than or equal to 2.50:100; provided, further
--------
that any portion of the amount permitted pursuant to the foregoing clause (B)
together with any amount carried forward from a prior year which is not utilized
for such purpose in a given Fiscal Year may be carried over to the subsequent
Fiscal Year up to a maximum amount so carried forward to such subsequent Fiscal
Year of $2,000,000; (iii) Company may make distributions to BSH Holdings or SIG
Holdings and BSH Holdings and SIG Holdings may make distributions to BSH Trust
or SIG Trust in an amount not to exceed the amount necessary for such Person to
pay Taxes imposed on such Person when due; (iv) Company may make distributions
to BSH Holdings or SIG Holdings and BSH Holdings and SIG Holdings may make
distributions to BSH Trust or SIG Trust in an annual amount not to exceed
$100,000 for the purpose of paying general operating expenses of Holdings and
the Trusts; and (v) Company may make distributions in Fiscal Year 1999 to
Michael E. Bronner, Reuben Cosinuke, Kathleen Biro, Ruben Pinchanski and Myron
Slosberg in an aggregate amount not to exceed $3,000,000.
7.6 Financial Covenants.
-------------------
A. Minimum Interest Coverage Ratio. Company shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four-Fiscal Quarter period ending during any of the periods set forth below to
be less than the correlative ratio indicated:
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<PAGE>
Minimum
Period Interest Coverage Ratio
-------------------------- -----------------------
First Fiscal Quarter 1999 2.25:1.00
Second Fiscal Quarter 1999 2.50:1.00
Third Fiscal Quarter 1999 2.75:1.00
Fourth Fiscal Quarter 1999 3.00:1.00
First Fiscal Quarter 2000 3.25:1.00
Second Fiscal Quarter 2000 3.50:1.00
Third Fiscal Quarter 2000 4.00:1.00
Fourth Fiscal Quarter 2000 4.50:1.00
First Fiscal Quarter 2001 5.00:1.00
Second Fiscal Quarter 2001 5.00:1.00
Third Fiscal Quarter 2001 5.00:1.00
Fourth Fiscal Quarter 2001 5.00:1.00
First Fiscal Quarter 2002 5.00:1.00
Second Fiscal Quarter 2002 5.00:1.00
Third Fiscal Quarter 2002 5.00:1.00
Fourth Fiscal Quarter 2002 5.00:1.00
First Fiscal Quarter 2003 5.00:1.00
Second Fiscal Quarter 2003 5.00:1.00
Third Fiscal Quarter 2003 5.00:1.00
Fourth Fiscal Quarter 2003 5.00:1.00
First Fiscal Quarter 2004 5.00:1.00
Second Fiscal Quarter 2004 5.00:1.00
Third Fiscal Quarter 2004 5.00:1.00
Fourth Fiscal Quarter 2004 5.00:1.00
B. Maximum Leverage Ratio. Company shall not permit the Consolidated
Leverage Ratio as of the last day of any Fiscal Quarter ending during any of the
periods set forth below to exceed the correlative ratio indicated:
Period Maximum Leverage Ratio
------------------------- ----------------------
First Fiscal Quarter 1999 4.60:1.00
Second Fiscal Quarter 1999 4.25:1.00
Third Fiscal Quarter 1999 4.00:1.00
Fourth Fiscal Quarter 1999 3.75:1.00
First Fiscal Quarter 2000 3.50:1.00
Second Fiscal Quarter 2000 3.25:1.00
Third Fiscal Quarter 2000 2.75:1.00
Fourth Fiscal Quarter 2000 2.50:1.00
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<PAGE>
First Fiscal Quarter 2001 2.00:1.00
Second Fiscal Quarter 2001 1.75:1.00
Third Fiscal Quarter 2001 1.75:1.00
Fourth Fiscal Quarter 2001 1.75:1.00
First Fiscal Quarter 2002 1.75:1.00
Second Fiscal Quarter 2002 1.75:1.00
Third Fiscal Quarter 2002 1.75:1.00
Fourth Fiscal Quarter 2002 1.75:1.00
First Fiscal Quarter 2003 1.75:1.00
Second Fiscal Quarter 2003 1.75:1.00
Third Fiscal Quarter 20003 1.75:1.00
Fourth Fiscal Quarter 2003 1.75:1.00
First Fiscal Quarter 2004 1.75:1.00
Second Fiscal Quarter 2004 1.75:1.00
Third Fiscal Quarter 2004 1.75:1.00
Fourth Fiscal Quarter 2004 1.75:1.00
C. Minimum Consolidated Adjusted EBITDA. Company shall not permit
Consolidated Adjusted EBITDA for any four-Fiscal Quarter period ending during
any of the periods set forth below to be less than the correlative amount
indicated:
Minimum Consolidated
Period Adjusted EBITDA
------------------------- --------------------
First Fiscal Quarter 1999 $19,250,000
Second Fiscal Quarter 1999 $21,300,000
Third Fiscal Quarter 1999 $22,500,000
Fourth Fiscal Quarter 1999 $23,000,000
First Fiscal Quarter 2000 $24,000,000
Second Fiscal Quarter 2000 $24,000,000
Third Fiscal Quarter 2000 $27,000,000
Fourth Fiscal Quarter 2000 $28,000,000
First Fiscal Quarter 2001 $29,000,000
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
----------------------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Company or any of its Subsidiaries,
or enter into any transaction of merger or consolidation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or
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substantially all the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any Person or any division or line of
business of any Person, except;
(i) any Subsidiary of Company may be merged with or into Company or
any wholly-owned Subsidiary Guarantor, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any wholly-owned
Subsidiary Guarantor; provided that, in the case of such a merger, Company
--------
or such wholly-owned Subsidiary Guarantor shall be the continuing or
surviving corporation;
(ii) Trusts or Holdings may be merged with or into Company, or be
liquidated, wound up or dissolved, or all or part of its business, property
or assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions to Company; provided
--------
that in the case of such a merger, Company shall be the continuing or
surviving corporation;
(iii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8;
(iv) Company and its Subsidiaries may dispose of obsolete, worn out
or surplus property in the ordinary course of business;
(v) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof; and
(vi) subject to subsection 7.12, Company and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess of
$100,000; provided that (x) the consideration received for such assets
--------
shall be in an amount at least equal to the fair market value thereof; (y)
the sole consideration received shall be cash; and (z) the proceeds of such
Asset Sales shall be applied as required by subsection 2.4B(iii)(a), and
(vii) Company and its Subsidiaries may make Investments in accordance
with subsection 7.3.
7.8 Consolidated Capital Expenditures.
---------------------------------
Company shall not, and shall not permit its Subsidiaries to, make or incur
Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an
aggregate amount in excess of the corresponding amount (the "Maximum
Consolidated Capital Expenditures Amount") set forth below opposite such Fiscal
Year; provided that the Maximum Consolidated Capital Expenditures Amount for any
--------
Fiscal Year shall be increased by an amount equal to the excess, if any (but in
no event more than $1,000,000), of the Maximum Consolidated Capital Expenditures
Amount for the previous Fiscal Year over the actual amount of Consolidated
Capital Expenditures for such previous Fiscal Year.
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Maximum Consolidated
Fiscal Year Capital Expenditures
----------- --------------------
1999 $ 8,500,000
2000 $ 8,500,000
2001 $ 9,000,000
2002 $10,000,000
2003 $11,000,000
2004 $12,000,000
7.9 Sales and Lease-Backs.
---------------------
Except for equipment leases to the extent such equipment leases are
permitted under subsection 7.8, Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, become or remain liable as lessee
or as a guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any property (whether real, personal or
mixed), whether now owned or hereafter acquired, (i) which Company or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than Company or any of its Subsidiaries) or (ii) which Company or
any of its Subsidiaries intends to use for substantially the same purpose as any
other property which has been or is to be sold or transferred by Company or any
of its Subsidiaries to any Person (other than Company or any of its
Subsidiaries) in connection with such lease.
7.10 Sale or Discount of Receivables.
-------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.
7.11 Transactions with Shareholders and Affiliates.
---------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity Securities of
Company or with any Affiliate of Company or of any such holder, on terms that
are less favorable to Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not such a holder or
Affiliate; provided that the foregoing restriction shall not apply to (i) any
--------
transaction between Company and any of its wholly-owned Subsidiaries or between
any of its wholly-owned Subsidiaries or (ii) reasonable and customary fees paid
to members of the Boards of Directors of Company and its Subsidiaries (iii)
payment of Transaction Costs and payments permitted under subsection 7.5, (iv)
transactions contemplated by the Related Agreements and (v) arms-length
transactions in the ordinary course of business with other companies in which
H&F is an investor.
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7.12 Disposal of Subsidiary Stock.
----------------------------
Except pursuant to the Collateral Documents and except for any sale of 100%
of the capital stock or other equity Securities of any of its Subsidiaries in
compliance with the provisions of subsection 7.7(i) or (vi), Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors or members if required by
applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Company, another Subsidiary of Company, or to
qualify directors if required by applicable law.
7.13 Conduct of Business.
-------------------
From and after the Closing Date, Company shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than (i) the businesses
engaged in by Company and its Subsidiaries on the Closing Date and similar or
related businesses and (ii) such other lines of business as may be consented to
by Requisite Lenders.
7.14 Amendments or Waivers of Certain Related Agreements: Amendments of
------------------------------------------------------------------
Documents Relating to Subordinated Indebtedness.
- -----------------------------------------------
A. Amendments or Waivers of Certain Related Agreements. Neither Company
nor any of its Subsidiaries will (i) agree to any amendments to either the
Recapitalization Agreement or the Noncompetition and Nonsolicitation Agreement
after the Closing Date, or (ii) waive any of its rights under either the
Recapitalization Agreement or the Noncompetition and Nonsolicitation Agreement
after the Closing Date, which amendments or waivers in the aggregate would be
materially adverse to Lenders without in each case obtaining the prior written
consent of Requisite Lenders to such amendment or waiver. Each of Company and
its Subsidiaries agree to provide Administrative Agent written notice of(i) any
amendments made to either the Governance Agreement or any of the Management
Contracts and (ii) any waiver of Company's or any of its Subsidiaries' rights
under either the Governance Agreement or any of the Management Contracts
promptly after such amendment or waiver has been made, which amendments or
waivers in the aggregate would be materially adverse to Lenders.
B. Amendments of Documents Relating to Subordinated Indebtedness. Except
for payments or prepayments on the Management Notes permitted pursuant to
subsection 7.5, Company shall not, and shall not permit any of its Subsidiaries
to, amend or otherwise change the terms of any Subordinated Indebtedness, or
make any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
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change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
7.15 Fiscal Year.
-----------
Company shall not change its Fiscal Year-end from December 31.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
8.1 Failure to Make Payments When Due.
---------------------------------
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Company to pay when
due any amount payable to an Issuing Lender in reimbursement of any drawing
under a Letter of Credit; or failure by Company to pay any interest on any Loan
or any fee or any other amount due under this Agreement within five days after
the date due; or
8.2 Default in Other Agreements.
---------------------------
(i) Failure of Company or any of its Subsidiaries to pay when due any
principal of or interest on or any other amount payable in respect of one
or more items of Indebtedness (other than Indebtedness referred to in
subsection 8.1) or Contingent Obligations in an aggregate principal amount
of $1,000,000 or more, in each case beyond the end of any grace period
provided therefor; or (ii) breach or default by Company or any of its
Subsidiaries with respect to any other material term of (a) one or more
items of Indebtedness or Contingent Obligations in the aggregate principal
amounts referred to in clause (i) above or (b) any loan agreement,
mortgage, indenture or other agreement relating to such item(s) of
Indebtedness or Contingent Obligation(s), if the effect of such breach or
default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligation, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
8.3 Breach of Certain Covenants.
---------------------------
Failure of Company to perform or comply with any term or condition
contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or
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8.4 Breach of Warranty.
------------------
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 20 days after the earlier
of (i) an officer of Company or such Loan Party becoming aware of such default
or (ii) receipt by Company and such Loan Party of notice from Administrative
Agent or any Lender of such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
----------------------------------------------------
A court having jurisdiction in the premises shall enter a decree or order
for relief in respect of Holdings, Company or any of its Material Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Holdings, Company or any of its Material Subsidiaries under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Holdings, Company or any of its Material Subsidiaries, or over all or a
substantial part of its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver, trustee or other
custodian of Holdings, Company or any of its Material Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Holdings, Company or any of its Material Subsidiaries, and any such
event described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
--------------------------------------------------
Holdings, Company or any of its Material Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Holdings, Company or any of its Material
Subsidiaries shall make any assignment for the benefit of creditors; or (ii)
Holdings, Company or any of its Material Subsidiaries shall be unable, or shall
fail generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Holdings, Company or any of
its Material Subsidiaries (or any
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committee thereof) shall adopt any resolution or otherwise authorize any action
to approve any of the actions referred to in clause (i) above or this clause
(ii); or
8.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $1,000,000 or (ii)
in the aggregate at any time an amount in excess of $1,000,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Holdings, Company or any of its Material Subsidiaries or any of their respective
assets and shall remain undischarged, unvacated, unbonded or unstayed for a
period of 60 days (or in any event later than five days prior to the date of any
proposed sale thereunder); or
8.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against Company or any of
its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
----------------------
There shall occur one or more ERISA Events which individually or in the
aggregate results in or might reasonably be expected to result in liability of
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
excess of $1,000,000 during the term of this Agreement; or there shall exist an
amount of liability from unfunded benefit liabilities or withdrawal liability,
calculated in accordance with the provisions of subsection 5.12, which exceeds
$1,000,000; or
8.11 Change in Control.
-----------------
H&F shall cease to beneficially own and control at least a majority of the
issued or outstanding interests of the Trusts entitled (without regard to the
occurrence of any contingency) to vote for the election of members of the Board
of Directors of the Trusts; the Trusts shall cease to beneficially own (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Exchange Act) 100% of the membership interests of Holdings; or Holding shall
cease to beneficially own 100% of the membership interest of Company. Any Person
or any two or more Persons acting in concert who is not a holder of stock or
stock options as of the Closing Date shall have acquired beneficial ownership,
directly or indirectly, of Securities of Company (or other Securities
convertible into such Securities) representing 30% or more of the combined
voting power of all Securities of Company entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency; or
8.12 Invalidity of Guaranties: Failure of Security; Repudiation of Obligations.
-------------------------------------------------------------------------
At any time after the execution and delivery thereof; (i) any Guaranty for
any reason, other than the satisfaction in full of all Obligations, shall cease
to be in full force and effect (other than in accordance with its terms) or
shall be declared to be null and void, (ii) any
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Collateral Document shall cease to be in full force and effect (other than by
reason of a release of Collateral thereunder in accordance with the terms hereof
or thereof; the satisfaction in full of the Obligations or any other termination
of such Collateral Document in accordance with the terms hereof or thereof) or
shall be declared null and void, or Administrative Agent shall not have or shall
cease to have a valid and perfected First Priority Lien in any Collateral
purported to be covered thereby, in each case for any reason other than the
failure of Administrative Agent or any Lender to take any action within its
control, or (iii) any Loan Party shall contest the validity or enforceability of
any Loan Document in writing or deny in writing that it has any further
liability, including with respect to future advances by Lenders, under any Loan
Document to which it is a party; or
8.13 Failure to Consummate Reorganization.
------------------------------------
The Reorganization shall not be consummated in accordance with this
Agreement and the applicable Related Agreements on the day following the making
of the initial Loans, or the Reorganization shall be unwound, reversed or
otherwise rescinded in whole or in part for any reason; or
8.14 Conduct of Business By Holdings.
-------------------------------
Trusts shall (i) engage in any business other than entering into and
performing its obligations under and in accordance with the Related Agreements
to which it is a party or (ii) own any assets other than (a) the membership
interests of Holdings and (b) Cash and Cash Equivalents in an amount not to
exceed $100,000 annually for the purpose of paying general operating expenses of
Trusts. Holdings shall (i) engage in any business other than entering into and
performing its obligations under and in accordance with the Loan Documents and
Related Agreements to which it is a party or (ii) own any assets other than (a)
the membership interests of Company and (b) Cash and Cash Equivalents in an
amount not to exceed $100,000 annually for the purpose of paying general
operating expenses of Holdings:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Company, declare all
or any portion of the amounts described in clauses (a) through (c) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit and the right of any Lender to issue any
Letter of Credit hereunder shall thereupon terminate; provided that the
--------
foregoing shall not affect in any way the
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obligations of Lenders under subsection 3.3C(i) or the obligations of Lenders to
purchase participations in any unpaid Swing Line Loans as provided in subsection
2.1A(iii).
Any amounts described in clause (b) above, when received by Administrative
Agent, shall be held by Administrative Agent pursuant to the terms of the
Collateral Account Agreement and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph, if at
any time within 60 days after an acceleration of the Loans pursuant to clause
(ii) of such paragraph Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than non-
payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended,
directly or indirectly, to benefit Company, and such provisions shall not at any
time be construed so as to grant Company the right to require Lenders to rescind
or annul any acceleration hereunder or to preclude Administrative Agent or
Lenders from exercising any of the rights or remedies available to them under
any of the Loan Documents, even if the conditions set forth in this paragraph
are met.
SECTION 9. AGENTS
9.1 Appointment.
-----------
A. Appointment of Agents. BTCo is hereby appointed Administrative Agent,
Fleet is hereby appointed Documentation Agent and BankBoston is hereby appointed
Syndication Agent hereunder and under the other Loan Documents and each Lender
hereby authorizes such Agent to act as its agent in accordance with the terms of
this Agreement and the other Loan Documents. Each Agent agrees to act upon the
express conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 9 are solely for the benefit of
Agents and Lenders and Company shall have no rights as a third party beneficiary
of any of the provisions thereof. In performing its functions and duties under
this Agreement, each Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Company or any of its Subsidiaries.
B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
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of any of the Loan Documents, or in case Administrative Agent deems that by
reason of any present or future law of any jurisdiction it may not exercise any
of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that Administrative Agent appoint an
additional individual or institution as a separate trustee, co-trustee,
collateral agent or collateral co-agent (any such additional individual or
institution being referred to herein individually as a "Supplemental Collateral
Agent" and collectively as "Supplemental Collateral Agents").
In the event that Administrative Agent appoints a Supplemental Collateral
Agent with respect to any Collateral, (i) each and every right, power, privilege
or duty expressed or intended by this Agreement or any of the other Loan
Documents to be exercised by or vested in or conveyed to Administrative Agent
with respect to such Collateral shall be exercisable by and vest in such
Supplemental Collateral Agent to the extent, and only to the extent, necessary
to enable such Supplemental Collateral Agent to exercise such rights, powers and
privileges with respect to such Collateral and to perform such duties with
respect to such Collateral, and every covenant and obligation contained in the
Loan Documents and necessary to the exercise or performance thereof by such
Supplemental Collateral Agent shall run to and be enforceable by either
Administrative Agent or such Supplemental Collateral Agent, and (ii) the
provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent, as
the context may require.
Should any instrument in writing from Company or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Company shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments promptly
upon request by Administrative Agent. In case any Supplemental Collateral Agent,
or a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be exercised
by Administrative Agent until the appointment of a new Supplemental Collateral
Agent.
9.2 Powers and Duties; General Immunity.
-----------------------------------
A. Powers; Duties Specified. Each Lender irrevocably authorizes each Agent
to take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to such Agent by the terms hereof and thereof; together
with such powers, rights and remedies as are reasonably incidental thereto. Each
Agent shall have only those duties and responsibilities that are expressly
specified in this Agreement and the other Loan Documents. Each Agent may
exercise such powers, rights and remedies and perform such duties by or through
its agents or employees. Each Agent shall not have, by reason of this Agreement
or any of the other Loan Documents, a fiduciary relationship in respect of any
Lender; and nothing in this Agreement or any of the other Loan Documents,
expressed or implied, is intended to or shall be so construed as to impose upon
such Agent any obligations in respect of this Agreement or any of the other Loan
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Documents except as expressly set forth herein or therein. Neither Documentation
Agent nor Syndication Agent shall have any duties or obligations under this
Agreement in their capacities as such.
B. No Responsibility for Certain Matters. No Agent shall be responsible to
any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by such Agent to Lenders or by or on behalf of
Company to such Agent or any Lender in connection with the Loan Documents and
the transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall such Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or as to the existence
or possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding,
Administrative Agent shall not have any liability arising from confirmations of
the amount of outstanding Loans or the Letter of Credit Usage or the component
amounts thereof.
C. Exculpatory Provisions. Neither of the Agents nor any of their
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by any such Agent under or in connection with
any of the Loan Documents except to the extent caused by such Agent's gross
negligence or willful misconduct. Each Agent shall be entitled to refrain from
any act or the taking of any action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents or from the
exercise of any power, discretion or authority vested in it hereunder or
thereunder unless and until such Agent shall have received instructions in
respect thereof from Requisite Lenders (or such other Lenders as may be required
to give such instructions under subsection 10.6) and, upon receipt of such
instructions from Requisite Lenders (or such other Lenders, as the case may be),
such Agent shall be entitled to act or (where so instructed) refrain from
acting, or to exercise such power, discretion or authority, in accordance with
such instructions. Without prejudice to the generality of the foregoing, (i)
each Agent shall be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and
shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Company and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against such Agent as a result
of such Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Agents Entitled to Act as Lender. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as
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any other Lender and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder, and the term "Lender" or
"Lenders" or any similar term shall, unless the context clearly otherwise
indicates, include such Agent in its individual capacity. Any Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of banking, trust, financial advisory or other business with Company or any
of its Affiliates as if it were not performing the duties specified herein, and
may accept fees and other consideration from Company for services in connection
with this Agreement and otherwise without having to account for the same to
Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
------------------------------------------------------------------
Creditworthiness.
- ----------------
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries.
Administrative Agent shall not have any duty or responsibility, either initially
or on a continuing basis, to make any such investigation or any such appraisal
on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter, and no Agent shall have
any responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
9.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in exercising its powers, rights and remedies or performing its duties
hereunder or under the other Loan Documents or otherwise in its capacity as such
Agent in any way relating to or arising out of this Agreement or the other Loan
Documents; provided that no Lender shall be liable for any portion of such
--------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to such Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
9.5 Successor Administrative Agent and Swing Line Lender.
----------------------------------------------------
A. Successor Administrative Agents. Administrative Agent may resign at any
time by giving 30 days' prior written notice thereof to Lenders and Company, and
Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Company and
Administrative Agent and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to Company, to appoint a successor Administrative
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Agent. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Administrative Agent and the retiring or
removed Administrative Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
B. Successor Swing Line Lender. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Bankers Trust Company or its successor as Swing Line
Lender, and any successor Administrative Agent appointed pursuant to subsection
9.5A shall, upon its acceptance of such appointment, become the successor Swing
Line Lender for all purposes hereunder. In such event (i) Company shall prepay
any outstanding Swing Line Loans made by the retiring or removed Administrative
Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the
retiring or removed Administrative Agent and Swing Line Lender shall surrender
the Swing Line Note held by it to Company for cancellation, and (iii) Company
shall issue a new Swing Line Note to the successor Administrative Agent and
Swing Line Lender substantially in the form of Exhibit VI annexed hereto, in the
principal amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 Collateral Documents and Guaranties.
-----------------------------------
Each Lender hereby further authorizes Administrative Agent, on behalf of
and for the benefit of Lenders, to enter into each Collateral Document as
secured party and to be the agent for and representative of Lenders under each
Guaranty, and each Lender agrees to be bound by the terms of each Collateral
Document and the Subsidiary Guaranty; provided that Administrative Agent shall
--------
not (i) enter into or consent to any material amendment, modification,
termination or waiver of any provision contained in any Collateral Document or
the Subsidiary Guaranty or (ii) release any Collateral (except as otherwise
expressly permitted or required pursuant to the terms of this Agreement or the
applicable Collateral Document), in each case without the prior consent of
Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders);
provided further, however, that, without further written consent or
- -------- ------- -------
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented or (b) release
any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital
stock of such Subsidiary Guarantor is sold to any Person (other than an
Affiliate of Company) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented. Anything
contained in any of the Loan Documents to the contrary notwithstanding, Company,
Administrative Agent and each Lender hereby agree that (X) no Lender shall have
any right individually to realize upon any of the Collateral under any
Collateral Document or to enforce any Subsidiary Guaranty, it being understood
and agreed that all powers, rights and remedies under the Collateral Documents
and the Guaranties may be exercised solely by Administrative Agent for the
benefit of Lenders in accordance with the terms thereof; and (Y) in the event of
a foreclosure by Administrative Agent on any of the Collateral
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pursuant to a public or private sale, Administrative Agent or any Lender may be
the purchaser of any or all of such Collateral at any such sale and
Administrative Agent, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.
SECTION 10. MISCELLANEOUS
10.1 Assignments and Participations in Loans and Letters of Credit.
-------------------------------------------------------------
A. General. Subject to subsection 10.1B, each Lender shall have the right
at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii)
sell participations to any Person in, all or any part of its Commitments or any
Loan or Loans made by it or its Letters of Credit or participations therein or
any other interest herein or in any other Obligations owed to it; provided that
--------
no such sale, assignment, transfer or participation shall, without the consent
of Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided, further that no
--------
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii); provided, further
--------
that no such sale, assignment, transfer or participation of any Letter of Credit
or any participation therein may be made separately from a sale, assignment,
transfer or participation of a corresponding interest in the Revolving Loan
Commitment and the Revolving Loans of the Revolving Lender effecting such sale,
assignment, transfer or participation; and provided, further that, anything
--------
contained herein to the contrary notwithstanding, the Swing Line Loan Commitment
and the Swing Line Loans of Swing Line Lender may not be sold, assigned or
transferred as described in clause (i) above to any Person other than a
successor Administrative Agent and Swing Line Lender to the extent contemplated
by subsection 9.5. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment or transfer of, or any
granting of participations in, all or any part of its Commitments or the Loans,
the Letters of Credit or participations therein, or the other Obligations owed
to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit or participation therein, or other Obligation may (a) be assigned
in any amount to another Lender, or to an Affiliate of the assigning Lender
or another Lender, with the giving of notice to Company and Administrative
Agent or (b) be assigned in an aggregate amount of not less than $5,000,000
(or such lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit and participations therein, and other
Obligations of the assigning Lender) to any other Eligible Assignee with
the consent of Company and Administrative Agent (which consent of Company
and Administrative Agent shall not be unreasonably withheld or delayed). To
the extent of
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any such assignment in accordance with either clause (a) or (b) above, the
assigning Lender shall be relieved of its obligations with respect to its
Commitments, Loans, Letters of Credit or participations therein, or other
Obligations or the portion thereof so assigned. The parties to each such
assignment shall execute and deliver to Administrative Agent, for its
acceptance and recording in the Register, an Assignment Agreement, together
with a processing fee of $3,500 and such forms, certificates or other
evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Administrative Agent pursuant to subsection
2.7B(iii)(a). Upon such execution, delivery, acceptance and recordation,
from and after the effective date specified in such Assignment Agreement,
(y) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights which
survive the termination of this Agreement under subsection l0.9B) and be
released from its obligations under this Agreement (and, in the case of an
Assignment Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall
cease to be a party hereto; provided that, anything contained in any of the
--------
Loan Documents to the contrary notwithstanding, if such Lender is the
Issuing Lender with respect to any outstanding Letters of Credit such
Lender shall continue to have all rights and obligations of an Issuing
Lender with respect to such Letters of Credit until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts
drawn thereunder). The Commitments hereunder shall be modified to reflect
the Commitment of such assignee and any remaining Commitment of such
assigning Lender and, if any such assignment occurs after the issuance of
the Notes hereunder, the assigning Lender shall, upon the effectiveness of
such assignment or as promptly thereafter as practicable, surrender its
applicable Notes to Administrative Agent for cancellation, and thereupon
new Notes shall be issued to the assignee and to the assigning Lender,
substantially in the form of Exhibit IV or Exhibit V annexed hereto, as the
case may be, with appropriate insertions, to reflect the new Commitments
and/or outstanding Term Loans, as the case may be, of the assignee and the
assigning Lender.
(ii) Acceptance by Administrative Agent: Recordation in Register. Upon
-----------------------------------------------------------
its receipt of an Assignment Agreement executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee, together with the
processing and recordation fee referred to in subsection 10.1B(i) and any
forms, certificates or other evidence with respect to United States federal
income tax withholding matters that such assignee may be required to
deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a),
Administrative Agent shall, if Administrative Agent and Company have
consented to the assignment evidenced thereby (in each case to the extent
such consent is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided therein
(which acceptance shall evidence any required consent of Administrative
Agent to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company.
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Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection 10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation,
and all amounts payable by Company hereunder (including amounts payable to such
Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such
Lender had not sold such participation. Company and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5,
(a) any participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
--------
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. Information. Each Lender may furnish any information concerning Company
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.19.
F. Representations of Lenders. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 Expenses.
--------
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents and any consents, amendments,
waivers or other modifications thereto; (ii) all the costs of furnishing all
opinions by counsel for Company (including any opinions requested by Lenders as
to any legal matters arising hereunder) and of Company's performance of and
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compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including with
respect to confirming compliance with environmental, insurance and solvency
requirements; (iii) the reasonable fees, expenses and disbursements of counsel
to Administrative Agent (including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and any consents, amendments, waivers or other modifications
thereto and any other documents or matters requested by Company; (iv) all the
actual costs and reasonable expenses of creating and perfecting Liens in favor
of Administrative Agent on behalf of Lenders pursuant to any Collateral
Document, including filing and recording fees, expenses and taxes, stamp or
documentary taxes, search fees, title insurance premiums, and reasonable fees,
expenses and disbursements of counsel to Administrative Agent and of counsel
providing any opinions that Administrative Agent or Requisite Lenders may
request in respect of the Collateral Documents or the Liens created pursuant
thereto; (v) all the actual costs and reasonable expenses (including the
reasonable fees, expenses and disbursements of any auditors, accountants or
appraisers and any environmental or other consultants, advisors and agents
employed or retained by Administrative Agent or its counsel) of obtaining and
reviewing any appraisals provided for under subsection 6.9C, any environmental
audits or reports provided for under subsection or 6.9B(viii) and any audits or
reports provided for under subsection 6.5B with respect to Inventory and
accounts receivable of Company and its Subsidiaries; (vi) the custody or
preservation of any of the Collateral; (vii) all other actual and reasonable
costs and expenses incurred by Administrative Agent in connection with the
syndication of the Commitments and the negotiation, preparation and execution of
the Loan Documents and any consents, amendments, waivers or other modifications
thereto and the transactions contemplated thereby; and (viii) after the
occurrence of an Event of Default, all costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Administrative Agent and Lenders in enforcing any
Obligations of or in collecting any payments due from any Loan Party hereunder
or under the other Loan Documents by reason of such Event of Default (including
in connection with the sale of, collection from, or other realization upon any
of the Collateral or the enforcement of the Guaranties) or in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
10.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection 10.2, whether
or not the transactions contemplated hereby shall be consummated, Company agrees
to defend (subject to Indemnitees' selection of counsel), indemnify, pay and
hold harmless each Agent and Lenders, and the officers, directors, employees,
agents and affiliates of each Agent and Lenders (collectively called the
"Indemnitees"), from and against any and all Indemnified Liabilities (as
hereinafter defined); provided that Company shall not have any obligation to any
--------
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims (including Environmental Claims),
costs (including the costs of any investigation,
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study, sampling, testing, abatement, cleanup, removal, remediation or other
response action necessary to remove, remediate, clean up or abate any Hazardous
Materials Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Loan Documents or the Related
Agreements or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds thereof or the issuance of Letters of Credit hereunder or the use or
intended use of any thereof; or any enforcement of any of the Loan Documents
(including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the Guaranties), (ii) the statements contained
in the commitment letter delivered by any Lender to Company with respect
thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of Company or any of its
Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 10.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
10.4 Set-Off: Security Interest in Deposit Accounts.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence of any Event of
Default each Lender is hereby authorized by Company at any time or from time to
time, without notice to Company or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by certificates
of deposit, whether matured or unmatured and whether or not otherwise fully
secured, but not including trust accounts) and any other Indebtedness at any
time held or owing by that Lender to or for the credit or the account of Company
against and on account of the obligations and liabilities of Company to that
Lender under this Agreement, the Letters of Credit and participations therein
and the other Loan Documents, including all claims of any nature or description
arising out of or connected with this Agreement, the Letters of Credit and
participations therein or any other Loan Document, irrespective of whether or
not (i) that Lender shall have made any demand hereunder or (ii) the principal
of or the interest on the Loans or any amounts in respect of the Letters of
Credit or any other amounts due hereunder shall have become due and payable
pursuant to Section 8 and although said obligations and liabilities, or any of
them, may be contingent or unmatured. Company hereby further grants to
Administrative Agent and each Lender a security interest in all deposits and
accounts maintained with Administrative Agent or such Lender as security for the
Obligations.
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10.5 Ratable Sharing.
---------------
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment (other than a voluntary prepayment of Loans made and applied
in accordance with the terms of this Agreement), by realization upon security,
through the exercise of any right of setoff or banker's lien, by counterclaim or
cross action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to that Lender hereunder or
under the other Loan Documents (collectively, the "Aggregate Amounts Due" to
such Lender) which is greater than the proportion received by any other Lender
in respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (i) notify Administrative
Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
them; provided that if all or part of such proportionately greater payment
--------
received by such purchasing Lender is thereafter recovered from such Lender upon
the bankruptcy or reorganization of Company or otherwise, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Company expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Company to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
----------------------
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, and no consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any amendment, modification, termination,
--------
waiver or consent which:
(a) extends the final scheduled maturity of any Loan or Note or
extends the stated maturity of any Letter of Credit beyond the
Revolving Loan Commitment Termination Date, or reduces the rate or
extends the time of payment of interest or fees thereon (except in
connection with a waiver of applicability of any post-default increase
in interest rates), or reduces the principal amount thereof (except to
the extent repaid in cash); or
(b) releases all or substantially all of (x) the Collateral
(except as expressly provided in the Loan Documents) under all the
Collateral Documents, or (y) the Guarantors (except as expressly
provided in the Loan Documents) from their obligations under any of
the Guaranties; or
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(c) amends, modifies or waives any provision of this subsection
10.6; or
(d) reduces the percentage specified in the definition "Requisite
Lenders" or "Super Majority Lenders" (it being understood that, with
the consent of Requisite Lenders, additional extensions of credit
pursuant to this Agreement may be included in the determination of
Requisite Lenders on substantially the same basis as the extensions of
Term Loans and Revolving Loan Commitments are included on the Closing
Date); or
(e) consents to the assignment or transfer by Company of any of
its rights and obligations under this Agreement or any other Loan
Document; or
shall be effective only if evidenced in a writing signed by or on behalf of all
Lenders (with Obligations being directly affected in the case of clause (a)
above).
In addition, (i) no amendment, modification, termination or waiver of
any provision of any Note held by a Lender or which increases the Commitments of
any Lender over the amount thereof then in effect shall be effective without the
written concurrence of such Lender, (ii) no amendment, modification, termination
or waiver of any provision of subsection 2.lA(iii) or any other provision of
this Agreement relating to the Swing Line Lender shall be effective without the
written concurrence of Swing Line Lender, (iii) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Administrative Agent shall be effective without the written
concurrence of Administrative Agent, and (iv) no amendment, modification,
termination or waiver of any provision of subsection 2.4 which has the effect of
changing any interim scheduled payments, voluntary and mandatory prepayments, or
Commitment reductions applicable to either Class in a manner that
disproportionately disadvantages such Class relative to the other Class shall be
effective without the written concurrence of Super Majority Lenders of the
Affected Class (it being understood and agreed that any amendment, modification,
termination or waiver of voluntary or mandatory prepayment, or Commitment
reduction from those set forth in subsection 2.4 with respect to one Class but
not the other Class shall be deemed to disadvantage such other Class for
purposes of this clause (iv)).
B. If; in connection with any proposed amendment, modification,
termination or waiver of any of the provisions of this Agreement or the Notes
which requires the consent of all Lenders, the consent of Requisite Lenders is
obtained but the consent of one or more of such other Lenders whose consent is
required is not obtained, then Company shall have the right, so long as all non-
consenting Lenders whose individual consent is required are treated as described
in either clause (i) or (ii) below, to either (i) replace each such non-
consenting Lender or Lenders with one or more Replacement Lenders pursuant to
subsection 2.8 so long as at the time of such replacement, each such Replacement
Lender consents to the proposed amendment, modification, termination or waiver,
or (ii) terminate such non-consenting Lender's Commitments and repay in full its
outstanding Loans in accordance with subsections 2.4B(i)(b) and 2.4B(ii)(b);
provided that unless the Commitments that are terminated and the Loans that are
- --------
repaid pursuant to the preceding clause (ii) are immediately replaced in full at
such time through the addition of new
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Lenders or the increase of the Commitments and/or outstanding Loans of existing
Lenders (who in each case must specifically consent thereto), then in the case
of any action pursuant to the preceding clause (ii), the Requisite Lenders
(determined before giving effect to the proposed action) shall specifically
consent thereto; provided further that Company shall not have the right to
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terminate such non-consenting Lender's Commitment and repay in full its
outstanding Loans pursuant to clause (ii) of this subsection 10.6B if,
immediately after the termination of such Lender's Revolving Loan Commitment in
accordance with subsection 2.4B(ii)(b), the Revolving Loan Exposure of all
Lenders would exceed the Revolving Loan Commitments of all Lenders; provided
--------
still further that Company shall not have the right to replace a Lender solely
- ----- -------
as a result of the exercise of such Lender's rights (and the withholding of any
required consent by such Lender) pursuant to the second paragraph of subsection
10.6A.
C. Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on Company in any case shall entitle Company to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection 10.6 shall be binding upon each Lender at the time outstanding, each
future Lender and, if signed by Company, on Company.
10.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Administrative Agent shall not
--------
be effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
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10.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the cancellation or
expiration of the Letters of Credit and the reimbursement of any amounts drawn
thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of any Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other power, right or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
10.11 Marshalling; Payments Set Aside.
-------------------------------
None of the Agents or any Lender shall be under any obligation to marshal
any assets in favor of Company or any other party or against or in payment of
any or all of the Obligations. To the extent that Company makes a payment or
payments to any Agent or Lenders (or to any Agent for the benefit of Lenders),
or any Agent or Lenders enforce any security interests or exercise their rights
of setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or setoff had not occurred.
10.12 Severability.
------------
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in
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any other Loan Document, and no action taken by Lenders pursuant hereto or
thereto, shall be deemed to constitute Lenders as a partnership, an association,
a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent debt, and each
Lender shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
10.14 Headings.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 Applicable Law.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
10.17 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
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REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION
5-1402 OR OTHERWISE.
10.18 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
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10.19 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Company that in any event a
Lender may make disclosures to Affiliates of such Lender or disclosures
reasonably required by any bona fide assignee, transferee or participant in
connection with the contemplated assignment or transfer by such Lender of any
Loans or any participations therein or disclosures required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court order,
- --------
each Lender shall notify Company of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such nonpublic information prior to disclosure of
such information; and provided, further that in no event shall any Lender be
-------- -------
obligated or required to return any materials furnished by Company or any of its
Subsidiaries.
10.20 Counterparts; Effectiveness.
---------------------------
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
BRONNER SLOSBERG HUMPHREY, LLC
By: /s/ David Kenny
---------------------------------
Title: CEO
-------------------------------
Notice Address:
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: Meryl Beckingham
STRATEGIC INTERACTIVE GROUP, LLC
By: /s/ David Kenny
---------------------------------
Title:_______________________________
Notice Address:
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: Meryl Beckingham
S-1
<PAGE>
LENDERS:
BANKERS TRUST COMPANY,
individually and as Administrative Agent
By: /s/ Mary Jo Jolly
--------------------------------------
MARY JO JOLLY
Title: Assistant Vice President
-----------------------------------
Notice Address:
130 Liberty Street
New York, NY 10006
Attn: Mary Jo Jolly
S-2
<PAGE>
BANKBOSTON, N.A.,
individually and as Syndication Agent,
By: /s/ Patricia K Corny
-------------------------------------
Title: Director
----------------------------------
Notice Address:
100 Federal Street
Mail Stop, MA BOS 01-07-07
Boston, MA 02110
Attn: Patricia Corny
S-3
<PAGE>
FLEET NATIONAL BANK,
individually and as Documentation Agent
By: /s/ Deb Lawrence
-------------------------------------
Title: Senior Vice President
----------------------------------
Notice Address:
One Federal Street
Boston, MA 02110
Attn: Deb Lawrence
S-4
<PAGE>
DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ Colleen A. Madden By: /s/ B. Sacin
----------------------- --------------------------------
COLLEEN A. MADDEN BRIGITTE SACIN
----------------------- --------------------------------
Title: VICE PRESIDENT Title: Assistant Treasurer
Notice Address:
333 South Grand Avenue
Suite 1700
Los Angeles, CA 90017
Attn: Sid Jordan
S-5
<PAGE>
STATE STREET BANK AND TRUST COMPANY
By: /s/ [ILLEGIBLE]^^
--------------------------------
Title: [ILLEGIBLE]^^
-----------------------------
Notice Address:
225 Franklin Street
Boston, MA 02110-2804
Michael McAuliffe
S-6
<PAGE>
U.S. BANK, NATIONAL ASSOCIATION
By: /s/ Janet Jordan
----------------------------------
Title: Vice President
-------------------------------
Notice Address:
555 SW Oak, Suite 400
Portland, OR 97204
Attn: Janet Jordan
S-7
<PAGE>
EXHIBIT 10.17
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"),
dated as of November 5, 1999, and entered into by and among BRONNERCOM, LLC
("Company"), a Delaware limited liability company (formerly known as Bronner
Slosberg Humphrey, LLC, and successor by merger to Strategic Interactive Group,
LLC), the lenders listed on the signature pages hereof (collectively,
"Lenders"), Bankers Trust Company, as Administrative Agent (in said capacity,
"Administrative Agent"), Fleet Boston Corporation, as Documentation Agent and as
Syndication Agent (in said capacities, "Documentation Agent" and "Syndication
Agent", and together with Administrative Agent, "Agents"). This First Amendment
is made with reference to that certain Credit Agreement (the "Credit
Agreement"), dated as of January 6, 1999, by and among Company, Lenders and
Agents. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company, Lenders and Agents desire to amend the Credit
Agreement in certain respects, including increasing the aggregate amount of
Revolving Loan Commitments from $20,000,000 to $25,000,000 for sole purpose of
increasing the amount available for drawing under Letters of Credit;
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 Amendment to Subsection 1.1: Definitions.
----------------------------------------
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding the
following definitions:
"First Amendment" means the First Amendment to Credit Agreement dated
as of November 5, 1999 by and among Company, Lenders and Agents.
"First Amendment Closing Date" means November 11, 1999.
B. Subsection 1.1 of the Credit Agreement is further amended by deleting
the definition of Revolving Notes and inserting the following in lieu thereof:
"Revolving Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.lE(ii) on the Closing Date, (ii) the promissory notes
of Company issued pursuant to the First Amendment on the First Amendment Closing
Date and (iii) any promissory notes issued by Company pursuant to the last
sentence of subsection 10.1 B(i) in connection with assignments of the Revolving
Loan Commitments or Revolving Loans of any Lenders, in each
1
<PAGE>
case substantially in the form of Exhibit V annexed hereto or Exhibit V-A
--------- -----------
attached to the First Amendment, as they may be amended, supplemented or
otherwise modified from time to time.
1.2 Amendment to Subsection 2.1: Commitments; Making of Loans; the Register;
-----------------------------------------------------------------------
Notes.
-----
A. (i) Subsection 2.1A(ii) is hereby amended by deleting the reference
to "$20,000,000" contained therein and substituting "$25,000,000" therefor.
(ii) Subsection 2.1A(ii) is further amended by deleting the last
sentence thereof and inserting the following in lieu thereof:
"Anything contained in this Agreement to the contrary notwithstanding
the Revolving Loans and the Revolving Loan Commitments shall be
subject to the following limitations in the amounts and during the
periods indicated.
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan
Commitments then in effect;
(b) in no event shall the sum of the aggregate outstanding
principal amount of all Revolving Loans plus the aggregate
outstanding principal amount of all Swing Line Loans exceed
$20,000,000; and
(c) for 30 consecutive days during each consecutive twelve-
month period, the sum of the aggregate outstanding
principal amount of all Revolving Loans plus the aggregate
outstanding principal amount of all Swing Line Loans shall
not exceed $8,000,000."
(iii) Subsection 2.1A(iii) is hereby amended by deleting the last
sentence thereof and inserting the following in lieu thereof:
"Anything contained in this Agreement to the contrary notwithstanding
the Swing Line Loans and the Swing Line Loan Commitments shall be
subject to the following limitations in the amounts and during the
periods indicated.
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan
Commitments then in effect;
(b) in no event shall the sum of the aggregate outstanding
principal amount of all Revolving Loans plus the aggregate
outstanding principal amount of all Swing Line Loans exceed
$20,000,000; and
(c) for 30 consecutive days during each consecutive twelve-
month period, the sum of the aggregate outstanding
principal amount of
2
<PAGE>
all Revolving Loans plus the aggregate outstanding principal
amount of all Swing Line Loans shall not exceed $8,000,000."
1.3 Amendment to Subsection 2.4: Repayments, Prepayments and Reductions in
----------------------------------------------------------------------
Commitments; General Provisions Regarding Payments.
--------------------------------------------------
A. Subsection 2.4A of the Credit Agreement is hereby amended by deleting
the table set forth therein and inserting the following in lieu thereof:
<TABLE>
<CAPTION>
Date Scheduled Repayment
---- -------------------
<S> <C>
September 30, 1999 $ 2,446,636.33
December 31, 1999 2,446,636.33
June 30, 2000 2,446,636.33
September 30, 2000 2,446,636.33
December 31, 2000 2,446,636.33
June 30, 2001 3,425,290.87
September 30, 2001 3,425,290.87
December 31, 2001 3,425,290.87
June 30, 2002 4,403,945.40
September 30, 2002 4,403,945.40
December 31, 2002 4,403,945.40
June 30, 2003 5,382,599.93
September 30, 2003 5,382,599.93
December 31, 2003 5,382,599.93
June 30, 2004 7,176,799.91
September 30, 2004 7,176,799.91
December 31, 2004 7,176,799.93
--------------
Total $73,399,090.00
</TABLE>
1.4 Amendment to Subsection 3.1: Issuance of Letters of Credit and Lenders'
-----------------------------------------------------------------------
Purchase of Participations Therein.
----------------------------------
A. Subsection 3.1A(ii) is hereby amended by deleting the reference to
"$10,000,000" contained therein and substituting "$15,000,000" therefor.
1.5 Amendments to Subsection 6.11: Deposit Accounts and Cash Management
-------------------------------------------------------------------
Systems.
-------
A. Subsection 6.11 of the Credit Agreement is hereby amended by deleting
the number "$500,000" each place it appears therein and by inserting the number
"$1,000,000" in lieu thereof.
1.6 Amendments to Subsection 6.1: Financial Statements and Other Reports.
--------------------------------------------------------------------
A. Subsection 6.1 (iv) of the Credit Agreement is hereby amended by
deleting the phrase "together with each delivery of financial statements of
Company and its Subsidiaries
3
<PAGE>
pursuant to subdivisions (i), (ii) and (iii) above, (a) an Officers' Certificate
of Company" and by inserting the following in lieu thereof:
"(a) together with each delivery of financial statements of Company
and its Subsidiaries pursuant to subdivisions (i), (ii) and (iii) above, an
Officers' Certificate of Company".
B. Subsection 6.1(iv) of the Credit Agreement is hereby further amended
by deleting the phrase "(b) a Compliance Certificate" and by inserting the
following in lieu thereof:
"(b) together with each delivery of financial statements of Company
and its Subsidiaries pursuant to subdivisions (ii) and (iii) above, (x) a
Compliance Certificate" and by deleting the phrase "and (c)" and by
inserting in lieu thereof "and (y)".
1.7 Amendments to Subsection 7.8: Consolidated Capital Expenditures.
---------------------------------------------------------------
A. Subsection 7.8 of the Credit Agreement is hereby amended by deleting
the first line in the table contained in such subsection and by inserting the
following in lieu thereof.
Maximum Consolidated
"Fiscal Year Capital Expenditures
1999 $11,500,000"
1.8 Amendment to Exhibits and Schedules.
-----------------------------------
A. The Credit Agreement is hereby amended by adding Exhibit V-A hereto
-----------
as Exhibit V-A thereto.
-----------
B. Schedule 2.1 to the Credit Agreement is hereby amended by deleting it
in its entirety and inserting Schedule 2.1 hereto in lieu thereof.
SECTION 2. ADDITIONAL NOTES
Company agrees to execute and deliver to each Lender that has agreed
to increase its Revolving Loan Commitment an additional Revolving Note (each an
"Additional Revolving Note"), in the form of Exhibit V-A to this First Amendment
-----------
with appropriate insertions, to evidence Revolving Loans in excess of the
Revolving Loan Commitment of such Lender as in effect prior to the First
Amendment Closing Date. Each of the parties hereto acknowledges and agrees that
each Additional Revolving Note is a Revolving Note for all purposes under the
Credit Agreement and the other Loan Documents and that the loans evidenced by
the Additional Revolving Notes shall constitute Revolving Loans for all purposes
under the Credit Agreement and the other Loan Documents.
4
<PAGE>
SECTION 3. CONDITIONS TO EFFECTIVENESS. This First Amendment shall be effective
only if the following conditions precedent have been satisfied:
A. On or before the First Amendment Closing Date, Company shall deliver
to Administrative Agent the following:
(i) Signature and incumbency certificates of its officers executing
this First Amendment.
(ii) Copies of this First Amendment executed by Company and each
other Loan Party.
(iii) An Additional Revolving Note to the Lenders described in
Section 2.
(iv) Resolutions of the members of Company approving and authorizing
this First Amendment and the Additional Revolving Notes.
(v) An opinion of counsel to Company as to the due authorization,
execution and delivery and enforceability of the First Amendment and the
Additional Revolving Notes in form and substance satisfactory to
Administrative Agent and its counsel.
B. On or before the First Amendment Closing Date, Administrative Agent
shall have received copies of the First Amendment executed by Requisite Lenders.
C. Company shall pay to Administrative Agent a financing fee equal to
2.00% of the aggregate amount of the $5,000,000 in additional Revolving Loan
Commitments (the "Additional Revolving Loan Commitments") and Administrative
Agent shall distribute to each of the Lenders providing such Additional
Revolving Loan Commitments a portion of such financing fee in an amount equal to
2.00% of their pro rata share of such Additional Revolving Loan Commitments.
D. On or before the First Amendment Closing Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto shall be satisfactory
in form and substance to Administrative Agent, acting on behalf of Lenders, and
its counsel and Administrative Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
Administrative Agent may reasonably request.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. Power and Authority. Company has all requisite power and authority to
-------------------
enter into this First Amendment, to issue the Additional Revolving Notes and to
carry out the transactions
5
<PAGE>
contemplated by, and perform its obligations under, the Credit Agreement as
amended by this First Amendment (the "Amended Agreement") and the Additional
Revolving Notes.
B. Authorization of Agreements. The execution and delivery of this First
---------------------------
Amendment and the Additional Revolving Notes and the performance of the Amended
Agreement and the Additional Revolving Notes have been duly authorized by all
necessary action on the part of Company and each other Loan Party.
C. No Conflict. The execution and delivery by Company of this First
-----------
Amendment and the Additional Revolving Notes and the performance by Company of
the Amended Agreement and the Additional Revolving Notes do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the organizational documents
of Company or any of its Subsidiaries or any order, judgment or decree of any
court or other agency of government binding on Company or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Company or any of its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Holdings, Company
or any of its Subsidiaries (other than Liens created under any of the Loan
Documents in favor of Administrative Agent on behalf of Lenders), or (iv)
require any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of Holdings, Company or any of its
Subsidiaries.
D. Governmental Consents. The execution and delivery by Company and each
---------------------
other Loan Party of this First Amendment and the Additional Revolving Notes and
the performance by Company and each other Loan Party of the Amended Agreement
and the Additional Revolving Notes do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body except for
such registrations, consents, approvals, notices or other actions which have
been or will be made, obtained, given or taken on or before the First Amendment
Closing Date or which the failure to obtain or take could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
E. Binding Obligation. This First Amendment, the Additional Revolving
------------------
Notes and the Amended Agreement have been duly executed and delivered by Company
and are the legally valid and binding obligations of Company, enforceable
against Company in accordance with their respective terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
F. Incorporation of Representations and Warranties From Credit Agreement.
---------------------------------------------------------------------
The representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects on
and as of the effective date of this First Amendment to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
6
<PAGE>
G. Absence of Default. No event has occurred and is continuing or will
------------------
result from the consummation of the transactions contemplated by this First
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Pledge Agreement, the Company
Security Agreement and the Collateral Account Agreement. Each Subsidiary
Guarantor is a party to a Subsidiary Guaranty, Subsidiary Pledge Agreement and
Subsidiary Security Agreement, and Holdings is a party to the Holdings Guaranty
and the Holdings Pledge Agreement, pursuant to which such Subsidiary Guarantors
and Holdings have (i) guarantied the Obligations, (ii) created Liens in favor of
Administrative Agent on certain Collateral, and (iii) pledged certain Collateral
to Administrative Agent to secure the obligations of such Subsidiary Guarantor
under the Subsidiary Guaranty or Holdings under the Holdings Guaranty, as the
case may be. Company, Holdings and Subsidiary Guarantors are collectively
referred to herein as the "Credit Support Parties," and the Company Pledge
Agreement, the Company Security Agreement, the Collateral Account Agreement, the
Holdings Guaranty, the Holdings Pledge Agreement, the Subsidiary Guaranty, the
Subsidiary Pledge Agreements and the Subsidiary Security Agreements are
collectively referred to herein as the "Credit Support Documents."
Each Credit Support Party hereby acknowledges that it has reviewed
the terms and provisions of the Credit Agreement and this First Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
First Amendment. Each Credit Support Party hereby confirms that each Credit
Support Document to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and performance of all "Obligations,"
"Guarantied Obligations" and "Secured Obligations," as the case may be (in each
case as such terms are defined in the applicable Credit Support Document),
including without limitation the payment and performance of all such
"Obligations," "Guarantied Obligations" or "Secured Obligations," as the case
may be, in respect of the Obligations of Company now or hereafter existing under
or in respect of the Amended Agreement and the Notes.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or by which it is otherwise
bound shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or limited
by the execution or effectiveness of this First Amendment. Each Credit Support
Party represents and warrants that all representations and warranties contained
in the Amended Agreement and the Credit Support Documents to which it is a party
or otherwise bound are true, correct and complete in all material aspects on and
as of the effective date of this First Amendment to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges and
agrees that (i) notwithstanding the conditions to effectiveness set forth in
this First Amendment, such Credit Support Party is not required by the terms of
the Credit Agreement or any other Loan Document
7
<PAGE>
to consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this First Amendment or any
other Loan Document shall be deemed to require the consent of such Credit
Support Party to any future amendments to the Credit Agreement.
SECTION 6. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
------------------------------------------------------------------
Documents.
- ---------
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof', "herein" or words of
like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.
(ii) Except as specifically amended by this First Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this First Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Agents or any Lender under, the Credit Agreement or any of the other Loan
Documents.
B. Fees and Expenses. Company acknowledges that all costs, fees and
-----------------
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this First Amendment and
the documents and transactions contemplated hereby shall be for the account of
Company.
C. Headings. Section and subsection headings in this First Amendment are
--------
included herein for convenience of reference only and shall not constitute a
part of this First Amendment for any other purpose or be given any substantive
effect.
D. Applicable Law. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
--------------
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts. This First Amendment may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
8
<PAGE>
[Remainder of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY:
BRONNERCOM, LLC
By: /s/ M.K. Beckingham
----------------------------
Title: CFO
--------------------------
Notice Address:
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: Meryl Beckingham
LENDERS:
BANKERS TRUST COMPANY,
individually and as Administrative Agent
By:_____________________________
Title:__________________________
Notice Address:
130 Liberty Street
New York, NY 10006
Attn: Mary Jo Jolly
BANKBOSTON, N.A.,
individually and as Syndication
Agent and Documentation Agent
By:___________________________
Title:________________________
Notice Address:
100 Federal Street
Mail Stop, MA BOS 01-07-07
Boston, MA 02110
Attn: Patricia Conry
S-1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY:
BRONNERCOM, LLC
By:__________________________
Title:_______________________
Notice Address:
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: Meryl Beckingham
LENDERS:
BANKERS TRUST COMPANY,
individually and as Administrative Agent
By: /s/ M.A. Orlando
-------------------------
Title: Principal
---------------------
Notice Address:
130 Liberty Street
New York, NY 10006
Attn: Mary Jo Jolly
BANKBOSTON, N.A.,
individually and as Syndication
Agent and Documentation Agent
By:__________________________
Title:_______________________
Notice Address:
100 Federal Street
Mail Stop, MA BOS 01-07-07
Boston, MA 02110
Attn: Patricia Conry
<PAGE>
FLEET BOSTON CORPORATION,
individually and as Syndication Agent and
Documentation Agent
By: /s/ Patricia K. Conry
--------------------------
Title: Director
-----------------------
Notice Address:
100 Federal Street
Mail Stop, MA BOS 01-07-07
Boston, MA 02110
Attn: Patricia Conry
S-1A
<PAGE>
DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN
BRANCHES
By: /s/ John R. Morrison, Beverly G. Cason
---------------------------------------
Title: Vice President, Vice President
------------------------------------
Notice Address:
333 South Grand Avenue
Suite 1700
Los Angeles, CA 90017
Attn: Sid Jordan
CITIZENS BANK OF MASSACHUSETTS
By:_______________________________________
Title:____________________________________
Notice Address:
100 Summer Street
Boston, MA 02110-2804
Michael McAuliffe
U.S. BANK NATIONAL ASSOCIATION
By:_______________________________________
Title:____________________________________
Notice Address:
555 SW Oak, Suite 400
Portland, OR 97204
Attn: Janet Jordan
S-2
<PAGE>
DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN
BRANCHES
By:__________________________
Title:_______________________
Notice Address:
333 South Grand Avenue
Suite 1700
Los Angeles, CA 90017
Attn: Sid Jordan
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Michael McAuliffe
--------------------------
Title: Vice President
-----------------------
Notice Address:
100 Summer Street
Boston, MA 021l0-2804
Michael McAuliffe
U.S. BANK NATIONAL ASSOCIATION
By:__________________________
Title:_______________________
Notice Address:
555 SW Oak, Suite 400
Portland, OR 97204
Attn: Janet Jordan
S-2
<PAGE>
DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN
BRANCHES
By:__________________________
Title:_______________________
Notice Address:
333 South Grand Avenue
Suite 1700
Los Angeles, CA 90017
Attn: Sid Jordan
CITIZENS BANK OF MASSACHUSETTS
By:__________________________
Title:_______________________
Notice Address:
100 Summer Street
Boston, MA 02110-2804
Michael McAuliffe
U.S. BANK, NATIONAL ASSOCIATION
By: /s/ Janet Jordan
--------------------------
Title: VP
-----------------------
Notice Address:
555 SW Oak, Suite 400
Portland, OR 97204
Attn: Janet Jordan
S-2
<PAGE>
CREDIT SUPPORT PARTIES
BSH HOLDING, LLC
By: /s/ M.K. Beckingham
--------------------------
Title: CFO
-----------------------
BRONNERCOM, LLC
By: /s/ M.K. Beckingham
--------------------------
Title: CFO
-----------------------
SANSOME, INC.
By: /s/ M.K. Beckingham
--------------------------
Title: CFO
-----------------------
BRONNERCOM (UK), INC.
By: /s/ M.K. Beckingham
--------------------------
Title: CFO
-----------------------
S-3
<PAGE>
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of January 10, 2000 between DIGITAS INC., a Delaware
corporation (the "Company"), and MICHAEL GOSS (the "Executive").
WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and conditions under which the Executive will be employed by
and will render services to the Company;
NOW, THEREFORE, the Company and the Executive agree, as follows:
I . Effective Date. The Effective Date of this Agreement is the date
--------------
first set forth above or the date upon which the Executive commences employment
with the Company, whichever is later. The date for commencement of employment
shall be January 10, 2000 or such other date as the parties shall agree.
2. Employment Period. The period beginning with the Effective Date
-----------------
during which the Company shall employ the, Executive and the Executive shall
serve the Company under this Agreement is referred to as the "Employment
Period".
3. Position and Duties. During the Employment Period, the Executive
-------------------
shall serve as Chief Financial Officer, with the duties and responsibilities
customarily assigned to such position and such other duties and responsibilities
as the Board of Directors or the Chief Executive Officer of the Company shall
from time to time assign to the Executive.
4. Full-time Position. During the Employment Period, and excluding
------------------
any periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote his full business attention and time to the business and
affairs of the Company and shall use his best efforts to carry out such
responsibilities faithfully and efficiently. It shall not be considered a
violation of the foregoing for the Executive to (a) serve on corporate, civic or
chanitablc boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c) manage personal
investments, so long as such activities do not materially interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
5. Compensation.
------------
(a) Base Salary. As compensation for the Executive's services hereunder
-----------
during the Employment Period, the Company shall pay to the Executive an annual
salary (the
<PAGE>
"Base Salary") of not less than $350,000, payable at such times and intervals as
the Company pays the base salaries of its other executive employees. The Base
Salary shall be reviewed annually during the Employment Period for possible
increase, The Base Salary shall not be reduced after any such increase, and the
term "Base Salary" shall thereafter refer to the Base Salary as so increased.
(b) Annual Bonus. In addition to the Base Salary, for each fiscal
------------
year ending during the Employment Period the Executive shall be eligible for an
annual bonus of (the "Annual Bonus"), in a targeted amount of between 50%
(minimum) and 100% of the annual Base Salary, the precise amount to be
determined by the Chief Executive Officer subject to approval by the
Compensation Committee of the Board. Annual bonuses are awarded for calendar
year performance and are generally paid in March of the following year, subject
to the conditions precedent that Executive is employed on that date. If the
period from the Effective Date to December 31 is less than a full year, any
Annual Bonus paid in respect of that period shall be adjusted pro rata based
upon the number of months that the Executive is employed by the Company during
such fiscal year.
(c) Signing Bonus. The Executive shall receive a one-time bonus of
-------------
$225,000, payable within three weeks of commencing employment with the Company.
(d) Stock Options.
--------------
(i) On or prior to the Effective Date, the Board will authorize the
grant to the Executive of options to purchase 200,000 shares of the
Company's common stock (the "Options"). The Options shall be granted
under the Company's 1999 Option Plan and shall be subject to the terms
of both the 1999 Option Plan and an Option Agreement to be executed by
the Executive in connection with the grant of the Options. The Option
Agreement shall provide, among other things, that the Options are
exercisable at a price per share of $17.50 and that the Options vest
over four years at the rate of 25% on the first anniversary of the
grant date and 611,01. on each quarter thereafter.
(ii) In addition to the stock options described above in
Section 5(d)(i), on or prior to the Effective Date, the Board will
authorize the grant to the Executive of options to purchase 100,000
shares of the Company's common stock exercisable at the offering price
of the Company's initial underwritten public offering, if and when such
offering should occur (the "IPO Options"). The IPO Options shall be
granted under the Company's then applicable Option Plan and shall be
subject to the terms of both such Option Plan and an Option Agreement
(the "IPO Option Agreement") to be executed by the Executive in
connection with the grant of the IPO Options. The IPO Option Agreement
shall provide, among other things, that the IPO Options vest over four
term at the rate of 25% on the first anniversary of the grant date and
6 1/4% on each quarter thereafter.
2
<PAGE>
(iii) Notwithstanding any other provisions of this Section, the
applicable Option Plans governing issuance of stock options to the
Executive hereunder shall provide that all stock options granted to the
Executive shall (A) immediately vest and (B) become exercisable within
ninety days after termination of employment within two years following
a Change in Control, whether by the Company without Cause or by the
Executive with Good Reason (as hereinafter defined).
(c) Benefits. During the Employment Period, the Executive shall be
--------
entitled to receive employee benefits (including without limitation medical,
life insurance and other welfare benefits and benefits under retirement and
savings plans), Company-provided parking and paid vacation, in each case to the
same extent as, and on the same terms and conditions as, other similarly
situated senior executives of the Company from time to time.
(f) Relocation Allowance. The Executive shall be entitled to receive an
--------------------
allowance of up to $175,000 (plus a one-time tax gross-up) to reimburse him for
relocation expenses actually incurred, such as commissions payable in connection
with the sale of his house, costs of moving personal property, charges for
temporary housing, etc., such allowance to be allocatable in the discretion of
the Executive.
(g) Expenses. The Executive shall be entitled to receive prompt
--------
reimbursement for all reasonable expenses incurred by the Executive during the
Employment Period in carrying out his duties under this Agreement, provided that
the Executive complies with the policies, practices and procedures of the
Company for submission of expense reports, receipts, or similar documentation of
such expenses.
6. Termination of Employment.
-------------------------
(a) Termination by the Company. The Executive's employment may be
--------------------------
terminated by the Company under any of the following circumstances:
(i) upon the "Disability" of the Executive, defined as the inability
of the Executive to perform his duties hereunder on a full-time basis
by reason of physical or mental incapacity, sickness or infirmity that
continues for more than 180 days or for periods aggregating more than
180 days during any period of 365 consecutive days;
(ii) for "Cause," as defined below; or
(iii) for any other reason (a termination without "Cause"),
(b) Definition of "Cause". "Cause" means and shall be limited to:
---------------------
(i) wrongful misappropriation of the funds or property of the Company;
3
<PAGE>
(ii) use of alcohol or illegal drugs interfering with the performance
of the Executive's obligations, continuing after written warning of
such actions;
(iii) admission, confession, indictment or plea bargain to, or
conviction of, a felony, or of any crime involving moral turpitude,
dishonesty, theft, unethical or unlawful conduct;
(iv) commission of any willful, intentional or grossly negligent act
which could reasonably be expected to injure the reputation, business
or business relationships of the Company or which may tend to bring the
Executive or the Company into disrepute, or the willful commission of
any act which is a breach of the Executive's fiduciary duties to the
Company;
(v) the deliberate or willful failure by the Executive (other than by
reason of the Executive's physical or mental illness, incapacity or
disability) to substantially perform his duties with the Company and
the continuation of such failure for a period of 30 days after delivery
by the Company to the Executive of Notice specifying the scope and
nature of such failure and the Company's intention to terminate the
Executive for Cause.
(vi) commission of any act which constitutes a material breach of the
policies of the Company, including but not limited to the disclosure of
any confidential information or trade secrets pertaining to the Company
or any of its clients.
For purposes of this Section, any act or failure to act of the
Executive shall not be considered "'willful" unless done or omitted to be done
by the Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the Company. The
Company shall give the Executive Notice of termination specifying which of the
foregoing provisions is applicable. The effective date of the Executive's
termination of employment with the Company (the "Date of Termination') shall be
the 30th business day after such Notice is given or such other date as the
Company and the Executive shall agree.
(c) Termination by the Executive. The Executive's employment may be
----------------------------
terminated by the Executive under either of the following circumstances:
(i) for "Good Reason," as defined below; or
(ii) for any other reason (a termination without "Good Reason").
(d) Definition of "Good Reason". "Good Reason" means termination at
--------------------------
the Executive's initiative:
4
<PAGE>
(i) within two years after a corporate Change in Control (as defined in
Exhibit A to this Agreement) if the Executive's title, duties, status,
reporting relationship, authority, responsibilities or compensation
have, been materially and adversely affected; or if the Executive's
principal place of employment immediately prior to the change of
control is relocated to a location more than 50 miles from such place
of employment.
(ii) after any material failure by the Company to comply with any
provision of Section 5 of this Agreement, unless such failure is
remedied by the Company within ten business days after receipt of
Notice thereof from the Executive.
The Executive shall give the Company Notice of termination specifying
which of the foregoing provisions is applicable and the factual basis therefor,
and if the Company fails to remedy such material failure, the Date of
Termination shall be the 30th business day after such Notice is given or such
other date as the Company and the Executive shall agree.
(e) Severance Benefits upon Certain Terminations. If the Executive's
--------------------------------------------
employment hereunder is terminated by the Company without Cause or by the
Executive for Good Reason, the Executive shall not be entitled to any further
compensation or benefits provided for under this Agreement except as follows:
(i) The Company shall continue to pay the Executive the Base Salary at
the rate in effect immediately before the Date of Termination (but, in
the case of a termination by the Executive for Good Reason,
disregarding any reduction thereof that was the basis for such
termination), for twelve months after the, Date of Termination,
(ii) The Company shall continue to provide the Executive with group
health benefits pursuant to COBRA (the "Group Health Benefits") for
twelve months after the Date of Termination; provided, that during any
--------
period when the Executive is eligible to receive any such benefits
under another employer provided plan or a government plan, the Group
Health Benefits or substitute benefits provided by the Company under
this clause may be made secondary to those provided under such other
plan;
(iii) The Company shall pay the Executive any amounts that have been
earned but not yet paid under Section 5 hereof.
(iv) In addition to the compensation or benefits described in
subsections 6(e)(i). (ii) and (iii), in the event of a termination
within two years after a corporate Change in Control, either by the
Company without Cause or by the Executive for Good Reason, (A) the
Executive shall be entitled to a one-time separation payment of
$250,000, payable within seven days after the Date of Termination and
(B) stock options previously granted to the Executive will become
vested and exercisable as described in Section 5(d)(iii).
5
<PAGE>
(vi) Receipt of severance benefits is conditioned on Executive's
execution and delivery of a separation agreement including a general
release of claims, in a form reasonably acceptable to the Company, and
on Executive's strict compliance with the Non-Competition, Non-
Solicitation and Confidentiality Agreement substantially in the form
attached hereto as Exhibit B.
(f) Additional Limitation.
---------------------
(i) Anything in this Agreement to the contrary
notwithstanding, in the event that any compensation, payment or
distribution by the Company to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (the "Severance Payments"), would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the following provisions
shall apply:
(A) If the Severance Payments, reduced by the sum of (1) the
Excise Tax and (2) the total of the Federal, state, and local
income and employment taxes payable by the Executive on the amount
of the Severance Payments which are in excess of the Threshold
Amount, are greater than or equal to the Threshold Amount, the
Executive shall be entitled to the full benefits payable under
this Agreement.
(B) If the Threshold Amount is less than (X) the Severance
Payments, but greater than (y) the Severance Payments reduced by
the sum of (1) the Excise Tax and (2) the total of the Federal,
state, and local income and employment taxes Oil the amount of the
Severance Payments which are in excess of the Threshold Amount,
then the benefits payable under this Agreement shall be reduced
(but not below zero) to the extent necessary so that the maximum
Severance Payments shall not exceed the Threshold Amount. To the
extent that there is more am one method of reducing the payments
to bring them within the Threshold Amount, the Executive shall
determine which method shall be followed; provided that if the
Executive fails to make such determination within 45 days after
the Company has sent the Executive Notice of the need for such
reduction, the Company may determine the amount of such reduction,
in its sole discretion.
For the purposes of this Section 6(f), "Threshold Amount" shall mean
three times the Executive's "base amount" within the meaning of Section
28OG(b)(3) of the Code and the regulations promulgated thereunder less
one dollar ($1.00); and "Excise Tax" shall mean the excise tax imposed
by Section 4999 of the Code, and any interest or penalties incurred by
the Executive with respect to such excise tax.
6
<PAGE>
(ii) The determination as to which of the alternative
provisions of Section 6(f)(i) shall apply to the Executive shall be
made by PricewaterhouseCoopers LLP or any other nationally recognized
accounting firm selected by the Company (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the Date of Termination, if
applicable, or at such earlier time as is reasonably requested by the
Company or the Executive. For purposes of determining which of the
alternative provisions of Section 6(f)(i) shall apply, the Executive
shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation applicable to individuals for the
calendar year in which the determination is to be made, and state and
local income taxes at the highest marginal rates of individual taxation
in the state and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. Any
determination by the Accounting Firm shall be binding upon the Company
and the Executive.
(g) Other Terminations. If the Executive's employment is terminated by
------------------
reason of the Executive's death or for any other reason other than by the
Company without Cause or other than by the Executive for Good Reason, the
Executive shall not be entitled to any compensation under this Agreement other
than:
(i) Bast salary through the 90th day following the Date of
Termination in the case of the Executive's death, and through the Date
of Termination in all other cases,
(ii) any unpaid Annual Bonus that Executive has earned fully in
accordance with Section 5(b) above, for a fiscal year that ended before
the Date of Termination,
(iii) benefits under and subject to the terms and conditions of any
long-term disability insurance coverage in the case of termination
because of Disability, and
(iv) vested benefits, if any, required to be paid or provided by law.
7. Non-Competition, Non-Solicitation and Confidentiality Agreement.
---------------------------------------------------------------
As a condition to his employment, on or before the Effective Date the Executive
agrees to
7
<PAGE>
execute and deliver a Non-Competition, Non-Solicitation and Confidentiality
Agreement substantially in the form attached hereto as Exhibit B.
8. No Mitigation. In no event shall the Executive be obligated to
-------------
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and, except as specifically provided in Section 6(e)(ii) (Group Health Benefits)
above, such amounts shall not be reduced, regardless of whether the Executive
obtains other employment.
9. Notices.
-------
(a) Each notice, demand, request, consent, report approval or
communication (hereinafter "Notice") which is or may be required to be given by
any party to the other party in connection with this Agreement shall be in
writing and given by facsimile, personal delivery, receipted delivery services,
or by certified mail, return receipt requested, prepaid and properly addressed
to the other party as shown below.
(b) Notices shall be effective on the date sent via facsimile, the date
delivered personally or by receipted delivery service, or three (3) days after
the date mailed:
If to the Company: Digitas Inc.
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: David Kenny
Facsimile: (617) 867-1111
If to the Executive: Michael Goss
3 Compo Parkway
Westport, CT 06880
Or at the residence address
most recently filed with the Company.
(c) Each party may designate by Notice to the other a new address to
which any Notice may thereafter be given.
10. Entire Agreement. This Agreement shall constitute the entire
----------------
agreement of the parties with respect to the subject matter hereof and shall
supersede all prior agreements whether oral or written with the Company and its
predecessor entities with respect to the subject matter hereof.
8
<PAGE>
11. Successors and Assigns.
----------------------
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive without the prior written consent of the Company.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) The Company may assign this Agreement to any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company that expressly
agrees to assume and perform this Agreement in the same, manner and to the same
extent that the Company would have been required to perform it if no such
assignment had taken place, and "Company" shall include any such successor that
assumes and agrees to perform this Agreement, by operation of law or otherwise.
12. Miscellaneous.
--------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles, of conflict of laws.
(b) This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(e) The headings contained in this Agreement are for convenience only
and in no manner shall be construed as part of this Agreement.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(g) When required by the context, references to "the "Company" in this
Agreement shall mean or shall include Digitas Inc., its successors and assigns
(subject to the
9
<PAGE>
provisions of Section 11(b), its predecessors and its Affiliates. Affiliates are
companies that control, that are controlled by, or are under common control with
Digitas Inc.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.
/s/ Michael Goss
----------------
MICHAEL GOSS
DIGITAS INC.
By /s/ David Kenny
---------------
David Kenny
Chief Executive Officer
10
<PAGE>
EXHIBIT A
DEFINITION OF "CHANGE IN CONTROL"
"Change in Control" shall mean any of the following:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act") (other than the
Company, any of its subsidiaries, or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of the
Company or any of its subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of either (A) the combined voting
power of the Company's then outstanding securities having the right to vote in
an election of the Company's Board ("Voting Securities") or (B) the then
outstanding shares of Company's common stock par value $0.01 per share ("Common
Stock") (other than as a result of an acquisition of securities directly from
the Company); or
(b) persons who, as of the Effective Date, constitute the Company's
Board (the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to the Effective Date shall
be considered an Incumbent Director if such person's election was approved by or
such person was nominated for election by a vote of at least a majority of the
Incumbent Directors; but provided further, that any such person whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of members of the Board or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other
than the Board, including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be considered an
Incumbent Director, or
(c) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company where the stockholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate more than fifty percent (50%) of the voting shares of the Company
issuing cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other transfer (in
one, transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the
Company or (C) any plan or proposal for the liquidation or dissolution of the
Company.
EXHIBIT A-1
<PAGE>
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred for purposes of the foregoing clause (a) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Common Stock or other Voting Securities outstanding, increases the
proportionate number of shares beneficially owned by any person to twenty-five
percent (25%) or more of either (A) the combined voting power of all of the then
outstanding Voting Securities or (B) Common Stock; provided, however, that if
-----------------
any person referred to in this sentence shall thereafter become the beneficial
at owner of any additional shares of Voting Securities or Common Stock (other
than pursuant to a stock split, stock dividend, or similar transaction or as a
result of an acquisition of securities directly from the Company) and
immediately thereafter beneficially owns twenty-five percent (25%) or more of
either (A) the combined voting power of all of the then outstanding voting
Securities or (B) Common Stock, then a "Change of Control" shall be deemed to
have occurred for purposes of the foregoing clause (a).
EXHIBIT A-2
<PAGE>
EXHIBIT B
---------
FORM OF NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY
-------------------------------------------------------------
AGREEMENT
---------
THIS AGREEMENT, dated as of , by and between DIGITAS INC., a Delaware
corporation (the "Company") and MICHAEL GOSS (the "Executive").
WHEREAS, in connection with the execution of this Agreement, the Executive
will, among other things, be granted options to purchase shares of common stock
in the Company (the "Consideration") and
WHEREAS, the Company and the Executive desire to set forth in a written
agreement certain terms and conditions with respect to the Executive's
employment with the Company from and after the receipt by the Executive of the
Consideration.
NOW, THEREFORE, Company and the Executive agree as follows:
1. Effectiveness of Agreement. The Effective Date of this Agreement is
--------------------------
the date first set forth above.
2. Non-Competition, Non-Solicitation, and Confidentiality.
------------------------------------------------------
(a) The Executive hereby covenants and agrees that:
(i) during the Executive's employment with the Company and for
one (1) year after termination of employment with the Company for any
reason, the Executive shall not work for any competitor of the Company
on the account of any client of the Company with whom the Executive had
a direct relationship or as to which the Executive had a significant
supervisory responsibility or otherwise was significantly involved at
any time during the two (2) years prior to such termination;
(ii) during the Executive's employment with the Company and for
six (6) months after termination of such employment for any reason, the
Executive shall not work for a competitor of the Company on the account
of any substantial competitor of any client of the Company for which
the Executive had substantial responsibility during the two-year period
prior to termination of employment and shall not work directly for such
a competitor of such a client.
(iii) during the Executive's employment with the Company and
for one (1) year after termination of employment with the Company for
any reason, the Executive shall not directly or indirectly solicit or
hire, or assist any other person in soliciting or hiring, any Executive
of the Company (as of the date of termination) or any person who, as of
the date of termination, was in the process of being recruited by the
Company or induce any such Executive to terminate his or her employment
with the Company;
EXHIBIT B-1
<PAGE>
(iv) the Executive shall retain in strictest confidence all
confidential information of the Company and its clients learned by the
Executive during the period of his or her employment by the Company,
and shall not disclose any of such information to anyone outside the
Company, except in the course of his or her duties for the Company or
with the Company's express written consent; and
(v) for the purposes of Section 2(a)(i) and (ii), the term "work
for" shall include, without limitation, communicating with or advising,
directly or indirectly, any individuals who work on such account, or
the client of such account, with respect to any business matter
relating to such account.
(b) The covenants contained in Section 2(a) are for the benefit of the
Company and shall survive any termination of this Agreement,
(c) The Executive acknowledges and agrees that: (i) the purpose of the
foregoing covenants is to protect the goodwill, trade secrets and other
confidential information of the Company; (ii) because of the nature of the
business in which the Companys are engaged and because of the nature of the
confidential information to which the Executive has access, it would be
impractical and excessively difficult to determine the actual damages of the
Company in the event the Executive breached any of the covenants of this
Section 2; and (iii) remedies at law (such as monetary damages) for any breach
of the Executive's obligations under this Section 2 might be inadequate. The
Executive therefore agrees and consents that if he commits any breach of a
covenant under this Section 2 or threatens to commit any such breach, the
Company shall have the right (in addition to, and not in lieu of, any other
right or remedy that may be available to it) to temporary and permanent
injunctive relief from a court of competent jurisdiction, without posting any
bond or other security and without the necessity of proof of actual damage.
(d) With respect to any provision of this Section 2 finally determined
by a court of competent jurisdiction to be unenforceable, the Executive and the
Company hereby agree that such court shall have jurisdiction to reform this
Agreement or any provision hereof so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's
determination, If any of the covenants of this Section 2 are determined to be
wholly or partially unenforceable in any jurisdiction, such determination shall
not be a bar to or in any way diminish the Company's right to enforce any such
covenant in any other jurisdiction.
(e) For purposes of this Agreement, the term "Company" shall mean the
Company and its subsidiaries, predecessors, successors, assigns and Affiliates.
Affiliates are companies that control, that are controlled by, or are under
common control with Digitas Inc.
EXHIBIT B-2
<PAGE>
3. Notices.
-------
(a) Each notice, demand, request, consent, report, approval or
communication (hereinafter "Notice") which is or may be required to be given by
any party to any other party in connection with this Agreement and the
transactions contemplated hereby, shall be in writing, and given by facsimile,
personal delivery, receipted delivery services, or by certified mail, return
receipt requested, prepaid and properly addressed to the party to be served as
shown below.
(b) Notices shall be effective on the date sent via facsimile, the date
delivered personally or by receipted delivery service, or three (3) days after
the date mailed.
If to the Company: Digitas Inc.
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: Chief Executive Officer
Facsimile: (617) 867-1111
If to the Executive: At his residence address
most recently filed with the Company
(c) Each party may designate by Notice to the other a new address to
which any Notice may thereafter be so given.
4. Entire Agreement. As of the effective date of this Agreement, this
----------------
Agreement shall constitute the entire agreement of the parties with respect to
the subject matter hereof
5. Successors and Assigns.
----------------------
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive without the prior written consent of the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Company and its successors and assigns.
6. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws.
(b) This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto.
EXHIBIT B-3
<PAGE>
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(e) The headings contained in this Agreement are for convenience only
and in no manner shall be construed as part of this Agreement.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrumnent.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.
-------------------------
MICHAEL GOSS
Three Compo Parkway
Westport, CT 06880
DIGITAS INC.
By
-----------------------
Name:
Title:
EXHIBIT B-4
<PAGE>
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of January 10, 2000 between Digitas Inc., a Delaware
corporation (the "Company"), and Robert Galford (the "Executive").
WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and conditions under which the Executive will be employed by
and will render services to the Company;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. EFFECTIVE DATE. The Effective Date of this Agreement is the date
---------------
first set forth above or the date upon which the Executive commences employment
with the Company, whichever is later. The date for commencement of employment
shall be January 10, 2000 or such other date as the parties shall agree.
2. EMPLOYMENT PERIOD. The period during which the Company shall
-----------------
employ the Executive and the Executive shall serve the Company under this
Agreement (the "Employment Period") shall begin on the Effective Date and end on
the second anniversary of the Effective Date; provided, however, that on the
-----------------
second anniversary of the Effective Date and on each subsequent anniversary of
such date (each such anniversary hereinafter referred to as a "Renewal Date"),
the Employment Period shall be automatically extended by one year, unless at
least 60 days before a Renewal Date either party shall give notice to the other
that the Employment Period shall not be so extended.
3. POSITION AND DUTIES. During the Employment Period, the Executive
-------------------
shall serve as Chief People Officer, with the duties and responsibilities
customarily assigned to such position and such other duties and responsibilities
as the Board of Directors or the Chief Executive Officer of the Company shall
from time to time assign to the Executive.
4. FULL-TIME POSITION. During the Employment Period, and excluding
------------------
any periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote his full business attention and time to the business and
affairs of the Company and shall use his best efforts to carry out such
responsibilities faithfully and efficiently. It shall not be considered a
violation of the foregoing for the Executive to (a) serve on corporate, civic or
charitable boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c) manage personal
investments, so long as such activities do not materially interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement
1
<PAGE>
5. COMPENSATION.
------------
(a) BASE SALARY. As compensation for the Executive's services
-----------
hereunder during the Employment Period, the Company shall pay to the Executive
an annual salary (the "Base Salary") of not less than $350,000, payable at such
times and intervals as the Company pays the base salaries of its other executive
employees. The Base Salary shall be reviewed annually during the Employment
Period for possible increase. The Base Salary shall not be reduced after any
such increase, and the term "Base Salary" shall thereafter refer to the Base
Salary as so increased.
(b) ANNUAL BONUS. In addition to the Base Salary, for each fiscal year
------------
ending during the Employment Period the Executive shall be eligible for an
annual bonus of (the "Annual Bonus"), of up to 100% of the annual Base
Salary, the precise amount to be determined by the Chief Executive Officer
subject to approval by the Compensation Committee of the Board. Annual
bonuses are awarded for calendar year performance and are generally paid in
March of the following year, subject to the conditions precedent that the
Executive is employed on that date. If the period from the Effective Date
to December 31 is less than a full year, any Annual Bonus paid in respect
of that period shall be adjusted pro rata based upon the number of months
that the Executive is employed by the Company during such fiscal year.
(c) STOCK OPTIONS. On or prior to the Effective Date, the Board will
-------------
authorize the grant to the Executive of options to purchase 200,000 shares
of the Company's common stock (the "Options"). The Options shall be granted
under the Company's 1999 Option Plan and shall be subject to the terms of
both the 1999 Option Plan and an Option Agreement to be executed by the
Executive in connection with the grant of the Options. The Option Agreement
shall provide, among other things, that the Options are exercisable at a
price per share of $17.50 and that the Options vest over four years at the
rate of 25% on the first anniversary of the grant date and 6 1/4% on each
quarter thereafter. Notwithstanding any other provisions of this Section,
the applicable Option Plan governing issuance of stock options to the
Executive hereunder shall provide that all stock options granted to the
Executive shall vest and become exercisable within ninety days after
termination of employment within two years following a Change in Control,
whether by the Company without Cause or by the Executive with Good Reason
(as hereinafter defined).
(d) BENEFITS. During the Employment Period, the Executive shall be
--------
entitled to receive employee benefits (including without limitation
medical, life insurance and other welfare benefits and benefits under
retirement and savings plans), Company-provided parking and paid vacation,
in each case to the same extent as, and on the same terms and conditions
as, other similarly situated senior executives of the Company from time to
time.
(e) EXPENSES. The Executive shall be entitled to receive prompt
--------
reimbursement for all reasonable expenses incurred by the Executive during
the Employment Period in carrying out his duties under this Agreement,
provided that the Executive complies
2
<PAGE>
with the policies, practices and procedures of the Company for submission
of expense reports, receipts, or similar documentation of such expenses.
6. Termination of Employment.
-------------------------
(a) Termination by the Company. The Executive's employment may be
--------------------------
terminated by the Company under any of the following circumstances:
(i) upon the "Disability" of the Executive, defined as the
inability of the Executive to perform his duties hereunder on
a full-time basis by reason of physical or mental incapacity,
sickness or infirmity that continues for more than 180 days
or for periods aggregating more than 180 days during any
period of 365 consecutive days;
(ii) for "Cause," as defined below; or
(iii) for any other reason (a termination without "Cause").
(b) Definition of "Cause". "Cause" means and shall be limited to:
----------------------
(i) wrongful misappropriation of the funds or property of the
Company;
(ii) use of alcohol or illegal drugs interfering with the
performance of the Executive's obligations, continuing after
written warning of such actions;
(iii) admission, confession, indictment or plea bargain to, or
conviction of, a felony, or of any crime involving moral
turpitude, dishonesty, theft, unethical or unlawful conduct;
(iv) commission of any willful, intentional or grossly negligent
act which could reasonably be expected to injure the
reputation, business or business relationships of the Company
or which may tend to bring the Executive or the Company into
disrepute, or the willful commission of any act which is a
breach of the Executive's fiduciary duties to the Company;
(v) the deliberate or willful failure by the Executive (other
than by reason of the Executive's physical or mental illness,
incapacity or disability) to substantially perform his duties
with the Company and the continuation of such failure for a
period of 30 days after delivery by the Company to the
Executive of Notice specifying the scope and nature of such
failure and the Company's intention to terminate the
Executive for Cause.
3
<PAGE>
(vi) commission of any act which constitutes a material breach of
the policies of the Company, including but not limited to the
disclosure of any confidential information or trade secrets
pertaining to the Company or any of its clients.
For purposes of this Section, any act or failure to act of the
Executive shall not be considered "willful" unless done or omitted to be done by
the Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the Company. The
determination that any of the above described events constitute Cause shall be
made by the Board in its sole discretion. The Company shall give the Executive
Notice of termination specifying which of the foregoing provisions is
applicable. The effective date of the Executive's termination of employment
with the Company (the "Date of Termination") shall be the 30th business day
after such Notice is given or such other date as the Company and the Executive
shall agree.
(c) TERMINATION BY THE EXECUTIVE. The Executive's employment may be
----------------------------
terminated by the Executive under either of the following circumstances:
(i) for "Good Reason," as defined below; or
(ii) for any other reason (a termination without "Good Reason").
(d) DEFINITION OF "GOOD REASON". "Good Reason" means termination at
---------------------------
the Executive's initiative:
(i) within two years after a corporate Change in Control (as
defined in Exhibit A to this Agreement) if the Executive's
title, duties, status, reporting relationship, authority,
responsibilities or compensation have been materially and
adversely affected; or if the Executive's principal place of
employment immediately prior to the change of control is
relocated to a location more than 50 miles from such place of
employment.
(ii) after any material failure by the Company to comply with any
provision of Section 5 of this Agreement, unless such failure
is remedied by the Company within ten business days after
receipt of Notice thereof from the Executive.
The Executive shall give the Company Notice of termination specifying
which of the foregoing provisions is applicable and the factual basis therefor,
and if the Company fails to remedy such material failure, the Date of
Termination shall be the 30th business day after such Notice is given or such
other date as the Company and the Executive shall agree.
(e) SEVERANCE BENEFITS UPON CERTAIN TERMINATIONS. If during the
--------------------------------------------
Employment Period the Executive's employment is terminated by the Company
without Cause or by the Executive for Good Reason, the Executive shall not
be entitled to any further compensation or benefits provided for under this
Agreement except as follows:
4
<PAGE>
(i) The Company shall continue to pay the Executive the Base Salary at the
rate in effect immediately before the Date of Termination (but, in the
case of a termination by the Executive for Good Reason, disregarding any
reduction thereof that was the basis for such termination), for twelve
months after the Date of Termination,
(ii) The Company shall continue to provide the Executive with group health
benefits pursuant to COBRA (the "Group Health Benefits") for twelve
months after the Date of Termination; provided, that during any period
when the Executive is eligible to receive any such benefits under another
employer-provided plan or a government plan, the Group Health Benefits or
substitute benefits provided by the Company under this clause may be made
secondary to those provided under such other plan;
(iii) The Company shall pay the Executive any amounts that have been earned but
not yet paid under Section 5 hereof.
(iv) Stock options previously granted to the Executive may become vested and
exercisable as described in Section 5(c).
(v) Receipt of severance benefits is conditioned on Executive's execution and
delivery of a separation agreement including a general release of claims,
in a form acceptable to the Company, and on Executive's strict compliance
with the Non-Competition, Non-Solicitation and Confidentiality Agreement
substantially in the form attached hereto as Exhibit B.
(f) ADDITIONAL LIMITATION.
----------------------
(i) Anything in this Agreement to the contrary notwithstanding, in the
event that any compensation, payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Severance Payments"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the following provisions shall apply:
(A) If the Severance Payments, reduced by the sum of (1) the Excise
Tax and (2) the total of the Federal, state, and local income and
employment taxes payable by the Executive on the amount of the
Severance Payments which are in excess of the Threshold Amount,
are greater than or equal to the Threshold Amount, the Executive
shall be entitled to the full benefits payable under this
Agreement.
5
<PAGE>
(B) If the Threshold Amount is less than (x) the Severance Payments,
but greater than (y) the Severance Payments reduced by the sum of
(1) the Excise Tax and (2) the total of the Federal, state, and
local income and employment taxes on the amount of the Severance
Payments which are in excess of the Threshold Amount, then the
benefits payable under this Agreement shall be reduced (but not
below zero) to the extent necessary so that the maximum Severance
Payments shall not exceed the Threshold Amount. To the extent
that there is more than one method of reducing the payments to
bring them within the Threshold Amount, the Executive shall
determine which method shall be followed; provided that if the
Executive fails to make such determination within 45 days after
the Company has sent the Executive Notice of the need for such
reduction, the Company may determine the amount of such reduction
in its sole discretion.
For the purposes of this Section 6(f), "Threshold Amount" shall mean
three times the Executive's "base amount" within the meaning of
Section 280G(b)(3) of the Code and the regulations promulgated
thereunder less one dollar ($1.00); and "Excise Tax" shall mean the
excise tax imposed by Section 4999 of the Code, and any interest or
penalties incurred by the Executive with respect to such excise tax.
(ii) The determination as to which of the alternative provisions of Section
6(f)(i) shall apply to the Executive shall be made by
PriceWaterhouseCoopers LLP or any other nationally recognized
accounting firm selected by the Company (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the Date of Termination, if
applicable, or at such earlier time as is reasonably requested by the
Company or the Executive. For purposes of determining which of the
alternative provisions of Section 6(f)(i) shall apply, the Executive
shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation applicable to individuals for the
calendar year in which the determination is to be made, and state and
local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Executive's residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive.
(g) OTHER TERMINATIONS. If the Executive's employment is terminated
------------------
by reason of the Executive's death or for any other reason other than by the
Company without Cause or by the Executive for Good Reason, the Executive shall
not be entitled to any compensation under this Agreement other than:
(i) Base Salary through the 90th day following the Date of Termination in the
case of the Executive's death, and through the Date of Termination in all
other cases,
6
<PAGE>
(ii) any unpaid Annual Bonus that Executive has earned fully in accordance with
Section 5(b) above, for a fiscal year that ended before the Date of
Termination,
(iii) benefits under and subject to the terms and conditions of any long-term
disability insurance coverage in the case of termination because of Disability,
and
(iv) vested benefits, if any, required to be paid or provided by law.
7. NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY AGREEMENT. As a
----------------------------------------------------------------
condition to his employment, on or before the Effective Date the Executive
agrees to execute and deliver a Non-Competition, Non-Solicitation and
Confidentiality Agreement substantially in the form attached hereto as Exhibit
B.
8. NO MITIGATION. In no event shall the Executive be obligated to seek other
--------------
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
specifically provided in Section 6(e)(ii) (health benefits) above, such amounts
shall not be reduced, regardless of whether the Executive obtains other
employment.
9. NOTICES.
--------
(a) Each notice, demand, request, consent, report, approval or
communication (hereinafter "Notice") which is or may be required to be given by
any party to the other party in connection with this Agreement shall be in
writing and given by facsimile, personal delivery, receipted delivery services,
or by certified mail, return receipt requested, prepaid and properly addressed
to the other party as shown below.
(b) Notices shall be effective on the date sent via facsimile, the
date delivered personally or by receipted delivery service, or three (3) days
after the date mailed:
If to the Company: Digitas Inc.
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: David Kenny
Facsimile: (617) 867-1111
If to the Executive: Robert Galford
498 Strawberry Hill Road
Concord, MA 01742
7
<PAGE>
Or at the residence address
most recently filed with the Company.
(c) Each party may designate by Notice to the other a new address to
which any Notice may thereafter be given.
10. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement of
-----------------
the parties with respect to the subject matter hereof and shall supersede all
prior agreements whether oral or written with the Company and its predecessor
entities with respect to the subject matter hereof.
11. SUCCESSORS AND ASSIGNS
----------------------
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive without the prior written consent of the Company .
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) The Company may assign this Agreement to any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company that expressly
agrees to assume and perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
assignment had taken place, and "Company" shall include any such successor that
assumes and agrees to perform this Agreement, by operation of law or otherwise.
12. MISCELLANEOUS.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws.
(b) This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
8
<PAGE>
(e) The headings contained in this Agreement are for convenience only and in no
manner shall be construed as part of this Agreement.
(f) This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(g) When required by the context, references to "the "Company" in this
Agreement shall mean or shall include Digitas Inc., its successors and
assigns (subject to the provisions of Section 11(b), its predecessors and
its Affiliates. Affiliates are companies that control, that are controlled
by, or are under common control with Digitas Inc.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.
/s/ Robert Galford
------------------------------
ROBERT GALFORD
DIGITAS INC.
By /s/ David Kenny
--------------------------
David Kenny
Chief Executive Officer
9
<PAGE>
EXHIBIT A
DEFINITION OF "CHANGE IN CONTROL"
"CHANGE IN CONTROL" shall mean any of the following:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Act") (other than the
Company, any of its subsidiaries, or any trustee, fiduciary or other person
or entity holding securities under any employee benefit plan or trust of
the Company or any of its subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of
such person, shall become the "beneficial owner" (as such term is defined
in Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of either (A) the
combined voting power of the Company's then outstanding securities having
the right to vote in an election of the Company's Board ("Voting
Securities") or (B) the then outstanding shares of Company's common stock,
par value $0.01 per share ("Common Stock") (other than as a result of an
acquisition of securities directly from the Company); or
(b) persons who, as of the Commencement Date, constitute the Company's Board
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to the
Commencement Date shall be considered an Incumbent Director if such
person's election was approved by or such person was nominated for election
by a vote of at least a majority of the Incumbent Directors; but provided
further, that any such person whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of members of the Board or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board,
including by reason of agreement intended to avoid or settle any such
actual or threatened contest or solicitation, shall not be considered an
Incumbent Director; or
(c) the stockholders of the Company shall approve (A) any consolidation or
merger of the Company where the stockholders of the Company, immediately
prior to the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate more than fifty percent (50%) of the voting shares of the Company
issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all of
the assets of the Company or (C) any plan or proposal for the liquidation
or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have
EXHIBIT A - 1
<PAGE>
occurred for purposes of the foregoing clause (a) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Common Stock or other Voting Securities outstanding, increases the
proportionate number of shares beneficially owned by any person to twenty-five
percent (25%) or more of either (A) the combined voting power of all of the then
outstanding Voting Securities or (B) Common Stock; provided, however, that if
any person referred to in this sentence shall thereafter become the beneficial
owner of any additional shares of Voting Securities or Common Stock (other than
pursuant to a stock split, stock dividend, or similar transaction or as a result
of an acquisition of securities directly from the Company) and immediately
thereafter beneficially owns twenty-five percent (25%) or more of either (A) the
combined voting power of all of the then outstanding Voting Securities or (B)
Common Stock, then a "Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (a).
EXHIBIT A - 2
<PAGE>
NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY AGREEMENT
---------------------------------------------------------------
THIS AGREEMENT, dated as of , by and between
Digitas Inc., a Delaware corporation (the "Company") and Robert Galford (the
"Executive").
WHEREAS, in connection with the execution of this Agreement, the Executive
will, among other things, be granted options to purchase shares of common stock
in the Company (the "Consideration"); and
WHEREAS, the Company and the Executive desire to set forth in a written
agreement certain terms and conditions with respect to the Executive's
employment with the Company from and after the receipt by the Executive of the
Consideration.
NOW, THEREFORE, Company and the Executive agree as follows:
1. EFFECTIVENESS OF AGREEMENT. This Effective Date of this Agreement is
--------------------------
the date first set forth above.
2. NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY.
------------------------------------------------------
(a) The Executive hereby covenants and agrees that:
(i) during the Executive's employment with the Company and for one
(1) year after termination of employment with the Company for any
reason, the Executive shall not work for any competitor of the Company
on the account of any client of the Company with whom the Executive
had a direct relationship or as to which the Executive had a
significant supervisory responsibility or otherwise was significantly
involved at any time during the two (2) years prior to such
termination;
(ii) during the Executive's employment with the Company and for
six (6) months after termination of such employment for any reason,
the Executive shall not work for a competitor of the Company on the
account of any substantial competitor of any client of the Company for
which the Executive had substantial responsibility during the two-year
period prior to termination of employment and shall not work directly
for such a competitor of such a client.
(iii) during the Executive's employment with the Company and for
one (1) year after termination of employment with the Company for any
reason, the Executive shall not directly or indirectly solicit or
hire, or assist any other person in soliciting or hiring, any
Executive of the Company (as of the date of
<PAGE>
termination) or any person who, as of the date of termination, was in
the process of being recruited by the Company or induce any such
Executive to terminate his or her employment with the Company;
(iv) the Executive shall retain in strictest confidence all
confidential information of the Company and its clients learned by the
Executive during the period of his or her employment by the Company,
and shall not disclose any of such information to anyone outside the
Company, except in the course of his or her duties for the Company or
with the Company's express written consent; and
(v) for the purposes of Section 2(a)(i) and (ii), the term "work
for" shall include, without limitation, communicating with or
advising, directly or indirectly, any individuals who work on such
account, or the client of such account, with respect to any business
matter relating to such account.
(b) The covenants contained in Section 2(a) are for the benefit of the Company
and shall survive any termination of this Agreement.
(c) The Executive acknowledges and agrees that: (i) the purpose of the
foregoing covenants is to protect the goodwill, trade secrets and other
confidential information of the Company; (ii) because of the nature of the
business in which the Companys are engaged and because of the nature of the
confidential information to which the Executive has access, it would be
impractical and excessively difficult to determine the actual damages of
the Company in the event the Executive breached any of the covenants of
this Section 2; and (iii) remedies at law (such as monetary damages) for
any breach of the Executive's obligations under this Section 2 might be
inadequate. The Executive therefore agrees and consents that if he
commits any breach of a covenant under this Section 2 or threatens to
commit any such breach, the Company shall have the right (in addition to,
and not in lieu of, any other right or remedy that may be available to it)
to temporary and permanent injunctive relief from a court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage.
(d) With respect to any provision of this Section 2 finally determined by a
court of competent jurisdiction to be unenforceable, the Executive and the
Company hereby agree that such court shall have jurisdiction to reform this
Agreement or any provision hereof so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's
determination. If any of the covenants of this Section 2 are determined to
be wholly or partially unenforceable in any jurisdiction, such
determination shall not be a bar to or in any way diminish the Company's
right to enforce any such covenant in any other jurisdiction.
(e) For purposes of this Agreement, the term "Company" shall mean the Company
and its subsidiaries, predecessors, successors, assigns and Affiliates.
Affiliates are companies that control, that are controlled by, or are under
common control with Digitas Inc.
2
<PAGE>
3. NOTICES.
-------
(a) Each notice, demand, request, consent, report, approval or
communication (hereinafter "Notice") which is or may be required to be given by
any party to any other party in connection with this Agreement and the
transactions contemplated hereby, shall be in writing, and given by facsimile,
personal delivery, receipted delivery services, or by certified mail, return
receipt requested, prepaid and properly addressed to the party to be served as
shown below.
(b) Notices shall be effective on the date sent via facsimile, the
date delivered personally or by receipted delivery service, or three (3) days
after the date mailed.
If to the Company: Digitas Inc.
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attn: Chief Executive Officer
Facsimile: (617) 867-1111
If to the Executive: At his residence address
most recently filed with the Company
(c) Each party may designate by Notice to the other a new address to
which any Notice may thereafter be so given.
4. ENTIRE AGREEMENT. As of the effective date of this Agreement, this
----------------
Agreement shall constitute the entire agreement of the parties with respect to
the subject matter hereof.
5. SUCCESSORS AND ASSIGNS.
----------------------
(a) This Agreement is personal to the Executive and shall not be assignable by
the Executive without the prior written consent of the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Company and its successors and assigns.
6. MISCELLANEOUS.
-------------
(a) This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without reference to principles
of conflict of laws.
(b) This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto.
3
<PAGE>
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(e) The headings contained in this Agreement are for convenience only
and in no manner shall be construed as part of this Agreement.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.
________________________________________
ROBERT GALFORD
498 Strawberry Hill Road
Concord, MA 01742
DIGITAS INC.
By______________________________________
Name:
Title:
4
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.29
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
ADVERTISING SERVICES AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - AGENCY SERVICES
ARTICLE 2 - COMPENSATION AND EXPENSES
ARTICLE 3 - AGENCY EVALUATION
ARTICLE 4 - AGENCY'S INFORMATION
ARTICLE 5 - ASSIGNMENT AND SUBCONTRACTING
ARTICLE 6 - ATTACHMENTS
ARTICLE 7 - AUDIT
ARTICLE 8 - CHANGES
ARTICLE 9 - CHOICE OF LAW
ARTICLE 10 - COMPLIANCE WITH LAWS
ARTICLE 11 - DISCOUNTS
ARTICLE 12 - ELECTRONIC DATA INTERCHANGE (EDI)
ARTICLE 13 - ENTIRE AGREEMENT
ARTICLE 14 - EXCLUSIVITY AND RESERVATION OF RIGHTS
ARTICLE 15 - FORCE MAJEURE
ARTICLE 16 - IDENTIFICATION
ARTICLE 17 - IMPLEADER
ARTICLE 18 - INDEMNITY
ARTICLE 19 - INFRINGEMENT
ARTICLE 20 - INSPECTION
ARTICLE 21 - INSURANCE
ARTICLE 22 - INVOICING
ARTICLE 23 - MEDIATION
ARTICLE 24 - NON-EXCLUSIVE SERVICES
ARTICLE 25 - NOTICES
ARTICLE 26 - ORDERING COMPANIES
ARTICLE 27 - ORDERLY TRANSITION
ARTICLE 28 - PAYMENT TERMS
ARTICLE 29 - PUBLICITY, ADVERTISING
ARTICLE 30 - RELEASES VOID
ARTICLE 31 - REPRESENTATIVES
ARTICLE 32 - SEVERABILITY
ARTICLE 33 - SURVIVAL OF OBLIGATION
ARTICLE 34 - TAXES
ARTICLE 35 - TERMINATION
ARTICLE 36 - TITLE
ARTICLE 37 - TOOLS AND EQUIPMENT
ARTICLE 38 - USE OF AT&T NAME, LOGO, AND MARKS
ARTICLE 39 - USE OF INFORMATION
ARTICLE 40 - UTILIZATION OF MINORITY AND WOMEN OWNED BUSINESS
ARTICLE 41 - WAIVER
ARTICLE 42 - WARRANTY
ARTICLE 3 - WORK DONE BY OTHERS
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 1 OF 14
ADVERTISING AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, AT&T Corp. ("AT&T")
having an office at 295 N. Maple Avenue, Basking Ridge, New Jersey 07920 and
Bronner Slosberg Humphrey a Corporation of the state of Massachusetts
("Agency"), having an office at 800 Boyleston Street, Boston, Massachusetts
02199 do hereby agree as follows:
ARTICLE 1 - AGENCY SERVICES
Commencing January 1, 1998 and ending on December 31, 2000, Agency shall perform
advertising/direct marketing services ("Work") in support of various AT&T
Programs. All such Work shall be considered Work under this Agreement and the
terms and conditions hereof shall govern. Work may include, but not necessarily
be limited to, the following services which are requested by AT&T:
I. SERVICES
A. Familiarizing itself with the business of AT&T, its services, and the
industry in which AT&T operates; analyzing the present and potential
marketing opportunities for such services so as to provide AT&T with
marketing communications counsel, including specific marketing
communications objectives, strategies, and plans for reaching AT&T's
business objectives.
B. Developing an advertising strategy, planning advertising campaigns, and
making recommendations for adoption thereof.
C. Creating advertising materials for all media.
D. Producing finished advertisements and commercials.
E. Media planning for television, radio, and print. Forwarding advertising
materials and instructions to designated media for execution.
F. Buying advertising space and time or other means for transmitting AT&T's
advertising, whether created by Agency or otherwise.
G. Direct marketing and database management, including the planning,
creation, direct response advertising, and the placement, insertion or
distribution thereof.
H. Preparing copy, scripts, storyboards, and other elements and materials
to be used in the execution of advertising and promotion.
I. Conducting and analyzing research for television, radio, and print
advertising and testing its effectiveness.
J. Negotiating, arranging, and contracting, all talent, photography,
models, special effects, layouts, and artwork, and all materials and
services required to execute approved media plans. Securing all
clearances, consents, permissions, and implementing tax withholdings and
other procedures as required by law.
K. Analyzing, tracking, and reporting competitive marketing communications.
L. Pursuing sponsorship opportunities to provide public recognition to AT&T
and to enhance AT&T's reputation with its customers.
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AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 2 OF 14
M. Performing event marketing services; coordinating, managing, and
executing marketing events and reporting results thereof.
N. Developing, implementing, and managing effective and efficient account
and financial management practices.
0. Providing written reports as required (e.g., billing and financial).
P. Attending meetings as requested by AT&T.
Q. Stewardship with media buys, i.e., post analysis of television buys,
print positioning reports, etc.
R. Coordinating research, including quantitative and qualitative studies.
S. Submitting concepts, scripts, print copy and other materials to AT&T for
internal review and required legal and technical approval, and when
appropriate to the networks' Broadcast Standards Departments for
specific approval prior to initial photographing, broadcasting,
telecasting, direct mailing, or print production of commercials or print
advertisements.
T. Contracting with third parties of media based on Approved Estimates, as
described in this Article, Paragraph II below.
The parties shall negotiate and agree upon in writing Agency's level of
support and scope of work annually. Agency shall assign a dedicated staff
to the AT&T business accordingly. The parties shall make best efforts to
negotiate the level of support and statement of work for years 1999 and
2000 no later than fourth quarter of each respective year.
II. ESTIMATES AND APPROVAL
Within five (5) business days of AT&T's request, Agency shall furnish to
AT&T a written proposal ("Estimate") setting forth a detailed proposal for
implementing any proposed advertising program requested by AT&T and any
third party costs thereof Agency shall obtain written approval of such
Estimate ("Approved Estimate") prior to implementing a program(s). AT&T
agrees to provide approval/disapproval within five (5) business days of
receipt of such Estimate. Approved Estimates (also at times referred to as
"Order(s)" in this Agreement) shall constitute the only authorization for
Agency to take any action, make any commitments or expend any money. Agency
acknowledges and agrees that no Work shall begin unless and until an
authorized representative of each of the parties properly executes an
Estimate. Agency further acknowledges that AT&T is not responsible for any
costs or expenses in excess of 10% of those set forth in the Approved
Estimate. Notwithstanding the foregoing, in those situations where time or
circumstances do not permit prior written approval, commitments not to
exceed $50,000 may be made with oral approval, provided such approval is
confirmed by an Approved Estimate no later than two (2) business days
thereafter. In the event the requirements under an Approved Estimate
changes and the cost associated with the Estimate changes, plus or minus
10%, Agency shall submit a revised Estimate and obtain prior written
approval by AT&T if additional costs or expenses are to be reimbursed by
AT&T.
Estimates submitted by Agency to AT&T shall include the following:
A. Incorporation, by reference, of this Agreement.
B. Estimate Number.
C. Name of Program, project and a detailed description of implementation
thereof.
D. Duration for which Agency is authorized to perform services in support
of the project.
E. All third party costs and expenses including production, media, and
travel expenses, each itemized separately.
F. Appropriate signature(s) of the authorized representative(s) of AT&T and
Agency.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 3 OF 14
The services referred to in Paragraph I and II above and all other Agency
activities under this Agreement shall be performed to the satisfaction of AT&T,
shall be performed in accordance with the highest professional standards and
shall be in accordance with such requirements or restrictions as may be lawfully
imposed by governmental authority. Services not completed to AT&T's satisfaction
shall be re-performed at no cost to AT&T.
ARTICLE 2 - COMPENSATION AND EXPENSES
Exhibit A, Paragraph I, establishes Agency's Fee which includes the costs of all
labor, and materials and equipment associated with performing services necessary
to complete Work required under this Agreement. In addition to the foregoing
payments, AT&T agrees to pay Agency a performance bonus, pursuant to Exhibit A,
Paragraph II, if in AT&T's sole discretion and judgment, Agency's overall
performance rating is above or well above target.
In the event AT&T determines that certain services it requires for special
projects are not within the scope contemplated by the Agency Fee set forth in
Exhibit A, Paragraph I, AT&T may request a written proposal from Agency for such
services including additional compensation required by Agency. Agency shall
submit such written proposal to AT&T within ten (10) days of the request. If
AT&T agrees with such proposal, it shall be incorporated into a writing signed
by both parties which shall incorporate the terms and conditions of this
Agreement by reference. If such proposal provides for payment of additional
compensation by AT&T to Agency exceeding that set forth in Exhibit A, Paragraph
I, such additional compensation will be included in the bonus calculation, if
applicable. AT&T's sole, reasonable discretion and judgment shall determine
whether particular services are within or not within the scope contemplated by
the Agency Fee set forth in Exhibit A, Paragraph I.
AT&T further agrees to reimburse Agency at actual cost incurred for a) out-of-
pocket expenses for third party production and media fees, as set forth in
Exhibit A, Paragraph III, incurred in accordance with Approved Estimates, and b)
travel and living expenses incurred while on AT&T approved travel assignments
pursuant to Exhibit A, Paragraph IV. Agency shall list a) and b) as separate
items on each invoice, which shall be accompanied by receipts substantiating
expenses. Agency shall retain all such records for a period of not less than
three (3) calendar years after the expiration of this Agreement.
ARTICLE 3 - AGENCY/AT&T EVALUATION
An evaluation of Agency's previous year's services shall occur during the first
quarter (January - March) and a mid-year evaluation shall occur during the third
quarter (July - September) of each calendar year. The objective of the
evaluation is for AT&T to present Agency an evaluation of its performance and
for Agency to evaluate and provide feedback to AT&T, for AT&T and Agency to
mutually agree on any corrective action that may be needed, and for AT&T and
Agency to set objectives. Agency's overall performance rating shall form the
basis of any bonus to be paid to Agency by AT&T, in accordance with Exhibit A,
Paragraph II. It is acknowledged and understood by Agency that AT&T's sole
discretion shall govern the evaluation and Agency shall not have any contractual
or other right to receive a bonus if AT&T determines Agency's overall
performance rating is not above or well above target.
ARTICLE 4 - AGENCY'S INFORMATION
Agency shall not provide under, or have provided in contemplation of, this
Agreement any idea, data, program, technical, business or other intangible
information, however conveyed, or any document, print, tape, disk, semiconductor
memory or other information-conveying tangible article, unless Agency has the
right to do so, and Agency shall not view any of the foregoing as confidential
or proprietary unless subject matter so furnished is owned by AT&T as defined
and provided under Articles TITLE or USE OF INFORMATION under this Agreement.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 4 OF 14
ARTICLE 5 - ASSIGNMENT AND SUBCONTRACTING
Agency shall not assign any right or interest under this Agreement (excepting
monies due or to become due) or delegate or subcontract any Work or other
obligation to be performed or owed under this Agreement without the prior
written consent of AT&T. Any attempted assignment, delegation or subcontracting
in contravention of the above provisions shall be void and ineffective. Any
assignment of monies shall be void and ineffective to the extent that (1) Agency
shall not have given AT&T at least thirty (30) days prior written notice of such
assignment or (2) such assignment attempts to impose upon AT&T obligations to
the assignee additional to the payment of such monies, or to preclude AT&T from
dealing solely and directly with Agency in all matters pertaining to this
Agreement including the negotiation of amendments or settlements of charges due.
All Work performed by Agency's subcontractor(s) at any tier shall be deemed Work
performed by Agency.
In the event AT&T consents to the use of subcontractors, Agency shall be
responsible for informing subcontractors of their responsibility to protect any
confidential and proprietary information included in any Work subcontracted
hereunder, and Agency shall undertake all necessary precautions to insure that
each subcontractor is in compliance with this Article.
Unless otherwise directed by AT&T, all work subcontracted by Agency to third
parties and reimbursable under this Agreement, as described in Exhibit A,
Paragraph III shall be competitively quoted. Agency shall request competitive
quotations from a minimum of three suppliers when the subcontracted work is
estimated to exceed $35,000. The quotation process shall be administered by
Agency and contracts awarded by Agency, but only with the prior written approval
of AT&T. Copies of the quotations shall be submitted to AT&T for review and
approval prior to the award of a contract. In the event a selected third party
subcontractor cannot perform, Agency shall select another third party
subcontractor following notification to and written approval by AT&T. Agency
shall not fragment any subcontracted work to avoid the obligation to obtain
quotations. Agency shall strive to secure monetary savings for all services
received by third party subcontractors. Agency shall report all such savings to
AT&T's Supplier Management/Agreement Representative monthly in accordance with
Exhibit C no later than the 10th day of the subsequent month of Agency's
contract award to a third party subcontractor.
All subcontracts shall provide that Agency shall be solely liable for payment to
media for time and/or space costs and for other costs related to the subcontract
and that all billing shall be sent to Agency. Agency agrees to make payment of
such billing in a timely manner. It is understood and agreed that Agency is
acting as an independent contractor/principal in connection with this Agreement
and nothing herein shall be construed to make it an agent of AT&T.
This Agreement is not intended to create any legal rights or interests as to
persons not a party hereto. In accordance with this understanding, Agency shall
remain fully, directly and solely responsible as a principal for all expenses it
incurs of any nature whatsoever and shall indemnify, defend and hold AT&T
harmless from any and all claims made against AT&T by persons not a party to
this Agreement for non-payment of such expenses.
ARTICLE 6 - ATTACHMENTS
The following Attachments are hereby made part of the Agreement:
Exhibit A - Compensation/Third Party Expenses/Reimbursable Expenses
Exhibit B - Travel Guidelines
Exhibit C - Third Party Subcontractor Savings Reporting Form
Exhibit D - MWBE Definitions
Exhibit E - AT&T MWBE Second Tier Reporting Form
ARTICLE 7 - AUDIT
Agency shall maintain accurate and complete records including a physical
inventory, if applicable, of all costs incurred under this Agreement including
all hours of employees engaged in work, the costs of labor (other than
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 5 OF 14
individual salaries of Agency employees) and all other costs payable by AT&T
under this Agreement. These records shall be maintained in accordance with
recognized commercial accounting practices so they may be readily audited and
shall be held until i) costs have been finally determined under this Agreement
and payment or final adjustment of payment, as the case may be, has been made,
ii) three (3) calendar years after the a final delivery date of material ordered
or completion of services rendered, or iii) three (3) calendar year(s) after
expiration date of this Agreement, whichever comes later. Agency shall permit
AT&T or AT&T's representative to examine and audit these records and all
supporting records upon reasonable notice at all reasonable business hours.
ARTICLE 8 - CHANGES
AT&T may at any time during the progress of the Work require additions to or
alterations of or deductions or deviations (all hereinafter referred to as a
"Change") from the work called for hereunder. No Change shall be considered as
an addition or alteration to or deduction or deviation from the Work called for
by this Agreement nor shall Agency be entitled to any compensation for work done
pursuant to or in contemplation of a Change, unless approved in writing by AT&T.
Within five (5) days after a request for a Change, Agency shall submit a
proposal to AT&T which includes any increases or decreases in Agency's costs or
changes in the delivery or Work schedule necessitated by the Change. AT&T shall,
within five (5) days of receipt of the proposal, either (i) accept the proposal,
in which event AT&T shall provide written approval of the proposal directing
Agency to perform the Change or (ii) advise Agency not to perform the Change in
which event Agency shall proceed with the original Work.
ARTICLE 9 - CHOICE OF LAW
The construction, interpretation and performance of this Agreement and all
transactions under it shall be governed by the laws of the State of New Jersey
excluding its choice of laws rules and excluding the Convention for the
International Sale of Goods. The parties agree that the provisions of the New
Jersey Uniform Commercial Code apply to this Agreement and all transactions
under it, including agreements and transactions relating to the furnishing of
services, the lease or rental of equipment or material, and the license of
software. Agency agrees to submit to the jurisdiction of any court wherein an
action is commenced against AT&T based on a claim for which Agency has agreed to
indemnify AT&T under this Agreement.
ARTICLE 10 - COMPLIANCE WITH LAWS
Agency and all persons furnished by Agency shall comply at their own expense
with all applicable federal, state, local and foreign laws, ordinances,
regulations and codes, including those relating to the use of
chlorofluorocarbons, and including the identification and procurement of
required permits, certificates, licenses, insurance, approvals and inspections
in performance under this Agreement. Agency agrees to indemnify, defend (at
AT&T's request) and save harmless AT&T, its affiliates, its and their customers
and each of their officers, directors and employees from and against any losses,
damages, claims, demands, suits, liabilities, fines, penalties and expenses
(including reasonable attorney's fees) that arise out of or result from any
failure to do so.
ARTICLE 11 - DISCOUNTS
Agency shall obtain all prompt payment or other similar discounts available to
it from media and other suppliers from which it makes purchases in the
performance of the services hereunder. When Agency receives a cash discount,
rebate, frequency discount, volume discount, promotional consideration, or other
similar credit from such media or other third parties, AT&T shall receive full
allowance for each such amount.
ARTICLE 12 - ELECTRONIC DATA INTERCHANGE (EDI)
Agency and AT&T agree that they will use electronic means of issuing
Estimates/Orders, approvals, acknowledgments, Estimate/Order changes, invoicing,
ship notices, or such other purchasing communications as may be agreed upon by
Agency and AT&T for transactions under this Agreement ("Electronic Data
Interchange" or "EDI"). Such EDI shall be in effect no later than sixty (60)
days of execution of this Agreement. In order to
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 6 OF 14
implement and operate such EDI, Agency shall, at its sole expense obtain, make
fully operational and maintain all equipment, software and other materials set
forth in AT&T's EDI Planning Guide (a copy of which Agency has in its
possession). Agency and AT&T shall have executed and have in effect an
Electronic Purchase Agreement no later than sixty (60) days of execution of this
Agreement.
ARTICLE 13 - ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties with
respect to the subject matter of this Agreement and the Order(s)/Estimate(s) and
shall not be modified or rescinded, except by a writing signed by Agency and
AT&T. All references in these terms and conditions to this Agreement or to Work,
services, material, equipment, products, software or information furnished
under, in performance of, pursuant to, or in contemplation of, this Agreement
shall also apply to any Orders/Estimates. All provisions on Agency's forms shall
be deemed deleted. Additional or different terms inserted in this Agreement by
Agency, or deletions thereto, whether by alterations, addenda, or otherwise,
shall be of no force and effect, unless expressly consented to by AT&T in
writing. Forecasts furnished by AT&T shall not constitute commitments. Beginning
with its effectiveness, the provisions of this Agreement supersede Agreement No.
MC941170LD, and all contemporaneous oral agreements and all prior oral and
written quotations, communications, agreements and understandings of the parties
with respect to the subject matter of this Agreement. The term "Work" as used in
this Agreement may also be referred to as "services."
ARTICLE 14 - EXCLUSIVITY AND RESERVATION OF RIGHTS
In recognition of the highly sensitive competitive information Agency will
receive from AT&T in order to develop advertising for AT&T, for the duration of
this Agreement, including the period of notice prior to its effectiveness of
termination, Agency and any of its subsidiaries and affiliates anywhere in the
world, shall not perform any work for any strategic competitor that competes
with any part of AT&T without the prior written approval AT&T. Strategic
competitors are those offering products or services in the areas of
telecommunications services, including long distance, local, wireless, systems
integration business, or on-line Internet services, or as otherwise identified
by AT&T in writing at any future time. In the event AT&T approves an Agency
request to work for a strategic competitor of AT&T, Agency acknowledges that
such approval is subject to the following:
I. A "virtual wall" is erected so that Agency's employees working on the AT&T
account cannot share any information with Agency's employees working on the
competitive account.
II. Agency's agreement that it will not assign any of its employees who have
performed services for the AT&T account within the previous 12 months to an
account of a competitor of AT&T.
Agency shall within ten (10) days of execution of this Agreement notify AT&T of
any assignment it has to perform work for any competitor of AT&T anywhere in the
world.
ARTICLE 15 - FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in performance
of any part of this Agreement to the extent such delay or failure is caused by
fire, flood, explosion, war, strike, embargo, government requirement, civil or
military authority, act of God, or other similar causes beyond its control and
without the fault or negligence of the delayed or nonperforming party or its
subcontractors ("force majeure conditions"). Notwithstanding the foregoing, a
party's liability for loss or damage to the other's material in such party's
possession or control shall not be modified by this Article. If any force
majeure condition occurs, the party delayed or unable to perform shall give
immediate notice to the other party, stating the nature of the force majeure
condition and any action being taken to avoid or minimize its effect. The party
affected by the other's delay or inability to perform may elect to: (1) suspend
this Agreement or an Order/Estimate for the duration of the force majeure
condition and (i) at its option buy, sell, obtain or furnish elsewhere material
or services to be bought, sold, obtained or furnished under this Agreement or an
order (unless such sale or furnishing is prohibited under this Agreement) and
deduct from any commitment the quantity bought, sold, obtained or furnished or
for which commitments have been made elsewhere and (ii) once the force majeure
condition ceases, resume performance
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 7 OF 14
under this Agreement or an Order/Estimate with an option in the affected party
to extend the period of this Agreement or order up to the length of time the
force majeure condition endured and/or (2) when the delay or nonperformance
continues for a period of at least fifteen (15) days, terminate, at no charge,
this Agreement or an order or the part of it relating to material not already
shipped, or services not already performed. Unless written notice is given
within forty-five (45) days after the affected party is notified of the force
majeure condition, (1) shall be deemed selected.
ARTICLE 16 - IDENTIFICATION
Agency shall not, without AT&T's prior written consent, engage in advertising,
promotion or publicity related to this Agreement, or make public use of any
Identification in any circumstances related to this Agreement. "Identification"
means any copy or semblance of any trade name, trademark, service mark,
insignia, symbol, logo, or any other product, service or organization
designation, or any specification or drawing of AT&T or its affiliates, or
evidence of inspection by or for any of them. Agency shall remove or obliterate
any Identification prior to any use or disposition of any material rejected or
not purchased by AT&T, and, shall indemnify, defend (at AT&T's request) and save
harmless AT&T and its affiliates and each of their officers, directors and
employees from and against any losses, damages, claims, demands, suits,
liabilities, fines, penalties and expenses (including reasonable attorneys'
fees) arising out of Agency's failure to so remove or obliterate.
ARTICLE 17 - IMPLEADER
Agency shall not implead or bring an action against AT&T or its customers or the
employees of either based on any claim by any person for personal injury or
death to an employee of AT&T or its customers occurring in the course or scope
of employment and that arises out of material or services furnished under this
Agreement.
ARTICLE 18 - INDEMNITY
All persons furnished by Agency shall be considered solely Agency's employees or
agents, and Agency shall be responsible for payment of all unemployment, social
security and other payroll taxes, including contributions when required by law.
Agency agrees to indemnify and save harmless AT&T, its affiliates, its and their
customers and each of their officers, directors, employees, successors and
assigns (all hereinafter referred to in this Article as "AT&T") from and against
any losses, damages, claims, demands, suits, liabilities, fines, penalties and
expenses (including reasonable attorney's fees) that arise out of or result
from: (1) injuries or death to persons or damage to property, including libel,
slander, defamation and theft, in any way arising out of or occasioned by,
caused or alleged to have been caused by or on account of the performance of the
Work or services performed by Agency or persons furnished by Agency; (2)
assertions under Workers' Compensation or similar acts made by persons furnished
by Agency or by any subcontractor of Agency or by reason of any injuries to such
persons for which AT&T would be responsible under Workers' Compensation or
similar acts if the persons were employed by AT&T; (3) any failure on the part
of Agency to satisfy all claims for labor, equipment, materials and other
obligations relating directly or indirectly to the performance of the Work; or
(4) piracy, unfair competition, plagiarism, idea misappropriation under implied
contract; or (5) any failure by Agency to perform Agency's obligations under
this Article or the INSURANCE Article. Agency agrees to defend AT&T, at AT&T's
request, against any such claim, demand or suit. AT&T agrees to notify Agency
within a reasonable time of any written claims or demands against AT&T for which
Agency is responsible under this Article.
ARTICLE 19 - INFRINGEMENT
Agency shall indemnify and save harmless AT&T, its affiliates, its and their
customers, and each of their officers, directors, employees, successors and
assigns (all hereinafter referred to in this Article as "AT&T") from and against
any losses, damages, liabilities, fines, penalties, and expenses (including
reasonable attorneys' fees) that arise out of or result from (1) any
infringement of any patent, copyright, title, slogan or other trademark or trade
secret right, or other intellectual property right, private right, or any other
proprietary or personal interest, and (2) related circumstances to the existence
of this Agreement or performance under or in contemplation of it (an
Infringement Claim). To the extent that the Infringement Claim arises solely
from Agency's adherence to AT&T's written instructions which are so specific as
to directly cause said infringement or authorized use regarding
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AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 8 OF 14
services or tangible or intangible goods (Items) provided by Agency and if the
Items are not (1) commercial items available on the open market or the same as
such items, or (2) items of Agency's designated origin, design or selection,
AT&T shall indemnify Agency. AT&T or Agency (at AT&T's request) shall defend or
settle, at its own expense any demand, action or suit on any Infringement Claim
against the other for which it is the indemnitor under the preceding provisions
and each shall timely notify the other of any assertion against it of any
Infringement Claim and shall cooperate in good faith with the other to
facilitate the defense of any such claim. If Agency is requested by AT&T to
defend or settle at its own expense, Agency shall have the exclusive right to
defend or settle. Notwithstanding the provisions of the preceding sentence, both
parties agree that in the event that a lawsuit includes claims other than
Infringement Claims, AT&T shall retain sole control of such other claims.
ARTICLE 20 - INSPECTION
Upon at least five (5) business days prior written notice to Agency, AT&T's
Representatives shall at all times have access to the Work for the purpose of
inspection or a Quality Review and Agency shall provide safe and proper
facilities for such purpose.
ARTICLE 21 - INSURANCE
Agency shall maintain and cause Agency's subcontractors to maintain during the
term of this Agreement:
(1) Workers' Compensation insurance as prescribed by the law of the state or
nation in which the Work is performed; (2) employer's liability insurance with
limits of at least $500,000 for each occurrence; (3) comprehensive automobile
liability insurance if the use of motor vehicles is required, with limits of at
least $1,000,000 combined single limit for bodily injury and property damage for
each occurrence; and (4) Commercial General Liability ("CGL") insurance,
including Advertiser's Liability and Blanket Contractual Liability and Broad
Form Property Damage, with limits of at least $5,000,000 combined single limit
for bodily injury and property damage for each occurrence. All CGL and
automobile liability insurance shall designate AT&T Corp., its affiliates, and
each of their officers, directors and employees (all hereinafter referred to in
this Article as "AT&T") as an additional insured. All such insurance must be
primary and required to respond and pay prior to any other available coverage.
Agency agrees that Agency, Agency's insurer(s) and anyone claiming by, through,
under or in Agency's behalf shall have no claim, right of action or right of
subrogation against AT&T and its customers based on any loss or liability
insured against under the foregoing insurance. Agency and Agency's
subcontractors shall furnish prior to the start of Work certificates or adequate
proof of the foregoing insurance including, if specifically requested by AT&T,
copies of the endorsements and insurance policies. AT&T shall be notified in
writing at least thirty (30) days prior to cancellation of or any change in the
policy.
ARTICLE 22 - INVOICING
Agency's invoices shall be rendered monthly. Agency shall submit invoices with
copies of any supporting documentation required by AT&T as directed by AT&T. In
no event shall AT&T be liable for payment of any invoice submitted by Agency to
AT&T later than six (6) months of Agency incurring costs associated with the
invoice. The Work shall be delivered free from all claims, liens, and charges
whatsoever. AT&T reserves the right to require proof that all parties furnishing
labor and materials for the Work have been paid.
ARTICLE 23 - MEDIATION
If a dispute arises out of or relates to this Agreement, or its breach, and the
parties have not been successful in resolving such dispute through negotiation,
the parties agree to attempt to resolve the dispute through mediation by
submitting the dispute to a sole mediator selected by the parties or, at any
time at the option of a party, to mediation by the American Arbitration
Association ("AAA"). Each party shall bear its own expenses and an equal share
of the expenses of the mediator and the fees of the AAA. The parties, their
representatives, other participants and the mediator shall hold the existence,
content and result of the mediation in confidence. If such dispute is not
resolved by such mediation, the parties shall have the right to resort to any
remedies permitted by law. All defenses based on passage of time shall be tolled
pending the termination of the mediation. Nothing in
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 9 OF 14
this Article shall be construed to preclude any party from seeking injunctive
relief in order to protect its rights pending mediation. A request by a party to
a court for such injunctive relief shall not be deemed a waiver of the
obligation to mediate.
ARTICLE 24 - NON-EXCLUSIVE SERVICES
It is expressly understood and agreed that this Agreement neither grants to
Agency an exclusive right or privilege to sell to AT&T any or all material or
services of the type described in this Agreement which AT&T may require, nor
requires the purchase of any material or services from Agency by AT&T. It is,
therefore, understood that AT&T may contract with other manufacturers and
agencies for the procurement of comparable material or services. In addition,
AT&T shall at its sole discretion, decide the extent to which AT&T will market,
advertise, promote, support, or otherwise assist in further offerings of the
material or services. Agency agrees that purchases by AT&T under this Agreement
shall neither restrict the right of AT&T to cease purchasing nor require AT&T to
continue any level of such purchases.
ARTICLE 25 - NOTICES
Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Agency or AT&T shall be in writing and
shall be given or made by telegram tested telex, confirmed facsimile, or similar
communication or by certified or registered mail addressed to the respective
parties as follows:
To AT&T: AT&T Corp.
295 North Maple Avenue, Room 4417G1
Basking Ridge, NJ 07920
Attention: Antoinette Hein
To: Bronner Slosberg Humphrey
800 Boyleston Street
Boston, MA 02199
Attention: David Kenny
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile, or other communication or when deposited, postage
prepaid in the U.S. mail. The above addresses may be changed at any time by
giving prior written notice as above provided.
ARTICLE 26 - ORDERING COMPANIES
Any of the corporations listed below, or such additional associated
corporations, partnerships, or ventures, both U.S. and foreign, as may be
designated in writing by AT&T Corp., may order under this Agreement:
AT&T Corp.
AT&T Communications, Inc.
For the purpose of this Agreement, the term "Company" shall mean the corporation
or other entity which enters into or issues a contract or order under this
Agreement. An associated corporation, partnership, or venture is an entity, 10
percent of whose voting stock or ownership interest is owned directly or
indirectly by AT&T Corp. Any contract or order issued under this Agreement will
be a contractual relationship between the ordering Company and Agency shall look
only to the ordering Company for performance of the Company's obligations under
such contract or order.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 10 OF 14
ARTICLE 27 - ORDERLY TRANSITION
In the event of expiration or termination of this Agreement, in whole or in
part, wherein all or some portion of the Work will be performed by AT&T itself
or elsewhere, Agency agrees to provide its full cooperation in the orderly
transition of the Work to AT&T or elsewhere, including, but not necessarily
limited to packing and preparing for shipment any materials or other inventory
to be transferred, provision of reports, files and similar media necessary for
continuation of the Work transferred, continuation of work at reducing levels if
necessary during a transition period and at reduced levels if work is
transferred in part. Prices for additional work such as packing and preparation
for shipment, and revision of prices resulting from revised volumes, if
necessary, shall be proposed by Agency and shall be mutually agreed upon by the
parties.
ARTICLE 28 - PAYMENT TERMS
Invoices shall be paid net 30 days from the date of receipt of invoice by AT&T.
ARTICLE 29 - PUBLICITY, ADVERTISING
Agency agrees to submit to AT&T all advertising, sales promotion, press
releases, and other publicity matters relating to the material furnished or the
services performed by Agency under this Agreement wherein AT&T's names or marks
are mentioned or language from which the connection of said names or marks
therewith may be inferred or implied; and Agency further agrees not to publish
or use such advertising, sales promotion, press releases, or publicity matters
without AT&T's prior written approval. This does not reduce or modify Agency's
obligations under the Article IDENTIFICATION.
ARTICLE 30 - RELEASES VOID
Neither party shall require (i) waivers or releases of any personal rights or
(ii) execution of documents which conflict with the terms of this Agreement,
from employees, representatives or customers of the other in connection with
visits to its premises and both parties agree that no such releases, waivers or
documents shall be pleaded by them or third persons in any action or proceeding.
ARTICLE 31 - REPRESENTATIVES
AT&T's Marketing Communications Representative is Ira Cohen and AT&T's Supplier
Management/Agreement Representative is Antoinette Hein or such other persons as
may be designated in writing by AT&T from time to time. Agency's Representative
is David Kenny or such other person as may be designated in writing by Agency
from time to time.
ARTICLE 32 - SEVERABILITY
If any of the provisions of this Agreement shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render unenforceable
this entire Agreement, but rather this entire Agreement shall be construed as if
not containing the particular invalid or unenforceable provision or provisions,
and the rights and obligations of the parties shall be construed and enforced
accordingly.
ARTICLE 33 - SURVIVAL OF OBLIGATION
The obligations of the parties under this Agreement which by their nature would
continue beyond the termination, cancellation or expiration of this Agreement,
including, by way of illustration only and not limitation, those in the Articles
COMPLIANCE WITH LAWS, IDENTIFICATION, IMPLEADER, INDEMNITY, INFRINGEMENT,
INSURANCE, RELEASES VOID, USE OF INFORMATION and WARRANTY, shall survive
termination, cancellation or expiration of this Agreement.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 11 OF 14
ARTICLE 34 - TAXES
AT&T shall reimburse Agency only for the following tax payments with respect to
transactions under this Agreement unless AT&T advises Agency that an exemption
applies: state and local sales and use taxes, as applicable. Taxes payable by
AT&T shall be billed as separate items on Agency's invoices and shall not be
included in Agency's prices. Agency agrees to itemize services and products by
type on each invoice and provide the applicable sales and use taxes by item and
state. When services provided requires any mailing, Agency shall itemize the
number of units mailed by state. AT&T shall have the right to have Agency
contest any such taxes that AT&T deems improperly levied at AT&T's expense and
subject to AT&T's direction and control.
ARTICLE 35 - TERMINATION
Either party may at any time terminate this Agreement in whole by giving the
other at least ninety (90) days prior written notice.
In the event AT&T gives such notice of termination, Agency shall for such 90 day
period be compensated pursuant to the provisions set forth in Exhibit A,
Paragraph I, and Agency shall provide an equitable level of transition services,
acceptable to and directed by AT&T. In addition, AT&T will reimburse Agency for
any non-avoidable third party costs and expenses actually incurred by Agency in
accordance with an Approved Estimate. Payment of such compensation and approved
third party costs will constitute a full and complete discharge of AT&T's
obligations under this Agreement.
In the event Agency gives such notice of termination, AT&T shall not be required
to pay Agency in accordance with the provisions set forth in Exhibit A,
Paragraph I during the 90 day notice period, but instead Agency shall provide
all transition services requested and directed by AT&T and the parties shall
negotiate a fair and equitable compensation therefor. Payment of such equitable
compensation and reimbursement to Agency for any third party costs and expenses
actually incurred by Agency in accordance with an Approved Estimate will
constitute a full and complete discharge of AT&T's obligations under this
Agreement.
In addition, AT&T may at any time terminate an Approved Estimate in whole or in
part by giving Agency at least 10 days prior written notice. In such an event,
AT&T shall reimburse Agency for any non-avoidable third party costs and expenses
actually incurred by Agency in accordance with the Approved Estimate. In the
event AT&T terminates an assignment valued in excess of 25% of Agency's Annual
Fee and does not request additional services in its place, in part or in whole,
then Agency shall for a period of 90 days be compensated for the work being
terminated. In such event, Agency shall use its best efforts to immediately
transition its employees dedicated to such AT&T business to other Agency
accounts, thereby minimizing AT&T's compensation to Agency during such 90 day
period and shall invoice AT&T monthly on a decreasing basis during the 90 day
period therefor.
In the event a termination notice is given under the provisions of this Article,
Agency shall settle contracts with third parties made pursuant to an Approved
Estimate by, at AT&T's option, a) cancellation, if such third party contract so
permits, b) assignment of such third party contract to AT&T, or c) carrying out
such third party contract to its completion.
ARTICLE 36 - TITLE
Except as set forth below, all creative work and work products, including, but
not limited to, advertising and/or marketing plans, media plans, ideas,
multimedia software, and advertising materials developed by Agency, or on
Agency's behalf, for AT&T in connection with this Agreement, and any and all
copyrights therein are hereby assigned and agreed to be assigned by Agency to
AT&T and shall be and will remain the exclusive property of AT&T, which may use
any of such work as it deems appropriate. All such work and work products shall
be considered "work made for hire" to the extent allowed by law. Agency shall
acquire from its subcontractors for the benefit of AT&T all such assignments,
rights, covenants, and any other documentation deemed necessary to assure
vesting in AT&T of such rights, title and interest in such work, work products
and copyrights, and to perfect the enforceability of such copyrights.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 12 OF 14
If Agency furnishes AT&T with materials previously copyrighted by Agency and not
originally prepared hereunder, Agency hereby grants and agrees to grant to AT&T
a perpetual, worldwide, unrestricted, nonexclusive, royalty-free licenses for
all purposes under any and all copyrights in such materials, with the
unrestricted right to grant sublicenses to third parties under the licenses
granted hereunder, as AT&T may see fit for the sole benefit of AT&T, provided
that such sublicenses are used for the sole benefit of AT&T. If AT&T has
consented to the inclusion of materials owned or copyrighted by others, or in
which other rights may be claimed by others (and there shall be no such
inclusion without AT&T's prior expressed written consent), then Agency shall
notify AT&T of the scope of the rights and permissions Agency intends to obtain
with respect to such materials and shall modify the scope of same as requested
by AT&T. If Agency services include interactive marketing (i.e., World Wide Web
communications), Agency shall be responsible for clearing all rights in such
materials including without limitation rights to film clips, narration, music,
text, illustration, software and all other elements. Agency shall provide AT&T
with copies of forms for obtaining all applicable rights and permissions and
such forms shall be subject to AT&T's written approval. Copies of all rights and
permissions clearly identifying the included works to which they apply shall be
supplied to AT&T prior to program completion. Agency warrants the work prepared
for AT&T hereunder does not infringe any intellectual property rights of any
third party.
Agency agrees that no part of the creative work or work products developed for
AT&T in connection with this Agreement, whether or not copyrightable, shall be
disclosed to any third party or used by Agency to produce creative materials for
any third party without the express written permission of AT&T. Agency shall
retain all materials furnished by AT&T or by a third party at AT&T's request or
for AT&T's benefit for minimum three (3) years or for such longer period as the
parties mutually agree in writing is necessary for purposes of carrying out
Agency's obligations hereunder after which time they will be returned to AT&T,
placed in public storage at AT&T's expense, or destroyed as requested by AT&T.
Agency shall safeguard and be responsible for all materials entrusted to it by
or on behalf of AT&T and shall return such materials to AT&T upon request of
AT&T, and, in any event, as soon as practicable upon termination of this
Agreement. Agency shall provide copies of materials requested by AT&T to the
extent necessary for AT&T to litigate or negotiate claims or to handle
proceedings before regulatory agencies.
ARTICLE 37 - TOOLS AND EQUIPMENT
Unless otherwise specifically provided in this Agreement, Agency shall provide
all labor, tools and equipment (the "tools") for performance of this Agreement.
Should Agency actually use any tools owned or rented by AT&T or its customer,
Agency acknowledges that Agency accepts the tools "as is, where is," that
neither AT&T nor its customer have any responsibility for the condition or state
of repair of the tools and that Agency shall have risk of loss and damage to
such tools. Agency agrees not to remove the tools from AT&T's or its customer's
premises and to return the tools to AT&T or its customer upon completion of use,
or at such earlier time as AT&T or its customer may request, in the same
condition as when received by Agency, reasonable wear and tear excepted.
ARTICLE 38 - USE OF AT&T NAME, LOGO, AND MARKS
All use of AT&T's name, logo and marks shall be in strict conformance with any
written (Corporate or other) guidelines provided by AT&T and shall be approved
in advance by AT&T.
ARTICLE 39 - USE OF INFORMATION
Agency shall view as AT&T's property any idea, data, program, technical,
business or other intangible information, however conveyed, and any document,
print, tape, disk, tool, or other tangible information-conveying or performance-
aiding article owned or controlled by AT&T, and provided to, or acquired by,
Agency under or in contemplation of this Agreement (Information). Agency shall,
at no charge to AT&T, and as AT&T directs, destroy or surrender to AT&T promptly
at its request any such article or any copy of such Information. Agency shall
keep Information confidential and use it only in performing under this Agreement
and obligate its employees, subcontractors and others working for it to do so,
provided that the foregoing shall not apply to information previously known to
Agency free of obligation, or made public through no fault imputable to Agency.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 13 OF 14
ARTICLE 40 - UTILIZATION OF MINORITY AND WOMEN OWNED BUSINESS
It is AT&T's policy that minority and women-owned business enterprises (MWBEs)
as defined in Exhibit D shall have the maximum practicable opportunity to
participate in the performance of contracts. Agency agrees to use its good faith
efforts to award subcontracts and/or utilize MWBEs to carry out this policy to
the fullest extent consistent with the efficient performance of this Agreement
and without compromise of quality and reliability expectations.
In addition to these general conditions for MWBE support, Agency agrees to (a)
use its good faith efforts to utilize MWBEs in support of this Agreement and
strive to increase the percentage of total expenditures from MWBEs to fulfill
AT&T's purchases each successive year of this Agreement; (b) support AT&T's
state and regional goals for MWBE and service-disabled veterans (SDVs) spending
in California and other states/regions as may be defined in the future; and (c)
work with AT&T to develop opportunities for the utilization of MWBEs for first
tier procurement by AT&T.
Agency shall submit to AT&T quarterly reports of work with known MWBEs in the
form of Exhibit E in such manner and at such time as AT&T's representative may
prescribe. Such quarterly reports shall state separately for minority-owned
business enterprises (MBEs), women-owned business enterprises (WBEs), and, for
California, service-disabled veterans (SDVs), the third-party work which is
attributable to AT&T. In instances where direct correlation cannot be
determined, such MWBE payments may be established by Agency comparing AT&T's
payments to Agency, in that period, to total payments to Agency from all of its
customers, in that period, and then arriving at AT&T's apportionment of such
MWBE payments. Nothing in this clause shall affect or diminish Agency's
obligations as set forth in the assignment and subcontracting provisions or any
other provisions of this Agreement. Agency's compliance with the provisions of
this clause will be a factor AT&T will consider favorably in making procurement
decisions about future business with Agency.
ARTICLE 41 - WAIVER
The failure of either party at any time to enforce any right or remedy available
to it under this Agreement or otherwise with respect to any breach or failure by
the other party shall not be construed to be a waiver of such right or remedy
with respect to any other breach or failure by the other party.
ARTICLE 42 - WARRANTY
Agency warrants to AT&T and its customers that services will be performed in a
first class, workmanlike manner. In addition, if material furnished contains one
or more manufacturers' warranties, Agency hereby assigns such warranties to AT&T
and its customers. All warranties shall survive inspection, acceptance and
payment. Material or services not meeting the warranties will be, at AT&T's
option, returned for refund, repaired, replaced or reperformed by Agency at no
cost to AT&T or its customers and with transportation costs and risk of loss and
damage in transit borne by Agency. Repaired and replacement material shall be
warranted as set forth above in this clause.
Supplier warrants that its data processing services will not cause any
"Products" to exchange or receive, record, store, process, route and transfer
and present calendar dates and any related information falling on or after
January 1, 2000 in a different manner or with lesser functionality than it
performed such functions before January 1, 2000. For purposes of this clause,
the term "Products" includes, but is not limited to, hardware, software, network
equipment, premises equipment, components of systems relating to building
infrastructure, and components of environmental systems owned or operated by
Company, its affiliates and its subcontractors. Supplier shall promptly correct
any such failure at no additional cost to Company or its customers and shall
indemnify and hold Company and its customers harmless from any damage resulting
from breach of the foregoing
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
PAGE 14 OF 14
warranty. Furthermore, Supplier shall immediately advise Company, in writing,
upon reasonable suspicion or actual knowledge that its Services may cause any
such failure.
ARTICLE 43 - WORK DONE BY OTHERS
If any of the Work is dependent on work done by others, Agency shall inspect and
promptly report to AT&T's Representative any defect that renders such other work
unsuitable for Agency's proper performance. Agency's silence shall constitute
approval of such work as fit and suitable for Agency's performance.
IN WITNESS WHEREOF, Agency and AT&T have executed this Agreement in duplicate on
the day and year below written.
AT&T CORP. BRONNER SLOSBERG HUMPHREY, INC.
BY: /s/ Stephen Graham BY: /s/ Meryl K. Beckingham
-------------------------------- ------------------------------
(Signature) (Signature)
Meryl K. Beckingham
Stephen Graham, Vice President Senior Vice President &
Marketing Communications Chief Financial Officer
-------------------------------- ------------------------------
(Name & Title Typed or Printed) (Name & Title Typed or Printed)
November 16, 1998 1/19/99
-------------------------------- ------------------------------
(Date) (Date)
By: Anthony Boumli (for M.C.)
--------------------------------
(Signature)
M.D. Connelly, District Manager
Supplier Management Division
--------------------------------
(Name & Title Typed or Printed)
11-17-98
--------------------------------
(Date)
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC
AGREEMENT NO. LQ6237D
EXHIBIT A - COMPENSATION
PAGE 1 OF 3
EXHIBIT A
This is Exhibit A to Agreement No. LQ6237D between AT&T Corp. ("AT&T") and
Bronner Slosberg Humphrey Inc. ("Agency") and sets forth the principles for
computing Agency's compensation and provisions for reimbursing Agency for
expenses incurred in performance of the Work hereunder.
I. AGENCY FEE
Agency's annual compensation ("Fee") for Work under this Agreement for year
1998 shall be [***] to be paid in monthly installments of
[***]. The parties shall use best efforts to negotiate a new Agency
Fee prior to commencement of each year, i.e., 1999 and 2000. In the event
Agency's Fee is not established prior to January 1st of the respective
year, AT&T shall pay Agency in accordance with the prior year's monthly fee
until such time Agency's Fee is established.
It is further understood and agreed that any significant increase or
decrease in Agency's level of support and scope of work within a given year
shall cause Agency's Fee for that year to be equitably adjusted upward or
downward, as appropriate, by mutual written agreement.
II. BONUS
Agency's bonus shall be based upon its annual performance evaluation, which
shall be at AT&T's sole discretion and judgement, as follows:
A. [***] if Agency's overall performance rating is above target
B. [***] if Agency's overall performance rating is well above target
Agency's Fee as set forth in Paragraph I above, prorated for the period
worked, shall be used as a basis for calculating Agency's bonus, if any.
III. THIRD PARTY EXPENSES (In Conjunction With Estimates)
AT&T agrees to reimburse Agency for production costs and expenses paid by
Agency to third parties, limited to those set forth below or as otherwise
specifically agreed to by the parties, provided that they have been
actually incurred by Agency and Agency has first secured an approved
Estimate to incur such costs. Reimbursement will only be for net out-of-
pocket actual cost incurred by Agency and will not include any other costs
therefor.
A. Publication Advertising and Out-Of-Home Advertising
1. Type composition, printing, engraving, electrotypes, finished art,
photographs, photostats and other reproduction mats, stereotypes,
quantity proofs
2. Endorsement fees, testimonials, etc.
3. Fashion coordination performed by studio and/or stylist
4. Talent for use in test and/or finished advertising
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC
AGREEMENT NO. LQ6237D
EXHIBIT A - COMPENSATION
PAGE 2 OF 3
5. Production of test advertisements
6. Research and licensing costs for stock photography
7. Location scouting
8. All other elements required to produce publications and out-of-door
advertising not referred to above
9. Release prints and duplicate tapes for distribution
10. Distribution of release prints and duplicate tapes
B. Broadcast and Electronic Advertising
1. Packaged shows and films
2. Programs and scripts by outside specialty writers or producers
3. Music rights, jingles, prize money, dramatic literary or musical
adaptations or arrangements
4. Production charges for filming, taping or recording commercials
5. Film production charges, studio and equipment rentals, scenery,
props and costumes and location scouting
6. Fashion coordination/hair and makeup by studio and/or stylist
7. Release prints and duplicate tapes for distribution
8. Distribution of release prints and duplicate tapes
9. Motion picture, slide and slidefilm processing
10. Music production associated with creative presentations, demos and
test ads
11. Talent, including voice over, associated with creative
presentations, demos and test ads
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC
AGREEMENT NO. LQ6237D
EXHIBIT A - COMPENSATION
PAGE 3 OF 3
12. Closed captioning expenses
C. Postage, Express and Freight
1. Shipment of advertising materials to Agency's, third party
subcontractors
D. Electronic Media
1. Travel
2. Website, software and program development
E. Research
1. Test materials
NOTE: ALL OTHER THIRD PARTY COSTS AND EXPENSES INCURRED (EXCEPT THOSE
DESCRIBED IN PARAGRAPH IV BELOW) ARE NOT REIMBURSABLE AND ARE
INCLUDED IN AGENCY'S TOTAL ANNUAL FEE SET FORTH IN PARAGRAPH I
ABOVE.
IV. TRAVEL AND LIVING REIMBURSEMENT
AT&T agrees to reimburse Agency for reasonable travel and living expenses
in accordance with Exhibit C, subject to approval by AT&T, incurred by
Agency and directly related to assignments performed under this Agreement.
Reimbursable expenses shall in accordance with the travel guidelines and
any other documentation as may be provided by AT&T in writing, and be
itemized and substantiated by receipts or other credible evidence.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT B - TRAVEL GUIDELINES
PAGE 1 OF 3
EXHIBIT B
This is Exhibit B to Agreement No. LQ6237D between AT&T Corp. ("AT&T") and
Bronner Slosberg Humphrey, Inc. ("Agency") and sets forth the travel guidelines
when performing services under this Agreement.
I. PURPOSE
Establish and communicate effective procedures for reducing travel costs.
II. OBJECTIVES
a) Ensure travelers/arrangers/approvers have clear, consistent
understanding of policies and procedures for arranging, approving, and
reporting travel-related expenses
b) Provide travelers with reasonable level of service and comfort at lowest
possible cost
c) Maximize ability to negotiate discounts/reduced rates with preferred
suppliers
d) Minimize/reduce travel costs
III. REIMBURSABLE TRAVEL EXPENSES
Reasonable travel and living expenses directly related to assignments
performed under this Agreement as approved by AT&T, shall be reimbursable.
Reimbursable expenses shall be itemized and substantiated by receipts or
other credible evidence acceptable to AT&T and in accordance with the
guidelines hereunder. Expenses shall be billed at actual cost incurred and
invoices for all reimbursable expenses shall list the date(s), copy,
person(s) visited and business purpose for the expense.
A. Land Travel
Use public transportation as a first choice, personal car as a second
choice, and car rental as the last choice. Reasonable cab/taxi, bus,
rail or car rental expenses will be reimbursed along with associated
receipts from tolls, tips, and parking fees will be reimbursed by AT&T,
unless otherwise specifically state herein.
Mileage, as approved yearly by the IRS, will be reimbursed for use of
personal automobiles for services provided on behalf of AT&T. Allowable
mileage is determined by deducting the normal commuting mileage from
total miles actually incurred. Maximum allowable mileage between
Manhattan and New Jersey shall not exceed 80 miles round-trip (no
exceptions).
Cab fare will only be reimbursed when used from Agency's location to the
production house and return. Cab fare for "late nights" (after 8:00 pm)
will be reimbursed. Cabs to Agency's employee's home will only be
reimbursed if they are taken from the airport. Cabs to pickup rental
cars are not reimbursable. Tolls, mileage and train fare are
reimbursable when work is performed on weekends.
Rental car charges within Agency's city will not be reimbursable.
If a rental car is used to attend a meeting outside of Manhattan, a
maximum of $60.00 will be reimbursed, excluding tolls.
Refueling - All rental cars must be refueled prior to returning. Cost
for the rental car company to refuel will not be reimbursed.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT B - TRAVEL GUIDELINES
PAGE 2 OF 3
B. Air Travel & Associated Expenses
1. Air Travel
a) Must accept lowest available fare based on the following time
window:
b) Coach service for all domestic travel; Business service for
international (international under 5 hours must be coach).
c) Should consider other, lower-priced discounted fare opportunities
whenever possible, e.g., non-refundable, Saturday night stay,
connections, alternate airports, etc.
d) Use of electronic tickets (e-tickets) encouraged to reduce
process costs.
e) Must return unused fully refundable tickets in a timely manner.
Non-refundable tickets must be used on next applicable business
trip.
2. Lodging
a) Require use of moderate or economy priced hotels (vs.
upscale/luxury) when available
When shooting, agencies should stay in the same hotel as AT&T. Not
to exceed $150 per night. However, lower rates should be used if
available. Agency shall only invoice hotel expenses that are
directly related to the work performed under this Agreement.
Expenses incurred at hotels for AT&T business-related (fax, typing,
photocopying) are reimbursable.
3. Rental Car
a) Rent a car only when more cost effective than other modes of
transportation (e.g., hotel shuttles, public transportation,
taxis, airport shuttles).
b) Must rent compact/subcompact size car unless two or more people
are traveling in which case a midsize car is acceptable.
c) All rental cars must be refueled prior to returning. Cost for the
rental car company to refuel will not be reimbursed.
4. Meals
a) Meal expenses are only reimbursable when traveling overnight.
b) Maximum daily reimbursement for business meals is $35 recognizing
meal costs may be higher in certain metropolitan areas and
international locations. In no event shall daily meal allowance
exceed $65.00 when metropolitan areas or international locations
are involved.
5. Miscellaneous Expenses
a) Laundry: Reasonable laundry expenses will be reimbursed for trips
that extend beyond five days.
b) Business Calls: Business calls made on AT&T's behalf while staying
overnight are reimbursable. Personal calls will not be reimbursed.
Calls must list reason and person called and be on the AT&T
network.
c) Airplane Calls: Not reimbursed for any reason.
d) Movies: In-room and Airplane Movies: Movies rented while on
company business will not be reimbursed.
e) Periodicals: Magazines, newspapers, and books are not reimbursable
unless specifically requested, in writing, by AT&T.
f) Flowers: Flowers for any reason are not reimbursable.
g) Federal Express: All Federal Express receipts must list the reason
for the overnight and who authorized the request. If a complete
reason is not listed, it will not be reimbursed.
h) Health Club and Mini Bars: Health club and mini bar expenses will
not be reimbursed for any reason.
NOTE 1: IT IS AGREED AND UNDERSTOOD THAT AT&T IS NOT RESPONSIBLE NOR WILL IT
REIMBURSE ANY ENTERTAINMENT EXPENSES INCURRED BY AGENCY.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT B - TRAVEL GUIDELINES
PAGE 3 OF 3
NOTE 2: WHEN PERFORMING SERVICES LISTED BELOW, AGENCY SHALL ADHERE TO THE
FOLLOWING:
Maximum Number of Employees
---------------------------
. Location Shoots 3
. Press Runs 1
. Production 3
. Strategy Meetings or Review Meetings *
. Research Meetings (Focus Groups) *
* Agency shall propose appropriate attendance to AT&T for approval prior to
performing services. In no event shall the number exceed three (3) employees.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT C - THIRD PARTY SUBCONTRACTOR
SAVINGS REPORTING FORM
PAGE 1 OF 1
EXHIBIT C
This is Exhibit C to Agreement No. LQ6237D between AT&T Corp. ("AT&T") and
Bronner Slosberg Humphrey ("Agency") and sets forth the Third Party
Subcontractor Savings Reporting Form to be completed by Agency in accordance
with the requirements set forth in Article ASSIGNMENT AND SUBCONTRACTING.
THIRD PARTY SUBCONTRACTOR SAVINGS REPORTING FORM
Agency Name:
--------------------------------------
Reporting Month:
--------------------------------------
Preparer's Name:
--------------------------------------
Title:
--------------------------------------
Phone Number:
--------------------------------------
Fax Number:
--------------------------------------
Date Prepared:
--------------------------------------
- ----------------------------------------------------------------------
RFP/QUOTE THIRD PARTY ASSOCIATED EXPENSE SAVINGS
NO. SUPPLIER AWARDED ESTIMATE #/PROJECT AMOUNT
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<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT D - MWBE DEFINITIONS
PAGE 1 OF 1
EXHIBIT D
This is Exhibit D to Agreement No. LQ6237D between AT&T Corp. ("AT&T") and
Bronner Slosberg Humphrey, Inc.("Agency") and sets forth Minority and Women
Owned-Business Enterprises ("MWBE") definitions.
DEFINITION OF MWBEs:
An MWBE is defined as a business which is owned, controlled and operated by
minority or women group members. MWBE ownership exists in a business which is at
least 51% owned by minority or women group members, or in the case of a
publicly held company, a firm which at least 51% of the stock is owned by
minority or women group members. MWBE companies must be located within the
United States, its territories or possessions; and the owners must be United
States citizens. (In California only, legal aliens with permanent resident
status in the United States are also eligible.)
OPERATE/CONTROL:
Operate is defined as being actively involved in the day-to-day management.
Control is defined as exercising the power to make policy decisions.
CERTIFICATION PROCESS:
AT&T utilizes a self-certification process in addition to recognizing
certification of MWBEs by agencies such as:
Regional affiliates of the National Minority Supplier Development Council, Small
Business Administration 8(a) certification, State government agencies, municipal
government agencies, Women Business Owners Corporation, Women's Business
Enterprise National Council, and the California Clearinghouse. AT&T accepts
certification only from those agencies who recognize MWBEs as defined in this
document.
GROUPS CONSIDERED MINORITIES:
NATIVE AMERICANS: Persons having origins in any of the original peoples of North
America or the Hawaiian Islands, in particular, American Indians, Eskimos,
Aleuts, and Native Hawaiians.
ASIAN PACIFIC AMERICANS: Persons having origins in Asia including, but not
limited to, Japan, China, Vietnam, Korea, Sanioa, Guam, the US Trust Territories
of the Pacific, The Philippines, Northern Mariana Islands, Laos, Cambodia,
Taiwan, Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the
Marshall Islands, or the Federated States of Micronesia.
ASIAN INDIAN AMERICANS: Persons having origins in the Indian subcontinent
including, but not limited to India, Pakistan, Bangladesh, Sri Lanka, Bhutan, or
Nepal.
AFRICAN AMERICANS: Persons having origin in any Black racial groups of Africa.
HISPANIC AMERICANS: All persons of Mexican, Puerto Rican, Cuban, South or
Central American, or other Spanish culture or origin.
NON-MINORITY WOMEN-OWNED: All non-minority women not covered by the definition
of groups considered minorities above.
DISABLED VETERANS: (California only) A veteran of the military, naval, or air
service of the United States with a service-connected disability who is a
resident of the State of California, and whose disabled veteran status has been
certified by the State Treasurer (in the case of business enterprises seeking
contracts to supply utilities with professional bond services), or the Office of
Small and Minority Business (OSMB) (in the case of business enterprises seeking
contracts to supply utilities with any other type of products or services).
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT E - AT&T MWBE SECOND TIER
REPORTING FORM
PAGE 1 OF 5
EXHIBIT E
This is Exhibit E to Agreement No. LQ6237D between AT&T Corp. ("AT&T") and
Bronner Slosberg Humphrey, Inc. ("Agency") and sets forth AT&T's MWBE Second
Tier Reporting Form to be completed by Agency in accordance with the
requirements set forth in the clause UTILIZATION OF MINORITY AND WOMEN OWNED
BUSINESS.
AT&T MWBE SECOND TIER REPORTING FORM
(Required for National and California Reporting)
PART I: NATIONAL REPORTING - Indirect and Direct Reporting Options
INDIRECT METHOD
1 - Revenues from AT&T ____________________________________________
2 - AT&T % of Total Revenues ____________________________________________
(Revenues from AT&T/Total Domestic Revenues)
3 - Total MBE Dollars $___________________________________________
(Total Payments to MBEs)
4 - Total WBE Dollars $___________________________________________
(Total Payments to WBEs)
5 - Total AT&T Attributable MBE $___________________________________________
(AT&T % of Total Revenues x Total MBE $)
6 - Total AT&T Attributable WBE $___________________________________________
(AT&T % of Total Revenues x Total WBE $)
7 - Total AT&T Attributable MWBE $___________________________________________
(Line 5 + Line 6)
8 - Goals: MBE $ or % ___________________
WBE $ or % ___________________
Total MWBE $ or % ____________
DIRECT METHOD
1 - Total AT&T Attributable MBE $___________________________________________
2 - Total AT&T Attributable WBE $___________________________________________
3 - Total AT&T Attributable MWBE $___________________________________________
4 - Goals: MBE $ or % ___________________
WBE $ or % ___________________
Total MWBE $ or % ____________
Reporting Period: ____________________________________
Date: ________________________________________________
Company Name: ________________________________________
Name of CEO: _________________________________________
Address: _____________________________________________
_____________________________________________
Preparer's Name: _____________________________________
Phone: _______________________________________________
Title: _______________________________________________
Fax: _________________________________________________
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT E - AT&T MWBE SECOND TIER
REPORTING FORM
PAGE 2 OF 5
PART II: CALIFORNIA REPORTING ONLY - Indirect and Direct Reporting Options
INDIRECT METHOD
1 - Revenues from AT&T $_________________________________________
2 - AT&T % of Total Revenues __________________________________________
(Revenues from AT&T/Total Domestic Revenues)
3 - Total MBE Dollars $_________________________________________
(Total Payments to MBEs)
4 - Total WBE Dollars $_________________________________________
(Total Payments to WBEs)
5 - Total SDV Dollars $_________________________________________
(Total Payments to SDVs)
6 - Total AT&T Attributable MBE $_________________________________________
(AT&T % of Total Revenues x Total MBE $)
7 - Total AT&T Attributable WBE $_________________________________________
(AT&T % of Total Revenues x Total WBE $)
8 - Total AT&T Attributable SDV $_________________________________________
(AT&T % of Total Revenues x Total SDV $)
9 - Total AT&T Attributable MWSDVBE $_________________________________________
(Line 6 + Line 7 + Line8)
10-Goals: MBE $ or % _________________
WBE $ or % _________________
SDV $ or % _________________
Total MWSDVBE $ or % ________
DIRECT METHOD
1 - Total AT&T Attributable MBE $_________________________________________
2 - Total AT&T Attributable WBE $_________________________________________
3 - Total AT&T Attributable SDV $_________________________________________
4 - Total AT&T Attributable MWSDVBE $_________________________________________
5 - Goals: MBE $ or % ____________________
WBE $ or % ____________________
SDV $ or % ____________________
Total MWSDVBE $ or % __________
Reporting Period: ____________________________________
Date: ________________________________________________
Company Name: ________________________________________
Name of CEO: _________________________________________
Address: _____________________________________________
_____________________________________________
Preparer's Name: _____________________________________
Phone: _______________________________________________
Title: _______________________________________________
Fax: _________________________________________________
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT E - AT&T MWBE SECOND TIER
REPORTING FORM
PAGE 3 OF 5
SECOND TIER REPORTING SUPPLIER LISTING
CALIFORNIA REPORTING ONLY
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SUPPLIER ADDRESS PHONE SERVICE VON NUMBER ETHNIC YEAR TO
DESCRIPTION Or CODE/ DATE $
OSMB SDV
REFERENCE
NUMBER
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If additional space is needed to list suppliers, please make copies of this
page.
Mail or fax report to: Jackie Sherrod
P.0. Box 25000
Room GC1 - 3E10
Greensboro, NC 27420-5000
336-279-2434 (Fax)
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT E - AT&T MWBE SECOND TIER
REPORTING FORM
PAGE 4 OF 5
FORM(S) COMPLETION INSTRUCTIONS
If a supplier can not track direct MWBE content, the INDIRECT METHOD portion of
the report should be
completed.
If a supplier has the capability to track MWBE content directly attributable to
the product they sell to AT&T, the DIRECT METHOD portion of the report should be
completed.
If a supplier does business with AT&T in multiple states, including California,
then both parts of the report should be completed - Part I for all states
combined and Part II for California alone. In the California report, SDV sub-
contracting dollars should also be provided.
CALIFORNIA REPORTING
If a supplier ships to an AT&T organization located in California, only MWBEs
verified by the California Clearinghouse should be reported and the SECOND TIER
REPORTING SUPPLIER LISTING must also be completed. This information is furnished
to the California PUC along with our annual filing. If the supplier does not
have any dollars to report in California with verified MWSDVBE suppliers, the
supplier should mark "NONE" across Part II of the form.
Service Description = brief description of products & services provided by
company
VON Number = California Clearinghouse Verification Order Number
OSMB Reference Number = State of California's Office of Small & Minority
Business Reference Number
CALIFORNIA CLEARINGHOUSE
The California Clearinghouse is responsible for verifying that MWBE applicants
meet the established eligibility criteria. The Clearinghouse solely verifies
that a business meets eligibility criteria and maintains the information in its
database, which is available by participating utilities and the California
Public Utilities Commission. The verification process entails the thorough
review of a firm's Verification Application with required documents
demonstrating evidence of minority, ownership, management and control. Questions
concerning the Clearinghouse Verification process can be directed to their San
Francisco office on (800) 359-7998.
COMPARABLE AGENCY VERIFICATION PROCEDURE (CALIFORNIA)
Business which have been certified as MBEs, WBEs, or Disadvantage Enterprises
(DBEs) by any of the comparable agencies may apply for MWBE Verification to the
California Clearinghouse by simply submitting 1) a fully executed "MWBE
Clearinghouse Verification Application" and 2) a copy of a current letter or
certification which grants MBE, WBE, or DBE status from any of the following
agencies. No other documents are needed.
COMPARABLE AGENCIES
<TABLE>
<CAPTION>
<S> <C>
California Department of Transportation (Caltrans) City of Fresno
City of San Diego, Equal Opportunity Contracting Program (EOCP) City of Oakland
Los Angeles County Metropolitan Transportation Authority (MTA) Los Angeles County
Los Angeles Unified School District Contra Costa County
Regional Transit Coordinating Council of the Bay Area (RTCC) Port of Oakland
</TABLE>
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY, INC.
AGREEMENT NO. LQ6237D
EXHIBIT E - AT&T MWBE SECOND TIER
REPORTING FORM
PAGE 5 OF 5
Small Business Administration (SBA) 8(a)
National Minority Supplier Development Council
Questions regarding the AT&T form should be directed to Jackie Sherrod at 336-
279-2430. The completed AT&T form should be mailed or faxed to:
Jackie Sherrod
AT&T Supplier Management
P. 0. Box 25000
Room GC1 - 3E10
Greensboro, NC 27420-5000
336-279-2434 (Fax)
<PAGE>
EXHIBIT 10.30
AT&T / BRONNER SLOSBERG HUMPHREY
General Agreement No. G00040D
Page l of 2
GENERAL AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, AT&T Corp. ("AT&T")
having an office at 295 N. Maple Avenue, Basking Ridge, New Jersey 07920 and
Bronner Slosberg Humphrey a Corporation of the state of Massachusetts
("Agency"), having an office at 800 Boyleston Street, Boston, Massachusetts
02199 do hereby agree as follows:
I. With the exception to all references to Agency's compensation, Agreement
LQ6237D between Agency and AT&T is incorporated herein, and its terms and
conditions will be applicable to the services authorized under this
Agreement.
II. From time to time, commencing January 1, 1999 and ending December 31, 2001,
AT&T may authorize Agency to render to AT&T services for advertising/direct
marketing and related work (hereinafter "Work"). Agency shall timely accept
or reject such requests for Work. All Work conducted by Agency in response
to such request shall be considered Work under this Agreement, and the
terms and conditions hereof shall govern. Agency shall render all the
services specified in the request within the time allowed therein and shall
meet all interim deadlines set by the parties. The services shall be
performed to the satisfaction of AT&T, shall be performed in accordance
with the highest professional standards, and shall be in accordance with
such requirements or restrictions as may be lawfully imposed by
governmental authority. Services not completed to AT&T's satisfaction shall
be re-performed at no cost to AT&T.
III. All requests for Work under this Agreement shall be in writing, shall
contain the information set out below, and shall be executed by AT&T for
itself or as agent for its other entities and Agency.
A. The incorporation, by reference, of this Agreement.
B. A description of the Work to be performed by Agency.
C. The schedules for performance of the Work.
D. The maximum total expenditure authorized.
E. The schedule of payments.
F. The invoice instructions.
G. The appropriate signature(s) of the authorized representative(s) of AT&T
and Agency.
Such writing shall constitute the only authorization for Agency to take any
action or to expend any money. Agency acknowledges and agrees that no Work shall
begin unless and until an authorized representative of each of the parties
properly executes such written request for Work.
IN WITNESS WHEREOF, Agency and AT&T have executed this Agreement in duplicate on
the day and year below written.
BRONNER SLOSBERG HUMPHREY, INC. AT&T CORP.
/s/ Meryl K. Beckingham /s/ Antoinette Hein
By: ________________________ By: ___________________________
(Signature) (Signature)
Meryl K. Beckingham Antoinette Hein
EVP/Chief Financial Officer Procurement Specialist
_______________________________ _______________________________
(Name & Title Typed or Printed) (Name & Title Typed or Printed)
4/12/99 3/26/99
____________________________ _______________________________
(Date) (Date)
<PAGE>
EXHIBIT 10.31
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
AT&T / BRONNER SLOSBERG HUMPHREY
PAGE l OF 1
ADVERTISING AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, AT&T Corp. ("AT&T")
having an office at 295 N. Maple Avenue, Basking Ridge, New Jersey 07920 and
Bronner Slosberg Humphrey a Corporation of the state of Massachusetts
("Agency"), having an office at 800 Boyleston Street, Boston, Massachusetts
02199 do hereby agree as follows:
I. Agreement G00040D between Agency and AT&T is incorporated herein, and its
terms and conditions will be applicable to the services authorized
hereunder.
II. Agency shall perform advertising and direct mail services ("Work") for
AT&T's Marketing organization in support of various programs/markets, as
requested by AT&T, commencing January 1, 1999 and ending December 31,
1999.
III. Attachment A, attached hereto and hereby made a part hereof, Paragraph I
establishes Contract Number, Billing Number, Compensation ("Annual Fee"),
Incremental Monthly Payment ("Monthly Fee"), and Reimbursable Expense
allocation associated with each program/market to be supported by Agency
hereunder. Agency's Annual Fee for services authorized hereunder includes
the costs of all labor, and materials and equipment associated with
performing services necessary to complete Work required hereunder. In
addition to such payments, AT&T agrees to pay Agency a performance bonus,
pursuant to Attachment A, Paragraph II, if in AT&T's sole discretion and
judgment, Agency's overall performance rating is above or well above
target.
IV. AT&T agrees to reimburse Agency at actual cost incurred for a) out-of-
pocket expenses for third party production and media fees, as set forth in
Attachment A, Paragraph III, incurred in accordance with Approved
Estimates, and b) travel and living expenses incurred while on AT&T
approved travel assignments pursuant to Exhibit A, Paragraph IV. Agency
shall list a) and b) as separate items on each invoice, which shall be
accompanied by receipts substantiating expenses. Agency shall retain all
such records for a period of not less than three (3) calendar years after
the expiration of this Agreement.
V. Invoices for Work performed hereunder shall be submitted monthly, reflect
the applicable Billing Number, pursuant to Attachment A, Paragraph I, and
be submitted in duplicate, as follows:
AT&T
Craig Farber, Room 3447G2
295 North Maple Avenue
Basking Ridge, NJ 07920
VI. AT&T's Marketing Representative is Craig Farber and AT&T's Supplier
Management/Agreement Representative is Antoinette Hein or such other
persons as may be designated in writing by AT&T from time to time.
Agency's Representative is Gretchen Gayton or such other person as may be
designated in writing by Agency from time to time.
ACCEPTED:
BRONNER SLOSBERG HUMPHREY, INC. AT&T CORP.
/s/ Meryl K. Beckingham /s/ Michael McGowan
By: _________________________ By: ___________________________
(Signature) (Signature)
Meryl K. Beckingham Michael McGowan
EVP/Chief Financial Officer Supplier Management District Manager
_______________________________ _____________________________________
(Name & Title Typed or Printed) (Name & Title Typed or Printed)
4/12/99 3/26/99
_______________________________ _____________________________________
(Date) (Date)
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY
ATTACHMENT 1
PAGE 1 OF 4
I. PROGRAM/MARKET, CONTRACT NUMBER, BILLING NUMBER, ANNUAL FEE, MONTHLY FEE,
AND REIMBURSABLE EXPENSE ALLOCATION
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<CAPTION>
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Program/Market Contract Billing Annual Fee Monthly Fee Reimbursable
Number Number Expense
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[***] LMA191D 26307 [***] [***] $45,000
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[***] LMA192D 26358 [***] [***] $54,000
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[***] LMA193D 26368 [***] [***] $ 0
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[***] LMA194D 26449 [***] [***] $15,950
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[***] LMA2O9D 26710 [***] [***] $10,500
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[***] LMA195D 26474 [***] [***] $ 9,200
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[***] LMA196D 26509 [***] [***] $ 4,800
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[***] LMA197D 26560 [***] [***] $ 0
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[***] LMA198D 26602 [***] [***] $43,100
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[***] LMA199D 26626 [***] [***] $43,100
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[***] LMA200D 26631 [***] [***] $ 500
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[***] LMA2O1D 26636 [***] [***] $34,375
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[***] LMA2O2D 26692 [***] [***] $ 0
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[***] LMA2O3D 26696 [***] [***] $ 6,540
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</TABLE>
II. BONUS
Agency's bonus shall be based upon its annual performance evaluation, which
shall be at AT&T's sole discretion and judgement, as follows:
A. [***] if Agency's overall performance rating is above target
B. [***] if Agency's overall performance rating is well above target
Agency's Annual Fee as set forth in Paragraph I above, prorated for the
period worked, shall be used as a basis for calculating Agency's bonus, if
any.
III. THIRD PARTY EXPENSES (In Conjunction With Estimates)
AT&T agrees to reimburse Agency for production costs and expenses paid by
Agency to third parties, limited to those set forth below or as otherwise
specifically agreed to by the parties, provided that they have been actually
incurred by Agency and Agency has first secured an approved Estimate to incur
such costs. Reimbursement will only be for net out-of-pocket actual cost
incurred by Agency and will not include any other costs therefor.
A. Publication Advertising and Out-Of-Home Advertising
1. Type composition, printing, engraving, electrotypes, finished art,
photographs, photostats and other reproduction mats, stereotypes,
quantity proofs
2. Endorsement fees, testimonials, etc.
3. Fashion coordination performed by studio and/or stylist
4. Talent for use in test and/or finished advertising
5. Production of test advertisements
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY
ATTACHMENT 1
PAGE 2 OF 4
6. Research and licensing costs for stock photography
7. Location scouting
8. All other elements required to produce publications and out-of-door
advertising not referred to above
9. Release prints and duplicate tapes for distribution
10. Distribution of release prints and duplicate tapes
B. Broadcast and Electronic Advertising
1. Packaged shows and films
2. Programs and scripts by outside specialty writers or producers
3. Music rights, jingles, prize money, dramatic literary or musical
adaptations or arrangements
4. Production charges for filming, taping or recording commercials
5. Film production charges, studio and equipment rentals, scenery, props
and costumes and location scouting
6. Fashion coordination/hair and makeup by studio and/or stylist
7. Release prints and duplicate tapes for distribution
8. Distribution of release prints and duplicate tapes
9. Motion picture, slide and slidefilm processing
10. Music production associated with creative presentations, demos and test
ads
11. Talent, including voice over, associated with creative presentations,
demos and test ads
12. Closed captioning expenses
C. Postage, Express and Freight
1. Shipment of advertising materials to Agency's, third party
subcontractors
D. Electronic Media
1. Travel
2. Website, software and program development
E. Research
1. Test materials
NOTE: ALL OTHER THIRD PARTY COSTS AND EXPENSES INCURRED (EXCEPT THOSE DESCRIBED
IN PARAGRAPH IV BELOW) ARE NOT REIMBURSABLE AND ARE INCLUDED IN AGENCY'S
TOTAL ANNUAL FEE SET FORTH IN PARAGRAPH I ABOVE.
<PAGE>
AT&T / BRONNER SLOSBERG HUMPHREY
ATTACHMENT 1
PAGE 3 OF 4
IV. REIMBURSABLE TRAVEL EXPENSES
Reasonable travel and living expenses directly related to assignments
performed under this Agreement as approved by AT&T, shall be reimbursable.
Reimbursable expenses shall be itemized and substantiated by receipts or
other credible evidence acceptable to AT&T and in accordance with the
guidelines hereunder. Expenses shall be billed at actual cost incurred and
invoices for all reimbursable expenses shall list the date(s), copy, person(s)
visited and business purpose for the expense.
A. Land Travel
Use public transportation as a first choice, personal car as a second
choice, and car rental as the last choice. Reasonable cab/taxi, bus, rail
or car rental expenses will be reimbursed along with associated receipts
from tolls, tips, and parking fees will be reimbursed by AT&T, unless
otherwise specifically state herein.
Mileage, as approved yearly by the IRS, will be reimbursed for use of
personal automobiles for services provided on behalf of AT&T. Allowable
mileage is determined by deducting the normal commuting mileage from total
miles actually incurred. Maximum allowable mileage between Manhattan and
New Jersey shall not exceed 80 miles round-trip (no exceptions).
Cab fare will only be reimbursed when used from Agency's location to the
production house and return. Cab fare for "late nights" (after 8:00 pm)
will be reimbursed. Cabs to Agency's employee's home will only be
reimbursed if they are taken from the airport. Cabs to pickup rental cars
are not reimbursable. Tolls, mileage and train fare are reimbursable when
work is performed on weekends.
Rental car charges within Agency's city will not be reimbursable.
If a rental car is used to attend a meeting outside of Manhattan, a maximum
of $60.00 will be reimbursed, excluding tolls.
Refueling - All rental cars must be refueled prior to returning. Cost for
the rental car company to refuel will not be reimbursed.
B. Air Travel & Associated Expenses
1. Air Travel
a) Must accept lowest available fare based on the following time window:
b) Coach service for all domestic travel; Business service for
international travel (international under 5 hours must be coach).
c) Should consider other, lower-priced discounted fare opportunities
whenever possible, e.g., non-refundable, Saturday night stay,
connections, alternate airports, etc.
d) Use of electronic tickets (e-tickets) encouraged to reduce process
costs.
e) Must return unused fully refundable tickets in a timely manner. Non-
refundable tickets must be used on next applicable business trip.
2. Lodging
a) Require use of moderate or economy priced hotels (vs. upscale/luxury)
when available
When shooting, agencies should stay in the same hotel as AT&T, not to
exceed $150 per night. However, lower rates should be used if available.
Agency shall only invoice hotel expenses that are directly related to the
work performed under this Agreement. Expenses incurred at hotels for AT&T
business-related (fax, typing, photocopying) are reimbursable.
<PAGE>
AT&T I BRONNER SLOSBERG HUMPHREY
ATTACHMENT 1
PAGE 4 OF 4
3. Rental Car
a) Rent a car only when more cost effective than other modes of
transportation (e.g., hotel shuttles, public transportation, taxis,
airport shuttles).
b) Must rent compact/subcompact size car unless two or more people are
traveling in which case a midsize car is acceptable.
c) All rental cars must be refueled prior to returning. Cost for the rental
car company to refuel will not be reimbursed.
4. Meals
a) Meal expenses are only reimbursable when traveling overnight.
b) Maximum daily reimbursement for business meals is $35 recognizing meal
costs may be higher in certain metropolitan areas and international
locations. In no event shall daily meal allowance exceed $65.00 when
metropolitan areas or international locations are involved.
5. Miscellaneous Expenses
a) Laundry: Reasonable laundry expenses will be reimbursed for trips that
extend beyond five days.
b) Business Calls: Business calls made on AT&T's behalf while staying
overnight are reimbursable. Personal calls will not be reimbursed. Calls
must list reason and person called and be on the AT&T network.
c) Airplane Calls: Not reimbursed for any reason.
d) Movies: In-room and Airplane Movies: Movies rented while on company
business will not be reimbursed.
e) Periodicals: Magazines, newspapers, and books are not reimbursable
unless specifically requested, in writing, by AT&T.
f) Flowers: Flowers for any reason are not reimbursable.
g) Federal Express: All Federal Express receipts must list the reason for
the overnight and who authorized the request. If a complete reason is
not listed, it will not be reimbursed.
h) Health Club and Mini Bars: Health club and mini bar expenses will not be
reimbursed for any reason.
NOTE 1: IT IS AGREED AND UNDERSTOOD THAT AT&T IS NOT RESPONSIBLE NOR WILL IT
REIMBURSE ANY ENTERTAINMENT EXPENSES INCURRED BY AGENCY.
NOTE 2: WHEN PERFORMING SERVICES LISTED BELOW, AGENCY SHALL ADHERE TO THE
FOLLOWING:
Maximum Number of Employees
. Location Shoots 3
. Press Runs 1
. Production 3
. Strategy Meetings or Review Meetings *
. Research Meetings (Focus Groups) *
* Agency shall propose appropriate attendance to AT&T for approval prior to
performing services. In no event shall the number of employees exceed three
(3).
<PAGE>
AT&T / BRONNER SLOSBERG HUMPRHEY
Amendment 01
Page 1 of 1
AGREEMENT AMENDMENT
Contractor: Bronner Slosberg Humphrey
800 Boyleston Street
Boston, Massachusetts 02199
Agreements LMA194D, LMA209D, LMA195D, LMA196D, LMA197D dated April 12, 1999,
between AT&T Corp. ("Company") and Contractor are hereby amended as follows:
1) Attachment 1, Paragraph I is modified to change the Annual and Monthly Fees
for the aforementioned Agreements, as follows:
- -------------------------------------------------------------------------------
Contract Annual Fee Monthly Fee
Number
- -------------------------------------------------------------------------------
LMA194D [***] [***]
- -------------------------------------------------------------------------------
LMA209D [***] [***]
- -------------------------------------------------------------------------------
LMA195D [***] [***]
- -------------------------------------------------------------------------------
LMA196D [***] [***]
- -------------------------------------------------------------------------------
LMA197D [***] [***]
- -------------------------------------------------------------------------------
All other terms and conditions to remain unchanged.
Accepted:
BRONNER SLOSBERG HUMPHREY, INC. AT&T CORP.
/s/ Meryl K. Beckingham /s/ Antoinette Hein
By: _________________________ By: ___________________________
(Signature) (Signature)
Meryl K. Beckingham Antoinette Hein
Chief Financial Officer Procurement Specialist
_______________________________ _____________________________________
(Name & Title Typed or Printed) (Name & Title Typed or Printed)
5/12/99 5/12/99
_______________________________ _____________________________________
(Date) (Date)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.32
MC941121LD
Page 1 of 19
ADVERTISING/MARKETING AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, AT&T
Communications, Inc. - Business Communications Services ("AT&T") having an
office at 55 Corporate Drive, Bridgewater, New Jersey 08807 and Bronner
Slosberg Humphrey Inc., a corporation of the Commonwealth of Massachusetts
("Agency"), having an office at 695 Atlantic Avenue, Boston, Massachusetts
02111, do hereby agree as follows:
ARTICLE 1 - AGENCY SERVICES
The Agency shall act as AT&T's advertising/marketing agency in the planning,
preparing, and placing of such advertising/marketing, as may be requested by
AT&T. The Agency shall perform other services as AT&T may request, as outlined
in Article 30, subject to mutual written agreement of the parties.
Agency shall devote its best efforts on behalf of AT&T to farther AT&T's
interests and shall reasonably endeavor in every proper way to make AT&T's
advertising/marketing and associated efforts, for which the Agency is herein
responsible, successful. To accomplish the foregoing, Agency specifically agrees
that its services shall include but not be limited to the following:
A. Assigning and maintaining, with AT&T's consent executive strategic
input and review, an account management group, creative, systems and
fulfillment, research and analysis, teleservices marketing, partnership
marketing, production, media and traffic teams necessary to service the
AT&T account;
B. Provide direct marketing services, including the creation, production
and placement, insertion or distribution of direct mail and direct
response advertising.
C. Attending meetings, as requested by AT&T, with AT&T's staff and
periodic meetings with AT&T's top management;
D. Familiarizing itself with the business of AT&T, its products and
services, and the industry in which AT&T operates; and analyzing the
present and potential advertising/marketing opportunities for such
products and services so as to provide AT&T with marketing and
advertising counsel, including specific advertising/marketing
objectives, strategies and plans for reaching AT&T's business
objectives;
E. Preparing layouts, copy, artwork, scripts and storyboards and furnishing
other elements and materials to be used in finished advertisements for
all media and promotions to be used by AT&T;
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MC941121LD
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F. Advising AT&T of the availability of all broadcast, publication and out-
of-home media which can appropriately be used to advertise AT&T products
and services; and developing media plans suitable for AT&T;
G. When publications media are to be used, arranging for insertions and
checking the advertisements in accordance with mutually acceptable
practices for date, appearance, position, size, quality and mechanical
reproduction;
H. When broadcast media are to be used, arranging for the programs,
commercials, time and talent, and plan; rendering all services necessary
for the proper and efficient use of the media; auditing the audience
share of broadcasts and verifying the broadcasts in accordance with
mutually acceptable practices for time, accuracy and other related
factors;
I. When outdoor posters, carcards, painted boards and other media are to
be used, arranging for displays and verifying in accordance with
mutually acceptable practices for date, appearance, position, site,
workmanship and mechanical reproduction;
J. Supervising the production of all finished advertising and marketing
material;
K. Negotiating, arranging and contracting for any special talent required,
with AT&T's approval, and for all photography, models, special effects,
layout, artwork and for all printing for use in the
advertising/promotions program; and making appropriate arrangements for
tax withholdings from talent;
L. Analyzing advertising, marketing and consumer research to aid AT&T in
developing advertising strategy and developing and evaluating AT&T's
advertising and media;
M. Conducting and analyzing competitive advertising tracking.
The above services shall be performed to the satisfaction of AT&T, shall be
performed in accordance with the highest professional standards and shall be in
accordance with such requirements or restrictions as may be lawfully imposed by
governmental authority. Services not completed to the reasonable satisfaction of
AT&T shall be reperformed at no cost to AT&T.
ARTICLE 2 - APPROVALS BEFORE COMMITMENT
No commitment of any kind shall be made by the Agency on behalf of AT&T unless
specifically authorized in writing by AT&T, except as provided in Article 3
(Estimates).
The Agency shall submit concepts, scripts, print copy and other materials as
early as possible to AT&T for internal review and required legal and technical
approval, and when appropriate to the networks' Broadcast
<PAGE>
MC941121LD
Page 3 of 19
Standards Departments, for specific approval prior to initial photographing,
broadcasting, telecasting, or print production of commercials or print
advertisements.
Agency shall contract with suppliers of media and such contracts shall provide
that Agency shall be solely liable for payment of media for time and/or space
costs incurred on behalf of AT&T from and after the time at which AT&T shall put
Agency in funds for payment thereof, and that all billing shall be sent to the
Agency.
ARTICLE 3 - ESTIMATES
The Agency shall furnish to AT&T, in writing and in advance, labor fee and a
cost estimate of all expenditures in connection with all services and projects
recommended by Agency or requested by AT&T. Prior to undertaking such projects
or committing AT&T's funds, Agency shall obtain written authorization from
AT&T. Agency shall furnish revisions of these estimates when changes in costs
are anticipated in excess of ten percent (10%), plus or minus. Each estimate as
approved by AT&T shall be executed by both parties. Approved estimates shall
constitute the only authorization for the Agency to take any action, make any
commitments or expend any money. In those situations where time or circumstances
will not permit specific prior written authorization, commitments not to exceed
$50,000 may be made with oral approval, provided such approval shall be
confirmed by an approved written estimate no later than ten (10) working days
thereafter.
ARTICLE 4 - DISCOUNTS
Agency shall obtain all prompt payment or other similar discounts available to
it from media and other suppliers from which it makes purchases in the
performance of the services hereunder. When Agency receives a cash discount,
rebate, frequency discount, volume discount, promotional consideration, or other
similar credit from such media or other suppliers, AT&T shall receive full
allowance for each such amount, provided Agency, after timely notification,
receives payment from AT&T within the applicable discount period.
ARTICLE 5 - ANNUAL REVIEW
An annual review shall take place during the first quarter (January - March) of
each calendar year for the review of the previous year's performance, to be
attended by appropriate AT&T management representatives and by Agency management
and senior members of the AT&T agency group. The purpose of this review is for
AT&T to present its evaluation of Agency performance to Agency and for Agency to
present its evaluation of AT&T management to AT&T, for AT&T and Agency to
mutually agree on any corrective action that may be needed and for AT&T and
Agency to set annual objectives.
<PAGE>
MC941121LD
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ARTICLE 6 - DEFINITIONS
A. "Gross Revenue" as used herein shall mean the total amount of compensation,
exclusive of pass-through costs, the Agency receives from AT&T for a
advertising/marketing services performed after reconciliation and any
rebates or supplementary fees are paid.
B. "Annual Salary" as used herein shall mean annual base salary, excluding
bonuses. It does not include employer paid FICA, insurance and medical
benefits its or payments into retirement plans.
C. "Direct Salaries" as used herein shall mean [***]
1. [***]
[***]
Total number of hours worked on Agency business means [***]
2. At AT&T's option, such option to be obtained by the Agency in writing
from AT&T, AT&T may elect to "buy-out" designated individuals. For those
individuals bought out by AT&T, AT&T shall be responsible for that
person's total annual base salary, excluding bonuses.
D. "Indirect Salaries" as used herein shall mean [***]
E. "All Other Expenses (ACE)" as used herein shall mean all other allowable
expenses allocable to AT&T and shall include:
1. Other salaries that can be directly allocable to the AT&T account that
are not included in direct salaries as defined in Section C above.
2. Payroll Related Expenses such as employer paid FICA, insurance and
medical benefits.
3. Employer payments into ERISA-approved retirement plans.
4. Indirect Costs which include indirect salaries, agency overhead costs
(e.g., space and facilities, professional fees and general corporate
expenses). Donations are not to be included in Indirect Costs.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
MC941121LD
Page 5 of 19
For purposes of compensation computation as set forth in Article 7, All
Other Expenses are equal to [***]
F. "Direct Client Service Expenses" as used herein shall include out-of-pocket
expenses of Agency employees related to the AT&T account.
G. "Total Costs" as used herein shall equal [***]
H. "Profit Before Taxes" as used herein shall mean [***]
ARTICLE 7 - AGENCY COMPENSATION
A. Agency compensation for the calendar year shall be computed as follows:
1. During the last quarter of the previous calendar year, AT&T and the
Agency shall meet to determine:
a. The account staffing (including all functions as defined in Article
6, Paragraph C) for the AT&T account for the next calendar year.
b. The aggregate Direct Salaries, as defined herein, of the agreed upon
account staff.
2. The fee for the calendar year is then [***]
3. For 1994 the yearly fee is [***]. For each subsequent year, the
yearly fee shall be mutually agreed upon by the parties in writing and
attached as an amendment hereto.
B. [***] The specific criteria for evaluation shall be mutually agreed
upon by the parties. However, the yearly Agency evaluation as performed by
AT&T shall be at the sole discretion of AT&T.
1. At the end of each calendar year, the Agency shall submit to AT&T actual
Direct Salaries as defined herein, and a computation of Profit Before
Taxes according to the formula:
Profit = [***]
2. Based on the Agency evaluation as decided by AT&T, the Agency shall be
allowed:
a. [***] profit (expressed as a percent of Total Costs) if Agency
evaluation is rated "unacceptable."
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
MC941121LD
Page 6 of 19
b. [***] profit (expressed as a percent of Total Costs) if Agency
evaluation is rated "fully meets."
c. [***] profit (expressed as a percent of Total Costs) if
Agency evaluation is rated "exceeds."
d. [***] profit (expressed as a percent of Total Costs) if Agency
evaluation is rated "far exceeds."
Agency shall use its best effort to provide actual Direct Salaries, actual
All Other Expenses and Profit calculations within sixty (60) days of the end
of the calendar year but in no event later than ninety (90) days after the
end of the calendar year, so that reconciliation can be made. Agency agrees
to keep accurate books of account and records, in accordance with generally
accepted accounting principles, concerning all transactions hereunder,
including documentation supporting all charges and including out-of-pocket
expenses. An independent certified public accounting firm of the Agency's
choice and at the Agency's expense shall annually review the Agency's
books of account and records and shall certify that the bills to AT&T and
actual Direct Salaries and Profit computations are accurate and in
accordance with the definitions set forth in this Agreement. Verification of
Direct Salaries shall be performed as outlined in Schedule I, attached
hereto and made a part hereof. This audit privilege shall include access by
the independent auditors to individual payroll and personnel records. Said
books of account and records (excluding individual payroll and personnel
records) shall be preserved and maintained by Agency and kept available for
inspection by AT&T for at least three (3) years from the end of each
accounting period.
C. AT&T shall pay the Agency on dates to be mutually agreed upon by the
parties.
D. If for any reason Agency anticipates exceptional increases in Direct
Salaries during any quarter of the year, a meeting between Agency and AT&T
shall be called by the Agency to discuss what action should be taken while
still providing AT&T with needed services.
E. If for any reason AT&T expects the advertising/marketing budget to decline
or increase significantly above or below the anticipated budget for the
year, AT&T will notify Agency of this change as soon as possible.
F. AT&T agrees to reimburse the Agency directly for reasonable Direct Client
Service Expenses, including travel and living expenses authorized by AT&T
and incurred in connection with this Agreement. Reimbursement for travel and
living expenses shall be in accordance with the following guidelines:
1. Transportation
a. Airline Tickets - Agency will be reimbursed for air fare that has been
purchased at coach fare for domestic travel (business class is allowed
for international flights over six (6) hours in
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
MC941121LD
Page 7 of 19
duration). Agency employees may not request specific flights/carriers or
arrange/alter travel plans to obtain airline promotional benefits. Agency
employees traveling under first class status will be responsible for the
expense difference incurred. The ticket stub must be presented and relate
directly to the AT&T assignment. Reimbursement will not be made for the
purchase of travel insurance.
b. Reasonable taxi, bus, rail or car rental expenses will be reimbursed along
with associated receipts from tolls, tips, and parking fees will be
reimbursed by AT&T. Reimbursement for car rental expenses will be made upon
presentation of a car rental agreement/receipt. Car rentals must be
contracted at the lowest available rate and in the compact/subcompact
category where possible, unless special requirements dictate otherwise, in
which cases AT&T prior approval is required. For more than two people, a
mid-size rental is acceptable, however, names of the people must be
indicated on the car rental receipt.
AT&T will not reimburse car rental refueling charges.
Cab fares for "late nights" (after 8PM) are billable.
c. A mileage allowance, as approved yearly by the IRS, will be reimbursed to
Agency employees who use their own personal automobiles for services
provided on behalf of AT&T. Allowable mileage is determined by deducting the
normal commuting mileage.
When traveling, use public transportation as a first choice, personal car as
a second choice, and car rental as the last choice.
2. Lodging and Meals - Maximum of $150.00/day hotel allowance for domestic
travel, unless special requirements dictate otherwise, in which case AT&T
prior approval is required. Lower rates should be used if available. Agency
shall only invoice hotel expenses that are directly related to the work
performed under this Agreement. Expenses incurred at hotels for AT&T
business-related services (fax, typing, photocopying) are reimbursable.
AT&T will reimburse the Agency for meal expenses not exceeding $65.00 per
day, per person, which shall include room service and gratuities. Business
lunches are billable (only if an AT&T employee is present). Overtime meals
are not billable.
3. Business Calls - Business calls made on AT&T's behalf while staying
overnight are billable. Calls must list reason and person called and be on
the AT&T Network. Personal calls are not billable.
4. Personal Expenses - AT&T will not reimburse personal expenses of Agency
employees. If expenses of a personal nature (i.e., hotel/ship purchases,
alcoholic beverages, telephone and long
<PAGE>
MC941121LD
Page 8 of 19
distance charges, in-room movies, sundry items, etc.) are charged
against the room, the amount will be deducted from the invoice presented
to AT&T. For trips which extend beyond five (5) days, reasonable valet
and laundry charges will be reimbursed. AT&T will reimburse reasonable
gratuities.
5. Magazines/Newspapers/Books are not billable unless specifically
requested, in writing, by AT&T.
E. Services provided by Agency employees - For services requested by AT&T,
the Agency shall provide, as a maximum, the following number of people:
Maximum Number of People
a. Location Shoots 3
b. Press Runs 1
c. Strategy Meetings *
d. Review Meetings *
e. Research Meetings (Focus Groups) *
* Agency shall obtain prior approval from AT&T regarding the number of
people to attend.
The Agency shall submit copies of all hotel bills and other reimbursable
expenses along with the associated charge receipt(s). Expenses shall be
billed at cost and invoices for all reimbursable expenses shall list the
date(s), company, person(s) visited and business purpose for the expense.
ARTICLE 8 - DURATION
The term of this Agreement shall begin on January 1, 1994 and shall continue
until terminated by either party for their convenience by giving ninety (90)
days written notice or as otherwise provided herein.
After expiration of the period of notice, no rights or liabilities shall arise
out of this relationship, regardless of any plans which may have been made for
future advertising promotions, except that: (1) if AT&T terminates, any non-
cancelable contracts made on AT&T's authorization (or any uncompleted work
previously approved by AT&T either specifically or as part of a plan, and still
existing at the expiration of the period of notice), which contracts were not or
could not be assigned by the Agency to AT&T or AT&T's assignee, shall be
carried to completion by the Agency and paid for by AT&T; and (2) if Agency
terminates, it shall be similarly responsible for any non-cancelable contracts
unless AT&T chooses to assume such contracts. Upon termination of this
Agreement, the Agency shall transfer, assign, and make available to AT&T, all
property and materials in the Agency's possession or control belonging to and
paid for by AT&T, and all information regarding AT&T's advertising. The Agency
also agrees to give all reasonable cooperation towards transferring, with the
approval of third parties in interest, all assignable reservations, contracts
and agreements with advertising media, or others, for advertising space,
<PAGE>
MC941121LD
Page 9 of 19
broadcast time or materials yet to be used and all rights and claims thereto and
therein, upon being duly released from the obligation thereof. Upon termination,
unused advertising/promotional plans and ideas prepared by the Agency for AT&T
prior to the date of termination shall remain AT&T's property.
Except as otherwise specifically set forth, all the rights and liabilities of
the parties arising out of this Agreement shall cease on the date of
termination.
ARTICLE 9 - BILLING AND PAYMENT
A. Agency's bills for space in publications, outdoor and carcard advertising,
and radio and TV time and talent shall be rendered to AT&T in sufficient
time to afford AT&T a reasonable opportunity to remit funds to enable Agency
to pay charges incurred for AT&T's account on their due dates, and AT&T
agrees to pay such bills within the time herein specified for payment.
Agency's bills for other items will be rendered to AT&T from time to time;
unless otherwise specified, such bills will be due and payable within
thirty (30) days from date thereof. Agency shall submit all media and other
invoices in time for AT&T to obtain customary cash discounts. All bills
submitted to AT&T by Agency shall be net of all commissions and/or markups.
All non-media billing charges shall be in accordance with Schedule II,
attached hereto and made a part hereof. In no event shall AT&T be liable for
media or non-media bills unless the Agency submits such bills to AT&T within
three (3) months from the date in which costs were incurred.
B. Receipt or acceptance by AT&T of any statement or invoice furnished pursuant
hereto or any sums paid by AT&T hereunder shall not preclude AT&T from
questioning the correctness thereof within two (2) years of the year in
question, and if any inconsistencies or mistakes are discovered in such
statements or payments, they shall be immediately rectified and prompt
adjustments and corresponding payments shall be made to compensate thereof.
C. AT&T agrees to pay any "short rates" with which AT&T is justly charged by
the media placed on AT&T's behalf by Agency for any premature termination
of a contract that is caused by AT&T. Agency shall pay any "short rates"
with which AT&T is charged by media for any premature termination of a
contract that is caused by Agency.
The Agency shall submit invoices for all work performed under this Agreement.
Invoices against this Agreement shall indicate the work performed for which
billing is rendered, shall be in accordance with approved estimates and shall be
submitted in duplicate.
<PAGE>
MC941121LD
Page 10 of 19
ARTICLE 10 - NOTICES
Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Agency or AT&T shall be in writing and
shall be given or made by telegram, telex, confirmed facsimile or by certified
or registered mail.
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile or when deposited, postage prepaid in the
U.S. mail.
ARTICLE 11 - TITLE
A. Except as set forth in Paragraph C below, all creative work and work
products, including, but not limited to, advertising and/or marketing plans,
media plans, ideas, and advertising materials developed by the Agency, or on
Agency's behalf, for AT&T in connection with this Agreement, and any and all
copyrights therein are hereby assigned and agreed to be assigned by Agency
to AT&T and shall be and will remain the exclusive property of AT&T, which
may use any of such as it deems appropriate. All such work and work products
shall be considered "works made for hire" to the extent allowed by law.
Agency shall acquire for AT&T from Agency subcontractors or others all such
assignments, rights and covenants, and will furnish AT&T with all such
documentation, as, any of them, are needed in AT&T's reasonable opinion to
assure vesting in it of title to, and unrestricted ownership rights in, such
work, work products and copyrights, and to perfect the enforceability of
such copyrights.
Should the Agency desire to use material developed for AT&T for another
client or for other business reasons it may request AT&T's permission to do
so. Granting of any such permission shall be at AT&T's sole discretion.
B. If Agency furnishes AT&T with materials previously copyrighted by Agency and
not originally prepared hereunder, Agency hereby grants and agrees to grant
to AT&T unrestricted, non-exclusive, royalty-free licenses for all purposes
under any and all copyrights in such materials, with the unrestricted right
to grant such sublicenses under those licenses as AT&T may see fit, to the
extent that such materials are used in conjunction with any of the work and
work products referred to in Paragraph A of this Article.
C. If AT&T has consented to the inclusion of materials owned or copyrighted by
others, or in which other rights may be claimed by others (and there shall
be no such inclusion without AT&T's prior consent), then the Agency shall
notify AT&T of the scope of the rights and permissions the Agency intends to
obtain with respect to such materials and shall modify the scope of same as
requested by AT&T. Copies of all rights and permissions clearly identifying
the included works to which they apply shall be supplied to AT&T prior to
program completion.
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MC941121LD
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D. Agency warrants the originality of the work prepared for AT&T hereunder
(except if such work is in the public domain) and its disclosure to AT&T
exclusively and that, except as provided in Paragraphs B and C above, no
portion of the material prepared for AT&T under this Agreement is derived
from copyrighted material.
E. Agency undertakes that no part of the creative work or work products
developed for AT&T in connection with this Agreement, whether or not
copyrightable, shall be disclosed to any persons or used by the Agency to
produce creative materials for any persons other than AT&T without the
express written permission of AT&T.
F. Agency shall retain all materials for two years or for such longer period as
is necessary for purposes of carrying out Agency's obligations hereunder
after which time they will be returned to AT&T, placed in public storage at
AT&T's expense, or destroyed as requested by AT&T. Agency shall safeguard
and be responsible for all materials entrusted to it by or on behalf of AT&T
and shall return such materials to AT&T upon request of AT&T, and, in any
event, as soon as practicable upon termination of this Agreement. Agency
shall provide copies of materials requested by AT&T to the extent necessary
for AT&T to litigate or negotiate claims or to handle proceedings before
regulatory agencies.
ARTICLE 12 - USE OF INFORMATION
Except under the conditions stated in the next sentence, any materials and/or
information furnished or disclosed by AT&T or developed by the Agency hereunder
is the property of and shall be deemed confidential to AT&T and shall be
surrendered to AT&T at the conclusion of this Agreement, or shall be destroyed
if AT&T shall so direct in writing. Unless such information or materials were
previously known to the Agency free of any obligation to keep it confidential,
or is subsequently made public by AT&T or by a third party having a legal right
to make such disclosure, it shall be held in confidence by the Agency, shall be
used only for the purposes hereunder, and may be used for other purposes only
upon such terms and conditions as may be mutually agreed upon in writing.
ARTICLE 13 - EXCLUSIVITY AND RESERVATION OF RIGHTS
A. For the duration of this Agreement, including the period of notice prior to
its effectiveness of termination, Agency and any of its constituent
companies anywhere in the world shall not undertake any work for any of the
following companies: Ameritech, Bell Atlantic, Bell South, British Telecom,
IBM, MCI, NYNEX, Pacific Telesis, Southwestern Bell, Sprint or US West.
B. Further, Agency and any of its constituent companies shall not work for
other companies that compete with any AT&T unit unless Agency receives
written approval from AT&T and the following three (3) conditions are met:
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MC941121LD
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1. The non-AT&T business is not competitive with the AT&T account handled
by the Agency.
2. A "virtual wall" is erected so that none of the people working
on AT&T's business share any information with people working on the
competitive account.
3. The Agency understand that if the competitive company shifts its focus
and strategy to become a strategic competitor, the Agency must then
choose to work only for AT&T or the competitor.
ARTICLE 14 - AGENCY'S INFORMATION
No specifications, drawings, sketches, models, samples, tools, computer or other
apparatus programs, technical or business information or data, written, oral or
otherwise, furnished by Agency to AT&T under this Agreement, or in contemplation
of this Agreement, shall be considered by Agency to be confidential or
proprietary unless subject matter so furnished is owned by AT&T as defined and
provided under the Article 11 (Title) or Article 12 (Use of Information),
contained herein.
ARTICLE 15 - INDEMNIFICATION/INFRINGEMENT
The Agency agrees to indemnify and save harmless AT&T, its subsidiaries,
affiliates and its customers and their officers, directors, employees successors
and assigns (collectively referred to as "AT&T") from and against the following
claims, losses, suits, demands, or liens:
A. Any tortious act, omission, or statement of the Agency or any person
employed by or under contract with the Agency that results in
injury (including death), loss or damage to any person or property,
including libel, slander, and defamation;
B. Injuries or death to persons or damage to property, including theft, in any
way arising out of or occasioned by, caused or alleged to have been caused
by or on account of the performance of the work or services performed by
Agency or persons furnished by Agency, except to the extent such injury or
damages are caused by AT&T's sole negligence or willful misconduct;
C. Any failure on the part of the Agency to satisfy all claims for labor,
equipment, materials and other obligations relating to the performance of
the work hereunder;
D. Piracy, unfair competition, plagiarism, idea misappropriation under implied
contract;
E. Assertions under Worker's Compensation or similar acts made by persons
furnished by Agency or by any subcontractor, or by reason of any injuries to
such persons for which AT&T would be responsible under Worker's
Compensation or similar acts if the persons were employed by AT&T;
<PAGE>
MC941121LD
Page 13 of 19
F. Any failure by the Agency to perform Agency's obligations under this clause
or, Article 16 (Insurance); and
G. Any act of infringement of any patent, trademark, or copyright; any title,
slogan, or other trademark; or any unauthorized use of trade secret or other
proprietary interest, except where such infringement or unauthorized use
arises solely from Agency's adherence to AT&T's written instructions which
are so specific as to directly cause said infringement or unauthorized use,
in which case AT&T shall so indemnify Agency; provided however, if such
instructions specify (1) commercial material which is available on the open
market or is the same as such material or (2) material of Agency's origin,
design or selection, and the adherence to such instructions results in the
infringement or unauthorized use, then Agency shall indemnify AT&T for any
such infringement or unauthorized use.
However, the indemnification in (A) shall not apply to claims for loss or damage
to property arising solely from Agency's reasonable reliance upon the accuracy,
completeness and propriety of information furnished by AT&T concerning its and
its competitors organization, products, industry and services in developing or
producing work or work products under this Agreement.
Each party shall defend or settle, at its own expense, any action or suit
against the other for which it is responsible hereunder and shall reimburse the
other for reasonable attorneys' fees, interest, costs of suit and all other
expenses incurred by the other in connection therewith. Each party shall notify
the other promptly of any claim for which the other is responsible hereunder and
shall cooperate with the other in every reasonable way to facilitate the defense
of any such claim.
ARTICLE 16 - INSURANCE
Agency shall maintain during the term of this Agreement (1) Worker's
Compensation insurance as prescribed by the law of the state or nation in which
the work is performed; (2) employer's liability insurance with limits of at
least $300,000 for each occurrence; (3) comprehensive automobile liability
insurance if the use of motor vehicles is required, with limits of at least
$1,000,000 combined single limit for bodily injury and property damage for each
occurrence; (4) Comprehensive General Liability ("CGL") insurance, including
Advertiser's Liability and Blanket Contractual Liability and Broad Form
Property damage, with limits of at least $5,000,000 combined single limit for
personal injury and property damage for each occurrence. All CGL insurance shall
designate AT&T as an additional insured for work Agency performs for AT&T.
Agency shall cause its subcontractors to maintain insurance similar in form and
account as AT&T shall approve, which approval shall not be reasonably withheld.
All such insurance must be primary and required to respond and pay prior to any
other available coverage.
Agency agrees that Agency, Agency's insurer(s) and anyone claiming by, through,
under or in Agency's behalf shall have no claim, right of action or right of
subrogation against AT&T and its customers based on any loss
<PAGE>
MC941121LD
Page 14 of 19
or liability insured against under the foregoing insurance. Agency shall furnish
prior to the start of work certificates or adequate proof of the foregoing
insurance. AT&T shall be notified in writing at least thirty (30) days prior to
cancellation of or any change in the policy.
ARTICLE 17 - RELATIONSHIP
The Agency shall exercise full control and direction over the employees of the
Agency performing the work covered by this Agreement. Any changes in personnel
performing services for AT&T that may be reasonably requested by AT&T through
its authorized representative shall be made promptly.
Neither the Agency nor its employees or agents shall be deemed to be AT&T's
employees or agents, it being fully understood that Agency employees are
entitled to no benefits or compensation from AT&T. It is understood that the
Agency is an independent contractor for all purposes and at all times. The
Agency is wholly responsible for withholding and payment of all applicable
federal, state and local income and other payroll taxes with respect to its
employees, including contributions from them as required by law. Agency agrees
to indemnify, defend and hold AT&T harmless from any claims made by Agency
employees or former Agency employees, their heirs or assigns, against AT&T for
direct compensation, including salaries and bonuses, or for any benefits such as
medical, dental, life insurance or pension benefits.
ARTICLE 18 - SUBCONTRACTS
The Agency shall be responsible for informing subcontractors of their
responsibility to protect any confidential and proprietary information included
in any work subcontracted hereunder, and Agency shall undertake all necessary
precautions to insure that each subcontractor is in compliance with this
Article. This Agreement is not intended to create any legal rights or interests
as to persons not directly a party hereto. In accordance with this
understanding, Agency shall remain fully, directly and solely responsible for
all expenses it incurs of any nature whatsoever and shall indemnify, defend and
hold AT&T harmless from any and all claims made against AT&T by persons not a
party to this Agreement for non-payment of such expenses (except those incurred
as an authorized and disclosed advertising agent for AT&T in connection with
approved work or services performed or purchases made hereunder).
If Agency elects to subcontract out any work, then the Agency shall request
competitive quotations from a minimum of three vendors when the subcontracted
work is estimated to exceed $20,000. The quotation process shall be
administered by the Agency and contracts awarded by the Agency, but only with
the prior concurrence of AT&T. Copies of the quotations shall be submitted to
AT&T for review and approval prior to the award of a contract. In the event a
selected vendor cannot perform, the Agency shall select another vendor upon
notification to and approval by AT&T. The Agency shall not fragment any
subcontracted work to avoid the obligation to obtain quotations.
<PAGE>
MC941121LD
Page 15 of 19
ARTICLE - 19 USE OF AT&T'S NAME, LOGO, AND MARKS
All use of AT&T's name, logo and marks shall be in strict conformance with any
written BCS, Corporate or other guidelines provided by AT&T and shall be
approved in advance by AT&T.
ARTICLE 20 - AUDIT
Agency shall maintain accurate and complete records including a physical
inventory, if applicable, of all costs incurred under this Agreement in
performing the services covered by this Agreement, including the costs of labor
(other than individual salaries and bonuses of agency employees), equipment,
materials, and other disbursements. These records shall be maintained in
accordance with recognized commercial accounting practices so they may be
readily audited and shall be held until costs have been finally determined under
this Agreement and payment or final adjustment of payment, as the case may be,
has been made. Agency shall permit AT&T or AT&T's representative to examine and
audit these records on reasonable notice. Audits shall be made not later than
two (2) calendar years after the end of the year in question.
ARTICLE 21 - ASSIGNMENT
The Agency shall not assign any right under this Agreement (excepting monies due
or to become due), subcontract any work or delegate any other obligations to be
performed or owed under this Agreement without the prior written consent of
AT&T. Any attempted assignment or delegation in contravention of the above
provisions shall be void and ineffective. Any assignment of monies shall be void
and ineffective to the extent that (1) Agency shall not have given AT&T at least
thirty (30) days prior written notice of such assignment or (2) such assignment
attempts to impose upon AT&T obligations to the assignee additional to the
payment of such monies, or to preclude AT&T from dealing solely and directly
with Agency in all matters pertaining to this Agreement including the
negotiation of amendments or settlements of charges due. All work performed by
Agency's subcontractor(s) at any time shall be deemed work performed by the
Agency.
ARTICLE 22 - TAXES
AT&T shall reimburse Agency only for the following tax payments with respect to
transactions under this Agreement unless an exemption applies: state and local
sales and use taxes, as applicable. Taxes payable by AT&T shall be billed as
separate items on Agency's invoices and shall not be included in Agency's
prices. AT&T shall have the right to have Agency contest any such taxes that
AT&T reasonably deems improperly levied, at AT&T's expense and subject to its
direction and control.
<PAGE>
MC941121LD
Page 16 of 19
ARTICLE 23 - COMPLIANCE WITH LAWS
Agency and all persons furnished by Agency shall comply at their own expense
with all applicable federal, state and local laws, ordinances, regulations and
codes, including identification and procurement of required permits,
certificates, licenses, insurance approvals and inspections, in performance
under this Agreement. Agency agrees to indemnify AT&T and its customers for any
loss or damage that may be sustained by reason of any failure to do so.
ARTICLE 24 - PUBLICITY, ADVERTISING
The Agency agrees not to advertise, promote, make use of any identification of
AT&T or publicize matters relating to the services performed under this
Agreement or to mention or imply any relationship or connection with AT&T in
such advertising, promotion or publicity without the prior written consent of
AT&T. The term "identification" includes any trade name, trademark, service
mark, insignia, symbol, or any simulation thereof, and any code, drawing,
specification, or evidence of AT&T's inspection. This article does not modify
Article 12 (Use of Information).
ARTICLE 25 - WAIVER
The failure of either party at any time to enforce any right or remedy available
to it under this Agreement with respect to any breach or failure by the other
party shall not be construed to be a waiver of such right or remedy with respect
to any other breach or failure by the other party.
ARTICLE 26 - SEVERABILITY
In the event that any one or more of the provisions contained herein shall for
any reason be held to be unenforceable in any respect under the laws of any
state, or of the United States of America, such unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall then be
construed as if such unenforceable provision or provisions had never been
contained herein.
ARTICLE 27 - SURVIVAL OF OBLIGATION
The obligations of the parties under this Agreement that by their nature would
continue beyond the termination, cancellation or expiration of this Agreement,
including by way of illustration only and not limitation, those in the clauses
in Article 23 (Compliance With Laws), Article 16 (Insurance), Article 15
(Indemnification/Infringement), Article 12 (Use of Information), shall survive
termination, cancellation or expiration of this Agreement.
<PAGE>
MC941121LD
Page 17 of 19
ARTICLE 28 - CHOICE OF LAW
The construction, interpretation and performance of this Agreement shall be
governed by the laws of the State of New Jersey, excluding its choice of law
rules.
ARTICLE 29 - RELEASES VOID
Neither party shall require (1) waivers or releases of any personal rights or
(2) execution of documents, which conflict with the terms of this Agreement from
employees, representatives or customers of the other in connection with visits
to its premises and both parties agree that no such releases, waivers or
documents shall be pleaded by them or third persons in any action or proceeding.
ARTICLE 30 - SPECIAL SERVICES
At the request of AT&T, Agency may be asked to perform the following special
marketing communications services:
A. Create and produce sales promotion and collateral material.
B. Develop new product or service concepts and test marketing of new products
and services.
C. Conduct special advertising or market research.
D. Provide publicity and public relations services.
E. Provide specialized advertising services such as classified and recruitment
advertising.
F. Manage print media contracts and maintain total AT&T print data base.
G. Negotiate services for print media.
H. Negotiate services for media appearing outside the United States
(international).
I. Design services including packaging, trademarks and corporate identity
programs.
J. Stage and conduct sales, marketing positioning, sporting or other events and
meetings.
K. Design and prepare exhibits for trade shows or other venues.
L. Prepare visual presentation materials.
M. Produce television and/or radio programming other than commercials, or print
materials which are not advertising.
<PAGE>
MC941121LD
Page 18 of 19
For any special services requested by AT&T and performed by Agency, compensation
shall be mutually agreed upon in writing prior to the start of work.
ARTICLE 31 - NONEXCLUSIVE RIGHTS
It is expressly understood and agreed that this Agreement does not grant to the
Agency an exclusive right or privilege to provide any and all of the services
described in this Agreement which AT&T may require. It is, therefore, understood
that AT&T may contract with other agencies for the procurement of the same or
comparable services.
ARTICLE 32 - CHANGES IN, TERMINATION, OR SUSPENSION OF PARTICULAR WORK
AT&T may, at any time, by written notice, advise the Agency of AT&T's intent to
make changes in, additions to, or deductions from, the work on any specific
program under an approved estimate. If such intended changes cause an increase
or decrease in the amount or character of the services to be rendered under this
Agreement, or in the time required for its performance, the Agency shall
promptly so advise AT&T, specifying the impact of such change on the approved
estimates. Thereafter, if AT&T elects to make such change, an equitable
adjustment to all appropriate terms and conditions, including the amount to be
paid to the Agency and the time for performance shall be made and this Agreement
shall be modified accordingly in writing. Notwithstanding anything contained in
this Article 32 to the contrary no change shall have the effect of reducing the
required ninety (90) days notice of termination.
ARTICLE 34 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Agency and AT&T
relating to the subject matter hereof and shall not be modified or rescinded in
any manner except by a writing executed by both parties. Other than as expressly
provided herein, both the Agency and AT&T agree that no prior or contemporaneous
oral representations form a part of their agreement. Additional or different
terms inserted in this Agreement by Agency, or deletions thereto, whether by
alterations, addenda, or otherwise, shall be of no force and effect, unless
expressly consented to by AT&T in writing. The provisions of this Agreement
supersede all contemporaneous oral agreements and all prior oral and written
quotations, communications, agreements and understandings of the parties with
respect to the subject matter of this Agreement.
It is agreed and understood that Agreement Number AD911475LD executed on May 7,
1991 shall be deemed terminated, superseded and replaced by the terms and
conditions of this Agreement effective January 1, 1994.
<PAGE>
MC941121LD
Page 19 of 19
WITNESS WHEREOF, the Agency and AT&T have executed this Agreement in duplicate
on the day and year below written.
AT&T COMMUNICATIONS, INC.
BRONNER SLOSBERG HUMPHREY INC. BUSINESS COMMUNICATIONS SERVICES
By: /s/ Robert E. Stoloff By: /s/ David W. Robertson
------------------------------- ------------------------------------
(Signature) (Signature)
Robert E. Stoloff David W. Robertson
SVP & Chief Financial Officer - Director
------------------------------- ------------------------------------
(Name & Title Typed or Printed) (Name & Title Typed or Printed)
October 11, 1995 September 11, 1995
------------------------------- ------------------------------------
(Date) (Date)
<PAGE>
MC941121LD
Schedule I
SCHEDULE I
[***] (3 pages)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
MC941121LD
Schedule II
Page 1 of 5
SCHEDULE II
NON-MEDIA BILLING SCHEDULE
Net out-of-pocket ("Net O-O-P") as used in this Schedule II shall mean the
amount of money the Agency pays to outside suppliers on behalf of AT&T based on
an authorized estimate.
A. Charges for Publication Advertising and Outdoor Advertising
1. Preparation of rough layouts and copy No Charge
2. Production of comprehensive layouts:
- purchased from outside suppliers Net O-O-P
- produced by Agency personnel Quoted in advance
3. Type composition, printing, engraving,
electrotypes, finished art, photographs,
photostats and other reproduction mats,
stereotypes, quantity proofs:
- purchased from outside suppliers Net O-O-P
- produced by Agency personnel Quoted in advance
4. Endorsement fees, testimonials, etc. Net O-O-P
5. Fashion Coordination performed by:
- studio and/or stylist Net O-O-P
- Agency personnel (Competitive Fee
Schedule) Net O-O-P
6. Travel expenses of Agency personnel to Net O-O-P
supervise production, obtain testimonials
and otherwise directly attributable to
specific publication and outdoor
advertising
7. Supervision and checking No Charge
<PAGE>
MC941121LD
Schedule II
Page 2 of 5
8. Talent for use in test and/or finished Net O-O-P
advertising
9. Production of test advertisements Net O-O-P
10. Research and licensing costs for stock Net O-O-P
photography
11. Location scouting Net O-O-P
12. All other elements required to produce Net O-O-P
publications and outdoor advertising
not referred to above
B. Charges for Broadcast Advertising
1. Preparation of copy and rough storyboards No Charge
by Agency for the Agency's presentation
of creative executions
2. Regular storyboards and reproduction
copies of all regular storyboards and
animatics:
- purchased from outside suppliers Net O-O-P
- produced by Agency Quoted in advance
3. Talent for use in programs and Net O-O-P
commercials when separately contracted
for the Agency
4. Packaged shows and films Net O-O-P
5. Programs and scripts by outside Net O-O-P
speciality writers or producers
6. Music rights, jingles, prize money, Net O-O-P
dramatic literary or musical adaptions
or arrangements
<PAGE>
MC941121LD
Schedule II
Page 3 of 5
7. Previewing, auditioning, selecting, No Charge
negotiating, contracting of programs
and talent
8. Producer's charges for filming, taping Net O-O-P
or recording commercials
9. Film production charges, studio and Net O-O-P
equipment rentals, scenery, props and
costumes and location scouting
10. Fashion Coordination/hair and makeup:
- by Agency personnel No Charge
- by studio and/or stylist Net O-O-P
11. Release prints and duplicate tapes for Net O-O-P
distribution
12. Distribution of release prints and Net O-O-P
duplicate tapes
13. Motion picture, slide and slidefilm Net O-O-P
processing
14. Checking, including air checks No Charge
15. Endorsement fees, testimonials, etc. Net O-O-P
16. Travel expenses of Agency personnel to Net O-O-P
supervise production or expenses otherwise
directly attributable to specific
commercial production
17. Music production associated with creative Net O-O-P
presentation, demos and test ads
18. Talent, including voice over, associated Net O-O-P
with creative presentations, demos and
test ads
<PAGE>
MC941121LD
Schedule II
Page 4 of 5
19. Closed captioning expenses Net O-O-P
20. All production costs for rough or test Net O-O-P
productions
21. All other elements required to televise or
broadcast television or radio commercials
and not referred to above:
- purchased from outside suppliers Net O-O-P
- produced by Agency No Charge
C. Postage, Express and Freight and Sales Taxes
1. Incidental to normal business routine No Charge
between Agency and client home office
2. Shipment of advertising materials to Net O-O-P
suppliers, media, etc.
3. Sales Taxes Net O-O-P
D. Telephone, Teletype, Telegraph and Facsimile
1. Incidental to normal business routine No Charge
between Agency and client home office
2. Attributable to unusual service or to the Net O-O-P
production of specific advertising
projects
E. Research
1. All research conducted by Agency unless No Charge
authorized by client
2. All media research normally provided by No Charge
agencies
<PAGE>
MC941121LD
Schedule II
Page 5 of 5
3. Test materials Net O-O-P
4. Travel for Agency personnel to supervise, Net O-O-P
participate in and observe the research
F. Free-Lance Creative/Technical Talent Net O-O-P
<PAGE>
MC941121LD
Amendment No. 1
Page 1 of 1
ADVERTISING/MARKETING AGREEMENT AMENDMENT
AGREEMENT NUMBER: MC941121LD
AMENDMENT NUMBER: 1
AGENCY: BRONNER SLOSBERG HUMPHREY INC.
695 Atlantic Avenue
Boston, Massachusetts 02111
Advertising/Marketing Agreement MC941121LD dated October 11, 1995 between
AT&T Communications, Inc. - Business Communications Services and Bronner
Slosberg Humphrey Inc., is hereby amended as follows:
Effective January 1, 1995, Article 7, Section A.3. is deleted in its entirety
and replaced with the following:
Article 7.A.3
For 1995 the yearly fee is [***]. For each subsequent year, the yearly
fee shall be mutually agreed upon by the parties in writing and attached as
an amendment hereto.
ALL OTHER TERMS AND CONDITIONS TO REMAIN UNCHANGED
Accepted:
BRONNER SLOSBERG AT&T COMMUNICATIONS, INC.
HUMPHREY INC. BUSINESS COMMUNICATIONS SERVICES
By: /s/ Robert E. Stoloff By: /s/ David W. Robertson
------------------------------ ------------------------------
David W. Robertson - Director/Adv.
- --------------------------------- ----------------------------------
(Name & Title-Printed) (Name & Title-Printed)
11/27/95
- --------------------------------- ----------------------------------
(Date) (Date)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.33
Contract No. _______
Page 1 of 15
DIRECT MARKETING AGREEMENT
WITNESSETH:
That in consideration of the agreements expressed herein, Cellular Telephone
Company d/b/a AT&T Wireless Services, Northeast Region, ("AWS") having an office
at 15 East Midland Avenue, Paramus, New Jersey 07652 and Bronner Slosberg
Humphrey Inc., a corporation of the Commonwealth of Massachusetts ("Agency"),
having an office at 800 Boylston Street, The Prudential Tower, Boston,
Massachusetts 02199, do hereby agree as follows:
ARTICLE 1 - AGENCY SERVICES
The Agency shall act as AWS's direct marketing agency in the planning,
preparing, and placing of such direct communication programs (i.e. business to
business retention, consumer acquisition, marketing consulting, database
consulting and special projects) and marketing, as may be requested by AWS. The
Agency shall perform other services as AWS may request, as outlined in Article
30, subject to mutual written agreement of the parties.
Agency shall devote its best efforts, on behalf of AWS to further AWS's
interests and shall reasonably endeavor in every proper way to make AWS's direct
marketing and associated efforts, for which the Agency is herein responsible,
successful. To accomplish the foregoing, Agency specifically agrees that its
services shall include but not be limited to the following:
A. Assigning and maintaining, with AWS's consent executive strategic input
and review, an account management group, creative, systems and
fulfillment, research and analysis, teleservices marketing, partnership
marketing, production, media and traffic teams necessary to service the
AWS account;
B. Provide direct marketing services, including the creation, production
and placement, insertion or distribution of direct mail and other direct
communication programs;
C. Attending meetings, as requested by AWS, with AWS's staff and periodic
meetings with AWS's top management;
D. Familiarizing itself with the business of AWS, its products and
services, and the industry in which AWS operates; and analyzing the
present and potential direct marketing opportunities for such products
and services so as to provide AWS with direct marketing counsel,
including specific direct marketing objectives, strategies and plans for
reaching AWS's business objectives;
E. Preparing layouts, copy, artwork, scripts and storyboards and furnishing
other elements and materials to be used in finished advertisements for
all media and promotions to be used by AWS;
F. If requested, advising AWS of the availability of all broadcast,
publication and out-of-home media which can appropriately be used to
advertise AWS products and services; and developing media plans suitable
for AWS;
G. Supervising the production of all finished direct marketing material;
<PAGE>
Contract No.________
Page 2 of 15
H. Negotiating, arranging and contracting for any special talent required,
with AWS's approval, and for all photography, models, special effects,
layout, artwork and for all printing for use in the direct marketing
promotions program; and making appropriate arrangements for tax
withholdings from talent;
I. Analyzing direct marketing, marketing and consumer research to aid AWS
in developing advertising strategy and developing and evaluating AWS's
direct marketing and media;
J. Conducting and analyzing competitive direct marketing tracking.
The above services shall be performed to the satisfaction of AWS, shall be
performed in accordance with the highest professional standards and shall be in
accordance with such requirements or restrictions as may be lawfully imposed by
governmental authority. Services not completed to the reasonable satisfaction of
AWS shall be reperformed at no cost to AWS.
ARTICLE 2 - APPROVALS BEFORE COMMITMENT
No commitment of any kind shall be made by the Agency on behalf of AWS unless
specifically authorized in writing by AWS, except as provided in Article 3
(Estimates).
The Agency shall submit concepts, scripts, print copy and other materials as
early as possible to AWS for internal review and required legal and technical
approval.
ARTICLE 3 - ESTIMATES
The Agency shall furnish to AWS, in writing and in advance, labor fee and a cost
estimate of all expenditures in connection with all services and projects
recommended by Agency or requested by AWS. Prior to undertaking such projects or
committing AWS's funds, Agency shall obtain written authorization from AWS.
Agency shall furnish revisions of these estimates when changes in costs are
anticipated in excess of ten percent (10%), plus or minus. Each estimate as
approved by AWS shall be executed by both parties. Approved estimates shall
constitute the only authorization for the Agency to take any action, make any
commitments or expend any money. In those situations where time or circumstances
will not permit specific prior written authorization, commitments to exceed
$10,000.00 may be made with oral approval, provided such approval shall be
confirmed by an approved written estimate no later than ten (10) working days
thereafter.
ARTICLE 4 - DISCOUNTS
Agency shall obtain all prompt payment or other similar discounts available to
it from media and other suppliers from which it makes purchases in the
performance of the services hereunder. When Agency receives a cash discount,
rebate, frequency discount, volume discount, promotional consideration, or other
similar credit from such media or other suppliers, AWS shall receive full
allowance for each such amount, provided Agency, after timely notification,
receives payment from AWS within the applicable discount period.
ARTICLE 5 - ANNUAL REVIEW
An annual review shall take place during the first quarter (January - March) of
each calendar year for the review of the previous year's performance, to be
attended by appropriate AWS management representatives and by Agency management
and senior members of the AWS agency group. The purpose of this review will be
to determine the appropriate Agency bonus based on previous year's business
results. There will also be a mid-year review that addresses the quality of
Agency
<PAGE>
Contract No.________
Page 3 of 15
services and account management. AWS and the Agency will mutually agree on
any corrective actions needed.
ARTICLE 6. DEFINITIONS
A. "Gross Revenue" as used herein shall mean the total amount of
compensation, exclusive of pass-through costs, the Agency receives from
AWS for direct marketing services performed after reconciliation and any
rebates or supplementary fees are paid.
B. "Annual Salary" as used herein shall mean annual base salary, excluding
bonuses. It does not include employer paid FICA, insurance and medical
benefits or payments into retirement plans.
C. "Direct Salaries" as used herein shall mean [***]
1. [***]
[***]
Total number of hours worked on Agency business means [***]
2. At AWS's option, such option to be obtained by the Agency in writing
from AWS, AWS may elect to "buy-out" designated individuals. For those
individuals bought out by AWS, AWS shall be responsible for that
person's total annual base salary, excluding bonuses.
D. "Profit Before Taxes" as used herein shall mean [***]
ARTICLE 7 - AGENCY COMPENSATION
A. Agency compensation for the calendar year shall be computed as follows:
1. During the last quarter of the previous calendar year, AWS and the
Agency shall meet to determine:
a. The account staffing (including all functions as defined in Article
6, Paragraph C) for the AWS account for the next calendar year.
b. The aggregate Direct Salaries, as defined herein, of the agreed
upon account staff.
2. The fee for the calendar year is then [***]
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Contract No.________
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3. For 1997 the yearly fee is estimated at [***]. Any increase or
decrease in the estimated fee will require AWS approval. For each
subsequent year, the yearly fee shall be mutually agreed upon by the
parties in writing and attached as an amendment hereto.
4. For 1997 the Agency's average rates range between [***] and [***]
per hour for marketing communications and planning. There will be
additional projects that will fall outside of this range that involve
operational enablement work beyond marketing communications (i.e.
database support, customer care assessments, etc.).
B. [***] The specific criteria for evaluation shall be mutually
agreed upon by the parties.
Based on the Agency's performance in assisting AWS to meet its stated
goals, the Agency shall be allowed a bonus based on an agreed upon formula
attached hereto as Schedule I.
C. AWS shall pay the Agency on dates to be mutually agreed upon by the
parties.
D. If for any reason Agency anticipates exceptional increases in Direct
Salaries during any quarter of the year, a meeting between Agency and AWS
shall be called by the Agency to discuss what action should be taken while
still providing AWS with needed services.
E. If for any reason AWS expects the direct marketing budget to decline or
increase significantly above or below the anticipated budget for the year,
AWS will notify Agency of this change as soon as possible.
F. AWS agrees to reimburse the Agency directly for reasonable direct client
service expenses (i.e. out of pocket expenses of Agency related to the AWS
account), including travel and living expenses authorized by AWS and
incurred in connection with this Agreement. Reimbursement for travel and
living expenses shall be in accordance with the following guidelines:
1. Transportation
a. Airline Tickets - Agency will be reimbursed for air fare that has
been purchased at coach fare for domestic travel (business class is
allowed for international flights over six (6) hours in duration).
Agency employees may not request specific flights/carriers or
arrange/alter travel plans to obtain airline promotional benefits.
Agency employees traveling under first class status will be
responsible for the expense difference incurred. The ticket stub
must be presented and relate directly to the AWS assignment. Agency
employees must account for all business related tickets whether
used, partially used, or unused. Unused tickets should be promptly
returned to the licensing travel agency for credit. Reimbursement
will not be made for the purchase of travel insurance.
b. Reasonable taxi, bus, rail or car rental expenses will be
reimbursed along with associated receipts from tolls, tips, and
parking fees will be reimbursed by AWS. For groups traveling to the
same destination, special group fares should be utilized when
available. Reimbursement for car rental expenses will be made upon
presentation of a car rental agreement/receipt. Car rentals must be
contracted at the lowest available rate and in the
compact/subcompact category
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
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where possible, unless special requirements dictate otherwise, in which
cases AWS prior approval is required. For more than two people, a mid-
size rental is acceptable, however, names of the people must be indicated
on the car rental receipt. Taxis, shuttles and other available forms of
transportation should be used where it is more practical or less
expensive.
AWS will not reimburse car rental refueling charges.
Cab fares for "late nights" (after 8 PM) are billable.
c. A mileage allowance, as approved yearly by the IRS, will be reimbursed to
Agency employees who use their own personal automobiles for services
provided on behalf of AWS. Allowable mileage is determined by deducting
the normal commuting mileage.
When traveling, use public transportation as a first choice, personal car as
a second choice, and car rental as the last choice.
2. Lodging - Business class hotels should be utilized by Agency employees unless
another kind of hotel better meets the Agency employees needs at a lower
rate. Agency shall only invoice hotel expenses that are directly related to
the work performed under this Agreement. Expenses incurred at hotels for AWS
business related services (fax, typing, photocopying) are reimbursable. If
accommodations are not needed, it is the responsibility of the Agency
employee to ensure that the hotel is notified. "No show" bills will not be
reimbursed.
3. Meals and Entertainment - Reasonable expenses for business meals and/or
entertainment are reimbursable it the activities are directly related to AWS
related services. Business entertainment must be directly related and
conducive to the transaction of AWS related business and may precede or
follow the conducting of AWS business related activities or discussion. The
senior AWS representative must approve all such business entertainment in
writing and in advance.
Receipts for meal expenditures should be submitted for meal reimbursement.
However, per diem meal allowances may be charged for meals, with no
requirement for submitting receipts. The per diem meal allowances (including
gratuities) are as follows:
Breakfast $ 5.00
Lunch $ 7.00
Dinner $25.00
Daily Total $37.00
Normal reasonable and necessary gratuities up to 20% are reimbursable to the
Agency employee. This would include, but is not limited to, tips for Airport
Sky Caps, Hotel Bellboys, etc. Tips for meals should be listed individually
for reimbursement.
Overtime meals are not billable.
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4. Business Calls - Business calls and faxes made on AWS's behalf while
staying overnight are billable. Agency employees are encouraged to use a
calling card whenever possible. Calls must list reason and person called
and be on the AT&T Network. Personal calls are not billable.
5. Personal Expenses - AWS will not reimburse personal expenses of Agency
employees. If expenses of a personal nature (i.e., hotel/ship purchases,
alcoholic beverages, telephone and long-distance charges, in-room movies,
sundry items, etc.) are charged against the room, the amount will be
deducted from the invoice presented to AWS. Personal expenses for
laundry/valets, tips, etc. will be reimbursed where reasonable; up to a
maximum of $10.00 per day.
6. Magazines/Newspapers/Books are not billable unless specifically requested,
in writing, by AWS.
7. Services provided by Agency employees - For services requested by AWS, the
Agency shall provide, as a maximum, the following number of people:
Maximum Number of People
a. Location Shoots 3
b. Press Runs 1
c. Strategy Meetings *
d. Review Meetings *
e. Research Meetings (Focus Groups) *
* Agency shall obtain prior approval from AWS regarding the number of
people to attend.
The Agency shall submit copies of all hotel bills and other reimbursable
expenses along with the associated charge receipt(s). Expenses shall be billed
at cost and invoices for all reimbursable expenses shall list the date(s),
company, person(s) visited and business purpose for the expense.
ARTICLE 8 - DURATION
The term of this Agreement shall begin on January 1, 1997 and shall continue
until terminated by either party for their convenience by giving ninety (90)
days written notice or as otherwise provided herein.
After expiration of the period of notice, no rights or liabilities shall arise
out of this relationship, regardless of any plans which may have been made for
future direct marketing promotions, except that: (1) if AWS terminates, any non-
cancelable contracts made on AWS's authorization (or any uncompleted work
previously approved by AWS either specifically or as part of a plan, and still
existing at the expiration of the period of notice), which contracts were not or
could not be assigned by the Agency to AWS or AWS's assignee, shall be carried
to completion by the Agency and paid for by AWS; and (2) if Agency terminates,
it shall be similarly responsible for any non-cancelable contracts unless AWS
chooses to assume such contracts. Upon termination of this Agreement, the Agency
shall transfer, assign, and make available to AWS, all property and materials in
the Agency's possession or control belonging to and paid for by AWS, and all
information regarding AWS's direct marketing. The Agency also agrees to give all
reasonable cooperation towards transferring, with the approval of third parties
in interest, all assignable reservations, contracts and agreements with direct
marketing media, or others, for advertising
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space, broadcast time or materials yet to be used and all rights and claims
thereto and therein, upon being duly released from the obligation thereof.
Upon termination, unused direct marketing/promotional plans and ideas
prepared by the Agency for AWS prior to the date of termination shall remain
AWS's property.
Except as otherwise specifically set forth, all the rights and liabilities of
the parties arising out of this Agreement shall cease on the date of
termination.
ARTICLE 9. BILLING AND PAYMENT
A. Agency's bills for space in publications, outdoor and carcard
advertising, and radio and TV time and talent shall be rendered to AWS in
sufficient time to afford AWS a reasonable opportunity to remit funds to
enable Agency to pay charges incurred for AWS's account on their due
dates, and AWS agrees to pay such bills within the time herein specified
for payment. Agency's bills for other items will be rendered to AWS from
time to time; unless otherwise specified, AWS shall pay Agency 100% of
all estimated Agency fee prior to the commencement of each project. AWS
shall pay 70% of all reimbursable expenses in advance of project work and
the remaining 30% of reimbursable expenses shall be invoiced upon
completion of the particular project. Such bills will be due and payable
within thirty (30) days from date thereof. Agency shall submit all media
and other invoices in time for AWS to obtain customary cash discounts.
All bills submitted to AWS by Agency shall be net of all commissions
and/or markups.
On a quarterly basis and again within ninety (90) days after the close of
each project, Agency will prepare for review by AWS a fee and pass-
through reconciliation for each project with appropriate credit/payment
adjustments made. Agency will provide AWS with credits in the amount of
any overpayment made by AWS for fee and reimbursable expenses.
(i) Fee reconciliations for direct marketing will reflect actual hours
worked at each billing rate, by position, by department;
(ii) Fee reconciliations for advertising materials and deliverables will
be supported by advertising and production summaries, including
number of advertisements placed and number of units actually
produced and shipped; and
(iii) Pass-through reconciliations will be supported by vendor invoices
(except summary compilations in the case of courier charges) and
travel expense summary reports.
All non-media billing charges shall be in accordance with Schedule II,
attached hereto and made a part hereof. In no event shall AWS be liable
for media or non-media bills unless the Agency submits such bills to AWS
within three (3) months from the date in which costs were incurred.
B. Receipt or acceptance by AWS of any statement or invoice furnished
pursuant hereto or any sums paid by AWS hereunder shall not preclude AWS
from questioning the correctness thereof within two (2) years of the year
in question, and if any inconsistencies or mistakes are discovered in
such statements or payments, they shall be immediately rectified and
prompt adjustments and corresponding payments shall be made to compensate
thereof.
C. AWS agrees to pay any "short rates" with which AWS is justly charged by
the media placed on AWS's behalf by Agency for any premature termination
of a contract that is caused by AWS. Agency shall pay any "short rates"
with which AWS is charged by media for any premature termination of a
contract that is caused by Agency.
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The Agency shall submit invoices for all work performed under this Agreement.
Invoices against this Agreement shall indicate the work performed for which
billing is rendered, shall be in accordance with approved estimates and shall
be submitted in duplicate.
ARTICLE 10 - NOTICES
Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Agency or AWS shall be in writing and
shall be given or made by telegram, telex, confirmed facsimile or by
certified or registered mail to the addresses noted in the first paragraph of
this Agreement.
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile or when deposited, postage prepaid in the U.S.
mail.
ARTICLE 11 - TITLE
A. Except as set forth in Paragraph C below, all creative work and work
products, including, but not limited to, direct marketing and/or
marketing plans, media plans, ideas, and direct marketing materials
developed by the Agency, or on Agency's behalf, for AWS in connection
with this Agreement, and any and all copyrights therein are hereby
assigned and agreed to be assigned by Agency to AWS and shall be and will
remain the exclusive property of AWS, which may use any of such as it
deems appropriate. All such work and work products shall be considered
"works made for hire" to the extent allowed by law. Agency shall acquire
for AWS from Agency subcontractors or others all such assignments, rights
and covenants, and will furnish AWS with all such documentation, as, any
of them, are needed in AWS's reasonable opinion to assure vesting in it
of title to, and unrestricted ownership rights in, such work, work
products and copyrights, and to perfect the enforceability of such
copyrights.
Should the Agency desire to use material developed for AWS for another
client or for other business reasons it may request AWS's permission to
do so. Granting of any such permission shall be at AWS's sole discretion.
B. If Agency furnishes AWS with materials previously copyrighted by Agency
and not originally prepared hereunder, Agency hereby grants and agrees to
grant to AWS unrestricted, non-exclusive, royalty-free licenses for all
purposes under any and all copyrights in such materials, with the
unrestricted right to grant such sublicenses under those licenses as AWS
may see fit, to the extent that such materials are used in conjunction
with any of the work and work products referred to in Paragraph A of this
Article.
C. If AWS has consented to the inclusion of materials owned or copyrighted
by others, or in which other rights may be claimed by others (and there
shall be no such inclusion without AWS's prior consent), then the Agency
shall notify AWS of the scope of the rights and permissions the Agency
intends to obtain with respect to such materials and shall modify the
scope of same as requested by AWS. Copies of all rights and permissions
clearly identifying the included works to which they apply shall be
supplied to AWS prior to program completion.
D. Agency warrants the originality of the work prepared for AWS hereunder
(except if such work is in the public domain) and its disclosure to AWS
exclusively and that, except as provided in Paragraphs B and C above, no
portion of the material prepared for AWS under this Agreement is derived
from copyrighted material.
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E. Agency undertakes that no part of the creative work or work products
developed for AWS in connection with this Agreement, whether or not
copyrightable, shall be disclosed to any persons or used by the Agency to
produce creative materials for any persons other than AWS without the
express written permission of AWS.
F. Agency shall retain all materials for two years or for such longer period
as is necessary for purposes of carrying out Agency's obligations
hereunder after which time they will be returned to AWS, placed in
public storage at AWS's expense, or destroyed as requested by AWS.
Agency shall safeguard and be responsible for all materials entrusted to
it by or on behalf of AWS and shall return such materials to AWS upon
request of AWS, and, in any event, as soon as practicable upon
termination of this Agreement. Agency shall provide copies of materials
requested by AWS to the extent necessary for AWS to litigate or negate
claims or to handle proceedings before regulatory agencies.
ARTICLE 12 - USE OF INFORMATION
Except under the conditions stated in the next sentence, any materials and/or
information furnished or disclosed by AWS or developed by the Agency
hereunder is the property of and shall be deemed proprietary and confidential
to AWS and shall be surrendered to AWS at the conclusion of this Agreement,
or shall be destroyed if AWS shall so direct in writing. Unless such
information or materials were previously known to the Agency free of any
obligation to keep it confidential as agreed to by both parties, or is
subsequently made public by AWS or by a third party having a legal right to
make such disclosure, it shall be held in confidence by the Agency for a
period of twenty (20) years, shall be used only for the purposes hereunder,
and may be used for other purposes only upon such terms and conditions as
may be mutually agreed upon in writing.
ARTICLE 13 - EXCLUSIVITY AND RESERVATION OF RIGHTS -
A. For the duration of this Agreement, including the period of notice prior
to its effectiveness of termination, Agency and any of its constituent
companies anywhere in the world shall not undertake any work for any of
the following companies or their wireless subsidiaries or partnerships:
Ameritech, Bell Atlantic, Bell South, British Telecom, IBM, MCI, NYNEX,
Pacific Telesis, Southwestern Bell, Sprint or US West.
B. Further, Agency and any of its constituent companies shall not work for
other companies that compete with any AWS unit unless at AWS sole
discretion the Agency receives written approval from AWS and the
following three (3) conditions are met:
1. The non-AWS business is not competitive with the AWS account handled
by the Agency.
2. A "virtual wall" is erected so that none of the people working on
AWS's business share any information with people working on the
competitive account.
3. The Agency understand that if the competitive company shifts its
focus and strategy to become a strategic competitor, the Agency must
then choose to work only for AWS or the competitor.
ARTICLE 14 - AGENCY'S INFORMATION
No specifications, drawings, sketches, models, samples, tools, computer or
other apparatus programs, technical or business information or data, written,
oral or otherwise, furnished by Agency to AWS under this Agreement, or in
contemplation of this Agreement, shall be considered
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by Agency to be confidential or proprietary unless subject matter so
furnished is owned by AWS as defined and provided under the Article 11
(Title) or Article 12 (Use of Information), contained herein.
ARTICLE 15 - INDEMNIFICATION/INFRINGEMENT
The Agency agrees to indemnify and save harmless AWS, its subsidiaries,
affiliates and its customers and their officers, directors, employees
successors and assigns (collectively referred to as "AWS") from and
against the following claims, losses, suits, demands, or liens:
A. Any tortious act, omission, or statement of the Agency or any person
employed by or under contract with the Agency that results in injury
(including death), loss or damage to any person or property, including
libel, slander, and defamation;
B. Injuries or death to persons or damage to property, including theft, in
any way arising out of or occasioned by, caused or alleged to have been
caused by or on account of the performance of the work or services
performed by Agency or persons furnished by Agency, except to the
extent such injury or damages are caused by AWS's sole negligence or
willful misconduct;
C. Any failure on the part of the Agency to satisfy all claims for labor,
equipment, materials and other obligations relating to the performance
of the work hereunder;
D. Piracy, unfair competition, plagiarism, idea misappropriation under
implied contract;
E. Assertions under Worker's Compensation or similar acts made by persons
furnished by Agency or by any subcontractor, or by reason of any
injuries to such persons for which AWS would be responsible under
Worker's Compensation or similar acts if the persons were employed by
AWS;
F. Any failure by the Agency to perform Agency's obligations under this
clause or, Article 16 (Insurance); and
G. Any act of infringement of any patent, trademark, or copyright; any
title, slogan, or other trademark; or any unauthorized use of trade
secret or other proprietary interest, except where such infringement or
unauthorized use arises solely from Agency's adherence to AWS's written
instructions which are so specific as to directly cause said
infringement or unauthorized use, in which case AWS shall so indemnify
Agency; provided however, if such instructions specify (1) commercial
material which is available on the open market or is the same as such
material or (2) material of Agency's origin, design or selection, and
the adherence to such instructions results in the infringement or
unauthorized use, then Agency shall indemnify AWS for any such
infringement or unauthorized use.
However, the indemnification in (A) shall not apply to claims for loss or
damage to property arising solely from Agency's reasonable reliance upon
the accuracy, completeness and propriety of information furnished by AWS
concerning its and its competitors organization, products, industry and
services in developing or producing work or work products under this
Agreement.
Each party shall defend or settle, at its own expense, any action or suit
against the other for which it is responsible hereunder and shall
reimburse the other for reasonable attorneys' fees, interest, costs of
suit and all other expenses incurred by the other in connection therewith.
Each party shall notify the other promptly of any claim for which the
other is responsible hereunder and shall cooperate with the other in every
reasonable way to facilitate the defense of any such claim.
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ARTICLE 16. INSURANCE
Agency shall maintain during the term of this Agreement (1) Worker's
Compensation insurance as prescribed by the law of the state or nation in
which the work is performed; (2) employer's liability insurance with limits
of at least $300,000 for each occurrence; (3) comprehensive automobile
liability insurance if the use of motor vehicles is required, with limits of
at least $1,000,000 combined single limit for bodily injury and property
damage for each occurrence; (4) Comprehensive General Liability ("CGL")
insurance, including Advertiser's Liability and Blanket Contractual Liability
and Broad Form Property damage, with limits of at least $5,000,000 combined
single limit for personal injury and property damage for each occurrence. All
CGL insurance shall designate AWS as an additional insured for work Agency
performs for AWS. Agency shall cause its subcontractors to maintain insurance
similar in form and amount as AWS shall approve, which approval shall not be
reasonably withheld. All such insurance must be primary and required to
respond and pay prior to any other available coverage.
Agency agrees that Agency, Agency's insurer(s) and anyone claiming by,
through, under or in Agency's behalf shall have no claim, right of action or
right of subrogation against AWS and its customers based on any loss or
liability insured against under the foregoing insurance. Agency shall furnish
prior to the start of work certificates or adequate proof of the foregoing
insurance. AWS shall be notified in writing at least thirty (30) days prior
to cancellation of or any change in the policy.
ARTICLE 17 - RELATIONSHIP
The Agency shall exercise full control and direction over the employees of
the Agency performing the work covered by this Agreement. Any changes in
personnel performing services for AWS that may be reasonably requested by AWS
through its authorized representative shall be made promptly.
Neither the Agency nor its employees or agents shall be deemed to be AWS's
employees or agents, it being fully understood that Agency employees are
entitled to no benefits or compensation from AWS. It is understood that the
Agency is an independent contractor for all purposes and at all times. The
Agency is wholly responsible for withholding and payment of all applicable
federal, state and local income and other payroll taxes with respect to its
employees, including contributions from them as required by law. Agency
agrees to indemnify, defend and hold AWS harmless from any claims made by
Agency employees or former Agency employees, their heirs or assigns, against
AWS for direct compensation, including salaries and bonuses, or for any
benefits such as medical, dental, life insurance or pension benefits.
ARTICLE 18 - SUBCONTRACTS
The Agency shall be responsible for informing subcontractors of their
responsibility to protect any confidential and proprietary information
included in any work subcontracted hereunder, and Agency shall undertake all
necessary precautions to insure that each subcontractor is in compliance with
this Article. This Agreement is not intended to create any legal rights or
interests as to persons not directly a party hereto. In accordance with this
understanding, Agency shall remain fully, directly and solely responsible for
all expenses it incurs of any nature whatsoever and shall indemnify, defend
and hold AWS harmless from any and all claims made against AWS by persons not
a party to this Agreement for non-payment of such expenses (except those
incurred as an authorized and disclosed direct marketing agent for AWS in
connection with approved work or services performed or purchases made
hereunder).
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If Agency elects to subcontract out any work, then the Agency shall request
competitive quotations from a minimum of three vendors when the subcontracted
work is estimated to exceed $20,000. The quotation process shall be administered
by the Agency and contracts awarded by the Agency, but only with the prior
concurrence of AWS. Copies of the quotations shall be submitted to AWS for
review and approval prior to the award of a contract. In the event a selected
vendor cannot perform, the Agency shall select another vendor upon notification
to and approval by AWS. The Agency shall not fragment any subcontracted work to
avoid the obligation to obtain quotations.
ARTICLE 19 - USE OF AWS'S NAME, LOGO, AND MARKS
All use of AWS's name, logo and marks shall be in strict conformance with any
written AWS, Corporate or other guidelines provided by AWS and shall be
approved in advance by AWS. AWS retains all rights to restrict or terminate any
use of its trademark and marks at anytime.
ARTICLE 20 - AUDIT
Agency shall maintain accurate and complete records including a physical
inventory, if applicable, of all costs incurred under this Agreement in
performing the services covered by this Agreement, including the costs of labor
(other than individual salaries and bonuses of agency employees), equipment,
materials, and other disbursements for purposes of certifying that the bills to
AWS and actual Direct Salaries and Profit computations are accurate and in
accordance with the definitions set forth in this Agreement. Discrepancies in
the bills shall be remedied by Agency within a reasonable period of time after
they are discovered, by either crediting or debiting AWS or by issuing a check
to AWS. These records shall be maintained in accordance with recognized
commercial accounting practices so they may be readily audited and shall be held
until costs have been finally determined under this Agreement and payment or
final adjustment of payment, as the case may be, has been made. Agency shall
permit AWS or AWS's representative to examine and audit these records on
reasonable notice. Audits shall be made not later than two (2) calendar years
after the end of the year in question.
ARTICLE 21 - ASSIGNMENT
The Agency shall not assign any right under this Agreement (excepting monies due
or to become due), subcontract any work or delegate any other obligations to be
performed or owed under this Agreement without the prior written consent of
AWS. Any attempted assignment or delegation in contravention of the above
provisions shall be void and ineffective. Any assignment of monies shall be void
and ineffective to the extent that (1) Agency shall not have given AWS at least
thirty (30) days prior written notice of such assignment or (2) such assignment
attempts to impose upon AWS obligations to the assignee additional to the
payment of such monies, or to preclude AWS from dealing solely and directly with
Agency in all matters pertaining to this Agreement including the negotiation of
amendments or settlements of charges due. All work performed by Agency's
subcontractor(s) at any time shall be deemed work performed by the Agency.
ARTICLE 22 - TAXES
AWS shall reimburse Agency only for the following tax payments with respect to
transactions under this Agreement unless an exemption applies: state and local
sales and use taxes, as applicable. Taxes payable by AWS shall be billed as
separate items on Agency's invoices and shall not be included in Agency's
prices. AWS shall have the right to have Agency contest any such taxes that AWS
reasonably deems improperly levied, at AWS's expense and subject to its
direction and control.
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ARTICLE 23 - COMPLIANCE WITH LAWS
Agency and all persons furnished by Agency shall comply at their own expense
with all applicable federal, state and local laws, ordinances, regulations and
codes, including identification and procurement of required permits,
certificates, licenses, insurance approvals and inspections, in performance
under this Agreement. Agency agrees to indemnify AWS and its customers for any
loss or damage that may be sustained by reason of any failure to do so.
ARTICLE 24 - PUBLICITY, ADVERTISING
The Agency agrees not to advertise, promote, make use of any identification of
AWS or publicity matters relating to the services performed under this Agreement
or to mention or imply any relationship or connection with AWS in such direct
marketing, promotion or publicity without the prior written consent of AWS. The
term "identification" includes any trade name, trademark, service mark,
insignia, symbol, or any simulation thereof, and any code, drawing,
specification, or evidence of AWS's inspection. This article does not modify
Article 12 (Use of Information).
ARTICLE 25 - WAIVER
The failure of either party at any time to enforce any right or remedy available
to it under this Agreement with respect to any breach or failure by the other
party shall not be construed to be a waiver of such right or remedy with respect
to any other breach or failure by the other party.
ARTICLE 26 - SEVERABILITY
In the event that any one or more of the provisions contained herein shall for
any reason be held to be unenforceable in any respect under the laws of any
state, or of the United States of America, such unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall then be
construed as if such unenforceable provision or provisions had never been
contained herein.
ARTICLE 27 - SURVIVAL OF OBLIGATION
The obligations of the parties under this Agreement that by their nature would
continue beyond the termination, cancellation or expiration of this Agreement,
including by way of illustration only and not limitation, those in the clauses
in Article 23 (Compliance With Laws), Article 16 (Insurance), Article 15
(Indemnification/Infringement), Article 12 (Use of Information), shall survive
termination, cancellation or expiration of this Agreement.
ARTICLE 28 - CHOICE OF LAW AND VENUE
The construction, interpretation and performance of this Agreement shall be
governed by the laws of the State of New Jersey, excluding its choice of law
rules, and any action on this Agreement will be in the state or federal courts
of the state of New Jersey.
ARTICLE 29 - RELEASES VOID
Neither party shall require (1) waivers or releases of any personal rights or
(2) execution of documents, which conflict with the terms of this Agreement from
employees, representatives or customers of the other in connection with visits
to its premises and both parties agree that no such releases, waivers or
documents shall be pleaded by them or third persons in any action or proceeding.
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ARTICLE 30 - SPECIAL SERVICES
At the request of AWS, Agency may be asked to perform the following special
marketing communications services:
A. Create and produce sales promotion and collateral material.
B. Develop new product or service concepts and test marketing of new products
and services.
C. Conduct market research.
D. Design services including packaging, trademarks and corporate identity
programs.
E. Stage and conduct sales, marketing positioning, sporting or other events
and meetings.
F. Design and prepare exhibits for trade shows or other venues.
G. Prepare visual presentation materials.
H. Other services outside of the scope of direct marketing.
For any special services requested by AWS and performed by Agency, compensation
shall be mutually agreed upon in writing prior to the start of work.
ARTICLE 31 - NON-EXCLUSIVE RIGHTS
It is expressly understood and agreed that this Agreement does not grant to
the Agency an exclusive right or privilege to provide any and all of the
services described in this Agreement which AWS may require. It is, therefore,
understood that AWS may contract with other agencies for the procurement of the
same or comparable services.
ARTICLE 32 - CHANGES IN, TERMINATION, OR SUSPENSION OF PARTICULAR WORK
AWS may, at any time, by written notice, advise the Agency of AWS's intent to
make changes in, additions to, or deductions from, the work on any specific
program under an approved estimate. If such intended changes cause an increase
or decrease in the amount or character of the services to be rendered under
this Agreement, or in the time required for its performance, the Agency shall
promptly so advise AWS, specifying the impact of such change on the approved
estimates. Thereafter, if AWS elects to make such change, an equitable
adjustment to all appropriate terms and conditions, including the amount to be
paid to the Agency and the time for performance shall be made and this
Agreement shall be modified accordingly in writing. Notwithstanding anything
contained in this Article 32 to the contrary no change shall have the effect of
reducing the required ninety (90) days notice of termination.
ARTICLE 33 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Agency and AWS
relating to the subject matter hereof and shall not be modified or rescinded in
any manner except by a writing
<PAGE>
Contract No.________
Page 15 of 15
executed by both parties. Other than as expressly provided herein, both the
Agency and AWS agree that no prior or contemporaneous oral representations form
a part of their agreement. Additional or different terms inserted in this
Agreement by Agency, or deletions thereto, whether by alterations, addenda, or
otherwise, shall be of no force and effect, unless expressly consented to by AWS
in writing. The provisions of this Agreement supersede all contemporaneous oral
agreements and all prior oral and written quotations, communications, agreements
and understandings of the parties with respect to the subject matter of this
Agreement.
WITNESS WHEREOF, the Agency and AWS have executed this Agreement in duplicate on
the day and year below written.
CELLULAR TELEPHONE COMPANY
BRONNER SLOSBERG HUMPHREY, INC. d/b/a AT&T Wireless Services
- ------------------------------- ----------------------------
By: Robert E. Stoloff By: Kathryn A. Russell
____________________________ ________________________
(Signature) (Signature)
Robert E. Stoloff Kathryn Russell
SVP & Chief Financial Officer Vice President
_______________________________ __________________________________
(Name & Title Typed or Printed) (Name & Title Typed or Printed)
7/24/97 7/16/97
_______________________________ __________________________________
(Date) (Date)
<PAGE>
SCHEDULE I
1997 BSH Agency Bonus Structure -
AWS NY/NJ
7/97
OBJECTIVE: Reward BSH with bonus when company-wide annual business goals are met
or exceeded across three program areas: [***], [***], and [***]. Bonus based on
% of total year fees by program (all bonus fees to be paid in 1998). Note:
research and data fees are not included in 1997.
[***]
[***]
Business Goal
Low to Medium to High
--- ------ ----
Response Rate Range* [***] to [***] to [***]
Bonus % [***] to [***] to [***]
* Response rate / associated bonus to be determined after each [***] for
[***] (Data not included).
[***]
Low to Medium to High
--- ------ ----
Response Rate * [***] to [***] to [***]
Bonus % [***] to [***] to [***]
* Response rate / associated bonus to be
determined after each [***].
[***]
<TABLE>
<CAPTION>
Above Churn Target to Target to Below Target
------------------ ------ ------------
<S> <C> <C> <C> <C> <C>
End of Year Total [***] to [***] to [***]
Voluntary Churn [***] of target* to [***] of target * to [***] of target
Bonus % [***]
[***] = x [***] = x [***]
</TABLE>
* For every % point below target of voluntary churn BSH will receive [***] of
the bonus pool with a maximum of [***] bonus (below target bonus based (x) =
target [***] dollars).
Note: To receive any payout, churn must reach a minimum of [***] of the target.
After [***] payout is incremental based on delivery (e g. if [***] of target
churn is achieved,
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Bronner Bonus Fees Opportunity
7/97
[***]
Business Goal
Response Rate [***]
<TABLE>
<CAPTION>
Low Medium High
--- ------ ----
<S> <C> <C> <C> <C> <C>
[***] to [***] to [***]
Bonus % [***] [***] [***]
</TABLE>
CALCULATION
Bonus % [***] [***] [***]
X X X
Est. Fee Total [***] [***] [***]
= = =
Bonus $ Opportunity [***] to [***] [***]
Range
[***] Fees *
[***] $[***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
------
[***]
* Note: Actual fees will be calculated after program completion.
(2)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
[***]
7/97
Business Goal
Response Rate [***]
Low Medium High
--- ------ ----
Response Rate [***] to [***] to [***]
Bonus % [***] [***] [***]
CALCULATION
Bonus % [***] to [***] to [***]
X X X
Est. Fee Total [***] [***] [***]
= = =
Bonus $ Opportunity [***] [***] [***]
Range
Estimated Fees (Fees to be actualized at year-end)
[***] [***]
[***] [***]
[***] [***]
[***] 2B Control [***]
[***] 2B [***]
[***] III [***]
-----
[***]
Brainstorming [***]
[***] [***]
-----
[***]
(3)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
[***]
7/97
<TABLE>
<CAPTION>
Above Churn Target Target Below Target
<S> <C> <C> <C> <C> <C>
End of Year Total [***] [***] [***]
Voluntary Churn
Bonus % of Total [***] of target to [***] of target to [***] of target
Retention Fees [***] [***] = x plus up to [***]
increase of x
</TABLE>
<TABLE>
<CAPTION>
CALCULATION
<S> <C> <C> <C>
Est. Bonus % [***] of [***] [***] of [***] [***] of [***]
X X X
Est. Fee Total [***] [***] [***]
= = =
Bonus $ Opportunity Range [***] to [***] to [***]
</TABLE>
Estimated Retention Fees *
<TABLE>
<CAPTION>
[***] $ [***] $
----- - --- -
<S> <C> <C> <C>
Jan. Rate [***] [***] Auto [***] [***]
Feb. Rate [***] [***] Ed. Mailing [***]
[***] [***] Life Cycle [***]
Bond [***] [***] Predictive Churn [***]
Bond 15/24 [***] [***] [***]
March Rate [***] [***] Lifecycle [***]
April Rate [***] [***] [***] [***]
May Rate [***] [***] Creative Platform [***]
June Rate [***] [***] [***] [***]
July Rate [***] [***] [***] [***]
Bond [***] [***] -----
June Remail [***] [***]
August Rate [***] [***]
Rate [***] Sept.-Dec [***]
[***] 1Q [***]
[***] [***]
Rate [***] [***]
Consumer 1997 DPCS [***] [***]
Deact Research March [***]
Rate Elimination [***]
[***] [***]
DPCS [***] [***]
[***] 2Q [***]
KAR Meeting 4/16 [***]
2Q [***] [***] * Actual as of 5/23.
-----
[***]
</TABLE>
(4)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
1997 Total BSH Bonus
Opportunity Range
7/97
Low High
--- ----
$ $
- -
[***] [***] [***]
[***] [***] [***]
[***] [***] [***]
------ ------
Total [***] [***]
NOTE: The fees listed for each of the projects herein are rough figures. The
bonus calculation will be done based on actual fees for each program.
In addition, as a point of clarification, the "Below Target" portion of the
bonus calculation for [***] should be interpreted to be [***]. This calculation
should not be interpreted to mean that BSH gets [***]
(5)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Contract No._______
Schedule II
Page l of 2
SCHEDULE II
NON-MEDIA BILLING SCHEDULE
Net out-of-pocket ("Net O-O-P") as used in this Schedule II shall mean the
amount of money the Agency pays to outside suppliers on behalf of AWS based on
an authorized estimate.
A. Charges for Publication Advertising and Outdoor Advertising
1. Preparation of rough layouts and copy No Charge
2. Production of comprehensive layouts:
- purchased from outside suppliers Net O-O-P
- produced by Agency personnel Quoted in advance
3. Type composition, printing, engraving;
electrotypes, finished art, photographs,
photostats and other reproduction mats,
stereotypes, quantity proofs:
- purchased from outside suppliers Net O-O-P
- produced by Agency personnel Quoted in advance
4. Endorsement fees, testimonials, etc. Net O-O-P
5. Fashion Coordination performed by:
- studio and/or stylist Net O-O-P
- Agency personnel (Competitive Fee Schedule) Net O-O-P
6. Travel expenses of Agency personnel to
supervise production, obtain testimonials
and otherwise directly attributable to
specific publication and outdoor advertising Net O-O-P
7. Supervision and checking No Charge
<PAGE>
Contract No.________
Schedule II
Page 2 of 2
8. Talent for use in test and/or finished Net O-O-P
advertising
9. Production of test advertisements Net O-O-P
10. Research and licensing costs for stock Net O-O-P
photography
11. Location scouting Net O-O-P
12. All other elements required to produce Net O-O-P
publications and outdoor advertising
not referred to above
B. Postage, Express and Freight, and Sales Taxes
1. Incidental to normal business routine No Charge
between Agency and client home office
2. Shipment of advertising materials to Net O-O-P
suppliers, media, etc.
3. Sales Taxes Net O-O-P
D. Telephone, Teletype, Telegraph and Facsimile
1. Incidental to normal business routine No Charge
between Agency and client home office
2. Attributable to unusual service or to the Net O-O-P
production of specific advertising
projects
E. Research
1. All research conducted by Agency unless No Charge
authorized by client
2. All media research normally provided by No Charge
agencies
3. Test materials Net O-O-P
4. Travel for Agency personnel to supervise, Net O-O-P
participate in and observe the research
F. Free-Lance Creative/Technical Talent Net O-O-P
<PAGE>
EXHIBIT 10.34
Strategic Interactive Group
A Bronner Slosberg Humphrey Company
Ms. Marlene D. Beeler
AT&T Interactive Group, Vice President
295 North Maple Avenue - Room 5113B#2
Mr. John C. Casserly
District Manager, Marketing Communications
AT&T Corporation
295 North Maple Avenue - Room 2247G#1
Basking Ridge, NJ 07920
July 1, 1999
Dear Marlene and Chris:
The purpose of this letter is to confirm the appointment of Strategic
Interactive Group as AT&T's interactive agency partner. In this capacity SIG
will provide strategic and implementation support to AT&T's internet development
efforts.
Attached is the overall scope of work between now and the end of the 1999,
including staffing, fees, and approximate timelines. Page 15 of the attached
document details the professional fees for the approved scope of work (totaling
$1.625 million). In addition, this attached document also details activities
that are not included in this budget but which will be discussed for potential
subsequent approval.
We will be providing detailed scope of work, timelines, and specific budgets for
each of the identified subprojects within the overall scope, as they are
initiated. The sum of these specific budgets will not exceed the total
professional fees in the scope of work without prior approval from AT&T. Our
expectation is that this agreement will fall under Bronner Slosberg Humphrey's
overall contract terms with AT&T and that the specific scope of work we
undertake will be governed by this agreement. Please sign below indicating your
approval of this letter of engagement.
Both SIG and the overall Bronnercom company are extremely excited to be your
strategic partner in achieving AT&T's goal of being the leader in this critical
area. We look forward to initiating this relationship with you.
Sincerely,
/s/ John Marshall
- ---------------------------
John Marshall
SVP, Group Director
Agreed: /s/ John C. Casserly /s/ Marlene D. Beeler
-------------------------- ------------------------------
John C. Casserly Marlene D. Beeler
Attachment
cc: Michael Ward
Strategic Interactive Group Inc. . The Prudential Tower, 800 Boylston Street,
Boston, Massachusetts 02199 . 617867-1000, Fax: 617 867-1111
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.35
AGREEMENT
between
Bronnercom, LLC
and
General Motors Corporation
January 1, 2000
<PAGE>
TABLE OF CONTENTS
1. Services
2. Cost Estimates; Authorization; Reports
3. Bronnercom Review Obligations; Approval for Publication
4. Invoices and Payment
5. Right of Audit
6. Term and Termination
7. Termination of Authorized Services
8. Ownership of Materials
9. Confidentiality
10. Insurance
11. Defense and Indemnity
12. Loaned Vehicles
13. Notices
14. Utilization of Minority Contracts
15. Relationship of Parties
16. General Provisions
16.1 Compliance with Laws
16.2 Waiver
16.3 Settoff/Recoupment
16.4 Governing Law
16.5 Non-Assignment
16.6 Severability
16.7 Modification
16.8 Entire Agreement
Exhibit A - Services and Compensation
Attachment 1 - General Conditions
Exhibit B - Authorizations and Approvals
Exhibit C - Reports
Exhibit D - Travel Guidelines
Exhibit E - Proof of Services
Exhibit F - Intellectual Property Rights Agreement
Exhibit G - Property Disposal
Exhibit H - Loan of Vehicle Receipt
Exhibit I - Notices
2
<PAGE>
MARKETING & ADVERTISING SERVICES AGREEMENT
THIS AGREEMENT is entered into this 1st day of January, 2000 by and between
Bronnercom, LLC and General Motors Corporation, and relates to the marketing
and/or advertising services identified on Exhibit A ("Services") which may
hereafter be furnished by Bronnercom to General Motors.
1. Services
1.1 Bronnercom will provide Services on a non-exclusive basis for General
Motors. It is expressly understood that General Motors is not obligated
under this Agreement to purchase any services from Bronnercom or to issue
to Bronnercom any "Authorization" (as defined in Exhibit B), nor is
Bronnercom obligated to accept any Authorization issued by General Motors.
1.2 Bronnercom will render Services to General Motors for the effectiveness of
advertising, merchandising, sales promotion and other such matters assigned
to Bronnercom pursuant to Authorizations which may be issued from time to
time by General Motors. Bronnercom agrees to cooperate with General Motors
and to use its best skill and judgment in the performance of Services.
Bronnercom will perform Services timely, diligently and to the reasonable
satisfaction of General Motors, in an efficient and economical manner
consistent with the best interest of General Motors.
2. Cost Estimates; Authorization; Reports
2.1 Bronnercom agrees to prepare and furnish, within ten (10) business days and
in such detail as may be reasonably required by General Motors, an itemized
cost estimate of all Services being requested by General Motors for which a
charge is to be made by Bronnercom. Such estimates will be in writing to
the extent reasonably possible, however, if because of time constraints, a
written estimate is not possible, a verbal estimate is acceptable, provided
that it is promptly forwarded to General Motors in writing. No fee for
Services will be payable by General Motors, unless an Authorization has
first been approved by an appropriate General Motors representative, or his
or her designee, as identified in Exhibit B. Such approvals will be in
writing to the extent possible, however, if time limitations make this
impossible, an oral approval is acceptable, provided that such oral
approval is promptly confirmed in writing by Bronnercom to General Motors.
When directed by General Motors, Bronnercom will obtain input from a
production consultant before General Motors approval is requested.
2.2 No additions to, changes in or deletions from Services authorized under
this Section 2 will be made without the prior written approval of the
appropriate General Motors representative (or his or her designee);
provided, however, that a representative of Bronnercom may authorize an
emergency change in the field when such a change is deemed to be in the
best interest of General Motors and the appropriate General Motors
representative(s) is unavailable. Any such change made by Bronnercom will
be
3
<PAGE>
communicated to General Motors as soon as possible, and in any event within
two (2) business days, at which time written approval must be secured.
2.3 Bronnercom may obtain verbal approval from General Motors for amounts which
exceed the cost estimate(s) by the lesser of ten percent (10%) or ten
thousand dollars ($10,000). However, written confirmation of such verbal
approval must be obtained from General Motors within two (2) weeks.
Requests for written confirmation of verbal approval may be accumulated and
submitted on one revised cost estimate for each job number.
2.4 Bronnercom will provide General Motors with the reports identified in
Exhibit C, at the frequency indicated.
3. Bronnercom Review; Approval for Publication
3.1 No advertising, merchandising, sales promotion, research or other material
will be released, or in any manner placed or published in any medium,
unless (1) the material has been reviewed by appropriate Bronnercom
personnel, including Bronnercom legal counsel or legal compliance officer;
(2) the material has also been reviewed by appropriate General Motors legal
counsel; (3) the material in its to-be-released form has been provided to
General Motors and a written authorization obtained from the individual
identified in Exhibit B or such individual's designee. If, because of time
constraints, a written authorization cannot be obtained, a verbal
authorization is acceptable provided that such verbal authorization is
immediately confirmed in writing by Bronnercom to General Motors.
3.2 Bronnercom will establish and maintain a procedure to ensure (1) that an
appropriate level of legal review of claims and substantiation is available
at, or on behalf of, Bronnercom; (2) that adequate substantiation exists
for all claims; and (3) that all legal requirements (e.g., required
disclosures) applicable to the advertising, merchandising, or other
materials are met. Bronnercom will judge the adequacy of claim
substantiation in light of its internal policies and applicable laws,
rules, regulations and interpretations of them. General Motors will provide
Bronnercom with a copy of all current consent orders between GM and the
Federal Trade Commission and/or various states which apply to General
Motors' advertising.
3.3 General Motors, at the request of Bronnercom, will provide Bronnercom with
substantiation for claims and representations regarding its products or
services and industry made in all advertising and other materials. General
Motors will indemnify Bronnercom pursuant to Section 11.2 with respect to
the accuracy of any material or information furnished to Bronnercom to
substantiate claims or representations. Bronnercom will maintain adequate
substantiation of all claims and representations in all advertising and
other material published by Bronnercom on file until the end of the next
model year (current model year plus the next model year), except for
substantiation of comparative handling claims which must be retained until
the end of four model years (current model year plus three model years).
4
<PAGE>
3.4 Nothing in this Agreement will be deemed to require Bronnercom to undertake
any act or perform any services, which in its judgment, would be
misleading, false, libelous, unlawful or otherwise prejudicial to General
Motors' or Bronnercom's interests.
4. Invoices and Payment
4.1 Agency compensation is based on a fixed fee which shall be billed monthly
on a pro rata basis. Agency shall be paid a performance bonus, the criteria
of which shall be determined by the parties and set forth in Exhibit A or
any other subsequent General Motors Division compensation agreements. If
bonus criteria is not developed and agreed to by the parties, then a
performance bonus will not be paid and Bronnercom will continue to be paid
based on the fixed fee agreed to in Exhibit A or subsequent General Motors
Division compensation agreements.
4.2 Upon completion of Services or agreed upon segments thereof as set forth in
the estimates, and acceptance by General Motors, General Motors agrees to
pay Bronnercom those amounts, if any, set forth in Exhibit A for Service(s)
rendered by Bronnercom pursuant to General Motors' Authorization(s).
Bronnercom will issue invoices to the attention of General Motors'
department which authorized such Service(s). Unless otherwise agreed to in
the Authorization, remittances shall be paid as follows: Invoices for
media, pre-paid postage, and customer incentive redemptions received the
1st through 15th of the month will be paid by the 25th of the month. Such
invoices received the 16th through the 31st will be paid by the 10th of the
month following the month billed. All other invoices received during a
month will be paid in accordance with GM's Multilateral Netting System
(MNS-2) which provides, on average, that payment shall be made on the 2nd
day of the 2nd month.
4.3 Upon the request of General Motors, supporting subcontractor invoices, upon
which the charges of Bronnercom are based, will accompany any Bronnercom
invoice. If Bronnercom's invoice includes allowable charges for travel and
subsistence, whether incurred by the subcontractor or by Bronnercom
personnel, these will also be included with such invoice documentation
fully supporting such charges, supplied in accordance with Exhibit A, and
be in accordance with the Travel Guidelines set forth in Exhibit D,
attached to and made a part of this Agreement.
4.4 Bronnercom will review all invoices from subcontractors to ensure that
appropriate supporting documentation has been received and verification of
performance has been completed, prior to submitting an invoice to General
Motors for the Services provided by the subcontractor.
4.5 Bronnercom will prepare and furnish to General Motors with each invoice, a
written explanation of amounts which exceed the approved cost estimate(s)
by the lesser of ten percent (10%) or ten thousand dollars ($10,000).
General Motors is liable for amounts which exceed the approved cost
estimate(s) only if Bronnercom has complied with the
5
<PAGE>
procedures of Section 2.2 or 2.3 above, or if such overages are due to
causes beyond the control of Bronnercom and its subcontractors or suppliers
and without their fault or negligence.
4.6 Provided that the "Proof of Services" requirements set forth in Exhibit E
have been fulfilled, General Motors will pay Bronnercom's invoices in
accordance with the payment terms set forth on the Authorization, or if no
such payment terms are stated on the Authorization, then as stated in
Exhibit A.
5. Right of Audit
Bronnercom will keep a separate account of the cost of Services based on
its customary accounting procedures. This account is subject to audit by
General Motors during Bronnercom's normal business hours and upon
reasonable advance notice to Bronnercom, at any time during the progress of
and after completion of all Services. Bronnercom will keep such account and
maintain its records in a manner to facilitate such audit and agrees that
such audit may be used as a basis for settlement of disputes which might
arise regarding the propriety of charges, if any. For this purpose,
Bronnercom agrees to preserve all pertinent ledgers, payroll data (confined
to timekeeping records for projects billed on an hourly basis), books,
vouchers, audit reports and all other relevant documents for the purpose of
auditing charges and/or all allocations related to this Agreement, for a
period from the final payment of invoice to the longer of either (i) the
current year plus three (3) calendar years, or (ii) the last closed GM tax
year. Notwithstanding the above, Bronnercom is not required to provide or
make available to client for such audit personnel records, individual
payroll or salary data or information that could be used to calculate
individual payroll or salary data. In addition, Bronnercom shall have the
right to redact the names of other clients from the records. Bronnercom
also agrees to use reasonable efforts to include a provision in each
contract it enters into with others relating to Services that requires the
foregoing retention of records by such subcontractors and grants to
Bronnercom, its agents and representatives, and to General Motors, a
similar right to audit such charges. In the event Bronnercom is unable to
secure the inclusion of such audit rights and record retention by its
subcontractors, prior to entering into any contract with others relating to
Services, Bronnercom will promptly obtain and follow General Motors' advice
with respect thereto.
6. Term and Termination
6.1 The term of this Agreement will commence as of the date first above written
and will continue in effect thereafter until terminated, with or without
cause, by either party by giving the other party at least ninety (90) days
prior written notice of the date of such termination. Notwithstanding the
foregoing, the terms and provisions of this Agreement will govern all
Authorizations issued by General Motors and accepted by Bronnercom prior to
the termination of this Agreement, provided that such Authorizations are
not terminated in accordance with Section 7 below.
6
<PAGE>
6.2 On or before December 31 of each year during the term of this Agreement,
General Motors and Bronnercom will review the services provided by
Bronnercom and the compensation received by it as set forth in Exhibit A
and will, as agreed to by the parties, prepare, date and execute an amended
Exhibit A for the following year.
7. Termination of Authorized Services
7.1 Notwithstanding anything to the contrary contained in this Agreement or in
any Authorization, and in addition to General Motors' right to terminate in
Section 6.1, General Motors may terminate, at any time, with or without
cause, any portion of Services under any Authorization by giving Bronnercom
written notice, which notice will state the portion of the Services to be
terminated and the effective date of such termination. If the termination
by General Motors, in whole or in part, of any General Motors' Division
scope(s) of work represents a majority of the Services for such Division
and requires Bronnercom to re-assign personnel or reduce overhead for such
Division, General Motors will allow at least a 90 day period for Bronnercom
to make an orderly transition for redeploying or terminating personnel and
reducing overhead. During this 90 day period, Bronnercom will transition
resources in good faith to minimize fee compensation. Upon receipt of such
notice of termination, and except as otherwise directed by General Motors,
Bronnercom will:
(a) stop all work on the Services on the date(s) and to the extent
specified in the notice;
(b) place no further orders or enter into contracts for materials,
services, facilities, media time or space or otherwise, except as may
be necessary for the completion of such portion of the Services that
have not been terminated;
(c) immediately advise General Motors of all material orders or contracts
that in any way relate to the performance of the Services terminated
by the notice;
(d) terminate all orders or contracts as may be requested by General
Motors and, with the prior approval of General Motors, use its best
efforts to settle all outstanding liabilities or claims arising out of
the termination of such orders or contracts;
(e) assign to General Motors, or persons designated by General Motors, all
rights, title and interest of Bronnercom in and to such orders or
contracts as may be requested by General Motors, including all fees
and commissions to be received by Bronnercom pursuant to the terms of
any such order or contract; provided, however, that, with respect to
any Services which would normally have been performed by Bronnercom,
all fees commissioned on any audio or audio/visual advertising (e.g.,
radio, TV, cable, etc.) placed up to the effective date of termination
and run during such period, or on any print advertising whose closing
dates are prior to the effective date of termination, will be paid to
Bronnercom, regardless of who may have planned, prepared or placed
such advertising;
7
<PAGE>
(f) subject to the rights of third parties permitted under Section 8
below, and subject to payment of amounts specified in Section 7.2, as
directed by General Motors and at General Motors' sole expense,
transfer title and deliver to General Motors, (1) all work in process,
completed work, supplies and other items produced as part of, or
acquired in connection with, the performance of the Services
terminated by such notice and (2) completed or partially completed
drawings, films, photographs, information or other tangible property
which, had the Authorization been fulfilled, would have been furnished
to General Motors;
(g) complete performance of Services, or portions thereof, which have not
been terminated by the notice; and
(h) take such further action, and execute such further instruments, as may
be reasonably necessary or as General Motors may reasonably direct,
for the protection and preservation of all work performed by or for
Bronnercom for General Motors or property in the possession of
Bronnercom and in which General Motors has or may be entitled to
acquire an interest.
7.2 If General Motors terminates all or any portion of an Authorization
pursuant to Section 7.1, or this entire Agreement pursuant to Section 6.1,
except with respect to Bronnercom's breach of such Authorization or this
Agreement, if any, General Motors will pay to Bronnercom the following
amounts:
(a) compensation pursuant to Section 4 of this Agreement for all Services
completed and accepted by General Motors as of the effective date
specified in the notice of such termination, recognizing that if the
termination by General Motors, in whole or in part, of any General
Motors' Division scope(s) of work represents a majority of the
Services for such Division and requires Bronnercom to re-assign
personnel or reduce overhead for such Division, General Motors will
allow at least a 90 day period for Bronnercom to make an orderly
transition for redeploying or terminating personnel and reducing
overhead. During this 90 day period, Bronnercom will reallocate
resources in good faith to minimize applicable fees.
(b) reimbursement for all non-cancelable commitments or contract
cancellation charges and settlement costs, if any, actually paid by
Bronnercom to supplier(s), contractor(s) and/or subcontractor(s) with
the prior approval of General Motors; and General Motors will hold
Bronnercom harmless from any further liability to third party
suppliers (including all reasonable legal fees and costs) arising from
the termination of Services; and
(c) reimbursement for all necessary and documented expenses or costs
incurred and actually paid by Bronnercom pursuant to sub-paragraphs
(f) and (h) of Section 7.1 above for the transfer and the protection
and preservation of all work performed by or for Bronnercom for
General Motors.
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7.3 In no event will General Motors be liable for, and General Motors will make
no payment to Bronnercom or its subcontractors with respect to loss of
anticipated profit or commission and unabsorbed overhead on any Services
terminated under this Section.
7.4 Within ninety (90) days from the effective date of termination,
Bronnercom will submit a comprehensive termination claim to General Motors,
with sufficient supporting data to permit General Motors to audit such
claim within days, and Bronnercom will promptly furnish such
supplemental and supporting information as General Motors may reasonably
request. General Motors, or its authorized agents, will have the right to
audit as permitted under section 5, and examine all books, records,
facilities, work, material, inventories and other items relating to any
termination claim of Bronnercom. Upon final settlement of any such
termination claim, Bronnercom will furnish General Motors with an
appropriate release of all claims arising from termination of an
Authorization or this Agreement.
8. Ownership of Materials
The following are applicable to all materials, services, ideas and concepts
adopted and paid for by General Motors.
(a) Subject to Subsection (e) and (i) below, Bronnercom agrees that all
software, reports, manuals, names, logos, programs, compositions,
photographs, illustrations, tapes and any other material prepared by
Bronnercom employees under this Agreement and all other work products
of Bronnercom employees made or created under this Agreement belong
exclusively to General Motors.
(b) Subject to Subsection (e) and (i) below, Bronnercom agrees that all
software, writings, compositions, photographs, illustrations,
discoveries, designs, ideas, inventions and improvements whether
copyrightable, patentable or not, that are written, conceived,
created, discovered or made by Bronnercom employees or subcontractors
in the course of the work done under this Agreement will be promptly
disclosed to General Motors and will become General Motors' sole
property.
(c) Bronnercom agrees to sign and execute, require employees to sign and
execute, and make best efforts to have subcontractors sign and
execute, all assignments (including waiver of moral rights), and other
papers necessary to vest the entire right, title and interest in such
software, writings, compositions, photographs, illustrations, names,
logos, music, lyrics designs, ideas, inventions, improvements or
discoveries in General Motors, and do all lawful acts and sign all
assignments and other papers General Motors may reasonably request
relating to applications for patents, trademarks and copyrights, both
United States and foreign, or relating to the conduct of any
opposition, litigation or other controversy in connection therewith,
provided all expenses incident to the filing of such applications, the
prosecution such applications, and the conduct of any opposition,
litigation or other controversy will be borne by General Motors.
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(d) Bronnercom agrees to require Bronnercom employees, and make best efforts to
have all subcontractors assigned to perform work for General Motors, sign
an Intellectual Property Rights Agreement or an equivalent document,
subject to General Motors approval. Such approval has been granted for the
documents attached as Exhibit F. Bronnercom further agrees to maintain such
signed documents on file throughout the term of this Agreement and upon
request of General Motors to deliver them to General Motors upon
termination of this Agreement.
(e) In exceptional instances, Bronnercom may not recommend or be able to secure
an assignment to General Motors of exclusive ownership in the rights to a
work, which encompasses all original works or authorship, literary,
dramatic, musical, artistic and certain other intellectual works. Those
instances will be mutually agreed upon in writing by General Motors and
Bronnercom prior to any contractual arrangements being implied or entered
into by Bronnercom and General Motors, or Bronnercom on behalf of General
Motors. General Motors and Bronnercom together, or Bronnercom on behalf of
General Motors, will execute a contract containing all final terms and
conditions of the limited license interest or restricted usage on such
works accorded to General Motors.
(f) Bronnercom agrees to submit copies of all photographs and transparencies as
well as submitting copies of any other works as directed by General Motors
which are created or acquired for purposes of performing this Agreement to
the GM Media Archives along with the name, address and telephone number of
the copyright owner and any restrictions on future use by General Motors as
provided for in Paragraph 8(e) above.
(g) Any material or ideas prepared for or submitted to General Motors, but not
adopted and paid for by General Motors (regardless of whether the physical
embodiment of the creative work is in General Motors' possession in the
form of copy, artwork, plates, recording, films, tapes, etc.), remain the
property of Bronnercom and may be submitted by Bronnercom to other clients
for their use, provided that such submission or use does not involve the
release of any confidential information regarding General Motors' business
or methods of operations.
(h) At the conclusion of each job, Bronnercom will advise General Motors of any
remaining special equipment, props or wardrobe material and will dispose of
such items in accordance with Exhibit G.
(i) Notwithstanding provisions contained in this agreement to the contrary,
General Motors acknowledges that Bronnercom possesses general knowledge,
experience, skill, talent, ideas, concepts, know-how, algorithms, libraries
of code and other information the field in which it will provide the
Services and that such
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information was or will be developed or acquired by Bronnercom other than
on the account of General Motors, including without limitation,
Bronnercom's Customer Base Management (CBM) model and ancillary Behavior
Optimization Process (BOP) (all the foregoing, whether developed or
acquired prior to or concurrent with the Services and Deliverables,
referred to as "Agency Information"). General Motors further acknowledges
and agrees that such Agency Information may be incorporated, in whole or in
part, into the General Motors' work, and that, notwithstanding any other
provision of this Agreement, Bronnercom retains all rights in and to the
Agency Information subject only to a non-exclusive, non-transferable
license granted to General Motors to use such Agency Information, but only
to the extent that Agency Information may be embodied in the General Motors
work as contemplated by this agreement. To the extent that General Motors'
work or Agency Information has entered the public domain (due to, for
example, publication) through no breach by Bronnercom of its obligations to
General Motors, Bronnercom shall have the same rights to such General
Motors' work as it would have under the law, absent this Agreement and the
relationship described in this Agreement.
9. Confidentiality
9.1 Bronnercom covenants and agrees that, both during the term and after the
termination of this Agreement, Bronnercom will not disseminate, reveal or
otherwise make available to any person, or use for its own purposes, any of
General Motors non-public information learned by it during the term of this
Agreement regarding, but not limited to, trade secrets and confidential
information, advertising matters, ideas, plans, techniques, accounts,
products, business, customers or methods of operation, except as otherwise
required in the performance of its obligations under Authorizations, or
except as may be required by any law, court, legal process or other
regulatory or examining authorities (whether governmental or otherwise), or
except information that becomes public through no fault of Bronnercom.
Bronnercom will use its best efforts to include a confidentiality provision
in each contract it enters into with others relating to Services which is
substantially similar to the foregoing sentence. Any exception to this
Section will be at the direction of General Motors and must be documented
in writing.
9.2 The provisions of this Section 9 will survive the termination of this
Agreement for a period of three (3) years from the effective date of any
such termination. Upon termination of this Agreement, all documents in
Bronnercom's possession containing such information will be returned to
General Motors or destroyed, as General Motors may elect. Notwithstanding
the foregoing, Bronnercom may retain a copy of the documents for archival
purposes.
10. Insurance
10.1 During the term of this Agreement, Bronnercom will maintain policies of
insurance in the following types and amounts:
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(a) Workers compensation in an amount not less than the statutory limits
for the state(s) in which Services are to be performed, including
employer's liability insurance in an amount not less than $1,000,000.
If Bronnercom is self-insured, a certificate of the state in which
the Services are to be performed must be furnished by such state
agency directly to General Motors.
(b) Commercial general liability insurance, including contractual
liability coverage, with minimum limits of liability of not less than
$10,000,000 per occurrence.
(c) Automobile liability insurance (including owned, non-owned, and hired
vehicles), with minimum limits of not less than $10,000,000 per
occurrence.
(d) Advertiser's liability insurance, including contractual liability
coverage, with minimum limits of not less than $10,000,000 per
occurrence.
10.2 All insurance policies will be issued by reputable insurance companies
satisfactory to General Motors. If such policies do not contain a
separation of insureds provision, they will be endorsed to provide cross-
liability coverage. Bronnercom will maintain all such required insurance
in force unless agreed to in writing by General Motors.
10.3 Before Services are started, Bronnercom will furnish to General Motors
certificates(s) of insurance evidencing compliance with the insurance
requirements. Each certificate will: (1) set forth the amount of coverage,
policy number and date of expiration, (2) name General Motors as an
additional insured under all of the above policies, except those listed in
Section 10.1(a) but only with respect to operations performed by
Bronnercom for General Motors under this Agreement, (3) provide that such
insurance carrier will not terminate, cancel, or materially modify such
insurance coverage without thirty (30) days prior written notice to
General Motors, and (4) state that such insurance is primary in coverage
to any other insurance or self-insurance programs which may be available
to General Motors Corporation.
10.4 The purchase of insurance coverage and furnishing of certificate(s) will
neither modify Bronnercom's obligation to indemnify General Motors under
Section 11.1 nor be in satisfaction of Bronnercom's liability under this
Agreement or any Authorization.
11. Defense and Indemnity
11.1 Bronnercom agrees to indemnify and save harmless General Motors
Corporation, its officers, directors and/or employees from and against any
and all claims, demands, and/or causes of action, and all damages,
liabilities, judgments, costs (including reasonable settlement costs) and
expenses associated therewith (including reasonable attorneys' fees and
costs), arising from:
(i) any act or omission by Bronnercom, or its employees or agents or
subcontractors
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in the course of performing Services pursuant to this Agreement,
whether or not within the scope of performing this Agreement;
(ii) any material breach by Bronnercom of any of the representations, terms
or conditions of this Agreement;
(iii) except to the extent covered by Section 11.2, any advertising,
merchandising, publicity or other materials prepared by or on behalf
of Bronnercom which result in any alleged or actual:
(a) libel, slander, defamation or product disparagement;
(b) infringement of trademark, copyright, title, slogan or other
property rights with respect to materials created by Bronnercom
or obtained by Bronnercom from third parties;
(c) piracy, plagiarism, unfair competition or idea misappropriation
with respect to materials created by Bronnercom or obtained by
Bronnercom from third parties; or
(d) invasion of the right of privacy or publicity;
(iv) any claim by a third party based upon an actual or alleged contractual
relationship with Bronnercom when acting as an independent contractor,
or when acting as General Motors' agent if Bronnercom has exceeded the
authority granted to it by General Motors.
11.2 General Motors agrees to indemnify and save harmless Bronnercom, its
officers, directors and/or employees from and against all claims, demands,
and/or causes of action, and all damages, liabilities, judgments, costs
(including reasonable settlement costs) or expenses associated therewith
(including reasonable attorneys' fees and costs) arising from any
information or material directly or indirectly supplied by GM, or which is
based on material or information relating to General Motors' products, or
products of its competitors used by Bronnercom for the provision of its
Services and which General Motors reviewed and approved before the public
dissemination of such information or material, including any product's
liability claims. Approval obtained from General Motors based upon
statements or representations made by Bronnercom as to the accuracy or
truthfulness of advertising content will be deemed to have been published
without General Motors' approval.
11.3 With respect to the defense of any claim or litigation to which these
indemnification provisions apply, the indemnifying party, at its own
expense, will have the right to select counsel of its own choice and direct
defense of the action and any settlement as it deems proper. Upon request
of the indemnified party, the other party will allow the indemnified party,
at its own expense, to participate in the defense.
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11.4 Each party will give the other party prompt written notice in the event of
the receipt of knowledge of any claim against either of the parties to
which these indemnification provisions apply, and will cooperate with the
other and assist in the defense of such claim.
11.5 The obligations contained in this Section 11 will continue in full force
and effect notwithstanding termination of this Agreement or any
Authorization for any reason.
12. Loaned Vehicles
The following provisions apply in the event vehicles are furnished to
Bronnercom by General Motors ("Loaned Vehicles"):
(a) Bronnercom agrees to obtain from each individual permitted to drive a
Loaned Vehicle, a signed copy of (1) the Vehicle Terms and Conditions
and Vehicle Receipt and (2) General Motors Safe Driving Conduct
Requirements (attached as Exhibit H). Bronnercom will retain the
executed copy for a period of three (3) years and will provide it to
General Motors at General Motors' request.
(b) Bronnercom agrees to obtain and maintain, at its own expense, the
automobile liability insurance required in Section 10.1(c). Bronnercom
will also provide comprehensive (fire and theft) and collision
coverage on Loaned Vehicles (other than prototype vehicles).
(c) Bronnercom will return Loaned Vehicle in the same condition as
delivered, reasonable wear and tear excepted, to the location
designated by General Motors. All repairs necessary to restore Loaned
Vehicles to such condition will be performed at a facility approved by
General Motors, at the expense of Bronnercom. If, in General Motors'
opinion, a Loaned Vehicle cannot or should not be repaired based upon
General Motors Corporation's policy for repairing/scrapping damaged
vehicles, then the Loaned Vehicle must be returned to General Motors
and Bronnercom will pay General Motors the Loaned Vehicle's value,
based upon the following formula: The amount General Motors
Corporation would have received if the Loaned Vehicle had been sold at
auction the month the Loaned Vehicle was damaged based on a similar
make and model year vehicle with similar mileage, as determined by GM
NAO Fleet Operations Auction Results' Report, less $4,000.
13. Notices
Except as otherwise specifically provided for in this Agreement, all
notices required or permitted to be given by either party under or in
connection with this Agreement will be in writing and will be deemed duly
given when personally delivered or sent by registered or certified mail,
return receipt requested, postage prepaid, or by prepaid recognized
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overnight delivery service, or by facsimile confirmed by letter, to the
other party at the address set forth in Exhibit I, or such other address
as may be requested by either party by like notice.
14. Utilization of Minority Contractors
14.1 It is the policy of General Motors Corporation that minority business
enterprises will have the opportunity to participate in the performance of
General Motors Corporation contracts. As a provision of this Agreement and
any Authorization issued to Bronnercom under this Agreement, Bronnercom
agrees to use reasonable efforts to carry out this policy. For the
purposes of this Agreement, minority business enterprises will be as
stated in U.S. Executive Order 11625 dated October 13, 1971. Bronnercom
may rely upon written representations by subcontractors regarding their
status as minority business enterprises in lieu of an independent
investigation.
14.2 Upon award and as a provision of such Authorization, Bronnercom will
identify the minority subcontractors who will be utilized by stating the
subcontract bid amount, description of the work, subcontractor name and
address and the principal person to contact. Bronnercom will also include
a copy of the written representation received by Bronnercom from the
minority business enterprise concerning minority ownership.
15. Relationship of Parties
15.1 Bronnercom expressly acknowledges that it is and in the performance of
this Agreement or any Authorization that it will act as an independent
contractor. When acting as an independent contractor, Bronnercom will
enter into, and assume the liability for, contracts made or placed with a
third party required for performing the services included in this
Agreement. However, General Motors specifically reserves the right to
approve any and all subcontractors employed by Bronnercom. All contracts
made or placed by Bronnercom with a third party, when Bronnercom is acting
as an independent contractor, will include a provision that states that
the third party agrees that it will hold Bronnercom solely liable for the
fulfillment of all obligations under the contract.
15.2 Commitments or agreements will include General Motors only if General
Motors determines that there would be a specific benefit to be gained by
being a party to the contract or permitting Bronnercom to act as General
Motors' limited agent. In such instances, Bronnercom will provide General
Motors with written estimates of all costs and charges to be incurred by
third-party suppliers and will obtain General Motors' approval prior to
such costs and charges being incurred. Bronnercom will notify all such
third-party suppliers of General Motors' identity as principal. In
addition, such third-party suppliers will be required to bill separately
for all materials supplied on General Motors' behalf and will charge sales
tax as appropriate. The costs and charges of third-party suppliers
incurred by Bronnercom on General Motors' behalf will be paid by General
Motors with the commission or markup, if any, as set forth in Exhibit A.
Title to all materials purchased from third-party suppliers will pass to
General Motors upon
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payment by General Motors to Bronnercom for such materials as set forth in
Section 8.
16. General Provisions
16.1 Compliance with Laws. Bronnercom agrees to comply with the applicable
provisions of any federal, state or local law or ordinance and all lawful
orders, rules and regulations issued thereunder and any provisions,
representations or agreements, or contractual clauses required thereby to
be included or incorporated by reference or by operation of law in this
Agreement. Without limiting the foregoing, Bronnercom will be responsible
for complying with all requirements of federal and state social security,
unemployment compensation and tax withholding laws, and all applicable
federal, state and local laws and regulations pertaining to (1)
immigration, (2) occupational health and safety of its employees, (3) wages
and hours of employment, and (4) equal employment opportunity and
employment practices, and in this connection, agrees that it will not
discriminate in its employment practices due to age, disability, sex, race,
color, religion, creed or national origin.
16.2 Waiver. Waiver by either party of any breach or failure to comply with any
provision of this Agreement by the other party will not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of or failure to comply with any other provision of this Agreement.
16.3 Setoff/Recoupment - In addition to any right of setoff or recoupment
provided by law, all amounts due to Bronnercom shall be considered net of
indebtedness of Bronnercom and its affiliates/subsidiaries to General
Motors and its affiliates/subsidiaries; and General Motors shall have the
right to setoff against or to recoup from any amounts due to Agency and its
affiliates/subsidiaries from General Motors and its
affiliates/subsidiaries.
16.4 Governing Law. This Agreement will be construed and enforced in accordance
with, and governed by, the laws of the State of Michigan, without reference
to its choice of law rules.
16.5 Non-assignment - Neither party may assign this Agreement without the prior
written consent of the other party.
16.6 Severability - If any term(s) of this Agreement is invalid or unenforceable
under any statute, regulation, ordinance, executive order or other rule of
law, such term(s) shall be deemed reformed or deleted, as the case may be,
but only to the extent necessary to comply with such statute, regulation,
ordinance, order or rule, and the remaining provisions of this Agreement
shall remain in full force and effect.
16.7 Modification. No waiver, alteration or modification of any of the
provisions of this Agreement will be binding upon either party unless in
writing, signed by a duly authorized representative of each, and
conspicuously states that it amends this Agreement.
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16.8 Entire Agreement. This Agreement, together with all attachments and
exhibits to this Agreement, constitutes the entire agreement between
General Motors and Bronnercom with respect to the subject matter of this
Agreement and will supersede all prior oral or written representations and
agreements.
IN WITNESS WHEREOF, this Agreement has been executed in multiple counter-parts
as of the day and year first above written by Bronnercom and General Motors by
their duly authorized representatives.
Bronnercom, LLC General Motors Corporation
By By
-------------------------------- ------------------------------
Title: Title:
Exhibits:
Exhibit A - Services and Compensation
Attachment 1 - General Conditions
Exhibit B - Authorizations and Approvals
Exhibit C - Reports
Exhibit D - Travel Guidelines
Exhibit E - Proof of Services
Exhibit F - Intellectual Property Rights Agreement
Exhibit G - Property Disposal
Exhibit H - Loan of Vehicle Receipt
Exhibit I - Notices
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Exhibit A
Services and Compensation - Pontiac - GMC (Commercial)
This Exhibit A sets forth the compensation which will be paid by Pontiac - GMC
to Bronnercom; it is the intent of the parties that this Exhibit A be attached
to and become part of the Advertising Bronnercom Agreement between General
Motors and Bronnercom dated as of January 1, 1999.
Bronnercom will be compensated on a fixed-fee basis for the agreed upon services
as outlined in the Scope of Services as provided. Bronnercom is prepared to
render services to Pontiac - GMC with the understanding that no advertising
media shall be placed and no chargeable services performed without Pontiac - GMC
authorization as defined in Exhibit B.
Bronnercom compensation is fixed at [***] per month, not to exceed [***]
for the agreed to scope of services, unless otherwise agreed to by Pontiac -
GMC. If Bronnercom services terminate on a date other than the last day of the
month, a pro-rated share of the fixed fee will be due for the final month.
Media/production/travel expenditures will be billed separately. Pontiac - GMC
will be billed at net cost for these expenditures on a monthly basis.
Attachment 1 - General Conditions, details payment provisions for miscellaneous
business expenses. All cash discounts will be passed on to Pontiac - GMC.
Bronnercom shall bill Pontiac - GMC for all sales tax and other itemized taxes
at cost. Bronnercom travel associated with General Motors' activities will not
exceed [***] without prior Pontiac - GMC approval.
It is the responsibility of Bronnercom to manage its costs against the above
fee. As a result there will be no reconciliation of the agreed upon fee at year-
end. However, if there is a material change in the Scope of Services, the fee
will be adjusted as agreed upon by both parties.
ACCEPTED AND AGREED TO:
Pontiac - GMC Bronnercom, LLC
By: By:
-------------------------------- ------------------------------
Date: Date:
-------------------------------- ------------------------------
18
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Exhibit A
Services and Compensation - Pontiac - GMC
This Exhibit A sets forth the compensation which will be paid by Pontiac - GMC
to Bronnercom; it is the intent of the parties that this Exhibit A be attached
to and become part of the Advertising Bronnercom Agreement between General
Motors and Bronnercom dated as of January 1, 1999.
Bronnercom will be compensated on a fixed-fee basis for the agreed upon services
as outlined in the Scope of Services as provided. Bronnercom is prepared to
render services to Pontiac - GMC with the understanding that no advertising
media shall be placed and no chargeable services performed without Pontiac - GMC
authorization as defined in Exhibit B.
Bronnercom compensation is fixed at [***] per month, not to exceed
[***] for the agreed to scope of services, unless otherwise agreed to by
Pontiac - GMC. If Bronnercom services terminate on a date other than the last
day of the month, a pro-rated share of the fixed fee will be due for the final
month. Media/production/travel expenditures will be billed separately. Pontiac -
GMC will be billed at net cost for these expenditures on a monthly basis.
Attachment 1 - General Conditions, details payment provisions for miscellaneous
business expenses. All cash discounts will be passed on to Pontiac - GMC.
Bronnercom shall bill Pontiac - GMC for all sales tax and other itemized taxes
at cost. Bronnercom travel associated with General Motors' activities will not
exceed [***] without prior Pontiac - GMC approval.
It is the responsibility of Bronnercom to manage its costs against the above
fee. As a result there will be no reconciliation of the agreed upon fee at year-
end. However, if there is a material change in the Scope of Services, the fee
will be adjusted as agreed upon by both parties.
ACCEPTED AND AGREED TO:
Pontiac - GMC Bronnercom, LLC
By: By:
-------------------------------- ------------------------------
Date: Date:
-------------------------------- ------------------------------
19
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Exhibit A
Services and Compensation - Enterprise Customer Management
This Exhibit A sets forth the compensation which will be paid by General Motors
to Bronnercom; it is the intent of the parties that this Exhibit A be attached
to and become part of the Advertising Bronnercom Agreement between General
Motors and Bronnercom dated as of January 1, 1999.
Bronnercom will be compensated on a fixed-fee basis for the agreed upon services
as outlined in the Scope of Services as provided. Bronnercom is prepared to
render services to General Motors with the understanding that no advertising
media shall be placed and no chargeable services performed without General
Motors authorization as defined in Exhibit B.
Bronnercom compensation is fixed at [***] per month, not to exceed
[***] for the agreed to scope of services, unless otherwise agreed to by
General Motors. If Bronnercom services terminate on a date other than the last
day of the month, a pro-rated share of the fixed fee will be due for the final
month. Media/production/travel expenditures will be billed separately. General
Motors will be billed at net cost for these expenditures on a monthly basis.
Attachment 1 - General Conditions, details payment provisions for miscellaneous
business expenses. All cash discounts will be passed on to General Motors.
Bronnercom shall bill General Motors for all sales tax and other itemized taxes
at cost. Bronnercom travel associated with General Motors' activities will not
exceed [***] without prior General Motors approval.
It is the responsibility of Bronnercom to manage its costs against the above
fee. As a result there will be no reconciliation of the agreed upon fee at year-
end. However, if there is a material change in the Scope of Services, the fee
will be adjusted as agreed upon by both parties.
ACCEPTED AND AGREED TO:
General Motors Corporation Bronnercom, LLC
By: By:
-------------------------------- ------------------------------
Date: Date:
-------------------------------- ------------------------------
20
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Attachment 1
GENERAL CONDITIONS
Communication Charges:
Bronnercom will assume cost of telephone, facsimile and other like communication
charges incurred in the normal conduct of business, including communications to
General Motors, media owners, and material suppliers.
Bronnercom will assume cost of calls or communications giving instructions to
Bronnercom' branch offices, field representatives, or traveling staff members.
Bronnercom will also assume cost of calls or communications regarding billings,
as well as those made necessary by delays or oversight on the part of the
Bronnercom.
General Motors will pay net costs for communication charges incurred upon
request to provide General Motors with special or unusual service or to meet
special emergencies above and beyond the normal range of Bronnercom service.
These charges must be approved in advance by General Motors. General Motors will
also assume net cost of calls or communications:
. When General Motors changes copy or schedules after original instructions have
been issued, and when time does not permit revising instructions by regular
mail;
. When General Motors delays release of copy, tapes, or schedules until it is
too late to issue instructions by regular mail;
. When it is necessary to obtain information for the preparation of special
advertisements requested (General Motors will first be advised that
information is needed);
. When it is necessary to make a market analysis in completing research
requested;
. When it is necessary to give instructions to media or suppliers regarding
publicity material;
. When General Motors' field organization requests information regarding
campaign (such requests will be referred to General Motors, unless General
Motors asks Bronnercom to supply information).
Mailing and Shipping
Bronnercom will pay all mailing and shipping charges incident to the routine
conduct of business. This includes correspondence between the Bronnercom' and
the General Motors' representatives, publishers, broadcasters, outdoor plant
owners, and suppliers of materials/services. This includes postage on the
mailing of orders, revisions, cancellations, etc., sent by regular mail.
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General Motors will pay net cost for mailing and shipping of:
. Advertising materials to publications or suppliers;
. All shipments of publicity material;
. Direct mail or sales promotion literature;
. General letters sent by Bronnercom over General Motors' signature, or at
General Motors' request, over Bronnercom' signature;
. Advertising material or instructions to General Motors' field organization
(field offices, dealers, or dealer marketing association), special research or
market analysis materials, at the request of General Motors;
. Expediting or special delivery of mail or shipment upon request of General
Motors.
Outside Packing and Handling
Bronnercom shall charge net cost on the purchase of outside packaging and
handling.
Duplicating and Copying
Bronnercom shall charge net cost on the purchase of outside goods and services
as previously authorized by General Motors:
1. Audio and video duplicates;
2. Slides, transparencies, prints;
3. Xerox copies, Photostats.
When duplicated or prepared internally, audio tapes, video tapes, Xerox copies,
and Photostats will be billed at net cost.
Overtime and Premium Service
In recognition of the need for photography during the quality sun up and
twilight hours and the desire to compress costly shoots into the least number of
days, General Motors accepts the probability of overtime work on the part of
various suppliers and is prepared to pay for such work. It is, therefore, the
responsibility of Bronnercom to include such overtime in production estimates
for General Motors' evaluation and approval before commitments are made.
However, it is not to be assumed that overtime is a necessary element in the
production of every ad or commercial, nor should provision for overtime be
provided in every production estimate.
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Bronnercom assumes responsibility to so plan production requirements as to
minimize the cost penalties associated with overtime.
When necessary overtime is occasioned and provision has not been made,
Bronnercom has responsibility of securing written General Motors' approval in
advance of the commitment. If an approved General Motors representative is not
available, Bronnercom may authorize a supplier to proceed with overtime work,
securing approval as soon as possible and, in any event, within 48 hours.
Premium service, whether identified as special service, overnight processing,
lab or studio rental overtime, or similar descriptive phrases, is not recognized
as the normal way of doing business. Therefore, premium service should not be
built into all production estimates. If and when premium service is required, it
must be identified on the production estimate for General Motors' approval.
Applied Graphics Technology Preferred Supplier Status
General Motors has entered into an agreement with Applied Graphics Technology
(AGT), for AGT to provide the following services:
1. Complete pre-press production for all catalogs, print ads, and collateral
material.
2. Broadcast duplication and distribution services for radio and television
advertising, including a plan to transition toward digital distribution
for radio and television spots.
3. Digital archive development and implementation for print and broadcast
materials.
Pre-press is defined as the point at which General Motors artwork is complete
and prepared for a printer or processed for dub and ship to television or
radio stations.
The rates for the above services have been negotiated by General Motors with
AGT and will be billed at net cost through Bronnercom to General Motors.
Work performed in the above categories by other suppliers and all cost in
excess of the GM rates must be pre-approved by General Motors. However, an
officer of Bronnercom may authorize emergency work to other suppliers when
such work is deemed to be in the best interest of General Motors and the
appropriate General Motors' representative(s) is unavailable. Any such work
authorized by Bronnercom shall be communicated to General Motors as soon as
possible, and in any event within two (2) business days, at which time
written approval must be secured.
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Exhibit B
Authorizations and Approvals - Oldsmobile
All authorizations and approvals with respect to any Services performed in
Exhibit A shall be authorized with the proper submission of an expense
authorization in the following manner:
Total Cost of Project
General Motors Signature Required
$ 0 - $ 500,000
Advertising Budget Coordinator, MARCOM Manager
Debi Lange, Martha Morrissey, Judi Helm, Phil Caruso,
Cynthia Babcock, Schryse Crawford
In excess of $ 500,000
Advertising Director, General Manager
Mike Sands, Karen Francis
AUTHORIZED SIGNATURES:
---------------------------------------
Debie Lange
---------------------------------------
Martha Morrissey
---------------------------------------
Judy Helm
---------------------------------------
Phil Caruso
---------------------------------------
Cynthia Babcock
---------------------------------------
Schryse Crawford
---------------------------------------
Mike Sands
---------------------------------------
Karen Francis
24
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Exhibit B
Authorizations and Approvals - Pontiac - GMC (Commercial)
All authorizations and approvals with respect to any Services performed in
Exhibit A shall be authorized with the proper submission of an expense
authorization in the following manner:
Total Cost of Project
General Motors Signature Required
$0 - $100,000
Budget Coordinator
Susan Baskett
$0 - $500,000
Advertising Manager
Dave Koziara
In excess of $500,000
Advertising Director
Robert Kraut
AUTHORIZED SIGNATURES:
---------------------------------------
Susan Baskett
---------------------------------------
Dave Koziara
---------------------------------------
Robert Kraut
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Exhibit B
Authorizations and Approvals - Pontiac - GMC
All authorizations and approvals with respect to any Services performed in
Exhibit A shall be authorized with the proper submission of an expense
authorization in the following manner:
Total Cost of Project
General Motors Signature Required
$0 - $500,000
Brand Relationship Manager, Interactive Marketing Manager, Advertising Manager
Larry Mueller, Joyce Fierens, Dave Koziara
In excess of $500,000
Advertising Director
Robert Kraut
AUTHORIZED SIGNATURES:
---------------------------------------
Larry Mueller
---------------------------------------
Joyce Fierens
---------------------------------------
Dave Koziara
---------------------------------------
Robert Kraut
26
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Exhibit B
Authorizations and Approvals - Enterprise Customer Management
All authorizations and approvals with respect to any Services performed in
Exhibit A shall be authorized with the proper submission of an expense
authorization in the following manner:
Total Cost of Project
General Motors Signature Required
$ 0 - $ 500,000
Manager
In excess of $ 500,000
Director
Karen Ebben, Chuck Kirk
AUTHORIZED SIGNATURES:
---------------------------------------
Maria Rohrer
---------------------------------------
Pete Maguire
---------------------------------------
Gwen Smith
---------------------------------------
Robert Kraut
27
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Exhibit C
Reports
Bronnercom agrees to supply status and other reports as General Motors may
require from time to time. Such reports shall include, but not be limited to:
1. Quantitative Business Management System (QBMS). This report should
detail Bronnercom staff hours and direct payroll by department/function
and Bronnercom overhead. It should be provided on a forecast basis at
the time the scope of work is finalized and on an actual basis at the
end of the year if an annual contract or at the end of the contracted
project.
2. Monthly Commitment Report of Consumer Influence Expense. This report
shall indicate, by medium, the total dollars committed in the respective
month's General Motors advertising schedule.
3. Monthly Forecast of Consumer Influence Expense. This report shall
indicate, by medium, by month, committed and forecast General Motors
advertising expense for the full calendar year.
4. Expenditures with Minority Contractors. This report shall be a summation
of the information required in Section 14, and may be substituted for
individual Authorization reporting if deemed appropriate by General
Motors.
5. Bronnercom will notify responsible General Motors when determination
must be made to exercise bonus spots.
Copies of the above reports shall be provided to the appropriate Advertising
Manager for General Motors.
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Exhibit D
Travel Guidelines
The following are guidelines for reporting and reimbursement of business-related
travel/incidental expenses:
1. Bronnercom's travel on behalf of General Motors, which has been previously
approved by General Motors, will be reimbursed at actual cost not to exceed
General Motors' "Preferred Supplier" rates. Bronnercom is responsible for
making travel reservations, hotel/motel accommodations, and reserving rental
cars.
2. Original copies of receipts are required for all airfare, hotel, car rental,
and transportation expenditures, plus any individual expenditure, such as
parking, gasoline purchases, highway tolls, etc. If applicable, the last copy
of the airline ticket must be included. All travel and per diem for which
Bronnercom seeks reimbursement will be submitted to General Motors on an
expense report form acceptable by General Motors, along with substantiating
documentation, and will accompany the regular invoices. The Bronnercom'
employee, his or her immediate supervisor, and an authorized representative
of General Motors must sign the expense report form.
3. General Motors will provide Bronnercom with the current version (and future
revisions) of the General Motors Travel Policy and Guidelines Manual for
detailed acceptable reimbursable travel/incidental expense parameters (as
applicable).
4. All expenses must be reasonable and are subject to audit.
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Exhibit E
Proof of Services
Vendor invoices must be accompanied by the following substantiation/proof of
service and Bronnercom must keep on file for Section 5 audits:
TV/Radio Network....
Network billing with program, program date, program time slot, commercial code,
cost per announcement
TV/Radio Spot....
Station billing with city and state, date, air time, commercial code, cost per
announcement
TV/Cable....
Date, air time, commercial code, cost per announcement
TV/Syndication....
Program, date (by "week of"), commercial code, cost per announcement
Print (Magazine)....
Publication Insertion Order with issue, date, ad number, space/inches, rate,
cost per insertion, cash discount, right to audit valid tearsheet per magazine
or for each magazine
Print (Newspaper)....
Publication Insertion Order with issue, date, space/inches, rate, cost per
insertion, cash discount (Tearsheets may be obtained from ad checking bureau for
two months.)
Outdoor....
Name of outdoor company, market, cost by location or cost by number of
locations, gross costs, commission adjustment, amount payable
Production....
Invoice number, date of invoice due date, estimate/job number, job description
noncommissionable items listed separately, total cost due (including vendor
invoices, and expense reports when applicable)
30
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Exhibit F
EMPLOYEE CONFIDENTIAL INFORMATION,
NONCOMPETITION AND OWNERSHIP AGREEMENT
As a condition of my continuing employment with Bronnercom, LLC (the
"Company" which term shall include Sansome, Inc. and Bronnercom (UK), Inc.) to
hire me as an employee, I hereby agree as follows:
1. When used in this Agreement "Confidential Information" shall mean all
information which has not been made public concerning the Company's
business, including but not limited to: names of clients or prospective
clients, participant lists, marketing strategies, mailing lists, personnel
information, billing rates, accounting procedures, income information,
financial data, advertising ideas, other information or knowledge which a
reasonable person would believe to be of a confidential or secretive
nature, writings (whether or not copyrightable), "know-how", ideas and
concepts, whether patentable or not, and whether conceived or developed by
me on behalf of the Company or made known to me by the Company. The term
"Confidential Material" shall mean all physical embodiments of such
Confidential Information, including, without limitation, drawings,
training manuals, decks (proposals), cassettes, filmstrips, customer
lists, contracts, reports, financial reports, manuals and correspondence.
References in this Agreement to the "Company" shall include all parent,
affiliated subsidiary, assigns and successor corporations or entities of
the Company.
2. I recognize that in the performance of my services for the Company I may
gain knowledge of Confidential Information and may have access to
Confidential Materials, both of which I acknowledge are valuable and
protectable assets, and the exclusive property, of the Company. I also
recognize that I may work directly with the Company's customers and
clients, and develop good will on behalf of the Company with such
customers and clients, and that the Company has a vital business interest
in protecting such good will.
3. I agree that during and following my employment with the Company I shall
not use, divulge, disclose, communicate, copy or make accessible any
Confidential Information or Confidential Materials to or for anyone except
as authorized in writing by the Company.
4. I agree not to remove from the Company's facilities any Confidential
Materials whether created or produced by me or obtained from the Company,
except as directed by the Company, and I agree to return all originals and
copies such Confidential Materials to the Company upon request, and in any
event upon the termination of my employment with the Company.
5. (a) The following shall be the exclusive property of the Company to which
the Company shall have the entire right, title and interest: all computer
software, writings
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(including reports, source and object codes, manuals and other
documentation), discoveries, inventions, improvements, ideas, names, models
trademarks, innovations and contributions (including all data and records
pertaining thereto), regardless of what form they may take, and whether or
not patentable or copyrightable, and whether or not reduced to writing (or
other copyrightable form), drawings, practice, or recordation in any form
readable or accessible by any person or machine, (i) which I may produce,
develop, write, invent, discover, originate, make or conceive during the term
of my employment or during the one year period following termination of such
employment, either alone or with others and whether or not during working or
business hours or by or with the use of facilities, materials or proprietary
information or rights of the Company, and (ii) which relate to, or are or may
likely be useful in connection with, any of the Company's businesses or
products; the foregoing are collectively referred to as "Writings and
Inventions". I shall promptly and fully disclose all Writings and Inventions
to the Company, and shall promptly record all Writings and Inventions in such
form as the Company may request. All Writings and Inventions reduced to
copyrightable form shall be considered a "work made for hire" for the sole
benefit of the Company. The Company shall own all rights in my Writings and
Inventions, including the right to use or not to use any of such Writings and
Inventions, and the right to change, alter, supplement, edit, translate or
improve any Writings and Inventions as the Company sees fit.
(b) I hereby assign to the Company my entire right, title and interest in and
to all Writings and Inventions. I shall execute and deliver, upon the
Company's request at any time (including any time after termination of my
employment by the Company), and at the Company's expense, any and all legal
instruments or applications, assignments and other documents or papers that
the Company may deem necessary or desirable to obtain, establish, maintain,
protect and perfect or enjoy its rights, including any patent or copyright
rights, in the Writings and Inventions, and shall assist the Company, at the
Company's expense, in obtaining, defending, and enforcing the Company's
rights therein, all without further compensation or royalty payments to me.
6. In order to protect the Company's Confidential Information and good will, I
agree that, for as long as I am employed by the Company and for one year
following completion of such employment, I shall not, directly or indirectly
(whether as an employee, agent, consultant or otherwise), solicit or accept
work from, or perform work for, or have an ownership interest in, or other
connection with: (a) any client or prospective client of the Company for
which I performed services while employed by the Company; or (b) any entity
which solicits or accepts work from, or performs work for, any client or
prospective client of the Company for which I performed services while an
employee of the Company; nor for such period of time will I take any action
which might disturb the existing business relationship of the Company with
any of its clients. During my employment with the Company and for one year
following completion of such employment, I shall not participate or engage
directly or indirectly in the solicitation or persuasion of any employee of,
or consultant to, the Company to terminate his or her relationship with the
Company or in hiring of such employee or consultant by any other
32
<PAGE>
person or entity.
7. I acknowledge that the Confidential Information and Confidential Materials
and good will referred to above are of a special, unique and extraordinary
character and that any violation of this Agreement would cause the Company
irreparable harm which could not be reasonably or adequately compensated
by damages in an action of law, and I agree that this Agreement shall
therefore be enforceable both at law and in equity, by injunction or
otherwise, and I agree that if the Company prevails in any legal
proceedings arising out of its attempt to enforce this Agreement, in
addition to any damages and/or injunctive relief which may be ordered, the
Company shall be entitled to all costs, including reasonable attorneys
fees, incurred by the Company in such proceedings.
8. I agree that this Agreement does not constitute an agreement by the
Company to employ me for any particular term, but that my employment is
at-will, and may be terminated by me or the Company at any time, with or
without cause.
9. I represent and warrant to the Company that I am not now under any
obligations to any person, firm or corporation or have any other interest
which is inconsistent or in conflict with this Agreement or which would
prevent, limit or impair in any way the performance by me of any of the
covenants hereunder or of my duties of my said performance of services
contemplated hereby.
10. The Company may assign this Agreement to any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company.
11. I acknowledge and agree that the terms and conditions of this Agreement
shall survive the termination of my providing services for the Company.
12. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts as an instrument under seal.
Employee: Witness:
Signature: Signature:
---------------------------- ---------------------------
Printed Name: Printed Name:
------------------------- -------------------------
Date: Date:
--------------------------------- ---------------------------------
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Exhibit F, Part II
CONFIDENTIAL INFORMATION AGREEMENT
This Confidential Information Agreement is entered into this ___ day of_______
____, by and between ____________________, a __________ corporation with a place
of business at ______________ ("Company") and Bronnercom, LLC, a Delaware
limited liability company with a place of business at The Prudential Tower, 800
Boylston Street, Boston, Massachusetts 02199 ("Bronnercom").
WHEREAS, Company and Bronnercom contemplate entering into discussions concerning
a possible business transaction between the Company and Bronnercom (the
"Transaction"); and
WHEREAS, in connection with such discussions the parties may disclose to each
other certain confidential and proprietary information, and that neither party
would make such disclosures without the other's agreement to maintain
confidential the treatment of such information in accordance with the terms
hereof; and
WHEREAS, the parties desire to proceed with discussions and negotiations, and to
be provided with such information, on the terms and conditions herein set forth,
NOW THEREFORE, the parties agree as follows:
1. If during the course of discussions between Bronnercom and the Company, one
party should have cause to deliver any information ("Disclosing Party") to
the other party ("Receiving Party"), then the Receiving Party shall not
disclose or use any such information of the Disclosing Party to the extent
that:
a. it has been designated orally or in writing as "Confidential" or
"Proprietary" or in like words;
b. it contains certain information which is generally treated as proprietary,
such as information regarding its business, finances or operations; or
c. it contains certain information, whether or not in written form and
whether or not designated as confidential, which the Receiving Party knows
or should have known is treated as confidential by the Disclosing Party.
(all such information to be referred to as "Confidential Information")
without the prior written consent of the Disclosing Party and then only to
the extent specified in such consent. Confidential Information may be used
and disseminated within the Receiving Party's own organization only to the
extent reasonably required for the purposes hereof.
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2. The Receiving Party shall exercise the same degree of care in safeguarding
the Confidential Information of the Disclosing Party that the Receiving Party
would exercise for its own information of the same type. The Receiving Party
shall authorize access to the Disclosing Party's Confidential Information
only by its employees who have entered into appropriate confidentiality
agreements (and shall ensure compliance with the terms of such agreements) or
the Receiving Party's attorneys or other appropriately authorized agents and
representatives.
3. The restrictions on use or disclosure described in Paragraphs 1 and 2 above
do not extend to any item of information which:
a. is publicly known at the time of its disclosure;
b. is lawfully received from a third party not bound in a confidential
relationship to the Disclosing Party;
c. is published or otherwise made known to the public by the Disclosing
Party;
d. was generated independently before its receipt from the Disclosing Party;
or
e. is required by law to be disclosed, provided that the Receiving Party
gives the Disclosing Party prior notice of the required disclosure to
provide the Disclosing Party the opportunity to obtain appropriate
protective orders.
4. Each party acknowledges that a violation of this Agreement would cause
irreparable harm to the Disclosing Party for which no adequate remedy at law
exists and each party therefore agrees that, in addition to any other
remedies available, the Disclosing Party shall be entitled to injunctive
relief to enforce the terms of this Agreement. The prevailing party shall be
entitled to recover all costs and expenses, including reasonable attorney's
fees, incurred because of any legal action arising in relation to this
Agreement.
5. Upon demand by the Disclosing Party, the Receiving Party shall return any
written Confidential Information of the other and all physical media on which
Confidential Information was received, including any copies thereof, with a
letter confirming that the Confidential Information has in no way been
reproduced or copied or that all copies have been returned.
6. Company agrees that during this Agreement and for one (1) year following
Company shall not participate or engage directly or indirectly in the
solicitation or persuasion of any employee of, or consultant to, Bronnercom
to terminate his or her relationship with Bronnercom or in hiring of such
employee or consultant by any other person or entity.
7. The parties have entered into this Agreement only for the purposes of
facilitating discussions regarding the potential Transaction, and neither
Bronnercom nor the Company shall be under any further obligation to
consummate the Transaction merely by executing this Agreement.
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8. This Agreement shall be binding on the parties, their successors and assigns,
and shall be governed by the laws of the Commonwealth of Massachusetts as an
instrument under seal.
[Name] Bronnercom, LLC
Signature: Signature:
---------------------------- ----------------------------
Printed Name: Printed Name: Meryl K. Beckingham
------------------------- ------------------------
Title: Title: EVP/Chief Financial Officer
-------------------------------- --------------------------------
Date: Date:
--------------------------------- ---------------------------------
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Exhibit G
Property Disposal
The preferred disposition of special equipment, props and wardrobe material is
(in declining order) as follows:
1. Return of materials to their original supplier for the full purchase price.
(No authorization required).
2. Sale of non-returnable materials at a price greater than 50% of the
purchase price.
3. Donation of materials to a nondenominational charitable organization
approved by General Motors Corporation. Approved organizations are as
follows: American Red Cross, Focus Hope, Goodwill Industries and Salvation
Army.
4. Scrapping of all materials which cannot be disposed of or where shipping or
other additional costs prohibit cost-effective disposition.
On most jobs, the materials can be disposed of more effectively at the job site
immediately following the conclusion of the job, and in these instances
disposition will be included on the approved Authorization. However, if no
previous Authorization has been provided for, verbal authorization from General
Motors in accordance with Exhibit B, must be obtained before disposing of the
material. The verbal authorization must be confirmed in writing by the
authorizing individual.
Upon final disposition of said material, Bronnercom will make available to
General Motors the following as applicable:
1. Credit to General Motors for the full value of material returned, or
selling price of material sold, or
2. Proof of contribution to a charitable organization in a form suitable for
IRS reporting requirements, or
3. Proof that materials have been scrapped in the form of an affidavit signed
by the manager responsible for verifying that the material was scrapped.
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Exhibit H
Loan of Vehicle Terms and Conditions
and Vehicle Receipt
General Motors Corporation agrees to loan the following Vehicle to the
undersigned from approximately __________________ to ____________, upon the
terms set forth below:
MAKE:______________
MODEL:_____________
VIN: ______________
PARTICIPANT'S NAME:
------------------------------------------------------------
Last First M.I.
ADDRESS:
-----------------------------------------------------------------------
Street City State
PHONE: ( ) (home) ( ) (work)
-------------------------- ---------------------------------
DRIVER'S LICENSE No.: State:
---------------------------- ---------------------------
Terms:
1. The Vehicle is, and shall remain, the property of General Motors.
2. The undersigned agrees that: (a) the Vehicle will not be utilized illegally,
improperly, for hire, as a public conveyance or in any manner for any
political purpose whatsoever; (b) the Vehicle shall be driven in a safe and
prudent manner by insured, licensed drivers, twenty-one (21) years of age or
older; (c) the undersigned shall not modify, disconnect, or otherwise
interfere with the operation of the odometer, emission control equipment, or
any other equipment; (d) the undersigned will comply with the Driver Conduct
Requirements on the reverse side of this form, and (e) the undersigned shall
be responsible for all fines, forfeitures and penalties incurred by reason
of the use of the Vehicle.
3. GENERAL MOTORS MAKES NO WARRANTY OTHER THAN THAT EXPRESSED IN ITS NEW
VEHICLE LIMITED WARRANTY, A PRINTED COPY OF WHICH IS FURNISHED WITH THE
VEHICLE. General Motors authorizes the undersigned to obtain, on General
Motors behalf as owner of the Vehicle, such warranty service as is necessary
and provided for under the new vehicle limited warranty. Ordinary operating
expenses such as gas, oil, grease, tire repair and other incidentals are the
responsibility of the undersigned.
4. At the end of the term of this loan, or earlier if requested by General
Motors, the undersigned shall return the Vehicle in the same condition as
delivered, reasonable wear and tear excepted, to the nearest General Motors
office or such other location as designated by General Motors. All repairs
necessary to restore the Vehicle to such condition shall be performed at a
General Motors approved facility, at the expense of the undersigned.
Driver's Signature: Date:
------------------------------ ---------------
38
<PAGE>
General Motors Safe Driver Program
Driver Conduct Requirements
I understand that the loan of this Vehicle is subject to the following terms,
and verify that I am 21 years of age or older:
1. Possess a valid operator's license, display such license to the vehicle
key issuer at each vehicle exchange, and comply with all license
restrictions.
2. Never drive while impaired by alcohol, drugs, medication, illness,
fatigue, or injury.
3. Ensure the proper use of safety belts and child safety restraints for
all occupants.
4. Obey all applicable motor vehicle laws, codes, and regulations.
5. Drive in a defensive manner, anticipating situations where incidents are
likely to occur.
6. Refrain, at all times, from using radar/laser detection devices.
7. Plan trips by selecting the safest route, depart early enough to observe
posted speed and traffic regulations, and will be mindful of current and
forecasted weather conditions.
8. Report all incidents/crashes involving damage to the vehicle, including
reporting incident/crash to ESIS (a subsidiary of CIGNA Insurance) at
1-800-888-0154 and to the vehicle key issuer. (Direction is provided in
the glove compartment of the vehicle.)
9. Prohibit use of the vehicle by other parties, including family members.
Furthermore, by signing this receipt and acknowledgment, I verify that I have
not been convicted within the past 36 months of any of the following motor
vehicle violations:
1. Driving while operator's license is suspended, revoked, or denied.
2. Vehicular manslaughter, negligent homicide, felonious driving or felony
with a vehicle.
3. Operating a vehicle while impaired, under the influence of alcohol or
illegal drugs, or refusing a sobriety test.
4. Failure to stop or identify under a crash (includes leaving the scene
of a crash; hit and run; giving false information to an officer).
5. Eluding or attempting to elude a law enforcement officer.
6. Traffic violation resulting in death or serious injury.
7. Any other significant violation warranting suspension of license.
Driver's Signature: Date:
------------------------------ ---------------
39
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Exhibit I
Notices
If to Bronnercom: Bronnercom, LLC
The Prudential Tower
800 Boylston Street
Boston, MA 02199
Attention: Meryl K. Beckingham, EVP & CFO
If to General Motors: General Motors Corporation
200 Renaissance Center
Detroit, MI 48265-2000
Attention:
Director of Advertising
M.C.
with a copy to: General Motors Corporation
Office of the General Counsel
3031 W. Grand Boulevard
Detroit, MI 48202
M.C. 482-208-825
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EXHIBIT 10.36
Agreement
2000 Compensation
This Agreement made as of the 5th day of January, 2000, between General Motors
Corporation, Oldsmobile Division, (herein after referred to as "Oldsmobile") and
Bronnercom, LLC. (hereinafter referred to as "Bronnercom").
FOR AND IN CONSIDERATION of the mutual covenants contained in this
Agreement, Oldsmobile and Bronnercom (herein after referred to as the "parties")
agree as follows:
1. This Agreement sets forth the compensation which will be paid by
Oldsmobile to Bronnercom for January 1, 2000 through December 31, 2000; it
is the intent of the parties that this Agreement be attached to and become
part of a Marketing & Advertising Services Agreement between General
Motors Corporation and Bronnercom.
2. Oldsmobile will pay Bronnercom a fee for services rendered based on actual
hours worked for the agreed upon Core and Brand Support and Promotions
services described in the statement of work (attached hereto as Exhibit
A). Bronnercom's compensation for such services during the period of
January 1, 2000 through December 31, 2000 is estimated at $4,743,026, and
will be billed by Bronnercom in 12 monthly installments of $395,252.16 on
or about the first of each month for that month.
3. All other expenditures (i.e., database vendors, telemarketing vendors,
media, production and travel) in connection with the Core and Brand
Support Promotions services will be billed separately. Oldsmobile will be
billed for such expenditures at net cost on a monthly basis. All cash
discounts will be passed on to Oldsmobile. Bronnercom will bill Oldsmobile
for all sales and use taxes (if applicable) and other itemized taxes at
cost. A travel budget of $310,000 has also been established and cannot be
exceeded without prior client approval.
4. On a quarterly basis Bronnercom will reconcile actual costs against billed
fee and either issue a credit or invoice for work performed to date.
However, if there is a material change in the statement of services, the
annual fee may be adjusted if agreed to by the parties. If there is a need
to reduce services, Oldsmobile will provide Bronnercom with 90 days notice
prior to the reduction of services.
5. Bronnercom will obtain Oldsmobile's written approval of budgets for all
incremental work described in Exhibit A as well as work that is outside of
Exhibit A prior to undertaking such work, or making any commitments for
work or services. The approval of such work or services may be made in the
form of a letter ("Work Authorization") detailing the scope of services
and the budget for Bronnercom compensation, research, and reimbursable
expenses. Such Work Authorization shall be signed by Oldsmobile and
Bronnercom, indicating approval of the work to be performed and
corresponding budget.
IN WITNESS WHEREOF, the parties hereby execute this Agreement on the day
and year first above written.
General Motors Corporation -
Bronnercom, LLC Oldsmobile Division
By: /s/ Robert G. Willms By:
---------------------------- ------------------------------------------
Printed Name: Robert G. Willms Printed Name: Michael D. Sands
------------------ -------------------------------
Title: Executive Vice President Title: Advertising & Sales Promotion Director
------------------------- --------------------------------------
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.37
Agency Name: Bronner Slosberg Humphrey Inc.
ADVERTISING/MARKETING PROMOTION AGENCY AGREEMENT
This sets forth the Agreement between the above-named advertising, marketing or
promotion firm ("Agency") and American Express Travel Related Services Company,
Inc. ("American Express") concerning the provision to American Express of
advertising, marketing, promotion or similar services. This contract is
effective as of October 1, 1997.
1. Services Provided to American Express. Agency shall provide to American
Express the services described in Exhibit 1 as attached. (In the event of any
conflict between any exhibit and this Agreement, the terms of this Agreement
shall control.) The Services shall be provided in a professional manner to
American Express' reasonable satisfaction.
2. Fees and Costs. (a) Fees - Agency shall be paid as set forth in Exhibit 2 as
attached. If any of the Services to be provided are covered by the ratecard
published by American Express, the fees to be paid will be as set forth on
such ratecard. Such fees are in lieu of any and all commissions except those
commission set forth in Exhibit 2, markups or other payments to Agency, other
than reimbursable expenses as provided herein.
(b) Third-Party Costs. American Express will reimburse Agency at Agency's
cost (without markup or commission) for reasonable expenditures paid to
third parties and incurred for necessary artwork, engraving,
electrotyping, typography, translations and all other materials involved
in the mechanical production of marketing material, advertising, radio
and television production and all their associated costs, talent, music,
photographs, testimonials and all other marketing and advertising
adjuncts, including expenditures in connection with acquiring
authorization for the use of the names or photographs of individuals.
Such costs shall be reimbursed only if American Express' approval was
obtained before such costs are incurred. Any of the third party services
specified in the this paragraph, which are covered by ratecards published
by American Express from time to time, shall be billed by Agency to
American Express at the rates no more than those specified in the
ratecards and shall not be included in Agency fee.
(c) Internal Costs. American Express will reimburse Agency at Agency's cost
(without mark-up or commission) for reasonable expenses, including:
. transportation, hotels and meals, of Agency personnel in connection
with travel made in furtherance of this Agreement, in conformance with
American Express' Travel and Entertainment Guidelines attached hereto
as Appendix 1 and Appendix la. No such travel shall be undertaken
without American Express' prior approval and any travel expenses in
excess of $500.00 must be approved in advance by Client. Agency shall
not charge for local travel expenses incurred for in-town trips;
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. messenger, packing, forwarding, tape duplication and the like, and
express delivery, if approved in advance by American Express.
. American Express shall not reimburse Agency for any other out-of-
pocket expenses, including without limitation telexes, long distance
or local telephone, telecopying, photocopying, secretarial and postage
on correspondence, except if such expenses are incurred by Agency in
the course of out-of-town travel made in furtherance of this
Agreement.
. Under no circumstances will Agency bill American Express for
entertainment of Client's employees other than normal meal expense
incurred during out-of-town travel which is paid by Agency; and such
entertainment as Agency may deem appropriate shall be kept to a
minimum and within the bounds of prudent business practice. Agency
records of reimbursement for entertainment of American Express'
personnel shall be kept and made available for, and be part of, the
examination of Agency's books and records referred to in paragraph 11
of this Agreement.
(d) Billing. Unless American Express and Agency specifically agree otherwise,
Agency will bill American Express directly on a weekly basis for third-
party and internal costs. Such bill will be due within thirty days of
receipt by American Express at the address designated by American
Express.
3. Confidentiality. Proprietary information provided by the disclosing party to
the receiving party shall remain the property of the disclosing party and
shall not be disclosed by the receiving party to any third party including
employees of affiliates during the term of this Agreement or thereafter
without the disclosing party's prior written approval. Notwithstanding the
foregoing, the receiving party may disclose such information when required to
do so by law provided; however, that the receiving party gives the disclosing
party prior written notice of any intention to make such disclosures, with
sufficient time for the disclosing party to take steps to protect its
interest if it so desires. The receiving party shall promptly inform the
disclosing party of all requests by third parties for information about the
disclosing party prior to delivery of any such information with sufficient
time to provide the disclosing party with opportunity to object in a timely
and meaningful manner.
4. Term and Termination. This Agreement shall be effective as of the date it is
signed by duly authorized representatives of Agency and American Express. It
shall remain in force until the services to be performed by Agency are
completed or canceled by American Express. Either party may terminate this
agreement by 90 days' prior written notice to the other party. In the event
of any such cancellation, at American Express' option agreements with third
parties shall be assigned to American Express or its designee or canceled.
Where the terms of such third party agreements do not permit such assignment
and/or cancellation, American Express shall bear any losses incurred by
Agency associated with cancellation of this Agreement. Provisions of this
Agreement that by their nature continue beyond any termination, including
Confidentiality, Indemnity and Ownership, shall not be affected by any
cancellation or termination of this Agreement. The provisions of paragraph
3,6,8,10 shall survive the termination of this agreement.
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5. Insurance. Agency, at its own cost and expense, shall continuously maintain
in full force and effect an Advertising Liability Insurance Policy (the
"Policy") that provides coverage for Agency and American Express in a minimum
amount of five million ($5,000,000.00) U.S. dollars for any claim, loss or
liability resulting from the conduct of Agency or from the creation or
publication of advertising pursuant to this Agreement, which policy shall
provide that it may not be changed or, canceled without 30 days' prior
written notice to Agency. Agency shall provide American Express with
immediate notice of any such change or cancellation of the Policy. The Policy
may have a deductible of not more than one million ($1,000,000.00) U.S.
dollars. At American Express' request, Agency shall provide American Express
with a copy of the Policy.
6. Indemnity. (a) American Express Indemnifies Agency. (i) American Express
shall be responsible for the accuracy, completeness and propriety of
information concerning its industry, organization, products and services, or
the products and services of competitors, which American Express furnishes to
Agency in connection with the performance of this Agreement. Accordingly,
American Express shall indemnify and hold Agency harmless from and against
any loss, damage, liability, claim, demand, suit and expense (including
reasonable attorneys' fees) which may be incurred by Agency as the result of
any claim, suit or proceeding made or brought against Agency based upon any
advertising or other services which Agency prepared or performed for American
Express and which was approved by American Express, to the extent such
claims, suits or proceedings relate to the accuracy, completeness or
propriety of the information concerning American Express' industry,
organization, products and services, or the products and services of
competitors, which American Express furnished to Agency.
(ii) American Express shall also similarly indemnify and hold Agency
harmless in respect of any loss which Agency may sustain resulting
from any claim, suit or proceeding made or brought against it
arising out of the nature or use by a third party of any of
American Express' products or services.
(b) Agency Indemnifies American Express. (i) Agency agrees in connection with
all advertising or promotional matter or other materials submitted by
Agency to American Express to indemnify and hold American Express
harmless from and against any loss, damage, liability, claim, demand,
suit or expense (including reasonable attorneys' fees) which may be
incurred by American Express as the result of any claim, suit or
proceeding made or brought against American Express based upon any
advertising or other services which Agency prepared or performed for
American Express (whether or not approved by American Express), to the
extent such claims, suits or proceedings relate to:
A) libel, slander or defamation; or
B) any infringement of copyright, trademark, service mark, title or
slogan; or
C) piracy, plagiarism, unfair competition or idea misappropriation;
or
D) misappropriation of personality; or
E) any invasion of privacy; or
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F) violation of the right of publicity; or
G) other property or intellectual property rights.
(ii) Agency similarly agrees to indemnify and hold American Express
harmless from and against any loss, damage, liability, claim,
demand, suit or expense (including reasonable attorney's fees)
which may be incurred by American Express as the result of any
claim, suit or proceeding made or brought against American Express
based upon claims arising from contracts, agreements or
understandings between Agency and third parties to effectuate the
purposes of the Agreement.
(iii) Agency agrees to pay American Express liquidated damages in the
amount of $2 million for breach of the obligations of section 10(a)
including solicitation and hiring American Express employees with
access to proprietary information to support Competitive Products
as defined in section 10.
(c) Obligations and Rights of Indemnified Party. Upon the assertion of a
claim or commencement of any suit against a party that may give rise to
a claim of indemnity under this Agreement, the indemnitee shall promptly
give the indemnitor notice of such a claim or suit, and shall give the
indemnitor reasonable opportunity to settle or defend the claim or suit
with counsel of its own choosing. Indemnitee shall have at all times the
right to participate in any such settlement which it reasonably believes
would have an adverse impact on its business. The parties shall render
to each other such assistance as may be reasonably requested to defend
against any such claim or suit. An indemnitee shall not settle any such
claim or suit without the prior written permission of the indemnitor.
7. Duties of Agency. (a) Agency shall not place any advertising without first
obtaining the approval of American Express nor shall it incur any expenditure
for which American Express shall be billed, without first obtaining the
approval of American Express for the estimated cost thereof. Agency shall
make no agreements, commitments or disbursements nor incur any obligations in
an amount greater than or equal to $3,000.00 on behalf of American Express or
for American Express' account without American Express' prior written
approval. American Express' verbal approval is required for amounts less than
$3,000.00.
(b) Agency has not accepted and shall not hereafter during the term of this
Agreement and for ninety (90) days thereafter accept appointment as an
advertising agency for any products or services competing with American
Express' products or services without full discussion and disclosure to
American Express and American Express' prior written approval. Products
or services which compete with American Express' products or services
include, without limitation, credit, debit, charge or stored value cards,
calling card with linkage to credit or financial services, travelers
cheques and travel agency services.
(c) Agency will take all reasonable precautions to safeguard any and all of
American Express' property entrusted to Agency's custody or control.
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(d) Agency will take all reasonable precautions to safeguard any and all
wardrobe and prop items owned by or rented by or on behalf of American
Express and entrusted to Agency's custody or control.
(e) Agency will take all reasonable precautions to guard against any loss to
American Express which arises out of Agency's engagement of third parties
for the execution of American Express assignments and the failure of such
third parties to properly execute such assignment.
(f) Agency will obtain all necessary releases, licenses, permits and other
authorization to use names, likeness, photographs, music, artwork, film,
copyrighted materials or any other property or rights belonging to third
parties or employees and independent contractors of Agency for use in
advertising for American Express, and shall indemnify and hold American
Express harmless from and against any loss, damage, liability, claim,
demand, suit or expense (including reasonable attorneys' fees) which may
be incurred by American Express as the result of any claim, suit or
proceeding made or brought against American Express based upon claims
arising out of or in connection with any such use.
(g) All acting, musical or other performing talent (the "Talent") employed by
Agency pursuant to this Agreement shall be engaged through a third party
service and shall not be considered employees of American Express. Agency
shall instruct such third party service to withhold all legally required
income and other taxes for the Talent, and to prepare and file all
required tax reports and returns in connection with compensation paid to
the Talent.
(h) Agency will proofread all advertising materials prepared by Agency,
including those approved by American Express.
(i) From time to time American Express may provide Agency with new or
additional information concerning American Express' organization,
products or services. Agency will assure that its personnel performing
services for American Express become familiar with such information, and
shall be responsible for any additional production costs incurred as a
result of errors arising from Agency's failure to do so.
(j) Agency shall use its best efforts to undertake, obtain or perform all of
the above services at the most advantageous rates, terms and conditions
available and, from time to time, cooperate with American Express in
evaluating the effectiveness of such efforts. Agency agrees to obtain
bids from at least three vendors for all services in connection with
television and print production which are in excess of $3,000 and which
Agency obtains from third parties. Agency further agrees to keep all
documentation reflecting such bids for at least two years after their
receipt.
8. Ownership. All slogans, names, plans, advertising, publicity, promotional
materials or ideas (as those ideas are embodied in Agency materials) or any
other materials submitted, created or developed by Agency for American
Express during the term of this Agreement ("American Express Work") shall be,
as between Agency and American Express, American Express' sole and exclusive
property and shall be dealt with by Agency as such. All American Express work
shall be deemed to be "work made for hire". To the extent that any American
Express work hereunder may not be
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considered "work made for hire", Agency hereby irrevocably assigns to
American Express all its right, title and interest in and to such American
Express Work to American Express and will execute any and all documents
necessary to transfer and/or evidence American Express' ownership rights.
Agency shall not copyright or sell American Express Work for Agency's own
benefit or take any other action inconsistent with American Express'
exclusive ownership of Client Work.
American Express acknowledges that Agency possesses general knowledge,
experience, skill, talent, ideas, concepts, know-how, algorithms, libraries
of codes and other information in the field in which it will provide the
services and deliverables and that such information was or will be developed
or acquired by Agency other than directly in connection with the services and
deliverables, including, without limitation, Agency's proprietary models and
processes ("Agency Information"). American Express does not assert any right
to the Agency Information, except to the extent when such model and process
is customized to include in whole or in part American Express data, processes
and methodology and proprietary information. In such event, the customized
Agency Information shall constitute American Express work, but Agency retains
all rights to the underlying Agency Information.
Agency warrants that all American Express Work shall be originally and
exclusively created for American Express, except for those materials which
Agency obtains or licenses from third parties with American Express' consent.
Agency shall inform American Express in writing if American Express'
ownership of any material is limited in any way by rights of a third party.
Agency further warrants that no American Express Work shall infringe on the
copyrights, trademarks or other property rights of third parties. Agency
shall not grant to third parties or use for the benefit of third parties
copyrights or property rights in original American Express Work created by
Agency without the express consent of American Express.
9. Non-Exclusivity. This Agreement does not establish Agency as the exclusive
advertising agency of American Express during the term of this Agreement or
otherwise. American Express shall not be obliged to use the services of
Agency except as specifically set forth in this Agreement.
10. Non-Competition. (a) Agency Non-Competition. Agency shall render undivided
loyalty and allegiance to American Express in relation to the services to be
rendered under this Agreement. Agency shall not, during the term of this
Agreement and for a period of one (1) year thereafter, act as advertising
agency or render any of the services to be supplied hereunder in connection
with any of the products or services listed on Exhibit 3 ("Competitive
Products").(1) Agency agrees not to solicit or hire American Express
employees with access to or knowledge of American Express proprietary
information during the term of this Agreement and for a period of one (1)
year after termination of this Agreement and cause its affiliates to do the
same.
(b) Employee Non-Competition. Agency account management and creative
personnel working on the subject matter herein who have access to
American Express' confidential and/or proprietary information,
including but not limited to information concerning current and
- ----------------------
(1) Exhibit 3 and 4 should list (i) the product lines covered by the Agreement,
and (ii) any other related product lines, as well as (iii) entities that compete
generally with American Express Travel Related Services' business.
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future marketing plans and strategies, (each an "Employee") shall not
perform any work for any other client (including those of affiliates)
that sells or markets any Competitive Product (each a "Client") or for
any of the American Express' competitors listed on Exhibit 4 (each a
"Competitor") (1) during the term of this Agreement and for a period of
one (1) year after the earlier of the termination of this Agreement or
the termination of the Employee's employment with Agency. Furthermore,
employee shall not work for or support affiliates that provide services
to competitors during the term of this Agreement and for a period of one
(1) year after termination of this Agreement. Furthermore, each Employee
agrees not to solicit or hire existing or former agency or American
Express employees, agents or third parties with knowledge of American
Express confidential or proprietary information to perform or assist on
any work involving a Competitive Product for any Client or Competitor for
a period of one (1) year after the earlier of the termination of this
Agreement or the termination of the Employee's employment with Agency.
(c) Employee Undertaking. Agency shall cause each Employee, as consideration
for being permitted to work on the American Express account and for being
granted access to American Express' confidential and/or proprietary
information, to agree in writing to the terms of sub-paragraph 10(b) by
executing a Non-Competition Agreement substantially in the form set forth
as Exhibit 5 hereof. Agency shall provide an original counterpart of all
such Non-Competition Agreements to American Express.
(d) It is expressly understood and agreed that Michael Bronner and David
Kenny shall have no involvement with the development or implementation of
strategies and marketing plans for Charles Schwabs, Prudential and any
other competitors of American Express supported by an affiliate.
11. Reports: Books and Records. 1) From time to time American Express may
request Agency to participate in, and Agency will use its best efforts to
participate in, a periodic agency performance evaluation with respect to (a)
Agency's contribution to the American Express business results, (b) Agency's
servicing of American Express's account, (c) Agency's economics in servicing
American Express's accounts, (d) the working relationship between Agency and
American Express, and (e) the implementation of this Agreement.
2) Upon reasonable notice, all contracts, paper, correspondence, copybooks,
time sheets, account records, records reflecting discounts, and other
documents which relate to American Express's account, will be open to
inspection, examination and audit by American Express or American
Express's representative during Agency's normal business hours at
Agency's place of business.
3) At any reasonable time during the life of this Agreement and for one year
thereafter, and upon reasonable prior notice to Agency, American Express
may examine and make reasonable copies of American Express's files and
records (excluding, however, payroll and personnel records) pertaining to
American express advertising and marketing.
4) Unless prohibited by applicable law, Agency shall promptly advise
American Express of any actual or contemplated material changes in
Agency's ownership or control.
5) Agency shall provide American Express with annual financial ratios no
later than March 31 of the following year. In the event that there is
sufficient risk that agency may become insolvent
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or unable to complete projects for American Express, American Express may
suspend the agency relationship and withdraw any or all projects
previously assigned.
All of the foregoing and other requested information supplied by Agency to
American Express will be provided in such form and substance as American
Express shall reasonably designate.
American express shall have the right to set-off against the compensation to
be paid to Agency for any current year under paragraph 2. Hereof the amount
of any overpayment revealed in any audit performed by American Express of
amounts paid by American Express to Agency or billed by Agency to American
Express of amounts paid prior year. If an underpayment is revealed in the
audit, Agency will be entitled to any additional payment.
12. Corporate Purchasing Card. Agency agrees, upon request from American
Express, to accept the American Express Corporate Purchasing Card as a
method of payment, subject to the parties agreeing on mutually acceptable
terms and conditions, as well as the method of implementing the Corporate
Purchasing card program.
13. Services by Affiliate. In the event that Agency desires any of its parents,
subsidiaries or other affiliates ("Affiliate") to render services to
American Express, Agency first shall cause said Affiliate to execute either
a separate Agency Agreement with American Express or the Affiliate Agreement
attached hereto as Exhibit 6.
14. Compliance With Law. Agency will take all reasonable precautions to ensure
that all services, materials and copy supplied to American Express shall not
violate any laws or orders or regulations. In addition, Agency will comply
with all applicable provisions of the Workers' Compensation law and all
other federal, state and local laws, rules and regulations which may be
applicable to Agency as an employer.
15. Notice. All notices which either party is required or may desire to give the
other party hereunder shall be given by addressing the communication to an
appropriate officer of the other party at the address set forth hereunder
and may be given by registered mail, fax, telex, cable or personal delivery.
Such notices shall be deemed given on the date of receipt if given by mail,
fax or personal delivery, or after prepaid deposit of message with cable
company if telexed or cabled:
A. To: American Express at: American Express Travel Related Services
Company, Inc.
World Financial Center
New York, New York 10285
Attention: Vice President - Global Agency Contract and
Procurement (Mariana Ng Meyerson)
Copy: General Counsel's Office (Ron Gray)
Executive Vice President- Global Advertising
(John D Hayes)
B. To Agency at: Bronner Slosberg Humphrey, Inc.
The Prudential Tower, 800 Boylston Street,
Boston, Massachusetts 02199
Attention: CEO and President - David Kenny
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Copy: CEO - Meryl Beckingham
The Prudential Tower,
800 Boylston Street,
Boston, Massachusetts 02199
16. Entire Agreement. This Agreement constitutes the entire agreement with
respect to the subject matter hereof, and may only be modified or amended in
a written document signed by both parties.
17. Severability. The invalidity or unenforceability of one or more provisions
of this Agreement shall not affect the validity or enforceability of any of
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
18. Waiver. No waiver or breach of any provision of this Agreement shall
constitute a waiver of any other provision, and no waiver shall be effective
unless made in writing and signed by an authorized representative of the
party against whom such waiver is to be enforced. In the event that any
provision of this Agreement shall be illegal or otherwise unenforceable,
such provision shall be severed, and the balance of the Agreement shall
continue in full force and effect.
19. Assignment. This Agreement may not be assigned by Agency in whole or in part
without the express prior written consent of American Express.
20. Construction. This Agreement shall be construed in accordance with and
governed by the laws (excluding the conflicts of laws provisions) of the
State of New York.
21. Titles. Titles are for reference only. In the event of a conflict between a
title and the content of a section, the content of the section shall
control.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the later date below.
AMERICAN EXPRESS TRAVEL BRONNER SLOSBERG HUMPHREY, INC.
RELATED SERVICES COMPANY, INC.
By: /s/ John D. Hayes By: /s/ David Kenny
------------------------------ ---------------------------------
(John D Hayes) (David Kenny)
Title: EVP Global Advertising Title: CEO and President
--------------------------- ------------------------------
Date: Date: October 19, 1998
---------------------------- ------------------------------
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EXHIBIT 1
Services To Be Provided By Agency
Agency agrees to devote its best efforts to further American Express' interests
with respect to American Express' direct marketing, including but not limiting
to collateral, direct marketing materials and interactive area for the
businesses and marketing areas specified by American Express from time to time.
In addition, Strategic Interactive Group will be the media Agency of Record for
American Express.
As direct marketing agency for American Express, Agency will provide the
following services ("Basic Services"):
A. Familiarize itself with American Express' business and the industry in
which American Express operates.
B. Provide direct marketing counsel and promotion planning as appropriate in
areas in which Agency's advice and guidance would be helpful.
C. Provide senior level strategic counseling.
D. Provide insight of competitive marketing and industry trend.
E. Prepare creative, layouts, copy, scripts and any other elements and
materials to be used in direct marketing and promotion.
F. Produce and / or purchase artwork and mechanicals in a timely, accurate and
usable manner and within the standard set by American Express.
G. Make available to American Express the benefits of Agency's library,
process, media and market research conducted for the common benefits of all
Agency's Clients.
H. Prepare and submit to American Express in writing timely estimates of the
relevant cost of American Express' advertising and direct marketing
expenses.
I. Comply with American Express' standards and processes and work with
American Express to improve marketing processes and standards including but
not limiting to STAMP (standardized direct marketing process), DTP (DeskTop
Publishing Process) and ratecard process.
J. Ensure all relevant agency staff is familiar with American Express'
processes and standards and that agency staff attend relevant training
sessions.
K. Coordinate with American Express' other designated agencies on all related
areas of work.
L. Strategic Interactive Group will be the Agency of Record for interactive
media
M. Other services mutually agreed to by Agency and American Express.
N. Participate in periodic Agency performance evaluation as determined by
American Express.
<PAGE>
EXHIBIT 2
Fee Schedule
A. Agency Compensation / Agency Fee
Client agrees to pay Agency a fee for its services based on compensation
schedules, as follows:
1. Annual Retainer -- for Agency's senior management's counseling and strategic
advice to American Express, in accordance with the hourly rate schedule set
forth in Appendix 2 and in the format set forth in Appendix 3. Retainer is
designed to cover only senior agency staff's fully loaded time cost. It
should be proposed by Agency for American Express review no later than
November 15 for the following twelve months. It should be mutually agreed on
no later than Dec 15 for the following twelve months. Retainer can be
modified upon mutual agreement based on business needs.
2. Counseling and Creative Execution Project Ratecards -- this includes
counseling and creative execution ratecards. They are for Agency's services
in performing particular projects, including account management, creative
development and production / traffic, according to the schedules set forth in
Appendix 4a for direct mail ratecard, Appendix 4b for advertising ratecard
and Appendix 4c for media commission (which classifies types of projects
based upon the level of complexity); and Appendix 4 (which provides prices
for the classes of projects set forth in Appendix 3). It is understood that
certain projects may be of an extraordinary nature and may require pricing
between the defined complexity levels or over and above what is outlined in
the standard project ratecards. Any extraordinary adjustment will be mutually
agreed upon in advance of the work being done and will be made in accordance
with the approval process. For example, it is possible for a "brochure" to be
at priced at between simple and moderate which means at 1.5 simple pricing.
3. Hourly rate Project Ratecard - for Agency's services in performing particular
projects that do not have a set counseling or creative execution ratecard
pricing for. These typically are non-typical projects, which can either be
very large or very small. Agency should estimate the resource and time that
it will take and use the hourly rate schedule in Appendix 2 to price out the
project for client approval.
4. Media Commission - For Agency's services in planning / stewardship and buying
media placements, according to the schedule set forth in Appendix 4c.
5. Interactive media - For Agency's interactive media fee, according to the
prices set forth in Appendix 6a.
6. Interactive creative - For Agency's interactive services relating to creative
work, according to prices set forth in Appendix 6b.
The prices set in Appendix 2, Appendix 4a, Appendix 4b, Appendix 4c and Appendix
5a, Appendix 5a, Appendix 5b, Appendix 5c and Appendix 6a and Appendix 6b can be
reviewed and revised upon mutual agreement every two years. If either party
desires to adjust one or more of the compensation or fee schedules, it shall
notify the other party thereof in writing no later than ninety (90) days before
the first of the year and provide to the other party information supporting its
request. The parties shall mutually determine the adjustment(s), if any, to the
compensation schedule(s). If the parties are unable to agree on such
adjustment(s), the schedule(s) will remain unchanged.
<PAGE>
EXHIBIT 2 (continued)
B. Third Party costs
1. For prepress (engraving) costs, Agency must ensure cost to be no more than
the prices set forth in Appendix 5a.
2. For stock and commissioned photography fee, Agency must ensure cost to be no
more than the prices set forth in Appendix 5b.
3. For preproduction or mechanical, Agency must ensure cost to be no more than
the prices set forth in Appendix 5c.
If Agency itself performs any of the services specified in the foregoing
paragraphs B. 1,2 and 3 and Agency's actual cost of doing so is less than the
rate specified in such ratecard, Agency may nevertheless bill Client at such
rate. If, however, any third party performs such services and such third party's
actual cost of doing so is less than such rate, Agency shall bill American
Express for such third party's actual cost. Agency shall not be reimbursed if
its own costs or those of any third party exceed the rate specified on the
ratecard for performance of such services.
Processes standards:
. Agency must comply with the standard established by American Express including
but not limiting to STAMP, STEPS, DeskTop Publishing (DTP) and ratecard.
. Agency prepares the Agency Fee Counseling, Execution and hourly rate ratecards
immediately after agency concept is developed.
. Agency submits ratecards electronically for American Express marketing
approval(s).
. American Express marketing approves ratecards electronically.
. Agency prints out approved ratecard (Purchase Order) and attach it to invoice
and send to Phoenix for finance processing and payment.
In case of inconsistency between STAMP and STEP and the above summary, the
standards set in STAMP including DTP and ratecard, as well as STEP will prevail.
Scope of Work
American Express will continue to work with Agency to supplement project by
project pricing by periodic scope of work using ratecard pricing and monthly
payment methodology or other mutually agreed upon payment method.
Agency and American Express responsibilities relating to ratecard and invoicing
processes
. Agency is accountable for creating, submitting and modifying ratecards
immediately after agency brief. This will ensures that both Agency and
American Express to have a record and audit trail on project pricing status.
<PAGE>
. Agency is accountable for following up with American Express marketing clients
on approval status and budget line information.
. American Express marketing is accountable for approving, request for Discuss
Further the submitted ratecards.
. American Express marketing is accountable for providing Agency with the
appropriate and accurate budget line details or cost center details for agency
to input when creating the ratecards.
. American Express Finance in Phoenix is accountable for ensuring that payment
is timely upon receipt of invoice.
. American Express Global Agency contact and procurement is accountable for
process set up, pricing negotiation and arbitration in case of disagreements
between American Express marketing and Agency.
Client Processes and training
More detailed Ratecard process and how it is integrated into the STAMP and DTP
process (standardized direct marketing and desk top publishing processes) are
contained in the STAMP and desk top publishing manuals which are updated from
time to time. All ratecard pricing, definition, standards and formats can be
found in the Ratecard system and the STAMP / Team work systems on Lotusnotes.
Agency must attend the appropriate training on these three major processes and
ensue agency staff have adequate access to the appropriate systems.
<PAGE>
Exhibit 2a
C. Agency Performance and Bonus
Agency will be evaluated twice a year, in June/July and December/January by
American Express clients in accordance with American Express agency evaluation
criteria and process.
Performance rating and bonus target is as follows:
Rating 1 : [***] of aggregate agency compensation before bonus
Rating 2 : [***] of aggregate agency compensation before bonus
Rating 3 : [***] of aggregate agency compensation before bonus
Rating 4 : [***]
Rating 5 : [***]
Performance will be evaluated twice a year, in June/July and December/January
based on the following two evaluation categories:
1) Business rating - This weighs [***] of total performance. Business rating is
further categorized into two categories as follows:
a) Shareholder rating - This weighs [***] of total business
rating (that is, [***]of total performance).
. Shareholder ratings for each business unit is determined by the
American Express Board.
. Overall shareholder rating for the Agency will be calculated based on
the weighted average of the shareholder ratings determined by the
American Express Board based on net income.
b) Customer rating - This weighs [***] of total business rating
(that is, [***] of total performance).
. Customer ratings are determined by the users of Agency services in
American Express.
. Overall customer rating for the Agency will be calculated based on
the weighted average of the customer ratings determined by the
different business units based on agency billing.
2) Leadership rating - This weighs [***] of total performance.
. Agency is rated on four leadership dimensions detailed in Appendix 7:
. Thought leadership [***] (i.e. [***] of total performance)
. Result leadership [***] (i.e. [***] of total performance)
. Change leadership [***] (i.e. [***] of total performance)
. Relationship leadership [***] (i.e. [***] of the total performance)
The performance evaluation matrix and the performance process may be modified
from time to time by American Express to reflect business needs.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Agency performance evaluation process
. Amex marketing leaders submit inputs to business unit leaders for
consolidation;
. Business unit leaders submit evaluation to VP of Global Agency Contract and
Procurement for Blue Box consolidation;
. Business unit leaders will discuss evaluation at Marketing Council Steering
Committee meeting to finalize ratings for Blue Box for agency.
. Each business unit leader is responsible for conducting evaluation meetings
with his/her agency counterpart. Each marketing leader within a business unit
will also conduct evaluation meeting with his/her counterpart.
. EVP of Global Advertising and Brand Management will conduct overall Blue Box
evaluation meeting with head of agency. This is the only source and time that
incentive % will be discussed. The final incentive communication will take
place after the final business result is available in March.
. It is the responsibility for both American Express and agency to ensure the
evaluation meeting and discussion take place appropriately and timely.
. VP of Global Agency Contract and Procurement is responsible for the overall
evaluation process management and counseling.
Agency incentive payment process
Agency's incentive will be paid out once a year no later than March 31st unless
the final business unit ratings are not finalized by the American Express.
<PAGE>
EXHIBIT 3
Competitive Products and Competitors
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Business Unit
Business Line of Business, Wide
Unit Department of Job Function Standard (if applicable) Competitors
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRS U.S. Consumer Card Group Top 15 credit card issuers in owned and VISA Association
(including U.S. Service managed receivable (based on publicly (U.S. and
utility) available data as of the date you begin to International)
provide services to the competitor).
plus
First Data Corp., Total System Services, Inc., Mastercard
Vital Processing Services, Global Payment Association (U.S.
Systems, EDS. and International
and including
Eurocard)
--------------------------------------------------------------------------------------
U.S. Business and Consumer Carlson, Rosenbluth, BTI, World Travel partners, Citicorp and its
Travel Maritz, Sabre, Galileo, Amadeus, Microsoft subsidiaries and
Travel Technologies, Preview Travel, Liberty affiliates
Travel, CUC, Travel Impressions/Empress Travel
plus
Competitors of the International Travel business
--------------------------------------------------------------------------------------
Corporate Card (including Chase, First Bank VISA (U.S. Bancorp), First
Large/middle market, Chicago NBD Corp., First USA, GE Capital,
government card and NationsBank, of Delaware, Portable Software,
Purchasing Card) Extensity, Diners Club, Bank of America
--------------------------------------------------------------------------------------
Top 15 credit card issuers in owned and managed
receivables (based on publicly available data
as of the date you begin to provide services to
the competitor).
plus
AERS First Data Corp., subsidiary of First Data
Resources; the group which is our competition is
called ValueLink - Stored value gift
cards. Stored Value Systems; a subsidiary of
National Processing Corp. - Stored value gift
cards. Any Credit Insurance Company (American
Banker, American Security) unless they do
business with Amex. CUC-HFS for service
enhancements specifically signature,
credentials. Memberworks (unless they do
business with us), Encore (unless they do
business with us), Creditcom (unless they do
business with us). Professional Employment
Organizations (PEOs), Brokerage companies,
E-mail companies, Internet payment companies
--------------------------------------------------------------------------------------
Companies: Merrill Lynch, Fidelity, Charles
Schwab, Prudential, SunAmerica, Morgan Stanley
Dean Witter, Smith Barney, Paine Webber,
John Hancock, T. Rowe Price, Dreyfus,
AEFA AEFA and Direct Janus, Scudder, Vanguard, Travelers.
Products/Services: Financial Planning Services,
Mutual Funds, Certificates, Long Term Card
Insurance, Security Services, Annuities,
Life Insurance, Medical Insurance, Tax and
Business Services, Property and Casualty
Insurance, Lending and Deposit Products,
Retirement Plans, Business Planning Services,
Income Protection Plans, Direct Investments,
Wealth Management Services
--------------------------------------------------------------------------------------
Companies: Thomas Cook, Citibank, Visa,
Mastercard, Any bank or institution offering
Travelers travel payment options. Products: Travel
Cheques payment options, Money orders, Debit cards,
Credit cards, Charge cards, Travelers Cheques
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 4
Competitive Products and Competitors
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Business Unit
Business Line of Business, Wide
Unit Department of Job Function Standard (if applicable) Competitors
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRS U.S. Consumer Card Group Top 15 credit card issuers in owned and VISA Association
(including U.S. Service managed receivable (based on publicly (U.S. and
utility) available data as of the date you begin to International)
provide services to the competitor).
plus
First Data Corp., Total System Services, Inc., Mastercard
Vital Processing Services, Global Payment Association (U.S.
Systems, EDS. and International
and including
Eurocard)
--------------------------------------------------------------------------------------
U.S. Business and Consumer Carlson, Rosenbluth, BTI, World Travel partners, Citicorp and its
Travel Maritz, Sabre, Galileo, Amadeus, Microsoft subsidiaries and
Travel Technologies, Preview Travel, Liberty affiliates
Travel, CUC, Travel Impressions/Empress Travel
plus
Competitors of the International Travel business
--------------------------------------------------------------------------------------
Corporate Card (including Chase, First Bank VISA (U.S. Bancorp), First
Large/middle market, Chicago NBD Corp., First USA, GE Capital,
government card and NationsBank, of Delaware, Portable Software,
Purchasing Card) NationsBank, Extensity, Diners Club, Bank of America
of Delaware,
--------------------------------------------------------------------------------------
Top 15 credit card issuers in owned and managed
receivables (based on publicly available data
as of the date you begin to provide services to
the competitor).
plus
AERS First Data Corp., subsidiary of First Data
Resources; the group which is our competition is
called ValueLink - Stored value gift
cards. Stored Value Systems; a subsidiary of
National Processing Corp. - Stored value gift
cards. Any Credit Insurance Company (American
Banker, American Security) unless they do
business with Amex. CUC-HFS for service
enhancements specifically signature,
credentials. Memberworks (unless they do
business with us), Encore (unless they do
business with us), Creditcom (unless they do
business with us). Professional Employment
Organizations (PEOs), Brokerage companies,
E-mail companies, Internet payment companies
--------------------------------------------------------------------------------------
Companies: Merrill Lynch, Fidelity, Charles
Schwab, Prudential, SunAmerica, Morgan Stanley
Dean Witter, Smith Barney, Paine Webber,
John Hancock, T. Rowe Price, Dreyfus,
AEFA AEFA and Direct Janus, Scudder, Vanguard, Travelers.
Products/Services: Financial Planning Services,
Mutual Funds, Certificates, Long Term Card
Insurance, Security Services, Annuities,
Life Insurance, Medical Insurance, Tax and
Business Services, Property and Casualty
Insurance, Lending and Deposit Products,
Retirement Plans, Business Planning Services,
Income Protection Plans, Direct Investments,
Wealth Management Services
--------------------------------------------------------------------------------------
Companies: Thomas Cook, Citibank, Visa,
Mastercard, Any bank or institution offering
Travelers travel payment options. Products: Travel
Cheques payment options, Money orders, Debit cards,
Credit cards, Charge cards, Travelers Cheques
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 5
Non-Competition Agreement
I, ____________________________, have been asked by [Agency]("Agency")
to provide services to American Express Travel Related Services Company, Inc.
("American Express"). In connection with providing those services to American
Express, I understand that I will be given access to confidential and/or
proprietary information concerning American Express, its business, and/or its
marketing plans and strategies.
As consideration for being permitted to work on the American Express
account, for being granted access to American Express' confidential and/or
proprietary information, and for my continued employment at the Agency, I hereby
agree personally to abide by the duties and obligations of Agency and its
Employees as set forth in Sections 3 and 10(a)-(b) of the Advertising/
Marketing/Promotion Agency Agreement dated [date ________] between Agency and
American Express (the "Agreement"), pursuant to which Agency has agreed to
provide [description of services________________] to American Express (the
"Services"). Those sections provide:
3. Confidentiality. Proprietary information provided by the
disclosing party to the receiving party shall remain the property of
the disclosing party and shall not be disclosed by the receiving party
to any third party including employees of affiliates during the term
of this Agreement or thereafter without the disclosing party's prior
written approval. Notwithstanding the foregoing, the receiving party
may disclose such information when required to do so by law provided;
however, that the receiving party gives the disclosing party prior
written notice of any intention to make such disclosures, with
sufficient time for the disclosing party to take steps to protect its
interest if it so desires. The receiving party shall promptly inform
the disclosing party of all requests by third parties for information
about the disclosing party prior to delivery of any such information
with sufficient time to provide the disclosing party with opportunity
to object in a timely and meaningful manner.
10. Non-Competition, (a) Agency Non-Competition. Agency shall render
undivided loyalty and allegiance to American Express in relation to
the services to be rendered under this Agreement. Agency shall not,
during the term of this Agreement and for a period of one (1) year
thereafter, act as advertising agency or render any of the services to
be supplied hereunder in connection with any of the products or
services listed on Exhibit 3 ("Competitive Products").l Agency agrees
not to solicit or hire American Express employees with access to or
knowledge of American Express proprietary information during the term
of this Agreement and for a period of one (1) year after termination
of this Agreement and cause its affiliates to do the same.
(b) Employee Non-Competition. Agency management and creative personnel
working on the subject matter herein who have access to American
Express' confidential and/or proprietary information, including
but not limited to information concerning current and future
marketing plans and strategies, (each an "Employee") shall not
perform any work for any other client that sells or markets any
Competitive Product (each a "Client") or for any of the American
Express competitors listed on Exhibit 4 (each a "Competitor")
during
<PAGE>
the term of this Agreement and for a period of one (1) year after
the earlier of the termination of this Agreement or the termination
of the Employee's employment with Agency. Furthermore, employee
shall not work for or support affiliates that provide services to
competitors during the term of this Agreement and for a period of
one (1) year after termination of this Agreement. Furthermore, each
Employee agrees not to solicit or hire existing or former agency or
American Express employees, agents or third parties with knowledge
of American Express confidential or proprietary information to
perform or assist on any work involving a Competitive Product for
any Client or Competitor for a period of one (1) year after the
earlier of the termination of this Agreement or the termination of
the Employee's employment with Agency.
(c) It is expressly understood and agreed that Michael Bronner and
David Kenny shall have no involvement with the development or
implementation of strategies and marketing plans for Charles
Schwabs, Prudential and any other competitors of American Express
supported by an affiliate.
I further agree that American Express is a third party beneficiary of
this agreement and has full right, power and authority to enforce its terms.
BRONNER SLOSBERG HUMPHREY, INC. [EMPLOYEE, DIRECTOR OR OFFICER]
By /s/ David Kenny
----------------------------- --------------------------------
Name:
Title: President and CEO
Date: October 19, 1998 Date:
------------------------ ---------------------------
<PAGE>
EXHIBIT 6
Affiliate Agreement
Strategic Interactive Group, Inc. ("Affiliate"), an affiliate of
Bronner Slosberg Humphrey, Inc. ("Agency"), having been asked by Agency to
provide interactive advertising, marketing or promotion services to American
Express Travel Related Services Company, Inc. ("American Express"), hereby
agrees with American Express as follows:
Affiliate has reviewed that certain "Advertising/Marketing/Promotion
Agency Agreement" dated October 9, 1998 (the "Agreement") between Bronner
Slosberg Humphrey, Inc. and American Express, pursuant to which Agency has
agreed to provide interactive, marketing, advertising and media services to
American Express (the "Services"). In consideration for being allowed to provide
Services to American Express directly and/or through Agency, Affiliate hereby
agrees to be bound by all of Agency's duties and obligations of the Agreement
with respect to any Services Affiliate provides to American Express including
but not limited to the duties and obligations set forth in paragraphs 3
(Confidentiality), 6 (Indemnity), 7 (Duties of Agency), 8 (Ownership), 10 (Non-
competition) and 12 (Compliance with Law).
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the later date below.
AMERICAN EXPRESS TRAVEL STRATEGIC INTERACTIVE GROUP, INC.
RELATED SERVICES COMPANY, INC.
By: /s/ John D Hayes By: /s/ Meryl Beckingham
------------------------------- ------------------------------
Name. John D Hayes Name: Meryl Beckingham
Title: EVP -- Global Advertising Title: SVP and CFO
and Brand Management
Date: Date: October 19, 1998
------------------------ ---------------------------
<PAGE>
APPENDIX 1
[AMERICAN EXPRESS LOGO]
1998
AMERICAN EXPRESS
EMPLOYEE
TRAVEL & EXPENSE
GUIDE
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
TABLE OF CONTENTS
I. General Policy 4
II. Payment Methods 4
A. Corporate Card 4
1. Use of Corporate Card 4
2. Reconciliation of Corporate Card Account 4
3. Membership Rewards 4
B. Cash Advances 5
C. Corporate Purchasing Card (CPC) 5
III. Out-of-Town Travel 5
A. Travel Authorization/Arrangements 5
1. Travel Authorization 5
2. Travel Arrangements 6
3. Traveler Profiles 6
4. Passport/Visa Services 6
5. Travel Advisories 6
B. Transportation 6
1. Air Travel 6
2. Car Rental 8
3. Rail 9
4. Taxis 9
5. Company Cars 10
6. Personal Auto 10
7. Ferry/Car Ferry/Channel Tunnel 10
C. Lodging 10
1. Hotel Selection 10
2. Hotel Cancellations 11
3. Hotel Frequent Guest Programs 12
4. Lodging with Relatives/Friends 12
D. Meals 12
E. Weekend Travel 13
1. Weekend Stay (Before or After a Business Trip) 13
2. Weekend Return Home 14
3. Weekend Side Trips 14
F. Spouse/Partner Travel 14
1. For Business or Achievement Awards 14
2. In Lieu of Employee Weekend Return Home 14
G. Temporary Assignments/Extended Business Trips 15
1. Lodging 15
- ----------------------------------------------------------------------------- 2
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
2. Meals and Incidental Expenses 15
H. Emergency Travel 15
1. General Procedures 15
2. Personal Emergencies 15
I. Miscellaneous Travel Expenses 15
J. Other Personnel - Travel Expenses 16
1. Consultants 16
2. Employment Candidates 16
3. Employment Contracts 16
4. Expatriate Employees 17
IV. In-Town Travel 17
A. Meals 17
1. Employee Business Meals/Meetings 17
2. Worked Late/Holiday/Weekend Meals 17
3. Meals with Clients/Prospects 17
4. Spouse/Partner In-Town Meal and Entertainment
Expenses 17
V. Group Travel 18
A. Approvals 18
B. Cost Containment Measures 18
VI. Other Business Expenses 18
A. Entertainment 18
B. Club Memberships 19
C. Gifts 19
D. Purchases 19
1. Supplies 19
2. Temporary Services 19
E. Telecommunications 20
1. Cellular Telephones 20
2. Air/Rail Telephones 20
3. Faxes/Modems 20
F. Training 20
G. Subscriptions . 20
H. Professional Dues and Licenses 20
I. Team Building/Department Parties 20
VII. Personal Employee Travel 21
VIII. Expense Reimbursement Procedures 21
A. Responsibilities 21
B. Support for and Submission of Claims 21
IX. Non-Reimbursable Expenses 23
- ----------------------------------------------------------------------------- 3
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
I. General Policy
The Company will reimburse employees for actual and reasonable expenses
incurred in conducting Company business that are properly documented, approved
and in accordance with this policy. Not complying with this policy will result
in not being reimbursed for expenses, and appropriate management action, up to
and including termination.
No American Express business segment or unit can establish and apply business
expense reimbursement guidelines more lenient than those set in this policy.
However, they may elect to maintain more restrictive guidelines. Refer to
Addendum 1 for supplemental guidelines for the U.S., and AEB and AEFA
employees. Exceptions not specifically authorized in this policy require the
prior written approval of a Planning and Policy Committee (PPC) member,
stating the business reason for the exception.
II. Payment Methods
The following methods may be used to pay for reimbursable business expenses:
A. Corporate Card
1. Use of Corporate Card
Reimbursable business expenses must be paid for using the American Express
Corporate Card, whenever and wherever possible. Employees incurring business
expenses of at least US$500 per year should apply for a Corporate Card.
Applications can be obtained through the Procurement Fax Information Service
at 1-800-644-0950 or on the Company e-mail bulletin board under "Global
Corporate Travel." Employees without Corporate Cards, for whatever reason,
should have their business travel expenses charged to their manager's
Corporate Card, wherever possible. Use of personal cards for payment of
business expenses and use of the Corporate Card for personal expenses are
prohibited.
2. Reconciliation of Corporate Card Account
Employee Corporate Card accounts must be kept current at all times. Expense
vouchers must be submitted on a timely basis to clear outstanding balances and
to prevent any account from aging past its due date. Employees should refer to
Addendum 1 or contact their local Controller for local account reconciliation
guidelines.
3. Membership Rewards
Employees are not eligible for Membership Rewards points for business-related
charges.
- ----------------------------------------------------------------------------- 4
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
B. Cash Advances
Employees are discouraged from using cash advances to pay for business travel
and should use the Corporate Card, whenever possible. Cash advances should
only be used on an exception basis, and when used, charged to an employee
Corporate Card. Employees requiring cash advances are encouraged to use
American Express cash products, including Corporate Travelers Cheques and
Corporate Express Cash. Refer to Addendum 1 or local market addendum for cash
advance limits.
C. Corporate Purchasing Card (CPC)
Where available and feasible, the American Express Corporate Purchasing Card
must be used by authorized employees to purchase goods and services from
designated vendors. These vendors are listed in an "Approved Supplier List"
maintained by Global Procurement. The CPC may not be used to pay for travel
expenses in lieu of the Corporate Card.
Departments that make purchases from vendors listed on the Approved Supplier
List should designate one or more employees to receive a CPC. The only person
who should use the CPC is the person whose name appears on the face of the
Card. Use of the CPC for personal purchases or expenses is prohibited. If the
CPC is currently not available in your location, purchases should be made
through a Global Procurement representative for your office, where applicable.
III. Out-of-Town Travel
A. Travel Authorization/Arrangements
1. Travel Authorization
Out of town travel should occur only when there is a significant value added
to the business that cannot be accomplished through conference calls,
videoconferencing, etc. A list of worldwide videoconferencing facilities and
reservation procedures, are available on the Company's e-mail bulletin board
under "Global Corporate Travel."
Individual trips, or long-term travel plans, must be pre-approved by the
employee's manager and booked as early as possible to take advantage of
advance purchase airline discounts. Pre-approval may be verbal, unless written
approval is required by the local business unit.
- ----------------------------------------------------------------------------- 5
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
2. Travel Arrangements
Travel arrangements for air, lodging and car rental must be made at the same
time through the traveler's designated American Express Travel or
Representative office. Failure to use designated offices may result in not
being reimbursed for expenses.
3. Traveler Profiles
To provide readily accessible traveler information and preferences within
policy guidelines to Travel Counselors, employees who travel should complete
and submit a Traveler Profile to their designated travel office for entry into
the American Express reservation system. Travelers are responsible for
ensuring that information on profiles is current. Profile forms are available
on the e-mail bulletin board under "Global Corporate Travel," or can be
obtained from designated travel offices.
4. Passport/Visa Services
When making reservations, travel counselors will notify travelers of passport,
visa, tourist card and immunization requirements and assist travelers, as
necessary, to ensure that the requirements are met. Passport, visa, tourist
card or other entry costs, as well as immunization expenses are reimbursable,
if required for business travel purposes.
5. Travel Advisories
Employees should NOT travel to countries for which a travel advisory has been
issued by the U.S. State Department, local governments or American Express.
B. Transportation
1. Air Travel
Travelers are required to use American Express preferred carriers and the
class of service designated by policy. AEB employees should refer to Addendum
1 for applicable class of service guidelines. Travel Counselors will provide
employees with, and employees must accept, the lowest logical airfare for
their eligible class of service.
Employees must accept alternative flights departing within one hour before or
after the original departure time requested (time window). For domestic
travel, the time window restriction may be waived on the return portion of a
trip if the employee would land after 8:00 p.m. local time. Carrier selection
based on frequent flyer programs is prohibited.
Use of penalty or non-refundable fares is recommended. These tickets can be
changed and reissued for a fee that still make their use more economical to
the company. Reissuance fees are reimbursable.
- ----------------------------------------------------------------------------- 6
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
The following tables illustrate class of air travel guidelines for employees who
do not receive agency discounts (AD) and employees eligible for agency
discounts* (AD employees):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CLASS OF AIR TRAVEL**
-----------------------------------------------------------------------------
Non-AD Flights (less than)5.5 Flights 5.5 to 8.5 Flights (greater than)8.5
Employees hours (1) hours hours
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Band 60 and
above Economy First Class First Class
- ---------------------------------------------------------------------------------------------
Band 50 Economy Business Class (2) First Class
- ---------------------------------------------------------------------------------------------
Band 45 Economy Business Class (2) Business Class
- ---------------------------------------------------------------------------------------------
All Others Economy Economy (3) Business Class
- ---------------------------------------------------------------------------------------------
Flights under 5.5 hours:
(1) All employees must accept the lowest logical air fare and may not request a
higher fared ticket to obtain an upgrade in class of service. Soft
dollar*** or free tickets must be accepted, when offered by the Travel
Counselor.
Flights 5.5 to 8.5 hours:
(2) If business class is not available, the lowest logical economy fare must be
accepted.
(3) Employees band 40 and below must accept the lowest logical fare and may not
request a higher fared ticket to obtain an upgrade in class of service.
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS OF AIR TRAVEL
---------------------------------------------------------------------------------------------------
Flights (less than) 5.5 Flights 5.5 to 8.5 Flights (greater than) 8.5
AD Employees hours hours hours (3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Band 40 and Business (1) Business (2) First Class
above
- ---------------------------------------------------------------------------------------------------------------------------
All Others Economy Business (2) First Class
- ---------------------------------------------------------------------------------------------------------------------------
Flights (less than) 5.5 hours:
(1) If business class is not offered or available, AD first class is authorized.
lf AD first class is not available, non-AD employee guidelines apply. Soft
dollar or free tickets must be accepted when offered, regardless of class of
service.
Flights 5.5 to 8.5 hours:
(2) If business class is not offered or available, AD first class is authorized.
If AD first class is not available, non-AD employee guidelines apply. If
soft dollar or free tickets are available in business class, they must be
accepted.
Flights greater than 8.5 hours:
(3) Employees who hold IATAN cards may fly first class, based on availability.
If AD first class is not available, non-AD employee guidelines apply. If
soft dollar or free tickets are available in business class, they must be
accepted.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Employees eligible for agency discounts must request and utilize AD tickets
for business travel.
** AEB employees should refer to Addendum 1 for class of air travel guidelines.
*** Soft dollars are promotional funds earned from individual airline partners
based on sales volume. Soft dollar tickets are charged to a special account,
not the employee's Corporate Card, and therefore, must not be expensed on an
expense voucher.
- ----------------------------------------------------------------------------- 7
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
Authorized Exceptions:
. Travel to, from and within Africa; Russia; the European countries of Croatia,
the Czech Republic, Greece, Hungary, Poland and Turkey; the Middle Eastern
countries of Bahrain, Iran, Iraq, lsrael, Jordan, Kuwait, Lebanon, Oman,
Republic of Yemen, Saudi Arabia, Syria, United Arab Emirates; and the Asian
countries of Bangladesh, India, Indonesia, Pakistan, the Peoples Republic of
China, the Philippines, Sri Lanka, and Vietnam may be in business class. In
addition, all employees band 40 and above may fly business class to, from and
within the remaining Asian countries.
. Employees who travel on overnight flights, and proceed directly to work, may
upgrade from economy to business class. If business class is not available,
then first class is permitted. Employees who upgrade may not book an
additional hotel night if their hotel cannot gratuitously accommodate early
check-in or late check-out.
. When traveling with clients or customers, employees may use the same class of
service. In such cases, specific details must be noted on the traveler's
itinerary.
. Travel on the Concorde requires prior written approval from the Office of the
Chief Executive (OCE).
Employees Traveling Together
It is suggested that no more than two senior Company executives or 50% of the
employees of a department travel on the same commercial flight.
Use of Chartered or Private Aircraft
Employees may not use chartered or private aircraft while traveling on Company
business.
2. Car Rental
The use of rental cars is only justified when it is economically cheaper than
the best local ground transportation alternative, taking safety and travel time
into consideration. Personal convenience is not an acceptable justification. Car
rentals are to be booked through the designated American Express Travel or
Representative office which must use preferred suppliers, when available. Rental
cars should be returned on time and with a full tank of gas to avoid additional
hourly and excessive refueling charges. Employees traveling in the U.S. should
refer to Addendum 1 for car rental rates.
Rental cars must be intermediate size for North America and standard size for
other locations. Use of a rental car one size larger than that allowed by policy
is acceptable when: four or more employees travel together and share the rental;
entertaining customers; cars in authorized category are not available; the
upgrade is at no additional cost; transporting excess baggage; or pre-approved
for medical reasons, i.e., drivers with disabilities.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
Car Rental Insurance Guidelines
The following table stipulates the policy for accepting or declining car rental
insurance, depending on the employee's domicile and travel destination:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Domicile Destination Accept Decline Accident Notification
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. U.S., territories, -- All insurance(1)(2) . Auto damage - Travelers
possessions and Insurance Co.
Canada 1-800-243-2490
. Bodily injury- Travelers
Insurance Co. 1-800-832-7839
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Outside U.S., All insurance -- . Bodily Injury - Corporate
territories and Risk Financing 612-671-8974
possessions
- ------------------------------------------------------------------------------------------------------------------------------------
Canada Canada, U.S., -- All insurance . Auto damage - Travelers
territories and Insurance Co. 1-800-243-2490
possessions . Bodily Injury - Travelers
Insurance Co. 1-800-832-7839
- ------------------------------------------------------------------------------------------------------------------------------------
Canada All other All insurance -- . Bodily Injury - Corporate
countries Risk Financing 612-671-8974
(except U.S.,
territories and
possessions)
- ------------------------------------------------------------------------------------------------------------------------------------
All other non- U.S., territories -- All insurance . Auto damage - Travelers
U.S./non- and possessions Insurance Co. 1-800-243-2490
Canada . Bodily Injury - Travelers
Insurance Co. 1-800-832-7839
- ------------------------------------------------------------------------------------------------------------------------------------
All EMEA Europe CDW/LDW if All other . Bodily Injury - Corporate
not included insurance Risk Financing 612-671-8974
in base rental
rate (2)
- ------------------------------------------------------------------------------------------------------------------------------------
All other non- countries other CDW/LDW -- . Bodily Injury - Corporate
U.S. except than own domicile and all other Risk Financing 612-671-8974
Canada and U.S., insurance
territories,
possessions,
Canada and
Europe
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1) Bodily injury and property damage liability; uninsured motorist; personal
injury protection; theft protection; personal accident and loss and damage.
2) CDW/LDW - collision damage waiver/loss damage waiver (damage to rental car).
3. Rail
Economy class should be used for rail travel under three (3) hours and
club/first class travel is permitted for trips exceeding three hours, where
airfare would be more expensive.
4. Taxis
Use of taxis and approved car services are authorized in cases where valid
business reasons warrant their use. The most economical and efficient means of
getting around at the travel destination should be used, taking safety into
consideration. The use of hotel courtesy coaches, when traveling to and from the
airport, should be evaluated as an alternative to
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
taxis. Employees traveling in the New York City area should refer to Addendum
1 for a list of American Express approved car services.
5. Company Cars
Employees with Company cars are expected to use them for local business-
related travel unless a more economical means of travel is available.
6. Personal Auto
The Company will reimburse employees for using their personal autos for
Company business when it is cheaper than the best local transportation
available and not for personal convenience. When using a personal auto, costs
are reimbursed as stated by local authorities. Refer to addendum 1 or local
market addendum for reimbursement rates. Employees will also be reimbursed for
parking and tolls. On long distance trips, i.e., over 300 miles or 500 kms,
car rental should be used as the less costly alternative.
7. Ferry/Car Ferry/Channel Tunnel
Employees may use ferries, car ferries or the Channel Tunnel where the total
cost is less than air or rail fare to the same location.
Travel to European centers by car and ferry is permitted provided a written
cost estimate is approved by a unit executive of band 45 or higher, prior to
the trip, and attached to the expense voucher. The decision to approve must
consider the loss of working hours between using the car and ferry and a more
expedient method of travel.
C. Lodging
Hotel reservations should be made by the designated American Express Travel or
Representative office.
1. Hotel Selection
Travel Counselors are instructed to book employees in preferred hotels with
which American Express has negotiated discounted employee rates. If a
preferred hotel is not available, employees must use a moderately priced hotel
listed in the American Express Select Hotel Guide, charging a rate at or below
the guideline rate set by American Express for the destination city. Lists of
preferred hotels and maximum guideline rates are available on the e-mail
bulletin board under Global Corporate Travel. The American Express Select
Hotel Guide is available at designated travel or representative offices or
from the Global Corporate Travel Group.
Employees holding IATAN (or IATA) cards (AD employees) are expected to request
and accept travel industry discounts at preferred hotels.
- ----------------------------------------------------------------------------- 10
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
Safety and security are of primary importance when employees are traveling on
Company business. If an employee arrives at a preferred hotel and feels that
there is a threat to his/her safety, the traveler may relocate to another hotel,
and be reimbursed. Travelers must, however, report this hotel, within 24 hours,
to the Global Corporate Travel Group responsible for the worldwide employee
hotel program. The Unit can be reached through e-mail (See addendum 1 for e-mail
addresses).
While hotel reservations should be booked by designated travel offices, there
will be occasions when individual, group or conference hotel reservations will
be booked directly, or where an American Express or Representative office in a
destination city can make a hotel reservation at a lower rate. In these
instances, the traveler is responsible for notifying his/her designated home
booking office of the accommodation, confirmation number and rate to complete
the traveler's itinerary.
When the combined costs of round trip ground transportation, to and from where
the employee must be for business purposes, and lodging at an American Express
preferred hotel equals or exceeds the combined cost of staying at another, more
conveniently located property, the alternate property may be used. In this case,
the Travel Counselor will note the reason for the exception on the traveler's
itinerary, and the reservation will be considered within policy. A detailed cost
comparison analysis must be attached to the expense voucher when submitting
related expenses for reimbursement.
For international flights arriving or departing at exceptionally early or late
hours, employees may book an additional day if the hotel cannot adequately
accommodate early check-in or late check-out. Where available, day rooms at
airports should be considered for such circumstances, or for long waits between
connecting flights. Employees traveling on an overnight flight and upgrading to
business class will not be reimbursed for an additional hotel day.
In instances where an American Express negotiated hotel is not available and the
only hotel available in the employee's business travel destination exceeds the
guideline rate, the Travel Counselor may make the reservation at the out-of-
policy hotel, noting on the itinerary that the employee is within policy and
why. Without the required itinerary indicating that the employee is within
policy or without written approval from a P&PC member, Vendors Payable will only
reimburse employees up to the guideline rate and employees are responsible for
paying the difference between the actual hotel rate and the guideline rate.
2. Hotel Cancellations
Travelers are responsible for canceling hotel reservations and must notify their
designated travel office of the cancellation. Any penalties incurred for not
canceling a guaranteed hotel
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
reservation are the responsibility of the traveler and not reimbursable.
Travel Counselors will not negotiate the removal of hotel cancellation fees.
3. Hotel Frequent Guest Programs
Some hotels have frequent guest programs that reward travelers with free
accommodations. Participation in these programs must not influence hotel
selection when it would result in a higher cost to the Company. Membership
fees associated with joining these programs are not reimbursable.
4. Lodging with Relatives/Friends
With prior approval of their manager, employees may choose to stay with
relatives or friends while traveling on Company business, in lieu of an
American Express negotiated preferred hotel. Employees will receive $25 for
each night lodging with relatives or friends. This includes weekend nights in
the midst of a trip, where the employee would not be entitled to return home,
as well as, weekend nights needed to take advantage of lower airfares. Meals
and incidentals are not included in the $25. Employees will be reimbursed
through normal expense voucher submission procedures, providing a brief
description of the circumstances on their expense voucher. The $25 may or may
not be taxable as income to employees, depending upon local tax laws.
D. Meals
The Company will reimburse employees for actual meal expenses following the
daily meal guideline established for their travel destination. When two or
more employees are eating together, meal guidelines per person should be
followed and the meal expense must be charged by the senior individual.
However, in cases where the employees are invited to a business meal as a
guest by the local management of the business destination, the host may charge
the meal. Meals with clients or business prospects are not subject to these
guidelines; however, they will be reimbursed only if reasonable and
appropriate.
- ----------------------------------------------------------------------------- 12
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
must be attached to the expense voucher when submitting related expenses for
reimbursement.
2. Weekend Return Home
Employees are entitled to return home on interim weekends of temporary
assignments. In general, once every three weeks while traveling within the
same continent and once every five weeks while traveling inter-continentally
are considered reasonable guidelines.
3. Weekend Side Trips
The cost of transportation, lodging and meals for weekend "side trips" to
alternate locations, on interim weekends of temporary assignments, is
reimbursable up to the cost of lodging and meals that would have been incurred
if the employee stayed at the business location. An analysis must be attached
to the expense voucher when submitting related expenses for reimbursement.
F. Spouse/Partner Travel
1. For Business or Achievement Awards
Travel expenses of a spouse/partner are not reimbursable as a business expense
unless a material and direct benefit to the Company will be derived from their
presence. However, if the Company invites or requests a spouse/partner to
accompany an employee on a business trip, to a meeting or to an achievement
award event, the Company will reimburse the employee for the spouse/partner's
travel expenses and reasonable dependent care, if applicable.
The spouse/partner is subject to the same travel policy guidelines as the
employee. In-policy spouse/partner expenses will be reimbursed through the
employee's expense voucher. Written approval must be obtained from the Unit
CFO prior to the trip and be attached to the expense voucher when it is
submitted.
2. ln Lieu of Employee Weekend Return Home
In lieu of a weekend return home trip, employees may elect to have a
spouse/partner visit them at their travel destination. The spouse/partner must
travel economy class and employees will only be reimbursed for transportation
costs up to the amount they would have incurred to travel home (e.g., airfare,
parking, mileage, taxi). An analysis must be attached to the expense voucher
when submitting related expenses for reimbursement. Spouse/partner weekend
lodging and meal expenses will not be reimbursed. The amount reimbursed will
be included in the employee's taxable income and will be subject to payroll
taxes.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
G. Temporary Assignments/Extended Business Trips
1. Lodging
Employees on temporary assignments or extended business trips exceeding 30
days should stay in leased, furnished apartments at their temporary locations,
in lieu of hotels, if these apartments are available, practical and cost
efficient. The local American Express business office should assist employees
in finding appropriate accommodations.
2. Meals and Incidental Expenses
Employees will receive a daily allowance to offset meals and incidental
expenses, including groceries, laundry and dry-cleaning. The allowance is in
lieu of specific expense reimbursements and must follow any guidelines
established by local authorities, e.g., IRS in the U.S. Daily allowances
should be reduced proportionately when meals are provided by others, i.e., 1/3
for each business meal attended. Contact your local tax office for applicable
per diem rates.
H. Emergency Travel
1. General Procedures
For any emergency situation, or if you unexpectedly need to change your travel
plans after office hours, contact the locally designated after-hours service
or the Emergency Travel Center at 1-800-847-0242 while traveling in the U.S.,
1-800-434-2941 in Canada and 313-271-7887 for all other locations. Call
collect or use AT&T USA Direct when not using one of the 800 numbers.
Emergency service is available 24 hours a day, 7 days a week, 365 days a year.
The Emergency Travel Center should not be used for non-emergency situations.
Refer to local market addendum for locally designated Emergency Travel Offices
outside the U.S. and Canada.
2. Personal Emergencies
In instances when a business trip is interrupted due to a family emergency,
all reasonable expenses incurred to return home are reimbursable.
I. Miscellaneous Travel Expenses
The following miscellaneous travel related expenses will be reimbursed:
. Reasonable telephone charges - When possible, office telephones should be
used for all calls. Employees should use a local calling card program that
bills charges to the American Express Corporate Card, where available, or a
personal calling card.
. Bottled water.
- ----------------------------------------------------------------------------- 15
<PAGE>
1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
. Reasonable laundry, dry-cleaning and pressing services during hotel stays
of more than 3 days.
. Medical expenses - In the case of a medical emergency while on a business
trip, reasonable and necessary doctors' bills, prescriptions, and other
medical services not covered by the employee's insurance program will be
reimbursed when supported by receipts. Reimbursed medical expenses are
included as income in the employee's taxable income and are subject to
payroll taxes.
. Reasonable tips.
. Emergency child care/dependent care expenses - When traveling on Company
business is not customarily part of an employee's job and the employee has
been given short notice of a trip without ample time to provide for regular
child or dependent care, the Company will bear additional care costs. A
brief explanation of the circumstances must be submitted with the expense
voucher.
J. Other Personnel - Travel Expenses
1. Consultants
Consultants are expected to follow the same policy guidelines as American
Express employees. When feasible, contracts should require consultants to
utilize American Express travel resources and products to minimize travel
costs. Travel and entertainment expenses, itemized on consultant invoices and
supported with original receipts, must be recorded as T&E expense in the
Company's accounting system.
2. Employment Candidates
Reasonable travel expenses, including airfare, lodging and meals, incurred by
external candidates will be reimbursed. These expenses should be charged to
the interviewer's Corporate Card, when possible, and submitted for
reimbursement on an expense voucher. Candidates who can reasonably return home
the day of the interview will not be reimbursed for lodging expenses, e.g.,
candidate lives in Boston and interviews in New York.
3. Employment Contracts
Employees who have employment contracts with American Express may be subject
to different reimbursable business expense policies and should consult their
contract for specific guidelines. When submitting claims for expenses
specifically allowed in the employment contract, employees must submit with
the expense voucher the portion of the contract that pertains to the expense
item.
- ----------------------------------------------------------------------------- 16
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
4. Expatriate Employees
Expatriate employees may be subject to different reimbursable expense policies
and should contact Expatriate Services at 212-640-2804 or their Human
Resources representative for specific guidelines.
IV. In-Town Travel
A. Meals
1. Employee Business Meals/Meetings
Meal expenses for employee business meetings. i.e., employees only, will be
reimbursed if costs are reasonable and meals are infrequent. Every effort
should be made to have these meetings in-house, e.g., cafeteria or approved
local caterer. If two or more employees are dining together, the senior
individual must charge the meal.
Personal development review meetings between a manager and a subordinate
should follow the in-house guideline for meetings during breakfast or lunch.
If schedules force these meetings to occur over dinner, a moderately priced
restaurant should be selected.
2. Worked Late/Holiday/Weekend Meals
If an employee works overtime: after normal hours, on a holiday or on a
weekend, the cost of meals will be reimbursed. See Addendum 1 or local market
addendum for guidelines.
3. Meals with Clients/Prospects
Reasonable business meals with business associates and clients that are
essential to conducting Company business will be reimbursed. If more than one
employee is present, the senior level employee must charge the meal.
Documentation of the attendees, their business relationship and topics
discussed, or benefits derived, must be written on the receipt or record of
charge (ROC). If a business meal meeting with a client is considered
confidential, the client's name need not be identified on the receipt, If this
would constitute a breach of confidentiality in the country where the client
is doing business. In this instance, a brief explanation must be provided on
the receipt.
4. Spouse/Partner In-Town Meal and Entertainment Expenses
Spouse/partner in-town meal and entertainment expenses are reimbursable if a
material and direct benefit to the Company will result from the presence of
the employee's spouse/partner, or the expense is incurred as part of a Company
sponsored event which specifically includes the spouse/partner. Refer to
Addendum 1 or local market addendum for additional guidelines.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
V. Group Travel
A. Approvals
Group meetings are Company-planned gatherings for at least 10 people.
Expenditures may include travel, meals, equipment rental, meeting rooms,
entertainment and other services. Group meetings must be approved in
accordance with the Company approval authority policy, considering the total
cost of the meeting to the Company, inclusive of all participants.
B. Cost Containment Measures
Employees are encouraged to use American Express group travel management
departments, e.g., GTMS in the U.S., to arrange group meetings and related
travel. International employees should contact their GTMS equivalent and
consult their local market addendum for additional guidelines. When a group
travel management department can not provide meeting services, employees
should contact their local travel management unit to ensure that they receive
the lowest negotiated air and hotel rates.
Group meetings can be a significant cost to the Company. As a result, the
meeting coordinator is expected to use preferred hotel properties whenever
feasible and consider the following techniques or measures to contain costs
when planning a meeting/event:
. A budget must be prepared and followed.
. Meeting frills must be kept to a minimum.
. American Express Company owned/leased facilities must be used, whenever
possible.
. The number of meeting days must be kept to a minimum.
. Group meetings, occurring at resort or tourist locations should be planned
off-season, whenever possible.
. Meeting sites should be within driving range for participants, if possible,
or at a location that will result in the least overall participant travel
cost to the Company.
. Volume discounts should be sought for all costs.
VI. Other Business Expenses
A. Entertainment
Reasonable entertainment expenses, i.e., non-meal activities, with business
associates and clients, that are essential to conducting Company business,
will be reimbursed. The Company must expect to derive income or some specific
benefit, at some definite future time, from business discussions before,
during or after the entertainment event. The senior level employee attending
the event must charge the expense.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
Season or Skybox entertainment tickets may only be purchased for business
purposes and require the prior written approval of a unit executive of band 70
or above. Employees should contact their local tax departments, to address any
tax issues, if the purchase of these tickets is being contemplated.
B. Club Memberships
Club memberships are limited to senior executives and should be essential to,
and used primarily for, conducting Company business. For country clubs, the
Company will reimburse the senior executive for membership in one club. The
Company will not pay for membership or other expenses incurred at any club or
facility with discriminatory practices. Club memberships (including renewals)
must be approved by a member of the Planning & Policy Committee.
C. Gifts
Refer to Addendum 1 or local market addendum for guidelines.
D. Purchases
Goods and services for business purposes should be purchased using the
American Express Corporate Purchasing Card, where available and whenever
possible. If the Corporate Purchasing Card is not available in your location,
purchases should be made through the Global Procurement representative for
your location. Employees should not be purchasing goods and services directly
from vendors when local purchasing functions exist. For AEB, system related
purchases must be made through EDS.
1. Supplies
Supplies should be purchased from vendors listed on the "Approved Supplier
List" maintained by Global Procurement and must be paid for with the Corporate
Purchasing Card, where available and whenever possible.
2. Temporary Services
Every attempt should be made to limit the use of temporary services. When
possible, the resources of other departments should be shared, or used, in
lieu of obtaining temporary help. Temporary help should be secured through
vendors with whom the Company has negotiated contracts, and paid for using the
Corporate Purchasing Card, where available and whenever possible.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
E. Telecommunications
1. Cellular Telephones
Refer to Addendum 1 or local market addendum for cellular telephone
guidelines.
2. Air/Rail Telephones
Except in an emergency, or when a critical business issue is involved,
employees should not use airphones, railphones or telephones in car services
or taxis, due to their high cost.
3. Faxes/Phone Lines
The installation and business usage of a fax or phone line outside of the
office requires prior written approval of a unit executive of band 45 or
above.
F. Training
The cost of training seminars should be charged to a Corporate Card or the
Corporate Purchasing Card, whenever possible.
G. Subscriptions
Subscriptions for general business publications, e.g., The Wall Street Journal
and Business Week, must be approved by a unit executive of band 70 or above.
Subscriptions for technical business publications necessary for performing job
functions, e.g., Financial Accounting Standards Board Update Service, US Tax
Reporter, will be reimbursed.
H. Professional Dues and Licenses
The Company will reimburse an exempt employee for membership fees in
professional job-related organizations. The Company will reimburse employees
for licenses necessary to perform job functions.
I. Team Building/Department Parties
Expenses for department parties, team meetings, holiday parties and outings
are limited to amounts designated for such events during the budget process.
In some countries, team building expenses are considered taxable benefits.
Employees should consult their local addendum for guidance on tax
implications.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
VII. Personal Employee Travel
Employees are eligible for personal leisure travel benefits. Refer to Addendum
1 or contact your designated travel office for a description of benefits.
VIII. Expense Reimbursement Procedures
A. Responsibilities
- --------------------------------------------------------------------------------
Employee/Travel . Provide and maintain a current Traveler Profile at
Arranger designated travel/representative office.
. Incur expenditures in accordance with policy.
. Ensure arrangements are made in accordance with policy.
. Prepare accurate expense claims and submit them on a
timely basis with appropriate documentation attached.
. Utilize Corporate Card, whenever possible, and for
business purposes only.
. Keep Corporate Card account current.
- --------------------------------------------------------------------------------
Designated . Provide information and travel options in accordance
Travel/Representative with policy: lowest logical airfares, lodging and car
Office rental rates of preferred vendors.
. Identify and note exceptions to policy.
- --------------------------------------------------------------------------------
Cost Center . Manage travel budget and employee travel in accordance
Owner/Expense Approver with goals.
. Review & approve expense voucher claims on a timely
basis ensuring claims comply with policy.
. Enforce T&E policy compliance.
- --------------------------------------------------------------------------------
Vendors Payable . Audit T&E expense claims against policy.
. Process claims for reimbursement in a timely manner.
. Reject claims which are out of policy.
- --------------------------------------------------------------------------------
Global Corporate . Negotiate best-in-class terms with travel suppliers.
Travel . Provide guidance, expertise and training on all
travel-related matters.
. Monitor and control travel expenditures through Card
and Travel systems MIS.
. Continuously improve the business travel process.
. Recommend policy revisions for adoption.
- --------------------------------------------------------------------------------
Senior Executives . Promote policy awareness and compliance by example.
- --------------------------------------------------------------------------------
B. Support for and Submission of Claims
All expenses submitted for reimbursement must be itemized on an expense
voucher with the business purpose expressly stated. Employees submitting an
expense voucher for the first time, should provide their home mailing address
and telephone number on the expense voucher. Original documentation, as
described below, must be submitted with the expense voucher. Tear tabs are not
acceptable receipts. If original receipts have been lost, the
- ----------------------------------------------------------------------------- 21
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
employee must acknowledge, in writing, that these expenses will not be submitted
again and the applicable expense item must be initialed on the Travel Expense
Voucher by the approver. Refer to local market addendum for additional
documentation requirements.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Required Documentation
- --------------------------------------------------------------------------------
<S> <C>
Air Transportation Travel itinerary, passenger coupon of airline ticket,
boarding pass and ROC. In the case of electronic ticketing,
the faxed or emailed passenger receipt of the electronic
ticket in lieu of the passenger coupon.
- --------------------------------------------------------------------------------
Car Rental Travel itinerary, car rental agreement and ROC.
- --------------------------------------------------------------------------------
Personal Auto Parking and Toll receipts.
- --------------------------------------------------------------------------------
Lodging Travel itinerary, hotel invoice and ROC.
- --------------------------------------------------------------------------------
Meals Hotel bill, ROC or receipt for expenses of US$25 or more.
Business purpose, attendees, titles and their affiliations
must be noted. If a business meal meeting with a client is
considered confidential, the client's name need not be
identified on the receipt, if this would constitute a breach
of confidentiality in the country where the client is doing
business. In this instance, a brief explanation must be
provided on the receipt.
- --------------------------------------------------------------------------------
Entertainment A receipt for any expense of US$25 or more. Names of
individuals entertained, their titles and company name. The
name and location of the establishment where the meal or
event took place. The exact amount and date of the expense.
The specific business topic discussed, and in the case of
entertainment events, the specific time the business
discussion took place, i.e., before, during or after the
event.
The name of individuals entertained need not be identified
on the receipt if this would constitute a breach of
confidentiality in the country where the persons are doing
business. In this instance, a brief explanation must be
provided on the receipt.
- --------------------------------------------------------------------------------
Meal allowances ROC or receipt for all expenses regardless of amount.
- --------------------------------------------------------------------------------
Telephone, Telex, AT&T Calling Card calls - Corporate Card statement; Other
Fax Card Card calls - Calling Card statement.
- --------------------------------------------------------------------------------
Taxi/Local Receipt for all expenses regardless of amount, in countries
Transportation where possible.
- --------------------------------------------------------------------------------
Other Expenses Receipts or supporting documentation for all items of US$25
or more.
- --------------------------------------------------------------------------------
Out of Policy Written approval must be attached to the expense voucher,
Exceptions along with a brief explanation or appropriate documentation
supporting the business reason for the exception.
- --------------------------------------------------------------------------------
</TABLE>
Employees must submit all pages of their original travel itineraries with their
expense vouchers. Employees will not be reimbursed for air travel, lodging or
car rental expenses
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
unless an itinerary is attached to the expense voucher to ensure that the
reservations were made through a designated American Express Travel or
Representative office and are in compliance with travel policy guidelines. If
an employee's designated Travel or Representative office does not generate
travel itineraries, a note to that effect must be attached to the expense
voucher. An employee's expense voucher must be reviewed and approved by their
direct supervisor and/or cost center owner.
Employees should contact Vendors Payable for clarification on expense
reimbursement procedures and documentation requirements.
IX. Non-Reimbursable Expenses
The following list of non-reimbursable expenses is provided only as a guide
and is not necessarily all inclusive. When unsure, clarification should be
sought from the Global Corporate Travel Group or Management & Finance Policy
Group prior to incurring expenses.
. Airline or other travel insurance, including automatic flight insurance.
Employees traveling on Company business are automatically covered under the
Company's business travel accident plan. See Employee Benefits Handbook or
contact Human Resources for additional information.
. Barbers and hairdressers.
. Car washes for personal cars and short-term car rentals (one week or less).
. Clothing.
. Costume rental, including formal dinner clothes, unless required and not
expected to be provided by the employee. Purchases of formal clothes are
not reimbursable.
. Excess baggage, except Company documents and equipment necessary for the
business trip. Prior approval of unit executive of band 45 or above is
required.
. Golf or tennis court fees, golf clubs, or any other sporting equipment,
except when part of customer entertainment or an authorized group meeting.
. Kennel cost for dogs and other pets.
. Delinquency charges or reinstatement fees for the Corporate Card.
. Luggage lost or delayed on Company business. Refer to Addendum 1 for
additional guidelines.
. Newspapers and videos.
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1998 AMERICAN EXPRESS EMPLOYEE TRAVEL AND EXPENSE GUIDE
. Passport issuance costs, unless required to travel for business purposes.
. Traffic and parking violations.
. Toiletry articles such as toothbrush, toothpaste and shampoo.
. Reserved parking spots used during normal business day routine.
. Personal telephone calls, considered excessive in amount.
. Hotel charges incurred from failing to cancel reservations.
. Hotel room movies.
. Hotel health and fitness center charges. Employees desiring these
facilities should stay at preferred properties offering them at no
additional cost.
. Car service "no show" charges or charges for personal stops with associated
waiting time while en route.
. Airline Club dues.
. Airline schedule pocket guides.
. Snacks and refreshments consumed during working hours such as coffee, soda,
candy, etc., which are in addition to meal charges for breakfast, lunch and
dinner.
. Doctor bills, prescriptions or other medical services. Refer to your
employee benefits medical plan. See section III, "Miscellaneous Travel
Expenses" for exception.
- ----------------------------------------------------------------------------- 24
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
Segment and Regional Supplemental Guidelines
This addendum should be used in conjunction with the American Express Employee
Travel & Expense Guide. Within the context of the Guide, it provides additional
policy guidance to employees of specific regions and business segments. Where
the Guide and Addendum appear inconsistent, the Addendum should be followed.
A. Index 1
B. United States 2
C. American Express Bank (AEB) 6
D. American Express Financial Advisors (AEFA) 8
- ----------------------------------------------------------------------------- 1
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
B. United States
1. Expense Voucher Submission and Corporate Card Account Reconciliation
Only one expense reimbursement submission may be made per month and Corporate
Card accounts should be reconciled monthly to prevent account delinquencies.
Account balances outstanding for 60 days will be charged a delinquency fee.
Account balances outstanding for 120 days will be canceled. And at 180 days, the
delinquency will be reported to a credit bureau and appear on the employee's
personal credit report. Employees are responsible for paying any delinquency and
reinstatement fee incurred.
2. Cash Advances
Cash advance limits are: $50 per day for domestic travel up to a maximum of
$200; and $100 per day for international travel up to a maximum of $500. Contact
the American Express Corporate Card Program Administrator to obtain information
about and enroll in American Express cash product programs.
3. Car Rental
The rates below are available within the USA:
COMPANY BASIC RATE ACCOUNT#
-----------------------------------------------------------------
Alamo US$37.00 502279
Avis US$41.00 AB572100
Budget US$37.00 T236100
Hertz US$42.00 CDP157564
National US$40.75 5201708
These rates apply to U.S. based employees, as well as, non-U.S. based employees
traveling in the U.S.
4. Personal Auto
Mileage for business trips will be reimbursed at the IRS tax deductible rate in
effect, i.e., 32.5 cents per mile for 1998. The auto mileage reimbursement rate
is meant to cover all operating related expenses, including insurance and
deductibles. Damage to an employees personal auto while being used for company
business will not be reimbursed.
5. In-Town Expenses
Worked Late Meals
If an employee works overtime and past 7PM, dinner will be reimbursed ($15 for
NYC employees). If an employee works 4 hours or more on a holiday or weekend,
lunch will be reimbursed ($10 for NYC employees).
- ----------------------------------------------------------------------------- 2
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
Worked Late Transportation
If an employee works overtime and past 8PM, the Company will reimburse the
employee for the use of a taxi or approved car service to the their home. For
employees living outside city limits, use of a taxi or car service to the most
convenient and safest public transportation is encouraged. Receipts are required
for all transactions.
American Express Approved Car Services In the NY Area
When using American Express approved car services, payment must be made on the
Corporate Card, unless the employee does not have a Corporate Card. For NYC
employees, car service vouchers are available at the cashiers window on the 44th
floor of the WFC for use by employees who do not have a Corporate Card.
All Employees (U.S. and non-U.S.) must use the following companies when using
car services in the New York City area:
Company Account # Phone Number "800" number
-------- --------- ------------ ------------
MinuteMen 2000 (718) 899-1333 (800) 345-6636
Utog 7200 (718) 361-3085 (800) 423-8864
Battery 9100 (718) 522-2288 (800) 785-7853
Garden State 102 (201) 997-7366 (800) 451-7554
For short trips, yellow cabs are typically more economical and should be used.
Employees are subject to non-reimbursable no show charges if they fail to use a
requested car. Additional stops and waiting time are extra. Tips are included in
the rate and are, therefore, not necessary.
6. Virtual Office Policy
The Virtual Office Policy will be available during the second quarter of 1998
through the Employee Relations Group (ERG). In the interim, employees with
virtual office policy questions should contact American Express Real Estate
Services (ARES) or their local real estate support group.
7. Employee Personal Travel Benefits
All fulltime and part-time U.S. employees and retirees of American Express and
their spouses/partners and unmarried children under 21 years old are entitled to
the following personal travel benefits:
. Discount equal to 50% of commissions paid to American Express by a cruise
line, tour operator, or package provider for cruises tours and land packages.
. "Employee Traveler" special sales - Deeply discounted special travel savings.
. Use of American Express negotiated preferred hotel and airline rates.
To book personal travel, employees should contact the American Express Leisure
Travel Office at 1-800-522-AMEX.
- ----------------------------------------------------------------------------- 3
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
8. Gifts
1. Gifts To Clients/External Parties
Gifts to U.S. business associates or clients cannot exceed US$25 per person
per year and will be reimbursed, or paid for, by the Company only if they bear
a direct relationship to Company business. The US$25 limit does not apply to
items that are for general distribution with a cost of US$4 or less and have
the Company's name clearly and permanently imprinted on them.
Gifts to non-U.S. business associates and clients will be reimbursed when the
value of the gift is reasonable. Gift giving is permissible if it is a widely
accepted local custom that is consistent with local laws and regulations.
Gifts to Companies are not subject to the US$25 limit if they are not intended
for an individual's personal use. The value of these gifts must be reasonable.
2. Gifts to Employees
Gifts to employees are generally considered taxable fringe benefits, except
for length of service awards, handled by Human Resources. Cash awards, e.g.,
gift cheques, gift certificates, of any amount are included in the employee's
taxable income and subject to payroll taxes, where applicable.
The value of these gifts should not exceed US$99. The Company will reimburse
employees for gifts up to US$99. Amounts over US$99 are the responsibility of
the gift-giver(s).
Customary gifts, such as flowers, gift-baskets, or charitable contributions,
sent for a birth, major illness, or bereavement can be charged to the Company.
However, gifts for holidays, showers, birthdays and weddings are not
reimbursable.
9. Cellular Telephones
Usage of cellular telephones is permitted for valid and sustained business
purposes, e.g., field sales personnel, and requires prior written approval by a
unit executive of band 70 or above. The Cellular phone provider must be
stipulated by the Global Procurement Department and charged with the Corporate
Card.
Employees will be reimbursed for reasonable business usage up to 200 minutes per
month. The usage charges itemized on the Corporate Card statement must be
submitted for reimbursement. Personal use of cellular phones will not be
reimbursed. Contact Global Procurement for additional guidelines and equipment
purchase procedures.
10. Baggage Insurance
All U.S. Employees traveling on business (and charging their airline ticket to
the Corporate Card) are covered under the American Express Baggage Insurance
Plan, which provides automatic
- ----------------------------------------------------------------------------- 4
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
coverage up to $1,250 for carry-on and up to $500 for checked baggage, in
excess of the common carrier's coverage. Call 1-800-645-9700 for more
information, claim reporting, or a copy of the Description of Coverage.
11. Key Contacts
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Designated AMEX Travel or Representative Offices:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
For AD and Level 50 and Above (212) 640-7300 (Executive Travel)
(New York and Phoenix Based Only)
- --------------------------------------------------------------------------------------------------------------------------
For SROC and Weston (305) 473-6611 or (800) 780-6611 (Jacaranda Travel)
- --------------------------------------------------------------------------------------------------------------------------
For All Others (800) 654-6391 (San Antonio Travel)
- --------------------------------------------------------------------------------------------------------------------------
Emergency Travel Center:
In the United States (800) 847-0242
Overseas (AT&T USA Direct or Collect) (313) 271-7887
Canada (800) 434-2941
- --------------------------------------------------------------------------------------------------------------------------
Employee Personal/Leisure Travel (800) 522-AMEX (2639)
- --------------------------------------------------------------------------------------------------------------------------
Group Travel Management Services (GTMS):
Ann Bronstein (212) 640-3959
- --------------------------------------------------------------------------------------------------------------------------
Global Corporate Travel Group E-mail Addresses:
Office Vision - GLOBAO2 Mailhub1
Lotus Notes & cc:Mail - Global Corporate Travel
Internet - GlobalCorporate [email protected]
- --------------------------------------------------------------------------------------------------------------------------
Management & Finance Policy Group E-mail Address: "Management and Finance Policy Group"
- --------------------------------------------------------------------------------------------------------------------------
AT&T Tariff 12 Card and USADirect:
Karen Beasley (212) 640-4185
- --------------------------------------------------------------------------------------------------------------------------
Corporate Travelers Cheque Program
In the US (800) 221-4102
Outside the US 492-5450/ (801) 965-2004 (collect)
- --------------------------------------------------------------------------------------------------------------------------
Car Rental Accident Reporting
Collision Damage (800) 243-2490
Bodily Injury (800) 832-7839 (Traveling in the U.S.)
(612) 671-8974 (Traveling outside the U.S.)
Lost or Stolen (800) 456-8250
- --------------------------------------------------------------------------------------------------------------------------
Tax Department
Stan Cesark (212) 640-3016
Curt DeVito (212) 640-3007
Catherine Taylor (AEFA) (612) 671-3108
- --------------------------------------------------------------------------------------------------------------------------
Human Resources- Relocation/Extended Stay
Housing Lisa Daub (212) 640-2804
- --------------------------------------------------------------------------------------------------------------------------
T&E Vouchers
FRC Help Desk (602) 516-5050
- --------------------------------------------------------------------------------------------------------------------------
Procurement Fax Information Service - for forms (800) 644-0950
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------------------------------------------------- 5
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
C. American Express Bank (AEB)
1. Out of Town Travel
Class of Air Travel
Class of air travel must adhere to the guidelines summarized in the table below.
Exceptions to these standards require the prior written approval of the AEB CEO.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS OF AIR TRAVEL
- ---------------------------------------------------------------------------------------------------
Flights (less than)5.5 Flights 5.5 - 8.5 Flights (greater than)8.5
Hours Hours Hours
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Band 70 + Coach Business First
- ---------------------------------------------------------------------------------------------------
Band 50 + Coach Business Business
- ---------------------------------------------------------------------------------------------------
All others Coach Coach Business
- ---------------------------------------------------------------------------------------------------
</TABLE>
Restriction:
. First Class air travel is not permitted between the US and Western Europe
(i.e., locations west of Vienna, Austria).
- -------------------------------------------------------------------------------
Authorized Exceptions:
. Travel to, from and within Africa; Russia; the European countries of
Croatia, the Czech Republic, Greece, Hungary, Poland and Turkey; the Middle
Eastern countries of Bahrain, Iran, Iraq, lsrael, Jordan, Kuwait, Lebanon,
Oman, Republic of Yemen, Saudi Arabia, Syria, United Arab Emirates; and the
Asian countries of Bangladesh, India, Indonesia, Pakistan, the Peoples
Republic of China, the Philippines, Sri Lanka, and Vietnam may be in
business class. In addition, all employees band 40 and above may fly
business class to, from and within the remaining Asian countries.
. Employees who travel on overnight flights, and proceed directly to work,
may upgrade from economy to business class, with prior written approval
from the appropriate Line of Business/Function Head. If business class is
not available, then first class is permitted. Employees who upgrade may not
book an additional hotel night if their hotel cannot gratuitously
accommodate early check-in or late check-out.
. When traveling with clients or customers, employees may use the same class
of service. In such cases, specific details must be noted on the traveler's
itinerary.
2. Spouse/Partner In-Town Meal and Entertainment Expenses
Spouse/partner in-town meal and entertainment expenses are reimbursable if a
material and direct benefit to AEB will result from the presence of the
employee's spouse/partner, or the expense is incurred as part of an AEB
sponsored event which specifically includes the spouse/partner. In either case,
written approval from the appopriate Line of Business Head and Regional
Controller must be obtained for these expenses to be reimbursed.
- ----------------------------------------------------------------------------- 6
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
3. Club Memberships
Club memberships should be limited to those essential to, and primarily used
for, conducting AEB business. Club memberships (including renewals) require
prior written approval from the office of the AEB CEO. All expatriates should
follow the Business and Personal Club Memberships Policy which can be obtained
from your local Human Resources Representative.
4. Subscriptions
Subscriptions to the American Banker require prior written approval of the AEB
CEO.
5. Network Office T & E Expense Policy Requirements
Network office employees should refer to local policy supplements established by
their Country Controller. The policy supplements address the following:
A. Cash advance procedures including daily limits, maximum allowances and
settlement requirements; and in locations where available, cash advance
accounting procedures.
B. In locations where the Corporate Card is not available, establishment of
local authorized principal payment methods.
C. Local American Express Business Travel Center office reservation procedures,
including addresses, telephone numbers, office hours, ticket delivery
instructions and the local travel office 24 hour hotline number for enroute
changes and travel arrangement emergencies.
D. Local policy guidelines for taxi and other local transportation, based on
local business customs and individual city circumstances, and any other local
policy guidelines for in-town transportation.
E. Local car rental company names, account numbers, rates and contact numbers.
Local automobile reimbursement rates based on local government regulations,
customs or operating costs.
F. Acceptable additional limits for lodging and meal expenses based on local
business customs and individual city circumstances. Additional local policy
guidelines for in-town business meals and supper money, including expense
limits.
G. In locations where available, an AT&T, or equivalent, calling card policy for
all business phone calls made outside of the Office.
H. In locations where the Corporate Card is not available, payment of fees for
personal American Express Cards or other credit cards.
I. Local contact names and telephone numbers.
J. Expense voucher preparation and submission procedures.
- ----------------------------------------------------------------------------- 7
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
D. American Express Financial Advisors (AEFA)
This addendum should be used in conjunction with the AEFA 1997/1998 Employee
Resource Guide and the 1998 American Express Employee Travel and Expense Guide.
Where differences exist between guides, this addendum and the Employee Resource
Guide supersedes the American Express Employee Travel and Expense Guide.
1. Air Travel
Class of air travel must adhere to the guidelines summarized in the table below.
Exceptions to these standards require the prior written approval of the AEFA
President and CEO and the SVP - Finance and CFO.
- -------------------------------------------------------------------------------
CLASS OF AIR TRAVEL
- -------------------------------------------------------------------------------
Flights (less than)6.5 Flights (greater than)6.5
Hours Hours
- -------------------------------------------------------------------------------
SVP's Coach First
- -------------------------------------------------------------------------------
All Others Coach Business
- -------------------------------------------------------------------------------
If the higher class of service for which the employee is eligible is not
available then the next lower class of service must be used. All employees
must accept the lowest logical fare. Lowest logical fare is defined as the
lowest priced non-stop route, departing within 1 hour of your requested
departure time, although employees may use connecting or stopover flights for
greater savings.
Authorized Exceptions:
. Travel to, from and within Africa; Russia; the European countries of
Croatia, the Czech Republic, Greece, Hungary, Poland and Turkey; the Middle
Eastern countries of Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon,
Oman, Republic of Yemen, Saudi Arabia, Syria, United Arab Emirates; and the
Asian countries of Bangladesh, India, Indonesia, Pakistan, the Peoples
Republic of China, the Philippines, Sri Lanka, and Vietnam may be in
business class. In addition, all employees band 40 and above may fly
business class to, from and within the remaining Asian countries.
. When traveling with clients or customers, employees may use the same class
of service. In such cases, specific details must be noted on the travelers
itinerary.
- -------------------------------------------------------------------------------
Employees may use frequent flyer award tickets in lieu of purchasing a ticket.
If you chose this alternative, you will be reimbursed up to $300 for each round
trip provided the amount is less than the amount the employee would have
incurred on a regularly scheduled flight. The $300 will be included in the
employees taxable income.
- ----------------------------------------------------------------------------- 8
<PAGE>
ADDENDUM 1-1998 EMPLOYEE GUIDE Appendix 1a
2. Cash Advances
Employees are not able to receive cash travel advances. For expenses which
cannot be charged to the Corporate Card, employees should use Corporate
Travelers Cheques (CTC's).
For extreme circumstances, when an employee must book air or other reservations
so far in advance that the trip will be charged to the Corporate Card before the
employee travels and submits an expense reimbursement, an advance payment can be
made. You need to contact your Controller or Corporate Accounting Operations, to
obtain approval to receive an advance payment.
3. Spouse/Guest Travel
Spousal or guest expenses for business related travel will be reimbursed and
excluded from the employee's income. Pre-approval, in writing is required from
the business unit SVP. SVP's or above must have their immediate manager's
approval. The spouses/guests presence must be shown to be both essential and
directly related to the effective accomplishment of Company business. A copy of
the SVP's approval, documentation of the business purpose, and separate
documentation of the spouse/guests expenses must be attached to the employee
reimbursement form in order to be reimbursed.
Spousal or guest related expenses for non-business related travel will be
reimbursed and included in the employee's income. Pre-approval, in writing is
required from the business unit SVP. SVP's or above must have their immediate
manager's approval. A copy of the SVP's approval and separate documentation of
the spouse/guests expenses must be attached to the employee reimbursement form
in order to be reimbursed.
4. Miscellaneous Travel Expenses:
. Medical Expenses - non-reimbursable.
. Child care/dependant care. For details, refer to the AEFA Employee Resource
Guide.
5. In-town Travel
Refer to the AEFA Employee Resource Guide.
6. Other Business Expenses
Refer to the appropriate section of the AEFA Employee Resource Guide or contact
your Controller or Corporate Accounting Operations.
- ----------------------------------------------------------------------------- 9
<PAGE>
1998 Hourly Rates - BSH
<TABLE>
<CAPTION>
Hourly Rates (updated 3/98) Appendix 2
Agency Function and title $ per hour
- ------ -------------------- -----------
<S> <C> <C>
BSH Account - Account Director, Associate/VP [***]
BSH Account - Account Director, EVP [***]
BSH Account - Account Director, SVP [***]
BSH Account - Account Director, VP [***]
BSH Account - Account Executive [***]
BSH Account - Account Executive, Associate [***]
BSH Account - Account Supervisor [***]
BSH Account - Account Supervisor, VP [***]
BSH Account - Chief Executive Officer [***]
BSH Account - Vice Chairman [***]
BSH Creative - Art Buyer [***]
BSH Creative - Art Buyer, Assistant [***]
BSH Creative - Art Buyer, Manager [***]
BSH Creative - Art Buyer, Senior [***]
BSH . Creative - Art Director [***]
BSH Creative - Art Director, Assistant [***]
BSH Creative - Art Director, Executive/VP [***]
BSH Creative - Art Director, Senior [***]
BSH Creative - Art Director, Senior/VP [***]
BSH Creative - Chief Creative Officer, Vice Chairman [***]
BSH Creative - Copywriter [***]
BSH Creative - Copywriter, Junior [***]
BSH Creative - Copywriter, Senior [***]
BSH Creative - Copywriter, Senior/VP [***]
BSH Creative - Creative Director, Executive [***]
BSH Creative - Creative Director, VP [***]
BSH Database Mktg - Analyst [***]
BSH Database Mktg - Analyst, Associate [***]
BSH Database Mktg - Analytical Services Director [***]
BSH Database Mktg - Analytical Services Director, Associate [***]
BSH Database Mktg - Business Technology Consultant [***]
BSH Database Mktg - Business Technology Consultant, Senior [***]
BSH Database Mktg - Business Technology Director [***]
BSH Database Mktg - Consultant [***]
BSH Database Mktg - Consultant, Senior [***]
BSH Database Mktg - Director, Associate [***]
BSH Database Mktg - Director, VP [***]
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
Page 1
<PAGE>
1998 Hourly Rates - BSH
<TABLE>
<S> <C> <C>
BSH Database Mktg - Manager [***]
BSH Database Mktg - Program Designer [***]
BSH Database Mktg - Program Designer, Senior [***]
BSH Database Mktg - Project Manager [***]
BSH Database Mktg - Project Manager, VP [***]
BSH Database Mktg - VP [***]
BSH ESPM - Account Director, VP [***]
BSH ESPM - Manager [***]
BSH ESPM - Marketing Director, Associate/VP [***]
BSH ESPM - Supervisor, VP [***]
BSH ESPM - SVP [***]
BSH lnfo Services - Systems Designer [***]
BSH IRBC - CCTL Manager, Senior [***]
BSH IRBC - Manager [***]
BSH IRBC - Specialist [***]
BSH Partnership Mktg - Director [***]
BSH Partnership Mktg - Manager [***]
BSH Partnership Mktg - VP [***]
BSH Planning & Analysis - Analyst [***]
BSH Planning & Analysis - Associate [***]
BSH Planning & Analysis - Director, Associate [***]
BSH Planning & Analysis - Manager [***]
BSH Planning & Analysis - SVP [***]
BSH Planning & Analysis - VP [***]
BSH Production - Coordinator [***]
BSH Production - Manager, Assistant [***]
BSH Production - Manager, Senior [***]
BSH Production - Manager, Senior/VP [***]
BSH Production - VP [***]
BSH Research & Analysis - Analyst [***]
BSH Research & Analysis - Analyst, Senior [***]
BSH Research & Analysis - Coordinator [***]
BSH Research & Analysis - Coordinator, Senior [***]
BSH Research & Analysis - Director [***]
BSH Research & Analysis - Director, Associate [***]
BSH Research & Analysis - Manager [***]
BSH Scope of Work Adjustment [***]
BSH Teleservices - Analyst [***]
BSH Teleservices - Coordinator [***]
BSH Teleservices - Director, Associate/VP [***]
BSH Teleservices - Director, Managing/VP [***]
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
Page 2
<PAGE>
1998 Hourly Rates - BSH
<TABLE>
<S> <C> <C>
BSH Teleservices - Director, VP [***]
BSH Teleservices - EVP [***]
BSH Teleservices - Manager [***]
BSH Teleservices - Manager, Senior [***]
BSH Test Lab - Agent [***]
SIG SIG Account - Account Director, Associate [***]
SIG SlG Account - Account Director, Associate/VP [***]
SIG SIG Account - Account Director, Senior/VP [***]
SIG SIG Account - Account Director, VP [***]
SIG SIG Account - Chief Int. Architect, SVP [***]
SIG SIG Account - Group Director, SVP [***]
SIG SIG Account - Media Analyst [***]
SIG SIG Account - Media Analyst, Senior [***]
SIG SIG Account - Media Manager [***]
SIG SIG Account - President [***]
SIG SIG Analysis - Director, VP [***]
SIG SIG Analysis - Manager [***]
SIG SIG Analysis - Measurement Analyst [***]
SIG SIG Analysis - Measurement Tech Consultant [***]
SIG SIG Content - Editor, Associate [***]
SIG SIG Content - Editor, Senior [***]
SIG SIG Creative - Art Director [***]
SIG SIG Creative - Art Director, Senior [***]
SIG SIG Creative - Copywriter [***]
SIG SIG Creative - Copywriter, Junior [***]
SIG SIG Creative - Copywriter, Senior [***]
SIG SIG Creative - Creative Director, Associate [***]
SIG SIG Creative - Creative Director, Associate/VP [***]
SIG SIG Creative - Creative Director, VP [***]
SIG SIG Creative - Designer [***]
SIG SIG Creative - Designer, Junior [***]
SIG SIG Creative - Designer, Principal [***]
SIG SIG Creative - Designer, Senior [***]
SIG SIG Development - Chief Technology Officer, VP [***]
SIG SIG Development - Media Director, Associate [***]
SIG SIG Development - Media Director, Associate/VP [***]
SIG SIG Development - Programmer Analyst [***]
SIG SIG Development - Programmer Analyst, Principal [***]
SIG SIG Development - Programmer Analyst, Senior [***]
SIG SIG Development - Technology Manager, Associate [***]
SIG SIG Media - Coordinator [***]
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
Page 3
<PAGE>
1998 Hourly Rates - BSH
<TABLE>
<S> <C> <C>
SIG SlG Media - Media Director, Associate/VP [***]
SIG SIG Media - Media Director, VP [***]
SIG SIG Media - Planner [***]
SIG SIG Media - Supervisor [***]
SIG SIG Production - Coordinator [***]
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
Page 4
<PAGE>
Retainer Appendix 3
<TABLE>
<CAPTION>
Billing Rate Proposed
(pre-negotiated Proposed % # Hours * Proposed
Likely every two years) Time For For Counseling Retainer
Agency Function** Title Candidates ($/hr) Counseling Amex Amex ($M)
- ------------------- --------- ----------- ---------------- ----------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
E.g. Account Management
E.g. Creative
</TABLE>
Amex senior management will determine which agency senior staff members will be
on retainer and for what % of their time, on a 12 monthly basis or other
periods of time that are deemed appropriate
* Note: Standard year is assumed to be 1,600 hours
** Retainer definition:
Under normal circumstances, only senior agency staff that are involved in
strategic counseling capacity will be considered to be on retainer. The
concept of retainer is to buy out a % of agency senior strategic thinkers'
time to work on the overall Amex strategy which are not "project" based. In
most situations, only account management / marketing or strategy function
people are on retainer.
Typically, no supervisors' time should be on retainer because their time are
covered by ratecards or projects priced using hourly rates. A typical
situation where supervisor time might be considered to be on retainer is when
there is little or no execution outputs for the period but Amex marketing
still requires Agency supervisor to be dedicated to Amex.
Page 1
<PAGE>
Counseling Fee Ratecard-Page 1 of 2 (version 7.3.98) Appendix 4a
Project preparation and presentation of work-in-progress and final results are
included in all the ratecard categories
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Simple Moderate Complex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Competitor Review . Review of competitors' . Moderate scope . Qualitative review of
offers and campaigns - 3-10 competitors competitors' positionings
. Limited scope - 5+ kinds of defined and strategies
- 1-2 competitors information types . Large scope
- 1-5 data points . Moderate difficulty - Industry-wide/l0-15
. Easily accessible information accessing information competitors
- Library, public sources - Large number of
- Straightforward phone information types,
surveys amorphous qualitative
information
. May require extensive
secondary/complicated
research
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Groups . Attendance at 1 in-town . Attendance at and preparation . Attendance at and preparation
(Incl. 2 agency people per (less than 2 hours travel (incl. up to 5 white card (incl., up to 5 white card
focus group location; time) focus group location concepts, input on concepts, input on
Multiple boxes will be questionaires, etc.) for 1 questionaires, etc.) for 1
checked for a multiple (i.e. a Chicago, L.A. NY in-town (less than 2 hours out-of-town (2+ hours
focus group location tour will be a complex, travel time) focus group travel time) focus
project) Creative because of the Chi. out-of- location OR group location
development used in town prep. and attendance, . Attendance at 1 out-of-town
focus groups will be based a moderate because of the (2+ hours travel time) (i.e. a Chicago, LA, NY tour
on execution ratecard. LA out-of-town attendance, focus group location will be a complex, because
Rough comps will be and a simple because of the (i.e. a Chicago, LA, NY tour of the Chi. out-of-town
charged at [***] of NY in-town attendance) will be a complex, because prep. and attendance, a
ratecard cost. of the Chi. out-of-town moderate because of the LA
prep. and attendance, a out-of-town attendance, and
moderate because of the LA a simple because of the NY
out-of-town attendance, and a in-town attendance)
simple because of the NY
in-town attendance)
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Segmentation . Model development . Cluster analysis . Business Unit Level
counseling . Recommendation and variable Segmentation of existing
- Agency works with Amex selection for further CM Base
modelers to provide detailed analysis . New target acquisition
input into variable market segmentation
selection and segment
identification
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Additional . 1-2 presentations within . 3-6 presentations . 6+ presentations
Presentation the same business unit . Involvement of MS and above . Meetings with other business
to personnel other than . Preparation of visual aids units and SEs
immediate team required . Preparation of visual aids
required
. Involvement of MS and above
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Counseling Fee Ratecard-Page 2 of 2 (version 7.3.98) Appendix 4a (continued)
Project preparation and presentation of work-in-progress and final results are
included in all the ratecard categories
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Simple Moderate Complex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Product Development Support . Offer/Service development . Program development . New Product development
. Includes: . 1 or no SE/Partner . Product Feature development . 4-6 SE/Partners
- idea generation, . Agency in supporting role . 2-3 SE/Partners . Agency performing majority
feature configuration to Amex . Agency and Amex work of development
. Excludes: together equally
- communication plan,
focus group
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Product Positioning . Positioning statement as . Positioning statement as the . Positioning statement, sample
the only deliverable only deliverable copy, other sample creative
. Offer/Service positioning . Program/Product Feature . High profile product/Major
. 1-3 positioning statements positioning Program positioning
. 4-6 positioning statements . 7+ positioning statements
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Communications Strategy . Tactical announcement plans . (Re)design of communications . (Re)design of all business
to create awareness about across different features to unit communications and
new or existing products induce loyalty or provide contact map from scratch
. Single product response lift . Multi media communications
. Single segment . 2-4 products design
. Agency in supporting role to . 2-3 segments . 5+ products
Amex . Agency and Amex work . 4+ segments
together equally . Agency performing majority
of work
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Mailing POV on Results . 1-8 test cells . 9-16 test cells . 17-25 test cells
Support Implications . Presents document describing . Presents document describing . Multi-media analysis
implication for control and implication for control and . Qualitative synthesis of
test strategy test strategy learnings from different
channels
. Intermedia optimization
analysis
. Presents document describing
implication for control and
test strategy
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Mail . 1-8 test cells . 9-16 test cells . 17-25 test cells
Plan Summary . Documentation of mailing . Documentation of mailing . Documentation of mailing
campaign campaign campaign
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Direct Marketing Creative Execution Fee Ratecard -
Page 1 of 4 (version 7.3.98) Appendix 4a (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
New Creative Modifications
--------------------------------------------------------------- -------------------------------------------
Short/ Short/ Long/ Long/ Minor Major
Simple Complex Simple Complex Variation Mod. Mod.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brochures/ . (less than) . (less than) . 750 to 2000 . 750 to 2000 . Up to 20 . Minor . Layout
Inserts/ 750 words 750 words words words words of layout redesign
Self- . No . Photoshoot . No . Photoshoot creative revision and/or
Mailers photoshoot and/or photoshoot and/or copy . 21 to 100 . 100 to 500
or illustration or illustration change/ words of words of
(Additional illustration and/or illustration and/or addtion copy creative copy
fees . 5 or less . 3 to 6 . 5 or less . 3 to 6 . Deletion change/ change and/or
warranted if art images special art images special of images addition . Addition
agency (typography requirements (typography requirements and/or . Addition and change
required to not and/or not included), and/or copy and change of 3 to 5
coordinate included), . 5 to 10 logos and . 5 to 10 OR of up to 3 images
directly with logos and art images Card art art images . Revison images
SE Partners) Card art (typography . No more than (typography after
. No more not included) 2 special not final
than 2 requirements included) mac comp
special
requirements
(glue ons,
pockets,
foldouts,
perforation,
stickers,
die-cuts,
etc.)
- -----------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------
Incremental Charges
- ------------------------------------
Additional Add'l
Revision Concept
- ------------------------------------
<S> <C>
. Each . Additional
additional client-
Client- requested
Requested concepts
Revision beyond the 3
beyond the that are
5 that are required at
allowed initial
during the, concept
Work-In- presentation
Progress
Stage
- ------------------------------------
[***] [***]
- ------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
Direct Marketing Creative Execution Fee Ratecard - Page 2 of 4 (version 7.3.98) Appendix 4a (continued)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
New Creative Modifications Additional Additional
- ---------------------------------------------------------------------------------------------------------
Simple Complex Variation Minor Mod. Major Mod. Revision Concept
- ------------------------------------------------------------------------------------------------------------------------------------
Letter Copy . All standard . New product . Up to 10 words of . Addition of 11 . Addition of 50 . Beyond 5 . Beyond 3
new letters . New audience creative copy change/ to 50 words of to 500 words that are required
. Ongoing addition creative copy of creative allowed in initial
communication . Deletion of paragraphs change copy Work-In- concepts
style OR . Reformat Progress
. All SE offers . Revision after final Stage
MAC comp
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Letterhead . Logos, Card . Photoshoot, . Personal/Gold . Reformat . Major layout . Beyond 3 . Beyond 3
art and SE stock art, variation OR . Minor layout redesign that are required
or Client and/or . Revision after redesign allowed in initial
provided illustration final MAC comp . Addition/ Work-In- concepts
artwork deletion of Progress
. Header lines copy Stage
typography
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Applications . Standard new . Artwork . Minor reformat . Addition of up . Layout redesign . Beyond 3 . Beyond 3
application design . Personal/Gold to 8 fields . Addition of that are required
. Up to 20 . 20 to 40 variation . Deletion of creative allowed in initial
fields fields . Up to 10 words fields teaser copy Work-In- concepts
. Simple logo . Stock art of new creative . Addition of Progress
or Card art and/or copy 8 to 15 fields Stage
illustration OR
. Revision after
final MAC comp
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Envelopes . Simple logo . Photoshoot, . Minor reformat . Teaser copy . Teaser copy . Beyond 3 . Beyond 3
or Card art stock art, . Personal/Gold change rewrite or that are required
and/or variation . Artwork allowed in initial
illustration . Up to 10 words redesign Work-In- concepts
of new creative Progress
copy Stage
OR
. Revision after
final MAC comp
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Coupons/ . No photoshoot, . Photoshoot, . Minor reformat . Minor layout . Layout redesign . Beyond 3 . Beyond 3
Certificates stock are, or stock art, . Personal/Gold revision . Same layout, that are required
illustration and/or variation . Minor creative different offer allowed in initial
. Simple logo illustration . Up to 10 words copy change or different SE Work-In- concepts
or Card art . Teaser copy of new creative (ll to 50 Progress
copy words) Stage
OR . Same offer,
. Revision after different
final MAC comp teaser copy
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
Direct Marketing Creative Execution Fee Ratecard - Page 3 of 4 (version 7.3.98) Appendix 4a (continued)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
New Creative Modifications
----------------------------------------------------------------------------------- Additional Additional
Simple Complex Variation Minor Mod. Major Mod. Revision Concept
- ---------------------------------------------------------------------------------------------------------------------------------
Postcards . No photoshoot . Photoshoot, . Minor reformat . Minor layout . Addition and/ . Beyond 3 . Beyond 3
or illustration stock art, . Personal/Gold revision or deletion that are required
. Simple logo or and/or variation . Minor creative of major allowed in initial
Card art illustration . Up to 10 words copy change (11 components and Work-In- concepts
of new creative to 50 words) layout redesign Progress Stage
copy OR . New creative
. Revision after copy and artwork
final Mac comp on same layout
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Buckslips . Simple logo or . Photoshoot, . Minor reformat . Minor layout . Major creative . Beyond 3 . Beyond 3
Card art stock art, . Personal/Gold revision copy change that are required
. Client or SE and/or variation . Minor creative (50 to 75 allowed in initial
provided illustration . Up to 10 words copy change (11 words) Work-In- concepts
artwork of new creative to 50 words) . Layout redesign Progress Stage
. Less than 75 copy OR
words of . Revision after
creative copy final Mac comp
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Take-Ones . Short/simple . Long/complex . Addition of app . Redesign or . Layout . Beyond 3 . Beyond 3
. Up to 1,000 . 1,000 to 2,500 fields or app reformat redesign that are required
words of words of layout revision application . 150 to 600 allowed in initial
creative copy creative copy . Minor Personal/ . Minor overall words of Work-In- concepts
. Single OR Gold color, logo, layout revision creative copy Progress Stage
application . 2 to 4 complex and benefits . 31 to 150 words change
applications in copy variation of creative copy
one (e.g., . Up to 30 words of change
Card plus creative copy
Membership change
Miles) . Deletion of images
and/or copy
OR
. Revision after
final Mac Comp
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
Direct Marketing Creative Execution Fee Ratecard - Page 4 of 4 (version 7.3.98) Appendix 4a (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
New Creative Modifications
----------------------------------------------------------------------------------- Additional Additional
Standard Variation Minor Mod. Major Mod. Revision Concept
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Riser . All new . Personal/Gold variation . Additional of up to . Layout . Beyond 3 that . Beyond 3
components . Up to 10 words of creative 2 images redesign are allowed in required
copy change OR . 11 to 50 words of . Copy rewrite Work-In-Progress initial
. Revision after final mac creative copy change Stage concepts
comp . Minor reformat
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Wallet Card . All new . Personal/Gold variation . Additional of up to . Layout . Beyond 3 that . Beyond 3
components . Up to 10 words of creative 2 images redesign are allowed in required
copy change OR . 11 to 50 words of . Copy rewrite Work-In-Progress initial
. Revision after final mac creative copy change Stage concepts
comp . Minor reformat
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Coupon . All new . Personal/Gold variation . Additional of up to . Layout . Beyond 3 that . Beyond 3
Carrier components . Up to 10 words of creative 2 images redesign are allowed in required
copy change OR . 11 to 50 words of . Copy rewrite Work-In-Progress initial
. Revision after final mac creative copy change Stage concepts
comp . Minor reformat
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Card . All new . Personal/Gold variation . Additional of up to . Layout . Beyond 3 that . Beyond 3
Carrier components . Up to 10 words of creative 2 images redesign are allowed in required
copy change OR . 11 to 50 words of . Copy rewrite Work-In-Progress initial
. Revision after final mac creative copy change Stage concepts
comp . Minor reformat
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Standing . All new . Personal/Gold variation . Additional of up to . Layout . Beyond 3 that . Beyond 3
Display components . Up to 10 words of creative 2 images redesign are allowed in required
copy change OR . 11 to 50 words of . Copy rewrite Work-In-Progress initial
. Revision after final mac creative copy change Stage concepts
comp . Minor reformat
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Fees for Canceled Projects-applies to all . If canceled before Work-In- . If canceled during Work-In- . If canceled at Final Mac
DM Creative Execution Ratecard categories Progress stage, AmEx pays Progress stage, AmEx pays Comp stage, AmEx pays
[***] of Ratecard cost [***] of Ratecard cost [***] of Ratecard cost
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Post-Concept Development Fees-applies to . AmEx pays [***] of Ratecard cost for client-requested Post-Concept Development
all DM Creative Execution Ratecard
Categories
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Advertising Agency Fee Ratecard - Domestic USA Only Appendix 4b
Projects - Standard Pricing
$
This is intentionally left blank and is not applicable to
Bronner Slosberg Humphrey
<PAGE>
Appendix 4bi
American Express Advertising Ratecard TV Edit Definitions
This ratecard is intentionally left blank and is not applicable to Bronner
Slosberg Humhrey
<PAGE>
Appendix 4c
Agency Fee Ratecard - Domestic USA Only
Media Planning/Stewardship & Buying
(This ratecard is intentionally blank and is not applicable for Bronner
Slosberg Humphrey)
<PAGE>
<TABLE>
<CAPTION>
Pre-Press (Engraving) Ratecard - Domestic USA Only
Appendix 5a
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
American Express Four Color Pring Advertising Specifications and Price List
- ------------------------------------------------------------------------------------------------------------------------------------
Format #1 Format #2 Format #3 Format #4 Format #5 Format #6
--------------------------------------------------------------------------------------
Up to (5-1/2x8-1/2) (7x10) (8-1/2x11) (10x14) (11x17) (17x22)
- ------------------------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Press proofs/6 progs/2 stop sheets [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Matchprint/Cromalin proofs [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Digital proofs (Amex approved) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Matchprints, (1) Press proof/progs/25 shs [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Four Color Additional Details
- ------------------------------------------------------------------------------------------------------------------------------------
Format #1 Format #2 Format #3 Format #4 Format #5 Format #6
--------------------------------------------------------------------------------------
Up to (5-1/2x8-1/2) (7x10) (8-1/2x11) (10x14) (11x17) (17x22)
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l film - same size/proportional resize [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l film - recrop [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l film - resize/not proportional [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l black type rider/5th rider [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l knockout type change/A.A. [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l Matchprint/Cromalin each [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l press proof/prog (while on press) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l press proof/prog (back to press) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l 100 top sheets (while on press) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l 100 top sheets (back on press) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l digital proof (Amex approved) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Press proof/6 progs/25 top sheets [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
American Express Black and White Print Advertising Specifications and Price List
- ------------------------------------------------------------------------------------------------------------------------------------
Format #7 Format #8 Format #9 Format #10 Format #11 Format #12
--------------------------------------------------------------------------------------
Up to (7x10) (8-1/2x11) (11x17) (13x21) (11x27) (22x30)
- ------------------------------------------------------------------------------------------------------------------------------------
Base Price* (Halftone) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Two veloxes [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Base Price* (Line shot) [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Two veloxes [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Additionals
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l film - same size/proportional resize [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l film - resize/not proportional [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l film - recrop [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l velox proof [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
B/W conversion of four color [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
Pre-Press (Engraving) Ratecard - Domestic USA Only Appendix 5a. (cont'd.)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
American Express Additional Line Item Pricing For All Formats
- ------------------------------------------------------------------------------------------------------------------------------------
All formats
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l min. sep. (2x3 or less) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l sep. ((up to 4x5) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l sep. (up to 7x9) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l sep. (up to 9x12) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l sep. (up to 11x17) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l 2/c tint each [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l 3/c tint each [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l 4/c tint each [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Simple silo [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Complex silo [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l blueprint proof [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Ghosting (simple square) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Paintbox retouching hourly rate [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Scitex retouching hourly rate [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Mac retouching hourly rate [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Mac hourly rate (non-retouching) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Color match swatch each [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Overtime daily rate (non-standard sched.) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Overtime weekend daily rate (pre-press) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Overtime weekend daily rate (press) [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Black drop shadow each [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l halftone inset [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Add'l line shot [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Base Price and Other Assumptions:
The 4/c base price includes one full size bleed separation, black and k/o type,
with proofing to satisfaction, three reviews on average, total review comprised
of two color proofs with a final confirming proof, to publication
specifications, and final film and blueprint to accompany final film. Six
additional final progs to be held for future placements. All additional
separations detail, silos, shadows, tints, etc., include film composition and
any trapping required.
The black and white base price includes one full size bleed halftone with two
(2) velox proofs, black and k/o type.
American Express and its Advertising Agencies will provide Desktop Publishing
files only.
All Desktop files must undergo Pre-Flight prior to RIP to minimize costs.
American Express will not pay for RIP charges.
American Express suppliers must follow the CREF, DDES and DDAP digital
standards.
American Express will pay only for approved estimates - dollars spent without
American Express approval will not be paid.
A standard schedule is defined as 7 days to first proof, 2 to second and 2 to
final confirming proof. Deviations from the standard schedule may increase
costs.
Note: All black type should be on separate rider during proofing for type
changes.
Note: All digital material must be archived for future use/resizing and cannot
be destroyed without American Express permission.
Note: A change in direction from art turn-over will be considered a chargeable
alteration- all charges must be pre-approved.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Stock & Commissioned Photography Ratecards - Domestic USA Only Appendix 5b
Commission Photography*
- --------------------------------------------------------------------------------
Direct Mail
- --------------------------------------------------------------------------------
Simple Medium Complex
Studio --------------------------------------------------------
(Price per Still Life Model in Studio
Photo) --------------------------------------------------------
Amex Card/ With With Props With No Set With Set
Statement Props and Styling
--------------------------------------------------------
[***] [***] [***] [***] [***]
- --------------------------------------------------------------------------------
Scenery with Simple Difficult
Location No Model Location With Location With
(Price per Model Model
Photo) --------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
6-10 11-20 Greater Than 20
Journalistic Photos Photos Photos
(Price Per
Project) --------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Multiple Usage % Premium Number of Jobs % Discount
- -------------------------------------- --------------------------------------
Buyout-Publication only [***] 2-3 [***]
Buyout-DM & Publications [***] 4-6 [***]
Total Buyout [***] 7-10 [***]
- -------------------------------------- --------------------------------------
Stock Photography**
- --------------------------------------------------------------------------------
Direct Mail - Brochures, Catalogs and Postcards
- --------------------------------------------------------------------------------
Quantity in 1/4 pg or Spot 1/2 pg Full pg
Thousands Photo (Less than 1/4)
- --------------------------------------------------------------------------------
10,000+ [***] [***] [***]
3,000 - 10,000 [***] [***] [***]
1,000 - 3,000 [***] [***] [***]
500 - 1,000 [***] [***] [***]
250 - 500 [***] [***] [***]
100 - 250 [***] [***] [***]
50 - 100 [***] [***] [***]
Less Than 50 [***] [***] [***]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Print Advertising
- --------------------------------------------------------------------------------
Circulations in Part of Less than Full pg
Thousands Montage Full pg
- --------------------------------------------------------------------------------
10,000+ [***] [***] [***]
3,000 - 10,000 [***] [***] [***]
1,000 - 3,000 [***] [***] [***]
500 - 1,000 [***] [***] [***]
250 - 500 [***] [***] [***]
Less Than 250 [***] [***] [***]
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Premium Positions % Premium Usage % Premium
- -------------------------------------- --------------------------------------
Front Cover [***] Total Buyout [***]
Back Cover [***] Exclusivity [***]
Double Page-Spread [***] Unlimited for 1 year [***]
Wrap Around Cover [***] Unlimited for 2 years [***]
- -------------------------------------- 2-3 Insertions [***]
4-8 Insertions [***]
- -------------------------------------- 9-15 Insertions [***]
No. of Images/Insertions % Discount --------------------------------------
- --------------------------------------
2-3 [***]
4-8 [***]
9-15 [***]
- --------------------------------------
* Fee based on unlimited time, DM, includes prep days; does not include travel
days & operating expenses (e.g., film, equipment rental, etc.)
** Fee based on basic one-time, non-exclusive, one image, per Insertion
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Pre-Production (Mechanical) Ratecard - Domestic USA Only Appendix 5c
A Pre-Production Ratecard was developed to provide American Express and its
agencies with a clear understanding of Pre-Production pricing criteria and
prices. The Ratecard indicates the maximum Pre-Production prices (excluding
artwork) for a single page of work (a project may be comprised of many pages).
Total Cost Per Page
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A B C D E F G H
- ------------------------------------------------------------------------------------------------------------------------------------
Page Category Type Simple Complex Simple Simple Complex Complex None None
- ------------------------------------------------------------------------------------------------------------------------------------
Page Content* Graphics None None Simple Complex Simple Complex Simple Complex
- ------------------------------------------------------------------------------------------------------------------------------------
Page Cost* Desktop* [***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Up to 10 1 2 2 3 3 4 1 2
Turn-Around pages
Time (Days)
-------------------------------------------------------------------------------------------------------------------
More than 2 3 3 4 4 5 2 3
10 pages
- ------------------------------------------------------------------------------------------------------------------------------------
FPO/Scans [***] each
- -------------------------------
Overtime [***]
- -------------------------------
</TABLE>
* Only Desktop Mechanical will be accepted by American Express
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
Pre-Production (Mechanical) Ratecard - Domestic USA Only Appendix 5c
(continued)
The ratecard has clear assumption built in to define simple and complex type, as
well as simple and complex graphics.
- Pages are defined as follows:
Envelope: 1 page
Sleeves: 1 page
Complete Standalone Text: 1 page
Ratecard prices per page assume the following:
1) No existing prototype
2) Final tight comp required and included in price.
3) No tissue/roughs.
4) Desktop type/mechanical provided.
5) Agency internal revisions (e.g., proofreading) included.
6) Non-client specified retouching included.
7) Overtime requires AmEx authorization.
8) Correction assumes new file, not type patch.
9) AmEx logos are considered stat/FPO's.
10) All revisions to the prototype should be considered "simple".
Pre-Production Ratecard Assumptions
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ------------------------------------------------------
Simple Complex Simple Complex
- ----------------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C>
Up to 3 typefaces More than 3 typefaces Single Graphic element Complex graphic
element
Less than 500 words More than 500 words Rules Multiple Graphic
element
Basic Headlines (no Headlines with visible Charts Multiple photos and
kerning) kerning illustrations
indicated as
Ragging Applications FPO's
Boxes Non-AmEx Logos
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Express Interactive Media Fee Ratecard Page 1/5 (rev. 6/11/98.b) Appendix 6a
- ------------------------------------------------------------------------------------------------------------------------------------
CPM Banner Programs Ratecard Simple Moderate Complex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL: [***] [***] [***]
Definition: . 1 Month Duration . 2 Months Duration . 3 Months Timing
. Programs based on a negotiated cost per . 1 Target Audience . 1 Target Audience . 2 Target Audiences
thousand . 2 Banner Placements . 4 Banner Placements . 6 Banner Placements
- ------------------------------------------------------------------------------------------------------------------------------------
Deliverable:
- ------------------------------------------------------------------------------------------------------------------------------------
Media Strategy- . 2 Site Categories . 4 Site Categories . 6 Site Categories
. Pre-planning (media brief, strategy development) . 15 Considered Sites . 30 Considered Sites . 60 Considered Sites
. Development of Consideration List . TIMEFRAME: 5 Days . TIMEFRAME: 5 Days . TIMEFRAME: 5 Days
. Development of RFP Agency + 1 Day Client Agency + 1 Day Client Agency + 2 Days
. Go/No Go Recommendation for proceeding to Go/No Go Decision Go/No Go Decision Client Go/No Go
next phase Decision
- ------------------------------------------------------------------------------------------------------------------------------------
Media Strategy Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Media Plan-Part I
. Send out RFP's . 5 Recommended Sites . 15 Recommended Sites . 30 Recommended Sites
. Follow-up RFP's . TIMEFRAME: Part I-6 . TIMEFRAME: Part I-7 . TIMEFRAME: Part I-7.5
. Input data in scoring model Days Agency + 2 Days Days Agency + 3 Days Days Agency + 3 Days
. Develop forecast detail Client Go/No Go Decision; Client Go/No Go Decision; Client Go/No Go
. Scoring/Evaluation of sites Part II-6 Days Part II-7 Days Decision; Part II -
. Go/No Go Recommendation for proceeding . [***] of [***] fee . [***] of [***] fee 7.5 Days
to next part of phase incurred after Part I incurred after Part I . [***] of [***] fee
[***] of Media Plan Phase fee incurred if canceled of Media Plan Phase. of Media Plan Phase. incurred after Part I
at this point. of Media Plan Phase.
Media Plan-Part II
. Negotiation
. Plan Development
. Present Recommendation/Revisions
- ------------------------------------------------------------------------------------------------------------------------------------
Media Plan Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation- . 5 sites . 15 Sites . 30 Sites
. Insertion Orders/PO's . TIMEFRAME: 6 Days in- . TIMEFRAME: 8 Days in- . TIMEFRAME: 9 Days
. Generation of banner instructions and adcodes market (Assumes standard market (Assumes standard in-market (Assumes
. Traffic banners graphics-only banners; 11 graphics-only banners; 13 standard graphics-
. Quality Control of banner placement days for complex banners days for complex banners only banners; 14 days
. Billing, Invoicing, & Make-Good Negotiations (i.e. Java, Shockwave) (i.e. Java, Shockwave) for complex banners
(i.e. Java, Shockwave)
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total before Tracking and other items [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking (via MatchLogic*), Analysis & . 1 Report . 2 Reports . 3 Reports
Recommendations**
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Creative Refresh (banner rotation) . 1 Creative Refresh . 2 Creative Refreshes
- ------------------------------------------------------------------------------------------------------------------------------------
Creative Refresh Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Media Buy Optimization (revise plan/re-negotiate) . 1 Optimization & 10
Sites Adjusted
- ------------------------------------------------------------------------------------------------------------------------------------
Media Buy Optimization Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
* NOTE: MatchLogic is billed as a pass-through expense based on [***] per
purchased impression
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
American Express Interactive Media Fee Ratecard Page 4/5 (rev. 6/11/98.b) Appendix 6a (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Bounty Banner Programs Ratecard Simple Moderate Complex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL: [***] [***] [***]
Definition: . 1 Month Duration . 2 Months Duration . 3 Months Timing
. Programs where each site is compensated . 1 Target Audience . 1 Target Audience . 2 Target Audiences
based on a per click/application/card. . 2 Banner Placements . 4 Banner Placements . 6 Banner Placement
. CPM/Bounty hybrid programs
- ------------------------------------------------------------------------------------------------------------------------------------
Deliverable:
- ------------------------------------------------------------------------------------------------------------------------------------
Media Strategy- . 2 Site Categories . 4 Site Categories . 6 Site Categories
. Pre-planning (media brief, strategy development) . 15 Considered Sites . 30 Considered Sites . 60 Considered Sites
. Development of Consideration List . TIMEFRAME: 5 Days . TIMEFRAME: 5 Days . TIMEFRAME: 5 Days
. Development of RFP Agency + 1 Day Client Agency + 1 Day Client Agency + 2 Days
. Go/No Go Recommendation for proceeding to Go/No Go Decision Go/No Go Decision Client Go/No Go
next phase Decision
- ------------------------------------------------------------------------------------------------------------------------------------
Media Strategy Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Media Plan-Part I
. Send out RFP's . 5 Recommended Sites . 15 Recommended Sites . 30 Recommended Sites
. Follow-up RFP's** . TIMEFRAME: Part I-7.5 . TIMEFRAME: Part I-9 . TIMEFRAME: Part I-10
. Input data in scoring model Days Agency + 2 Days Days Agency + 3 Days Days Agency + 3 Days
. Develop forecast detail Client Go/No Go Decision; Client Go/No Go Decision; Client Go/No Go
. Scoring/Evaluation of sites Part II-7.5 Days Part II-9 Days Decision; Part II-10
. Go/No Go Recommendation for proceeding . [***] of [***] fee . [***] of [***] fee Days
----- ----- ----- -----
to next part of phase incurred after Part I incurred after Part I . [***] of [***] fee
----- -----
[***] of Media Plan Phase fee incurred if canceled of Media Plan Phase. of Media Plan Phase. incurred after Part I
- -----
at this point. Media Plan Phase.
Media Plan-Part II
. Negotiation
. Plan Development
. Present Recommendation/Revisions
- ------------------------------------------------------------------------------------------------------------------------------------
Media Plan Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation- . 5 sites . 15 Sites . 30 Sites
. Insertion Orders/PO's . TIMEFRAME: 6 Days in- . TIMEFRAME: 8 Days in- . TIMEFRAME: 9 Days in-
. Generation of banner instructions and adcodes market (Assumes standard market (Assumes standard market (Assumes
. Traffic banners graphics-only banners; 11 graphics-only banners; 13 standard graphics-
. Quality Control of banner placement days for complex banners days for complex banners only banners; 14 days
. Billing, Invoicing, & Make-Good Negotiations (i.e. Java, Shockwave) (i.e. Java, Shockwave) for complex banners
(i.e. Java, Shockwave)
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Total before Tracking and other items [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking (via MatchLogic*), Analysis & . 1 Report . 2 Reports . 3 Reports
Recommendations**
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Creative Refresh (banner rotation) . 1 Creative Refresh . 2 Creative Refreshes
- ------------------------------------------------------------------------------------------------------------------------------------
Creative Refresh Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Media Buy Optimization (revise plan/re-negotiate) . 1 Optimization & 10
Sites Adjusted
- ------------------------------------------------------------------------------------------------------------------------------------
Media Buy Optimization Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
* NOTE: MatchLogic is billed as a pass-through expense based on [***] per
purchased impression
** Items requiring incremental fee versus CPM only programs
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
American Express Interactive Media Fee Ratecard Page 5/5 (rev. 6/11/98.b) Appendix 6a (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Multiple Site Sponsorships Programs Ratecard Simple Moderate Complex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL: [***] [***] [***]
Definition: . 1 Month Duration . 2 Months Duration . 3 Months Timing
. Programs which include advertising in . 1 Target Audience . 1 Target Audience . 2 Target Audiences
addition to or instead of simple banners . 2 Banner Placements . 4 Banner Placements . 6 Banner Placements
(i.e. branded content) across multiple sites.
- ------------------------------------------------------------------------------------------------------------------------------------
Deliverable:
- ------------------------------------------------------------------------------------------------------------------------------------
Media Strategy- . 2 Site Categories . 4 Site Categories . 6 Site Categories
. Pre-planning (media brief, strategy development) . 15 Considered Sites . 30 Considered Sites . 60 Considered Sites
. Development of Consideration List** . TIMEFRAME: 5 Days . TIMEFRAME: 5 Days . TIMEFRAME: 5 Days
. Development of RFP Agency + 1 Day Client Agency + 1 Day Client Agency + 2 Days
. Go/No Go Recommendation for proceeding to Go/No Go Decision Go/No Go Decision Client Go/No Go
next phase Decision
- ------------------------------------------------------------------------------------------------------------------------------------
Media Strategy Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Media Plan-Part I
. Send out RFP's . 5 Recommended Sites . 15 Recommended Sites . 30 Recommended Sites
. Follow-up RFP's . TIMEFRAME: Part I-7.5 . TIMEFRAME: Part I-9 . TIMEFRAME: Part I-10
. Input data in scoring model** Days Agency + 2 Days Days Agency + 3 Days Days Agency + 3 Days
. Develop forecast detail Client Go/No Go Decision; Client Go/No Go Decision; Client Go/No Go
. Scoring/Evaluation of sites** Part II-7.5 Days Part II-9 Days Decision; Part II-
. Go/No Go Recommendation for proceeding . [***] of [***] fee . [***] of [***] fee 10 Days
to next part of phase incurred after Part I incurred after Part I . [***] of [***] fee
[***] of Media Plan Phase fee incurred if canceled of Media Plan Phase. of Media Plan Phase. incurred after Part I
at this point. of Media Plan Phase.
Media Plan-Part II
. Negotiation**
. Plan Development
. Present Recommendation/Revisions
- ------------------------------------------------------------------------------------------------------------------------------------
Media Plan Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation- . 5 sites . 15 Sites . 30 Sites
. Insertion Orders/PO's . TIMEFRAME: 8 Days in- . TIMEFRAME: 10 Days in- . TIMEFRAME: 12 Days
. Generation of banner instructions and adcodes market (Assumes standard market (Assumes standard in-market (Assumes
. Traffic banners and coordinate non-banner graphics-only banners; 13 graphics-only banners; 15 standard graphics-
items** days for complex banners days for complex banners only banners; 17 days
. Quality Control of banner and non-banner items** (i.e. Java, Shockwave) (i.e. Java, Shockwave) for complex banners
. Billing, Invoicing, & Make-Good Negotiations (i.e. Java, Shockwave)
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total before Tracking and other items [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking (via MatchLogic*), Analysis & . 1 Report . 2 Reports . 3 Reports
Recommendations**
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Creative Refresh (banner rotation) . 1 Creative Refresh . 2 Creative Refreshes
- ------------------------------------------------------------------------------------------------------------------------------------
Creative Refresh Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Media Buy Optimization (revise plan/re-negotiate) . 1 Optimization & 10
Sites Adjusted
- ------------------------------------------------------------------------------------------------------------------------------------
Media Buy Optimization Total: [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
* NOTE: MatchLogic is billed as a pass-through expense based on [***] per
purchased impression
** Items requiring incremental fee versus CPM only programs
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
American Express Interactive Media Fee Ratecard Page 4/5 (rev. 6/11/98.b) Appendix 6a (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Single Site/Ad Hoc Sponsorship Ratecard Simple Complex
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL: [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Definition:
. Extensive POV (beyond first glance/simple POV), negotiation and
execution for a single sponsorship
- ------------------------------------------------------------------------------------------------------------------------------------
Deliverable:
- ------------------------------------------------------------------------------------------------------------------------------------
POV (beyond first glance/simple POV)-
. Briefing (determine client's level of interest, objectives, parameters)
. Clarification of details with Vendor
. Development of initial POV
. Go/No Go Recommendation for proceeding to next phase
- ------------------------------------------------------------------------------------------------------------------------------------
POV Total: [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation-
. Negotiation
. Determine logistics between vendor, client and SIG
. Coordinate creative, legal approval, timing
. Insertion orders / Pos
. Trafficking of materials
. Monthly
- ------------------------------------------------------------------------------------------------------------------------------------
Implementation Total: [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total before Tracking and other items [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Tracking (via MatchLogic*), Analysis & Recommendations [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
* NOTE: MatchLogic is billed as a pass-through expense based on [***] per
purchased impression
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
American Express Interactive Media Fee Ratecard Page 5/5 (rev. 6/11/98.b) Appendix 6a (continued)
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
AOR Work Definition
- -----------------------------------------------------------------------------------------------------------------------------------
Definition:
. Project work that crosses all business units [***]/month
- -----------------------------------------------------------------------------------------------------------------------------------
Deliverables:
- -----------------------------------------------------------------------------------------------------------------------------------
I. Media Vendor Site Management
. Manage site representatives . Includes fielding calls, attending meetings and reviewing proposals
. Evaluate unsolicited media vendor proposals . Includes delivery of weekly summary of Ad hoc sponsorships
. Contact appropriate AmEx client on appropriate received by agency
proposals
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
II. Rate Negotiation
. Recommend media efficiencies . Negotiate with sites under the AmEx umbrella to maximize efficiencies
. Interface with media vendors . Provide AmEx rates to media vendors
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
III. Rate Development
. Develop AmEx rate schedule . Negotiate with sites under the AmEx umbrella to maximize efficiencies
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
IV. AOL & Cross-Media (i.e. Entrepreneur Magazine, bonus . Negotiation of 1999 AOL contract
web banners) . Implementation of AOL and cross-media programs
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
V. Client Requests/Summations-
. Weekly client and agency status meetings
. Fielding of client questions/requests/calls . Any requests that fall outside of the planning cycle (not included
. Summation of all AmEx expenditures on a monthly basis on rate card)
. Quarterly summation of all AmEx activities with a . Report that details monthly Web expenditures for all AmEx activity
results analysis by business unit
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- ------------------------------------------------------------------------------------------------------------------------------------
Leadership Survey:
_________________
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Distinguished Achieved Expectations More Is Expected
- ------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
V. Overall Satisfaction . Relationship Leadership, Work . Relationship Leadership, Work . Relationship Leadership,
Products, Thought Leadership and Products, Thought Leadership Work Products, Thought
Results Leadership exceeded and Results Leadership Leadership and Results
expectations. achieved expectations. Leadership did not meet
expectations.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Category Weighting Evaluation Criteria
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Customers 25% . Metrics equal to those of the AmEx business units that are serviced by
the agency.
. Ultimate rating for the agency is the weighted average of the Customer
ratings for the different business units based on agency billings.
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholders 50% . 50% weight is on the metrics of the AmEx business units serviced by the
agency.
. 30% weight on Agency's creative thinking/ideas leading to improved
results.
. 20% weight on the client's evaluation of the agency's cost management,
billing and reporting (each business unit rates agency 1 to 5).
. Ultimate rating for the agency is the weighted average of the Shareholder
ratings and the client evaluation ratings on cost management, billing and
reporting for the different business units based on net income.
- -----------------------------------------------------------------------------------------------------------------------------------
Leadership 25% . Twice per year (April and November) conduct a survey of all key clients
(all American Express personnel who work with the agency - weighted 50%
VPs + above respondents and 50% below VP respondents). Dimensions
(and weightings) include Thought Leadership (40%), Result Leadership
(25%), Change Leadership (25%) and Relationship Leadership (10%). See
attached survey.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- -----------------------------------------------------------------------------------------------------------------------------------
Leadership Survey:
_________________
- -----------------------------------------------------------------------------------------------------------------------------------
Distinguished Achieved Expectations More Is Expected
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
I. Thought Leadership (40%)
- -----------------------------------------------------------------------------------------------------------------------------------
. Creativity/Leadership . Generates and tests break- . Consistently questions and . Rarely challenges the
through ideas with customers. challenges the adequacy and adequacy and quality of
. Seizes opportunities to provide quality of traditional thinking. traditional thinking.
value-added services. . Devises workable solutions to . Applies the same standard
. Develops leading-edge relevant non-routine problems. solutions to problems much
creative or programs that set . Makes practical and creative of the time.
a new industry standard and suggestions for enhancing work . Is hesitant to implement a
leads to above average response. processes. nontraditional solution.
. Devises original, motivating . Routinely includes customer . Sometimes opts for "quick
and successful solutions. perspectives in group fixes" to customer
. Eliminates non-value added activities, projects and meetings. problems rather than
processes and tasks. providing long-term
. Develops creative/programs solutions.
for new services/products
drawing from relevant
experience but pushing
beyond comfort zone.
- ------------------------------------------------------------------------------------------------------------------------------------
. Strategic Thinking . Is aware of how industry . Maintains a long-term, . Tends to demonstrate a
directions might impact big-picture view. short vs. long-term view.
American Express. . Adapts past solutions to fit . At times is unclear how
. Sees connections, trends current circumstances, maximizing business strategies
and patterns that are not efficiency and avoiding re-work. translate into individual
obvious to others. . Considers whether short-term goals.
. Synthesizes information goals will meet long-term . Considers a broad range of
from widely different sources. objectives. issues but does not
. Successfully integrates consistently distinguish
knowledge of American Express critical from less
businesses and programs within important ones.
and across business units.
. Understanding mission/objectives
of Amex partner and adapting style/
thinking to that group.
. Understanding other Blue Box
initiatives and goals.
. Understanding other relevant
businesses beyond credit cards.
. Contributes new product and service
ideas.
. Leverages multiple channel
experiences to build a comprehensive
strategy linking the message across
channels.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- -----------------------------------------------------------------------------------------------------------------------------------
Leadership Survey:
_________________
- -----------------------------------------------------------------------------------------------------------------------------------
Distinguished Achieved Expectations More Is Expected
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
II. Results Leadership (25%)
- -----------------------------------------------------------------------------------------------------------------------------------
. Driving Results/Timeliness . Consistently drives projects to . Completes projects on time and . Meets some but not all
successful completion within within budget. deadlines.
deadlines and under budget by . Operates with a sense of . Does not usually convey
following a rigorous project urgency. clear expectations.
plan. . Commits to and acts within . Tends to focus on
. Demonstrates strong commitment deadlines. process vs. results.
and drive to achieve results. . Conveys clear expectations and . Hesitates to see advice
. Is consistently results-driven accountability. of others to facilitate
relative to the competition. . Effectively uses technology to speedy achievement of
. Goes beyond role requirements to drive execution. results.
attain objectives. . Persists in working to meet
. Looks to improve cycle time. objectives despite obstacles
and opposition.
. Establishes milestones and
checkpoints for driving
projects to successful
completion.
. Understands and uses speed as
competitive advantage.
- -----------------------------------------------------------------------------------------------------------------------------------
. Responsiveness and . Anticipates customers' future . Proactively asks for customers' . Delays in following up
Commitment requirements. opinions and feedback. with customers.
. Consistently uses multiple . Makes realistic, short-and . Occasionally falls short
sources of information to long-term commitments to on commitments to
identify customer requirements. customers. customers.
. Consistently analyzes situations . Follows up to ensure customer . Makes decisions without
from the customers' perspective. satisfaction. consistently assessing
. Handles customer questions and customer needs.
concerns in a timely manner.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- -----------------------------------------------------------------------------------------------------------------------------------
Leadership Survey:
_________________
- -----------------------------------------------------------------------------------------------------------------------------------
Distinguished Achieved Expectations More Is Expected
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
II. Results Leadership (25%)
(con`t)
- -----------------------------------------------------------------------------------------------------------------------------------
. Timeliness . Consistently drives projects to . Completes projects on time and . Meets some but not
successful completion within within budget. all deadlines.
deadlines and under budget by . Operates with a sense of . Does not usually convey
following a rigorous project urgency. clear expectations.
plan. . Commits to and acts within . Tends to focus on
. Demonstrates strong commitment deadlines. process vs. results.
and drive to achieve results. . Effectively uses technology
to drive execution.
. Understands and uses speed as
competitive advantage.
- -----------------------------------------------------------------------------------------------------------------------------------
. Quality of Work . Eliminates non-value added . Establishes milestones and . Inconsistent in applying
process and tasks. checkpoints for driving projects lessons learned from
. Uses statistical and to successful completion. past successes and
quantitative information . Develops ways to continuously failures.
to manage quality. improve the organization. . Neglects to set up
. Sets high standards for . Analyzes, prioritizes, and milestones or feedback
how work gets done. implements improvement systems to evaluate
. Balances best-in-class opportunities. processes.
economics with world class . Establishes milestones . Tends to be accepting
service. and checkpoints for of the status quo.
. Goes beyond role requirements monitoring improvements. . Seldom looks for ways to
to attain objectives. . Applies lessons learned improve processes,
. Uses benchmarking and feedback from past successes and products, or services.
systems to improve processes. failures.
. Consistently benchmarks creative . Persists in working
process against brand principles, to meet objectives
creative brief and strategic despite obstacles and
objectives. opposition.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- -----------------------------------------------------------------------------------------------------------------------------------
Leadership Survey:
_________________
- -----------------------------------------------------------------------------------------------------------------------------------
Distinguished Achieved Expectations More Is Expected
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
II. Results Leadership (25%)
(con't)
- -----------------------------------------------------------------------------------------------------------------------------------
. Cost . Produces Quality work within . Produces work at budget. . Does not meet budget
budget. . Uses ratecard process to manage . Does not effectively use
. Uses ratecard process to at budget. and monitor ratecards.
optimize cost and quality
of creative.
- -----------------------------------------------------------------------------------------------------------------------------------
III. Change Leadership (25%)
- -----------------------------------------------------------------------------------------------------------------------------------
. Managing Change . Communicates a clear picture . Develops support mechanisms to . Shows a pattern of
of what change is needed and facilitate transitions to new resisting change.
why. ideas and changes. . Is unclear in
. Expresses confidence in the . Translates broad strategies translating broad
organization's ability to for change into specific goals, strategies into specific
manage change. objectives and responsibilities. goals, objectives, and
. Champions new initiatives . Strives to understand the reasons responsibilities.
and/or acts as a catalyst for change before taking a . Is overly cautious in
for change. position. ambiguous situations.
. Gains the support and . Encourages others to play an
commitment of others. active role in the change effort
. Effectively enlists others to to diffuse fears.
serve as champions and
advocates of change.
. Manages staffing changes
within the agency (as their
teams turnover) as seamlessly
as possible for the client.
. Proactively recommends staffing
changes as business changes.
. Helps drive change throughout
the organization.
- -----------------------------------------------------------------------------------------------------------------------------------
. Demonstrating Adaptability . Quickly adapts thoughts and . Quickly refocuses priorities . Demonstrates difficulty
actions in response to and adapts plans in response to in managing multiple
problems and opportunities. change. priorities.
. Readily adjusts style to . Demonstrates resiliency. . Is not always open to
perform effectively in . Demonstrates grace under new ideas and
different situations. pressure. perspectives.
. Adapts quickly and easily to . Approaches problems as . Loses composure in high-
highly ambiguous and complex opportunities for improvement. pressure situations.
situations. . Recovers slowly from
setbacks.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix 7
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT AGENCY EVALUATION
- -----------------------------------------------------------------------------------------------------------------------------------
Leadership Survey:
_________________
- -----------------------------------------------------------------------------------------------------------------------------------
Distinguished Achieved Expectations More Is Expected
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
IV. Relationship Leadership (10%)
- -----------------------------------------------------------------------------------------------------------------------------------
. Ease of working with Agency . Helps others to resolve issues. . Acknowledges the feelings of . Is inconsiderate of other
. Discourages others from others. people's time.
behaving disrespectfully . Honors requests for keeping . Cannot be counted on to
. Treats all people respectfully information confidential. maintain confidences.
regardless of level. . Follows up with people in a . Is timely in responding
. Proactively supports the active timely manner. to Agency management's
participation of all team . Values others' time. requests but not always
members. . Consistently reinforces to clients'.
. Actively solicits and others' self-esteem. . Is not sensitive to
incorporates feedback to . Contributes to cohesive, the concerns or needs
improve performance. diverse work teams to of others.
achieve goals.
. Consistently uses STAMP.
. Quality of Team . Actively builds, maintains and . Establishes contacts and . Makes effort to initiate
utilizes an extensive informal builds rapport with others. but not sustain
network of Blue Box and Agency . Interacts openly and candidly relationships over time.
colleagues. with others. . Focuses on relationships
. Willingly makes departmental or . Builds relationships with within own business unit,
unit resources available. others to share ideas and rather than seeking out
. Seeks and forges partnerships provide support. partnerships that
that are mutually beneficial. . Willingly engages in shared included Blue Box and
. Identified and maximizes utility processes for resource Agency colleagues.
opportunities to build allocation. . Focuses on maintaining
long-term relationships. existing relationships
. Develops and leverages staffing rather than forging
plan which supports Business new partnerships.
Partners' needs. . Is less than open and
. Hires/trains the teams to be candid with others at
experts within the industry, times.
and brings leading edge
marketplace learnings to Amex.
. Remains enthusiastic during . Is able to deal effectively
change. with multiple and conflicting
demands.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.38
INDEMNIFICATION AGREEMENT
This Agreement made and entered into this day of , (the
---- ------
"Agreement"), by and between Digitas Inc., a Delaware corporation (the
"Company," which term shall include, where appropriate, any Entity (as
hereinafter defined) controlled directly or indirectly by the Company) and
(the "Indemnitee"):
- ------------------
WHEREAS, it is essential to the Company that it be able to retain and
attract as directors the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors to
litigation risks and expenses, and the limitations on the availability of
directors and officers liability insurance have made it increasingly difficult
for the Company to attract and retain such persons;
WHEREAS, the Company's Certificate of Incorporation and By-laws (the
"Certificate of Incorporation" and "By-laws," respectively) require it to
indemnify its directors to the fullest extent permitted by law and permit it to
make other indemnification arrangements and agreements;
WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of the Certificate of Incorporation or By-laws or any change in
the ownership of the Company or the composition of its Board of Directors);
WHEREAS, the Company intends that this Agreement provide Indemnitee with
greater protection than that which is provided by the Company's Certificate of
Incorporation and By-laws; and
WHEREAS, Indemnitee is relying upon the rights afforded under this
Agreement in continuing as a director of the Company.
NOW, THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
<PAGE>
1. DEFINITIONS.
(a) "Corporate Status" describes the status of a person who is serving
or has served (i) as a director of the Company, (ii) in any capacity with
respect to any employee benefit plan of the Company, or (iii) as a
director, partner, trustee, officer, employee, or agent of any other Entity
at the request of the Company. For purposes of subsection (iii) of this
Section 1(a), if Indemnitee is serving or has served as a director,
partner, trustee, officer, employee or agent of a Subsidiary, Indemnitee
shall be deemed to be serving at the request of the Company.
(b) "Entity" shall mean any corporation, partnership, limited
liability company, joint venture, trust, foundation, association,
organization or other legal entity.
(c) "Expenses" shall mean all fees, costs and expenses incurred by
Indemnitee in connection with any Proceeding (as defined below), including,
without limitation, attorneys' fees, disbursements and retainers
(including, without limitation, any such fees, disbursements and retainers
incurred by Indemnitee pursuant to Sections 10 and 11(c) of this
Agreement), fees and disbursements of expert witnesses, private
investigators and professional advisors (including, without limitation,
accountants and investment bankers), court costs, transcript costs, fees of
experts, travel expenses, duplicating, printing and binding costs,
telephone and fax transmission charges, postage, delivery services,
secretarial services, and other disbursements and expenses.
(d) "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those
terms in Section 3(a) below.
(e) "Liabilities" shall mean judgments, damages, liabilities, losses,
penalties, excise taxes, fines and amounts paid in settlement.
(f) "Proceeding" shall mean any threatened, pending or completed
claim, action, suit, arbitration, alternate dispute resolution process,
investigation, administrative hearing, appeal, or any other proceeding,
whether civil, criminal, administrative, arbitrative or investigative,
whether formal or informal, including a proceeding initiated by Indemnitee
pursuant to Section 10 of this Agreement to enforce Indemnitee's rights
hereunder.
(g) "Subsidiary" shall mean any corporation, partnership, limited
liability company, joint venture, trust or other Entity of which the
Company owns (either directly or through or together with another
Subsidiary of the Company) either (i) a general partner, managing
member or other similar interest or (ii)
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(A) 50% or more of the voting power of the voting capital equity
interests of such corporation, partnership, limited liability
company, joint venture or other Entity, or (B) 50% or more of the
outstanding voting capital stock or other voting equity interests of
such corporation, partnership, limited liability company, joint
venture or other Entity.
2. SERVICES OF INDEMNITEE. In consideration of the Company's covenants
and commitments hereunder, Indemnitee agrees to serve or continue to serve as a
director of the Company. However, this Agreement shall not impose any
obligation on Indemnitee or the Company to continue Indemnitee's service to the
Company beyond any period otherwise required by law or by other agreements or
commitments of the parties, if any.
3. AGREEMENT TO INDEMNIFY. The Company agrees to indemnify Indemnitee as
follows:
(a) Proceedings Other Than By or In the Right of the Company. Subject
--------------------------------------------------------
to the exceptions contained in Section 4(a) below, if Indemnitee was or is
a party or is threatened to be made a party to any Proceeding (other than
an action by or in the right of the Company) by reason of Indemnitee's
Corporate Status, Indemnitee shall be indemnified by the Company against
all Expenses and Liabilities incurred or paid by Indemnitee in connection
with such Proceeding (referred to herein as "Indemnifiable Expenses" and
"Indemnifiable Liabilities," respectively, and collectively as
"Indemnifiable Amounts").
(b) Proceedings By or In the Right of the Company. Subject to the
---------------------------------------------
exceptions contained in Section 4(b) below, if Indemnitee was or is a party
or is threatened to be made a party to any Proceeding by or in the right of
the Company by reason of Indemnitee's Corporate Status, Indemnitee shall be
indemnified by the Company against all Indemnifiable Expenses.
4. EXCEPTIONS TO INDEMNIFICATION. Indemnitee shall be entitled to
indemnification under Sections 3(a) and 3(b) above in all circumstances other
than with respect to any specific claim, issue or matter involved in the
Proceeding out of which Indemnitee's claim for indemnification has arisen, as
follows:
(a) Proceedings Other Than By or In the Right of the Company. If
--------------------------------------------------------
indemnification is requested under Section 3(a) and it has been finally
adjudicated by a court of competent jurisdiction that, in connection with
such specific claim, issue or matter, Indemnitee failed to act (i) in good
faith and (ii) in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, or, with respect to any
criminal action or proceeding, Indemnitee had reasonable cause to believe
that Indemnitee's conduct was unlawful, Indemnitee shall not be entitled to
payment of Indemnifiable Amounts hereunder.
3
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(b) Proceedings By or In the Right of the Company. If indemnification
---------------------------------------------
is requested under Section 3(b) and
(i) it has been finally adjudicated by a court of competent
jurisdiction that, in connection with such specific claim,
issue or matter, Indemnitee failed to act (A) in good faith
and (B) in a manner Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company,
Indemnitee shall not be entitled to payment of Indemnifiable
Expenses hereunder; or
(ii) it has been finally adjudicated by a court of competent
jurisdiction that Indemnitee is liable to the Company with
respect to such specific claim, no Indemnifiable Expenses
shall be paid with respect to such claim, issue or matter
unless the Court of Chancery or another court in which such
Proceeding was brought shall determine upon application
that, despite the adjudication of liability, but in view of
all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnification for such
Indemnifiable Expenses which such court shall deem proper.
5. PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. Indemnitee shall
submit to the Company a written request specifying the Indemnifiable Amounts for
which Indemnitee seeks payment under Section 3 of this Agreement and the basis
for the claim. The Company shall pay such Indemnifiable Amounts to Indemnitee
within sixty (60) calendar days of receipt of the request. At the request of
the Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee is
entitled to indemnification hereunder.
6. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, Indemnitee shall be indemnified against all
Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Agreement, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without prejudice, by
reason of settlement, judgment, order or otherwise, shall be deemed to be a
successful result as to such claim, issue or matter.
7. EFFECT OF CERTAIN RESOLUTIONS. Neither the settlement or termination
of any Proceeding nor the failure of the Company to award indemnification or to
determine that
4
<PAGE>
indemnification is payable shall create a presumption that Indemnitee is not
entitled to indemnification hereunder. In addition, the termination of any
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company or, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
action was unlawful.
8. AGREEMENT TO ADVANCE EXPENSES; UNDERTAKING. The Company shall advance
all Expenses incurred by or on behalf Indemnitee in connection with any
Proceeding, including a Proceeding by or in the right of the Company, in which
Indemnitee is involved by reason of such Indemnitee's Corporate Status within
ten (10) calendar days after the receipt by the Company of a written statement
from Indemnitee requesting such advance or advances from time to time, whether
prior to or after final disposition of such Proceeding. To the extent required
by Delaware law, Indemnitee hereby undertakes to repay any and all of the amount
of Indemnifiable Expenses paid to Indemnitee if it is finally determined by a
court of competent jurisdiction that Indemnitee is not entitled under this
Agreement to indemnification with respect to such Expenses. This undertaking
is an unlimited general obligation of Indemnitee.
9. PROCEDURE FOR ADVANCE PAYMENT OF EXPENSES. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no
later than ten (10) calendar days after the Company's receipt of such request.
10. REMEDIES OF INDEMNITEE.
(a) Right to Petition Court. In the event that Indemnitee makes a
-----------------------
request for payment of Indemnifiable Amounts under Sections 3 and 5
above or a request for an advancement of Indemnifiable Expenses under
Sections 8 and 9 above and the Company fails to make such payment or
advancement in a timely manner pursuant to the terms of this
Agreement, Indemnitee may petition the Court of Chancery to enforce
the Company's obligations under this Agreement.
(b) Burden of Proof. In any judicial proceeding brought under Section
---------------
10(a) above, the Company shall have the burden of proving that
Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) Expenses. If Indemnitee is successful in whole or in part in
--------
connection with any action brought by Indemnitee under Section 10(a)
above, the Company agrees to reimburse Indemnitee in full for any
Expenses incurred by Indemnitee in connection with investigating,
preparing for, litigating, defending or settling
5
<PAGE>
any such action, or in connection with any claim or counterclaim
brought by the Company in connection therewith.
(d) Failure to Act Not a Defense. The failure of the Company
----------------------------
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination
concerning the permissibility of the payment of Indemnifiable Amounts
or the advancement of Indemnifiable Expenses under this Agreement
shall not be a defense in any action brought under Section 10(a)
above, and shall not create a presumption that such payment or
advancement is not permissible.
11. DEFENSE OF THE UNDERLYING PROCEEDING.
(a) Notice by Indemnitee. Indemnitee agrees to notify the Company
--------------------
promptly upon being served with any summons, citation, subpoena,
complaint, indictment, information, or other document relating to any
Proceeding which may result in the payment of Indemnifiable Amounts or
the advancement of Indemnifiable Expenses hereunder; provided,
however, that the failure to give any such notice shall not disqualify
Indemnitee from the right, or otherwise affect in any manner any right
of Indemnitee, to receive payments of Indemnifiable Amounts or
advancements of Indemnifiable Expenses unless the Company's ability to
defend in such Proceeding is materially and adversely prejudiced
thereby.
(b) Defense by Company. Subject to the provisions of the last
------------------
sentence of this Section 11(b) and of Section 11(c) below, the Company
shall have the right to defend Indemnitee in any Proceeding which may
give rise to the payment of Indemnifiable Amounts hereunder; provided,
however that the Company shall notify Indemnitee of any such decision
to defend within ten (10) calendar days of receipt of notice of any
such Proceeding under Section 11(a) above. The Company shall not,
without the prior written consent of Indemnitee, consent to the entry
of any judgment against Indemnitee or enter into any settlement or
compromise which (i) includes an admission of fault of Indemnitee or
(ii) does not include, as an unconditional term thereof, the full
release of Indemnitee from all liability in respect of such
Proceeding, which release shall be in form and substance reasonably
satisfactory to Indemnitee. This Section 11(b) shall not apply to a
Proceeding brought by Indemnitee under Section 10(a) above or pursuant
to Section 19 below.
(c) Indemnitee's Right to Counsel. Notwithstanding the provisions of
-----------------------------
Section 11(b) above, if in a Proceeding to which Indemnitee is a party
by reason of Indemnitee's Corporate Status, (i) Indemnitee reasonably
concludes that he or she may have separate defenses or counterclaims
to assert with respect to any issue which may not be consistent with
the position of other defendants in such
6
<PAGE>
Proceeding, (ii) a conflict of interest or potential conflict of
interest exists between Indemnitee and the Company, or if the Company
fails to assume the defense of such proceeding in a timely manner,
Indemnitee shall be entitled to be represented by separate legal
counsel of Indemnitee's choice at the expense of the Company. In
addition, if the Company fails to comply with any of its obligations
under this Agreement or in the event that the Company or any other
person takes any action to declare this Agreement void or
unenforceable, or institutes any action, suit or proceeding to deny or
to recover from Indemnitee the benefits intended to be provided to
Indemnitee hereunder, Indemnitee shall have the right to retain
counsel of Indemnitee's choice, at the expense of the Company, to
represent Indemnitee in connection with any such matter.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority
---------
to enter into, and be bound by the terms of, this
Agreement, and the execution, delivery and performance of the
undertakings contemplated by this Agreement have been duly
authorized by the Company.
(b) Enforceability. This Agreement, when executed and delivered by
--------------
the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting
the enforcement of creditors' rights generally.
13. INSURANCE. The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the Company to obtain and
maintain a policy or policies of insurance with a reputable insurance company
providing the Indemnitee with coverage for losses from wrongful acts, and to
ensure the Company's performance of its indemnification obligations under this
Agreement. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's officers and directors. Notwithstanding the foregoing,
the Company shall have no obligation to obtain or maintain such insurance if the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, or if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit. The Company
shall promptly notify Indemnitee of any good faith determination not to provide
such coverage.
14. CONTRACT RIGHTS NOT EXCLUSIVE. The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time
7
<PAGE>
under applicable law, the Company's Certificate of Incorporation or By-laws, or
any other agreement, vote of stockholders or directors (or a committee of
directors), or otherwise, both as to action in Indemnitee's official capacity
and as to action in any other capacity as a result of Indemnitee's serving as a
director of the Company.
15. SUCCESSORS. This Agreement shall be (a) binding upon all successors
and assigns of the Company (including any transferee of all or a substantial
portion of the business, stock and/or assets of the Company and any direct or
indirect successor by merger or consolidation or otherwise by operation of law)
and (b) binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall continue for the benefit of Indemnitee and such heirs, personal
representatives, executors and administrators after Indemnitee has ceased to
have Corporate Status.
16. SUBROGATION. In the event of any payment of Indemnifiable Amounts
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of contribution or recovery of Indemnitee against
other persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.
17. CHANGE IN LAW. To the extent that a change in Delaware law (whether
by statute or judicial decision) shall permit broader indemnification or
advancement of expenses than is provided under the terms of the By-laws and this
Agreement, Indemnitee shall be entitled to such broader indemnification and
advancements, and this Agreement shall be deemed to be amended to such extent.
18. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or any clause thereof,
shall be determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, in whole or in part, such provision or clause shall be limited
or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.
19. INDEMNITEE AS PLAINTIFF. Except as provided in Section 10(c) of this
Agreement and in the next sentence, Indemnitee shall not be entitled to payment
of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect
to any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director or officer thereof, or any third party, unless the Board
of Directors of the Company has consented to the initiation of such Proceeding.
This Section shall not apply to counterclaims or affirmative defenses asserted
by Indemnitee in an action brought against Indemnitee.
8
<PAGE>
20. MODIFICATIONS AND WAIVER. Except as provided in Section 17 above with
respect to changes in Delaware law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.
21. GENERAL NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed:
(i) If to Indemnitee, to:
________________________
________________________
________________________
________________________
(ii) If to the Company, to:
Digitas Inc.
The Prudential Tower
800 Boylston Street
Boston, Massachusetts 02199
Attention: General Counsel
or to such other address as may have been furnished in the same manner by any
party to the others.
22. GOVERNING LAW; CONSENT TO JURISDICTION; SERVICE OF PROCESS. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to its rules of conflict of laws. Each of the
Company and the Indemnitee hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the Court of Chancery of the State of
Delaware and the courts of the United States of America located in the State of
Delaware (the "Delaware Courts") for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the Delaware Courts
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum. Each of the parties
hereto agrees, (a) to the extent such party is not otherwise subject to service
of process in the State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of legal process, and (b)
9
<PAGE>
that service of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal Service
constituting evidence of valid service. Service made pursuant to (a) or (b)
above shall have the same legal force and effect as if served upon such party
personally within the State of Delaware. For purposes of implementing the
parties' agreement to appoint and maintain an agent for service of process in
the State of Delaware, each such party does hereby appoint The Corporation Trust
Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, as
such agent and each such party hereby agrees to complete all actions necessary
for such appointment.
[signature page follows]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DIGITAS INC.
By:
---------------------------------
Name:
Title:
INDEMNITEE
-------------------------------------
11
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Name State of Organization or Incorporation
- ---- --------------------------------------
Bronner Slosberg Humphrey Co. Massachusetts business trust
Vesuvio, Inc. Delaware corporation
BSH Holding LLC Delaware limited liability company
Bronnercom, LLC Delaware limited liability company
Sansome, Inc. Massachusetts corporation
Digitas (Europe) Inc. Massachusetts corporation
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 15, 1999 relating to the financial statements and
financial statement schedules included in Item 27 (a) of this Form S-1 of
Digitas Inc., which appear in such Registration Statement. We also consent to
the references to us under the headings "Experts" and "Selected Financial
Data" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 11, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen
-------------------------------------
Arthur Andersen
Boston, Massachusetts
February 11, 2000
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Digitas,
We have audited, in accordance with generally accepted auditing standards,
the financial statements of Bronner Slosberg Humphrey Co., also known as
Digitas, as of December 31, 1999 included in this registration statement, and
have issued our report thereon dated January 31, 2000. Our audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the index of this registration statement is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statement and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth herein in relation to
the basic financial statements taken as a whole as of and for the year ended
December 31, 1999.
Arthur Andersen LLP
Boston, Massachusetts
January 31, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 441
<SECURITIES> 0
<RECEIVABLES> 66,870
<ALLOWANCES> 1,053
<INVENTORY> 0
<CURRENT-ASSETS> 68,257
<PP&E> 39,586
<DEPRECIATION> (19,349)
<TOTAL-ASSETS> 252,889
<CURRENT-LIABILITIES> 70,127
<BONDS> 62,878
0
0
<COMMON> 0
<OTHER-SE> 119,836
<TOTAL-LIABILITY-AND-EQUITY> 252,889
<SALES> 187,007
<TOTAL-REVENUES> 187,007
<CGS> 102,247
<TOTAL-COSTS> 102,247
<OTHER-EXPENSES> 114,479
<LOSS-PROVISION> 1,137
<INTEREST-EXPENSE> 7,336
<INCOME-PRETAX> (37,000)
<INCOME-TAX> 567
<INCOME-CONTINUING> (37,567)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,567)
<EPS-BASIC> (0.74)
<EPS-DILUTED> (0.74)
</TABLE>
<PAGE>
EXHIBIT 99.1
Morgan Stanley & Co. Incorporated
Deutsche Banc Alex. Brown
Salomon Smith Barney
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Bronner Slosberg Humphrey Co., a Massachusetts
business trust, or its successor (the "COMPANY") providing for the public
offering (the "PUBLIC OFFERING") by the several Underwriters, including Morgan
Stanley (the "UNDERWRITERS"), of shares (the "SHARES") of the Common Stock,
$0.01 par value per share of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (a) the sale of any
Shares to the Underwriters pursuant to the Underwriting Agreement or (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
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[NAME]
Address:
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<PAGE>
EXHIBIT 99.2
, 1999
Morgan Stanley & Co. Incorporated
BT Alex. Brown Incorporated
Smith Barney Inc.
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING
AGREEMENT") with Bronner Slosberg Humphrey Co., and any successor thereto (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of shares
(the "SHARES") of the Common Stock, $0.01 par value per share of the Company
(the "COMMON STOCK").
To include the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, he, she or it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise; provided, however, that if the last reported sale price of the
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Common Stock per share is at least twice the price per share of the Common Stock
sold in the Public Offering for 20 out of the 30 consecutive trading days ending
on the trading day immediately preceding the 90th day after the date of the
Prospectus, then the foregoing restrictions shall be earlier released with
respect to 33% of the shares of Common Stock held by the undersigned on the date
hereof on the later to occur of (a) the 90th day after the date of the
Prospectus if the Company makes its first post-offering public release of its
quarterly or annual earnings results during the period beginning on the eleventh
trading day after the date of the Prospectus and ending on the day prior to the
90th day after the date of the Prospectus, or (b) the second trading day after
the first public release of the Company's quarterly or annual results occurring
on or after the 90th day after the date of the Prospectus if the Company does
not make its first post-offering public release as set forth in the foregoing
clause (a). Notwithstanding the foregoing, (i) gifts and transfers by will or
intestacy or (ii) transfers to (A) the undersigned's members, partners,
affiliates or immediate family or (B) a trust, the beneficiaries of which are
the undersigned and/or members of the undersigned's immediate family, shall not
be prohibited by this agreement; provided that (x) the donee or transferee
agrees in writing to be bound by the foregoing in the same manner as it applies
to the undersigned (and a copy of such agreement is delivered to Morgan Stanley)
and (y) if the donor or transferor is a reporting person subject to Section
16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), any gifts or
transfers made in accordance with this paragraph shall not require such person
to, and such person shall not voluntarily, file a report of such transaction on
Form 4 under the Exchange Act. "Immediate family" shall mean spouse, lineal
descendants, father, mother, brother, sister or first cousin of the transferor
and father, mother, brother or sister of the transferor's spouse. In addition,
the restrictions contained in clauses (1) and (2) above shall not apply to (a)
transactions entered into with the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, or (b) transactions relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the Public Offering. The undersigned further agrees
that, without the prior written consent of Morgan Stanley on behalf of the
Underwriters, he, she or it will not, during the period commencing on the date
hereof and ending 180 days after the date of the Prospectus, make any demand for
or exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
Name:
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Address:
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