<PAGE>
As filed with the Securities and Exchange Commission on February 8, 2000
Registration Statement No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Broadview Networks Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 4813 11-3310798
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification No.)
jurisdiction of Classification Code
incorporation or Number)
organization)
Vern M. Kennedy, Chief Executive Officer
Broadview Networks Holdings, Inc.
45-18 Court Square, Suite 300
Long Island City, NY 11101
(718) 707-8800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Thomas M. Vitale, Esq. John T. Gaffney, Esq.
Mayer, Brown & Platt Cravath, Swaine & Moore
1675 Broadway 825 Eighth Avenue
New York, NY 10019 New York, NY 10019
(212) 506-2500 (212) 474-1000
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Maximum
Aggregate Amount of
Title of Each Class of Amount to be Offering Registration
Securities to be Registered Registered (1) Price(1)(2) Fee
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock ($0.01 par value per
share).......................... $ $125,000,000 $33,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The underwriters may, under certain circumstances, purchase up to an
additional [ ] shares from Broadview Networks at the initial public
offering price, less the underwriting discount.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) promulgated under the Securities
Act of 1933, as amended.
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, as amended, or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell securities, and we are not +
+soliciting offers to buy these securities, in any jurisdiction where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated , 2000
[BROADVIEW NETWORKS LOGO]
[ ] Shares
Broadview Networks Holdings, Inc.
Common Stock
-----------
This is an initial public offering of shares of common stock of Broadview
Networks Holdings, Inc. All of the [ ] shares of common stock are being sold
by Broadview Networks. At Broadview Networks' request, the underwriters have
reserved up to [ ] shares of common stock to be sold at the initial public
offering price to employees and selected customers, suppliers and others having
a relationship with Broadview Networks.
Prior to this offering, there has been no public market for the common stock.
Broadview Networks currently anticipates that the initial public offering price
will be between $ and $ per share. Broadview Networks is applying for
quotation of the common stock on the Nasdaq National Market under the symbol
"BDVU".
See "Risk Factors" beginning on page 8 to read about factors you should
consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................ $ $
Underwriting discount.................................... $ $
Proceeds, before expenses, to Broadview Networks......... $ $
</TABLE>
To the extent that the underwriters sell more than shares of common stock,
the underwriters have the option to purchase an additional shares of common
stock from Broadview Networks at the initial public offering price less the
underwriting discount.
-----------
The underwriters expect to deliver the shares of common stock to purchasers
against payment in New York, New York on , 2000.
Goldman, Sachs & Co. Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
-----------
Prospectus dated , 2000.
<PAGE>
[INSIDE COVER]
[Maps showing our existing and planned networks]
<PAGE>
You should rely only on the information contained in this prospectus. The
Company has not authorized anyone to provide you with any other information.
The Company is 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 our common stock. Unless otherwise indicated, all references in
this prospectus to "Broadview Networks", "we", "us", or "our" are to Broadview
Networks Holdings, Inc.
Until , 2000, all dealers that buy, sell or trade our
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This 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.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 18
Corporate Information.................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 28
Management............................................................... 50
Certain Transactions..................................................... 58
Principal Stockholders................................................... 62
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 70
Underwriting............................................................. 72
Legal Matters............................................................ 74
Experts.................................................................. 74
Where You Can Find More Information about Broadview Networks............. 74
Index to Financial Statements............................................ F-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information that is set forth in more detail later
in this prospectus. You should read the entire prospectus carefully, especially
"Risk Factors" beginning on page 8.
Broadview Networks
Overview
We are an electronically integrated communications provider, or "e-ICP," a
new type of competitive communications carrier. We have developed and
implemented unique and scalable enterprise management systems and software that
are electronically integrated with the systems of Bell Atlantic and other key
suppliers. Our services include high-speed Internet access and services using
digital subscriber line, or DSL, technology, data services, and local, long-
distance and international voice services. We currently market bundles of these
services to small and medium-sized businesses, small office/home office
customers and other communications-intensive residential consumers in the
northeastern United States. As of December 31, 1999, we had approximately
39,000 customers with approximately 72,000 access lines. In 1999, our revenues
were $37.2 million, compared with revenues of $10.9 million in 1998.
Our goals include increasing our revenues and market share by acquiring
customers quickly and efficiently, continued lowering of our operating costs
through further automation and integration with our key suppliers and
customers, and achieving a higher return on capital than typically experienced
in our industry by deploying our network only after we have acquired a customer
base in a market. We plan to do this by leveraging our software systems, which
we call OPENnet, and our highly-automated business processes, which include
SmarterAcquire, SmarterBuild and SmarterCare, collectively referred to as
Smart/3/.
In October 1996, we became the first integrated communications provider to
establish information systems capable of communicating with Bell Atlantic's
computer systems to execute multiple tasks, including retrieving customer
information, placing and tracking orders, testing customer lines and billing.
We believe we are the only company that has developed software systems that
automatically and electronically process data from Bell Atlantic and
incorporate it directly into network provisioning, billing and customer care
systems. We believe that this level of electronic integration represents a
significant improvement over the electronic bonding used by traditional
competitive local exchange carriers, commonly known as CLECs.
We initially provide our customers with services using the Bell Atlantic
network by reselling local, long distance and data services. This customer
acquisition process, which we call SmarterAcquire, generally allows us to
provide new customers with services within five business days of taking their
order. In comparison, we believe our competitors, who put new customers
directly onto their networks, typically experience a delay of 20-30 business
days in providing new customers with service.
We are rapidly deploying our network. Our network equipment is installed
and operational in 21 colocations. We expect to have approximately 100
colocations operational by the end of 2000 and approximately 200 by the end of
2001. After we deploy our network equipment in a colocation, we migrate our
customers' lines in bulk from the Bell Atlantic network onto our own using a
highly-automated, efficient process. We call this SmarterBuild. We believe our
unique high-volume migration process reduces labor, time, cost, errors and
service disruptions compared to companies who connect access lines to their
networks one at a time.
3
<PAGE>
From the time we initially provide a customer with service, we provide
personalized, real time customer care, which we call SmarterCare. Each customer
can interact with one of our Universal Care Associates, who can assist
customers with a wide range of functions, including service and feature
ordering, billing, service inquiry and account administration, with a unified
look and feel, regardless of whether their services are provided using our
network or the Bell Atlantic network. We believe that our enhanced capabilities
allow us to provide a superior customer care experience and will help us
increase customer retention and attract new customers.
Our Market Opportunity
The deregulation of the telecommunications industry and the surging demand
for Internet and related data transmission services have created a significant
market opportunity for competitive providers of voice and data
telecommunications services. According to the Federal Communications Commission
(the "FCC"), the U.S. local and long distance telecommunications market had
revenues of approximately $166 billion in 1998, $41 billion of which were
generated within the Bell Atlantic region.
We believe that within the telecommunications market our most attractive
opportunity consists of small and medium-sized businesses. According to
industry sources, there are approximately 1.8 million of these businesses with
a total of 8.1 million lines within the Bell Atlantic region. Industry sources
have also reported that only 52% of small to medium-sized businesses have
Internet access and that 86% of these companies utilize dial-up connections. We
believe there is an opportunity to increase subscriptions to the Internet and
high-speed data services such as DSL.
Business Strategy
The key elements of our business strategy are:
. Focus on small and medium-sized businesses. We use a dedicated sales
force to target small and medium-sized businesses. We believe these
businesses have a need for simplicity and one-stop shopping, which we
address by providing integrated bundles of data and voice services
invoiced on a single bill. We believe that our OPENnet systems and
Smart/3/ business processes will enable us to achieve the efficiencies
in sales, provisioning, network deployment and customer care that are
required to serve these customers profitably.
. Rapidly acquire customers and provide services with SmarterAcquire. Our
processes and systems allow us to rapidly acquire customers by
reselling Bell Atlantic's local services and then migrating their lines
in bulk onto our own network with minimal disruption. As a result, we
believe we lose significantly fewer customers than our competitors from
the time we write a new order to the time we bring the customers onto
our network. In addition to the revenue benefits, we believe this
strategy allows us to attract and retain high-quality, motivated sales
professionals, because they are able to receive commissions sooner, and
on a greater percentage of their customers' orders, while spending less
time rescheduling the initiation of services to a customer and more
time seeking to acquire additional accounts.
. Exploit the growing demand for data services. We intend to become a
leading provider of data and Internet services and applications for our
target customers. We have recently begun our commercial introduction of
DSL-based services in New York, augmenting our DSL-trained sales force
with data sales specialists and installing high-
4
<PAGE>
speed data switches. We will be building a systems integration and
vendor testing laboratory to analyze vendors' equipment and further
refine our network architecture prior to putting new services and
equipment into commercial production.
. Foster customer loyalty by providing SmarterCare. Using OPENnet, we
provide our customers with a single point of contact, called a
Universal Care Associate, 24 hours a day, seven days a week. This
enables us to better meet the needs of our customers and increase
customer retention. We are in the process of enhancing OPENnet to
permit customers to interact directly with our systems online. This
will give them a choice of self-service over the Internet or
personalized attention from one of our Universal Care Associates.
. SmarterBuild our state of the art, scalable network. We generally
deploy our network assets in a particular location after we have
acquired a customer base. We own the intelligent components of our
network, such as switches, network electronics and software, but lease
the readily-available transport elements. Furthermore, our integrated
network is designed to be highly flexible to support the rapid and
cost-effective introduction of new services and technologies. We
believe that this SmarterBuild strategy will provide us with
significant cost and time-to-market advantages, reduce our capital risk
and produce a higher return on invested capital than others in our
industry.
. Capture market share through geographic expansion. We currently offer
services in New York and Massachusetts. We intend to expand our
operations into other markets within the Bell Atlantic region as well
as into selected other regions.
. Leverage the experience of our management team. We intend to leverage
the quality and experience of our management team as we implement our
growth strategy. Our eight executive officers have an average of 18
years of experience in the communications industry, and are former
executives of companies including Bell Atlantic, Teleport
Communications Group, Covad, MFS Communications, AT&T and MCI.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered............................ [ ] shares
Common stock to be outstanding after this
offering....................................... [ ] shares
Over-allotment option........................... [ ] shares
Proposed Nasdaq National Market symbol.......... BDVU
Use of proceeds................................. We currently intend to use
the net proceeds for
development and expansion of
our network, operational
infrastructure and sales
force, and for working
capital and general corporate
purposes.
</TABLE>
Unless otherwise specifically stated, all information in this prospectus,
including the calculation of the number of shares to be outstanding after this
offering:
. reflects the automatic conversion of all outstanding shares of our
Series A convertible preferred stock, Series B convertible preferred
stock, Series C mandatorily redeemable convertible preferred stock and
Series D mandatorily redeemable convertible preferred stock into
17,561,703 shares of our common stock following the closing of this
offering;
. the termination of the mandatory redemption feature of 370,000 shares
of mandatorily redeemable common stock;
. assumes the Underwriters do not exercise their over-allotment option;
and
. does not reflect shares that may be issued upon the exercise of options
or warrants.
6
<PAGE>
Summary Consolidated Financial Data
The following tables list our summary consolidated financial data. You
should read this information together with the consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus and the information under "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
In the following table, "Adjusted EBITDA" is defined as earnings before
interest, income taxes, depreciation, amortization and non-cash compensation.
Adjusted EBITDA is a non-GAAP measure commonly used by investors and analysts
to analyze companies on the basis of operating performance, leverage and
liquidity. We believe Adjusted EBITDA is an indicator of our operating
profitability since it excludes items which are not directly attributable to
our ongoing business operations. Adjusted EBITDA should not be construed as an
alternative to net income, as an indicator of a company's operating performance
or as an alternative to cash flow from operations as a measure of a company's
liquidity. Adjusted EBITDA as used in this prospectus is not necessarily
comparable to similarly titled measures reported by other companies. For
information about cash flows or results of operations in accordance with GAAP,
please see the audited consolidated financial statements included elsewhere in
this prospectus.
The pro forma balance sheet data gives effect to the sale and issuance of
6,006,959 shares of Series D mandatorily redeemable convertible preferred stock
for net proceeds of $27.9 million and the assumed conversion of all preferred
stock and mandatorily redeemable common stock outstanding into shares of common
stock upon the completion of this offering.
The pro forma as adjusted balance sheet data gives effect to the sale of
[ ] shares of common stock in this offering, assuming an initial public
offering price of $ per share and after deducting underwriting discounts and
commissions and estimated offering expenses of $ million.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues, net...................................... $ 2,070 $10,866 $ 37,203
Cost of revenues................................... 1,759 9,507 33,965
------- ------- --------
Gross profit....................................... 311 1,359 3,238
Operating expenses, excluding non-cash
compensation and depreciation and amortization.. 1,503 10,172 29,406
Non-cash compensation............................ -- 475 10,838
Depreciation and amortization.................... 124 610 1,060
------- ------- --------
Total operating expenses........................... 1,627 11,257 41,304
------- ------- --------
Operating loss..................................... (1,316) (9,898) (38,066)
------- ------- --------
Net loss........................................... $(1,302) $(9,691) $(37,549)
======= ======= ========
Other Consolidated Financial Data:
Capital expenditures............................... $ 62 $ 601 $ 15,678
Adjusted EBITDA.................................... (1,192) (8,813) (26,168)
Cash used in operating activities.................. (688) (9,309) (19,683)
Cash used in investing activities.................. (249) (474) (14,252)
Cash provided by financing activities.............. 1,416 12,064 36,454
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------
1999
Pro Forma
1999 as
1999 Pro Forma Adjusted
------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents..................... $ 5,572 $33,522
Working capital............................... (1,292) 26,658
Total assets.................................. 30,709 58,659
Long-term obligations, less current portion... 7,979 7,979
Mandatorily redeemable securities............. 44,068 --
Stockholders' equity (deficit)................ (36,675) 35,343
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial condition
and results of operations would likely suffer. In such case, the market price
of our common stock could decline, and you may lose all or part of your
investment in our common stock.
Our limited operating history may not provide a reliable basis for evaluating
our prospects
We were incorporated and began operations in March 1996. As a result of our
limited operating history, we have limited historical financial data on which
an evaluation of us or our prospects can be based. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in an early stage of development, particularly those
in new and rapidly evolving markets. To address these risks, we must, among
other things: expand the geographic coverage of our services; attract and
retain customers within our existing and in new regions; increase awareness of
our services; respond to competitive developments; continue to attract, retain
and motivate qualified employees; continue to upgrade our technologies;
incorporate these technologies into our service offerings; and effectively
manage our expanding operations. There can be no assurance that we will be
successful in addressing these risks, and our failure to do so could have a
material adverse effect on our business, prospects, operating results and
financial condition. In one or more future quarters, our results of operations
may fall below the expectations of securities analysts and investors. This
would likely materially adversely affect the market price of our common stock.
We have a history of negative Adjusted EBITDA, operating losses and net losses
since our inception
We have experienced negative Adjusted EBITDA, operating losses and net
losses in each quarter since our inception. The accumulated deficit at December
31, 1999 was $48,632,222. We cannot assure you that we will achieve or sustain
positive Adjusted EBITDA, operating income or net income in the future. If we
cannot, we may not be able to meet our working capital requirements or pay
interest on our debt, which would have a material adverse effect on our
business, financial condition and results of operations and on the market price
of our common stock.
We have limited experience in offering DSL, Internet and new communications
services
Our strategy includes offering a full suite of communications services,
including high speed data services, some of which are based on DSL technology,
and Internet service. We have limited experience providing these new services
and can give no assurance that we will be able to do so successfully. Our
ability to implement this strategy will depend on many factors, including our
ability to:
.upgrade our network and install new equipment;
. successfully meet technical requirements with which we have had little
experience to date; and
. expand, train and manage our employee base.
Our failure to do any of these things effectively could materially
adversely affect our results of operations and the market price of our common
stock.
8
<PAGE>
We cannot predict market acceptance for our services
Although we currently sell our products and services in several of our
target markets, we do not have a significant market share in any of those
markets. We must convince prospective customers to use our telecommunications
services. The markets for competitive local and long distance service, Internet
access and high-speed data communications, including those services based on
DSL technology, are in the early stages of development. We can give no
assurance that our new services will receive market acceptance or that prices
and demand for these services will be sufficient to sustain profitable
operations. If the markets for our new services fail to develop, grow more
slowly than anticipated or become saturated with competitors, our business,
prospects, financial condition and results of operations could be materially
adversely affected.
We may require significant amounts of additional capital
We believe that the estimated net proceeds from this offering, together
with our existing assets, anticipated debt and expected revenue growth will be
sufficient to fund our operations for at least the next 12 months. However, in
order to implement our business plan, or if our working capital needs exceed
our current expectations, we may need to raise additional capital from debt or
equity sources. We cannot assure you that we will be successful in raising
sufficient debt or equity capital on a timely basis, on acceptable terms, or at
all. If we fail to obtain any necessary financing, we could be compelled to
alter our business strategy, delay or abandon some of our future plans or
expenditures, sell assets or default on interest payments on our indebtedness.
Any of these events would have a material adverse effect on our business,
financial condition and results of operations and on the market price of our
common stock.
We may be unable to manage rapid growth
Our future performance will depend upon our ability to manage our growth
effectively. Our growth to date has placed, and in the future will continue to
place, a significant strain on our administrative, operational and financial
resources. To manage our growth effectively, we will have to hire and retain
qualified sales and other personnel and successfully train and integrate these
personnel. We will also need to continue to improve and upgrade operational,
financial and accounting information systems, controls and infrastructure, as
well as to control costs and maintain regulatory compliance. The failure to
maintain our financial controls and systems or otherwise manage our growth
could materially adversely affect us.
Our failure to sustain desired pricing levels could impair our ability to
achieve profitability or positive cash flow
Prices for communications services have historically fallen, a trend we
expect will continue. Accordingly, we cannot predict to what extent we may need
to reduce our prices to remain competitive or whether we will be able to
sustain future pricing levels as our competitors introduce competing services
or similar services at lower prices. Our failure to achieve or sustain market
acceptance at desired pricing levels could impair our ability to achieve
profitability or positive cash flow, which could have a material adverse effect
on our business, prospects, financial condition and results of operations.
We are highly dependent on Bell Atlantic and other incumbent local exchange
carriers
We are highly dependent on Bell Atlantic's willingness and ability to
provide us with the use of its local network lines and facilities, including
its unbundled copper lines and interoffice transport facilities, in a timely,
efficient and cost-effective manner. We have entered into two interconnection
agreements with Bell Atlantic covering the New York and Massachusetts markets.
The initial term of
9
<PAGE>
our New York agreement expired on December 31, 1999, at which time the
agreement was automatically extended. It may be terminated by either party upon
90 days' written notice. Our Massachusetts agreement will expire in April 2001,
unless either party requests negotiation prior to that time, in which case the
agreement would remain in effect until a new agreement is executed or an
arbitration decision is made by the Massachusetts Department of
Telecommunications and Energy. If these agreements are terminated, Bell
Atlantic is obligated to continue providing us with access to its network
elements but may do so under a new interconnection agreement, under standard
interconnection terms and conditions approved by regulators, or under tariff
terms and conditions available to all CLECs, all of which are or may be less
favorable to us than the terms of our current agreements. The provisions of our
agreements are subject in their entirety to the Telecommunications Act of 1996
(the "Telecom Act") and orders from other governmental regulatory agencies.
Bell Atlantic is, and will probably continue to be, both our largest supplier
and our largest competitor. As a result, Bell Atlantic has an inherent conflict
of interest in cooperating with us.
If we expand geographically, we will be similarly dependent on the
incumbent local exchange carrier, otherwise known as an ILEC, in each new
market, and each ILEC will be similarly conflicted. We can give no assurance
that Bell Atlantic or the ILEC in any of our future markets will comply with
state and federal regulations or contracts governing its interactions with us,
or will provide us with the cooperation we require. Nor can we give any
assurance that our existing interconnection agreements will not be terminated
or that we will be able to negotiate interconnection agreements in the other
markets in which we intend to offer local service. If we are unable to obtain
Bell Atlantic's cooperation, or secure or maintain interconnection agreements,
it could have a material adverse effect on our business, prospects, financial
condition and results of operations.
We depend on our suppliers and other service providers
We are highly dependent on third parties to supply us with services,
equipment and access. For example:
. We lease our transport capacity, including the transmission facilities
which give us access to our customers, from ILECS and other
competitive transport carriers;
. We resell, on a usage basis, regional, long distance, international
and Internet services of traditional and new market suppliers, and may
resell the DSL services of other suppliers until we have fully and
successfully deployed our own DSL capability;
. Our DSL-enabled services depend on the quality of the copper lines and
the ILECs' maintenance of such lines; and
. We rely on a single or limited number of vendors to supply key
components of our current and future network infrastructure, including
switching, access and networking equipment and DSL equipment that is
currently under development and that we plan to incorporate once it
becomes commercially available.
Many of these entities are, or may become, our competitors. We can give no
assurance that we will be able to obtain use of these facilities or services in
a timely manner, on terms and in quantities satisfactory to us, or at all.
Occasionally we have experienced delays or other problems in receiving these
facilities and services. We may be unable to negotiate, renew and enforce
favorable supply agreements. In addition, we can give no assurance that the
third party providers we use will maintain the quality of their facilities and
services. The occurrence of any of these events could affect our ability to
provide quality services to our customers and could materially adversely affect
us.
We will need to upgrade or modify our OPENnet software and Smart/3/ processes
as we expand
Our business strategy is largely based on our OPENnet software, our unique
Smart/3/ business processes and the level of integration that we have achieved
with Bell Atlantic in New York and
10
<PAGE>
Massachusetts and with other vendors. In order to successfully execute our
business strategy, it will become necessary to upgrade or modify OPENnet and
our Smart/3/ business processes in response to changing business conditions. In
particular, in order to successfully execute our strategy of expanding into
other markets within the Bell Atlantic region and in selected other regions, we
will need to integrate with the ILEC in those areas. We have not yet attempted
to integrate with ILECs outside New York and Massachusetts and will likely need
to modify our software and processes in order to successfully do so. An
inability to adequately upgrade or modify OPENnet or our Smart/3/ processes
could have an impact on our ability to acquire, manage or service our customers
and could materially adversely affect us.
We may need to modify OPENnet if our vendors modify their software or systems
A failure to keep our software synchronized with that of our vendors may
significantly impair our ability to add new customers and care for and bill our
existing customers. While most companies in our industry, including Bell
Atlantic and us, have agreed that any systems modifications or enhancements
will be communicated in advance, we have no guarantees that Bell Atlantic or
our other key vendors will not make these changes on short or no notice, which
could make it difficult for us to keep our software adequately synchronized.
Failure of our software could increase our costs, disrupt our services and
reduce demand for our services
Our OPENnet software is subject to design, coding and other software flaws.
Although we have taken reasonable and necessary precautions, we are also
vulnerable to hackers, computer viruses and equipment failures, including of
our computers, servers and data networks. Although we have extensively tested
our software, errors may be discovered in the software during the course of its
use. Any errors may result in partial or total failure of our systems, loss or
diminution in service delivery performance, additional and unexpected expenses
to fund further systems development or to add programming personnel to complete
or correct development, and loss of revenue because of the inability of
customers to use our services, any of which could adversely affect our business
condition.
We are subject to the risk of physical network failure and security risks
Our success in attracting and retaining customers requires us to provide
adequate network reliability, capacity and security. Our physical networks and
the networks of others on which we depend are subject to damage from fires,
floods, power losses, telecommunications failures, transmission cable cuts and
similar unforeseen events. They are also subject to capacity limitations,
breaches of security by computer virus, sabotage, break-ins or otherwise, and
other factors. Any of these occurrences may cause systems failures,
interruptions in service or reduced customer capacity, which could have an
impact on our ability to acquire, manage or service our customers and could
materially adversely affect us.
Terms of our indebtedness restrict our corporate activities
The terms of our vendor financing facility with NTFC Capital Corporation
restrict, and in some cases significantly limit or prohibit our ability and the
ability of our subsidiaries to, among other things:
. pay dividends and make other distributions on capital stock and redeem
capital stock;
. incur additional indebtedness, create liens on our assets or assume
contingent obligations;
. make investments, advances and loans;
11
<PAGE>
. lease personal property;
. engage in transactions with our shareholders and affiliates;
. remove collateral from various locations;
. make capital expenditures inconsistent with the business plan we
submitted to NTFC Capital Corporation when we entered into the
facility;
. engage in mergers and consolidations; and
. sell assets outside the ordinary course of business.
We cannot assure you that the covenants in our vendor financing facility
will not adversely affect our ability to finance our future operations or
capital needs or to engage in other business activities that may be in the best
interests of our stockholders. As a result, these restrictive covenants could
have a material adverse effect on our business, financial condition and results
of operations and on the market price of our common stock.
We are controlled by a limited number of stockholders whose interests may be
different from the interests of our public stockholders
Baker Communications Fund, ComVentures, New Enterprise Associates, Weiss,
Peck & Greer, the State of Michigan Retirement Systems and additional entities
affiliated with these institutional investors will control approximately % of
our common stock after this offering. Our executive officers and directors and
entities affiliated with them will control approximately % of our common
stock following this offering. As a result, these stockholders will be able to
exercise control over our future operations and strategy, including the
election of directors and the approval of significant corporate transactions.
Conflicts of interest between these stockholders and our public stockholders
may arise. For example, the interests of the institutional and management
stockholders regarding any proposed merger or sale of our company may differ
from the interests of our new public stockholders, especially if the
consideration to be paid for the common stock is less than the price paid by
public stockholders.
Competition in our industry is intense and growing, and we may be unable to
compete effectively
Our industry is highly competitive, and we expect competition to intensify
in the future. We do not have a significant market share in any of our markets.
Our primary competitor in each of our existing and future markets, the ILEC,
has substantially greater financial, technical, marketing and other resources,
including brand or corporate name recognition, than we do. We also face the
following specific competitive risks:
Need to compete with incumbent providers. In the local communications market,
our primary competitor is currently Bell Atlantic. Bell Atlantic has many
advantages over us, including its:
. longstanding relationships with their customers;
. significantly greater financial and technical resources; and
. ability to subsidize local services with revenues from other
businesses.
Larger and more competitive companies resulting from communications
mergers. A continuing trend towards business combinations and alliances in the
communications industry may create significant new competitors for us. Many of
these combined entities will have resources far greater than ours. These
combined entities may provide bundled packages of communications services,
including local, long distance and DSL-based services, that compete directly
with the
12
<PAGE>
services we offer. These entities may also offer services sooner and at more
competitive rates than we do.
Low barriers to entry. The market for telecommunications services,
including data communications and Internet access services, is extremely
competitive and characterized by rapid technological innovation and ongoing
regulatory change. There are no substantial barriers to entry, and we expect
that competition will intensify in the future as new technologies are developed
and regulatory barriers decrease.
Single product line carriers becoming all distance carriers. Many carriers
who, for legal, regulatory or technological reasons, previously had limited
service offerings, aspire or are beginning to offer a wide array of services,
either directly or through partnerships and strategic alliances. The companies
seeking to become all distance carriers include long distance carriers, local
carriers, integrated services providers, CLECs, wireless carriers and cable TV
companies.
Decrease in regulatory barriers to Regional Bell Operating Companies. On
December 22, 1999, Bell Atlantic became the first Regional Bell Operating
Company authorized by the FCC to enter the long distance telecommunications
market within its region when the FCC authorized it to provide long distance
services in New York. This represents the beginning of an expected trend toward
allowing the Regional Bell Operating Companies to offer bundled packages of
both local and long distance services, which would increase the level of
competition we face. It would also present us with competitors who have
significantly greater resources and long-standing relationships with millions
of customers. Bell Atlantic also benefits from recent regulations that relax
price restrictions and decrease regulatory oversight of it and may engage in
aggressive discount pricing practices or charge competitors excessive fees for
interconnection to their networks.
New and emerging entities offering free services. We also face competition
from new and emerging entities which offer services, features, or capabilities
free to customers in return for advertising revenues or fees or subscriptions
to other services. The services being offered for free include Internet access,
long distance, DSL-based access and web hosting. While occasionally we offer
these services for free or at reduced prices for promotional or marketing
purposes, we generally charge our users for these services. Should these new
business models become prevalent, we could be materially adversely affected.
Competition from providers using other technologies. We also face
competition from fixed or mobile wireless providers using either licensed or
unlicensed frequencies, including cellular, personal communications services
and other commercial mobile radio service providers, as well as from Internet
telephony, cable TV-based and satellite-based service providers.
Entrance of foreign companies into U.S. market. In February 1998, the FCC
adopted rules that make it substantially easier for many foreign communications
companies to enter the U.S. telecommunications market. This may further
increase the number of competitors.
We may be unable to adapt to technological change
The communications industry has been, and is likely to continue to be,
subject to:
. rapid and significant technological change, including continuing
developments in DSL technology, which does not presently have widely
accepted standards;
. frequent introductions of new services and alternative technologies,
including new technologies for providing high-speed data services; and
. evolving industry standards.
13
<PAGE>
We expect that new products and technologies will emerge that may be
superior to, or may not be compatible with, some of our services or
technologies. Also, technological changes, including advancements in emerging
wireline and wireless technologies, the use of unlicensed frequencies, Internet
services and technologies, photonic and infrared-based technologies and others,
could result in lower retail rates for communications services. These changes
could materially adversely affect our ability to price services competitively
or profitably. We cannot predict the effect of technological changes on our
business. Our future success will depend, in part, on our ability to anticipate
and adapt to technological changes and to offer, on a timely basis, services
that meet customer demands and evolving industry standards. As a result, we may
be unable to obtain access to new technology on a timely basis or on
satisfactory terms. Failure to adapt successfully to any technological change
or obsolescence, or the failure to obtain access to important technologies,
could materially adversely affect us.
The Telecom Act and other regulations could adversely affect us
Telecommunications services are subject to significant regulation at the
federal, state, local and international levels. Existing regulations, new
regulations or delays in receiving required regulatory approvals may materially
adversely affect our business, financial condition, results of operations and
prospects. In particular, we face the following regulatory risks:
Need to comply with federal regulations. We are regulated at the federal
level by the FCC. We are required to file and maintain domestic and
international tariffs containing the currently effective rates, terms and
conditions of service for our long distance and international services. We are
also required to maintain an FCC authorization in connection with our
international services. The FCC has the authority to sanction us or revoke our
authorization if we violate applicable law.
Legal and administrative burden of compliance with diverse state
regulations. Our communications operations are also subject to state laws.
Compliance with state regulations, challenges by third parties to our tariffs
or complaints about our practices could cause us to incur substantial expenses.
If we fail to obtain required state permits or otherwise comply with state
regulations, we may be sanctioned and our authorization to conduct business may
be revoked.
Difficulty predicting the impact of the Telecom Act. The Telecom Act has
resulted in comprehensive changes in the regulatory environment for the
communications industry and has materially affected the competitive
environment. We cannot predict how the FCC, state regulators, courts and the
ILECS will interpret and implement the relevant provisions of the Telecom Act.
Changes in access charges and universal service requirements. Changes in
access charges and universal service requirements could affect our local
service revenues. Changes in the regulations requiring local exchange carriers
to provide equal access for the origination and termination of calls by long
distance subscribers, or in the regulations governing access charge rates or
universal service contribution, could materially adversely affect our business,
financial condition, results of operations and prospects.
Uncertainty of the evolving regulatory environment. There is considerable
uncertainty regarding numerous regulatory issues in the communications
industry, including the appropriate methodology to determine the price of
unbundled elements, the ability to file with the FCC to enforce interconnection
agreements and the applicability of existing regulations to new technologies
such as Internet Protocol telephony. We cannot predict the impact of these and
other regulatory developments on our business.
14
<PAGE>
We may be unable to attract and retain sales, technical and management
personnel and other employees
Our expansion strategy is dependent upon our ability to hire and retain
additional personnel. In particular, we believe we will need to attract a
significant number of sales, customer service and technical personnel in order
to successfully expand geographically. Competition for qualified personnel in
the communications industry is intense. Difficulty in hiring and retaining
personnel could delay or prevent the execution of our strategy and could
materially adversely affect us.
Our success also depends to a significant extent upon the abilities and
continued efforts of our existing management team. We have employment
agreements with all of our executive officers. The loss of any member of our
management team could materially adversely affect us.
We may be unable to adequately protect our intellectual property rights
We regard our copyrights, service marks, trade secrets and similar
intellectual property as critical to our success. We rely upon a combination of
copyright law, trade secret protection and contractual restrictions with
employees, suppliers and others to protect our intellectual property rights. We
do not currently hold any patents. If we fail to adequately protect our
intellectual property rights, or if we become involved in intellectual property
litigation, our business, financial condition and results of operations could
be materially and adversely affected.
In the ordinary course of business we expect to be susceptible to claims,
including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties. While we have not been notified
that we have infringed the intellectual property rights of third parties, we
expect that infringement claims in our markets will increase in number as more
participants enter the market. These claims and any resultant litigation could
materially adversely affect our business, financial condition and results of
operations.
We may face risks associated with potential acquisitions
We may acquire other businesses that we believe will complement our
existing business, although we have no current plans to do so. These
acquisitions would likely involve some or all of the following risks:
. the difficulty of assimilating the acquired operations and personnel;
. the potential disruption of our ongoing business and the diversion of
resources;
. the possible inability of management to maintain uniform standards,
controls, procedures and policies;
. the risks of entering markets in which we have little experience;
. the potential impairment of relationships with employees or customers;
and
. the risks of regulatory delays.
These acquisitions may be required for us to remain competitive. We can give no
assurance that we will be able to obtain required financing for these
transactions or that such transactions will occur.
Antitakeover provisions
Various provisions of our certificate of incorporation, our bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so might be beneficial to our stockholders. Please see "Description of
Capital Stock."
15
<PAGE>
Future sales of our stock may negatively affect our stock price
The market price of our common stock may fall as a result of sales of a
large number of shares of our common stock in the market following this
offering, or the perception that such sales could occur. Such sales also might
make it more difficult for us to sell equity securities in the future at a time
and at a price that we believe is appropriate. Immediately after this offering,
there will be shares of our common stock outstanding. Of these shares,
all of the shares sold in this offering will be freely tradeable without
restriction under the Securities Act of 1933. Shares of common stock
outstanding after this offering will be available for sale in the public
market, subject to applicable volume and manner of sale restrictions under Rule
144, as follows:
<TABLE>
<CAPTION>
Number
of
Date of Availability for Sale Shares
----------------------------- ------
<S> <C>
Upon closing of this offering......................................
---
180 days after the closing of this offering........................
---
270 days after the closing of this offering........................
---
Total additional shares available for sale.......................
===
</TABLE>
In addition, the holders of approximately 18,151,342 shares of common
stock, including shares in the preceding table, have contractual registration
rights with respect to their shares.
Lack of prior public market and possible volatility of stock price
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in Broadview
Networks will lead to the development of an active trading market or how liquid
that market may become. The initial public offering price for the shares will
be determined by negotiations between the underwriters and us and may not be
indicative of the market price for the common stock that will prevail in the
trading market following this offering.
The market price at which our common stock will trade after this offering
is likely to be volatile and may fluctuate substantially due to factors such
as:
. our historical, current and anticipated quarterly and annual operating
results;
. variations between our actual results and analyst and investor
expectations;
. announcements by us or others and developments affecting our business
or prospects;
. investor perceptions of us and comparable public companies; and
. conditions, technological developments and trends in the
communications industry.
In particular, the stock market has experienced extreme price and volume
fluctuations affecting the stock of communications companies. These
fluctuations may be unrelated or disproportionate to our performance, and may
result in a material decline in the trading price of our common stock.
In the past, securities class action litigation has been instituted against
companies following periods of volatility in the market price of their
securities. If instituted against us, regardless of the outcome, this
litigation could result in substantial costs and diversion of our management's
attention and resources and could have a material adverse effect on our
business, financial condition and results of operations.
16
<PAGE>
You will incur immediate and substantial dilution
The initial public offering price per share will exceed the net tangible
book value per share. Accordingly, investors purchasing shares in this offering
will incur immediate and substantial dilution in their investments. To the
extent outstanding options to purchase common stock are exercised, there will
be further dilution.
Broad discretion in use of proceeds
We currently intend to use the net proceeds for development and expansion
of our network, operational infrastructure and sales force, and for working
capital and general corporate purposes. However, our management will have broad
discretion with respect to the expenditure of proceeds. Investors will be
relying on the judgment of our management regarding the application of the
proceeds of this offering.
We do not expect to pay dividends for the foreseeable future
We have never declared or paid any cash dividends on our common stock. We
intend to retain any future earnings to support operations and to finance the
growth and development of our business and do not anticipate paying cash
dividends for the foreseeable future. Our existing vendor financing facility
with NTFC Capital Corporation does, and any future indebtedness we incur may,
restrict our ability to pay dividends.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including the risks faced by us
described above and elsewhere in this prospectus. We assume no obligation to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.
17
<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of the shares offered in
this prospectus are estimated to be $ ($ if the underwriters
exercise their over-allotment option in full), assuming an initial public
offering price of $ per share and after deducting the underwriting
discounts and commissions and our estimated offering expenses.
We intend to use the net proceeds of the offering to fund the continued
development of our service offerings, the geographic expansion of our network,
the expansion of our operational infrastructure and sales force and for working
capital and general corporate purposes. We believe opportunities may exist to
expand our current business through acquisitions. If such an opportunity
arises, we may use a portion of the net proceeds for this purpose. We are not
currently a party to any contracts or letters of intent with respect to any
material acquisitions. Pending these uses, we expect to invest the net proceeds
of this offering in short-term, interest-bearing, investment grade securities.
Because of the number and variability of factors that may determine our use
of the net proceeds of this offering, management will retain a significant
amount of discretion over the application of the net proceeds. The actual use
of net proceeds could vary substantially from our current plans.
CORPORATE INFORMATION
We were incorporated in New York in March 1996 and converted to a Delaware
corporation in July, 1998. We hold a 100% interest in Broadview Networks, Inc.,
a New York corporation and our main operating subsidiary. Additionally, we hold
a 100% interest in Open Support Systems LLC, a Connecticut limited liability
company. Open Support Systems is the operating subsidiary that owns and has
developed the OPENnet software used by Broadview Networks, Inc. Prior to
October 1999, we operated under the name Coaxicom Inc., while Broadview
Networks, Inc. operated under the name Community Networks, Inc.
Our principal executive offices are located at 45-18 Court Square, Suite
300, Long Island City, New York 11101. Our telephone number at this location is
(718) 707-8800 and our Internet address is www.broadviewnet.com.
Open Support Systems has filed applications to register OPENnet, OPENorder,
OPENfix, OPENbill, OPENcare, OPENcontact and OPENgateway as service marks.
Broadview Networks, Inc. has filed applications to register Smart/3/,
SmarterAcquire, SmarterBuild, SmarterCare, One Touch and One Touch Care as
service marks. Each trademark, trade name or service mark of any other company
appearing in this prospectus belongs to its holder.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. For
the foreseeable future we intend to retain our earnings for our operations and
the expansion of our business and do not expect to pay dividends on our common
stock. The payment of any future dividends will be at the discretion of our
board of directors and will depend on, among other factors, our earnings,
financial condition, capital requirements and general business outlook at the
time payment is considered. In addition, our ability to pay dividends will
depend on the amount of distributions, if any, received from our operating
subsidiaries, Broadview Networks, Inc. and Open Support Systems, LLC, or any of
our future operating subsidiaries. Our existing vendor financing facility with
NTFC Capital Corporation does, and any future indebtedness incurred by us may,
restrict our ability to pay dividends.
18
<PAGE>
CAPITALIZATION
The following cash and capitalization table sets forth:
. Our actual cash and capitalization as of December 31, 1999.
. Our pro forma cash and capitalization after giving effect to:
. the conversions of the Series A and B convertible preferred shares
into 3,446,070 and 1,838,799 shares of common stock, respectively;
and
. the conversion of the Series C mandatorily redeemable convertible
preferred shares into 6,269,875 shares of common stock; and
. the sale and issuance of 6,006,959 shares of Series D mandatorily
redeemable convertible preferred stock for $27,950,000, net of
issuance costs of $50,000 and their subsequent conversion into
6,006,959 shares of common stock; and
. the termination of the mandatorily redeemable feature of the
370,000 shares of common stock sold to an executive officer.
. Our pro forma, as adjusted, cash and capitalization to reflect in
addition the issuance of shares in this offering and the net
proceeds received of $ .
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
financial statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
<S> <C> <C> <C>
(in thousands)
Cash and cash equivalents...................... $ 5,572 $ 33,522
======== ======== ======
Long-term obligations, including current
portion....................................... $ 8,798 $ 8,798
-------- -------- ------
Mandatorily redeemable securities
Series C convertible preferred shares, $0.01
par value, 6,269,875 shares authorized,
issued and outstanding, actual; no shares
issued and outstanding, pro forma or pro
forma as adjusted............................ 38,888 --
Series D convertible preferred shares, $0.01
par value, 6,006,959 shares authorized; no
shares issued and outstanding actual, pro
forma or pro forma as adjusted............... -- --
Common stock, $0.01 par value, 370,000 shares
issued and outstanding actual, no shares
issued and outstanding pro forma or pro forma
as adjusted ................................. 5,180 --
-------- -------- ------
Total mandatorily redeemable securities...... 44,068 --
-------- -------- ------
Stockholders' equity (deficit)
Convertible preferred stock, $0.01 par value,
16,900,000 shares authorized; 17,600,000
shares authorized pro forma..................
Series A, $0.01 par value, 3,446,070 shares
authorized, issued and outstanding, actual;
no shares issued and outstanding, pro forma
or pro forma as adjusted..................... 35 --
Series B, $0.01 par value, 1,838,799 shares
authorized, issued and outstanding, actual;
no shares issued and outstanding, pro forma
or pro forma as adjusted..................... 18 --
Common stock, $0.01 par value, 32,000,000
shares authorized, 7,695,413 shares issued
and outstanding, actual; 36,000,000 shares
authorized, 25,627,116 shares issued and
outstanding, pro forma, and [ ] shares issued
and outstanding pro forma as adjusted........ 77 256
Receivable from officer for issuance of
stock........................................ (960) (960)
Additional paid-in capital.................... 32,962 104,854
Deferred compensation......................... (20,175) (20,175)
Accumulated deficit........................... (48,632) (48,632)
-------- -------- ------
Total stockholders' equity (deficit)......... (36,675) 35,343
-------- -------- ------
Total capitalization......................... $ 16,191 $ 44,141
======== ======== ======
</TABLE>
19
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
$35,343,101 or $1.38 per share of outstanding common stock, after giving effect
to the adjustments shown in the pro forma column under "Capitalization." The
pro forma net tangible book value per share represents our total tangible
assets less total liabilities, divided by 25,627,116 shares of common stock
outstanding on a pro forma basis before the offering. Dilution per share
represents the difference between the amount per share paid by investors in
this offering and the pro forma net tangible book value per share after the
offering. After giving effect to this offering, the as adjusted pro forma net
tangible book value at December 31, 1999 would have been $ or $ per
share. This represents an immediate increase in the net tangible book value of
$ per share to existing stockholders and an immediate dilution in net
tangible book value of $ per share to new investors purchasing shares at the
initial public offering price. The following table illustrates this per share
dilution:
<TABLE>
<S> <C>
Assumed initial public offering price......................................
Net tangible book value per share as of December 31, 1999.................
Increase per share attributable to this offering..........................
Net tangible book value per share after this offering......................
Dilution per share to new investors........................................
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1999, the number of shares of common stock purchased from the Company, the
total consideration paid and the average consideration paid per share by our
existing stockholders and by the new investors at an assumed initial public
offering price of $[ ] per share for shares purchased in this offering, before
deducting underwriting discounts and commissions and our offering expenses.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 25,627,116 % $73,712,477 % $2.88
New investors.................
---------- --- ----------- --- -----
Total.......................
========== === =========== === =====
</TABLE>
The discussion above assumes no exercise of any options after the date of
this offering. As of the date of this offering, an aggregate of 5,674,224
shares of common stock were issuable following the exercise of outstanding
employee and director options issued under our 1997 and 2000 Stock Option Plans
at an average exercise price of $5.49 per share. If all options outstanding as
of the date of this offering were exercised, the net tangible book value per
share immediately after completion of this offering would be $ million. This
represents an immediate dilution in net tangible book value of $ per share to
purchasers of common stock in this offering.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present summary consolidated financial data for the
period from March 21, 1996 to December 31, 1996 and for the years ended
December 31, 1997 through 1999. The statement of operations, cash flow and
balance sheet data for the period from March 21, 1996 to December 31, 1996 and
for the years ending December 31, 1997 through 1999 have been derived from
financial statements, including those set forth elsewhere in this prospectus,
that have been audited by PricewaterhouseCoopers LLP, independent accountants.
<TABLE>
<CAPTION>
Period from
March 21, 1996
(inception) to Year Ended December 31,
December 31, 1996 ----------------------------------
<S> ----------------- <C> <C> <C>
1997 1998 1999
---------- ---------- ----------
(in thousands, except per share data)
Consolidated Statement
of Operations Data:
Revenues, net........... $ 4 $ 2,070 $ 10,866 $ 37,203
Cost of revenues........ 3 1,759 9,507 33,965
---------- ---------- ---------- ----------
Gross profit............ 1 311 1,359 3,238
Operating expenses
General and administra-
tive.................. 95 1,024 4,555 16,288
Sales and marketing.... 449 4,181 11,034
Software development... 30 1,436 2,084
Depreciation and amor-
tization.............. 1 124 610 1,060
Non-cash compensation.. -- 475 10,838
---------- ---------- ---------- ----------
Total operating ex-
penses................. 96 1,627 11,257 41,304
---------- ---------- ---------- ----------
Operating loss.......... (95) (1,316) (9,898) (38,066)
Interest income......... 5 18 221 854
Interest expense........ -- (4) (14) (337)
---------- ---------- ---------- ----------
Net loss................ (90) (1,302) (9,691) (37,549)
Accretion of mandatorily
redeemable
preferred shares....... -- -- -- (11,092)
---------- ---------- ---------- ----------
Net loss applicable to
common stockholders.... $ (90) $ (1,302) $ (9,691) $ (48,641)
========== ========== ========== ==========
Basic and diluted net
loss per share(1)...... $ (0.02) $ (0.24) $ (1.49) $ (6.72)
========== ========== ========== ==========
Shares used to compute
basic and diluted
net loss per share(1).. 3,850,844 5,391,317 6,510,871 7,238,631
Other Consolidated Fi-
nancial Data:
Adjusted EBITDA(2)...... $ (94) $ (1,192) $ (8,813) $ (26,168)
Capital expenditures.... 14 62 601 15,678
Cash used in operating
activities............. (95) (688) (9,309) (19,683)
Cash used in investing
activities............. (14) (249) (474) (14,252)
Cash provided by financ-
ing activities......... 401 1,416 12,064 36,454
Consolidated Balance
Sheet Data:
Cash and cash equiva-
lents.................. 292 772 3,052 5,572
Working capital......... 289 (110) 2,605 (1,292)
Total assets............ 325 2,849 8,007 30,709
Long-term obligations,
less current portion... -- 22 84 7,979
Mandatorily redeemable
securities............. -- -- -- 44,068
Stockholders' equity
(deficit).............. 311 939 3,832 (36,675)
</TABLE>
21
<PAGE>
- --------
(1) See Note 2 to the consolidated financial statements appearing elsewhere in
this prospectus for an explanation of the method used to determine the
number of shares used to compute basic and diluted net loss per share.
(2) "Adjusted EBITDA" is defined as earnings before interest, income taxes,
depreciation, amortization and non-cash compensation. Adjusted EBITDA is a
non-GAAP measure commonly used by investors and analysts to analyze
companies on the basis of operating performance, leverage and liquidity. We
believe Adjusted EBITDA is an indicator of our operating profitability
since it excludes items which are not directly attributable to our ongoing
business operations. Adjusted EBITDA should not be construed as an
alternative to net income as an indicator of a company's operating
performance or as an alternative to cash flow from operations as a measure
of a company's liquidity. Adjusted EBITDA as used in this prospectus is not
necessarily comparable to similarly titled measures reported by other
companies. For information about cash flows or results of operations in
accordance with GAAP, please see the audited consolidated financial
statements included elsewhere in this prospectus.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and related notes and other detailed information
regarding Broadview Networks included elsewhere in this Prospectus. The
discussion and analysis contains statements of a forward-looking nature
relating to future events or our future financial performance. Actual events or
results may differ materially from such statements. In evaluating these
statements, prospective investors should specifically consider the various
factors identified in this prospectus, including the matters described under
the caption "Risk Factors," which could cause actual results to differ
materially from those indicated in the forward-looking statements contained in
this prospectus.
Overview
We currently provide data, voice and Internet services to small and medium-
sized businesses and residential customers. We began operations in 1996
reselling, under our own brand name, Bell Atlantic's local dial tone and
regional telecommunications services. In October 1999 we changed our brand name
to Broadview Networks from Community Networks.
In September 1999, in addition to providing our customers with resold
services through Bell Atlantic and other wholesale providers, we began
migrating customers onto our own network, incorporating various owned and
leased network components and operating as a network-based integrated service
provider. As a result, we now provide dialtone and features, such as call
waiting and caller ID, and an array of local, toll, long distance, data and
Internet services over our own network. As a network-based provider, we are
able to lower the direct costs of providing our services and better manage our
service offerings and quality of service.
As we implement our business strategy, we intend to continue to expand our
existing network, enhance our software systems, further automate our processes
and increase our sales force. We also intend to continue expanding our service
offerings, including the further deployment of high-speed Internet and other
services using DSL technology in order to maintain and enhance our position as
an integrated communications provider.
As we undertake these expansion plans and attempt to grow our revenue base,
we anticipate that we will sustain operating losses and negative cash flows
from operations for the foreseeable future.
Year Ended December 31, 1999 Compared To Year Ended December 31, 1998
Revenues, net. Net revenues increased 241% to $37.2 million for the year
ended December 31, 1999 from $10.9 million for the year ended December 31,
1998. Customer access lines served increased to 71,965 at December 31, 1999
from 32,832 at December 31, 1998. During 1999, we became a network-based
service provider. We initiated the first conversion of access lines to our
network in September 1999 and had 8,201 lines on our network at December 31,
1999.
Cost of revenues. Cost of revenues for the year ended December 31, 1999
totaled $34.0 million, an increase of 258% from the $9.5 million incurred in
the corresponding period in 1998. Cost of revenues includes costs of wholesale
purchases of services from Bell Atlantic and other wholesale providers, and
costs of transport, unbundled network element loop, or UNE-L, charges,
colocation expenses and termination of on-net traffic, exclusive of
depreciation and amortization. During the fourth quarter, we began generating
on-net revenues, which improved our gross margins. We also anticipate that
costs of services as a percentage of revenue will eventually decrease as a
result of a significant increase in the number of access lines converted to our
network-based services.
23
<PAGE>
Sales and marketing. Sales and marketing expenses increased by 162% to
$11.0 million for the year ended December 31, 1999 from $4.2 million for the
year ended December 31, 1998, and decreased as a percentage of revenues to
29.6% from 38.5% for the corresponding period. Within sales and marketing
expenses, the largest component is personnel and related expenses, which
includes wages and salaries, along with commissions earned by our sales force.
These expenses increased by 820% from 1998 to 1999, reflecting a significant
increase in sales personnel at December 31, 1999 over the prior year. Other
expenses included the costs of opening and maintaining 6 sales offices (4 at
December 31, 1998) in New York and Massachusetts.
We expect to further expand our sales force in 2000. Variable expenses,
including commissions paid to independent marketing representatives, are
expected to increase with future sales growth.
Software development. Software development expenditures increased 50% to
$2.1 million for the year ended December 31, 1999 from $1.4 million for the
year ended December 31, 1998. In 1999, we began to capitalize internal payroll
costs related to improvements to our software under Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Therefore, we have capitalized $0.7 million of these
expenditures. Within software development expenses, the largest component is
personnel and related expenses, which includes wages and salaries. This element
of expense increased to $2.2 million from $1.2 million reflecting an
approximate 75% increase in employees at December 31, 1999 over the prior year.
We expect to continue to develop our software in order to increase its
capabilities and reinforce its reliability.
General and administrative. General and administrative expenses increased
by 254% to $16.3 million for the year ended December 31, 1999 from $4.6 million
for the year ended December 31, 1998. Within general and administrative
expenses, wages and salaries represent the majority of the costs. These
expenses increased by 152% from December 31, 1998 compared to December 31,
1999, reflecting an increase in the number of employees. The majority of the
increase in employees is a result of the significant expansion of our customer
service operation at December 31, 1999 over December 31, 1998. Other expenses
within general and administrative expenses also increased, reflecting our
ongoing growth.
Depreciation and amortization. Depreciation and amortization increased to
$1.1 million for the year ended December 31, 1999 from $0.6 million for the
year ended December 31, 1998, reflecting our network buildout, amortization of
software costs capitalized in connection with the implementation of Statement
of Position 98-1 and capital additions to our internal computer systems. At
December 31, 1999, we have one switch location and 20 colocation facilities in
service. Future depreciation expense will increase as assets related to our
network expansion plans are placed into service.
Non-cash compensation. During 1999, we issued stock options and common
stock to employees which were treated for accounting purposes as priced below
the estimated fair value of our common stock at the date of grant or issuance.
We have determined that the non-cash deferred compensation relating to the
stock options granted was $22.3 million. The deferred charge is being amortized
over the vesting period of the options, generally four years. In addition, we
issued common stock to certain executives during 1999, for which non-cash
compensation was recognized totalling $8.2 million in 1999. In addition, in
both 1999 and 1998 we recorded $0.5 million of non-cash compensation arising
from the acquisition of the remaining equity interest in Open Support Systems
LLC.
Interest. Interest income, net of interest expense, increased to $0.5
million for the year ended December 31, 1999 from $0.2 million for the year
ended December 31, 1998. This increase resulted
24
<PAGE>
from interest earned on excess invested funds averaging $9.6 million for the
year ended December 31, 1999 increasing from $3.5 million for the year ended
December 31, 1998.
Adjusted EBITDA. Adjusted EBITDA decreased to negative $26.2 million for
the year ended December 31, 1999 from negative $8.8 million for the year ended
December 31, 1998. This decrease was due to increased sales and marketing, the
deployment of our network, and increased operating, general and administrative
expenses as discussed above.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues, net. Net revenues increased 419% to $10.9 million for the year
ended December 31, 1998 from $2.1 million for the year ended December 31, 1997.
Customer access lines in service increased to 32,832 at December 31, 1998 from
5,469 at December 31, 1997.
Cost of revenues. Cost of revenues for the year ended December 31, 1998
totaled $9.5 million, an increase of 428% from $1.8 million incurred for the
year ended December 31, 1997. This increase is due to the increased number of
customer access lines placed in service.
Sales and marketing. Sales and marketing expenses increased by 950% to $4.2
million for the year ended December 31, 1998 from $0.4 million for the year
ended December 31, 1997, and increased as a percentage of revenues to 38.5%
from 19.0% for the corresponding period. Within sales and marketing expenses,
the largest component is personnel and related expenses, which includes wages
and salaries, and sales commissions. These expenses increased by 379% from 1997
to 1998, reflecting a significant increase in sales employees. Other expenses
included agents' commissions, and the costs of opening and maintaining four
sales offices in New York.
Software development. On November 25, 1997, we formed Open Support Systems
LLC, which commenced operations in 1998, to develop operating software for our
company. Within software development expenses, the largest component is
personnel and related expenses, which includes wages and salaries. This element
of expense totalled $1.2 million for the year ended December 31, 1998,
reflecting the establishment of our internal development team.
General and administrative. General and administrative expenses increased
by 360% to $4.6 million for the year ended December 31, 1998 from $1.0 million
for the year ended December 31, 1997. Within general and administrative
expenses, wages and salaries represent the majority of the costs. These
expenses increased by 373% from 1997 to 1998, reflecting an increase in the
number of employees from December 31, 1997 to December 31, 1998. The majority
of the increase was a result of the expansion of customer service personnel in
1998 as compared to 1997. Other expenses within general and administrative
expenses increased as a result of our ongoing growth.
Depreciation and amortization. Depreciation and amortization increased to
$0.6 million for the year ended December 31, 1998 from $0.1 million for the
year ended December 31, 1997, reflecting the expansion of our two call center
facilities in Long Island City, New York and Syracuse, New York and capital
additions to our internal computer systems.
Non-cash compensation. In 1998, we recorded a non-cash compensation charge
of $0.5 million for deferred compensation resulting from the acquisition of the
remaining equity interest in Open Support Systems LLC.
Interest. Interest income, net of interest expense, increased to $0.2
million for the year ended December 31, 1998. This increase resulted from
interest earned on excess invested funds which averaged $3.5 million during
1998.
25
<PAGE>
Adjusted EBITDA. Adjusted EBITDA decreased to negative $8.8 million for the
year ended December 31, 1998 from negative $1.2 million for the year ended
December 31, 1997. This decrease was due to increased sales and marketing,
software development and increased operating, general and administrative
expenses discussed above.
Liquidity and Capital Resources
Our operations require substantial capital investment for the acquisition
of telephony equipment and the construction and deployment of our network.
Capital expenditures for network construction were $13.0 million for the year
ended December 31, 1999. In addition, we invested $2.7 million in our call
center facilities and capital additions to internal computer systems during the
same period. We believe that the estimated net proceeds from this offering,
together with our existing assets, anticipated debt and expected revenues
growth, will be sufficient to fund our operations for at least the next 12
months. However, we anticipate the need for substantial additional amounts of
capital to fund the purchase of equipment necessary to continue to expand our
network in existing markets, in addition to the development of new products and
services. We expect to enter several new markets during the year 2000. We
expect to fund this requirement from cash on hand, vendor financing, leasing
arrangements and public or private debt and equity financing.
Since our inception through December 31, 1999, we have raised $4.6 million
from the private sale of common stock, including sales to some of our executive
officers.
In January and September 1998, we issued 3,446,070 and 1,838,799 shares of
Series A and B convertible preferred stock, respectively, for total net
proceeds of $11.9 million. The Series B shares carried warrants to purchase
612,183 shares of common stock for $0.01 per share. These shares and warrants
were sold to private investors.
In April 1999, we issued 6,269,875 shares of Series C mandatorily
redeemable convertible preferred stock at $4.47 per share for net proceeds of
$27.8 million. These shares were sold to private investors. Upon the issuance
of the Series C shares, the holders of the Series B shares exercised 459,139 of
the warrants described above and surrendered the balance of 153,044 warrants
for cancellation.
In February 2000, we issued 6,006,959 shares of Series D redeemable
convertible preferred stock at $4.66 per share for net proceeds of $28.0
million. These shares were sold to private investors.
In October 1999, we entered into a vendor credit facility to finance the
purchase of telecommunication equipment, related software and other associated
expenditures. The facility provides for an aggregate principal amount of $36
million, available for drawing on or before September 30, 2001. To secure the
loans, we have granted the lender a first priority collateralized interest in
the assets acquired with the loans. Loans must be repaid over a five-year
period from the date of the borrowing. As of December 31, 1999, we had $6.9
million outstanding under this credit facility.
The cost of deploying our network will depend on a variety of factors,
including our ability to meet our deployment schedules, negotiate favorable
prices for the purchase of additional equipment, the nature and penetration of
new services that we may offer, regulatory changes and changes in technology.
As a result, actual costs and revenues will vary from expected amounts,
possibly to a material degree, and these variations are likely to affect our
future capital requirements.
Accordingly, there can be no assurance that our actual capital requirements
will not exceed the anticipated amounts described above. There can be no
assurance that we will be successful in raising sufficient additional capital
at all or on terms acceptable to us.
26
<PAGE>
Impact of the Year 2000 Issue
The year 2000 issue generally describes the various problems that have
resulted or may result from the improper processing of dates and date-sensitive
calculations by computers and other equipment as a result of computer hardware
and software using two digits to identify the year in a date. Those computers
and software need to be upgraded or replaced to accept four digit dates to
distinguish dates in the 21st century from dates in the 20th century. Even
after January 1, 2000, the problem could result in system failures or
miscalculations and cause disruptions in operations, including, among other
possible occurrences, the inability to process transactions, maintain proper
billing records, send invoices, provide data and voice communications services
or engage in similar normal business activities.
We have reviewed our computer systems to identify those areas that could be
affected by the year 2000 issue. Based on our assessments to date, we have not
experienced and believe that we will not experience any material disruption in
internal systems or information processing as a result of the year 2000 issue.
We may identify a significant internal or external year 2000 issue in the
future which, if not remediated in a timely manner, could have a material
adverse effect on our business, financial condition and results of operations.
If the systems of any of our customers and suppliers, particularly the ILECs,
long distance carriers and others on whose services we depend or with whom our
systems interface were to experience disruptions as a result of the year 2000
issue, it could have a material adverse effect on our business, financial
condition, and results of operations.
We have not incurred any significant costs in identifying or addressing
year 2000 issues other than the opportunity cost of the time spent by our
personnel. We do not anticipate any significant further costs in identifying or
addressing year 2000 issues.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivatives and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. SFAS 133 is effective
for all fiscal quarters or fiscal years beginning after June 15, 2000, as
amended by SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133," issued
in June 1999. We do not expect the adoption of this statement to have a
significant impact on our results of operations, cash flows or financial
position.
27
<PAGE>
BUSINESS
The following discussion contains forward-looking statements based on our
current expectations, assumptions, estimates and projections about us and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from the forward-looking statements as a
result of various factors, including those described in the "Risk Factors"
section and elsewhere in this prospectus. In addition, the following discussion
includes market projections from industry sources which are based on data,
assumptions and methodologies compiled and applied by these sources and may not
be achieved. We assume no obligation to update any forward-looking statements
for any reason.
We are a holding company whose main assets are our wholly-owned
subsidiaries, Broadview Networks, Inc., an electronically integrated
communications provider and our main operating company, and Open Support
Systems LLC, the entity which has developed and owns the OPENnet software used
by Broadview Networks, Inc. The following discussion relates to the operations
of Broadview Networks, Inc. and Open Support Systems LLC, taken together as a
whole.
Overview
We are an electronically integrated communications provider, or "e-ICP," a
new type of competitive communications carrier. We have developed and
implemented unique and scalable enterprise management systems and software that
are electronically integrated with the systems of Bell Atlantic and other key
suppliers. Our services include high-speed Internet access and services using
digital subscriber line, or DSL, technology, data services, and local, long-
distance and international voice services. We currently market bundles of these
services to small and medium-sized businesses, small office/home office
customers and other communications-intensive residential consumers in the
northeastern United States.
Our goals include increasing our revenues and market share by acquiring
customers quickly and efficiently, lowering our operating costs through further
automation and integration with our key suppliers and customers, and achieving
a higher return on capital than typically experienced in our industry by
deploying our network only after we have acquired a customer base in a market.
We plan to do this by leveraging our software systems, which we call OPENnet,
and our highly-automated business processes, which include SmarterAcquire,
SmarterBuild and SmarterCare, collectively referred to as Smart/3/.
In October 1996, we became the first integrated communications provider to
establish information systems capable of communicating with Bell Atlantic's
computer systems to execute multiple tasks, including retrieving customer
information, placing and tracking orders, testing customer lines and billing.
We believe we are the only company that has developed software systems that
automatically and electronically process data from Bell Atlantic and
incorporate it directly into network provisioning, billing and customer care
systems. We believe that this level of electronic integration represents a
significant improvement over the electronic bonding used by traditional
competitive local exchange carriers, commonly known as CLECs.
We initially provide our customers with services using the Bell Atlantic
network by reselling local, long distance and data services. This customer
acquisition process, which we call SmarterAcquire, generally allows us to
provide new customers with services within five business days of taking their
orders. In comparison, we believe our competitors, who put new customers
directly onto their networks, typically experience a delay of 20-30 business
days in providing new customers with service.
28
<PAGE>
We are rapidly deploying our network. Our network equipment is installed
and operational in 21 colocations. We expect to have approximately 100
colocations operational by the end of 2000 and approximately 200 by the end of
2001. After we deploy our network equipment in a colocation, we migrate our
customers' lines in bulk from the Bell Atlantic network onto our own using a
highly-automated, efficient process. We call this SmarterBuild. We believe our
unique high-volume migration process reduces labor, time, cost, errors and
service disruptions compared to companies who connect access lines to their
networks one at a time.
From the time we initially provide a customer with service, we provide
personalized, real time customer care, which we call SmarterCare. Each customer
can interact with one of our Universal Care Associates, who can assist
customers with a wide range of functions, including service and feature
ordering, billing, service inquiry and account administration, with a unified
look and feel, regardless of whether their services are provided using our
network or the Bell Atlantic network. We believe that our enhanced capabilities
allow us to provide a superior customer care experience, and will help us
increase customer retention and attract new customers.
As of December 31, 1999, we had approximately 39,000 customers with
approximately 72,000 access lines, primarily in New York City, Long Island,
Buffalo, Syracuse and Albany, New York, and Boston, Massachusetts. On that
date, we were marketing our services in over 80 central offices and had our
network equipment deployed in 20 of those offices. In 1999, our revenues were
$37.2 million, compared with revenues of $10.9 million in 1998.
Our Market Opportunity
The deregulation of the telecommunications industry and the surging demand
for Internet and related data transmission services have created a significant
market opportunity for competitive providers of voice and data
telecommunications services. According to the FCC, the U.S. local and long
distance telecommunications market had revenues of approximately $166 billion
in 1998, $41 billion of which were generated within the Bell Atlantic region.
In addition, industry sources have projected the U.S. business market for DSL
will reach $5.7 billion by 2003, of which we estimate 24%, or $1.4 billion,
will be generated within the Bell Atlantic region.
We believe that within the telecommunications market our most attractive
opportunity consists of small and medium-sized businesses. According to
industry sources, there are approximately 1.8 million of these businesses with
a total of 8.1 million lines within the Bell Atlantic region. Industry sources
have also reported that only 52% of small to medium-sized businesses have
Internet access and that 86% of these companies utilize dial-up connections. We
believe there is an opportunity to increase subscriptions to the Internet and
high-speed data services such as DSL.
Additionally, there are approximately 63 million people living in the Bell
Atlantic region, which contains four of 10 states reporting the highest median
personal income. We estimate that multi-line, small office/home office, and
other communications-intensive households comprise approximately 35% of the
total residential line base and have higher than average telecommunications
spending patterns.
We believe that these customers are underserved by incumbent carriers and
have significant unmet needs for simplicity and value. To meet these customers'
needs, we plan to offer a full range of bundled data and voice services with
attributes that are more attractive than traditional alternatives, as well as a
single point of contact for high-quality, personalized customer care.
29
<PAGE>
Business Strategy
The key elements of our business strategy are:
Focus on small and medium-sized businesses
Small and medium-sized businesses have historically been underserved by
traditional local or long distance providers, who we believe have generally
found that it is not cost-effective to dedicate a significant amount of
resources to them. We believe that our OPENnet systems and Smart/3/ business
processes will enable us to achieve the efficiencies in sales, provisioning,
network deployment and customer care that are required to serve them
profitably.
In order to obtain a full package of Internet, data and voice services, our
target customers have generally had to purchase services from several different
providers, internally integrate the services and receive and reconcile bills
from each provider. We use a dedicated sales force to target small and medium-
sized businesses, who have a need for simplicity and one-stop shopping. To meet
their needs, we combine our data and voice applications into integrated service
bundles invoiced on a single bill.
Rapidly acquire customers and provide services with SmarterAcquire
Our strategy for acquiring new customers and expanding our market share is
designed to generate revenues from targeted customers before we deploy
significant network capital in those markets. We accomplish this by entering a
specific geographic market and initially reselling Bell Atlantic's services to
our new customers. After aggregating a sufficient number of geographically
concentrated customers through resale to justify the capital investment, we
deploy our own network equipment in colocation facilities in the Bell Atlantic
central office serving the applicable geographic area. We then migrate the
customers in bulk onto our network with minimal disruption.
By initially providing service by reselling Bell Atlantic's services prior
to migrating customers onto our network, we typically generate revenues from
new customers within five business days of taking a customer's order. As a
result, we believe we lose significantly fewer customers than our competitors
from the time we write a new order to the time we bring the customers onto our
network. In addition to the revenue benefits, we believe this strategy allows
us to attract and retain high-quality, motivated sales professionals, because
they are able to receive commissions sooner, and on a greater percentage of
their customers' orders while spending less time rescheduling the initiation of
services to a customer and more time seeking to acquire additional accounts.
Furthermore, our SmarterAcquire strategy enables us to take advantage of
the pre-existing switching and transport network of Bell Atlantic. This
minimizes our need to spend capital in advance of orders and reduces our risk
of inefficient capital investments or stranded plant.
Exploit the growing demand for data services
We intend to become a leading provider of data and Internet services and
applications for our target customers. We have recently begun commercial
introduction of DSL-based services in New York, augmenting our DSL-trained
sales force with data sales specialists and installing high-speed data
switches. We will be building a systems integration and vendor testing
laboratory to analyze vendors' equipment and further refine our network
architecture prior to putting new services and equipment into commercial
production. Over time, we expect that our service mix and revenue stream will
increasingly shift to data and Internet related services, and expect that our
network will seamlessly integrate data and voice traffic.
30
<PAGE>
Foster customer loyalty by providing SmarterCare
Using OPENnet, we provide our customers with a single point of contact,
called a Universal Care Associate, 24 hours a day, seven days a week. This
enables us to better meet the needs of our customers and increases customer
retention. In addition, our SmarterCare management process is designed to
present customers with integrated ordering, provisioning, billing and support
functions that have a unified look and feel, regardless of whether we are
currently providing the customer with service through our network or through
resold Bell Atlantic services.
We are in the process of enhancing OPENnet to permit customers to interact
directly with our systems online. This will give them a choice of self-service
over the Internet or personalized attention from one of our Universal Care
Associates.
SmarterBuild our state of the art, scalable network
In building our network, we use a success-based capital investment strategy
of deploying network assets in a location only after we have acquired a
customer base. We own the intelligent components of our network, such as
switches, network electronics and software, but lease the readily-available
transport elements. We believe that this strategy provides us with significant
cost and time-to-market advantages. By owning our switches, we can configure
our network to provide high performance, high reliability and cost-effective
solutions for our customers' needs. By leasing our transport lines, we can
reduce up-front capital expenditures, rapidly enter new markets, and generate
positive cash flow more quickly. We also believe that our unbundled loop
strategy permits us to offer service ubiquitously within an ILEC central
office, which leads to a larger addressable market than business models which
are based on building dedicated facilities to specific customers.
As we deploy our network, we transfer customer lines in bulk to our network
from Bell Atlantic's using a highly automated, efficient process that has
allowed us to achieve a successful transfer rate of over 90%, which we believe
is significantly higher than our competitors. Further, in those instances where
a successful transfer does not occur, we are able to quickly address the issue
because the lines are under our control. We believe this is a significant
competitive advantage given that a failure can cause a customer to lose service
for hours or even days. We are able to maintain our success rate because of our
high degree of integration with Bell Atlantic, which allows us to pre-test the
customer lines, isolate any potential problems, then do the transfers in a
highly-automated fashion. By migrating customers onto our network in bulk, we
also minimize the costs, and greatly reduce the labor, compared to other
companies who transfer customers one line at a time.
Our integrated network is designed to be flexible to support the rapid and
cost-effective introduction of new services and technologies. We have also
designed our network to be scalable; it can be replicated rapidly as we enter
new markets.
Capture market share through geographic expansion
We currently offer our services to small and medium-sized businesses and
communications-intensive households in New York and Massachusetts. We intend to
increase our current customer base by expanding our operations into other
markets within the Bell Atlantic region as well as into selected other regions.
We believe that the Northeast and mid-Atlantic regions are particularly
attractive due to a number of factors, including the population density and the
disproportional amount of telecommunications traffic that either originates,
terminates or transits within this area. We may also expand our operations
through acquisitions or strategic alliances with other communications
providers, though we have no current plans in this regard.
31
<PAGE>
Leverage the experience of our management team
Our management team has significant experience in the communications
industry and software development in general, and, in particular, in the
critical functions of network operations and development, sales and marketing,
back office and systems development, high-volume transactions, finance and
customer service. Our eight executive officers have an average of 18 years of
experience in the communications industry, and are former executives of
companies including Bell Atlantic, Teleport Communications Group, Covad, MFS
Communications, AT&T and MCI. We believe that the quality and experience of
our management team will be critical factors in the implementation of our
growth strategy.
Target Markets
We primarily target the following three areas within the
telecommunications market:
Small businesses (1 to 20 lines) spending up to $1,500 a month on
communications
Small businesses are receptive to data and voice services that are simple
to understand and use and that save both time and money. They also prefer to
buy bundles of integrated services to reduce their number of vendors and
achieve better service levels. The needs of small businesses also generally
include fast access to emerging technologies, account management and
integrated solutions. Small business accounts primarily buy basic voice
services as well as high-speed Internet access and applications. We believe
that this category will be our largest customer group.
Medium-sized businesses (21 to 150 lines) spending up to $10,000 a month
on communications
The needs of medium-sized businesses typically include fast access to new
technology, account management expertise, customized data and voice solutions,
and easy access to customer service and self-service tools for managing their
communications. These customers prefer bundles of integrated services and
fewer vendors, simpler invoices and better account management. Medium-sized
businesses typically purchase data connectivity as well as basic voice
services, network applications and high-speed Internet access and
applications.
Communications-intensive households spending up to $200 a month on
communications
Small office/home office users and communications-intensive households buy
a range of voice services and features and Internet services, including dial-
up access and broadband applications utilizing DSL technology.
Service Offerings
Our service offerings are being expanded to include a complete suite of
data, Internet and voice applications. We have recently begun our introduction
of DSL-based services in New York, enabling us to offer a fully-integrated
bundle of voice and high-speed data access and broadband applications. While
today most of our customers are primarily voice users, we believe that with
the increasing demand for new applications such as Internet access and e-
commerce, and the growing availability of broadband access as a result of DSL
technologies, over time many of our customers will increasingly shift to data
services, including voice over DSL and voice over the Internet. As a result,
we anticipate that our product mix and revenue stream will increasingly shift
to these areas as well.
32
<PAGE>
Our current and planned service offerings include the following:
<TABLE>
<S> <C> <C>
Segment Current Service Offerings Planned Service Offerings
Small and . Local Dial Tone . Web-based Self-Service
medium- . Custom Calling Features . Unified Messaging
sized businesses . Regional Toll Calls . Follow Me Services
. Long Distance . Conference Calling
. Toll Free Service . Prepaid Calling Cards
. Calling Cards . Virtual Private Networks
. Internet Service via DSL . Firewalls
. Dial-Up Internet Service . Transparent LAN Services
. Basic Web Hosting . Intranets and Application Hosting
. Virtual Key Service (City-Wide Centrex)
. Video Conferencing
. Advanced Web Hosting
Communications- . Local Dial Tone . Web-based Self-Service
intensive . Custom Calling Features . Prepaid Calling Cards
residential . Regional Toll Calls . Remote Office Connections
customers . Long Distance
. Internet Service via DSL
. Dial-Up Internet Service
. Personal Web Page Hosting
</TABLE>
Our pricing is designed to sell larger bundles of our more profitable
services. We provide incentives for higher volumes of usage, longer contract
terms and larger service bundles. Customers who are on our network are given
incentives to try new features and network-based services. Communications-
intensive households are offered all-in-one, flat-priced bundles that maximize
value. We also have various customer retention programs.
Sales, Marketing and Customer Care
Sales channels
Our sales channels are tailored to the particular characteristics of each
of our targeted markets. We reach medium-sized businesses primarily through our
direct sales force of 119 account executives. Because these customers are
somewhat larger and often have more complex data networking needs than our
other customers, we are building a team of dedicated data sales specialists.
These specialists focus on the needs of the more data-intensive accounts within
this market. We reach small businesses through our direct sales force, our
telemarketing operations, as well as through independent channels such as our
independent agent network and our affiliate lead generation programs. Finally,
we reach communications-intensive households through targeted direct mail and
telemarketing campaigns, affinity marketing and traditional and on-line
advertising.
Direct sales channels. Our direct sales force markets our integrated
communications bundles directly to end users. We generally recruit and hire
direct sales representatives and account executives who have several years
experience in the telecommunications industry, typically with other CLECs and
integrated service providers.
Direct sales representatives are compensated on a salary and commission
basis that rewards meeting revenue and line acquisition goals and customer
longevity. Our compensation structure provides significant incentives for
selling larger bundles of higher-margin on-network services.
33
<PAGE>
Since we have the ability to provide services to new customers in a matter
of days, we believe our sales force receives their commissions sooner and are
more productive because they spend less time rescheduling the provisioning of
services to a customer and more time seeking to acquire additional lines. As a
result, we believe we have a competitive advantage in our ability to attract
and retain the most productive and experienced communications sales
professionals. While we believe CLECs typically have large provisioning
backlogs and high sales force turnover, we have minimal provisioning backlogs
and, over the last year, have had less than 5% annual voluntary sales force
turnover.
Our direct sales force accounted for 50% of the lines we acquired in 1998
and 62% of the lines we acquired in 1999.
Indirect sales channels. We operate indirect sales channels in which we
market to end users through authorized agents, independent sales
representatives, resellers, associations and affinity groups. We generally
provide services under our own brand name to end users acquired for us by an
agent. We currently intend to offer unbranded and wholesale services to other
telecommunications companies, including value-added resellers, long distance
carriers, competitive local exchange carriers, Internet service providers,
wireless carriers, foreign carriers desiring a presence in the U.S. market,
out-of-region Regional Bell Operating Companies and others that may incorporate
our services with other products and services for resale to various market
segments. We believe that providing wholesale services will allow us to take
full advantage of the scalability of our systems and processes.
In addition to traditional telecommunications agents, we make extensive use
of our affinity relationships with charitable organizations and professional
associations. We market through these organizations through a combination of
direct marketing and joint marketing designed to generate direct response
and/or leads for our account executives. Our Community Partnership program
includes approximately 600 organizations. This program generates sales leads
and we believe it improves our customer retention.
Indirect sales through agents, affinity and telemarketing agents accounted
for approximately 29% of our lines in both 1998 and 1999. Other channels,
including direct mail and direct response accounted for 21% of our lines in
1998 and 9% of our lines in 1999.
Marketing and advertising
In the competitive market for telecommunications services, speed to market
with new services, bundles, price plans and products is critical. We have
unified databases which are accessed by our billing and customer care system,
which enables us to bring new plans, products and promotions to market in a
matter of days.
Our marketing and advertising support our direct and indirect sales
channels and generate direct response sales of communications-intensive
residential households. Through direct mail, telemarketing, print, radio and
outdoor advertising, we seek to generate brand awareness as well as inbound
mail and telemarketing leads and orders. Our web site is another channel
through which we seek to generate commercial and residential leads and, in the
future, orders.
We market jointly with a number of market partners, including Nortel
Networks, which provides us with direct marketing support to co-market our
services that are supported by their voice and data switching equipment. We
have begun marketing efforts in support of the roll out of our integrated voice
and high-speed data services, including our DSL-based services.
Customer care
Using our SmarterCare processes, we aim to provide a superior level of
convenience and customer service in order to increase our customer retention.
Key elements of our service are an
34
<PAGE>
integrated billing platform, a simple but comprehensive billing statement and
universal One Touch Care from our Universal Care Associates and account
managers. Our OPENnet software is designed to be user-friendly and enable one
of our Universal Care Associates to perform all customer service functions,
including ordering services and features, account administration, billing
inquiries, and service calls. Our competitors typically require customers to
interact with different departments, primarily because of organizational,
system or software limitations. We believe that having a single employee
perform all customer service functions results in a more timely, personalized
customer service experience for our customers.
We operate two call centers staffed with fully-trained Universal Care
Associates. Customer service is available 24 hours a day, seven days a week.
Customers with 10 or more lines are assigned a specific account manager and
given that person's name and direct, toll-free phone number. All of our
Universal Care Associates and account managers receive three weeks of initial
in-house training followed by ongoing training.
Customer retention responsibility initially resides with our sales force,
then is transferred to our Universal Care Associates.
We are currently developing the ability to extend OPENnet into web-based
interactions with customers. This would enable us to provide our customers with
a full range of web-based, self-service capabilities, including the ability to
see and pay their bills, add or subtract a service feature and initiate service
calls.
Enterprise Management System (OPENnet ) and Business Processes (Smart/3/)
Our business model is based on the benefits we obtain from the combination
of our OPENnet software and Smart/3/ business processes.
OPENnet software systems
In October 1996, we became the first integrated communications provider to
establish information systems capable of communicating with Bell Atlantic's
computer systems for multiple tasks and on multiple levels.
Today, through our OPENnet software, we have a large number of interfaces
with the legacy systems of Bell Atlantic. These interfaces allow us to
electronically retrieve information contained in Bell Atlantic's systems and
automatically incorporate it directly into our acquisition, billing and
customer care systems. This minimizes the manual work required in our customer
acquisition process, which reduces our labor and order processing costs and
significantly reduces errors.
OPENnet electronically retrieves a customer service record from Bell
Atlantic, automatically translates Bell Atlantic's universal service order
codes, known in the industry as USOCs, into English descriptions of features
and services, and automatically builds customer records in our systems,
initiates services on the Bell Atlantic network, and then submits orders to
Bell Atlantic to move customers from Bell Atlantic's switches onto our own.
Through real-time, electronically integrated transactions with Bell Atlantic,
including checking and reserving installation dispatch times, diagnostic
testing of a customer line and obtaining new telephone numbers, we are able to
take advantage of Bell Atlantic's existing systems and network while at the
same time maintaining our distinct customer service experience.
OPENnet also automatically handles many back office functions, including
nearly all aspects of generating our bills, tracking and invoicing all forms of
service and updating our accounts receivable. It processes usage data from
other carriers and from our own switching platforms and rates calls, calculates
taxes, applies any desired pricing plans or packaging plans and incorporates
local, long
35
<PAGE>
distance, data and Internet services onto a single monthly bill. In addition,
OPENnet allows one of our Universal Care Associates to view a customer's bill
and apply payments and credits in real-time, while interacting with the
customer, and allows us to rapidly generate and modify our marketing offers and
service packages.
We believe our OPENnet system is flexible and can be readily modified as we
introduce new services and enter new markets.
Smart/3/ business processes
Our SmarterAcquire, SmarterBuild and SmarterCare, collectively referred to
as Smart/3/, business processes allow us to exploit the strengths of the
OPENnet software. The mechanisms by which these business processes have
automated and integrated the steps involved in acquiring new customers,
bringing those customers onto our network and performing customer care are
described below:
SmarterAcquire. Our direct sales force sells our services within a
prescribed geographic area surrounding a Bell Atlantic central office. Using
OPENnet, we initially provide new customers with service by reselling Bell
Atlantic services. We accomplish this by electronically retrieving Bell
Atlantic's customer service record, which contains the customer's service and
billing profile, and electronically incorporating it into our systems. This
automatically establishes our new customer's account and billing profile
without manual intervention. OPENnet also automatically generates the resale
order to Bell Atlantic and initiates billing the customer once Bell Atlantic
sends the completion of the resale order.
SmarterBuild. After we have accumulated a large number of resale customers
within a designated area, we utilize our OPENnet system and automated processes
to migrate these customers in groups of several hundred per colocation, often
doing several colocations simultaneously, compared with those who connect
access lines to their network one at a time. We call this process High Volume
Coordinated Cutover. This has enabled us to achieve a successful transfer rate
of over 90%.
Prior to migrating a customer onto our network, we electronically perform
several tests across large groups of lines and identify those likely to have a
problem during the transfer process. We then remove these lines from the batch
scheduled to be transferred and address them individually, clearing the problem
before the next scheduled batch migration. We also automatically generate and
electronically process unbundled loop orders to Bell Atlantic, number
portability instructions to the Number Portability Administration Center,
switch provisioning instructions to our switch and provide updates to emergency
911 bureaus.
This combination of electronic integration, pre-testing and High Volume
Coordinated Cutovers eliminates the manual processing of orders, and greatly
reduces the physical work and the errors associated with migrating new
customers onto our own switching facilities. This process also helps us avoid
customer outages during the transfer. Outages are a prevalent problem in the
industry today and often lead to customer dissatisfaction and canceled orders.
SmarterCare. Using our SmarterCare processes, we aim to provide a superior
level of convenience and customer service in order to increase our customer
retention. Key elements of our service are an integrated billing platform, a
simple but comprehensive billing statement and universal One Touch Care from
our Universal Care Associates and account managers. Our OPENnet software is
designed to be user-friendly and enable one of our Universal Care Associates to
perform all customer service functions, including sales, ordering, account
management, billing inquiries and repair, while interacting with the customer.
Our Universal Care Associates can provide equivalent
36
<PAGE>
customer service whether the customer is on our network or provided with resold
service using Bell Atlantic's network.
Network
Integrated network architecture
We provide services to our customers over a single integrated network that
supports local, long distance and high-speed data and Internet services. Our
integrated network architecture includes customer premise equipment, unbundled
network elements, colocations, switches, routers, operating and application
software and interoffice and long distance transport facilities. We believe
that the further integration of our local, long distance and data networks and
the adoption of emerging technologies, particularly voice over DSL, will
significantly reduce our cost of providing a bundled service offering.
It is our strategy to own the intelligent and value-added components of our
network such as our hybrid voice and data switches while we lease readily
available transport facilities such as unbundled ILEC loops and interoffice and
long-haul transmission facilities. We are in the process of deploying DSL
technology to increase the data carrying capacity and bandwidth of the
unbundled loops, transforming them from narrowband to broadband. This will
enable us to provide a range of new services, including various high-speed data
services and Internet capabilities.
Unlike other CLECs, we are able, through our Smart/3/ processes supported
by OPENnet, to aggregate new customers in an ILEC central office by initially
providing them with Bell Atlantic's resold services, and then migrate those
customers in bulk onto our network in a streamlined, cost-effective and
efficient process. This enables us to build up a customer base and revenue
stream before migrating this traffic onto our network just as the network
becomes ready, giving us faster utilization of our capital dollars.
Accessing the customer through unbundled network elements
Our integrated network begins with our customers. We connect them by
leasing the ILEC's ubiquitous copper loops that run into homes and offices.
These loops are known as unbundled network element loops, or UNE-Ls. Through
our processes, we are able to rapidly move the UNE-Ls from Bell Atlantic's
switch to our switch using our colocation equipment. By doing so, we are able
to avoid the capital outlay, operating expenses and delay associated with
deploying our own facilities to our customers' premises. To increase the
bandwidth of these lines from narrowband to broadband, we deploy DSL technology
at both ends of the loop -- at our colocation site and by placing a DSL modem
at the customer's location. By utilizing UNE-Ls, we also obtain access and
termination revenues from long distance carriers as if we owned the loop.
To enable us to operate as a local carrier, and to send calls to and from
customers connected to Bell Atlantic's network, we have entered into two
interconnection agreements with Bell Atlantic covering the New York and
Massachusetts markets and plan to enter into additional agreements with Bell
Atlantic and ILECs in other markets as the deployment of our network
progresses. In addition to establishing the terms for network-based
interconnection, these agreements provide the terms under which we may
initially resell Bell Atlantic service to our customers. We are currently
negotiating similar agreements with Bell Atlantic for Pennsylvania, New Jersey,
Virginia, Maryland, Rhode Island, Delaware, Washington, D.C. and New Hampshire.
Our UNE-Ls are leased from Bell Atlantic in New York under tariff
regulations and in Massachusetts under the terms of our interconnection
agreement with Bell Atlantic.
37
<PAGE>
Colocation facilities
Each UNE-L we deploy is a direct connection from our customer to one of our
colocation sites located in the central office of the ILEC. Within each
colocation site, we have deployed or are in the process of deploying both
Nortel digital access nodes to support switched voice services and digital
subscriber line access multiplexers to support our high-speed DSL service
offerings. This colocation architecture supports integrated data and voice
services and can be extended to support emerging applications as customer
requirements dictate.
We use Nortel Network's AccessNode equipment and we are an inaugural user
of Nortel's Universal Edge 9000 product line, which provides both voice and
data access and can be integrated with virtually any manufacturer's digital
switch. Since this equipment handles both traditional voice services and newer
DSL-type services, we are able to provide and administer these services to our
customers without having to incur the cost of installing separate systems.
Our network equipment is installed and operational in 21 colocations. We
expect to have approximately 100 operational colocations by the end of 2000 and
approximately 200 by the end of 2001. Until we have deployed the necessary
colocation facilities in a specific geographical region, our DSL services may
utilize the underlying network of another DSL provider.
Switching platform
Our switching platform consists of Nortel DMS500 hybrid local and long
distance switches. We have deployed switches in Syracuse and New York City. We
are installing Nortel DMS500 digital switches in Boston and in the Philadelphia
area. We anticipate the Boston switch will be operational in the second quarter
of 2000 and the Philadelphia switch will be operational by the third quarter of
2000. Each Nortel DMS500 switch acts as a centralized switching node connected
to multiple colocations and may service one or more metropolitan areas.
Compared to the more traditional network architecture, which requires a switch
dedicated to each metropolitan area, we believe our network architecture
results in a more efficient use of capital. In addition, each of these
centralized switching nodes serves as an interconnection and concentration
point between our DSL and data network and the public Internet.
In conjunction with our deployment of DSL-based services, we are also
installing high-speed data switches known as ATM switches, which support
multiservice traffic switching and routing in each of our switching offices.
Transport facilities
We lease the broadband facilities that connect our colocations and switches
from both incumbent and competitive carriers at the DS3, OC-3, OC-12 and OC-48
levels.
We resell the long distance services of Global Crossing, formerly known as
Frontier Corporation, including international call origination and termination
services, 800 services, calling cards, long distance directory assistance and
operator services. Our contract with Global Crossing expires in April 2001.
Signaling System 7
The SS-7 signaling system reduces the time it takes to connect a call,
thereby enhancing overall network efficiencies and increased customer
satisfaction. It enables us to offer true number portability, which makes it
easier to migrate customers to our network and permits the use of all calling
features. It also enables us to offer advanced customer features like Enhanced
800 service and Caller ID With Name. We use Bell Atlantic's SS-7 network and
services.
38
<PAGE>
Network management and operational support
We monitor our network from our New York City switching center and plan to
build a national Network Management Center beginning in the first half of 2000.
This center is intended to have multiple functions. It will provide continuous
surveillance of all switching, colocation equipment and high-speed data
services equipment to ensure proper and efficient network function. When a
network alarm is received from any piece of equipment within our network, the
center will respond to isolate the cause and either switch to backup equipment
or dispatch technical assistance to the site. It is our goal to remedy any
network problems before they affect a customer's service. The Network
Management Center will also be responsible for quality acceptance of all new
network locations being activated and for services being turned-up for
customers. We expect our Network Management Center to become operational in the
third quarter of 2000.
Internet services
Consistent with our Smart/3/ business strategy, we construct, own and
operate those elements of our Internet network that contain the intelligent
components and offer enhanced services to our customers. Our data centers
contain the various servers that provide the security, user authentication, e-
mail, domain-name translations, accounting, Internet access, routing, web
hosting and other functions that are fundamental to serving high-speed and
dial-up Internet customers.
Our dial-up Internet access is provided by our own facilities and by AGIS
under a three-year contract that expires in July 2002. AGIS is able to support
dial-up access to the Internet nationwide. Our gateway to the Internet as well
as our Internet addressing is provided by Globix under a two-year contract that
expires in September 2001.
Network security
Our network employs an authorized access architecture which utilizes an
automatic number identification security screening to ensure that only those
users who have subscribed to our services and have satisfied our credit and
provisioning criteria are allowed access to the network. We believe that this
architecture allows us to minimize fraud in a manner that is invisible to the
customer.
Anticipated network expansion
We plan to continue significant network expansion. We expect to obtain
additional colocations and to deploy switches and transport facilities in order
to support our strategies of capturing additional market share, expanding
geographically and continuing to move our customers' traffic onto our network.
Expansion of our network-based infrastructure with more colocations, voice and
data switches and DSL equipment will increase the proportion of our customer
traffic that is originated or terminated on our network, which we believe will
result in higher long-term operating margins and greater control over our
network operations.
Competition
Our industry is highly competitive. We face a variety of existing and
potential competitors, many of whom aspire to offer multiple services in
integrated or non-integrated bundles or are potential replacements for our land
line-based services. These competitors include:
. The ILECs in our current and target markets, who aspire to become all
distance carriers;
. Long distance carriers who aspire to become all distance carriers;
. Other facility and non-facility-based voice and data CLECs;
39
<PAGE>
. New market entrants, including cable television companies, electric
utilities, fixed wireless-based providers (microwave, milliwave),
satellite-based operators and municipalities;
. Mobile voice and data wireless carriers, including cellular, PCS, and
paging companies; and
. Internet service providers who aspire to become all service carriers.
Our primary competitor in our existing markets, and most of our targeted
markets in the northeastern and mid-Atlantic United States, is Bell Atlantic.
If we expand beyond the Bell Atlantic region, our primary competitor in each of
those other markets will be another ILEC. Examples include BellSouth; GTE,
which has agreed to merge with Bell Atlantic; SBC Communications, which does
business as Ameritech, Southwestern Bell, Pacific Bell and Southern New England
Telephone; and U S WEST, which has announced a merger agreement with Qwest
Communications.
On December 22, 1999, the FCC granted Bell Atlantic's application to offer
long distance services in New York. The FCC's approval was based on its
conclusion that Bell Atlantic had taken the required steps under the Telecom
Act to open the local phone market to competitors. AT&T and Covad
Communications have asked the U.S. Court of Appeals for the District of
Columbia to overturn the FCC decision on the grounds that Bell Atlantic has
not, in fact, sufficiently opened the local phone market to rivals. While the
case is pending before the Court of Appeals, Bell Atlantic will continue to
offer long distance services.
The FCC's approval represents the first time since the breakup of AT&T that
a Regional Bell Operating Company is able to provide its customers with both
local and long distance phone service. Non-Bell ILECs that were never part of
AT&T, such as GTE, are already allowed to offer long distance services without
having to prove that they have opened their local markets. Since Bell
Atlantic's bundle of local and long distance services will be in direct
competition with our core voice services, the FCC's approval increases the
level of competition we face in New York, our primary market. In addition, Bell
Atlantic is currently seeking approval to offer long distance services in
Massachusetts and is expected to seek approval in other states, including
Pennsylvania and New Jersey. In January 2000, SBC Communications filed an
application with the FCC to provide long distance services in Texas. The FCC
has 90 days to approve or deny SBC's application. Other Regional Bell Operating
Companies are expected to file similar applications for other states. If the
FCC approves these applications, the competition we face in the states in which
we operate or plan to operate will also increase.
ILECs are generally required to file their prices, including any price
changes, with the state regulatory agencies in their service areas. The ILECs
have also been given some flexibility to respond to competition with lower
pricing. In most cases, proposals for lower pricing must also be filed with the
state regulatory commissions and the pricing must be made available to
similarly situated customers. We believe this provides a disincentive for the
ILECs to significantly vary or discount prices even in competitive situations.
However, similar obligations apply to us.
In March 1999, some of the ILECs requested, among other things, that the
FCC relax regulation of their provision of advanced data networks, which may
also be used for voice traffic. While the FCC denied those requests, it has
initiated a rule-making that is intended to establish the procedures and
safeguards necessary before these ILECs could, through separate subsidiary
companies, provide these services on a largely deregulated basis. If adopted,
these rules may provide additional opportunities for competition from these
ILECs. In March 1999, the FCC released an order addressing, among other things,
colocation rights of ILECs and CLECS offering advanced high-speed data
services, but deferred action on the ILEC separate subsidiary issue. SBC
Communications, in its agreement with the FCC regarding its acquisition of
Ameritech, agreed to form a separate
40
<PAGE>
subsidiary for data services. Bell Atlantic, in connection with its FCC
application to enter the long distance market, also formed a separate data
subsidiary, though it was not required to do so by the FCC.
The ILECs offer a wider variety of services in a broader geographic area
than ours and have much greater financial, network and human resources than we
do. This may encourage an ILEC to subsidize the pricing for services with which
we compete with the profits of other services in which the ILEC remains the
dominant provider. We believe state regulators have exercised their enforcement
powers in a way that makes it unlikely the ILECs would be able to successfully
pursue this type of pricing strategy for an extended period.
We also face competition from a growing number of facility and non-facility
based CLECs and all distance integrated communications providers. There are
typically several CLECs and integrated communications providers competing in
each metropolitan market we serve or plan to enter. Examples of data and voice
CLECs in our markets include Adelphia Business Solutions, Allegiance Telecom,
Covad Communications Group, NEXTLINK Communications, NorthPoint Communications
Group, Rhythms NetConnections and Teleport Communications Group (a subsidiary
of AT&T). In some instances, these CLECs and integrated communications
providers have resources greater than ours and offer a wider range of services.
Many of the CLECs and integrated communications providers in our markets target
small and medium-sized business customers and a few target residential
customers.
We are increasingly competing with long distance carriers who also want to
be all distance providers and offer bundled services. A number of large long
distance carriers, such as AT&T, MCI WorldCom and Sprint, have introduced local
telecommunications services to compete with the ILECs and, therefore, with us.
These services include toll calling and other local calling services and
wireless services which are often bundled with the carrier's long distance
service. Large long distance carriers enjoy various competitive advantages due
to their vast financial and operating resources and brand name recognition. In
addition, we believe there is a risk the long distance carriers may subsidize
the pricing of their local services with profits from long distance services or
wireless services.
Government Regulation
The following summary of regulatory developments and legislation is not
complete. It does not describe all present and proposed federal, state and
local regulation and legislation affecting the telecommunications industry.
Existing federal and state regulations are currently subject to judicial
proceedings, legislative hearings and administrative proposals that could
change, in varying degrees, the manner in which our industry operates. We
cannot predict the outcome of these proceedings or their impact on the
telecommunications industry or us.
Overview
Our services are subject to varying degrees of federal, state and local
regulation. The FCC exercises jurisdiction over all the facilities of, and
services offered by, telecommunications common carriers like us to the extent
our facilities provide, originate or terminate interstate or international
communications. Similarly, like most other CLECs and integrated service
providers, we are subject to various degrees of regulation in each state in
which we operate, under the jurisdiction of the pertinent state regulatory
commissions which retain jurisdiction over most of the same facilities and
services to the extent they are used to provide, originate or terminate
intrastate communications. The decisions of these regulatory bodies are subject
to judicial review, which makes it difficult for us to predict outcomes in this
area. We cannot assure you that regulators or third parties will not raise
material issues with regard to our compliance or non-compliance with applicable
laws or regulations.
41
<PAGE>
Federal regulation
We must comply with the requirements of common carriage under the
Communications Act of 1934. Comprehensive amendments to the Communications Act
of 1934 were made by the Telecom Act. The purpose of this legislation was to
significantly deregulate the telecommunications industry, and foster increased
competition among carriers. Because implementation of the Telecom Act is
subject to numerous federal and state policy rule-making and judicial review,
we cannot predict with certainty what its ultimate effect on us will be.
However, we believe we have obtained all Federal approvals necessary to conduct
our business as it is presently conducted.
Under the Telecom Act, any entity may enter a telecommunications market,
subject to reasonable state safety, quality and consumer protection
regulations. The Telecom Act makes local markets accessible by requiring the
ILEC to permit interconnection to its network and establishing obligations of
both ILECs and CLECs with respect to:
. Colocation of equipment. This allows companies like us to install and
maintain our own network equipment, including access nodes,
multiplexers and switches, in ILEC central offices;
. Reciprocal compensation. This requires the ILECs and CLECs to
compensate each other for telecommunications traffic that originates
on the network of one carrier and is sent to the network of the other;
. Resale of service offerings. This requires CLECs and ILECs to make
their retail services available for resale. ILECs are required to
establish wholesale rates for these services to promote resale by
CLECs;
. Interconnection. This requires CLECs and ILECs to permit their
competitors to interconnect with their facilities. ILECs are required
to permit interconnection at any technically feasible point in the
ILECs' networks under nondiscriminatory rates, terms and conditions;
. Access to unbundled network elements. This requires the ILECs to
unbundle and provide access to some components of their local service
network to other local service providers. Unbundled network elements
are portions of an ILEC's network, such as copper loops, that CLECs
can lease in order to build their own facilities networks;
. Number portability. This requires the ILECs and CLECs to allow a
customer to retain an existing phone number within the same local area
even if the customer changes telecommunications services providers.
All telecommunications carriers are required to contribute to the
shared industry costs of number portability;
. Dialing parity. This requires the ILECs and CLECs to establish dialing
parity so that customers will not have to dial additional digits to
reach customers served by another carrier's network; and
. Access to rights-of-way. This requires the ILECs and CLECs to
establish non-discriminatory access to telephone poles, ducts,
conduits and rights-of-way.
ILECs are required to negotiate in good faith with other carriers that
request any or all of the arrangements discussed above. If a requesting carrier
is unable to reach an agreement with the ILEC within a prescribed time, either
carrier may request arbitration before the applicable state regulatory
commission. If an agreement still cannot be reached, carriers are forced to
abide by the obligations established by the applicable state commission.
42
<PAGE>
We have entered into two interconnection agreements with Bell Atlantic
covering the New York and Massachusetts markets and plan to enter into
additional agreements with Bell Atlantic and ILECs in other markets as the
deployment of our network progresses. Our New York agreement with Bell Atlantic
may be terminated by either party upon 90 days notice to the other. Our
Massachusetts agreement will expire in April 2001, unless either party requests
renegotiation prior to that time, in which case the agreement would remain in
effect until a new agreement is executed or in the case of arbitration, the
effective date of an arbitration decision by the Massachusetts Department of
Telecommunications and Energy. In addition to establishing the terms for
network-based interconnection, these agreements provide the terms under which
we may initially resell Bell Atlantic service to our customers. The resale
terms are expressly described in the Massachusetts interconnection agreement,
while the New York agreement references and incorporates the resale terms
stated in a tariff filed by Bell Atlantic in New York.
The FCC is charged with establishing guidelines to implement the Telecom
Act. In August 1996, the FCC released a decision, known as the Interconnection
Decision, that established rules for the interconnection requirements outlined
above and provided guidelines for the review and approval of interconnection
agreements by state commissions. The U.S. Court of Appeals for the Eighth
Circuit vacated portions of the Interconnection Decision. On January 25, 1999,
the U.S. Supreme Court reversed the Eighth Circuit and upheld the FCC's
authority to issue regulations governing pricing of unbundled network elements
provided by the ILECs in interconnection agreements. In addition, the Supreme
Court affirmed an FCC rule that allows requesting carriers to "pick and choose"
the most attractive portions of existing interconnection agreements with other
carriers. The Supreme Court did not, however, address other challenges raised
about the FCC's rules at the Eighth Circuit. These challenges will have to be
addressed by the Eighth Circuit in light of the Supreme Court's decision. In
addition, the Supreme Court disagreed with the standard applied by the FCC for
determining whether an ILEC should be required to provide a competitor with
particular unbundled network elements.
The FCC adopted a new standard in 1999 for analyzing unbundled network
elements as required by the Supreme Court. Applying this standard to the
existing network elements, the FCC concluded that ILECs would no longer be
required to provide directory assistance and operator services as network
elements, though they will continue to be available pursuant to tariff at
different rates. The FCC also removed unbundled switching as an element in the
top 50 metropolitan statistical areas where the ILECs are also providing
certain other combinations of elements in a nondiscriminating fashion. However,
the FCC declined, except in limited circumstances, to require ILECs to unbundle
certain facilities used to provide high-speed Internet access and other data
services.
The decisions of the Eighth Circuit and Supreme Court have not resolved the
uncertainty about the rules governing the pricing terms and conditions of
interconnection agreements. The Supreme Court's actions in particular may
affect the renegotiation of existing agreements. The ILECs may, as a result of
the Supreme Court reversal, seek to stop providing some unbundled elements.
Although state commissions continue to implement and enforce interconnection
agreements, the Supreme Court ruling and future FCC and court rulings may
affect these commissions' authority to implement or enforce interconnection
agreements or lead to additional rule-making by the FCC. The resulting
uncertainty makes it difficult to predict whether we will be able to continue
to rely on our existing interconnection agreements or have the ability to
negotiate acceptable interconnection agreements in the future.
In addition to requiring the ILECs to open their networks to competitors
and reducing the level of regulation applicable to CLECs, the Telecom Act also
reduces the level of regulation that applies to the ILECs, thereby increasing
their ability to respond quickly in a competitive market. For example, the FCC
has applied "streamlined" tariff regulation of the ILECs, which shortens the
requisite waiting period before which tariff changes may take effect. These
developments enable the ILECs to change
43
<PAGE>
rates more quickly in response to competitive pressures. The FCC has also
adopted greater price flexibility for the ILECs, subject to specified caps.
This flexibility may decrease our ability to effectively compete with the ILECs
in our markets.
In March 1999, the FCC issued an order requiring ILECs to provide unbundled
loops and colocation on more favorable terms than had previously been
available. The order permits colocation of equipment that could be used to more
efficiently provide advanced data services such as high-speed DSL-based
service, and requires less expensive "cageless" colocation as well as "shared"
and "adjacent space" alternatives. These new forms of colocation will allow
more space in an ILEC's central office to be utilized for physical colocation.
In the past when an office reached full capacity, the only alternative was
virtual colocation whereby the ILEC took ownership of facilities dedicated for
the CLEC's use. We view virtual colocation as an inferior alternative since we
would have to rely on the ILEC to perform all provisioning and maintenance on
our behalf.
In the March order, the FCC deferred action on its previous proposal to
permit ILECs to offer advanced data services through separate affiliates, free
from some of the obligations of the Telecom Act. In an August 1999 order, the
FCC determined that services such as those based on DSL technology are
telecommunications services subject to regulation under sections 2.51 and 2.52
of the Telecom Act. In the August order, the FCC also included a separate
subsidiary proposal that would permit Regional Bell Operating Companies to
provide advanced services through a separate subsidiary. The FCC has not acted
on that proposal. Permitting ILECs to provision data services through separate
affiliates with fewer regulatory requirements could have a material adverse
impact on our ability to compete in the data services sector. SBC, in
connection with its acquisition of Ameritech, agreed with the FCC to certain
terms and conditions including the formation of a separate subsidiary to offer
DSL-based services. Also, Bell Atlantic, under FCC auspices, volunteered to
form a separate subsidiary to offer DSL based services in conjunction with
their application under the Telecom Act to offer long distance services. These
structural arrangements are subject to change through additional proceedings at
the FCC or judicial challenge.
The Telecom Act also gives the FCC authority to determine not to regulate
carriers if it believes regulation would not serve the public interest. The FCC
is charged with reviewing its regulations for continued relevance on a regular
basis. As a result of this mandate, a number of regulations that apply to CLECs
and integrated communications providers and therefore to us have been and may
in the future continue to be eliminated. We cannot, however, guarantee that any
regulations that are now or will in the future be applicable to us will be
eliminated.
Access reform
Our cost of providing long distance services, as well as revenues from
providing local services, will likely be affected by changes in the "access
charge" rates imposed by ILECs on long distance carriers for origination and
termination of calls over local facilities. The FCC has made major changes in
the interstate access charge structure. In a December 24, 1996 order, the FCC
removed restrictions on ILECs' ability to lower access prices and relaxed the
regulation of new switched access services in those markets where there are
other providers of access services. A May 16, 1997 order substantially
increased the amounts that ILECs subject to the FCC's price cap rules recover
through monthly flat-rate charges and substantially decreased the amounts that
these ILECs recover through traffic-sensitive (per minute) access. On August
19, 1998, the U.S. Court of Appeals for the Eighth Circuit upheld the FCC's
access charge reform rules.
On August 5, 1999, the FCC adopted an order granting ILECs additional
pricing flexibility, implementing certain access charge reforms, and seeking
comments on others. The order provides immediate regulatory relief to price cap
carriers and sets a framework of "triggers" to provide those companies with
greater pricing flexibility to set interstate access rates as competition
increases. The
44
<PAGE>
order also initiated a rulemaking to determine whether the FCC should regulate
the access charges of CLECs. If this increased pricing flexibility for price
cap ILECs is not effectively monitored, or if the FCC regulates CLEC access
charges, it could have a material adverse impact on our ability to price our
own interstate access services competitively.
Universal service
On May 8, 1997, the FCC issued an order establishing a significantly
expanded federal universal service subsidy regime. For example, the FCC
established new universal service funds to support telecommunications and
information services provided to qualifying schools and libraries and to rural
health care providers. The FCC also expanded the federal subsidies for local
exchange telephone services provided to low-income consumers and recently
doubled the size of the high-cost fund for non-rural carriers. Providers of
interstate telecommunications service, such as us and certain other entities,
must pay for these programs. The Company's contribution to these universal
service funds will be based on its telecommunications service end-user
revenues. The contribution level for each interstate provider is based upon its
revenues for the prior year. Contribution factors vary quarterly, the current
contribution rate is 5.877% of interstate and international end user
telecommunications revenues. Contribution amounts may be billed to customers.
We are unable to quantify the amount of subsidy payments we will be required to
make in the future and the effect that these required payments will have on our
financial condition because of uncertainties concerning the size of the
universal service fund and the uncertainties surrounding the classification of
certain services as subject to the fund's revenue measures.
Several parties appealed the FCC's May 8, 1997 and subsequent orders. The
U.S. Court of Appeals for the Fifth Circuit upheld the May 8, 1997 order in
most respects, but has rejected the FCC's effort to base contributions in part
on interstate revenues. The FCC's universal service program may also be altered
as a result of the agency's reconsideration of its policies, or by future
Congressional action.
Line sharing
On November 18, 1999, the FCC adopted rules to promote competition for
advanced services by directing local telephone companies to share their
telephone lines with providers of high-speed Internet access and other data
services. The FCC's order permits competitive carriers to obtain access to the
high-frequency portion of the local loop over which an ILEC provides voice
services. This will enable competitive providers like ourselves to provide
certain DSL-based services over the same telephone lines that the ILECs
simultaneously use to provide basic telephone service, a technique referred to
as "line sharing."
Line sharing will permit customers to obtain innovative data services from
either incumbent or competitive carriers, without having to forego the
traditional voice services from their provider of choice. Since line sharing
allows customers to receive both services on the same line, it eliminates the
need for customers to procure a second line when they elect to receive data
service from an ILEC competitor. By eliminating the need for a second line,
line sharing could have a positive effect on our ability to provision services
quickly and lower our costs of providing our customers with high-speed data and
Internet applications.
The FCC has requested that state regulatory commissions adopt interim rules
implementing line sharing within 180 days after the effective date of the order
so that other parties such as ourselves may begin offering services as soon as
possible. We will be able to request negotiations on line sharing with the
ILECs, and if those negotiations fail, will be able to seek arbitration before
a state regulatory commission 180 days after filing our initial request. While
the FCC has set pricing guidelines for state regulators to follow when
implementing line sharing, pricing disputes, litigation
45
<PAGE>
and technical issues at the state level are likely to delay broad
implementation of the FCC line sharing order past the FCC's 180 day goal.
As of December 3, 1999, one Regional Bell Operating Company, US West, has
agreed to interim line sharing terms with several CLECs in Minnesota. Under
that arrangement, the CLECs have agreed to pay $6.05 per shared loop, which
represents a cost reduction of approximately 50% off the regular line rate. The
Minnesota Public Utilities Commission plans to hold hearings to discuss
permanent rates, which may end up being different than the interim rates. On
December 20, 1999, Bell Atlantic filed a tariff in New York which offers
carriers an interim discount of 50% off of the regular rate applicable to lines
that are capable of providing advanced data services. Bell Atlantic's discount
rate is subject to the New York Public Service Commission's authority to
prescribe permanent rates which may be different, and carriers are free to
negotiate different rates as well.
Reciprocal compensation
Reciprocal compensation is the compensation paid by one local carrier to
complete local calls on another local carrier's network. As a result of the
current regulatory environment and several trends in our business, which are
discussed below, we expect our revenues from reciprocal compensation to be
minimal.
Several ILECs have submitted challenges to state public utility commissions
and the courts as to whether reciprocal compensation is owed for Internet bound
calls. Of the over 30 state commissions that have considered the issue, almost
all have upheld the requirement that the originating customer's carrier is
required to treat calls bound to ISPs as all other local calls and to pay
reciprocal compensation for ISP-bound traffic. In our target geographic areas,
only Massachusetts and New Jersey are not presently requiring reciprocal
compensation for this traffic, at least pending negotiations and a further FCC
decision. However, South Carolina and Louisiana have also determined reciprocal
compensation is not owed. Many of these cases are now being appealed. Other
states that have not considered the issue to date or reconsidered the issue may
yet determine that no compensation is owed.
In addition, on February 26, 1999, the FCC issued a declaratory ruling and
Notice of Proposed Rulemaking concerning inbound ISP traffic. The FCC concluded
in its ruling that ISP traffic is jurisdictionally mixed and largely interstate
in nature, and thus within the FCC's jurisdiction. The FCC also determined that
no federal rule existed that governed reciprocal compensation for ISP traffic
at the time existing interconnection agreements were negotiated and concluded
that it should permit states to determine whether reciprocal compensation
should be paid for calls to ISPs under existing interconnection agreements
pending the adoption of a federal rule by the FCC. This FCC order has been
appealed by several parties. Briefing was completed by September 2, 1999 and
oral arguments were heard on November 22, 1999. The Court of Appeals has set no
timeline or announced an expected date for its decision. On August 26th, 1999,
the New York Public Service Commission adopted rules that allow carriers to
continue to collect compensation for Internet-related calls but capped the
amount available based on traffic imbalances, thereby reducing the payments to
CLECs whose local and Internet-based traffic is in excess of a 3:1 ratio.
However, the New York Public Service Commission also gave CLECs the opportunity
to rebut the presumption that its ratio should be 3:1 or lower by demonstrating
that their networks are intended to be robust, general purpose networks, not
designed primarily to service inbound traffic only. This decision may serve as
precedent for other state commissions seeking to reconcile the growth of
Internet traffic and the increasingly larger payments owed by the ILECs to
competitive carriers serving ISPs.
We currently do not collect reciprocal compensation from Bell Atlantic for
ISP-bound traffic in the states of Massachusetts and New York. Under our
current interconnection agreements with Bell Atlantic in both of these states,
we are not eligible to collect reciprocal compensation for ISP-bound
46
<PAGE>
traffic. Thus, the uncertainty surrounding the consideration of this issue by
the states and the FCC does not have a substantial impact on our current
operations, although it could affect our ability to collect reciprocal
compensation for ISP-bound traffic under interconnection agreements in new
markets such as New Jersey, Rhode Island, or Delaware.
Tariff and filing requirements
Non-dominant carriers, including us, must file tariffs with the FCC
listing the rates, terms and conditions of interstate and international
services provided by the carrier. On October 29, 1996, the FCC adopted an
order in which it eliminated the requirement that non-dominant interstate
carriers maintain tariffs on file with the FCC for domestic interstate
services. The FCC's order was issued relying on authority granted in the
Telecom Act to forebear from regulating any telecommunications services
provider if specified statutory analyses are satisfied. The FCC's order,
however, was stayed by a federal court. Accordingly, non-dominant interstate
carriers, including us, currently must continue to file interstate tariffs
with the FCC until final determination of the issue. Any challenges to these
tariffs by regulators or third parties could cause us to incur substantial
legal and administrative expenses.
In addition, periodic reports concerning carriers' interstate circuits and
deployment of network facilities also are required to be filed with the FCC.
The FCC generally does not exercise direct oversight over cost justification
and the level of charges for services of non-dominant carriers, although it
has the power to do so. Recently it has suggested it may examine the access
rates charged by competitive local exchange carriers to long distance
carriers. At the current time, the FCC does not require competitive carriers
to file tariffs with respect to their interstate access services. Thus, we
have not filed our rates to provide Internet connectivity through DSL products
at this time, since the FCC has classified this as an interstate access
service. If, however, we begin using DSL products to offer telecommuting
services or other services that involve high-speed connections between
intrastate points, we may be required to file tariffs with the state
commissions with respect to such services.
The FCC may also impose prior approval requirements on transfers of
control and assignments of operating authorizations. Fines or other penalties
also may be imposed for violations of FCC rules or regulations. The FCC also
requires that certified carriers like us notify the FCC of foreign carrier
affiliations and secure a determination that such affiliations, if in excess
of a specified amount, are in the public interest.
State regulation
Most states regulate entry into the markets for local exchange and other
intrastate telecommunications and data services, and states' regulation of
CLECs vary in their regulatory intensity. The majority of states require that
companies seeking to provide local exchange and other intrastate services
obtain authorization from a state regulatory body, such as a state public
utility commission. This authorization process generally requires the carrier
to demonstrate that it has sufficient financial, technical and managerial
capabilities and that granting the authorization will serve the public
interest. As of December 31, 1999, we had obtained local exchange
certification or were otherwise authorized to provide local exchange and
intrastate long distance service in New York and Massachusetts.
We also have filed applications for local exchange and intrastate long
distance certification or other authorization in Delaware, Maryland, New
Hampshire, New Jersey, Rhode Island and the District of Columbia. We are
preparing applications for Pennsylvania and Virginia. We expect to be granted
the necessary approvals by mid-2000, although there is no assurance this will
occur. To the extent
47
<PAGE>
that an area within a state in which we provide service is served by a small
or rural exchange carrier not currently subject to competition, we may not
currently have authority to provide service in those areas at this time.
As an authorized local exchange carrier, we are and will continue to be
subject to the regulatory directives of each state in which we are and will be
certified. Most states require that competitive carriers such as ourselves
charge just and reasonable rates and not discriminate among similarly situated
customers. Other state requirements include, the filing of periodic reports,
the payment of various regulatory fees and surcharges and compliance with
service standards and consumer protection rules.
States also often require prior approvals or notifications for certain
transfers of assets, customers, or ownership of local exchange companies and
for issuances by certified carriers of equity securities, notes or
indebtedness, although the terms of this offering do not require any prior
approval. States generally retain the right to sanction a carrier or to revoke
certifications if a carrier violates relevant laws and/or regulations. Delays
in receiving required regulatory approvals could also have a material adverse
effect on us.
In most states, certificated carriers like us are required to file tariffs
describing the terms, conditions, and prices for services which are classified
as intrastate. In some states, the required tariff may list a range of prices
for particular services, and in others, these prices can be set on an
individual customer basis. We may, however, be required to file tariff addenda
of the contract terms.
Under the Telecom Act, implementation of our plans to compete in local
markets is and will continue to be, to a certain extent, controlled by the
individual states. The states in which we operate or intend to operate have
taken regulatory and legislative action to open local communications markets
to various degrees of local exchange competition.
Local regulation
We are also subject to numerous local regulations, including building code
requirements, rights of way, franchises, taxes and surcharges and,
occasionally, requirements that we acquire emergency 911 authorizations from
local municipalities or 911 administrators. These regulations may vary greatly
from state to state and from city to city.
Intellectual Property Rights
We regard our copyrights, service marks, trade secrets and similar
intellectual property as critical to our success. We rely upon a combination
of copyright law and contractual restrictions with employees, customers and
others to protect our rights. We do not currently hold any patents. If we fail
to adequately protect our rights, or if we become involved in intellectual
property litigation our business, financial condition and results of
operations could be materially and adversely affected.
Employees
As of December 31, 1999, we employed over 340 people. Our employees are
not unionized, and we believe our relations with our employees are good.
Legal Proceedings
We are occasionally a party to routine litigation and proceedings in the
ordinary course of business. We are not aware of any current or pending
litigation to which we are or may become a party that we believe could
materially adversely affect our results of operations or financial condition.
48
<PAGE>
Properties
We lease office space in a number of locations. In general, our sales
offices are short term leases. Our network facilities are typically ten year
leases with two five-year renewal options. As of February 4, 2000, our leased
properties were:
<TABLE>
<CAPTION>
Square
Location Feet Expiration of Lease Term Type of Facility
-------- ------ ------------------------ ----------------
<C> <C> <S> <C>
Long Island City, NY.. 35,100 September 2004, 20,000 Headquarters,
square foot lease, with Customer Operations,
one five-year renewal Sales Office
option(1)
Long Island City, NY.. 21,000 July 2009, with two Network
five-year renewal
options
New York, NY.......... 17,600 April 2010, with one Future Headquarters
five-year renewal
option
Syracuse, NY.......... 8,000 August 2004, with two Customer Operations,
five-year renewal Sales Office
options
Syracuse, NY.......... 4,100 December 2000, no Vacant Space(2)
renewal option
Syracuse, NY.......... 8,000 October 2009, with two Network
five-year renewal
options
Jericho, NY........... 2,200 May 2001, no renewal Sales Office
option
Albany, NY............ 1,900 October 2000, no renewal Sales Office
option
Buffalo, NY........... 2,300 January 2001, no renewal Sales Office
option
Boston, MA............ 12,500 April 2010, with one Network, Sales Office
five-year renewal
option
Philadelphia, PA...... 26,000 July 2005, with one Sales, Customer
five-year renewal Operations, Network
option Operations Center
Philadelphia, PA...... 10,000 November 2010, with two Network
five-year renewal
options
Westport, CT.......... 2,600 August 2000, with one General Office Use
two-year renewal option
</TABLE>
- --------
(1) The 35,100 square foot leased space is located in different areas of a
building and separated into four individual leases. The 20,000 square foot
lease expires September 2004. The 7,600 square foot lease expires December
2001. The 4,600 square foot lease expires July 2001. The 2,900 square foot
lease is month-to-month. Only the 20,000 square foot lease has a five year
option to renew.
(2) The Company's rent obligation under this lease is paid by 224 Harrison
Associates, LLC (the lessor of 224 Harrison in Syracuse) as a condition of
the Company entering into a lease with respect to the 224 Harrison
Property.
49
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, and their ages as of the date of this
prospectus, are listed below:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<C> <C> <S>
Vern M. Kennedy.................. 33 President, Chief Executive Officer and
Chairman of the Board of Directors
Joel D. Gross.................... 45 Chief Financial Officer and Executive
Vice President--Strategic Planning and
Corporate Development
Eric G. Roden.................... 44 Chief Operating Officer
Kenneth A. Shulman............... 46 Chief Technology Officer
Colm D. Kelly.................... 61 Chief Information Officer
George F. Holland................ 44 Executive Vice President--Sales and
Marketing
Terrence J. Anderson............. 33 Executive Vice President--Finance
Tracy W. Korman.................. 36 Executive Vice President--Marketing and
Strategy
Heidi B. Heiden (1).............. 61 Director
Stuart A. Mencher (2)............ 60 Director
Edward W. Scott (1)(2)........... 37 Director
Roland A. Van der Meer(1)........ 39 Director
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Vern M. Kennedy is one of our co-founders and has served as Chairman of the
board of directors, President and Chief Executive Officer since our inception
in March 1996. He was responsible for the initial design and development of
what have become our systems and processes. From July 1989 to January 1996, Mr.
Kennedy held various operations management positions at NYNEX (presently Bell
Atlantic Corporation). In his last position as Director of Operations, he was
responsible for field and center operations, process improvement and general
business management.
Joel D. Gross has served as our Chief Financial Officer and Executive Vice
President--Strategic Planning and Corporate Development since September 1999.
Mr. Gross has 22 years of telecommunications experience in finance, planning,
sales and marketing and other management functions. Prior to joining us, Mr.
Gross was Vice President of Corporate Strategy and Business Development for
AT&T since June 1998. From February 1993 to June 1998, he was Senior Vice
President of Corporate Development for Teleport Communications Group and a
member of the Executive Committee. He was Vice President and Senior Securities
Analyst for the telecommunications services sector for Donaldson, Lufkin &
Jenrette Securities from 1987 to 1993, and for Dean Witter Reynolds from 1985
to 1987. From 1978 to 1985, Mr. Gross held various management positions with
AT&T in sales, marketing, product management, regulatory affairs and systems
analysis.
Eric G. Roden has served as Chief Operating Officer since September 1998.
Mr. Roden has 16 years of management experience in operations and networks in
the telecommunications industry. From 1996 to 1998 he was general manager for
USN Communications. He was Vice President of Operations and Engineering for MFS
Communications from 1995 to 1996, and from 1993 to 1995, for Northeast
Networks. He also held senior management positions in engineering operations
and network management with Eastern Telelogic and ITT's U.S. Transmission
Systems, and served in the United States Marine Corps specializing in secure
data and voice communications for the Department of Defense.
50
<PAGE>
Kenneth A. Shulman joined us in December 1999 as Chief Technology Officer.
Mr. Shulman has 24 years of telecommunications experience in systems
engineering, network technology, planning and voice, data, and video
applications development. Prior to joining us, Mr. Shulman was Vice President
of Local Network Technology at AT&T since 1998. From 1987 to 1998, he held
various senior management positions in technology, network architecture,
engineering and planning at Teleport Communications Group, including Senior
Vice President and Chief Technology Officer from 1995 to 1998. Prior to joining
Teleport Communications Group, he held network and systems engineering
positions at MCI International, Bell Communications Research and Bell
Laboratories.
Colm D. Kelly is a co-founder of Open Support Systems and has served as
Vice President-- Development since our inception and as Chief Information
Officer since December 1999. Mr. Kelly has over 30 years of computer experience
in database development, programming and networking. From 1988 to 1997, he was
a founder and president of Unsel, which specialized in client/server database
and network applications to the telecommunications, banking and other
industries.
George F. Holland joined us in December 1999 as Executive Vice President--
Sales and Marketing. Mr. Holland has 21 years of telecommunications experience,
most recently serving as Senior Vice President of Covad Communications Group,
since 1998, where he was responsible for building a New York regional DSL
network. From 1997 to 1998, he was Senior Vice President for National Sales at
Toll Free Cellular. From 1995 to 1996, he was Chief Executive Officer of
Starlink Communications, where he was responsible for building a full service
long distance company. From 1979 to 1995, Mr. Holland held a number of
management positions with AT&T, including business sales, customer service,
product development and network operations.
Terrence J. Anderson is one of our co-founders and has served as Executive
Vice President-Finance since our inception in March 1996. He also served as a
Director from March 1996 to April 1999. From 1988 to 1995, Mr. Anderson was
employed at Chemical Bank, most recently as Vice President in the Media and
Telecommunications-Corporate Finance Group.
Tracy W. Korman is one of our co-founders and has served as Executive Vice
President--Marketing and Strategy since October 1996. He conceived, designed
and developed the Broadview Networks brand. From December 1995 to October 1996,
Mr. Korman was Business Manager for Sales and Marketing at Bantam Doubleday
Dell. He was a consultant in the Strategy and Marketing and Media practices of
Booz, Allen & Hamilton from 1986 to December 1995.
Heidi B. Heiden became a director in January 2000. Mr. Heiden has held
senior technology management positions in several industries. From 1995 to
1999, he served as Senior Vice President, Operations and Technology of UUNET, a
unit of MCI WorldCom, where he was responsible for building and running the
network, customer support and information systems. From 1990 to 1995, he was a
Senior Operating Officer at Salomon Brothers. His prior experience includes
senior management roles with The Wollongong Group and Trusted Information
Systems. He also served in the US Army where he led various technology
programs, including the design and implementation of voice and data systems and
the Defense Data Network, the largest data system at the time and the basis of
what is now known as the Internet.
Stuart A. Mencher became a director in January 2000. Mr. Mencher has held
several senior executive positions in the telecommunications and data
processing industries. From 1998 to 1999, he was Vice President of Strategic
Planning for AT&T Business Services. He was Senior Vice President of Sales and
Marketing for Teleport Communications Group and a member of the Executive
Committee from 1992 to 1998, where he was responsible for leading TCG's overall
market and sales channel development initiatives. His prior experience includes
strategic marketing, sales, customer service and general management roles with
MCI Communications, Motorola, AT&T Information Systems and IBM.
51
<PAGE>
Edward W. Scott has served as a director since April 1999. Mr. Scott is a
co-founder and general partner of the Baker Communications Fund, a private
equity fund that invests exclusively in communications equipment, services and
Internet applications companies. Mr. Scott has been a general partner of that
firm since 1996. From December 1990 until March 1996, Mr. Scott was a private
equity investor with the Apollo Investment Fund, L.P. Mr. Scott currently
serves on the board of directors of Akamai Technologies, Advanced Switching
Communications, DataStudy, Fort Point Partners, InterXion Holdings and
Style365.com.
Roland A. Van der Meer has served as a director since 1998. Mr. Van der
Meer is a general partner of ComVentures, a venture capital firm. From 1993 to
1997, he was also a partner at the venture firm Partech International. His
previous experience includes Hambrecht & Quist Venture Partners, GTE and
Sprint. Mr. Van der Meer is on the boards of Arbinet, Universal Access,
Chromatis, Dynamicsoft, Nisham Systems, Range Star International, SiteSmith,
Zantaz.com and Zoneworx.
Each officer serves at the discretion of our board of directors. Each
director serves until his successor is duly elected and qualified.
Board Composition
We have five individuals on our board of directors. The Board is divided
into three classes, with the term of office of the first class, which consists
solely of Mr. Kennedy, to expire at the first annual meeting of stockholders
after this offering which is expected to occur in 2000; the term of office of
the second class, which consists of Messrs. Van der Meer and Scott, to expire
at the second annual meeting of stockholders after this offering which is
expected to occur in 2001; and the term of office of the third class, which
consists of Messrs. Mencher and Heiden, to expire at the third annual meeting
of stockholders after this offering which is expected to occur in 2002. Each
term afterward will expire at each third succeeding annual meeting of
stockholders held after the meeting at which the director in question was
elected.
Election of Directors and Voting Agreement
Some of our stockholders have each agreed to vote all of their shares in
such a manner as to elect directors as follows: ComVentures, New Enterprise
Associates and Weiss, Peck & Greer Venture Partners collectively have the right
to designate one director and Baker Communications Fund, ComVentures, New
Enterprise Associates and Weiss, Peck & Greer Venture Partners collectively
have the right to designate one director. Under these arrangements, Mr. Van der
Meer and Mr. Scott have been elected to the board. Each group of stockholders
will lose its right to designate a director if its ownership of our common
stock falls below 5%.
Director Compensation
We reimburse non-employee directors for reasonable out-of-pocket expenses
incurred in attending meetings of the board of directors. We may, in our
discretion, grant stock options and other equity awards to our non-employee
directors from time to time, pursuant to our 2000 Stock Option Plan. Messrs.
Heiden and Mencher were each granted options to purchase 60,000 shares of
common stock pursuant to this plan. During 1999, we also granted 6,857 stock
options to Peter Lawson-Johnson, 11,405 stock options to Philip Smith and
22,808 stock options to Joseph Walsh. Messrs. Lawson-Johnson, Smith and Walsh
were non-employee directors at the time these options were granted under our
1997 Stock Option Plan, but are no longer members of our board of directors. We
pay the premiums on a directors and officers insurance policy covering all of
our directors.
Committees of the Board of Directors
Our audit committee oversees the appointment of our independent public
accountants, the scope and fees of prospective annual audits and the results
thereof, compliance with our accounting
52
<PAGE>
and financial policies, and management's procedures and policies relating to
the adequacy of our internal accounting controls. The three members of the
audit committee are Messrs. Van der Meer, Heiden and Scott, each of whom is an
outside director of the Company.
Our compensation committee will be composed solely of independent
directors. The compensation committee establishes salaries, incentives and
other forms of compensation for our directors, executive officers and key
employees and administers our equity incentive plans and other incentive and
benefit plans. The two members of the compensation committee are Messrs.
Mencher and Scott.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between our board of directors and the
board of directors or compensation committee of any other company, nor has any
such interlocking relationship existed in the past. Mr. Scott is affiliated
with Baker Communications Fund, L.P., which is our largest stockholder. Baker
is also a party with the Company to the Securities Purchase Agreement and
Stockholders' Agreement dated April 23, 1999.
Executive Compensation
The following table lists information concerning the compensation during
the years ended December 31, 1997, 1998 and 1999 of our Chief Executive Officer
and each of our other four most highly-compensated executive officers during
the year ended December 31, 1999 whose total compensation in fiscal 1999
equaled or exceeded $100,000, collectively referred to as the "Named Executive
Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
-------------- Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
- --------------------------- ---- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Vern M. Kennedy............. 1997 25,000 0 0 0
Chairman, President and 1998 76,846 30,000 0 675
Chief Executive Officer 1999 147,512 41,250 0 2,613
Eric G. Roden............... 1997 0 0 0 0
Chief Operating Officer 1998 40,385 10,096 200,000 0
1999 156,923 32,484 0 0
Colm D. Kelly............... 1997 0 0 0 0
Chief Information Officer 1998 176,576 0 0 11,142(1)
1999 190,000 0 0 1,054
Terence J. Anderson......... 1997 25,000 0 0 0
Executive Vice President--
Finance 1998 73,192 35,000 0 632
1999 115,000 28,875 60,000 2,100
Tracy W. Korman............. 1997 75,000 0 145,000 0
Executive Vice President-- 1998 81,154 35,000 0 655
Marketing and Strategy 1999 115,000 28,875 40,000 2,348
</TABLE>
- --------
(1) Includes a $10,000 consulting fee paid in 1998 for work done in the fourth
quarter of 1997.
53
<PAGE>
The following table lists information as to stock options granted to
Terrence J. Anderson and Tracy W. Korman during the fiscal year ended December
31, 1999. Stock options were not granted to any other Named Executive Officer
during the fiscal year ended December 31, 1999. We have not granted any stock
appreciation rights.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option
Individual Grants Term (3)
----------------------------------------------------- -----------------
Percentage of
Total
Number of Options
Securities Granted to
Underlying Employees in Exercise
Options Fiscal Price Per Market Expiration
Name Granted (1) Year(2) Share Price Date 5% 10%
- ---- ----------- ------------- --------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Terrence J. Anderson.... 60,000 2.46% $2.75 $4.46 5/18/08 $250,135 $465,987
Tracy W. Korman......... 40,000 1.64% $2.00 $4.46 5/18/08 $196,757 $340,658
</TABLE>
- --------
(1) These options were granted on May 18, 1999 under the 1997 Stock Option
Plan, as amended. As of December 31, 1999, none of these options were
exercisable. 25% of the shares of common stock subject to these options
become exercisable on the first anniversary of the grant date, with the
remainder vesting in equal monthly installments following the first
anniversary. All such options have a term of nine years, subject to
earlier termination in some situations related to termination of
employment.
(2) Based on an aggregate 2,440,670 options granted to our employees,
including management, during the year ended December 31, 1999.
(3) Potential realizable values are net of exercise price, but before the
payment of taxes associated with exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at
the end of the option term. The assumed 5% and 10% annual rates of
compounded stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of our future common stock prices. These amounts represent
certain assumed rates of appreciation in the value of the common stock
from the fair market value on the date of grant. Actual gains, if any, on
stock option exercises are dependent on the future performance of the
common stock and overall stock market conditions. The amounts reflected in
the table may not necessarily be achieved.
54
<PAGE>
The following table lists information with respect to unexercised options
held by the Named Executive Officers as of December 31, 1999. Neither Vern M.
Kennedy nor Colm D. Kelly held unexercised options as of December 31, 1999. No
Named Executive Officer exercised options during the fiscal year ended December
31, 1999.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1999(1) December 31, 1999(2)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Eric G. Roden............... 62,499 137,501 $1,078,108 $2,371,892
Terrence J. Anderson........ 0 60,000 $ -- $ 975,000
Tracy W. Korman............. 145,000 40,000 $2,629,996 $ 680,000
</TABLE>
- --------
(1) These options to purchase shares of our common stock were granted under
our 1997 Stock Option Plan. See "Employee Benefit Plans."
(2) There was no public trading market for our common stock as of December 31,
1999. Accordingly, these values have been calculated on the basis of the
fair market value as of December 31, 1999, less the applicable exercise
price per share, multiplied by the number of shares underlying such
options.
Employment Agreements
We have employment agreements with each of our executive officers. Each
agreement has an initial term and is automatically extended for successive one-
year periods after the initial term unless we or the executive elects to
terminate the agreement within 120 days before the end of the term. If, during
the employment period, we terminate an executive's employment other than for
cause, death or disability or the executive terminates for a good reason, we
will pay the executive a lump sum amount equal to one-half of the executive's
annual base salary plus the executive's pro rata annual bonus. In addition, any
unvested stock options will continue to vest as if the executive had remained
employed for a period of twelve months following the date of termination and
the executive will continue to receive benefits for a period of six months
after the date of termination. If there is a change of control, all of the
executives' unvested stock options will become 100% vested. All of the options
granted to executives were granted either under the 1997 Stock Option Plan or
the 2000 Stock Option Plan. Some options were granted at the time the executive
was hired. The following table shows information about the current compensation
arrangements under these employment agreements.
<TABLE>
<CAPTION>
Annual
Base Annual
Salary Bonus Options
Name Initial Term ($) (%) Granted(1)
- ---- ------------------- ------- ------ ----------
<S> <C> <C> <C> <C>
Vern M. Kennedy................... 2/03/00 - 12/31/01 250,000 60 590,000
Joel D. Gross..................... 10/01/99 - 9/30/01 260,000 50 830,000
Terrence J. Anderson.............. 2/03/00 - 12/31/01 175,000 45 210,000
Tracy W. Korman................... 2/03/00 - 12/31/01 175,000 45 335,000
George F. Holland................. 2/03/00 - 12/31/01 250,000 50 300,000
Kenneth A. Shulman................ 12/14/99 - 12/14/01 175,000 33 250,000
Eric G. Roden..................... 2/03/00 - 12/31/00 165,000 45 240,000
Colm D. Kelly..................... 2/03/00 - 12/31/00 200,000 20 50,000
</TABLE>
- --------
(1) Not all of these options were granted pursuant to the employment agreements
described above. However, all are subject to the change of control
provision within these agreements.
55
<PAGE>
Employee Benefit Plans
1997 Stock Option Plan
Our 1997 Stock Option Plan was adopted by the board of directors on
February 10, 1997. There are a total of 4,100,000 shares of common stock
reserved for issuance under it. As of December 31, 1999, we have granted
options to purchase 4,011,865 shares under this plan, we have issued 121,392
shares in connection with the exercise of options granted under the plan and
options to purchase 252,270 shares have been forfeited by employees who left
our employ prior to such options vesting. At such date, options to purchase
3,638,203 shares were outstanding under the plan at an average exercise price
of $3.53 per share.
We have occasionally granted stock options under the plan in order to
provide certain officers, directors, employees, and consultants with a
competitive total compensation package and to reward them for their
contribution to our performance. These grants of stock options are designed to
align these individuals' interest with that of our stockholders.
Our board of directors administers the plan and establishes the terms of
the options and the dates after which they become exercisable. Options granted
under the plan generally become exercisable over a four-year period.
The price at which each share of common stock subject to an option granted
under the plan may be purchased is determined by our board of directors at the
time the option is granted. Options granted under the plan to employees may be,
in the discretion of the Board, either incentive stock options or nonqualified
options. Options granted to consultants or directors are nonqualified options.
No incentive stock option may be granted under the plan to any person who
has been appointed to serve on the board of directors effective as of a future
date until the date the appointment becomes effective. Nor may any incentive
stock option be granted to an employee who owns, directly or indirectly, more
than 10% of our voting stock, unless:
. the option price of the incentive stock option is fixed at not less
than 110% of the fair market value of the shares on the date it is
granted, and
. the incentive stock option is not exercisable more than five years
after the date it is granted.
Options granted under the plan generally are not transferable by the
optionee during his or her lifetime.
2000 Long-Term Incentive Plan
Our 2000 Long-Term Incentive Plan was adopted by the board of directors on
February 3, 2000. There are a total of 5,200,000 shares of common stock
reserved for issuance under it. Under the 2000 Plan, we may grant stock
options, stock appreciation rights and shares of common stock. As of February
3, 2000, we have granted options to purchase a total of 1,765,121 shares under
this plan at an exercise price of $9.00 per share.
We will occasionally grant stock options, stock appreciation rights and
shares of common stock under the 2000 Plan in order to provide officers,
directors, employees, and consultants with a competitive total compensation
package and to reward them for their contribution to our performance. These
grants of stock options, stock appreciation rights and shares of common stock
will be designed to align these individuals' interest with that of our
stockholders.
The compensation committee of our board of directors administers the 2000
Plan and establishes the terms of the options and stock appreciation rights and
the dates after which they become exercisable. The exercise price of an option
or stock appreciation right granted under the
56
<PAGE>
2000 Plan is determined by our compensation committee at the time the option or
stock appreciation right is granted, but the exercise price will not be less
than 100% of the fair market value of the share of common stock on the date of
the grant. Options granted under the plan to employees may be, in the
discretion of the board, either incentive stock options or nonqualified
options. Options granted to consultants or directors are nonqualified options.
Stock appreciation rights may be granted in connection with options or may be
granted as free-standing awards. If a stock appreciation right is issued in
connection with an option, the stock appreciation right will expire when the
related option expires and the exercise of the stock appreciation right will
result in the surrender of the related option.
No incentive stock option may be granted under the plan to any person who
has been appointed to serve on the board of directors effective as of a future
date until the date the appointment becomes effective. Nor may any incentive
stock option be granted to an employee who owns, directly or indirectly, more
than 10% of our voting stock, unless:
. the option price of the incentive stock option is fixed at not less
than 110% of the fair market value of the shares on the date it is
granted, and
. the incentive stock option is not exercisable more than five years
after the date it is granted.
Under the 2000 Plan, our compensation committee may grant common stock to
participants. The compensation committee establishes the size of the grant and
any limitations and restrictions on the grant. The total number of shares of
common stock that may be awarded under the Plan is 1,000,000.
Options, stock appreciation rights and awards granted under the 2000 Plan
generally are not transferable by the recipient during his or her lifetime.
2000 Employee Stock Purchase Plan
Our 2000 Employee Stock Purchase Plan was adopted by our board of directors
on February 3, 2000. There are a total of 300,000 shares of common stock
available for sale. The purchase plan, which is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Internal
Revenue Code of 1986, is administered by our compensation committee. All
employees of Broadview Networks or any present or future subsidiary of
Broadview Networks designated by the board of directors may participate in the
purchase plan. The purchase plan permits eligible employees to purchase common
stock through payroll deductions, which may not exceed 10% of an employee's
compensation, subject to certain limitations. The purchase plan will be
implemented in a series of consecutive offering periods, each approximately six
months in duration. The purchase price of each share of common stock under the
purchase plan will be equal to 85% of the lesser of the closing price per share
of the common stock on the NASDAQ National Market System on the start date of
that offering period and on the date of termination of the offering period.
Employees may modify or end their participation in the purchase plan at any
time prior to the termination date of an offering period. An employee's
participation ends on the employee's termination of employment with Broadview.
The purchase plan will terminate in 2010 unless sooner terminated by our board
of directors.
401(k) Plan
We have adopted a tax-qualified employee savings and retirement plan
covering all of our full-time employees. Under the 401(k) plan, employees may
elect to reduce their current compensation up to the statutorily prescribed
annual limit and have the amount of such reduction contributed to the plan. We
match our employees' contributions up to a maximum amount of 50% of the first
3% of their base salaries by contributing cash to the 401(k) Plan. The 401(k)
plan is intended to qualify under Section 401 of the Code so that contributions
by employees and us to the 401(k) plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
plan. The trustees under the 401(k) plan, at the direction of each participant,
invest such participant's assets in the plan in selected investment options.
57
<PAGE>
CERTAIN TRANSACTIONS
The Securities Purchase Agreement and Shareholders' Agreement
On April 23, 1999 we entered into a Securities Purchase Agreement and a
Shareholders' Agreement with each of our preferred stockholders and our
founding stockholders in connection with our issuance of Series C preferred
stock. On February 2 and February 4, 2000, these agreements were both amended
in connection with our issuance of Series D preferred stock. On February 7,
2000, the Shareholders' Agreement was further amended in order to modify or
eliminate some of the rights previously granted. Under the Shareholders'
Agreement, as amended, these stockholders have preemptive rights, voting rights
and registration rights, and are subject to transfer restrictions, as described
below and elsewhere in this prospectus.
The Securities Purchase Agreement contains standard representations and
warranties by us and confidentiality provisions and transfer restrictions.
The Shareholders' Agreement contains provisions relating to:
. Election of our directors. Following the closing of this offering the
holders of our Series A preferred stock and Series B preferred stock
collectively have the right to designate one director and the holders
of Series C preferred stock and Series D preferred stock collectively
have the right to designate one director. All of our preferred
stockholders and our founding stockholders have agreed to vote all of
their shares in such a manner as to elect these two designees as
directors.
. Preemptive rights with respect to new issuances of common stock. Each
preferred stockholder and founding stockholder generally has the right
to purchase its proportional share, based on its current percentage
ownership, of any capital stock issued by us. These rights have been
waived with respect to this offering and will terminate following the
closing of this offering.
. Source of financing. If we decide to seek equity financing (other than
in connection with this offering), all preferred stockholders have the
first right to make a firm offer to provide that financing on terms
satisfactory to us.
. Transfer restrictions relating to sales of shares of common stock by
the preferred stockholders and the founding stockholders including:
. Rights of first offer. If any preferred stockholder or founding
stockholder wishes to sell its shares, it must give us and the
other preferred stockholders and founding stockholders the
exclusive right, for a period of 15 business days, to purchase
from the selling stockholder any of our common stock held by the
selling stockholder or any stock or security convertible into or
exchangeable for our common stock.
. Tag along rights. If any preferred stockholder or founding
stockholder proposes to sell any of our securities, the other
preferred stockholders and founding stockholders have the right,
for a period of 30 days, to participate in the sale by selling a
proportional share of their stock on the same terms.
None of these provisions and restrictions, other than the preemptive
rights, will terminate on the completion of this offering. The rights and
obligations of the holders of Series A and Series B preferred stock will
terminate at the time they no longer collectively hold at least 5% of our
fully-diluted common stock. The rights and obligations of the holders of Series
C and Series D preferred stock will terminate at the time they no longer
collectively hold at least 5% of our fully-diluted common stock.
58
<PAGE>
Registration Rights
We have granted registration rights to our preferred stockholders with
respect to the common stock they now hold and the common stock they will
receive following the closing of this offering. These holders have the benefit
of the following demand registration:
. The majority of the holders of Series C preferred shares and the
Series D preferred shares and the majority of the holders of Series A
preferred shares and the Series B preferred shares may each demand two
registrations on Form S-1 or, if available, on Form S-2 or S-3 or any
similar short form of registration. However, we are not obligated to
effect any demand registration within 120 days following the effective
date of a previous demand registration or other registration of our
securities that is an underwritten offering.
In addition, stockholders that have been granted registration rights have
unlimited piggyback registration rights under which they have the right to
request that we register their shares of common stock whenever we register any
of our securities under the Securities Act of 1933, following their written
request for inclusion within 30 days after the receipt of our notice, and the
registration form to be used may be used for the registration of their shares
of common stock. These piggyback registration rights will not, however, be
available in the following circumstances:
. If the piggyback registration is in connection with an underwritten
registration and the managing underwriter concludes that including
shares of common stock owned by holders of piggyback registration
rights would adversely affect the marketing of the securities to be
sold in the underwritten offering; or
. For registrations undertaken because of a demand registration.
Terms of Indebtedness
In October 1999 we entered into a Loan and Security Agreement with NTFC
Capital Corporation, which established a vendor financing facility in the
maximum principal amount of $36 million plus capitalized interest. Under the
terms of this facility, at least 60% of the aggregate principal amount we
borrow must be used for the purchase of Northern Telecom equipment and related
services associated with the installation and operation of Northern Telecom
equipment. As collateral, NTFC Capital Corporation obtained a continuing
security interest in all equipment financed or refinanced with proceeds from
the loan, all general intangibles and intangible property, and all proceeds. At
December 31, 1999, $6.9 million under the facility was outstanding with an
average interest rate of 11.7%.
The outstanding debt becomes due in monthly installments to be repaid by or
before November 1, 2007. Principal and capitalized interest on each advance is
payable according to the following amortization schedule. Interest is
capitalized and added to the principal amount over a twelve-month period. On
the last day of the 12th calendar month following the date of the advance, the
"conversion date," principal amounts and interest will be amortized and repaid
monthly in arrears over 48 consecutive months in payments of principal
calculated as follows:
. the first 12 payments of principal will each be equal to 0.833% of the
principal amount, including interest, of the advance as of the
conversion date;
. the next 12 payments will be each equal to 1.667% of the principal
amount, including interest, of the advance as of the conversion date;
. the next 12 payments will each be equal to 2.50% of the principal
amount, including interest, of the advance as of the conversion date;
and
. the next 12 payments will each be equal to 3.33% of the principal
amount, including interest, of the advance as of the conversion date.
59
<PAGE>
The agreement contains various restrictive covenants, including among
others, limitations on our ability and the ability of our subsidiaries to do
the following things:
. Pay dividends and make other distributions on capital stock and redeem
capital stock. We may not make any equity payments to any person
without NTFC Capital Corporation's written consent.
. Incur additional indebtedness or refinance existing
indebtedness. Except for trade payables and various subordinated,
unsecured indebtedness, we may not incur additional indebtedness in
excess of certain limitations determined pursuant to our financial
covenants.
. Incur responsibility for contingent obligations. We may not assume
contingent obligations other than those contemplated by our agreement
with NTFC Capital Corporation.
. Create liens on our assets. We may not create liens on any of our
property except for: (i) liens created by our agreement with NTFC
Capital Corporation; and (ii) liens arising in the ordinary course of
business and similar encumbrances which do not materially detract from
the value of our property.
. Engage in transactions with stockholders and affiliates. Except for
employment agreements entered into in the ordinary course of business
and permitted disbursements to our subsidiaries, we may not enter into
any transactions, including loans or advances, with our affiliates.
. Make investments, advances and loans. Other than in the ordinary
course of business or as permitted disbursements to our subsidiaries,
we may not make any advance, loan, guarantee of indebtedness or
capital contribution to any person without the consent of NTFC Capital
Corporation.
. Enter into agreements to lease personal property. We may only enter
into leases of personal property in excess of $100,000 which are in
the ordinary course of business and after we comply with various
financial covenants listed in our agreement with NTFC Capital
Corporation.
. Remove collateral from various locations. We may not remove any
material part of the collateral under our agreement from specified
locations without written notice to NTFC Capital Corporation and
without ensuring the continuation of NTFC Capital Corporation's
perfected security interest in the collateral.
. Make capital expenditures inconsistent with our business plan. We may
not acquire any fixed or capital assets that are inconsistent with the
business plan we submitted to NTFC Capital Corporation.
. Transact business under assumed names. We may not transact business
under assumed names not listed in our agreement with NTFC Capital
Corporation.
. Engage in mergers and consolidations. We are limited in our ability to
enter into any transaction of merger, acquisition or consolidation, to
change our name, corporate structure or fiscal year or to modify our
organizational documents.
. Sell assets. We may only sell the collateral given to NTFC Capital
Corporation in the ordinary course of business or with the permission
of NTFC Capital Corporation.
Events of default under the vendor financing facility include, among other
things:
. payment defaults;
60
<PAGE>
. covenant defaults;
. failure of conditions;
. involuntary and voluntary bankruptcy;
. non-compliance with governmental requirements; and
. default under third party agreements.
Stock Sales to Senior Management
On September 23, 1999, in connection with his hiring, Joel D. Gross was
granted an option to purchase 830,000 shares of common stock at an exercise
price of $3.75 per share. This option becomes exercisable over time, with the
initial 25%, or 207,500 shares, vesting upon the closing of this offering and
the remainder vesting in equal monthly installments following the first
anniversary of the grant date. On the same date, Mr. Gross also purchased
370,000 shares of common stock at a price of $3.75 per share, or an aggregate
purchase price of $1,387,500.
On February 2, 2000, in connection with our Series D preferred stock
financing, Baker Communications Fund, L.P. assigned a portion of its right to
purchase Series D preferred stock to Mr. Gross, who simultaneously exercised
that right and purchased 214,534 shares of Series D preferred stock for an
aggregate purchase price of $999,998.75.
On December 20, 1999, in connection with his hiring, Kenneth A. Shulman was
granted options to purchase 250,000 shares of common stock at an exercise price
of $6.40. This option becomes exercisable over time, with the initial 25%, or
62,500 shares, vesting upon the closing of this offering and the remainder
vesting in equal monthly installments following the first anniversary of the
grant date. On November 30, 1999, Mr. Shulman also purchased 100,000 shares of
common stock at a price of $6.40 per share or an aggregate purchase price of
$640,000.
On December 1, 1999, in connection with his hiring, George F. Holland was
granted an option to purchase 300,000 shares of common stock at a purchase
price of $6.40 per share. This option becomes exercisable over time, with the
initial 25%, or 75,000 shares, vesting on the first anniversary of the grant
date and the remainder vesting in equal monthly installments following the
first anniversary. On the same date, Mr. Holland also purchased 250,000 shares
of common stock at a price of $6.40 per share, or an aggregate purchase price
of $1,600,000. Mr. Holland paid $640,000 of the purchase price for 100,000 of
these shares in cash and paid the remaining $960,000 for 150,000 of these
shares with a full recourse promissory note.
Under the terms of the promissory note, Mr. Holland must pay us the
principal sum of $960,000, together with interest on the unpaid principal
balance at the rate of 6.47% per year, compounded annually, until the note is
paid in full. Principal and interest must be paid in full on December 1, 2009.
If Mr. Holland sells any of his shares, he must make a prepayment on the note
equal to the net proceeds of the sale. The note will become immediately due and
payable after an event of default, including default in payment or insolvency.
Mr. Holland may prepay the note in whole or in part at any time, without
penalty.
Stock Repurchase from Senior Management
On June 15, 1999, we repurchased 100,000 shares of common stock from
Terrence J. Anderson at an aggregate purchase price of $200,000.
61
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table lists various information with respect to the
beneficial ownership of our common stock as of February 5, 2000, adjusted to
reflect the sale of shares of common stock offered in this prospectus and the
related conversion into shares of common stock on a one-for-one share basis of
our Series A preferred stock, Series B preferred stock, Series C preferred
stock and Series D preferred stock immediately preceding this offering, by:
. each person or entity who is known by us to beneficially own five
percent or more of the outstanding shares of our common stock;
. each director;
. each Named Executive Officer; and
. all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Owned(1)(2)
Number of Shares -----------------
Beneficially Before After
Name Owned(1) Offering Offering
- ---- ---------------- -------- --------
<S> <C> <C> <C>
Baker Communications Fund, L.P.(4)......... 6,516,556 25.43% [ ]%
Communications Ventures II, L.P. .......... 2,991,159 11.67% [ ]%
Communications Ventures Affiliates Fund II,
L.P. ..................................... 245,098 * [ ]%
ComVentures, as a group(5)................. 3,236,257 12.63% [ ]%
New Enterprise Associates VII, L.P......... 3,228,998 12.60% [ ]%
NEA Presidents Fund........................ 47,859 * [ ]%
NEA Ventures 1998, L.P..................... 2,900 * [ ]%
New Enterprise Associates, as a group(6)... 3,279,757 12.80% [ ]%
WPG Enterprise Fund III, LLC............... 1,230,186 4.80% [ ]%
Weiss, Peck & Greer Venture Associates IV,
LLC....................................... 1,406,329 5.49% [ ]%
Weiss, Peck & Greer Venture Associates IV
Cayman, L.P. ............................. 177,581 * [ ]%
WPG Information Sciences Entrepreneur Fund,
L.P....................................... 52,067 * [ ]%
Weiss, Peck & Greer Venture Partners, as a
group(7).................................. 2,866,163 11.18% [ ]%
The State of Michigan Retirement
Systems(8)................................ 2,038,075 7.95% [ ]%
Vern M. Kennedy............................ 1,660,830 6.48% [ ]%
Eric G. Roden.............................. 74,999 * *
Colm D. Kelly.............................. 195,460 * *
Terrence J. Anderson....................... 730,270 2.85% [ ]%
Tracy W. Korman............................ 588,700 2.28% [ ]%
Heidi B. Heiden............................ 20,000 * *
Stuart A. Mencher.......................... 20,000 * *
Edward W. Scott(9)......................... 6,516,556 25.43% [ ]%
Roland A. Van der Meer(10)................. 3,236,257 12.63% [ ]%
Directors & Executive Officers as a group
(12 persons)(3)........................... 13,977,606 53.99% [ ]%
</TABLE>
- --------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of common stock
subject to options and warrants held by that person that are currently
exercisable or exercisable within 60 days of February 5, 2000 are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person. Except
for Mr. Scott and Mr. Van der Meer, and as required by applicable
community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
his or its name.
62
<PAGE>
Except as indicated in the footnotes, the address of each of the persons
in this table is: c/o Broadview Networks Holdings, Inc., 45-18 Court
Square, Suite 300, Long Island City, New York 11101.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Includes an aggregate of 8,333 shares of common stock subject to options
held by directors and executive officers which are exercisable within 60
days of February 5, 2000.
(4) Baker Communications Fund, L.P.'s address is c/o Baker Capital Corp., 540
Madison Avenue, New York, New York 10022.
(5) The ComVentures group consists of Communications Ventures II, L.P. and
Communications Ventures Affiliates Fund II, L.P. The address for each
entity in this group is c/o ComVentures, 505 Hamilton Avenue, Palo Alto,
California 94301.
(6) The New Enterprise Associates group consists of New Enterprise Associates
VII, L.P. NEA Presidents Fund and NEA Ventures 1998, L.P. The address for
each New Enterprise Associates entity in this group is c/o New Enterprise
Associates, One Freedom Square, 11951 Freedom Drive, Suite 1240, Reston,
Virginia 20190.
(7) The Weiss, Peck & Greer Venture Partners group consists of WPG Enterprise
Fund III, LLC, Weiss, Peck & Greer Venture Associates IV, LLC, Weiss,
Peck & Greer Venture Associates IV Cayman L.P. and WPG Information
Sciences Entrepreneur Fund, L.P. The address for each entity in this
group is c/o Weiss, Peck & Greer Venture Partners, 555 California Street,
San Francisco, California 94104.
(8) The State Treasurer of the State of Michigan, as Custodian of the
Michigan Public School Employees' Retirement System, State Employees'
Retirement System and Michigan State Police Retirement System. The
address for this stockholder is Michigan Department of Treasury,
Alternative Investment Division, 2501 Coolridge Road, Suite 400, East
Lansing, Michigan 48823.
(9) All of the shares indicated are owned by Baker Communications Fund, and
are included because of Mr. Scott's affiliation with Baker Communications
Fund. Mr. Scott disclaims beneficial ownership of these shares.
(10) All of the shares indicated are owned by the ComVentures group and are
included because of Mr. Van der Meer's affiliation with ComVentures. Mr.
Van der Meer disclaims beneficial ownership of these shares.
63
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of our capital stock is qualified in its
entirety by reference to the applicable provisions of Delaware law and our
certificate of incorporation and bylaws.
Our certificate of incorporation authorizes the issuance of up to
shares of capital stock, consisting of shares of common stock, par value
$0.01 per share, and shares of preferred stock, par value $0.01 per share.
The common stock and the preferred stock that may be issued under our
certificate of incorporation are described below.
Common Stock
Shares of common stock have the following rights, preferences and
privileges.
Voting Rights. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of our stockholders, including the
election of directors. There is no cumulative voting in the election of
directors.
Stockholders may not act by written consent and must act on all proposals
at an annual or special meeting.
Dividends, Distributions and Stock Splits. Holders of common stock are
entitled to receive dividends at the same rate if and when such dividends are
declared by our board of directors out of assets legally available therefor
after payment of dividends required to be paid on shares of preferred stock, if
any.
Liquidation. In the event of any dissolution, liquidation, or winding up of
our affairs whether voluntary or involuntary, after payment of our debts and
other liabilities and making provision for the holders of preferred stock, if
any, our remaining assets will be distributed ratably among the holders of the
common stock.
All shares of common stock outstanding are fully paid and nonassessable,
and all the shares of common stock to be outstanding upon completion of this
offering will be fully paid and nonassessable.
Preferred Stock
Shares of preferred stock have the following rights, preferences and
privileges. All outstanding shares of our Series A, Series B, Series C and
Series D preferred stock will be converted into 17,561,703 shares of common
stock following the closing of this offering.
Series A Convertible Preferred Stock. On January 29, 1998, we issued
3,446,070 shares of Series A convertible preferred stock to Communications
Ventures II, L.P., Communications Ventures Affiliates Fund II, L.P., New
Enterprise Associates VII, L.P., NEA Presidents Fund, NEA Ventures 1998, L.P.
WPG Enterprise Fund III, LLC, Weiss, Peck & Greer Venture Associates IV, LLC,
Weiss, Peck & Greer Venture Associates IV Cayman L.P. and WPG Information
Sciences Entrepreneur Fund L.P. for $5,970,384, net of $30,531 in fees and
expenses. The Series A preferred stock is convertible, at the option of the
holder, into shares of common stock at any time. The conversion ratio is 1:1,
subject to the investors' anti-dilution protection rights. The Series A
preferred stock automatically converts (a) after the closing of our
registration statement on a Form S-1 at a per share price of at least $6.97 or
at an aggregate public offering price of no less than $15 million, prior to
underwriting, commissions and expenses; or (b) at the election of holders of a
majority of the then
64
<PAGE>
outstanding Series A preferred stock, voting together as a single class, at the
current conversion ratio. If we are liquidated, holders of Series A preferred
stock are entitled to receive, before any amount is paid to holders of common
stock but after payments to holders of Series C preferred stock and Series D
preferred stock, an amount per share equal to $1.74, as adjusted for any stock
dividends, combinations or splits, plus all declared but unpaid dividends, if
any. The Series A preferred stock carries voting rights equal to one vote per
share, on an as if converted basis. Holders of the Series A preferred stock are
entitled to receive dividends at the discretion of our board of directors. No
dividends have been declared on the Series A preferred stock.
Series B Convertible Preferred Stock. On September 11, 1998, we issued
1,838,799 shares of Series B Convertible preferred stock to Communications
Ventures II, L.P., Communications Ventures Affiliates Fund II, L.P., New
Enterprise Associates VII, L.P., NEA Presidents Fund, WPG Enterprise Fund III,
LLC, Weiss Peck & Greer Venture Associates IV, LLC, Weiss Peck & Greer Venture
Associates IV Cayman L.P. and WPG Information Sciences Entrepreneur Fund, L.P.
for $5,969,470, net of $30,531 in fees and expenses. The Series B preferred
stock is convertible, at the option of the holder, into shares of common stock
at any time. The conversion ratio is 1:1, subject to the investors' anti-
dilution protection rights. The Series B preferred stock automatically converts
(i) after the closing of our registration statement on a Form S-1 at a per
share price of at least $6.97 or at an aggregate public offering price of no
less than $15 million, prior to underwriting, commissions and expenses; or (ii)
at the election of holders of more than 50% of the then outstanding Series B
preferred stock, voting together as a single class, at the current conversion
ratio. In the event of liquidation, holders of Series B preferred stock are
entitled to receive, before any amount is paid to holders of common stock, an
amount per share equal to $3.26, as adjusted for any stock dividends,
combinations or splits, plus all declared but unpaid dividends, if any. The
Series B preferred stock carries voting rights equal to one vote per share, on
an as converted basis. Holders of the Series B preferred stock are entitled to
receive dividends at the discretion of our board of directors. No dividends
have been declared on the Series B preferred stock.
Series C Mandatorily Redeemable Convertible Preferred Stock. On April 23,
1999 we issued 6,269,875 Series C mandatorily redeemable convertible preferred
stock to Baker Communications Fund, L.P., Communications Ventures II, L.P.,
Communications Ventures Affiliates Fund II, L.P., New Enterprise Associates
VII, L.P., WPG Enterprise Fund III, LLC, Weiss, Peck & Greer Venture Associates
IV Cayman, L.P. and WPG Information Sciences Entrepreneur Fund L.P. for
$27,795,875, net of $204,125 fees and expenses. This issue has a stated
liquidation preference of $4.46580 per share, plus all accrued and unpaid
dividends whether or not declared ("Series C Liquidation Preference") and is
senior in liquidation to the Series A preferred stock and Series B preferred
stock, and all common stock. Holders of the Series C preferred stock have the
right to convert their shares into common stock at a 1:1 ratio. Holders of
Series C preferred stock are entitled to receive, at the discretion of our
board of directors, cumulative preferential dividends at an annual rate of 8%
of the Series C Liquidation Preference. The Series C preferred stock carries
voting rights equal to one vote per share, on an as converted basis. In
addition, holders of Series C preferred stock, voting as a class, have veto
rights on specific corporate actions. At any time after April 23, 2005, the
Series C preferred stock is redeemable at the option and written election of
the holders of at least 50% of the Series C preferred stock within one year of
such election at the greater of (i) the fair market value of the common stock
underlying the Series C preferred stock to be redeemed, as defined, or (ii) the
aggregate Series C Liquidation Preference of the Series C preferred stock to be
redeemed. No dividends have been declared on the Series C preferred stock.
Series D Mandatorily Redeemable Convertible Preferred Stock. On February 2
and February 4, 2000 we issued a total of 6,006,959 shares of Series D
mandatorily redeemable convertible preferred stock to Baker Communications
Fund, L.P., Joel Gross, the State Treasurer of the State of Michigan, as
Custodian of the Michigan Public School Employees' Retirement System,
65
<PAGE>
State Employees' Retirement System and Michigan State Police Retirement System,
Communications Ventures II, L.P., Communications Ventures Affiliates Fund II,
L.P., New Enterprise Associates VII, L.P., WPG Enterprise Fund III, LLC, Weiss,
Peck & Greer Venture Associates IV Cayman, L.P. and WPG Information Sciences
Entrepreneur Fund L.P. for $27,950,000, net of approximately $50,000 fees and
expenses. This issue has a stated liquidation preference of $4.66126 per share,
plus all accrued and unpaid dividends whether or not declared ("Series D
Liquidation Preference") and is senior in liquidation to the Series A preferred
stock and Series B preferred stock, and all common stock. Holders of the Series
D preferred stock have the right to convert their shares into common stock at a
1:1 ratio. Holders of Series D preferred stock are entitled to receive when, as
and if, dividends are declared by our board of directors, cumulative
preferential dividends at an annual rate of 8% of the Series D Liquidation
Preference. The Series D preferred stock carries voting rights equal to one
vote per share, on an as converted basis. In addition, holders of Series D
preferred stock, voting as a class, have veto rights on specific corporate
actions. At any time after April 23, 2005, the Series D preferred stock is
redeemable at the option and written election of the holders of a majority of
the Series D preferred stock within one year of the election at the greater of
(i) the fair market value of the common stock underlying the Series D preferred
stock to be redeemed, or (ii) the aggregate Series D Liquidation Preference of
the Series D preferred stock to be redeemed. No dividends have been declared on
the Series D preferred stock.
New Preferred Stock. Upon the closing of this offering, the board of
directors will have the authority, without further action by the stockholders,
to issue up to shares of preferred stock, $0.01 par value, in one or more
series and to fix the designations, powers, preferences, privileges, and
relative participating options, or special rights and the qualifications,
limitations, or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the common stock. The board of
directors, without stockholder approval, can issue preferred stock with voting,
conversion, or other rights that could adversely affect the voting power and
other rights of the holders of common stock. Preferred stock could thus be
issued with terms calculated to delay or prevent a change in our control or
make removal of management more difficult. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price of the
common stock, and may adversely affect the voting and other rights of the
holders of common stock. Upon the completion of this offering, there will be no
shares of preferred stock outstanding and we have no current plans to issue any
of the preferred stock.
Warrants
We granted warrants to purchase a total of 344,520 shares of common stock
to the purchasers of Series A preferred stock. Each warrant could be exercised
at any time after August 1, 1998 at a price of $0.01 per share. As of the
effective date of the re-incorporation of the Company in the State of Delaware,
the warrants were terminated.
We granted warrants to purchase a total of 612,183 shares of common stock
to the purchasers of Series B preferred stock. Each warrant could be exercised
at any time after the closing of the transaction at a price of $0.001 per
share. The fair value of the warrants at the time of grant was approximately
$1,065,000. As a result of the closing of the Series C preferred stock on April
23, 1999, 459,139 warrants issued to the investors of Series B preferred stock
were exercised for 459,139 shares of common stock and the balance of the
warrants was terminated.
Registration Rights of Certain Holders
We have granted registration rights to holders of our Series A preferred
stock, Series B preferred stock, Series C preferred stock and Series D
preferred stock who will become common stockholders upon effectiveness of this
offering when their preferred stock is converted to our common stock.
66
<PAGE>
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Section 203 of the Delaware General Corporation Law. We are subject to the
provisions of Section 203 of the Delaware General Corporation Law, an anti-
takeover law. In general, the statute prohibits a publicly-held Delaware
corporation from engaging in a business combination with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
. the transaction is approved by the board of directors prior to the
date the "interested stockholder" obtained such status;
. upon consummation of the transaction which resulted in the stockholder
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 for purposes of
determining the number of shares outstanding those shares owned by:
(a)persons who are directors and also officers; and
(b) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer; or
. on or subsequent to such date the "business combination" is approved
by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of
the outstanding voting stock which is not owned by the "interested
stockholder."
A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, owns or within three years did own, 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to our company and, accordingly, may
discourage attempts to acquire us.
Stockholders may, by adopting an amendment to our certificate of
incorporation or bylaws, elect for us not to be governed by Section 203,
effective 12 months after adoption. Neither our certificate of incorporation
nor our bylaws exempt us from the restrictions imposed under Section 203 of the
Delaware General Corporation Law. It is anticipated that the provisions of
Section 203 of the Delaware General Corporation Law may encourage companies
interested in acquiring us to negotiate in advance with the board of directors
because the stockholder approval requirement would be avoided if a majority of
the directors then in office approve either the business combination or the
transaction that results in the stockholder becoming an interested stockholder.
Classified Board of Directors. Following completion of the offering, our
board of directors will be divided into three classes of directors. The first
class will consist of one director and the second and third classes will each
consist of two directors. Each class will serve a staggered three-year term. As
a result, only one or two members of the board of directors will be selected
each year, and a director will generally stand for election only once every
three years. The board of directors believes that a classified board will help
to assure the continuity and stability of the board and our business strategies
and policies. The classified board provision could have the effect, however, of
discouraging a third party from making a tender offer or otherwise attempting
to obtain control of our company, even though the attempt might be beneficial
to us and our stockholders. In addition, the classified board provision could
delay stockholders who do not agree with the policies of the board from
removing a majority of the board for two years. A vote of 66 2/3% is required
to change the classified board provision.
67
<PAGE>
Other Provisions. Following completion of this offering, our certificate of
incorporation and bylaws will provide, in general, that:
. any vacancy or newly created directorship on the board of directors
will be filled by a majority of, the directors in office with any new
director to serve for the remaining term of the class of directors to
which he or she is elected;
. directors may be removed by our stockholders only for cause and by a
vote of the holders of at least 66 2/3 of our stock (both common and
preferred) entitled to vote generally in the election of directors
("voting stock");
. special meetings of stockholders may be called only by the board of
directors or a committee of the board of directors expressly
authorized to call a special meeting, and the business permitted to be
conducted at a special meeting is limited to business brought before
the meeting by the board of directors;
. election of directors and votes regarding amendments to the
certificate of incorporation or bylaws must be by written ballot; and
. stockholders may not act by written consent and must act on all
proposals at an annual or special meeting.
Our bylaws also require that stockholders wishing to bring any business,
including director nominations, before an annual meeting of stockholders
deliver written notice to us not later than 60 days or more than 90 days prior
to the date on which we first mailed our proxy materials for the prior year's
annual meeting of stockholders. If, however, our annual meeting is set for a
date that is not within 30 calendar days of the anniversary of the prior year's
meeting, notice by the stockholder must be delivered to us not later than the
close of business on the tenth day following the day on which we publicly
announce the date of our annual meeting. Our bylaws further require that the
notice by the stockholder list, among other things:
. A description of the business to be brought before the annual meeting,
including information with respect to a nominated director;
. The reasons for conducting the business at the meeting; and
. Specific information concerning the stockholder proposing the business
and the beneficial owner, if any, on whose behalf the proposal is
made.
Our certificate of incorporation and bylaws state that the provisions
summarized in this section and the provisions relating to the classification of
the board of directors may not be amended by our stockholders, nor may any
provision inconsistent with the certificate of incorporation or bylaws be
adopted by our stockholders, without the affirmative vote of the holders of at
least 66 2/3 of our voting stock, voting together as a single class.
The above provisions of our certificate of incorporation and bylaws
relating to removal of directors, special meetings of stockholders and advance
notice of stockholder proposals may discourage or make more difficult the
acquisition of control of us by means of a tender offer, open market purchase,
proxy contest or otherwise. These provisions may have the effect of
discouraging specific types of coercive takeover practices and inadequate
takeover bids and may encourage persons seeking to acquire control of us first
to negotiate with the board of directors. We believe that these measures will
benefit us and our stockholders by enhancing our ability to negotiate with the
proponent of any unfriendly or unsolicited proposal to acquire or restructure
us. We also believe that the benefits outweigh the disadvantages of
discouraging these proposals because, among other things, negotiation of these
proposals could result in better terms.
68
<PAGE>
Limitation of Liability and Indemnification of Directors
Our certificate of incorporation provides for the indemnification of
directors to the fullest extent permissible under the Delaware General
Corporation Law. Among other things, our certificate of incorporation contains
provisions that eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in circumstances involving
some wrongful acts, including:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derives an improper
personal benefit.
These provisions do not limit or eliminate our rights or rights of any
stockholder to seek non-monetary relief, such as an injunction or rescission,
in the event of a breach of a director's fiduciary duty. These provisions will
not alter a director's liability under federal securities laws. Our bylaws also
contain provisions indemnifying our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law. We believe that these
provisions are necessary to attract and retain qualified individuals to serve
as directors and officers.
Listing
We are applying to have the common stock approved for quotation on the
Nasdaq National Market under the trading symbol "BDVU."
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is EquiServe Trust
Company. Its address is 525 Washington Boulevard, Jersey City, NJ 07310, and
its telephone number at this location is (201) 324-1225.
69
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the 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 of common stock
for sale will have on the market price of the common stock prevailing from time
to time. Nevertheless, sales of substantial amounts of common stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the common stock and could impair our future ability
to raise capital through the sale of our equity securities.
Upon completion of this offering and the related conversion into shares of
common stock on a one-to-one basis of the Series A preferred stock, Series B
preferred stock, Series C preferred stock and Series D preferred stock, we will
have an aggregate of shares of common stock outstanding, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options or warrants. Of the outstanding shares, the shares sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares purchased by our
"affiliates," as that term is defined in Rule 144 promulgated under the
Securities Act, will be deemed "restricted securities," as defined in Rule 144,
and may only be sold in compliance with the limitations described below.
Restricted securities may be sold in the public market only if such securities
are registered under the Securities Act or if they qualify for an exemption
from registration under Rule 144, 144(k) or 701 promulgated under the
Securities Act, which rules are summarized below. Subject to the lock-up
agreements described below and the provisions of Rules 144, 144(k) and 701,
this leaves additional shares eligible for sale in the public market
as follows:
<TABLE>
<CAPTION>
Number of
Shares Date
--------- ----
<C> <S>
After the date of this prospectus
Upon the filing of a registration statement to register for resale
shares of common stock issuable upon the exercise of options
granted under our 1997 Stock Option Plan
At various times after 90 days from the date of this prospectus
(Rule 144)
After 180 days from the date of this prospectus (subject, in some
cases, to volume limitations)
At various times after 180 days from the date of this prospectus
(Rule 144)
</TABLE>
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person, or persons whose shares are required to
be aggregated, such as an affiliate, who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any three-
month period, a number of shares that does not exceed the greater of
. 1% of the then outstanding shares of our common stock, which will
equal approximately shares immediately after this offering, or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to that sale.
Sales under Rule 144 are also subject to manner of sale restrictions and
notice requirements and to the availability of current public information about
us.
70
<PAGE>
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years would be entitled to sell
such shares under Rule 144(k) without regard to the volume, manner of sale and
notice requirements mentioned above. To the extent that shares were acquired
from an affiliate, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchase shares of our common
stock from us in connection with a compensatory stock or option plan or other
written agreement is eligible to resell those shares 90 days after the
effective date of this offering in reliance on Rule 144, but without compliance
with some of the restrictions, including the holding period, contained in Rule
144.
After the closing of this offering, we intend to file a registration
statement on Form S-8 to register for resale the 4.1 million shares of common
stock issued or reserved for issuance under our 1997 Stock Option Plan. Such
registration statement will automatically become effective upon filing.
Accordingly, shares covered by that registration statement will then be
eligible for sale in the public markets, unless these options are subject to
vesting restrictions or the lock-up agreements referred to below.
Lock-Up Agreements
Directors and officers and various stockholders who hold
shares in the aggregate, together with the holders of options to purchase
shares of common stock, have agreed that they will not sell,
directly or indirectly, any shares of common stock without the prior written
consent of Goldman, Sachs & Co. for a period of 180 days from the date of this
prospectus.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 2000
Long Term Incentive Plan.
Registration Rights
Following this offering, under various circumstances and subject to various
conditions, holders of shares of our outstanding common stock prior
to this offering will have certain demand registration rights with respect to
their shares of common stock, subject to the 180 day lock-up arrangement
described above, to require that we register their shares of common stock under
the Securities Act, and they will have certain rights to participate in any
future registration of securities by us. We are not required to effect more
than an aggregate of three demand registrations on behalf of such holders.
These holders are subject to lock-up periods of not more than 180 days
following the date of this prospectus or any subsequent prospectus.
71
<PAGE>
UNDERWRITING
The Company and the Underwriters named below (the "Underwriters") have
entered into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each Underwriter has severally agreed
to purchase the number of shares indicated in the following table. Goldman,
Sachs & Co., Bear, Stearns & Co. Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation are the representatives of the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Bear, Stearns & Co. Inc. ...................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
---
Total.....................................................
===
</TABLE>
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional
shares from the Company to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
Underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the Underwriters by the Company. Such amounts are
shown assuming both no exercise and full exercise of the Underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Broadview Networks
--------------------------
No Exercise Full Exercise
--------------------------
<S> <C> <C>
Per share....................................... $ $
Total........................................... $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the Underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the Underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all of the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
The Company and its directors, officers and stockholders have agreed with
the Underwriters not to dispose of or hedge any of its common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this Prospectus, except with the prior written consent
of the representatives. This agreement does not apply to any existing employee
benefit plans. See "Shares Eligible for Future Sale" for a discussion of
certain transfer restrictions.
At the Company's request, the Underwriters are reserving up to shares
of common stock for sale at the initial public offering price to directors,
officers, employees and friends through a directed share program. The number of
shares of common stock available for sale to the general public in the Offering
will be reduced to the extent these persons purchase these reserved shares. Any
shares not so purchased will be offered by the Underwriters to the general
public on the same basis as other shares offered hereby.
Prior to the Offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives. Among the factors to be
72
<PAGE>
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, will be the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.
The Company is applying for quotation of the common stock on the Nasdaq
National Market under the symbol "BDVU".
In connection with the Offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the Offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while this Offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The Underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
The Company estimates that its share of the total expenses of this
offering, excluding underwriting discounts and commission, will be
approximately $ .
The Company has agreed to indemnify the separate Underwriters against
various liabilities, including liabilities under the Securities Act of 1933.
73
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered in this prospectus will
be passed upon for Broadview Networks by Mayer, Brown & Platt, New York, New
York, and for the Underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated statements as of December 31, 1999 and 1998 and for each
of the three years in the period ended December 31, 1999 included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION ABOUT BROADVIEW NETWORKS
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the shares of common stock offered in this prospectus. This
prospectus does not contain all of the information in the Registration
Statement and the exhibits and schedules contained in it. Various items are
omitted following the rules and regulations of the Securities and Exchange
Commission. For further information with respect to Broadview Networks and the
common stock offered in this prospectus, reference is made to the Registration
Statement and the exhibits and schedules filed with it. Statements contained in
this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and, in each instance that a copy of
the contract or other document has been filed as an exhibit to the Registration
Statement, reference is made to the exhibit filed, each relevant statement
being qualified in all respects by the reference. A copy of the Registration
Statement, and the exhibits and schedules contained in it, may be inspected
without charge at the public reference facilities maintained by the Securities
and Exchange Commission in Room 1024, 450 Fifth Street., N.W., Washington, D.C.
20549, and at the Securities and Exchange Commission's regional offices located
at the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and Seven World Trade Center, 13th Floor, New York, New York 10048, and
copies of all or any part of the Registration Statement may be obtained from
these offices upon the payment of the fees prescribed by the Securities and
Exchange Commission. The Securities and Exchange Commission maintains a website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically. The address of the site is
http://www.sec.gov.
74
<PAGE>
Broadview Networks Holdings, Inc. and Subsidiaries
Index to the Consolidated Financial Statements
Page
<TABLE>
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets at December 31, 1998 and 1999.................. F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................................... F-4
Consolidated Statements of Mandatorily Redeemable Securities and
Stockholders' Equity (Deficit) for the years ended December 31, 1997, 1998
and 1999.................................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................................... F-6
Notes to the Consolidated Financial Statements............................. F-7
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Broadview Networks Holdings, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of mandatorily redeemable securities and
stockholders' equity (deficit) and cash flows present fairly, in all material
respects, the financial position of Broadview Networks Holdings, Inc. and its
subsidiaries as of December 31, 1998, and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
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.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 4, 2000
F-2
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Pro forma
December 31, as of
-------------------------- December 31,
1998 1999 1999
------------ ------------ ------------
Unaudited
See Note 2
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......... $ 3,052,524 $ 5,572,220
Accounts receivable, net of
allowance of $382,302 and
$1,302,491 at December 31, 1998
and 1999, respectively............ 3,171,920 6,552,341
Note receivable from officer....... -- 640,000
Other current assets............... 472,487 1,280,756
------------ ------------
Total current assets.............. 6,696,931 14,045,317
Restricted certificates of depos-
it................................ 100,000 434,000
Property and equipment, net........ 658,923 15,597,594
Intangible assets, net............. 319,923 --
Other assets....................... 231,198 632,115
------------ ------------
Total assets...................... $ 8,006,975 $ 30,709,026
============ ============
Liabilities, Mandatorily Redeemable
Securities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable................... $ 2,489,641 $ 5,817,458
Accrued and other current liabili-
ties.............................. 650,684 5,510,410
Payroll related liabilities........ 363,521 973,903
Taxes payable...................... 531,176 2,216,395
Capital lease obligations.......... 56,563 76,464
Current portions of long term debt
and payable....................... -- 742,268
------------ ------------
Total current liabilities......... 4,091,585 15,336,898
Long term payable.................. -- 1,049,397
Long term debt..................... -- 6,819,683
Capital lease obligations.......... 83,890 109,947
------------ ------------
83,890 7,979,027
------------ ------------
Total liabilities................. 4,175,475 23,315,925
Commitments and contingencies (see
Note 12)
Mandatorily redeemable securities:
Series C convertible preferred
stock, $0.1 par value, 6,269,875
shares authorized, issued and
outstanding at December 31, 1999;
no pro forma shares issued and
outstanding....................... -- 38,888,367
Common Stock, $0.1 par value,
370,000 shares issued and
outstanding at December 31, 1999;
no pro forma shares issued and
outstanding....................... -- 5,180,000
------------ ------------
Total mandatorily redeemable
securities....................... -- 44,068,367
Stockholders' equity (deficit):
Convertible preferred stock, $.01
par value 5,800,000 and 16,900,000
shares authorized at December 31,
1998 and 1999, respectively; pro
forma 17,600,000 shares authorized
Series A--3,446,070 shares issued
and outstanding at December 31,
1998 and 1999; no pro forma
shares issued and outstanding.... 34,461 34,461
Series B--1,838,799 shares issued
and outstanding at December 31,
1998 and 1999; no pro forma
shares issued and outstanding.... 18,388 18,388
Common stock, $.01 par value,
32,000,000 shares authorized,
6,980,882 and 7,695,413 shares
issued and outstanding at December
31, 1998 and 1999, respectively;
pro forma 36,000,000 shares
authorized, 25,627,116 shares
issued and outstanding............ 69,809 76,954 $ 256,271
Receivable from officer for
issuance of stock................. -- (960,000) (960,000)
Additional paid-in capital......... 15,268,004 32,962,153 104,854,052
Deferred compensation.............. (475,500) (20,175,000) (20,175,000)
Accumulated deficit................ (11,083,662) (48,632,222) (48,632,222)
------------ ------------ ------------
Total stockholders' equity (defi-
cit)............................. 3,831,500 (36,675,266) 35,343,101
------------ ------------ ------------
Total liabilities, mandatorily
redeemable securities and
stockholders equity (deficit).... $ 8,006,975 $ 30,709,026 $ 35,343,101
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenues, net.......................... $ 2,070,264 $10,866,123 $ 37,203,295
Cost of revenues....................... 1,759,426 9,506,778 33,964,926
----------- ----------- ------------
Gross profit.......................... 310,838 1,359,345 3,238,369
Operating expenses:
General and administrative (excluding
$9,792,700 of non-cash compensation
in 1999)............................. 1,024,303 4,555,312 16,288,690
Sales and marketing (excluding
$482,275 of non-cash compensation in
1999)................................ 449,056 4,181,043 11,034,222
Software development (excluding
$475,500 and $563,025 of non-cash
compensation in 1998 and 1999,
respectively)........................ 30,000 1,435,650 2,083,658
Depreciation and amortization......... 123,715 610,157 1,059,569
Non-cash compensation................. -- 475,500 10,838,000
----------- ----------- ------------
Total operating expenses.............. 1,627,074 11,257,662 41,304,139
Operating loss........................ (1,316,236) (9,898,317) (38,065,770)
Interest income........................ 18,406 221,248 854,207
Interest expense....................... (4,221) (14,070) (336,997)
----------- ----------- ------------
Net loss............................. (1,302,051) (9,691,139) (37,548,560)
Accretion of Series C mandatorily
redeemable convertible preferred
shares to redemption value............ -- -- (11,092,492)
----------- ----------- ------------
Net loss applicable to common
stockholders.......................... $(1,302,051) $(9,691,139) $(48,641,052)
=========== =========== ============
Basic and diluted net loss per share
applicable to common shareholders..... $ (0.24) $ (1.49) $ (6.72)
=========== =========== ============
Weighted average common shares used in
computing basic and diluted net loss
per share applicable to common
stockholders.......................... 5,391,317 6,510,871 7,238,631
=========== =========== ============
Pro forma basic and diluted net loss
per common share (unaudited).......... $ (2.23)
============
Weighted average shares used in
computing pro forma basic and diluted
net loss per common share
(unaudited)........................... 16,864,162
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MANDATORILY REDEEMABLE SECURITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Mandatorily Redeemable Securities
----------------------------------------------------
Series C
Convertible Total
Preferred Stock Common Stock Mandatorily
--------------------- ------------------ Redeemable
Shares Amount Shares Amount Securities
--------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at
December 31,
1996............
Issuance of
common stock in
connection with
business
acquisition.....
Issuance of
common stock....
Issuance of
common stock
options for non-
compete
agreements......
Issuance of
common stock
options for
consulting
services........
Net loss........
Balance at
December 31,
1997............
Issuance of
common stock
options for
consulting
services........
Issuance of
restricted
common stock in
connection with
business
acquisition.....
Amortization of
deferred
compensation....
Issuance of
common stock....
Exercise of
common stock
options.........
Issuance of
Series A
convertible
preferred
stock...........
Issuance of
Series B
convertible
preferred
stock...........
Net loss........
Balance at
December
31,1998.........
Amortization of
deferred
compensation....
Purchase of
treasury stock..
Issuance of
common stock.... 370,000 $1,387,500 $ 1,387,500
Deferred
compensation
related to stock
options.........
Compensation
related to
issuance
of common stock
and common stock
options at below
estimated
fair value...... 3,792,500 3,792,500
Exercise of
common stock
options.........
Exercise of
common stock
warrants........
Issuance of
Series C
mandatorily
redeemable
convertible
preferred
stock........... 6,269,875 $27,795,875 27,795,875
Accertion of
Series C
manditorily
redeemable
convertible
preferred stock
to redemption
value........... 11,092,492 11,092,492
Net loss........
--------- ----------- ------- ---------- -----------
Balance at
December
31,1999......... 6,269,875 $38,888,367 370,000 $5,180,000 $44,068,367
========= =========== ======= ========== ===========
<CAPTION>
Stockholders' Equity (Deficit)
---------------------------------------------------------------------------------
Receivable
Series A and B from
Convertible Officer
Preferred Stock Common Stock Additional Treasury Stock for
----------------- ----------------- Paid-in -------------------- Issuance
Shares Amount Shares Amount Capital Shares Amount of Stock
--------- ------- --------- ------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996............ 4,495,002 $44,950 $ 356,200
Issuance of
common stock in
connection with
business
acquisition..... 290,000 2,900 297,100
Issuance of
common stock.... 1,441,300 14,413 1,405,587
Issuance of
common stock
options for non-
compete
agreements...... 199,386
Issuance of
common stock
options for
consulting
services........ 10,518
Net loss........
--------- ------- --------- ------- ------------
Balance at
December 31,
1997............ 6,226,302 62,263 2,268,791
Issuance of
common stock
options for
consulting
services........ 18,750
Issuance of
restricted
common stock in
connection with
business
acquisition..... 551,580 5,516 945,484
Amortization of
deferred
compensation....
Issuance of
common stock.... 87,000 870 149,130
Exercise of
common stock
options......... 116,000 1,160 (1,156)
Issuance of
Series A
convertible
preferred
stock........... 3,446,070 $34,461 5,935,923
Issuance of
Series B
convertible
preferred
stock........... 1,838,799 18,388 5,951,082
Net loss........
--------- ------- --------- ------- ------------
Balance at
December
31,1998......... 5,284,869 52,849 6,980,882 69,809 15,268,004
Amortization of
deferred
compensation....
Purchase of
treasury stock.. (100,000) $(200,000)
Issuance of
common stock.... 250,000 2,500 2,037,500 100,000 200,000 $(960,000)
Deferred
compensation
related to stock
options......... 22,335,000
Compensation
related to
issuance
of common stock
and common stock
options at below
estimated
fair value...... 4,410,000
Exercise of
common stock
options......... 5,392 54 8,273
Exercise of
common stock
warrants........ 459,139 4,591 (4,132)
Issuance of
Series C
mandatorily
redeemable
convertible
preferred
stock...........
Accertion of
Series C
manditorily
redeemable
convertible
preferred stock
to redemption
value........... (11,092,492)
Net loss........
--------- ------- --------- ------- ------------ --------- ---------- -----------
Balance at
December
31,1999......... 5,284,869 $52,849 7,695,413 $76,954 $32,962,153 -- $ -- $(960,000)
========= ======= ========= ======= ============ ========= ========== ===========
<CAPTION>
------------------------------------------
Total
Stockholders'
Accumulated Deferred Equity
Deficit Compensation (Deficit)
------------- ------------- --------------
<S> <C> <C> <C>
Balance at
December 31,
1996............ $ (90,472) $ 310,678
Issuance of
common stock in
connection with
business
acquisition..... 300,000
Issuance of
common stock.... 1,420,000
Issuance of
common stock
options for non-
compete
agreements...... 199,386
Issuance of
common stock
options for
consulting
services........ 10,518
Net loss........ (1,302,051) (1,302,051)
------------- ------------- --------------
Balance at
December 31,
1997............ (1,392,523) 938,531
Issuance of
common stock
options for
consulting
services........ 18,750
Issuance of
restricted
common stock in
connection with
business
acquisition..... $ (951,000) --
Amortization of
deferred
compensation.... 475,500 475,500
Issuance of
common stock.... 150,000
Exercise of
common stock
options......... 4
Issuance of
Series A
convertible
preferred
stock........... 5,970,384
Issuance of
Series B
convertible
preferred
stock........... 5,969,470
Net loss........ (9,691,139) (9,691,139)
------------- ------------- --------------
Balance at
December
31,1998......... (11,083,662) (475,500) 3,831,500
Amortization of
deferred
compensation.... 475,500 475,500
Purchase of
treasury stock.. (200,000)
Issuance of
common stock.... 1,280,000
Deferred
compensation
related to stock
options......... (22,335,000) --
Compensation
related to
issuance
of common stock
and common stock
options at below
estimated
fair value...... 2,160,000 6,570,000
Exercise of
common stock
options......... 8,327
Exercise of
common stock
warrants........ 459
Issuance of
Series C
mandatorily
redeemable
convertible
preferred
stock........... --
Accertion of
Series C
manditorily
redeemable
convertible
preferred stock
to redemption
value........... (11,092,492)
Net loss........ (37,548,560) (37,548,560)
------------- ------------- --------------
Balance at
December
31,1999......... $(48,632,222) $(20,175,000) $(36,675,266)
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
<S> <C> <C> <C>
1997 1998 1999
----------- ----------- ------------
Cash flows from operating activities
Net loss.............................. $(1,302,051) $(9,691,139) $(37,548,560)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 14,442 118,014 739,646
Amortization of intangible assets... 109,273 425,016 319,923
Provision for doubtful accounts..... 84,885 243,784 3,955,938
Non-cash compensation expense....... -- -- 8,202,500
Amortization of deferred compensa-
tion............................... -- 475,500 2,635,500
Imputed interest on long term pay-
able............................... 74,950
Common stock options issued for con-
sulting
services........................... 10,518 18,750 --
Changes in assets and liabilities, net
of effects of business acquisition:
Accounts receivable................. (616,666) (2,515,547) (7,336,359)
Other current assets................ (62,846) (365,626) (808,269)
Other assets........................ 5,607 (181,907) (400,917)
Accounts payable.................... 510,650 1,484,365 3,327,817
Accrued and other current liabili-
ties............................... 333,212 226,380 4,859,726
Payroll related liabilities......... 60,323 303,198 610,382
Taxes payable....................... 165,001 149,902 1,685,219
----------- ----------- ------------
Net cash used in operating activi-
ties.............................. (687,652) (9,309,310) (19,682,504)
----------- ----------- ------------
Cash flows from investing activities
Purchase of restricted certificates of
deposit.............................. (100,000) -- (334,000)
Purchase of property and equipment.... (56,047) (473,717) (13,918,093)
Business acquisition, net of cash ac-
quired............................... (92,638) -- --
----------- ----------- ------------
Net cash used in investing activi-
ties.............................. (248,685) (473,717) (14,252,093)
----------- ----------- ------------
Cash flows from financing activities
Repayments of capital lease........... (3,931) (26,058) (61,828)
Proceeds from issuance of long term
debt................................. 6,883,960
Proceeds from exercise of common stock
options and warrants................. 8,786
Proceeds from issuance of mandatorily
redeemable common stock.............. 1,387,500
Proceeds from issuance of common
stock................................ 1,420,000 150,004 640,000
Repurchase treasury stock............. (200,000)
Proceeds from issuance of Series A and
B convertible preferred stock, net... -- 11,939,854 --
Proceeds from issuance of Series C
mandatorily redeemable convertible
preferred stock, net................. -- -- 27,795,875
----------- ----------- ------------
Net cash provided by financing ac-
tivities.......................... 1,416,069 12,063,800 36,454,293
----------- ----------- ------------
Net increase in cash and cash
equivalents....................... 479,732 2,280,773 2,519,696
Cash and cash equivalents, beginning of
period................................ 292,019 771,751 3,052,524
----------- ----------- ------------
Cash and cash equivalents, end of peri-
od.................................... $ 771,751 $ 3,052,524 $ 5,572,220
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.Organization and Nature of Business
Broadview Networks Holdings, Inc. (the "Company"), formerly Coaxicom, Inc.
(prior to the name change as of October 5, 1999), is a privately held
Delaware corporation originally incorporated in March 1996. The Company's
principal business consists of providing a complete line of local, long
distance, Internet, and data services to customers within New York and
Massachusetts.
Effective September 30, 1997, the Company acquired Briar Joy Development
Corporation d/b/a SCC Telecommunications ("SCC"), a provider of commercial
and residential telecommunication services. On April 16, 1998, the name of
SCC was formally changed to Community Networks, Inc. ("CNI"). On October 5,
1999, the name of CNI was formally changed to Broadview Networks, Inc.
("BNI").
On November 25, 1997, the Company, together with three computer
programmers, formed National CEJ, LLC ("CEJ") for the purpose of developing
operating software for the telecommunications industry. Concurrent with the
formation of CEJ, the Company obtained a 61% interest in CEJ. On January
29, 1998, the Company acquired the remaining 39% interest in CEJ. On May 7,
1998 the name of CEJ was formally changed to Open Support Systems LLC
("OSS").
2.Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, BNI and OSS. All significant
intercompany transactions have been eliminated in consolidation.
On June 29, 1998 the Company reorganized as a Delaware corporation, which
was effected in a manner so as to exchange each share of Coaxicom Inc., the
New York Corporation, for 290 shares of the Company. All share information
in the consolidated financial statements has been retroactively restated to
reflect the effect of this exchange as if it had occurred at the beginning
of the earliest period presented.
Revenue Recognition
The Company recognizes revenue on telecommunications and enhanced
communications services in the period that services are earned. Unbilled
revenue included in accounts receivable represents revenue for earned
services which will be billed in the succeeding month and totaled
$1,737,845 and $3,082,386 as of December 31, 1998 and 1999, respectively.
Beginning August 1, 1999, the Company began invoicing new customers one
month in advance for recurring services which resulted in deferred revenue
of $188,107 at December 31, 1999.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. A significant
portion of cash balances are maintained with several high credit quality
financial institutions, which are members of the FDIC.
F-7
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Restricted Certificates of Deposit
At December 31, 1998 and 1999, the Company held bank certificates of deposit
which are restricted to cover letters of credit required as security by a
long distance carrier and the lease of premises housing a switch facility.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets. The
estimated useful life is three years for computer equipment, five years for
furniture and fixtures, and seven years for network equipment. Leasehold
improvements are amortized on a straight-line basis over the shorter of
their estimated useful lives or the related lease term. Maintenance and
repairs are expensed as incurred.
Intangible Assets
Intangible assets consist of customer lists and non-compete agreements. The
intangible assets were amortized over a period of two years using the
straight-line method and were fully amortized during 1999.
Impairment of Long-lived Assets
Long-lived assets, including intangibles, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of the asset, a
loss is recognized for the difference between the fair value and carrying
value of the asset.
Income Taxes
The Company recognizes deferred taxes using the asset and liability method
of accounting for income taxes. Under the asset and liability method,
deferred income taxes are recognized for differences between the financial
reporting and tax bases of assets and liabilities at enacted statutory tax
rates in effect for the years in which the differences are expected to
reverse. The effect on deferred taxes of a change in tax rates is recognized
in income in the period that includes the enactment date. In addition,
valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
Stock-Based Compensation
The Company accounts for its employee stock option plans in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). Under APB 25, generally no compensation expense is
recorded when the terms of the award are fixed and the exercise price of the
employee stock option equals or exceeds the fair value of the underlying
stock on the date of grant. The Company adopted the disclosure-only
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). In accordance with
SFAS 123, stock options granted to non-employees are recorded at fair value.
F-8
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Software Development Costs
On January 1, 1999, the Company adopted Statement of Position ("SOP") 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use". SOP 98-1 provides guidance for the accounting for computer
software developed or acquired for internal use including the requirement to
capitalize certain costs and amortization of these costs. Costs for
preliminary stage projects are expensed as incurred while application stage
projects are capitalized. The latter costs are typically internal payroll
costs of employees associated with the development of internal use computer
software. The Company commences amortization of the software on a straight-
line basis over the estimated useful life, typically two years, when it is
ready for intended use.
The Company expensed approximately $30,000, $1,435,000, and $2,084,000 of
software development costs for the years ended December 31, 1997, 1998 and
1999, respectively. During the year ended December 31, 1999, the Company
capitalized $667,212 of software development costs, and amortized $19,953 of
these costs which are presented in property and equipment.
Advertising Costs
Advertising costs are charged to expense the first time the advertising
takes place and totaled approximately $288,000, $1,495,000, and $1,001,000
for the years ended December 31, 1997, 1998 and 1999, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Segment Reporting
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS 131 uses a management approach to report financial and
descriptive information about a Company's operating segments. Operating
segments are revenue-producing components of the enterprise for which
separate financial information is produced internally for the Company's
management. Under this definition, the Company operated, for all periods
presented, as a single segment.
Comprehensive Income
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income",
which establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. SFAS 130 was
effective for fiscal years beginning after December 15, 1997. Implementation
of this statement has not had an impact on the Company's financial
statements as the Company has no other comprehensive income to report.
F-9
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Recent Accounting Pronouncements
In June 1998, FASB issued SFAS 133, "Accounting for Derivatives and Hedging
Activities", which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS 133 is effective for all
fiscal quarters or fiscal years beginning after June 15, 2000, as amended by
SFAS 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB Statement No. 133," issued in June
1999. The Company does not expect the adoption of this statement to have a
significant impact on the Company's results of operations, cash flows or
financial position.
Net Loss Per Share
Basic net loss per common share is computed by dividing the net loss
applicable to common stockholders for the year by the weighted-average
number of common shares and mandatorily redeemable common shares outstanding
during the year. Diluted net loss per common share is computed by dividing
the net loss applicable to common stockholders for the year by the weighted-
average number of common and common stock equivalents, which include
unvested restricted common shares, common shares issuable upon the exercise
of stock options, warrants and upon conversion of the mandatorily redeemable
and convertible preferred shares outstanding during the year. Common stock
equivalents are excluded from the computation if their effect is
antidilutive.
At December 31, 1997, 1998, and 1999 523,875, 6,436,108 and 12,847,413
common stock equivalents, respectively, were excluded from basic and diluted
net loss per share calculation as their inclusion would have been
antidilutive. The unaudited pro forma basic and diluted net loss per share
is computed by dividing the net loss by the sum of the weighted average
number of shares of common stock outstanding giving effect for the one for
one conversion into common stock of all 11,554,744 shares of the Series A
and Series B convertible preferred stock and Series C mandatorily redeemable
preferred stock, as if such conversions had occurred at the beginning of the
earliest period presented or issuance date if later.
As the calculation of the unaudited pro forma basic and diluted net loss per
common share includes the assumed conversion of all preferred stock that
will occur upon the consummation of an initial public offering, the
accretion to the redemption value related to the Series C preferred stock of
$11,092,492 has been excluded from the calculation of the net loss
applicable to common stockholders.
F-10
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the numerator and denominator used in the calculation
of basic and diluted and unaudited pro forma basic and diluted net loss
per common share is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Numerator:
Net loss.......................... $(1,302,051) $(9,691,139) $(37,548,560)
Accretion of mandatorily
redeemable preferred stock....... -- -- (11,092,492)
----------- ----------- ------------
Net loss applicable to common
stockholders..................... $(1,302,051) $(9,691,139) $(48,641,052)
=========== =========== ============
Denominator:
Weighted average shares of common
stock outstanding................ 5,391,317 6,510,871 7,137,999
Weighted average shares of
mandatorily redeemable common
stock............................ -- -- 100,632
----------- ----------- ------------
Weighted average common shares
used in computing basic and
diluted net loss per share....... 5,391,317 6,510,871 7,238,631
----------- ----------- ------------
Basic and diluted net loss per
common share..................... $ (0.24) $ (1.49) $ (6.72)
=========== =========== ============
Weighted average shares used in
computing basic and diluted net
loss per common share............ 7,238,631
Adjustment to reflect the assumed
conversion of all mandatorily
redeemable and convertible
preferred stock (unaudited)...... 9,625,531
------------
Weighted average shares used in
computing pro forma basic and
diluted net loss per common share
(unaudited)...................... 16,864,162
------------
Pro forma basic and diluted net
loss per common share
(unaudited)...................... $ (2.23)
============
</TABLE>
Pro Forma Stockholders' Equity (unaudited)
As described in Notes 16 and 17, upon completion of the Company's
qualified initial public offering, all of the mandatorily redeemable
preferred stock and convertible preferred stock outstanding as of the
closing date, will automatically be converted into an aggregate amount of
shares of common stock. In addition, the mandatory redemption feature of
the Series C and Series D preferred stock and the mandatorily redeemable
common stock will terminate upon completion of an initial public offering.
Unaudited pro forma shareholders' equity at December 31, 1999, as adjusted
for the conversion of the mandatorily redeemable convertible preferred
stock outstanding at December 31, 1999 and the termination of the
mandatorily redemption feature of the common shares, is presented in the
accompanying balance sheet.
F-11
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reclassifications
Certain prior year balances have been reclassified to conform to current
year presentation.
3.Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
----------- -------- ----------
<S> <C> <C> <C>
Cash paid during the period for:
Interest.................................. $ 4,221 $ 14,070 $ 143,421
Supplemental noncash investing and
financing activities:
Common stock issued to an officer in
consideration of a note receivable....... $1,600,000
Equipment acquired under long term credit
(net of imputed interest in the amount of
$315,333)................................ $1,652,438
Equipment acquired under capital lease.... $ 6,108 $126,933 $ 107,786
Acquisition of business (net of cash
acquired):
Fair value of assets acquired............ $ 1,586,557
Fair value of liabilities assumed........ (1,193,919)
Common stock issued...................... (300,000)
-----------
$ 92,638
===========
</TABLE>
4.Risks and Uncertainties
The Company has experienced significant net operating losses and negative
cash flow since its inception. To date, the Company has funded its
operations and the construction of its network with external financing
through various preferred stock, common stock and debt issuances. The
Company's continued network deployment will require continued substantial
capital expenditures. The Company's ability to fund these expenditures is
dependent upon the Company raising substantial financing. Failure to raise
sufficient capital could compel the Company to delay or modify some of its
plans or expenditures. However, management believes that the Company's
current cash resources and credit facility together with anticipated equity
financing and expected revenue growth will be sufficient to fund the
Company's operations for the next twelve months (See Note 18).
The Company is dependent upon certain carriers for the provision of
telecommunications services to its customers. The Company's two largest
carriers accounted for approximately 84%, 88% and 90% of the costs incurred
by the Company to provide service to customers for the years ended December
31, 1997, 1998 and 1999, respectively.
5.Acquisition
On September 30, 1997, the Company acquired all of the outstanding shares
of common stock of BNI and settled certain outstanding debts of BNI for
290,000 shares of common stock and $180,000 cash. The total cost of
acquisition, accounted for using the purchase method, approximated
$504,000. The excess acquisition costs over the fair value of acquired net
assets of approximately $655,000 was allocated to an intangible for the
value of BNI's customer lists. The operating results of BNI have been
included in the consolidated statement of operations from the date of
acquisition. Unaudited pro forma results of operations as if the
acquisition had
F-12
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
taken place at the beginning of 1997, would have been as follows: revenue
of $4,284,000, net loss of $1,630,000 and basic and diluted net loss per
share of $0.30.
Such pro forma amounts are not necessarily indicative of the actual
consolidated results of operations that would have been reported as if the
acquisition had been effective as of the beginning of 1997. In connection
with the BNI acquisition, the Company also granted two employees of BNI,
common stock options in respect of non-compete agreements signed by the
employees. The aggregate fair value of the options in excess of the
exercise price in the amount of $199,386 was presented as an intangible
asset and was amortized over the two-year term of the agreements.
6.Deferred Compensation
On January 29, 1998, the Company issued 551,580 shares of its restricted
common stock valued at $951,000 to certain employees in exchange for their
interest in OSS and their employment agreements to provide development
services for the Company for a period of two years. Under the restricted
common stock agreements, the Company has the right to buy back the unvested
portion of the restricted shares for nominal consideration upon voluntary
separation by the employee. The restricted common stock grants are being
recorded as deferred compensation and are being amortized as compensation
expense over the term of the employment agreements.
7.Property and Equipment
Property and equipment, at cost, consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Furniture and fixtures............................... $ 72,936 $ 916,358
Equipment............................................ 691,915 1,664,022
Network equipment.................................... -- 7,886,379
Leasehold improvements............................... 27,192 182,562
Capitalized software costs........................... -- 667,212
Construction in progress--network equipment.......... -- 5,153,827
--------- -----------
792,043 16,470,360
Less: Accumulated depreciation and amortization...... (133,120) (872,766)
--------- -----------
$ 658,923 $15,597,594
========= ===========
</TABLE>
Included in network equipment and construction in progress are colocation
fees that represent one time fees paid to obtain central office space for
location of certain Company equipment. Colocation fees amounted to
$2,304,763 as of December 31, 1999 and are being amortized over seven
years. Included above is equipment under capital lease of $133,041 and
$240,827 as of December 31, 1998 and 1999, less accumulated depreciation
and amortization of $27,306 and $56,639, respectively.
F-13
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8.Intangible Assets
Intangible assets consist of the following at December 31 (see Note 5):
<TABLE>
<CAPTION>
1998 1999
--------- --------
<S> <C> <C>
Customer lists.......................................... $ 654,826 $654,826
Non-compete agreements.................................. 199,386 199,386
--------- --------
854,212 854,212
Less: Accumulated amortization.......................... (534,289) (854,212)
--------- --------
$ 319,923 $ --
========= ========
</TABLE>
9.Obligations under Capital and Operating Leases
The future minimum lease payments under capital leases at December 31, 1999
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000.............................................................. $ 81,380
2001.............................................................. 76,759
2002.............................................................. 58,640
2003.............................................................. 6,398
---------
Total minimum lease payments.................................... 223,177
Less: amounts representing interest............................... (36,766)
---------
$ 186,411
=========
</TABLE>
The Company rents office space and equipment under various operating
leases. The future minimum lease payments under operating leases at
December 31, 1999 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000............................................................ $ 1,369,137
2001............................................................ 1,672,507
2002............................................................ 1,542,691
2003............................................................ 1,557,832
2004............................................................ 1,394,528
Thereafter...................................................... 6,106,821
-----------
Total minimum lease payments.................................. $13,643,516
===========
</TABLE>
Total rent expenses under these operating leases for the years ended
December 31, 1997, 1998 and 1999 amounted to $54,230, $208,013 and
$767,804, respectively.
10.Long-Term Debt
In October 1999, the Company entered into a seven-year, $36 million credit
facility with a major financial institution. Advances under the credit
facility are available through September 30, 2001 and may be used to fund
the purchase of certain network-related equipment and certain costs related
to the network implementation. The credit facility provides the lender with
a first priority
F-14
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
collateralized interest in all assets funded under the credit facility.
Interest on the credit facility is capitalized from the date of each
funding until December 1, 2001. At this time the Company will begin making
stepped principal payments with accrued interest for four years. At
December 31, 1999, $6.9 million under the facility was outstanding with an
average interest rate of 11.7%. In connection with the issuance of the
debt, the Company paid $540,000 as commitment fee, which is being amortized
over the life of the loan.
Under the terms of the credit facility agreement, the Company is required
to comply with certain financial covenants, including minimum revenues,
minimum gross margins, fixed charged coverage ratio (as defined), and
minimum leverage ratio. As of December 31, 1999, the Company has met all
required covenants.
The maturities of long-term debt for the five years after December 31, 1999
are as follows:
<TABLE>
<S> <C>
2000.............................................................. $ 64,277
2001.............................................................. 835,545
2002.............................................................. 1,607,596
2003.............................................................. 2,378,942
Thereafter........................................................ 1,997,600
----------
Total............................................................ $6,883,960
==========
</TABLE>
11.Long-Term Payable
Under a purchase agreement with a vendor, the Company pays a specified
portion of each invoice within normal trade terms. The balance of each
invoice is due and payable in 18 months from the invoice date. These
balances are non-interest bearing and composed at December 31, 1999 as
follows:
<TABLE>
<S> <C>
Principal amount.............................................. $ 1,967,771
Less--unamortized discount based on imputed interest rate of
11.7%........................................................ (240,383)
-----------
1,727,388
Less--current maturities...................................... (677,991)
-----------
$ 1,049,397
===========
</TABLE>
12.Commitments and Contingencies
The Company purchases long distance services under a contract agreement
with one of its carriers. Minimum purchase requirements under this
agreement are $300,000 per month through April 2001.
During the year ended December 31, 1999, the Company entered into
employment agreements with seven executives. These agreements provide for
base salaries and performance bonuses over periods ranging from one to two
years. These employment agreements also provide for severance compensation
for a period of up to one year after termination if the employment
agreement of the executive is terminated without cause.
F-15
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13.Income Taxes
The components of the net deferred tax asset consist of the following at
December 31:
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Accounts receivable............................... $ 129,983 $ 442,847
Intangible assets................................. 23,974 --
Deferred income................................... -- 102,000
Organization costs................................ 7,423 5,466
Conversion costs.................................. 12,916 58,843
Net operating loss carryforwards.................. 3,493,655 12,514,178
Other............................................. 7,028 21,898
----------- ------------
Total deferred tax assets........................ 3,674,979 13,145,232
----------- ------------
Accelerated depreciation.......................... (41,069) (283,384)
----------- ------------
Total deferred tax liabilities................... (41,069) (283,384)
----------- ------------
Net deferred tax asset........................... 3,633,910 12,861,848
Valuation allowance.............................. (3,633,910) (12,861,848)
----------- ------------
$ -- $ --
=========== ============
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards
totaling approximately $36.8 million, which expire at various times through
2019. Under Section 382 of the Internal Revenue code of 1986, as amended,
utilization of prior net operating losses is limited after an ownership
change, as defined. As a result, a portion of the net operating loss
carryforward is subject to substantial limitation due to ownership changes.
As each entity files separate federal and state tax returns, the net
operating losses may be used to offset taxable income of each separate
company. The Company has recorded a valuation allowance against the entire
amount of net deferred tax assets since management believes that based upon
available evidence, it is more likely than not that these assets will not
be realized.
F-16
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14.Stock Options
In February 1997, the Company adopted the 1997 Stock Option Plan (the "1997
Plan"). The 1997 Plan provides for up to 2,900,000 shares for grants,
either as incentive stock options or as nonqualified stock options, to
purchase shares of the Company's common stock and for other stock-based
awards to officers, directors and key employees responsible for the
direction and management of the Company and to non-employee consultants and
independent contractors. In September 1999, the board of directors and
stockholders of the Company approved an increase in the number of shares
available under the 1997 Plan to 4,100,000 shares. The options generally
expire five years from the date of 100% vesting. The following information
relates to options issued under the Plan.
<TABLE>
<CAPTION>
Weighted Average
Exercise Price
Shares Per Share
--------- ----------------
<S> <C> <C>
Outstanding January 1, 1997...................... --
Granted.......................................... 554,325 $0.92
Exercised........................................ --
Forfeited........................................ --
---------
Outstanding January 1, 1998...................... 554,325 0.92
Granted.......................................... 975,800 1.74
Exercised........................................ (116,000) 0.00
Forfeited........................................ (126,600) 1.72
---------
Outstanding January 1, 1999...................... 1,287,525 1.55
Granted.......................................... 2,481,740 4.49
Exercised........................................ (5,392) 1.54
Forfeited........................................ (125,670) 2.42
---------
Outstanding December 31, 1999.................... 3,638,203 $3.53
========= =====
Shares exercisable at December 31, 1998.......... 539,025 $1.28
========= =====
Shares exercisable at December 31, 1999.......... 833,573 $1.47
========= =====
</TABLE>
The following table summarizes information about the stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted Average
Exercise Outstanding Remaining
Price Options Contractual Life Exercisable
-------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.01 75,690 7.7 75,690
0.34 29,000 7.1 29,000
0.86 165,300 7.3 165,300
1.72 410,431 8.0 301,527
1.75 814,691 9.0 211,819
2.00 162,600 9.5 3,000
2.75 60,000 9.4 --
3.45 43,500 7.7 43,500
3.75 860,870 9.7 800
6.40 954,788 9.8 2,604
9.00 61,333 9.9 333
--------- -------
3,638,203 833,573
========= =======
</TABLE>
F-17
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1997, in connection with the acquisition of BNI, stock options
having an aggregate estimated fair value of $199,386 were issued for two
non-compete agreements. This amount was deferred and amortized over the two
year term of the agreements. Stock options granted for consulting services
were recorded at a fair value of $10,518 and $18,750, for the years ended
December 31, 1997 and 1998, respectively.
The Company used the minimum value method to value the options issued. The
weighted average fair value of options granted during 1997, 1998 and 1999
were $0.39, $0.39 and $10.24, respectively. The fair value was based on a
risk free interest rate of approximately 6%, 5% and 5% for 1997, 1998 and
1999, respectively, zero dividend yield and an expected life of 5 years for
1997, 1998 and 1999.
In general, the options vest 25% after one year and then in equal
installments every month for a period of 36 months. Upon a change of
control of the Company, the unvested portion of the options granted to
various executive officers will automatically become 100% vested.
Had compensation cost been determined based upon the fair value method of
SFAS 123, the Company's net loss on a pro forma basis would have been
adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss:
As reported........................ $(1,302,051) $(9,691,139) $(48,641,052)
Pro forma.......................... $(1,430,484) $(9,776,664) $(52,598,749)
Net loss per share:
As reported--basic and diluted..... $ (0.24) $ (1.49) $ (6.72)
Pro forma--basic and diluted....... $ (0.27) $ (1.51) $ (7.27)
</TABLE>
During 1999, the Company granted stock options to employees to purchase
shares of common stock at exercise prices ranging from $1.75-$9.00 per
share. In connection with these issuances, the Company recorded $22,335,000
of deferred compensation and recognized $2,160,000 in 1999 as compensation
expense. The deferred compensation is being amortized over the vesting
period, which is generally four years.
The Company determined the amount of deferred compensation as the
difference between the estimated fair market value of the options granted
and the exercise price on the date of grant.
15.Employee Savings and Retirement Plan
The Company has a 401(k) plan that allows eligible employees to contribute
up to 15% of their salary, subject to annual limits. Under the plan,
eligible employees may defer a portion of their pretax salaries but not
more than the statutory limit. The Company matches the employees'
contributions, limited to a maximum of 1.5% of participants' eligible
compensation. The Company contributed approximately $0, $3,981 and $34,461
to the plan during the years ended December 31, 1997, 1998, and 1999,
respectively.
16.Mandatorily Redeemable Securities
Series C Mandatorily Redeemable Convertible Preferred Stock ("Series C")
On April 23, 1999, the Company issued 6,269,875 shares of Series C to
investors for $27,795,875, net of $204,125 issuance expense. This issue has
a stated liquidation preference
F-18
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of $4.46580 per share, plus all accrued and unpaid dividends whether or not
declared ("Series C Liquidation Preference") and is senior in liquidation
to the Series A, Series B, and all common stock. Holders of the Series C
have the right to convert their shares into common stock at a 1:1 ratio
subject to certain antidilution rights, as defined. Holders of Series C are
entitled to receive
when, as and if, declared by the Company's board of directors, cumulative
preferential dividends at an annual rate of 8% of the Series C Liquidation
Preference. The Series C carries voting rights equal to one vote per share,
on an as converted basis. In addition, holders of Series C, voting as a
class, have veto rights on certain specific corporate actions of the
Company, as defined. At any time after April 23, 2005, the Series C is
redeemable at the option and written election of the holders of at least
50% of the Series C within one year of such election at the greater of (i)
the fair market value of the Common Stock underlying the Series C to be
redeemed, or (ii) the aggregate Series C Liquidation Preference of the
Series C to be redeemed, as defined.
The Series C issue provides an option, exercisable through February 15,
2000, under which the Series C holders may acquire 5,300,892 shares of
Series D Mandatorily Redeemable Convertible Preferred Stock ("Series D")
for $5.28213 per share. The Company allocated a portion of the Series C
proceeds to the Series D option based upon its relative fair value at the
time of the Series C issuance. The fair value of the Series D option was
determined to be approximately $5.3 million options using the Black-Scholes
options pricing model.
Pursuant to the terms of the Series C agreement, the Company may cause the
outstanding shares of Series C to be automatically converted into common
stock at the Series C conversion price upon the consummation of an IPO in
which the gross proceeds to the Company are equal to or greater than $50
million and the price per share paid in the offering is greater than three
times the Series C conversion price.
The carrying value of the Series C is being accreted to its redemption
value over the period from issuance through the earliest redemption date.
Accretion related to the Series C totaled $11,092,492 for the year ended
December 31, 1999.
Series D Mandatorily Redeemable Convertible Preferred Stock ("Series D")
The Series D issue will have a stated liquidation preference of $5.28213
per share, plus all accrued and unpaid dividends whether or not declared
("Series D Liquidation Preference") and is equal in seniority with the
Series C holders and is senior in liquidation to the Series A, Series B,
and all common stock. Holders of the Series D have the right to convert
their shares into common stock at a 1:1 ratio subject to certain
antidilution rights, as defined. Holders of Series D are entitled to
receive when, as and if, declared by the Company's board of directors,
cumulative preferential dividends at an annual rate of 8% of the Series D
Liquidation Preference. The Series D carries voting rights equal to one
vote per share, on an as converted basis. In addition, holders of Series D,
voting as a class, have veto rights on certain specific corporate actions
of the Company, as defined. At any time after April 23, 2005, the Series D
is redeemable at the option and written election of the holders of at least
50% of the Series D within one year of such election at the greater of (i)
the fair market value of the Common Stock underlying the Series D to be
redeemed, or (ii) the aggregate Series D Liquidation Preference of the
Series D to be redeemed, as defined. There were no Series D issued or
outstanding as of December 31, 1999 (See Note 18).
F-19
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pursuant to the terms of the Series D agreement, the Company may cause the
outstanding shares of Series D to be automatically converted into common
stock at the Series D conversion price upon the consummation of an IPO in
which the gross proceeds to the Company are equal to or greater than $50
million and the price per share paid in the offering is greater than three
times the Series D conversion price.
Mandatorily Redeemable Common Stock
On September 23, 1999, the Company sold 370,000 shares of common stock to
an executive officer of the Company for $1,387,500. In connection with this
transaction, the Company recorded compensation expense of $3,792,500
representing the difference between the estimated fair market value of the
common stock purchased and the amount paid. If the Company is not a public
Company after the executive's employment ends, after at least an initial
six month holding period, the executive may require the Company to purchase
the shares at their then fair market value as determined by an independent
appraiser.
17. Stockholders' Equity
Common Stock
On January 29, 1998, the Board of Directors amended the certificate of
incorporation to increase the authorized shares of Common Stock to an
aggregate of 14,500,000 shares with a par value of $.01 and authorized
5,800,000 shares of Convertible Preferred Stock with a par value of $.01.
In April 1999, the Company amended its certificate of incorporation and
increased its authorized capital to 32,000,000 shares of Common Stock, $.01
par value, and 16,900,000 shares of Convertible Preferred Stock, $.01 par
value, of which 3,446,070 shares were designated as Series A, 1,838,799
shares were designated as Series B and 6,269,875 shares were designated as
Series C.
In June 1999, the Company repurchased 100,000 shares of common stock for
$2.00 per share from an executive officer of the Company.
On December 1, 1999, the Company sold 250,000 shares of common stock to an
executive officer for $1.6 million of which $640,000 was paid in January
2000, with the balance of $960,000 under a 10 year full recourse note
bearing interest at 6.47% per annum. On November 30, 1999, the Company sold
100,000 shares of common stock to another executive officer of the Company
for $640,000. In connection with these transactions, the Company recorded
$4,410,000 of compensation expense representing the difference between the
estimated fair market value of the common stock purchased and the amount
paid.
Series A Convertible Preferred Stock ("Series A")
On January 29, 1998, the Company issued 3,446,070 shares of Series A to
investors for $5,970,384, net of $30,531 issuance expense. The Series A is
convertible, at the option of the holder, into shares of common stock at
any time. The conversion ratio is 1:1, subject to certain anti-dilution
protection rights. The Series A automatically converts (i) upon the closing
of the Company's registration statement on a Form S-1 at a per share price
of $6.97 or at an aggregate public offering price of no less than $15
million, prior to underwriting, commissions and expenses; or (ii) at the
election of holders of more than 50% of the then outstanding Series A,
voting together as a single class, at the current conversion ratio. In the
event of liquidation, holders of Series A are entitled to receive, before
any amount shall be paid to
F-20
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
holders of Common Stock, an amount per share equal to $1.74, as adjusted
for any stock dividends, combinations or splits, plus all declared but
unpaid dividends, if any. The Series A carries voting rights equal to one
vote per share, on an as converted basis. Holders of the Series A are
entitled to receive dividends when, as and if, declared by the Company's
board of directors. As of December 31, 1999, no dividends have been
declared.
Series B Convertible Preferred Stock ("Series B")
On September 11, 1998, the Company issued 1,838,799 shares of Series B to
investors for $5,969,470, net of $30,531 issuance expense. The Series B is
convertible, at the option of the holder, into shares of Common Stock at
any time. The conversion ratio is 1:1, subject to certain anti-dilution
protection rights. The Series B automatically converts (i) upon the closing
of the Company's registration statement on a Form S-1 at a per share price
of $6.97 or at an aggregate public offering price of no less than $15
million, prior to underwriting, commissions and expenses; or (ii) at the
election of holders of more than 50% of the then outstanding Series B,
voting together as a single class, at the current conversion ratio. In the
event of liquidation, holders of Series B are entitled to receive, before
any amount shall be paid to holders of Common Stock, an amount per share
equal to $3.26, as adjusted for any stock dividends, combinations or
splits, plus all declared but unpaid dividends, if any. The Series B
carries voting rights equal to one vote per share, on an as converted
basis. Holders of the Series B are entitled to receive dividends when, as
and if, declared by the Company's board of directors. As of December 31,
1999, no dividends have been declared.
Warrants
The Company granted the investors of Series A, warrants to purchase a total
of 344,520 shares of Common Stock at any time after August 1, 1998 at a
price of $0.01 per share. As of the effective date of the re-incorporation
of the Company in the state of Delaware, the warrants were terminated.
In connection with the Series B issuance, the Company granted the investors
of Series B, warrants to purchase a total of 612,183 shares of common stock
at any time after the closing of the transaction at a price of $0.001 per
share. The fair value of the warrants at the time of grant was
approximately $1,065,000. As a result of the closing of the Series C on
April 23, 1999, 459,139 warrants issued to the investors of Series B were
exercised for 459,139 shares of common stock and the balance of the
warrants was terminated.
18. Subsequent Events
On February 2, 2000, the Company amended its certificate of incorporation
and increased its authorized capital to 36,000,000 shares of common stock,
$0.01 par value, and 17,600,000 shares of convertible preferred shares,
$0.01 par value.
In February 2000, the Company amended the Series D agreement and issued
6,006,959 shares of Series D to investors for $27,950,000, net of $50,000
issuance expense. The Series D issue has a stated liquidation preference of
$4.66126 per share, plus all accrued and unpaid dividends whether or not
paid. The Series D were issued with a conversion ratio that represented a
discount from the market value of the common stock at the time of issuance.
Accordingly, the discount amount is considered incremental yield ("the
beneficial conversion feature"), to the preferred stockholders and has been
accounted for as an embedded dividend to preferred stockholders. Based on
the conversion terms of the Series D, an embedded dividend of
F-21
<PAGE>
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximately $30.1 million will be added to the net loss in the
calculation of net loss applicable to common stockholders in the first
quarter of 2000.
In connection with the Series D issuance, 214,534 shares of Series D were
purchased by an executive officer of the Company. In connection with this
transaction, the Company will record compensation expense of approximately
$3,075,000 in the first quarter of 2000, representing the difference
between the estimated fair market value of the Series D purchased and the
amount paid.
During January 2000, the Company granted 270,900 stock options to employees
under the 1997 Plan to purchase shares of common stock at an exercise price
of $9.00 per share.
On February 3, 2000, the board of directors approved a new stock option
plan (the "2000 Plan") that provides for up to 5,200,000 shares of common
stock for grant, either as incentive stock options or as nonqualified stock
options, to purchase shares of the Company's common stock and for other
stock-based awards to officers, directors and key employees responsible for
the direction and management of the Company and to non-employee consultants
and independent contractors. The Company granted 1,765,121 options to
employees and directors to purchase shares of common stock at an exercise
price of $9.00 per share. In connection with these awards, the Company will
record approximately $20,360,000 of deferred compensation which will be
amortized over the vesting period, which is generally four years. In
addition, the board of directors approved an Employee Stock Purchase plan
to purchase up to 300,000 shares of common stock.
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, sales person or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. This
information contained in this prospectus is current only as of its date.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 18
Corporate Information.................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 28
Management............................................................... 50
Certain Transactions..................................................... 58
Principal Stockholders................................................... 62
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 70
Underwriting............................................................. 72
Legal Matters............................................................ 74
Experts.................................................................. 74
Where You Can Find More Information about Broadview Networks............. 74
Index to Financial Statements............................................ F-1
</TABLE>
------------
Through and including [ ] , 2000, (the 25th day after the date of this
prospectus) all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[ ] Shares
[Broadview Networks LOGO]
Common Stock
----------------
PROSPECTUS
----------------
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Representatives of the Underwriters
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and
commissions, are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee................................................ $[ ]
Printing and engraving expenses..................................... $[ ]
Legal fees and expenses............................................. $[ ]
Accountants' fees and expenses...................................... $[ ]
NASD filing fee..................................................... $[ ]
Nasdaq listing fee.................................................. $[ ]
Blue Sky fees and expenses.......................................... $[ ]
Transfer Agent's fees and expenses.................................. $[ ]
Miscellaneous costs................................................. $[ ]
=====
</TABLE>
<TABLE>
<S> <C>
Total............................................................. $[ ]
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Registrant's Restated certificate of incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's bylaws provide for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not
opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
in the Registrant's bylaws, and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
Item 15. Recent Sales of Unregistered Securities.
Since February 1, 1997, the Company has issued and sold the following
unregistered securities:
(1) On June 30, 1998, simultaneously with the merger of Coaxicom, Inc.
New York and Coaxicom, Inc. Delaware, the Company effected a stock split
of Coaxicom New York shares, converting each share of capital stock of
Coaxicom New York into 290 shares of capital stock of Coaxicom Delaware,
the surviving corporation. Shares of unregistered securities listed below
are reported post-split.
(2) On April 21, 1997, the Company issued 1,160,000 shares of common
stock to various private investors.
(3) On September 30, 1997, the Company issued 290,000 shares of common
stock to the stockholders of Briar Joy Development Corporation, now known
as Broadview Networks, Inc., in exchange for shares of Briar Joy
Development Corporation.
II-1
<PAGE>
(4) In December 1997, the Company issued 252,300 shares of common
stock to various private investors.
(5) On January 29, 1998, the Company issued 551,580 shares of common
stock to the members of National CEJ, LLC, now known as Open Support
Systems LLC, in exchange for membership interests in National CEJ, LLC.
(6) On January 29, 1998, the Company issued 3,446,070 shares of Series
A convertible preferred stock to Communications Ventures II, L.P.,
Communications Ventures Affiliates Fund II, L.P., New Enterprise
Associates VII, L.P., NEA Presidents Fund, NEA Ventures 1998, L.P. WPG
Enterprise Fund III, LLC, Weiss, Peck & Greer Venture Associates IV, LLC,
Weiss, Peck & Greer Venture Associates IV Cayman, L.P. and WPG Information
Sciences Entrepreneur Fund L.P. for $6 million.
(7) On January 29, 1998, the Company issued 344,520 warrants to
purchase shares of common stock at an exercise price of $0.01 per share to
Communications Ventures II, L.P., Communications Ventures Affiliates Fund
II, L.P., New Enterprise Associates VII, L.P., NEA Presidents Fund, NEA
Ventures 1998, L.P. WPG Enterprise Fund III, LLC, Weiss, Peck & Greer
Venture Associates IV, LLC, Weiss, Peck & Greer Venture Associates IV
Cayman, L.P. and WPG Information Sciences Entrepreneur Fund L.P. The
warrants expired, unexercised, on June 30, 1998.
(8) In January, 1998, the Company issued 87,000 shares of common stock
to various private investors.
(9) On June 28, 1998, the Company issued 116,000 shares of common
stock to Vern Kennedy, Terrence Anderson, Tracy Korman, Scott Matukas,
Colm Kelly, Eric Neikrug, Drury Phebus, John Crowley, Kevin Mattern,
Philip Smith, Barry Korman and Karen Korman.
(10) On September 9, 1998, the Company issued 1,838,799 shares of
Series B convertible preferred stock to Communications Ventures II, L.P.,
Communications Ventures Affiliates Fund II, L.P., New Enterprise
Associates VII, L.P., NEA Presidents Fund, WPG Enterprise Fund III, LLC,
Weiss Peck & Greer Venture Associates IV, LLC, Weiss Peck & Greer Venture
Associates IV Cayman, L.P. and WPG Information Sciences Entrepreneur Fund,
L.P. for $6 million.
(11) On September 9, 1998, the Company issued 612,183 warrants to
purchase shares of common stock at an exercise price of $0.01 per share to
Communications Ventures II, L.P., Communications Ventures Affiliates Fund
II, L.P., New Enterprise Associates VII, L.P., NEA Presidents Fund, WPG
Enterprise Fund III, LLC, Weiss Peck & Greer Venture Associates IV, LLC,
Weiss Peck & Greer Venture Associates IV Cayman, L.P. and WPG Information
Sciences Entrepreneur Fund, L.P.
(12) On April 23, 1999, the Company issued 6,269,875 shares of Series
C mandatorily redeemable convertible preferred stock to Baker
Communications Fund, L.P., Communications Ventures II, L.P.,
Communications Ventures Affiliates Fund II, L.P., New Enterprise
Associates VII, L.P., WPG Enterprise Fund III, LLC, Weiss, Peck & Greer
Venture Associates IV Cayman, L.P. and WPG Information Sciences
Entrepreneur Fund L.P. for $28 million.
(13) On April 23, 1999, the Company issued 459,139 shares of common
stock to Communications Ventures II, L.P., Communications Ventures
Affiliates Fund II, L.P., New Enterprise Associates VII, L.P., NEA
Presidents Fund, WPG Enterprise Fund III, LLC, Weiss Peck & Greer Venture
Associates IV, LLC, Weiss Peck & Greer Venture Associates IV Cayman, L.P.
and WPG Information Sciences Entrepreneur Fund, L.P. following the
exercise of warrants granted on September 9, 1998.
II-2
<PAGE>
(14) On June 30, 1999, the Company issued 634 shares of common stock
to Jacquelyn Anderson-Moore following the exercise of a stock option, at
$0.01 per share.
(15) On June 30, 1999, the Company issued 325 shares of common stock
to Jennifer Leach following the exercise of a stock option, at $1.75 per
share.
(16) On July 6, 1999, the Company issued 3,433 shares of common stock
to Michael Doyle following the exercise of a stock option, at $1.75 per
share.
(17) On September 23, 1999, the Company issued 370,000 shares of
common stock to Joel D. Gross at a price of $3.75 per share, or $1.4
million.
(18) On October 12, 1999, the Company issued 1,000 shares of common
stock to Larry Edelson-Kayne following the exercise of a stock option, at
$1.75 per share.
(19) On November 30, 1999, the Company issued 100,000 shares of common
stock to Kenneth A. Shulman at a price of $6.40 per share, or $640,000.
(20) On December 1, 1999, the Company issued 250,000 shares of common
stock to George F. Holland at a price of $6.40 per share, or $1.6 million.
(21) In February 2000, the Company issued 6,006,959 shares of Series D
mandatorily redeemable convertible preferred stock to Baker Communications
Fund, L.P., Communications Ventures II, L.P., Communications Ventures
Affiliates Fund II, L.P., New Enterprise Associates VII, L.P., WPG
Enterprise Fund III, LLC, Weiss, Peck & Greer Venture Associates IV
Cayman, L.P. and WPG Information Sciences Entrepreneur Fund L.P., Joel
Gross and The State Treasurer of the State of Michigan, Custodian of the
Michigan Public School Employees' Retirement System, State Employees'
Retirement System and Michigan State Police Retirement System for $28
million.
(22) Since January 1, 1997, the Company has issued 4,282,765 options
to purchase shares of common stock under the 1997 Stock Option Plan. The
options were issued at these prices:
. In January, 1997, 29,000 options issued at an exercise price of
$0.3448 per share
. From January, 1997 to June, 1997, 165,300 options issued at an
exercise price of $0.8621 per share
. In September, 1997, 192,324 options issued at an exercise price of
$0.0001 per share
. In September 1997, 43,500 options issued at an exercise price of
$3.4483 per share
. From September 1997 to June 1998, 526,431 options issued at an
exercise price of $1.7241 per share
. From June 1998 to May 1999, 901,519 options issued at an exercise
price of $1.75 per share
. From June 1999 to August 1999, 179,900 options issued at an exercise
price of $2.00 per share
. In May 1999, 60,000 options issued at an exercise price of $2.75 per
share
. From August 1999 to September 1999, 895,370 options issued at an
exercise price of $3.75 per share
. From October 1999 to December 1999, 957,188 options issued at an
exercise price of $6.40 per share
. From December 1999 to January 2000, 332,233 options issued at an
exercise price of $9.00 per share
II-3
<PAGE>
(23) Since February 3, 2000, the Company has issued 1,765,121 options
to purchase shares of common stock under the 2000 Stock Option Plan. The
options were issued at an exercise price of $9.00 per share.
(24) Since February 1, 1997, the Company has issued 121,392 shares of
common stock following the exercise of options granted to employees, at an
average exercise price of $0.08 per share.
The sales of the securities described in Items 15(9), 15(18), 15(22),
15(23) and 15(24) were deemed to be exempt from registration under the
Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The sale of
the securities described in Items 15(2) through 15(21), excluding 15(9) and
15(18), were deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, or Regulation D promulgated
thereunder, as transactions by an issuer not involving a public offering. The
recipients of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and other instruments issued in such
transactions. All recipients either received adequate information about the
Company or had access, through employment or other relationships, to such
information. The sale of securities in Item 15(1) was deemed to be exempt from
registration under the Securities Act in reliance on Section 3(a)(9) of the
Securities Act as an exchange by the issuer with its existing security holders
where no commission or other remuneration is paid or given directly or
indirectly for soliciting such exchange.
Item 16. Exhibits
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Form of Amended and Restated Certificate of Incorporation of Broadview
Networks*
3.2 Form of Amended and Restated Bylaws of Broadview Networks*
4.1 Specimen common stock certificate*
5.1 Form of Opinion of Mayer, Brown & Platt as to legality of the
securities being issued*
10.1 Lease, dated May 27, 1998 between Broadview Networks Holdings, Inc.
(formerly known as Coaxicom, Inc.) and 45-18 Court Square, Suite 403,
Long Island City, New York
10.2 Lease, dated October 20, 1998 between Broadview Networks Holdings,
Inc. (formerly known as Coaxicom, Inc.) and 45-18 Court Square, LLC,
for property located at 45-18 Court Square, Suite 400, Long Island
City, New York.
10.3 Lease, dated April 28, 1999 between Broadview Networks Holdings, Inc.
(formerly known as Coaxicom, Inc.) and 45-18 Court Square, LLC, for
property located at 45-18 Court Square, Suite 300, Long Island City,
New York.
10.4 Lease, dated March 27, 1997 between Broadview Networks Holdings, Inc.
(formerly known as Coaxicom, Inc.) and 45-18 Court Square, LLC, for
property located at 45-18 Court Square, Suite 502, Long Island City,
New York.
10.5 Lease, dated March 19, 1999 between Broadview Networks Holdings, Inc.
(formerly known as Community Networks, Inc.) and Standard Motor
Products, Inc. for property located at 37-18 Northern Boulevard, Long
Island City, New York.
10.6 Lease, dated December 30, 1999 between Broadview Networks, Inc. and 59
Maiden Lane Associates, LLC, for property located at 59 Maiden Lane,
27th Floor, New York, New York.
10.7 Lease, dated January 9, 1997 between Broadview Networks, Inc.
(formerly known as Community Networks, Inc.) and Briar Joy Development
Corp., for property located at 205-213 South Salina Street, 2nd Floor,
Syracuse, New York.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.8 Lease dated June 16, 1999 between Broadview Networks, Inc. (formerly
known as Community Networks, Inc.) and 224 Harrison Associates, LLC,
for property located at 224 Harrison Street, 5th floor, Syracuse, New
York.
10.9 Lease, dated June 16, 1999 between Broadview Networks, Inc. (formerly
known as Community Networks, Inc.) and 224 Harrison Associates, LLC,
for property located at 224 Harrison Street, 4th Floor, Syracuse, New
York.
10.10 Lease, dated November 25, 1998 between Broadview Networks, Inc.
(formerly known as Community Networks, Inc.) and Starbucks Coffee
Company, for property located at 2 Robins Lane, 2nd Floor, Jericho,
New York.
10.11 Lease, dated September 25, 1998 between Broadview Networks, Inc.
(formerly known as Community Networks, Inc.) and Galesi Management,
for property located at 100 State Street, Suite 140, Albany, New York.
10.12 Lease, dated October 22, 1998 between Broadview Networks Holdings,
Inc. (formerly known as Coaxicom, Inc.) and Main Place Liberty Group,
for property located at 416-426 Main Street, Suite 500, Buffalo, New
York.
10.13 Lease, dated September 23, 1999 between Broadview Networks, Inc.
(formerly known as Community Networks Inc.) and Hood Business Park,
LLC, for property located at Hood Business Park, 500 Rutherford
Avenue, 2nd Floor, Charlestown, Massachusetts.
10.14 Lease, dated January 31, 2000 between Broadview Networks, Inc. and 400
Horsham Road Associates, L.P., for 26,000 sq. ft. property located at
400 Horsham Road, Horsham, Pennsylvania.
10.15 Lease, dated January 31, 2000 between Broadview Networks, Inc. and 400
Horsham Road Associates, L.P., for 10,000 sq. ft. property located at
400 Horsham Road, Horsham, Pennsylvania.
10.16 Lease, dated July 15, 1998 between Open Support Systems, LLC and
Robert S. Sloat, for property located at 21 Charles Street, 4th Floor,
Westport, Connecticut.
10.17 Securities Purchase Agreement, dated as of April 23, 1999, among
Broadway Networks Holdings, Inc., Baker Communications Fund,
ComVentures, New Enterprise Associates, and Weiss, Peck & Greer
Venture Partners
10.18 Amendment No. 1, dated February 2, 2000, to Securities Purchase
Agreement dated as of April 23, 1999, among Broadview Networks
Holdings, Inc., Baker Communications Fund, ComVentures, New Enterprise
Associates, Weiss, Peck & Greer Venture Partners and Joel Gross.
10.19 Amendment No. 2, dated February 4, 2000, to Securities Purchase
Agreement dated as of April 23, 1999, among Broadview Networks
Holdings, Inc., Baker Communications Fund, ComVentures, New Enterprise
Associates, Weiss, Peck & Greer Venture Partners, Joel Gross and The
State Treasurer of the State of Michigan, as Custodian of the Michigan
Public School Employees' Retirement System, State Employees'
Retirement System and Michigan State Police Retirement System.
10.20 Shareholders' Agreement, dated as of April 23, 1999, among Broadview
Networks Holdings, Inc., Baker Communications Fund, Communications
Ventures, New Enterprise Associates, Weiss, Peck & Greer Venture
Partners and the founders of Broadview Networks.
10.21 Amendment No. 1, dated February 2, 2000, to Shareholders' Agreement
dated April 23, 1999, among Broadview Networks Holdings, Inc., Baker
Communications Fund, ComVentures, New Enterprise Associates, Weiss,
Peck & Greer Venture Partners, the founders of Broadview Networks and
Joel Gross
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.22 Amendment No. 2, dated February 4, 2000, to Shareholders' Agreement
dated April 23, 1999, among Broadview Networks Holdings, Inc., Baker
Communications Fund, ComVentures, New Enterprise Associates, Weiss,
Peck & Greer Venture Partners, the founders of Broadview Networks,
Joel Gross and The State Treasurer of the State of Michigan, as
Custodian of the Michigan Public School Employees' Retirement System,
State Employees' Retirement System and Michigan State Police
Retirement System
10.23 Amendment No. 3, dated February 7, 2000, to Shareholders' Agreement
dated April 23, 1999, among Broadview Networks Holdings, Inc., Baker
Communications Fund, ComVentures, New Enterprise Associates, Weiss,
Peck & Greer Venture Partners, the founders of Broadview Networks,
Joel Gross and The State Treasurer of the State of Michigan, as
Custodian of the Michigan Public School Employees' Retirement System,
State Employees' Retirement System and Michigan State Police
Retirement System
10.24 Interconnection Agreement, dated as of September 4, 1998, between
Community Networks of Massachusetts and New England Telephone and
Telegraph Company (d/b/a Bell Atlantic--Massachusetts)
10.25 Interconnection Agreement, dated as of December 18, 1998, between
Broadview Networks, Inc. formerly known as Community Networks, Inc.
and New York Telephone Company (d/b/a Bell Atlantic--New York)
10.26 Loan and Security Agreement, dated as of October 22, 1999, by and
among Broadview Networks Holdings, Inc., each of its subsidiaries and
NTFC Capital Corporation
10.27 Waiver Agreement No. 1 dated December 31, 1999 to the Loan and
Security Agreement dated October 22, 1999 by and among Broadview
Networks Holdings, Inc., each of its subsidiaries and NTFC Capital
Corporation
10.28 Master Purchase Agreement, dated March 30, 1999, between Broadview
Networks, Inc. and Northern Telecom, Inc., as amended
10.29 Wholesale Service Agreement, dated April 8, 1996, between Broadview
Networks, Inc. and Frontier Communications of the West, Inc., as
amended
10.30 Form of Employment Agreement between Broadview Networks Holdings, Inc.
and each of Vern M. Kennedy, Eric G. Roden, Colm D. Kelly, George F.
Holland, Terrence J. Anderson and Tracy W. Korman
10.31 Employment Agreement, dated as of October 1, 1999, between Joel D.
Gross and Broadview Networks Holdings, Inc.
10.32 Employment Agreement, dated as of December 14, 1999 between Kenneth A.
Shulman and Broadview Networks Holdings, Inc.
10.33 Broadview Networks 1997 Stock Option Plan*
10.34 Broadview Networks 2000 Long Term Incentive Plan*
10.35 Broadview Networks 2000 Employee Stock Purchase Plan*
21.1 Subsidiaries of Broadview Networks Holdings, Inc.*
23.1 Consent of PricewaterhouseCoopers LLP
23.4 Consent of Mayer, Brown & Platt (included in Exhibit 5.1)*
24.1 Power of Attorney (see page II-8)
27.1 Financial Data Schedule--Valuation and qualifying accounts
99.1 Report of Independent Accountants on Financial Data Schedule--
Valuation and qualifying accounts
</TABLE>
- --------
* To be filed by amendment
II-6
<PAGE>
Item 17. Undertakings
The Registrant hereby undertakes to provide 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 provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of such
issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from
the form of prospectus as filed as part of the registration statement in
reliance upon Rule 430A and contained in the 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, and (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 this 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, AS AMENDED,
THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF NEW YORK, STATE OF NEW YORK, ON THE 8th DAY OF FEBRUARY, 2000.
BROADVIEW NETWORKS HOLDINGS, INC.
By: /s/ Vern M. Kennedy
-----------------------------------
Vern M. Kennedy
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Vern M. Kennedy and Joel D.
Gross and each one of them, acting individually and without the other, as his
or her attorney-in-fact, each with full power of substitution, for him and her
in any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes may
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Vern M. Kennedy President, Chief Executive February 8, 2000
___________________________________________ Officer (Principal
Vern M. Kennedy Executive Officer) and
Chairman of the Board of
Directors
/s/ Joel D. Gross Chief Financial Officer February 8, 2000
___________________________________________ (Principal Financial
Joel D. Gross Officer and Principal
Accounting Officer)
/s/ Terrence J. Anderson Executive Vice President-- February 8, 2000
___________________________________________ Finance
Terrence J. Anderson
/s/ Tracy W. Korman Executive Vice President-- February 8, 2000
___________________________________________ Marketing and Strategy
Tracy W. Korman
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ George F. Holland Executive Vice President-- February 8, 2000
___________________________________________ Sales and Marketing
George F. Holland
/s/ Kenneth A. Shulman Chief Technology Officer February 8, 2000
___________________________________________
Kenneth A. Shulman
/s/ Eric G. Roden Chief Operating Officer February 8, 2000
___________________________________________
Eric G. Roden
/s/ Colm D. Kelly Chief Information Officer February 8, 2000
___________________________________________
Colm D. Kelly
/s/ Heidi B. Heiden Director February 7, 2000
___________________________________________
Heidi B. Heiden
/s/ Stuart A. Mencher Director February 8, 2000
___________________________________________
Stuart A. Mencher
/s/ Edward W. Scott Director February 8, 2000
___________________________________________
Edward W. Scott
/s/ Roland A. Van der Meer Director February 8, 2000
___________________________________________
Roland A. Van der Meer
</TABLE>
II-9
<PAGE>
EXHIBIT 10.1
[LETTERHEAD APPEARS HERE]
September 16, 1999
Mr. Scott Matukas
Community Networks
45-18 Court Square
Long Island City, NY 11101
RE: Suite 403
45-18 Court Square, Long Island City
Dear Scott:
Per your request I am pleased to offer you a short term lease for the above
referenced space. Below please find the changes to the existing lease which
will be terminating as of September 30, 1999:
1. The rental term shall commence October 1, 1999 and expire March 31, 2000.
2. Paragraph 40 will be deleted and replaced with the following terms:
A. Possession shall be deemed delivered as of October 1, 1999.
B. Left Blank Intentionally.
C. The minimum rent per month shall be Seven thousand five hundred
eighty-two dollars and ($7,582.42) forty-two cents.
D. Shall be eliminated in its entirety.
E. Shall remain the same as the original lease.
F. The rent shall be $7,582.42
3. Paragraph 41 the security deposit and reference to same shall be $7,582.42,
one full month's security.
4. Paragraph 43 shall be eliminated in its entirety.
5. Paragraph 44 electric usage. Tenant shall pay for electric usage at same
rate charged to Landlord by the utility company plus a five (5%) percent
administrative fee.
6. Paragraph 63 shall be changed to read no broker. Community Networks shall
indemnify Landlord from any and all broker claims other than Aegis Realty.
7. Paragraph 92 shall be deleted in its entirety.
8. Paragraph 99 is modified indicating that the initial entry access cards
have already been supplied to Tenant.
<PAGE>
September 16, 1999
Mr. Scott Matukas
Community Networks
Page 2
RE: Suite 403
45-18 Court Square, Long Island City
9. Paragraph 101 is deleted in its entirety.
10. Paragraph 104 is modified to read the first month's rent in the amount of
$7,582.42 and one month's security in the amount of $7,582.42.
If the above offer is acceptable to you, pleas sign both copies of this letter
and return one original to my offices together with the checks for the first
month's rent and one month security as soon as possible.
Upon its signing, this letter shall act as a short term lease, as modified
above, with all terms and conditions of the original lease dated May 27, 1998
together with the Rider to Lease attached hereto.
If you have any questions, please do not hesitate to contact me.
Very truly yours,
Alan Zaretsky Agreed to:
45-18 COURT SQUARE LLC
kk
_____________________________
Via Fax (718-706-9575) Scott Matukas Dated
and Regular Mail Community Networks
<PAGE>
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 27th day of May 1998, between 45-18 Court
Square, LLC having an office at 60 Morrow Ave., Scarsdale, New York 10583 party
of the first part, hereinafter referred to as OWNER, and Coaxicom, Inc. (dba
Community Telephone) party of the second part, hereinafter referred to as
TENANT, WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner approximately 4,594 square feet on the fourth floor as per the attached
plan designated Suite 403 in the building known as 45-18 Court Square in the
Borough of Queens, City of New York, for the term of three (3) years (or until
such term shall sooner cease and expire as hereinafter provided) to commence on
the 1st day of August nineteen hundred and ninety-eight, and to end on the 31st
day of July 2001 both dates inclusive, at an annual rental rate of.
See Rider annexed, Article 40.
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributes, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy 2. Tenant shall use and occupy demised premises for general offices
and for no other purpose.
<PAGE>
Tenant Alterations: 3. Tenant shall make no changes in or to the demised
premises of any nature without Owner's prior written consent. Subject to the
prior written consent of Owner, and to the provisions of this article, Tenant at
Tenant's expense, may make alterations, installations, additions or improvements
which are non-structural and which do not affect utility services or plumbing
and electrical line, in or on the interior of the demised premises by using
contractors or mechanics first approved by the Owner. Tenant shall, before
making any alterations, additions, installations or improvements, at its
expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by filing the bond required by law. All fixtures and all
paneling, partitions, railings and like installations, installed in the premises
at any time, either by Tenant or by Owner in Tenant's behalf, shall, upon
installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no later
than twenty days prior to the date fixed as the termination of this lease,
elects to relinquish Owner's right thereto and to have them removed by Tenant no
later than twenty days prior to the date fixed as the termination of this lease,
elects to relinquish Owner's rights thereto and to have them removed by Tenant,
in which event the same shall be removed from the premises by Tenant prior to
the expiration of the lease, at Tenant's expense. Nothing in this Article shall
be construed to give Owner title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment, but upon removal of any such
from the premises or upon removal of other installations as may be required by
Owner, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any damage
to the demised premises or the building due to such removal. All property
permitted or required to be removed, by Tenant at the end of the term remaining
in the premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may be removed from
the premises by Owner, at Tenant's expense.
Maintenance and Repairs: 4. Tenant shall, throughout the term of this lease,
take good care of the demised premises and fixtures and appurtenances therein.
Tenant shall be responsible for all damage or injury to the demised premises or
any other part of the building and the systems and equipment thereof, whether
requiring structural or nonstructural repairs caused by or resulting from
carelessness, omissions, neglect or improper conduct of Tenant, Tenant's
subtenants, agents, employees, invitees or licensees, or which arise out of any
work, labor, service or equipment done for or supplied to Tenant or any
subtenant or
<PAGE>
arising out of the installation, use or operation of the property or equipment
of Tenant or any subtenant. Tenant shall also repair all damage to the building
and the demised premises caused by the moving of Tenant's fixtures, furniture
and equipment. Tenant shall promptly make, at Tenant's expense, all repairs in
and to the demised premises for which Tenant is responsible, using only the
contractor for the trade or trades in question, selected from a list of at least
two contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by Owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating systems (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any set off or
reduction of rent by reason of any failure of Owner to comply with the covenants
of this or any other article of this Lease. Tenant agrees that Tenant's sole
remedy at law in such instance will be by way of an action for damages for
breach of contract. The provisions of this Article 4 shall not apply in the case
of fire or other casualty which are dealt with in Article 9 hereof.
Window Cleaning: 5. Tenant will not clean nor require, permit, suffer or allow
any window in the demised premises to be cleaned from the outside in violation
of Section 202 of the Labor Law or any other applicable law or of the Rules of
the Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads: 6. Prior to the commencement
of the lease term, if Tenant is then in possession, and at all times,
thereafter, Tenant, at Tenant's sole cost and expense, shall promptly comply
with all present and future laws, orders and regulations of all state, federal,
municipal and local governments, departments, commissions and boards and any
direction of any public officer pursuant to law, and all orders, rules and
regulations of the New York Board of Fire Underwriters, Insurance Services
Office, or any similar body which shall impose any violation, order or duty upon
Owner or Tenant with respect to the demised premises, whether or not arising out
of Tenant's use or manner of use thereof, (including Tenant's permitted use) or,
with respect to the building if arising out of Tenant's__________________[text
cut off]) the use permitted under the lease). Nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has, by its
manner of use of the demised premises or method of operation therein, violated
any such laws, ordinances, orders, rules, regulations or requirements
<PAGE>
with respect thereto. Tenant may, after securing Owners to Owner's satisfaction
against all damages, interest, penalties and expenses, including, but not
limited to, reasonable attorney's fees, by cash deposit or by surety bond in an
amount and in a company satisfactory to Owner, contest and appeal any such laws,
ordinances, orders, rules, regulations or requirements provided same is done
with all reasonable promptness and provided such appeal shall not subject Owner
to prosecution for a criminal offense or constitute a default under any lease or
mortgage under which Owner may be obligated, or cause the demised premises or
any part thereof to be condemned or vacated. Tenant shall not do or permit any
act or thing to be done in or to the demised premises which is contrary to law,
or which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner with
respect to the demised premises or the building of which the demised premises
form a part, or which shall or might subject Owner to any liability or
responsibility to any person or for property damage. Tenant shall not keep
anything in the demised premises except as now or hereafter permitted by the
Fire Department, Board of Fire Underwriters, Fire Institute Rating Organization
or other authority having jurisdiction, and then only in such manner and such
quantity so as to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses,
fines, penalties, or damages, which may be imposed upon Owner by reason of
Tenant's failure to comply with the provisions of this article and if by
reason of such failure the fire insurance rate shall, at the beginning of this
lease, or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
al fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make up" of rate for the building
or demised premises issued by the New York Fire Insurance Exchange, or other
body making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and charges in the
fire insurance rates than applicable to said premises shall be conclusive
evidence of the facts therein ste and of the several items and charge in the
fire insurance rates then applicable to said premises. Tenant shall not place a
load upon any floor of the demised premises exceeding the floor load per square
foot area which it was designed to carry and which is allowed by law. Owner
reserves the right to prescribe the weight and position of all safes, business
machines and mechanical equipment. Such installation shall be placed and
maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's
judgement, to absorb and prevent vibration, noise and annoyance.
Subordination: 7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases on the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self operative and no
further instrument of
<PAGE>
subordination shall be required by any ground or underlying lessor or by any
mortgage, affecting any lease on the real property of which the demised premises
are a part by confirmation of such subordination. Tenant shall execute promptly
any certificate that Owner may request.
Property Loss, Damage, Reimbursement, Indemnity: 8. Owner or its agents shall
not be liable for any damage to property of Tenant or of others entrusted to
employees of the building, nor for loss of or damage to any property of Tenant
by theft or otherwise, nor for any injury or damage to persons or property
resulting from any cause of whatsoever nature, unless caused by or due to the
negligence of Owner, its agents, servants or employees. Owner or its agents will
not be liable for any such damage caused by other tenants or persons in, upon or
about said building or caused by operations in construction of any private,
pubic or quasi public work. If at any time any windows of the demised premises
are temporarily closed, darkened or bricked up (or permanently closed, darkened
or bricked up, if required by law) for any reason whatsoever including, but not
limited to Owner's own rate, owner shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation therefor
nor abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorneys fees, paid, suffered or incurred as a
result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub tenant, and any agent,
contractor, employee, invitee or licensee of any sub tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action on proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
Destruction, Fire and Other Casualty: 9. (a) If the demised premises or any
part thereof shall be damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall continue in full force
and effect except as hereinafter set forth (b) If the demised premises are
partially damaged or rendered partially unusable by fire or other casualty, the
damages thereto shall be repaired by and at the expense of Owner and the rent,
until such repair shall be substantially completed, shall be appointed from the
day following the casualty according to the part of the premises which is
usable. (c) If the demised premises are totally damaged or rendered wholly
unusable by fire or other casualty, then the sent shall be proportionately paid
up to the time of the casualty and thenceforth shall cease until the date when
the premises shall have been repaired and restored by Owner, subject to Owner's
right to elect not to restore the same as hereinafter provided. (d) if the
demised premises are rendered wholly
<PAGE>
unusable or (whether or not the demised premises are damaged in whole or in
part) if the building shall be so damaged that Owner shall decide to demolish it
or to rebuild it, then, in any of such events, Owner may elect to terminate this
lease by written notice to Tenant, given within 90 days after such fire or
casualty, specifying a date for the expiration of the lease, which date shall
not be more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectible and to the extent right of recovery against the other or any one
claiming through or under each of them by way of subrogation or otherwise. The
foregoing release and waiver shall be in forced only if both releasors'
insurance policies contain a clause providing that such a release or waiver
shall not invalidate the insurance. If, and to the extent, that such waiver can
be obtained only by the payment of additional premiums, then the party
benefiting from the waivers shall pay such premium within ten days after written
demand or shall be deemed to have agreed that the party obtaining insurance
coverage shall be free of any further obligation under the provisions hereof
with respect to waiver of subrogation. Tenant acknowledges that Owner will not
carry insurance on Tenant's furniture and/or furnishings or any fixtures or
equipment, improvements, or appurtenances removable by Tenant and agrees that
Owner will not be obligated to repair any damage thereto or replace the same (f)
Tenant hereby waives the provisions of section 227 of the Real Property Law and
agrees that the provisions of this article shall govern and control in lieu
thereof.
Eminent Domain: 10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease and assigns
<PAGE>
to Owner, Tenant's entire interest in any such award.
Assignment, Mortgage, Etc.: 11. Tenant, for itself, its heirs, distributee,
executors, administrators, legal representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant shall be
deemed an assignment. If this lease be assigned, or if the demised premises or
any part thereof be underlet or occupied by anybody other than Tenant, Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collection shall be deemed a wavier
of this covenant, or the acceptance of the assignee, under tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenant's on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owners to any further
assignment or underletting.
Electric Current: 12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right (but shall
not be obligated) to enter the demised premises in any emergency at any time,
and at other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits therein provided they are concealed within the
walls, floor, or ceiling. Owner may, during the progress of any work in the
demised premises, take all necessary materials and equipment into said premises
without the same constituting an eviction nor shall the Tenant be entitled to
any abatement of rent while such work is in progress nor to any damages by
reason of loss or interruption of business or otherwise. Throughout the terms
hereof Owner shall have the right to enter the demised premises at reasonable
hours for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and using the last six months of the term for the
purpose of showing the same to prospective tenants. If Tenant is not present to
open and permit an entry into the premises, Owner or Owner's agents may enter
the same whenever such entry may be necessary or permissible by master key or
forcibly and provided reasonable care is exercised to
7
<PAGE>
safeguard Tenant's property, such entry shall render Owner or its agents liable
therefore, nor in any event shall the obligations of Tenant hereunder been. If
during the last month of the term Tenant shall have removed all or substantially
all of Tenant's property therefrom Owner may immediately enter, alter, renovate
or redecorate the demised premises without limitation or abatement of rent, or
incurring liability to Tenant for any compensation and such acts shall have no
effect on this lease or Tenant's obligations hereunder.
Vault, Vault Space, Area: 14. No Vaults, vault space or area, whether or not
enclosed or covered, not within the property line of the building is leased
hereunder, anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or areas be diminished or required by an
federal sate or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive on actual eviction. Any tax, fee or charge or
municipal authorities for such vault or area shall be paid by Tenant.
Occupancy: 15. Tenant will not at any time use or occupy the demised premises
in violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and accepts
them as is, subject to the riders annexed hereto with respect to Owner's work,
if any. In any event, Tenant agrees to accept the same subject to violations,
whether or not of record.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be canceled by Owner by the sending of a written
notice to Tenant within a reasonable time after the happening of any one or more
of the following events: (1) the commencement of a case in bankruptcy or under
the laws of any state naming Tenant as the debtor; or (2) the making by Tenant
of an assignment or any other arrangement for the benefit of creditors under any
state statue. Neither Tenant nor any person claiming through or under Tenant, or
by reason of any statute or order of court, shall thereafter be entitled to
possession of the premises demised but shall forthwith quit and surrender the
premises. If this lease shall be assigned in accordance with its terms, the
provisions of this Article 16 shall be applicable to the party then owning
Tenant's interest in this lease.
(b) it is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to recover from Tenant as
and for liquidated damages an amount equal to the difference between the rent
reserved hereunder for the unexpired portion of term demised and the fair and
reasonable rents value of the demised premises for the same period. In the
computation of such damages the
8
<PAGE>
difference between any installment of rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the demised premises
for the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
port or the whole or the premises so relet during the term of the reletting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove lot and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the amount
of the difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or additional rent;
or if the demised premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under (S)215 of Title 11 of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after the commencement of the term of this lease,
the,in any one or more of such events, upon Owner serving a written five (5)
days notice upon Tenant specifying the nature of said default and upon the
expiration of said five (5) days, if Tenant shall have failed to comply with or
remedy such default, or if the said default or omission complained of shall be
of a nature that the same cannot be completely cured or rendered within said
five (5) day period, and if Tenant shall not have diligently commenced during
such default within such five (5) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days of this lease
and the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease
9
<PAGE>
had not been made, and Tenant hereby waives the service of notice of intention
to re-enter or to institute legal proceedings to that end. If Tenant shall make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminated such renewal or
extension agreement by written notice.
Remedies of Owner and Waiver of Redemption: 18. In case of any such default,
re-entry, expiration and/or dispossess by summary proceedings or otherwise, (a)
the rent shall become due thereupon and be paid up to the time of such re-entry,
dispossess and/or expiration, (b) Owner may re-let the premises or any part or
parts thereof, either in the name of Owner or otherwise, for a term which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with the re-letting, such as legal expenses,
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for re-letting, such as legal expenses,
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for re-letting, Any such liquidated damages
shall be paid in monthly installments by tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re rental may, at
Owner's option, make such alterations, repairs, replacements, and/or decorations
shall not operate or be construed to release Tenant from liability hereunder as
aforesaid. Owner shall in no event be liable in any way whatsoever for failure
to re let, for failure to collect the rent thereof under such re letting, and in
no event shall Tenant be entitled to receive any excess, if any, of such net
rents collected over the sums payable by Tenant to Owner hereunder. In the event
of a breach or threatened breach by Tenant or any of the covenants or provisions
hereof, Owner shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re entry summary proceedings and other
remedies were not herein provided for. Mention in this lease of any particular
remed, shall not preclude Owner from any other remedy, in law or in equity.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Owner obtaining possession of
demised premises, by reason
10
<PAGE>
of the violation by Tenant of any of the covenants and conditions of this lease,
or otherwise.
Fees and Expenses 19. If Tenant shall default observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, then, unless
otherwise provided, elsewhere in this lease, Owner may immediately or at any
time thereafter and without notice perform the obligation of Tenant thereunder.
If Owner, in connection with the foregoing or in connection with any default by
Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs
any obligations for the payment of money including but not limited to attorney's
fees, in instituting, prosecuting or defending any action or proceeding, then
tenant will reimburse Owner for such sums so paid or obligations incurred with
interest and costs. The foregoing expenses incurred by reason of Tenant's
default shall be deemed to be additional rent hereunder and shall be paid by
Tenant to Owner within five (5) days of rendition of any bill or statement to
Tenant therefor. If Tenant's lease term shall have expired at the time of making
of such expenditures or incurring of such obligations, such sums shall be
recoverable by Owner as damages.
Building Alterations and Management: 20. Owner shall have right at any time
without the same constituting an eviction and without incurring liability to
Tenant therefor to change the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets or other
public parts of the building and to change the name, number or designation by
which the building may be known. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or other
Tenants making any repairs in the building or any such alterations, additions,
and improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of such controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem necessary
for the security of the building and its occupants.
No Representations by Owner: 21. Neither Owner nor Owner's agents have made any
representations or promises with respect to the physical condition of the
building, the land upon which it is erected on the demised premises, the rents,
leases, expenses of operation or any other matter or thing affecting or related
to the premises expect as herein expressly set forth and no rights, easements or
licenses are acquired by the Tenant by implication or otherwise except as
expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" and acknowledges that the taking
of possession of the demised premises by Tenant shall be conclusive evidence
that the said premises and the building of which the same form a part were in
good and satisfactory condition at the time such possession was so taken, except
as to latent defects. All understandings and agreements heretofore made between
the parties hereto are merged in this contract, which alone fully and completely
expresses
<PAGE>
the agreement between Owner and Tenant and any executory agreement hereafter
made shall be ineffective to change, modify, discharge or effect an abandonment
of it in whole or in part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change, modification,
discharge or abandonment is sought.
End of Term: 22. Upon the expiration of the term of this lease, Tenant shall
quit and surrender to Owner the demised premises, broom clean, in good order and
condition, ordinary wear and damages which Tenant is not required to repair as
provided elsewhere in this lease excepted, and Tenant shall remove all its
property. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of this lease. If the last day of the term
of this Lease or any renewal thereof, falls on Sunday, this lease shall expire
at noon on the preceding Saturday unless it be a legal holiday in which case it
shall expire at noon on the preceding business day.
Quiet Enjoyment: 23. Owner covenants an agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
Failure to Give Possession: 24. If Owner is unable to give possession of the
demised premises on the date of the commencement of the term hereof, because of
the holding over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the rent
payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession) until after Owner shall have given
Tenant written notice that the premises are substantially ready for Tenant's
occupancy. If permission is given to Tenant to enter into the possession of the
demised premises or to occupy premises other than the demised premises prior to
the date specified as the commencement of the term of this lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except as to the
covenant to pay rent. The provisions of this article are intended to constitute
"an express provision to the contrary" within the meaning of Section 2.23 a of
the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant
<PAGE>
or condition of this lease or of any of the rules or Regulations, set forth or
hereafter adopted by Owner, shall not prevent a subsequent act which would have
originally constituted a violation from having all the force and effect of an
original violation. The receipt by Owner of rent with knowledge of the breach of
any covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner unless such
waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement of any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner's right to recover the balance of such rent
or pursue any other remedy in this lease provided. No act or thing done by Owner
or Owner's agents during the term hereby demised shall be deemed an acceptance
of a surrender of said premises, and no agreement to accept such surrender shall
be valid unless in writing signed by Owner. No employee of Owner or Owner's
agent shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial by Jury: 26. It is mutually agreed by and between Owner and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding on counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any summary proceeding
for possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4.
Inability to Perform: 27. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in no way be affected, impaired or excused
because Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly impliedly to be supplied
or is unable to make, or is delayed in making any repair, additions, alterations
or decorations or is unable to supply or is delayed in supplying any equipment
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever including, but not limited to, government
preemption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
Bills and Notices: 28. Except as otherwise in this lease provided, a bill,
statement, notice or
13
<PAGE>
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises from a part or at the last known
residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left at
the premises as herein provided. Any notice by Tenant to Owner must be served
by registered or certified mail addressed to Owner at the address first
hereinabove given or at such other address as Owner shall designate by written
notice.
Services Provided by Owners: 29. As long as Tenant is not in default under any
of the covenants of this lease. Owner shall provide: (a) necessary elevator
facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m.
to 1 p.m. an have one elevator subject to call at all other times; (b) heat to
the demised premises when and as required by law, on business days from 8 a.m.
to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (c) water for ordinary
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge), Owner
may install a water meter at Tenant's expense which tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register such
water consumption and Tenant shall pay for water consumed as shown on said meter
as additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Owner's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner satisfactory to
Owner and no one other than persons approved by Owner shall be permitted to
enter said premises or the building of which they are a part for such purpose.
Tenant shall pay Owner the cost of removal of any of Tenant's refuse and rubbish
from the building; (e) If the demised premises are serviced by Owner's air
conditioning/cooling and ventilating system, air conditioning/cooling will be
furnished to tenant from May 15th through September 30th on business days
(Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m., and
ventilation will be furnished on business days during the aforesaid hours except
when air conditioning/cooling is being furnished as aforesaid. If tenant
requires air conditioning/cooling or ventilation for more extended hours or on
Saturdays, Sundays or on holidays, as defined under Owner's contract with
Operating Engineers Local 94-94A, Owner will furnish the same as Tenant's
expense. RIDER to be added in respect to rates and conditions for such
additional service:
(1) Owner reserves the right to stop services of the heating, elevators,
plumbing, air-conditioning, power systems or cleaning or other services, if any,
when necessary by reason of accident or for repairs, alterations, replacements
or improvements necessary or desirable in the judgment of Owner for as long as
may be reasonably required by reason thereof. If the building of which the
demised premises are a part supplies manually-operated elevator service and upon
ten days' written notice to tenant, proceed with alterations necessary therefor
14
<PAGE>
without in any wise affecting this lease or the obligation of Tenant hereunder.
The same shall be done with a minimum of inconvenience to Tenant and Owner shall
pursue the alteration with due diligence.
Captions: 30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.
Definitions: 31. The term "office", or "officers", wherever used in this lease,
shall not be construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagees in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties an the purchaser, at any such sale, or the said
lessee of the building, or of the land and building, that the purchaser or the
lessee of the building has assumed and agreed to carry out any and all covenants
and obligations of Owner, hereunder. The words "re-enter" and "re-entry" as used
in this lease are not restricted to their technical legal meaning. The term
"business days" as used in this lease shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 29 hereof), Sundays
and all days observed by the State or Federal Government as legal holidays and
those designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with respect
to HVAC service.
15
<PAGE>
EXHIBIT 10.2
RIDER ANNEXED TO LEASE
DATED OCTOBER 20, 1998
BY AND BETWEEN
45-18 COURT SQUARE, LIC, AS LANDLORD
AND
COAXICOM, INC. (DBA COMMUNITY TELEPHONE/COMMUNITY NETWORK),
AS TENANT
Landlord is defined as 45-18 Court Square, LLC, its partners, and successors in
interest.
40. Minimum Annual Rent
-------------------
A. Possession of the Demised Premises shall be deemed to have been
delivered upon delivery of keys by Landlord to Tenant at the address
earlier set forth, the premises to be broom clean and January 1, 1999
or upon substantial completion as hereinafter set forth (hereinafter
the "Possession Delivery Date"). Tenant to take occupancy and pay
rent as of December 15, 1998. Please see paragraph 92.
B. Left Blank Intentionally.
C. Tenant covenants and agrees to pay to Landlord as Minimum Annual Rent
on the first day of each month during the term hereof, the following
sums:/1/
(i) Years 1 through 3 - one hundred forty-one thousand one hundred
eighteen dollars ($141,118.00) and no cents payable in equal
monthly installments of Eleven thousand seven hundred fifty-nine
dollars and ($11,759.83) eighty-three cents per month.
D. Rent due for partial month(s) shall be prorated.
E. The above annual sum shall be paid in equal monthly installments, in
advance, on the first day of each month during said term at the office
of Owner or at such other place as Owner may designate, without offset
or deduction whatsoever.
F. Tenant shall pay the first month's rent, in the sum of $11,759.83 upon
the execution of this lease, the receipt of which is hereby
acknowledged. The payment of the first month's' rent will be applied
to the first full month following expiration of the abatement period.
/1 To the extent the tenant is not delivered the space (possession) on or-
before 2/15/98, the Landlord may grant 1 day free rent for every day
possession is not delivered (fully completed) after 12/15/98.
1
<PAGE>
41. Security Deposit
----------------
Simultaneous with entry into possession of the Demised Premises, Tenant
shall deposit with Owner the sum of $23,519.66 as security for the faithful
performance and observance by Tenant of the terms, provisions and
conditions of this Lease. It is agreed that in the event Tenant defaults
in respect of any of the terms, provisions and conditions of this Lease,
including, but not limited to, the payment of rent and additional rent,
owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional
rent or any other sum to which Tenant is in default or for any sum which
Owner may expend or may be required by reason of Tenant's default in
respect of any of the terms, covenants and conditions of this Lease,
including but not limited to, any damages or deficiency in the re-letting
of the premises, whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by Owner. Within thirty (30) days
after receipt of written notice that Owner has made application of all or
any part of the said security deposit, Tenant shall deposit with Owner such
additional funds as are necessary to restore the security deposit to its
original amount. In the event that Tenant shall fully and faithfully
comply with all of the non-monetary terms, provisions, covenants and
conditions of this Lease, the security not required to cure any monetary
default or otherwise deducted as a result of the physical condition of the
premises shall be returned to Tenant after the date fixed as the end of the
Lease and after delivery of entire possession of the Demised Premises to
Owner. In the event of a sale of the land and building or leasing of the
building, of which the Demised Premises form a part, Owner shall have the
right to transfer the security to the vendee or lessee and Owner shall
thereupon be released by Tenant from all liability for the return of such
security, and Tenant agrees to look to the new Owner solely for the return
of said security; and it is agreed that the provisions hereof shall apply
to every transfer or assignment made of the security to a new Owner.
Tenant further covenants that, other than in connection with a valid
disposition of this Lease in compliance with the terms of Article 64
hereof, it will not assign or encumber or attempt to assign or encumber the
monies deposited herein as security and that neither Owner nor its
successor or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
Tenant shall, at all times, maintain a rent security deposit equal to two
(2) month's rent. On each base rent increase date, Owner shall invoice
Tenant for, and Tenant shall deposit, such further sums with Owner as are
necessary to satisfy this obligation.
42. Restrictions on Use of the Demised Premises
-------------------------------------------
A. Subject to the provisions of this Lease, Tenant shall use the Demised
Premises only as offices in accordance with the Certificate of
Occupancy and for no other purposes.
B. Tenant shall not use or permit the use of the Demised Premises or any
part thereof in any way that would violate any of the covenants,
agreements, terms, provisions and conditions of this Lease or for any
unlawful purpose or in any unlawful manner
2
<PAGE>
or in violation of the Certificate of Occupancy for the Demised
Premises or the Building, and Tenant shall not suffer or permit the
Demised Premises or any part thereof to be used in any manner or for
anything to be done therein or anything to be brought into or be kept
therein that, in the judgment of Owner, shall in any way threaten to
impair or adversely affect the character, reputation or appearance of
the Building, the proper and economical operation of the Building or
any systems, facilities or services used to operate or clean all or
any part of the Building or the Demised Premises, or the use of any of
the areas of the Building by Owner or any of the other Tenants or
occupants of the Building. Tenant shall not install or use any
equipment that, in the judgment of Landlord, could cause any adverse
effect on the Demised Premises, the Building and/or the comfort and
convenience of other Tenants and occupants of the Building.
43. Landlord shall construct offices in accordance with layout drawn by
_________; Tenant to provide sketch presented to the Milowitz Group on or
before 10/30/98, in accordance with the attached sketch, all finishes to
building standard and in accordance with Building Codes. Any
additions/changes required by Tenant must be agreed to in writing by both
parties and shall be Tenant's sole cost to be paid upon written agreement.
[Document illegible ]
A. Landlord shall supply and install carpet and base at Landlord's cost.
Tenant shall have option of choosing carpet from Landlord's samples.
B. Left Blank Intentionally.
C. Any work performed by Tenant or Tenant's contractors shall be
performed in a good and workmanlike manner and shall comply with all
rules and regulations of all Governmental Authorities having
jurisdiction therein.
If Tenant is providing build-out of space or makes any alterations to
the space, the following paragraphs apply:
D. Tenant, or any contractor or contractors employed by Tenant, or any
other persons who will do work or install equipment for Tenant, shall
be fully covered by Workmen's Compensation Insurance, and the
Certificate by Tenant or any such contractor or persons as aforesaid.
Tenant further covenants, at its own cost and expense, to take out and
maintain at all times during the progress of such work and until
completion thereof, public liability insurance policies covering Owner
in compliance with the limits and such other conditions as set forth
in Article 49 hereof, and certificates evidencing the policies shall
be delivered to Owner prior to the commencement of any work hereunder.
3
<PAGE>
E. Tenant's contracts with its contractors and/or other persons who will
perform work for the Tenant shall require said persons to look solely
to the Tenant for payment and will hold Owner and the Building free
from all liens and claims of all persons furnishing labor or materials
therefor.
F. Subject to the provisions of this Article, any and all machinery,
equipment and fixtures installed by Tenant, which are not replacements
of fixtures either furnished by Owner as part of Owner's work or pre-
existing in the Demised Premises at the time of the commencement of
this Lease (sometimes herein referred to as "Tenant's Property") shall
remain personally, notwithstanding the fact that it may be affixed or
attached to the realty, and shall, during the term of this Lease or
any extension thereof, belong to and be removable by Tenant, provided
that (a) Tenant shall remove said installations prior to the
expiration of such term, and shall repair any damage caused by said
removal and shall deliver the Demised Premises to Owner in the same,
or better condition, as upon the commencement of the term hereof,
reasonable wear and tear excepted. Prior to the expiration of the
term or sooner termination thereof, Tenant shall at its own cost and
expense remove, from the Demised Premises, all of Tenant's property,
except such items thereof as Tenant shall have expressly agreed in
writing with Owner are to become the property of the Owner and Tenant
shall repair any damage to the Demised Premises resulting from such
removal. Any Tenant's property remaining in the Demised Premises
after termination of this Lease (except such items as Owner and Tenant
have expressly agreed in writing are to remain and become the property
of Owner) shall be deemed to have been abandoned by Tenant or any sub-
Tenant and either may be retained by Owner as its property or may be
removed from the premises by Owner at Tenant's expense.
G. Machinery, fixtures, chattels or equipment, if any, furnished or
installed by Tenant, the cost of which is borne by Owner, shall become
the property of Owner upon payment therefor by Owner, or reimbursement
of Tenant by Owner, as the case may be, and shall not be removed by
Tenant. Anything herein contained to the contrary notwithstanding, it
is understood and agreed that all structural improvements, all
plumbing lines and equipment (other than fixtures), all electrical
wiring, conduit and equipment (other than free-standing lighting
fixtures), all heating and ventilating installations made by Tenant,
whether with or without contribution or reimbursement by Owner, shall
forthwith become part of the Building and property of Owner.
Tenant's failure to comply with any of the items and conditions of
this Article will be deemed a default pursuant to Article 17 hereof.
4
<PAGE>
44. Utilities
---------
A. Electricity Service
-------------------
(1) Landlord shall contract directly with the public utility company
for electric service for the Demised Premises. Tenant shall be
responsible for the payment of the cost of such electric service.
Such electric service may be furnished to Tenant by means of the
then existing electrical facilities serving the Premises to the
extent that the same are available, suitable and safe for such
purposes. Landlord will, prior to the commencement date, install
a sub-meter to measure Tenant's electric usage and Tenant shall
pay for such electric usage at the rate charged to Landlord by
the utility company plus a five percent administrative fee.
(2) Any additional feeders or risers to be installed to supply
Tenant's additional electrical requirements, and all other
equipment proper and necessary in connection with such feeders or
risers shall be, at Landlord's option, installed by Landlord upon
Tenant's request, at the sole cost and expense of Tenant
(including a connection fee of Three Hundred Fifty Dollars
($350.00) per kilovolt ampere, provided that, in Landlord's
reasonable judgment, such additional feeders or risers are
necessary and are permissible under applicable laws and insurance
regulations and the installation of such feeders or risers will
not cause permanent damage or injury to the Building or the
Premises or cause or create a dangerous or hazardous condition or
entail excessive or unreasonable alterations or materially
interfere with or disturb other tenants or occupants of the
Building. Tenant covenants that, at no time, shall the use of
electrical energy in the Premises exceed the capacity of the
existing feeders or wiring installations then serving the
Premises. Tenant shall not make or perform or permit the making
or performance of any alterations to wiring installations or
other electrical facilities in or serving the Premises or any
additions to the business machines, office equipment or other
appliances in the Premises which utilize electrical energy
without the prior consent of Landlord in each instance, which
consent shall not be unreasonably withheld or delayed.
(3) Landlord shall not be liable to Tenant in any way for any
interruption, curtailment or failure, or defect in the supply or
character of electricity furnished to the Premises by reason of
any requirement, act or omission of Landlord or of any public
utility or other company servicing the Building with electricity
or for any other reason, except if caused by Landlord's
negligence or willful misconduct.
5
<PAGE>
Landlord reserves the right to estimate electric costs and Tenant
specifically agrees to pay estimated costs per submeter which
shall be confirmed by an outside source monthly.
45. Services
--------
(1) Cleaning services by Landlord at the additional charges of $1.50 per
square foot, to building standards plus actual increases from outside
cleaning company. No medical waste shall be removed by Landlord.
(2) HVAC - Landlord shall install the HVAC system and Landlord shall
maintain and repair same during the term of the Lease at the
Landlord's sole cost and expense and on the termination of the Lease,
Tenant shall deliver the Premises with the HVAC system in working
order, free and clear of all liens and encumbrances. Tenant shall pay
for electricity for its own cooling, at its sole cost and expense,
through the HVAC system.
(3) Service elevator other than Monday through Friday, 8:00 AM through
4:00 PM, at the rate of $50.00 per hour, subject to 48-hour written
notice.
46. Security Agreements
-------------------
A. Tenant covenants and agrees that no security agreement, whether by way
of conditional bill of sale, chattel, mortgage or instrument of
similar import, shall be placed upon any improvement made by Tenant
which is affixed to the realty.
B. In the event that any of the machinery, fixtures, furniture and
equipment installed by Tenant in the Demised Premises are purchased or
acquired by Tenant subject to a chattel, mortgage, conditional sale
agreement or other title retention or security agreement, Tenant
undertakes and agrees (1) that no such chattel, mortgage, conditional
sales agreement or other title retention or security agreement or
Uniform Commercial Code filing statement shall be permitted to be
filed as a lien against the building and real property of which the
Demised Premises form a part, and (2) to cause to be inserted in any
of the above-described title retention, chattel, mortgage or security
agreements the following provision:
"Notwithstanding anything to the contrary herein, this chattel,
mortgage, conditional sale agreement, title retention agreement or
security agreement shall not create or be filed as a lien against the
land, building and improvements comprising the real property in which
the goods, machinery, equipment, appliances or other personal property
covered hereby are to be located or installed."
C. If any such lien or UCC financing statement, based on an agreement as
above described, is filed against the building and improvements, of
which the Demised
6
<PAGE>
Premises form a part, Tenant will, upon at least ten (10) days' prior
written notice thereof from Owner, cause such lien or notice to be
removed or discharged at Tenant's cost and expense, and Tenant's
failure ' to do so shall constitute a breach of a material provision
of this Lease.
47. Mechanic's Liens
----------------
A. Tenant shall have no power to do any act or make any contract which
may create or be the foundation for any lien upon the reversion of
Owner, the Premises herein Demised or Owner's building and
improvements, it being agreed that should Tenant cause any
alterations, changes, additional improvements or repairs to be made to
the Demised Premises, or material furnished or labor performed therein
or thereon, neither Owner for the Demise Premises shall, under any
circumstances, be liable for the payment of any expenses incurred or
for the value of any such work done or material furnished to the
Demised Premises or any part thereof, but all such alterations,
changes, additions, improvements and repairs and materials and labor
shall be at Tenant's expense, and Tenant shall be solely and wholly
responsible to contractors, laborers, and materialmen furnishing labor
and material to said premises and building, or any part thereof, for
or on behalf of Tenant.
B. Tenant shall not suffer or permit any mechanic's liens to be filed
against the fee ownership of the Demised Premises nor against Tenant's
leasehold interest in said premises, by reason of work, labor,
services or materials supplied or claimed to have been supplied to
Tenant or to any occupant of the Demised Premises. If any such
mechanic's lien shall at any time be filed against the Demised
Premises or the building and improvements thereon, Tenant shall, at
its own cost and expense, cause the same to be canceled and discharged
of record by surety bond or appropriate cash deposit within thirty
(30) days after the date of filing the same and notice thereof to
Tenant, and Tenant shall indemnify and save harmless Owner from and
against any and all costs, expenses, claims, losses or damages
resulting therefrom or by reasons thereof.
C. Tenant shall also defend on behalf of Owner, at Tenant's sole cost and
expense, any action, suit or proceedings which may be brought thereon
or for the enforcement of such liens or orders, and Tenant shall pay
any damages and satisfy and discharge any judgment entered thereon and
save harmless Owner from any claim or damage resulting therefrom.
D. If Tenant shall fail to discharge such mechanic's lien within such
period, then, in addition to any other right or remedy of Owner, Owner
may, but shall not be obligated to, discharge the same, either by
paying the amount claimed to be due or by procuring the discharge of
such lien by deposit in court or bonding, and in any such event, Owner
shall be entitled, if Owner so elects, to compel the prosecution of an
action for the foreclosure of such mechanic's lien by the lienor and
to pay the
7
<PAGE>
amount of the judgment, if any, in favor of the lienor, with interest,
costs and allowances.
E. Any amount paid by Owner for any of the aforesaid charges and all
reasonable legal and other expenses of Owner, including reasonable
counsel fees, in defending any such action in procuring the discharge
of said lien, with all necessary disbursements in connection
therewith, with interest thereon at the then legal rate of imputed
interest from the date of payment, shall be repaid within a period of
twenty (20) days after written demand therefor by Owner to Tenant, and
may be treated as Additional Rent payable with the next installment of
Annual Basic Rent.
F. Prior to the commencement of any work in the Demised Premises by any
general contractor employed by Tenant or by any sub-contractors
employed by such general contractor, or sub-contractors employed by
Tenant, Tenant shall:
(1) furnish Owner with Tenant's written statement setting forth the
name and business address of the Tenant's general contractor or
sub-contractors employed by Tenant;
(2) obtain and furnish to Owner a written list of all sub-contractors
employed or to be employed by Tenant's general contractor and
certified by the general contractor.
48. Owner's Exculpation/No Recourse
-------------------------------
If the Owner or any successor-in-interest be an individual, joint venture,
tenancy-in-common, co-partnership, unincorporated association, limited
partnership or other unincorporated group of individuals, or a corporation
(all of which are referred to below, individually, and collectively, as an
"Owner Entity"), then, anything herein to the contrary notwithstanding,
Tenant shall look solely to the interest of such Owner Entity in the
building in satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by
Owner, in the event of any default or breach by Owner with respect to any
of the terms, covenants and conditions of this Lease to be observed and/or
performed by Landlord, and no other property or assets of such Owner Entity
or any member thereof, shall be subject to levy, execution or, other
enforcement procedure for the satisfaction of Tenant's remedies.
49. Parties' Certificates
---------------------
The Parties each shall, without charge at any time, and from time to time,
within ten (10) days after request by the other, certify to any mortgagee,
proposed assignee of any mortgagee, or proposed purchaser or any other
person, firm or corporation specified by the requesting party:
8
<PAGE>
a) That this Lease is unmodified and in full force and effect (or, if
there has been modification, that the same is in full force and effect
as modified and stating the modifications);
b) Whether or not there are then existing any set-offs or defenses
against the enforcement of any of the agreements, terms, covenants or
conditions hereof upon the part of the Tenant to be performed or
complied with (and, if so, specifying the same); and
c) The dates, if any, to which the rental and other charges hereunder
have been paid in advance.
50. Liability Insurance and Indemnification
---------------------------------------
A. During the term hereof, Tenant shall, at its own cost and expense:
(1) Obtain, maintain and keep in force, for the benefit of Owner,
Managing Agent and Tenant, comprehensive general liability
insurance covering the risks in the limits set forth below, on or
about the Demised Premises (which shall include Tenant's signs,
if any):
a) Bodily Injury:
Each person $1,000,000.00
Each Occurrence $1,000,000.00
b) Property Damage:
Each Occurrence $ 500,000.00
c) Completed operations and contractual liability with the same
bodily injury and property damage limits stated in (a) and
(b) above.
d) Fire and extended coverage for Tenant's fixtures,
alterations and inventory in an amount adequate to cover the
cost of replacement, but not less than $100,000.00.
B. Owner and its managing agent, Et-Al Management Corp., shall be named
as an additional insured in said policies, as their interests may
appear, and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be
issued by insurance companies reasonably satisfactory to Owner and
which are authorized to do business in the State of New York. Tenant
shall deliver to Owner the policies of insurance, together with
evidence of the payment of premiums thereon within ten (10) days of
taking occupancy of the
9
<PAGE>
Demised Premises and furnish to Owner at least twenty (20) days prior
to the expiration of any such policies, a new policy, with evidence of
the payment or premiums thereon. The parties hereto agree that the
payment of said premiums may be financed, as long as same are made and
kept current. Said policies shall also provide that the insurer will
give Owner at least thirty (30) days' prior written notice of
cancellation of said policy.
C. Notwithstanding the limits of insurance specified in this Article,
Tenant agrees to indemnify Owner, its agents, servants and employees
against all damage, loss or liability resulting from any of the risks
referred to in this Article. Such indemnification shall operate
whether or not Tenant has placed and maintained the insurance
specified in this Article and whether or not such proceeds from such
insurance actually are collectible from one or more of the insurance
companies; provided, however, that Tenant shall be relieved of its
obligations of indemnity herein Pro Tanto of the amount actually
recovered from one or more of the insurance companies by reason of
injury or damage to, or loss sustained on the Premises.
D. Tenant shall pay all premiums and charges for all of said policies,
and if Tenant shall fail to make any payment when due or carry any
such policy, Owner may, but shall not be obligated to, make such
payment or carry such policy, and the amount paid by Owner, with
interest thereon, shall be repaid to Owner by Tenant on demand, and
all such amounts so repayable, together with such interest, shall be
considered as Additional Rent payable hereunder for the collection of
which Owner shall have all of the remedies herein or by law provided
for the collection of rent. Payment by Owner of any such premium or
the carrying by Owner of any such policy, shall not be deemed to waive
or release the default of Tenant with respect thereto.
Tenant must provide evidence of coverages prior to taking occupancy of
leased space.
E. Tenant acknowledges that Owner will not carry insurance of any kind on
Tenant's furniture, furnishings, finishes, or wall coverings and/or
fixtures, equipment, and improvements, and agrees that Owner shall not
be obligated to repair any damage thereto or to replace the same.
F. Landlord will maintain same type of liability insurance for all public
spaces in building and will indemnify and defend Tenant for events
which occur in the buildings common space due to Landlord/Owner's
negligence.
10
<PAGE>
51. Tenant's Conduct of Business
----------------------------
Tenant covenants and agrees:
A. To do all things necessary to keep the Demised Premises clean,
orderly and neat at all times, and to prevent odors, all at
Tenant's sole cost and expense, and to conduct its business in a
proper manner.
B. That Tenant shall conduct its operations in the Demised Premises
in an orderly and proper manner so as not to annoy, disturb or be
offensive to others.
C. That Tenant shall not, at any time, discharge into the plumbing,
sewage or drainage system, any waste materials which will result
in the creation of a blockage in said system or otherwise
adversely affect the proper and clean maintenance and operation
thereof.
D. That Tenant, at its sole cost and expense, shall provide regular
exterminating and pest control services using Landlord's
exterminator in the Demised Premises at regular intervals, in
order to prevent the occurrence of any vermin in or about the
Demised Premises.
52. Adjustment of Rent for Increases in Real Estate Tax
---------------------------------------------------
See Paragraph 83.
53. Assignment and Sub-letting Provisions
-------------------------------------
Tenant may not assign this Lease under any circumstances without the prior
written consent of Owner, which consent may be withheld for any reason or
for no reason whatsoever.
54. Rent Arrears, Etc. Supplementing Article 25 of the printed form of lease:
------------------
A. Owner, at Owner's option, shall have the right, when Tenant is in
default in the payment of Fixed Rent or Additional Rent, to
demand payment by certified, bank or teller's check, or by postal
money order.
B. In the event that any payment under this Lease shall be made in
the form of a check from any person, firm or corporation other
than the person, firm or corporation named in this Lease, the
acceptance of same by Owner shall not, under any circumstances,
be deemed recognition of a sub-letting or any assignment of this
Lease, regardless of the number of times that such payment shall
be made by such other person, firm or corporation.
11
<PAGE>
C. Late Charge. If Tenant shall fail to pay all or any part of any
installment of Fixed Rent or Additional Rent for more than ten
(10) days after the same shall have become due and payable
(including the dishonor of a payment made by check, even if such
check was tendered in a timely manner), Tenant shall pay as
Additional Rent hereunder to Owner a late charge of six (6) cents
for each dollar of the amount of such Fixed Rent or Additional
Rent which shall not have been paid to Owner within said ten (10)
day period, in addition to any other right or remedy available
due to such late payment.
D. In the event that any check paid by or for the benefit of Tenant
to Owner is dishonored, Tenant shall pay Owner as Additional Rent
hereunder a charge of One Hundred Dollars ($100.00) in addition
to any other late charge or right or remedy available due to such
dishonored payment.
55. Additional Rent
---------------
A. All payments, other than Minimum Annual Rent required to be made by
Tenant pursuant to this Lease (including, but not limited to,
escalation charges, and any and all damages, interest, costs, fees and
expenses caused by Tenant's default) shall be deemed additional rent
and, in the event of any non-payment thereof, Owner shall have all
rights and remedies provided for herein and by law for non-payment of
Minimum Annual Rent in addition to whatever other remedies may be
available to Owner.
B. Unless expressly provided otherwise in this Lease, the amount shown as
due to Owner (or Owner's agent) in all bills, invoices and statements
to Tenant shall be due and payable by Tenant upon receipt without
further demand. Any delay or failure of Owner or its agent to prepare
and deliver any bill, statement or invoice shall not constitute a
waiver of the right to collect any payment which may have become due
during the term of this Lease, including without limitation,
retroactive payments for any and all amounts unbilled.
C. All payments of Minimum Annual Rent and additional rent pursuant to
this Lease shall be made by Tenant with checks drawn upon a New York
City bank. If Owner receives from Tenant any payment less than the
full amount of the Minimum Annual Rent and additional rent then due
and owing, Tenant hereby waives its right, if any, to designate the
items to which such payment shall be applied and agrees that Owner, in
its sole discretion, may apply such payment in whole or in part to any
Minimum Annual Rent, any additional rent or to any combination thereof
then due and payable hereunder.
D. The losing party in any action or proceeding between Owner and Tenant
shall pay the reasonable attorneys' fees, costs and disbursements of
the prevailing party for such action or proceeding upon the assignment
thereof by the Court or on demand.
12
<PAGE>
If a default of Tenant causes Owner to prosecute or defend an action
or proceeding with a third party, Tenant shall pay the reasonable
attorneys' fees, costs and disbursements of Owner for such action or
proceeding on demand. If Owner suffers, pays or incurs any damages,
losses, fees or expenses (including without limitation, reasonable
attorneys' fees and disbursements) due to a default, act, omission or
request of Tenant, Tenant shall pay the total amount thereof to Owner
on demand.
E. If all rent is not paid in full and actually received by Owner within
fifteen (15) days after it is due and payable hereunder, Tenant shall
pay Owner a late fee of 2% per month as additional rent. However, if
the collection of such late fee at the rate specified herein would be
usurious or otherwise unenforceable, interest on late payments shall
accrue at the highest enforceable rate.
F. References in this Lease to "rent," "Rent," "rents," "Rents,"
"rental," "Rental," "rentals" and "Rentals" shall mean and include
Minimum Annual Rent and additional rent. The Minimum Annual Rent is
the minimum rental due and payable without prior demand, offset or
deduction. No decrease in any additional rent for any period shall
yield an offset or deduction in any other rental or for any other
period. References in this Lease to Tenant being "in default" and/or
Tenant's "breach" or "default" shall mean and include each and every
default, breach, misfeasance, nonfeasance, non-payment, or any other
failure of Tenant to perform any of its obligations hereunder. If
Owner gives notice of default and Tenant seeks declaratory relief and
Tenant's time to cure is extended pending the outcome of such
declaratory judgment action, Tenant shall be deemed to be "in default"
under this Lease during the pendency of such action for the purposes
of those rights that are exercisable by Tenant only if it is not "in
default." All of Tenant's obligations to pay rent, to indemnify Owner
and to obtain insurance shall survive the expiration of the term or
sooner termination of this Lease.
G. Owner's managing agent, Et-Al Management Corp., may give notices,
demands, invoices, statements and/or bills to Tenant in Owner's
behalf; any such notice, statement, invoice, demand or bill shall be
deemed to have been given by Owner.
H. The provisions of this Article shall supplement (not limit) other
provisions of this Lease pertaining to the same matters as this
Article and related matters.
56. Owner's Right of Entry
----------------------
A. Tenant shall permit Owner to erect, use, maintain and repair pipes,
cables, conduits, plumbing, vents and wiring in, to and through the
Demised Premises, as and to the extent that Owner may now or hereafter
deem to be necessary or appropriate for the proper operation and
maintenance of the building of which the Demised Premises are a part.
All such work shall be done, so far as practicable, in such manner as
to avoid interference with Tenant's use of the Demised Premises, and
as expeditiously as
13
<PAGE>
possible. The liability of Owner, if any, under this Article shall be
limited to the prompt repair, at the sole cost and expense of Owner,
of any damage caused to the Demised Premises by the Owner in the
course of doing work under this paragraph.
B. Upon providing forty-eight (48) hours advance written notice, Owner,
or its agents or assignees, shall have the right to enter the Demised
Premises during business hours for the purpose of making such repairs
or alterations as Owner shall be required or shall have the right to
make by the provision of this Lease. Owner shall attempt to do all
such work at a time, and in a manner, that will not unreasonably
inconvenience Tenant, significantly diminish Tenant's floor area or
significantly disrupt Tenant's architectural layout. Owner shall be
allowed to take all material into and upon the Demised Premises that
may be required for repairs or alterations, without constituting an
eviction of Tenant, in whole or in part, so long as any repair work by
Owner is diligently prosecuted to completion. Owner shall also have
the right, without prior written notice, to enter the Demised Premises
at such other times as such entry may be required by circumstances of
emergency affecting the Demised Premises or the building containing
the same. In addition, Owner, or its agents or assignees, shall have
the right to enter the Demised Premises upon providing twenty-four
(24) hours' prior written notice during business hours for the purpose
of inspecting the general condition and state of repair of the
Premises and the showing of the Premises to any prospective purchaser
or mortgagee, such entry and inspection to be conducted in a manner
calculated to not unreasonably interfere with the operation of
Tenant's business or its customers.
C. The rights granted to Owner by the terms of this Article shall be
deemed supplementary to the provisions set forth in Article 13 of the
printed portion of this Lease.
57. Suspension of Services
----------------------
Anything in this Lease to the contrary notwithstanding, Owner reserves the
right to suspend the service of any utilities, when necessary by reason of
accident or of repairs, alterations or improvements necessary to be made in
the Demised Premises or the building of which it is a part, until such
repairs, alterations or improvements shall have been completed, and Owner
shall have no responsibility or liability for such suspension of services,
provided Owner proceeds with diligence and continuity to complete such
repairs, alterations or improvements and uses its best efforts to restore
such services as soon as practicable. The foregoing shall not be deemed to
impose upon Owner any obligations for the furnishing of any service,
maintenance or repair other than is specifically set forth in this Lease.
Owner will provide 72 hours advance notice of any planned service
suspension which is for regular maintenance purposes. No notice shall be
required for emergency suspension of service resulting from an accident or
other unanticipated event.
14
<PAGE>
58. Condemnation
------------
A. If the whole of the Demised Premises shall be taken under the power of
eminent domain of any public or private authority, then this Lease and
the term thereof shall cease and terminate, as of the date of such
taking and any unearned rent or other charges, if any, paid in
advance, shall be refunded to Tenant.
B. In the event that only a portion of the Demised Premises shall be
taken under the power of eminent domain by any public or private
authority, then this Lease and the term thereof shall continue in full
force and effect, at option of either the Owner or the Tenant,
provided, however, that Owner shall, at its expense forthwith restore
what may remain of the Demised Premises to substantially the same
condition as prior to the condemnation. There shall be a pro rata
abatement of basic rent hereunder to the extent that the amount of
floor space so taken compares to the amount of floor space prior to
such condemnation, to compensate Tenant for its loss of use of such
portion of the Demised Premises. The minimum rent reserved herein,
and any other charges payable to Tenant hereunder, shall be suspended
(provided Tenant is not then using the Demised Premises) for the
period from the date of the taking until the remainder of the Demised
Premises shall have been restored as aforesaid.
C. Tenant shall not be entitled to any award for the loss of or loss in
value of the leasehold, but only to an award for loss of or damage to
its fixtures and/or equipment and to moving expenses, all to the
extent allowed and solely in the event that such allowance does not,
in any way, diminish the award to Owner. The respective damages to
which Owner and Tenant are entitled by reason of any such taking shall
be fixed and paid, respectively, to Owner and Tenant, as their
interests appear, and in no event shall there be a merger of interest.
D. Within fifteen (15) days after Owner receives written notice of any
such taking or intention to take under power of eminent domain, Owner
shall forward a copy thereof to Tenant.
59. Damage or Destruction
---------------------
A. If the Demised Premises shall be partially damaged by fire or other
casualty, the damaged portions of the Demised Premises (but not
Tenant's trade fixtures or personal property) shall be repaired by and
at the expense of Owner (unless such fire or casualty resulted, in
whole or in part, from any act or omission, whether negligent or
otherwise, of Tenant or his agents, servants, contractors, employees,
invitees, or assigns, in which case such repairs shall be at the cost
and expense of Tenant), and the rent until such repairs shall be made
shall be apportioned according to the part of the Demised Premises
which is usable by Tenant. If Tenant shall have paid rent
15
<PAGE>
in advance, Owner shall repay to Tenant an amount equal to that
portion of rent so paid in advance, payment of which is abated.
B. If the Demised Premises are totally damaged or are rendered wholly
untenantable by fire or other casualty, Owner shall, within sixty (60)
days after such fire or other casualty, give Tenant written notice of
Owner's election whether:
1) To terminate this Lease and thereupon the term of this Lease
shall expire by lapse of time upon the third (3rd) day after such
notice is given, and Tenant shall vacate the Demised Premises and
surrender the same to Owner. If Tenant shall not be in default
under this Lease, or if any monetary default existing at the time
of the giving of such a notice is cured in full within three (3)
days after delivery of said notice, then upon the termination of
this Lease under the conditions provided for in the sentence
immediately preceding, Tenant's liability for rent accruing
subsequent to the fire or casualty shall cease and be apportioned
as of the day following such fire or casualty, or
2) To restore or rebuild the Demised Premises in character, layout,
area and equipment (but not Tenant's trade fixtures or personal
property) substantially equal to the premises damaged or
destroyed immediately prior to such damage or destruction, and it
is agreed that in such event, this Lease shall continue in full
force and effect, but the rent, the additional rent, and all
other payments and obligations of Tenant shall abate as of the
date of such fire or other casualty, until the Demised Premises
shall have been fully and completely restored or rebuilt by Owner
and possession thereof shall have been delivered to Tenant.
Should Owner elect to send Tenant written notice under
subparagraph (1) of this Article 56B, and thereafter, within one
(1) year of the giving of such notice, act nevertheless to
restore or rebuild the Demised Premises in character, layout,
area and equipment (but not Tenant's trade fixtures or personal
property) substantially equal to the premises damaged or
destroyed immediately prior to such damage or destruction, then
and in such event, Owner agrees to give Tenant a thirty (30) day
unilateral option to be exercised by Tenant in the method and
manner otherwise set forth in this Lease, to resume occupancy for
the remaining balance of the original lease term under all of the
other terms and conditions set forth in this Lease.
C. Owner shall not be liable for reasonable delay under the foregoing
subparagraphs A or B if such delay arises by reason of adjustment of
insurance on the part of Owner and/or Tenant or the reasonable delay
on account of any cause beyond the control of Owner or contractors
employed by Owner, including, but not limited to strikes, labor
disputes and shortages of material.
16
<PAGE>
D. Tenant hereby expressly waives the provisions of Section 227 of the
Real Property Law and of any law now in force or hereafter enacted
which, in substance, provides for termination of a lease of real
property by reason of destruction or untenantability of the Premises
demised thereunder caused by fire or other casualty and agrees that
the provisions of this Article 57 shall govern and control in lieu of
any such provisions of law.
60. Signs
-----
A. Tenant shall not, without Owner's prior written consent, place or
install any sign on the exterior of the Demised Premises, or the
building of which it is a part, or on the inner or outer faces of the
windows or doors of the Demised Premises. Tenant shall be permitted
to install and maintain, at its own cost and expense, an exterior
sign, provided the same receives the prior approval of Owner as to
dimensions, shape, design, size, color, wording, material of
composition and location. Tenant agrees that any exterior sign
approved by Owner shall not be installed until all approvals and
permits are first obtained by Tenant from governmental agencies having
jurisdiction thereover and that all fees payable in connection with
such installation, maintenance and permits shall be paid by Tenant.
B. Tenant shall not place in the window's or in any display or other area
visible to public view from the outside of the Demised Premises any
flashing, blinking or animated sign or one which otherwise has
variations in the intensity of illumination without first obtaining
Owner's prior written approval.
C. Tenant shall not, after having obtained the approval of Owner, change
or alter any sign in any respect whatsoever, including but not limited
to size, material of composition or location, without first obtaining
the prior written approval of Owner, except that Tenant may change the
phraseology in a sign previously approved by Owner without additional
approval.
D. In the event that Owner shall deem it necessary to remove any sign of
Tenant in order to make any repairs, alterations or improvements in,
to or upon the Demised Premises, or the building of which it is a
part, Owner shall have the right to do so, provided the same be
removed and replaced at Owner's expense, promptly upon completion of
such repair, alteration or improvements.
61. Replacement of Plate Glass
--------------------------
Tenant shall, at its own cost and expense, replace any and all plate or
other glass damaged or broken from any cause whatsoever in and about the
Demised Premises. Tenant shall, at its own cost and expense, either insure
and keep insured all such glass in stock companies authorized to do
business in the State of New York, naming the Owner as a party insured
thereunder, or may act as a self-insurer for plate glass.
17
<PAGE>
62. Holdover by Tenant
------------------
Tenant will have no right to remain in possession of all or any part of the
Demised Premises after the expiration of the term. If Tenant remains in
possession of all or any part of the Demised Premises after the end of said
term, with the express or implied consent of Owner: (a) such tenancy will
be deemed to be a periodic tenancy from month-to-month only; (b) such
tenancy will not constitute a renewal or extension of this Lease for any
further term; and (c) such tenancy may be terminated by Owner upon the
earlier of thirty (30) days' prior written notice or the earliest date
permitted by law. In such event, monthly rent (the reasonable value of use
and occupancy) will be increased to an amount equal to one-half (1/2) of
the sum of the Minimum Annual Rent plus all additional rentals payable
during the last year of the term, and any other sums due for additional
rent under this Lease will be payable in the amount and at the times
specified in this Lease. Such month-to-month tenancy will be subject to
every other term, condition and covenant contained in this Lease. Neither
the billing nor the collection of use and occupancy in the above amount
shall be deemed a waiver or any right of Owner to collect damages for
Tenant's failure to vacate the Demised Premises after the expiration or
sooner termination of this Lease. The provisions of this Article shall
survive the expiration or sooner termination of this Lease. In the event a
renewal lease is executed by all parties within ninety (90) days of the
expiration date and all rent has been paid timely, the rent will be
adjusted retroactively to the renewal rate.
63. Broker
------
Tenant and Owner covenant, warrant and represent to each other that neither
has had any dealings with any real estate broker, agent or finder in
consummating the Lease other than Aegis Realty, Equis, and Sholom &
Zuckerbrot and that no conversation or prior negotiations were had with any
individual or entity other than Aegis Realty, Equis, and Sholom &
Zuckerbrot concerning the renting of the Demised Premises. In reliance
upon such representation, Owner agrees to pay any commission due to Aegis
Realty, Equis, Sholom & Zuckerbrot. The parties agree to hold each other
harmless from and against any claims for brokerage commissions arising out
of any conversation of negotiations had by the Tenant with any other
broker./2/
__________________
/2/ Based on conversation w/ Alan Zaretsky, he has agreed to split the Broker
- Commission equally amongst the above names brokers. Additionally Mr.
Zaretsky agreed to give [ document illegible ]
---------------------------------------------------------------------------
18
<PAGE>
64. Subordination and Attornment
----------------------------
A. This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all mortgages and building
loan agreements, including without limitation, mortgages and building
loan agreements and leasehold mortgages which may now or hereafter
affect the Land and/or the Building and/or any of such Leases, whether
or not such mortgages shall also cover other lands and/or buildings,
to each and every advance made or hereafter to be made under such
mortgages and/or building loan agreements, and to all renewals,
modifications, replacements, assignments, and extensions of such
Leases, building loan agreements, mortgages and spreaders and
consolidations of such mortgages. This Article shall be self-
operative and no further instrument of subordination shall be
required. In confirmation of such subordination, Tenant shall
promptly, at its sole cost and expense, execute and deliver any
instrument in recordable form that Owner, the lessor of any such Lease
or the holder of any such mortgage or any of their respective assigns
or successors in interest may reasonably request evidence such
subordination and the Tenant hereby constitutes and appoints Owner the
attorney-in-fact for Tenant to execute any such instrument for and on
behalf of Tenant in the event Tenant fails to execute such instrument
within ten (10) days following delivery of written request therefor.
The Leases to which this Lease is, at the time referred to, subject
and subordinate pursuant to this Article, are hereinafter sometimes
called "Superior Leases" and the mortgages to which this Lease is, at
the time referred to, subject and subordinate, are hereinafter called
"Superior Mortgages" and the Lessor of a Superior Lease or its
successor in interest at the time referred to is sometimes hereinafter
called a "Lessor" and the holder of a Superior Mortgage or its
successor in interest at the time referred to is sometimes hereinafter
called a "Holder." This provision supplements Article 7 of this
Lease.
B. In the event of any act or omission of Owner which would give Tenant
the right, immediately or after lapse of a period of time, to cancel
or terminate this lease, or to claim a partial or total eviction,
Tenant shall not exercise such right (1) until it has given written
notice of such act or omission to the holder of each Superior Mortgage
of record as of the date of the execution of this Lease, or of which
Owner has given Tenant written notice, and (2) unless such act or
omission shall be one which is not capable of being remedied by Owner
or such Holder within a reasonable period of time, until reasonable
period of time for remedying such act or omission shall have elapsed
following the giving of such notice and following the time when such
Holder shall have become entitled under such Superior Mortgage to
remedy the same (which reasonable period shall in no event be less
than the period to which Owner would be entitled under this Lease or
otherwise, after similar notice, to effect such remedy), provided such
Holder shall, with due diligence give Tenant written notice of its
intention to, and commence and continue to, remedy such act or
omission. As of the date hereof, the parties entitled to receive
notice under this Paragraph 63C are as follows:
19
<PAGE>
45-18 Court Square LLC and 45-18 Equity, at
60 Morrow Avenue
Scarsdale, NY 10583
In the event of any changes, notification will be given to tenant.
C. If the fee owner of the building which includes the Demised Premises,
or the Holder of a Superior Mortgage, shall succeed to the rights of
Owner under this Lease, whether through possession or foreclosure
action or through termination for any reason of the leasehold estate
covering the building which includes the Demised Premises or by
delivery of a new lease or deed, then, at the request of such party so
succeeding to Owner's rights (herein sometimes called "Successor
Owner") and upon such Successor Owner's written agreement to accept
Tenant's attornment, Tenant shall attorn to and recognize such
Successor Owner as Tenant's Landlord under this Lease. The foregoing
provisions shall inure to the benefit of any such Successor Owner, and
shall be self-operative upon any such demand, without requiring any
further instrument to give effect to said provisions. Tenant,
however, upon demand of any such Successor Owner, agrees to execute,
from time to time, an instrument in confirmation of such attornment
which is satisfactory to such Successor Landlord. Upon such
attornment, this Lease shall continue in full force and effect for the
remainder of the term originally demised under this Lease, as or as if
it were a direct lease between the Successor Owner and Tenant upon all
of the terms, covenants, conditions, agreements and provisions, as are
set forth in this Lease, except that the Successor Owner shall not:
1) be subject to any offset not expressly provided for in this
Lease.
2) be bound by any previous modification of this Lease not expressly
provided for in this Lease, or by any previous pre-payment of
more than one month's rent, unless such modification or
prepayment shall have been expressly approved in writing by the
Successor Owner through or by reason of which the Successor
Landlord shall have succeeded to the rights of Owner under this
lease.
D. Owner covenants and represents that it knows of no outstanding
lawsuits, claims or judgments affecting or limiting Owner's right or
authority to perform under this lease.
65. Left Blank Intentionally
------------------------
20
<PAGE>
66. Modification - Financing
------------------------
If, in connection with Owner's obtaining financing for the Real Property or
any portion thereof, a bank, insurance company or other lending institution
shall request reasonable modifications of 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 adversely affect the leasehold interest
hereby created or otherwise and adversely affect Tenant's rights hereunder.
67. Conditional Limitation
----------------------
In the event that in any twelve (12) month period (A) a non-monetary
default of the kind set forth in Article 17(l) shall have occurred or (B)
Tenant shall have defaulted in the prompt payment of Minimum Annual Rent or
Additional Rent, or any part of either, and Owner shall have commenced a
summary proceeding to dispossess Tenant in each such instance, then,
notwithstanding that such defaults may have been cured at any time after
the commencement of such summary proceeding, any two (2) further defaults
by Tenant within the ensuing twenty-four (24) month period shall be deemed
to be a violation of a substantial obligation of this Lease by Tenant and
Owner may serve a written three (3) days' notice of cancellation of this
Lease upon Tenant and, upon the expiration of said three (3) days, this
Lease and the term shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely
fixed for the end and expiration of this Lease and the term and Tenant
shall then quit and surrender the Demised Premises to Owner, but Tenant
shall remain liable as elsewhere provided in this Lease. Tenant's payment
of Minimum Annual Rent and/or Additional Rent shall be considered "prompt"
if received by Owner within ten (10) days of the date that same is due.
68. Bankruptcy
----------
Without limiting any of the provisions of Article 16, 17 or 18 hereof, if
pursuant to the Bankruptcy Code of 1978 and the Bankruptcy Code of 1986, as
the same may be amended, Tenant is permitted to assign this Lease in
disregard of the restrictions contained in Article 11 or any other
provision of this Lease. Tenant agrees that adequate assurance of future
performance by the assignee permitted under such Code shall mean deposit of
cash security with Owner in an amount equal to the sum of one year's
Minimum Base Rent then reserved hereunder plus an amount equal to all
additional rent payable under the provisions of this Lease for the calendar
year preceding the year in which such assignment is intended to become
effective, which deposit shall be held by Owner, without interest, for the
balance of the term of this Lease as security for the full and faithful
performance of all of the obligations under this Lease on the part of
Tenant yet to be performed. If Tenant receives or is to receive any
valuable consideration for such an assignment of this Lease, such
consideration, after deducting therefrom (A) the brokerage commissions, if
any, and other expenses reasonably incurred by Tenant for such assignment
and (B) any portion of such consideration reasonably designated by the
assignee as paid for the purchase of Tenant's
21
<PAGE>
property in the demised premises, shall be and become the sole and
exclusive property of Owner and shall be paid over to Owner directly by
such assignee. In addition, adequate assurance shall mean that any such
assignee of this Lease shall have a net worth, exclusive of good will,
equal to at least fifteen (15) times the aggregate of the Minimum Annual
Rent reserved hereunder plus all additional rent for the preceding calendar
year as aforesaid.
69. Hazardous Materials
-------------------
A. For purposes of this Lease, "hazardous materials" means any
explosives, radioactive materials, hazardous wastes, or hazardous
substances, including without limitation, substances defined as
"hazardous substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. #9601-
9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C.
#1801-1812; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. #6901-6987; or any other similar laws (collectively, "hazardous
materials laws").
B. Tenant will not cause or permit the storage, use, generation, or
disposition of any hazardous materials in, on, or about the demised
premises or the Building by Tenant, its agents, employees or
contractors. Tenant will not permit the Demised Premises to be used
or operated in a manner that may cause the Demised Premises or the
Building to be contaminated by any hazardous materials in violation of
any hazardous materials laws. Tenant will immediately advise Owner in
writing of (1) any and all enforcement, cleanup, remedial, removal, or
other governmental or regulatory actions instituted, completed or
threatened pursuant to any hazardous materials laws relating to any
hazardous materials affecting the Demised Premises; and (2) all claims
made or threatened by any third party against Tenant, Owner, or the
Demised Premises relating to damage, contribution, cost recovery,
compensation, loss, or injury resulting from any hazardous materials
on or about the Demised Premises. Without Owner's prior written
consent, Tenant will not take any remedial action or enter into any
agreements or settlements in response to the presence of any hazardous
materials in, on or about the Demised Premises.
C. Tenant will be solely responsible for and will defend, indemnify and
hold Owner, its agents and employees, harmless from and against all
claims, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with Tenant's breach of its
obligations in this Article, including, but not limited to, the
removal, cleanup and restoration work and materials necessary to
return the Demised Premises and any other property of whatever nature
located on the Building to their condition existing prior to the
appearance of Tenant's hazardous materials on the Demised Premises.
Tenant's obligations under this Article will survive the expiration or
other termination of this Lease.
22
<PAGE>
70. Left Blank Intentionally
------------------------
71. Occupancy Prior to Commencement Date
------------------------------------
In the event that Owner permits Tenant to occupy the Demised Premises prior
to the commencement date, such occupancy shall be upon all of the terms and
conditions contained in this Lease except that Tenant shall pay a pro-rated
rent for the period to the commencement date and shall be responsible for
all other charges provided for under the Lease.
72. Waste Removal, Etc.
-------------------
Tenant shall, at its own cost and expense, promptly dispose of all garbage,
ashes and waste arising from the conduct of its business in the Demised
Premises at such times and in such manner so as to avoid any obnoxious or
offensive smells or odors therefrom or otherwise materially interfering
with the comfort and quiet enjoyment of the other occupants of the
building. Tenant further covenants and agrees, at the Tenant's own cost
and expense, to keep the drain waste and connections with mains free from
obstruction to the reasonable satisfaction of the Landlord, its agents and
all authorities having jurisdiction thereof. Tenant further covenants and
agrees that Tenant will, at Tenant's own cost and expense, keep and
maintain the interior in good order and repair. (See paragraph 45(i) of
Rider).
73. Irrespective of the place of execution or performance, this agreement shall
be governed by and construed in accordance with the laws of the State of
New York. This agreement shall be construed without regard to any
presumption or other rules requiring construction against the party causing
this agreement to be drafted. If any words or phrases in this agreement
shall have been stricken out or otherwise eliminated, whether or not any
other words or phrases have been added, this agreement shall be construed
as if the words or phrases so stricken out or otherwise eliminated were
never included in this agreement and no implication or inference shall be
drawn from the fact that said words or phrases were so stricken out or
otherwise eliminated. All terms and words used in this agreement,
regardless of the number or gender in which they are used, shall be deemed
to include any other number and any other gender, as the context may
require.
74. Left Blank Intentionally
------------------------
75. Notice of Owner's Default
-------------------------
In the event of any alleged default in the obligation of Owner under this
Lease, Tenant will deliver to Owner written notice listing the reasons for
Owner's default and Owner will have thirty (30) days following receipt of
such notice to cure such alleged default or, in the event that the alleged
default cannot reasonably be cured within a thirty (30) day period, to
commence action and proceed diligently to cure such alleged default. A
copy of such notice to Owner will be sent to any holder of a mortgage or
other superior lien on the Building or
23
<PAGE>
this Lease of which Tenant has been notified in writing, and any such
holder will also have the same time periods to cure such alleged default.
76. Modifications Requested by Mortgagee
------------------------------------
If any actual or prospective holder of a fee or mortgage interest in the
Building, the improvements thereon, the land thereunder or any leasehold
interest in either, requires the modification of this Lease in such manner
as does not materially lessen Tenant's rights or increase its obligations
hereunder, Tenant shall not withhold or delay its consent to such
modification and shall execute and deliver such confirming documents
therefor as such holder requires.
77. Conflict Between Rider and Printed Lease
----------------------------------------
If and to the extent that any of the provisions of any Rider to this Lease
conflict or are otherwise inconsistent with any of the printed provisions
of this Lease, whether or not such inconsistency is expressly noted in the
Rider, the provisions of the Rider shall prevail. The description of a
particular right or remedy of Owner shall not be deemed exclusive or
otherwise limit, waive or impair Owner's resort to any or all other rights
and remedies available. The terms "Owner" and "Landlord" whenever used in
this Lease shall have the same meaning. The meaning and effect of this
Lease shall not be determined subject to any presumption against Owner as
drafter. The doctrine of "ejusdem generis" shall not be applied to limit a
general description to the same class or category of things or matters
contained in the list (or specific description) which the general
description follows or otherwise relates to. If a word or phrase contained
in a prior draft of this Lease was deleted intentionally, the meaning and
effect of this Lease shall be determined as if the language stricken had
not been included in any prior draft.
78. Rider Governs
-------------
If any provision contained in this Rider is inconsistent or in conflict
with any printed provision of this Lease, the provision contained in this
Rider shall supersede said printed provision and shall be paramount and
superior.
79. Partial Invalidity/Joint Liability
----------------------------------
If any provision of this Lease or the application thereof to any person or
circumstance shall, to any extent be held void, unenforceable or invalid,
then the remainder of this Lease or the application of such provisions to
persons or circumstances other than those to which it is held void,
unenforceable or invalid shall be valid and enforced to the fullest extent
permitted by law. If there shall be more than one Tenant, they shall all
be bound, jointly and severally, by the terms, covenants and conditions of
this Lease.
24
<PAGE>
80. Indemnity: Supplementing Article 8 of the printed form of this lease.
---------
A. Tenant agrees to indemnify and save harmless Owner from and against
(a) all claims of whatever nature against Owner arising from any
negligent or improper act or omission of Tenant, its contractors,
licensees, agents, servants, employees, invitees or visitors, (b) all
claims against Owner arising from any accident, injury or damage
whatsoever caused to any person or to the property of any person and
occurring during the Term in or about the Demised Premises, and (c)
all claims against Owner arising from any accident, injury or damages
which result or are claimed to have resulted from an act or omission
of Tenant or Tenant's contractors, agents, servants, employees,
invitees or visitors. This indemnity shall not apply to the extent
that any of the claims described above are caused by the negligent act
or omission of Landlord, its contractors, agents, servants or
employees. This indemnity and hold harmless agreement shall include
indemnity from and against any and all liabilities, fines, suits,
demands, costs and expenses (including without limitation, reasonable
attorneys' fees) of any kind or nature incurred in or in conjunction
with any such claim or proceeding brought thereon, and the defense
thereof.
B. Tenant's indemnity set forth in this Article 80 shall extend and apply
to each Superior Lessor and Superior Mortgagee.
81. Requirements of Law
-------------------
Supplementing Article 6 of the printed form of Lease, Tenant's obligation
to comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions
and boards relating to Tenant's manner of use of the Demised Premises shall
include, but shall not be limited to, all requirements relating to
environmental matters by reason of Tenant's manner of use of the Demised
Premises (whether or not such requirement would otherwise be the
responsibility of Owner under said laws, orders or regulations) including,
but not limited to, the storage, treatment, handling or transportation of
hazardous waste.
82. Restrictions on Tenant's Use
----------------------------
Under no circumstances may the Demised Premises or any portion thereof be
used for residential purposes. Tenant understands that any such use shall
be a material default under the Lease and, notwithstanding anything herein
to the contrary, shall entitle Landlord to immediately send Tenant a notice
of cancellation of this Lease. Tenant further understands and acknowledges
that the Building is not, has not been and is not intended to be an Interim
Multiple Dwelling within the meaning of Section 280 et seq. of the New York
Multiple Dwelling Law or any other type of multiple dwelling.
25
<PAGE>
83. Tax Escalation
--------------
The rent payable by Tenant during each lease year shall be adjusted in
accordance with this Article:
A. Definitions: For the purpose of this Article, the following
definitions shall apply:
1. The term "Base Tax Year" shall mean the fiscal year commencing
July 1, 1998 and ending June 30, 1999.
The term "Tax Year" shall mean any year commencing July 1st and
ending June 30th which covers any portion of the term of this
Lease.
2. The term "Percentage" shall mean 6%.
3. The term "Building" shall mean the land and building known as:
45-18 Court Square, Queens, N.Y. a/k/a 45-17 Pearson Street,
Queens, N.Y.
4. The term "Real Estate Taxes" shall mean all taxes levied,
assessed or imposed at any time by any governmental authority
upon or against the Building and also any tax or assessment
levied, assessed or imposed at any time by any governmental
authority in connection with the receipt of income or rents from
the Building to the extent that same shall be in lieu of all or a
portion of any of the aforesaid taxes upon or against the
Building.
B. Real Estate Taxes
1. In the event that the Real Estate Taxes payable during any Tax
Year subsequent to the Base Tax Year shall exceed the amount of
Real Estate Taxes payable during the Base Tax Year (whether any
such excess results from a higher tax rate or an increase in the
assessed valuation of the Building, or both), Tenant shall pay to
Landlord, as additional rent for such subsequent Tax Year, an
amount equal to The Percentage of the excess. After receipt of
the tax bills which indicate that Real Estate Taxes payable for
any subsequent Tax Year will exceed the Real Estate Taxes for the
Base Year, Landlord shall furnish to Tenant a statement of the
additional rent payable under this subdivision (B).
The percentage is defined as Tenant's portion of space in
building, specifically, 6%.
Such statement shall set forth the Real Estate Taxes payable for
such subsequent Tax Year and shall show an amount equal to the
Percentage of the said excess, which amount shall be due from
Tenant to Landlord, as
26
<PAGE>
additional rent, within ten (10) business days after receipt of
the aforesaid statement; copies of the tax bills of the City of
New York shall be sufficient evidence of the amount due under
this Article, upon request.
2. The amount of Real Estate Taxes actually payable by Landlord
during the Base Tax Year shall be used in the computation of the
amount of additional rent payable under this subdivision (B)
until the amount of the Real Estate Taxes payable during the Base
Tax Year be reduced by final determination of legal proceedings,
settlement or otherwise. In the event of such reduction, the
reduced amount of such taxes shall thereafter determine the
amount of additional rent payable by Tenant pursuant to this
subdivision (B), the additional rent theretofore paid or payable
hereunder shall be recompute on the basis of such reduction.
3. If Landlord shall receive a refund of any portion of the Real
Estate Taxes payable during any Tax Year after the Base Tax Year,
based upon which Tenant shall have paid additional rent as
provided in this subdivision (B), then as a result of such a
reduction of said Real Estate Taxes by final determination of
legal proceedings, settlement or otherwise, Landlord shall,
within ten (10) business days after receiving the refund, pay to
Tenant the percentage of the refund, less the percentage of
reasonable expenses (including but not limited to attorneys' and
appraisers' fees) incurred in connection with any such
application or proceeding.
C. In no event shall the annual fixed rent under the Lease (exclusive of
the additional rents under this Article) be reduced.
D. All of the additional rent payments required under this Article shall
be appropriately prorated for any partial Tax Year occurring during
the first and last years of the term of this Lease. Landlord's
failure to prepare and deliver any of the foregoing tax bills,
statements or bills of Landlord's failure to make a demand, shall not
in any way waive or cause the Landlord to forfeit or surrender its
rights to collect the additional rent required to be paid under this
Article.
E. In the event of a default by Tenant of any of the terms, covenants and
conditions of the Lease on the part of Tenant to be performed,
Landlord shall terminate the Lease as a result thereof, Landlord shall
have any and all of the rights and remedies available to Landlord
under the provisions of the Lease or otherwise with regard to the
collection of the additional rent required to be paid by Tenant under
the terms of this Article "83."
27
<PAGE>
84. A. "Operating Expenses" shall consist of expenses that are directly
------------------
attributable to the operation, maintenance, management and repair of
the Real Property. Tenant shall pay 6% of the increase in Operating
Expenses ("Expense Increase") incurred in connection with the Real
Property over the base year of the calendar year 1998 as and for
additional rent.
B. Operating Expenses shall exclude:
a. Capital Improvements.
b. The cost of any repair made by the Landlord because of the total
or partial destruction of the Real Property or the condemnation
of a portion of the Real Property.
c. Any costs which are reimbursed by insurance proceeds or any other
source.
d. Expenses of Landlord in curing its defaults or performing work
expressly provided for in the Lease to be borne at Landlord's
expense (including work for other tenant(s) in the Real
Property).
e. The cost of marketing and leasing the Real Property, including
leasing commissions, advertising and other marketing costs, and
related legal, accounting and other professional services; costs
to prepare space for occupancy by any tenants of the Real
Property and for renovating, repainting, decorating,
redecorating, planning, designing space for any tenants
(including Tenant) and the cost of any credits, allowances, or
other payments or rent waivers or concessions granted to any
tenant (including Tenant).
f. Landlord's cost of electricity and other services sold to
tenants, including retail tenants and the parking garage
operator, if any, which services are not standard for the
Premises, or are not available to Tenant without the necessity of
paying a separate additional charge.
g. Costs incurred by Landlord in exercising remedies against tenants
of the Real Property who violate terms of their leases.
h. Sums paid by Landlord for any indemnity, damages, fines, late
charges, penalties or interest for late payment, or to correct
violations of building codes or other laws or regulations
relative to the Real Property which are not Tenant's obligation
under the Lease.
i. Any costs incurred to remedy defects in the structure or systems
of the building located on the Real Property which are not
Tenant's obligations under the Lease.
28
<PAGE>
j. Costs incurred to investigate and respond to hazardous materials
contamination, exposure or release (including hazardous
substances in the ground water or soil, provided the hazardous
material was not stored, used or disposed of by Tenant in
violation of law).
k. Any employee salaries and other compensation and/or health
benefits or other such benefits for the personnel of Landlord
above the level of building manager.
l. Costs of goods or services furnished by entities affiliated with
Landlord to the extent that such costs exceed the cost that would
have been incurred in an arm's length transaction with an
unrelated party.
m. Costs of Landlord's general overhead and general administrative
expenses (individual, partnership or corporate, as the case may
be), which costs would not be chargeable to operating expenses
of the Real Property under generally accepted accounting
principles consistently applied.
n. Payments of principal, interest, ground rent or any other
financing or refinancing costs on any mortgages, deeds of trust,
ground leases or other encumbrances, whether secured or unsecured
on the Real Property, including any equipment, fixtures or
improvements therein, or any penalties or late charges relating
thereto.
o. Depreciation and amortization of the building or any fixtures or
improvements located on the Real Property; and
C. Upon request, Landlord will provide accountant's breakdown of
operating costs compared against Base Year for any year in which an
additional charge is billed to Tenant.
D. Any additional rent charged may be used as an estimate for the next
year's billings and will be paid by Tenant in twelve (12) equal
installments together with all other rent charges. Any adjustments
will be made based upon the following year's actual costs.
E. If Tenant disputes figures provided by Landlord's accountant, Tenant,
at Tenant's sole cost, upon reasonable notice, may review the books
and records within thirty (30) days' receipt of accountants'
certification of costs. All reviews shall take place at Landlord's
place of business during normal working hours. The books and records
shall be kept in accord with generally accepted accounting principles
consistently applied.
29
<PAGE>
In no event shall any rent adjustment hereunder result in a decrease
in the fixed/minimum annual rent.
85. ICIP Abatement
--------------
The Landlord and Tenant agree to cooperate in an application for ICIP
Abatement of Taxes.
86. Capital Improvements
--------------------
In the event any new law, rule, ordinance or regulation takes effect after
the date hereof and requires the Landlord to do any work of a capital
nature in the Demise Premises and/or the building, the Tenant shall pay, in
equal monthly installments over the remainder of the lease term to the
Landlord, 1/6th of the cost multiplied by the remaining months under the
Lease divided by one hundred twenty (120). The monthly payments shall
commence within thirty (30) days after written demand together with a copy
of the applicable invoice as for additional rent.
87. Notices
-------
Supplementing the terms of Article 27 hereof, a copy of any notice by
Tenant to Owner shall be sent to:
Et-Al Management Corp.
60 Morrow Avenue
Scarsdale, New York 10583
and to:
Seymour Hurwitz, Esq.
36 West 44th Street
New York, New York 10036
and a copy of any notice by Owner to Tenant shall also be sent to:
Coaxicom, Inc. (dba Community Telephone)
48-18 Court Square
Long Island City, N.Y. 11101
88. Lease Not Binding Unless Executed and Delivered
-----------------------------------------------
This lease shall not bind Owner unless and until it has been (i) signed and
delivered by Tenant; (ii) received and accepted by Owner; and (iii) then
countersigned and redelivered by Owner to Tenant. The execution and
delivery of this Lease by Tenant shall constitute its irrevocable offer to
enter into this Lease. The Owner warrants and represents, upon which
30
<PAGE>
warranty and representation that he understands that the Tenant shall rely
in the execution of this Lease, that Owner has the full right and lawful
authority to execute this Lease for the term thereof.
At Tenant's option, lease shall not be binding and all deposits and all
advance payments will be returned to Tenant if space is not ready for
occupancy by August 1 due to Landlord's unexcusable delay. Landlord agrees
to make best efforts to provide space as soon as possible.
89. Tenant's Federal Tax I.D. Number
--------------------------------
Tenant states that its Federal Tax Identification Number (the "Number") is
11-331-0798. From time to time, upon Owner's request, Tenant shall confirm
in writing that the Number provided by Tenant is correct and, if it is
missing or incorrect, what the correct number is. Tenant shall indemnify
Owner from and against any and all liability for any claim, fine, penalty,
cost or expense (including attorneys' fees) paid, suffered or incurred by
reason of Tenant's failure to comply with this Article.
90. Miscellaneous
-------------
A. No Offer.
This Lease is offered to signature by Tenant and it is understood that
this Lease shall not be binding upon Landlord unless and until
Landlord shall have executed and delivered a fully executed copy of
this Lease to Tenant.
B. Signatories.
If more than one person executes this Lease as Tenant, each of them
understands and hereby agrees that the obligations of each of them
under this Lease are and shall be joint and several, that the term
"Tenant" as used in this Lease shall mean and include each of them
jointly and severally and that the act of or notice from, or notice or
refund to, or the signature of, any one or more of them, with respect
to the tenancy and/or this Lease, including, but not limited to any
renewal, extension, expiration, termination or modification of this
Lease, shall be binding upon each and all of the persons executing
this Lease as Tenant with the same force and effect as if each and all
of them had so acted or so given or received such notice or refund or
so signed.
C. Authority.
If Tenant is a corporation or partnership, each individual executing
this Lease on behalf of Tenant hereby represents and warrants that
Tenant is a duly formed and validly existing entity qualified to do
business in the State of New York and that
31
<PAGE>
Tenant has full right and authority to execute and deliver this Lease
and that each person signing on behalf of Tenant is authorized to do
so.
D. Merger.
This Lease represents the entire understanding of the parties hereto
and all prior understandings or agreements between the parties are
merged in this agreement.
E. Pornographic Uses Prohibited.
Tenant agrees that the value of the Demised Premises and the
reputation of the Owner will be seriously injured if the premises are
used for any obscene or pornographic purposes or any sort of
commercial sex establishment or for certain other purposes. Tenant
agrees that Tenant will not bring or permit any obscene or
pornographic material on the premises and shall not permit or conduct
any obscene, nude or semi-nude live performances on the premises, nor
permit use of the premises for nude modeling, rap sessions, or as a
so-called "rubber goods shop", or as a sex club of any sort, or as a
"massage parlor", nor shall the Demised Premises be used for erotic
dancing, a night club or for the preparation or serving of food or
beverages. Tenant further agrees that Tenant will not permit any of
these uses by any sublessee or assignee of the premises. This Article
shall directly bind any successors in interest to the Tenant. Tenant
agrees that if, at any time, Tenant violates any of the provisions of
this Article, such violation shall be deemed a breach of a substantial
obligation of the terms of this Lease and objectionable conduct.
"Pornographic material" is defined for purposes of this Article as any
written or pictorial matter with prurient appeal or any objects or
instruments that are primarily concerned with lewd or prurient sexual
activity.
91. Left Blank Intentionally.
-------------------------
92. Rent Commencement. The sooner of January 1, 1999 or upon substantial
-----------------
completion of Tenant's installation. See Paragraph 40.
93. Left Blank Intentionally.
------------------------
94. Left Blank Intentionally.
------------------------
95. Left Blank Intentionally.
------------------------
96. Building Services. Building shall be operated with all services and common
-----------------
area maintenance as normally provided for similar office buildings in the
area during normal business hours (including HVAC, janitorial services,
electric current, etc.). Tenant shall have 24-hours access seven (7) days
a week except for freight elevator as indicated hereinabove. Building is
managed by Landlord.
32
<PAGE>
97. Left Blank Intentionally.
------------------------
98. Landlord covenants and agrees to reasonably maintain the building in a
neat, orderly, safe, and sanitary manner, including but not limited to,
cleaning and maintaining the common areas and exterior of the building, bag
and remove all garbage, snow and ice removal, pest and rodent extermination
for common areas.
99. Landlord has installed a central security system in the building with
electronic card entry. Landlord shall provide sufficient entry cards to
Tenant and Tenant's employees, not to exceed 10, at no charge to Tenant.
Additional cards can be purchased by Tenant at ten (10%) percent above
Landlord's cost. Landlord shall also provide to Tenant, upon Tenant's
request, security printouts and videotape, if any, at no charge to Tenant -
not to exceed three (3) times per year.
100. Landlord represents to the best of its knowledge that the Building
currently complies with the American Disabilities Act of 1990, and any
amendments or regulations promulgated thereunder or any related or similar
law (the "ADA"), and that throughout the term of this Lease Landlord shall
make any and all necessary repairs and alterations to the Building,
including the Demised Premises, required to comply with the ADA.
101. Left Blank Intentionally.
------------------------
102. By executing this lease, Owner represents that as of the date hereof, it
has the resources to fulfill its obligations hereunder.
103. By executed this lease, Tenant represents that as of the date hereof, it
has the resources to full its obligations hereunder.
104. With the signing of the lease, Tenant shall pay first month's rent in the
amount of $11,759.83 and two month's security in the amount of $23,519.66
as agreed.
105. Landlord will furnish additional security at each entry door, if possible,
completed by 12/15/98, to Tenant's spaces in the form of card swipe or
keypad systems, the cost of which to be shared equally by Landlord and
Tenant.
a. Landlord agreed to give his "Best effort" to have a security guard in
place by 3/1/99. The Landlord also agreed to position security cameras
at the front and rear entrance of the building. (within a reasonable
time after lease commencement).
106. The walls for the new offices will be gypsum board to slab for improved
acoustical privacy.
33
<PAGE>
WITNESSES: OWNER: 45-18 COURT SQUARE, LLC
____________________________ BY: ______________________________
TENANT: COAXICOM, Inc.
(dba COMMUNITY TELEPHONE)
____________________________ BY: _______________________________
1
<PAGE>
RIDER TO LEASES BETWEEN 45-18 COURT SQUARE ASSOC., LANDLORD AND COAXICOM, INC.
(DBA COMMUNITY TELEPHONE), AS TENANTS TO BE ATTACHED TO LEASES FOR OFFICE 502
AND OFFICE 403.
It is hereby agreed that Paragraph 101 is deleted from both leases dated May 27,
1998 and March 27, 1997 for offices located at 45-18 Court Square, Long Island
City.
45-18 SQUARE, LLC
BY: _______________________
LANDLORD
COAXICOM, INC.
DBA COMMUNITY TELEPHONE,
BY: _______________________
TENANT
2
<PAGE>
RIDER ANNEXED TO LEASE
DATED OCTOBER 20, 1998
BY AND BETWEEN
45-18 COURT SQUARE, LIC, AS LANDLORD
AND
COAXICOM, INC. (DBA COMMUNITY TELEPHONE/COMMUNITY NETWORK),
AS TENANT
Landlord is defined as 45-18 Court Square, LLC, its partners, and successors in
interest.
40. Minimum Annual Rent
-------------------
A. Possession of the Demised Premises shall be deemed to have been
delivered upon delivery of keys by Landlord to Tenant at the
address earlier set forth, the premises to be broom clean and
January 1, 1999 or upon substantial completion as hereinafter set
forth (hereinafter the "Possession Delivery Date"). Tenant to take
occupancy and pay rent as of December 15, 1998. Please see
paragraph 92.
B. Left Blank Intentionally.
C. Tenant covenants and agrees to pay to Landlord as Minimum Annual
Rent on the first day of each month during the hereof, the
following sums:
(i) Years 1 through 3 - One hundred forty-one thousand
one hundred eighteen dollars ($141,118.00) and no cents
payable in equal monthly installments of Eleven thousand
seven hundred fifty-nine dollars and ($11,759.83) eighty-
three cents per month.
D. Rent due for partial month(s) shall be prorated.
E. The above annual sum shall be paid in equal monthly installments,
in advance, on the first day of each month during said term at the
office of Owner or at such other place as Owner may designate,
without offset or deduction whatsoever.
F. Tenant shall pay the first month's rent, in the sum of $11,759.83
upon the execution of this lease, the receipt of which is hereby
acknowledged. The payment of the first month's rent will be
applied to the first full month following expiration of the
abatement period.
1
<PAGE>
41. Security Deposit
----------------
Simultaneous with entry into possession of the Demised Premises, Tenant
shall deposit with Owner the sum of $23,519.66 as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions
of this Lease. It is agreed that in the event Tenant defaults in respect of
any of the terms, provisions and conditions of this Lease, including, but
not limited to, the payment of rent and additional rent, owner may use,
apply or retain the whole or any part of the security so deposited to the
extent required for the payment of any rent and additional rent or any other
sum to which Tenant is in default or for any sum which Owner may expend or
may be required by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this Lease, including but not limited to,
any damages or deficiency in the re-letting of the premises, whether such
damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. Within thirty (30) days after receipt of written notice
that Owner has made application of all or any part of the said security
deposit, Tenant shall deposit with Owner such additional funds as are
necessary to restore the security deposit to its original amount. In the
event that Tenant shall fully and faithfully comply with all of the non-
monetary terms, provisions, covenants and conditions of this Lease, the
security not required to cure any monetary default or otherwise deducted as
a result of the physical condition of the premises shall be returned to
Tenant after the date fixed as the end of the Lease and after delivery of
entire possession of the Demised Premises to Owner. In the event of a sale
of the land and building or leasing of the building, of which the Demised
Premises form a part, Owner shall have the right to transfer the security to
the vendee or lessee and Owner shall thereupon be released by Tenant from
all liability for the return of such security, and Tenant agrees to look to
the new Owner solely for the return of said security; and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that, other than in
connection with a valid disposition of this Lease in compliance with the
terms of Article 64 hereof, it will not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and that neither
Owner nor its successor or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
Tenant shall, at all times, maintain a rent security deposit equal to two
(2) month's rent. On each base rent increase date, Owner shall invoice
Tenant for, and Tenant shall deposit, such further sums with Owner as are
necessary to satisfy this obligation.
2
<PAGE>
42. Restrictions on Use of the Demised Premises
-------------------------------------------
A. Subject to the provisions of this Lease, Tenant shall use the Demised
Premises only as offices in accordance with 3 the Certificate of
Occupancy and for no other purposes.
B. Tenant shall not use or permit the use of the Demised Premises or any
part thereof in any way that would violate any of the covenants,
agreements, terms, provisions and conditions of this Lease or for any
unlawful purpose or in any unlawful manner or in violation of the
Certificate of Occupancy for the Demised Premises or the Building, and
Tenant shall not suffer or permit the Demised Premises or any part
thereof to be a used in any manner or for anything to be done therein
or anything to be brought into or be kept therein that, in the judgment
of Owner, shall in any way threaten to impair or adversely affect the
character, reputation or appearance of the Building, the proper and
economical operation of the Building or any systems, facilities or
services used to operate or clean all or any part of the Building or
the Demised Premises, or the use of any of the areas of the Building by
Owner or any of the other Tenants or occupants of the Building. Tenant
shall not install or use any equipment that, in the judgment of
Landlord, could cause any adverse effect on the Demised Premises, the
Building and/or the comfort and convenience of other Tenants and
occupants of the building.
43. Landlord shall construct offices in accordance with layout drawn by Milowitz
Group in accordance with the attached sketch, all finishes to building
standard and in accordance with Building Codes. Any additions/changes
required by Tenant must be agreed to in writing by both parties and shall be
at Tenant's sole cost to be paid upon written agreement.
A. Landlord shall supply and install carpet and base at Landlord's cost.
Tenant shall have option of choosing carpet from Landlord's samples.
B. Left Blank Intentionally.
C. Any work performed by Tenant or Tenant's contractors shall be
performed in a good and workmanlike manner and shall comply with all
rules and regulations of all Governmental Authorities having
jurisdiction therein.
If Tenant is providing build-out of space or makes any alterations to
the space, the following paragraphs apply:
Tenant, or any contractor or contractors employed by Tenant, or any
other persons who will do work or install
3
<PAGE>
equipment for Tenant, shall be fully covered by Workmen's Compensation
Insurance, and the Certificate by Tenant or any such contractor or
persons as aforesaid. Tenant further covenants, at its own cost and
expense, to take out and maintain at all times during the progress of
such work and until completion thereof, public liability insurance
policies covering Owner in compliance with the limits and such other
conditions as set forth in Article 49 hereof, and certificates
evidencing the policies shall be delivered to Owner prior to the
commencement of any work hereunder.
E. Tenant's contracts with its contractors and/or other persons who will
perform work for the Tenant shall require said persons to look solely
to the Tenant for payment and will hold Owner and the Building free
from all liens and claims of all persons furnishing labor or materials
therefor.
F. Subject to the provisions of this Article, any and all machinery,
equipment and fixtures installed by Tenant, which are not replacements
of fixtures either furnished by Owner as part of Owner's work or pre-
existing in the Demised Premises at the time of the commencement of
this Lease (sometimes herein referred to as "Tenant's Property") shall
remain personally, notwithstanding the fact that it may be affixed or
attached to the realty, and shall, during the term of this Lease or
any extension thereof, belong to and be removable by Tenant, provided
that (a) Tenant shall remove said installations prior to the
expiration of such term, and shall repair any damage caused by said
removal and shall deliver the Demised Premises to Owner in the same,
or better condition, as upon the commencement of the term hereof,
reasonable wear and tear excepted. Prior to the expiration of the term
or sooner termination thereof, Tenant shall at its own cost and
expense remove, from the Demised Premises, all of Tenant's property,
except such items thereof as Tenant shall have expressly agreed in
writing with Owner are to become the property of the Owner and Tenant
shall repair any damage to the Demised Premises resulting from such
removal. Any Tenant's property remaining in the Demised Premises after
termination of this Lease (except such items as Owner and Tenant have
expressly agreed in writing are to remain and become the property of
Owner) shall be deemed to have been abandoned by Tenant or any sub-
Tenant and either may be retained by Owner as its property or may be
removed from the premises by Owner at Tenant's expense.
G. Machinery, fixtures, chattels or equipment, if any, furnished or
installed by Tenant, the cost of which is
4
<PAGE>
borne by Owner, shall become the property of Owner upon payment
therefor by Owner, or reimbursement of Tenant by Owner, as the case
may be, and shall not be removed by Tenant. Anything herein contained
to the contrary notwithstanding, it is understood and agreed that all
structural improvements, all plumbing lines and equipment (other than
fixtures), all electrical wiring, conduit and equipment (other than
free-standing lighting fixtures), all heating and ventilating
installations made by Tenant, whether with or without contribution or
reimbursement by Owner, shall forthwith become part of the Building
and property of Owner.
Tenant's failure to comply with any of the items and conditions of
this Article will be deemed a default pursuant to Article 17 hereof.
44. Utilities
---------
A. Electricity Service
-------------------
(1) Landlord shall contract directly with the public utility
company for electric service for the Demised Premises. Tenant
shall be responsible for the payment of the cost of such
electric service. Such electric service may be furnished to
Tenant by means of the then existing electrical facilities
serving the Premises to the extent that the same are available,
suitable and safe for such purposes. Landlord will, prior to
the commencement date, install a sub-meter to measure Tenant's
electric usage and Tenant shall pay for such electric usage at
the rate charged to Landlord by the utility company plus a five
percent administrative fee.
(2) Any additional feeders or risers to be installed to supply
Tenant's additional electrical requirements, and all other
equipment proper and necessary in connection with such feeders
or risers shall be, at Landlord's option, installed by Landlord
upon Tenant's request, at the sole cost and expense of Tenant
(including a connection fee of Three Hundred Fifty Dollars
($350.00) per kilovolt ampere, provided that, in Landlord's
reasonable judgment, such additional feeders or risers are
necessary and are permissible under applicable laws and
insurance regulations and the installation of such feeders or
risers will not cause permanent damage or injury to the
Building or the Premises or cause or create a dangerous or
hazardous condition or entail excessive or unreasonable
alterations or materially interfere with or disturb other
tenants or
5
<PAGE>
occupants of the Building. Tenant covenants that, at no time,
shall the use of electrical energy in the Premises exceed the
capacity of the existing feeders or wiring installations then
serving the Premises. Tenant shall not make or perform or
permit the making or performance of any alterations to wiring
installations or other electrical facilities in or serving the
Premises or any additions to the business machines, office
equipment or other appliances in the Premises which utilize
electrical energy without the prior consent of Landlord in each
instance, which consent shall not be unreasonably withheld or
delayed.
(3) Landlord shall not be liable to Tenant in any way for any
interruption, curtailment or failure, or defect in the supply
or character of electricity furnished to the Premises by reason
of any requirement, act or omission of Landlord or of any
public utility or other company servicing the Building with
electricity or for any other reason, except if caused by
Landlord's negligence or willful misconduct.
Landlord reserves the right to estimate electric costs and
Tenant specifically agrees to Pay estimated costs per submeter
which shall be confirmed by an outside source monthly.
45. Services
--------
(1) Cleaning services by Landlord at the additional charges of $1.50 per
square foot, to building standards plus actual increases from outside
cleaning company. No medical waste shall be removed by Landlord.
(2) HVAC - Landlord shall install the HVAC system and Landlord shall
maintain and repair same during the term of the Lease at the
Landlord's sole cost and expense and on the termination of the Lease,
Tenant shall deliver the Premises with the HVAC system in working
order, free and clear of all liens and encumbrances. Tenant shall pay
for electricity for its own cooling, at its sole cost and expense,
through the HVAC system.
(3) Service elevator other than Monday through Friday, 8:00 AM through
4:00 PM, at the rate of $50.00 per hour, subject to 48-hour written
notice.
6
<PAGE>
46. Security Agreements
-------------------
A. Tenant covenants and agrees that no security agreement, whether by way
of conditional bill of sale, chattel, mortgage or instrument of
similar import, shall be placed upon any improvement made by Tenant
which is affixed to the realty.
B. In the event that any of the machinery, fixtures, furniture and
equipment installed by Tenant in the Demised Premises are purchased or
acquired by Tenant subject to a chattel, mortgage, conditional sale
agreement other title retention or security agreement, Tenant
undertakes and agrees (1) that no such chattel, mortgage, conditional
sales agreement or other title retention or security agreement or
Uniform Commercial Code filing statement shall be permitted to be
filed as a lien against the building and real property of which the
Demised Premises form a part, and (2) to cause to be inserted in any
of the above-described title retention, chattel, mortgage or security
agreements the following provision:
"Notwithstanding anything to the contrary herein, this chattel,
mortgage, conditional sale agreement, title retention agreement or
security agreement shall not create or be filed as a lien against the
land, building and improvements comprising the real property in which
the goods, machinery, equipment, appliances or other personal property
covered hereby are to be located or installed."
C. If any such lien or UCC financing statement, based on an agreement as
above described, is filed against the building and improvements, of
which the Demised Premises form a part, Tenant will, upon at least ten
(10) days' prior written notice thereof from Owner, cause such lien or
notice to be removed or discharged at Tenant's cost and expense, and
Tenant's failure to do so shall constitute a breach of a material
provision of this Lease.
47. Mechanic's Liens
----------------
A. Tenant shall have no power to do any act or make any contract which
may create or be the foundation for any lien upon the reversion of
Owner, the Premises herein Demised or Owner's building and
improvements, it being agreed that should Tenant cause any
alterations, changes, additional improvements or repairs to be made to
the Demised Premises, or material furnished or labor performed therein
or thereon, neither Owner for the
7
<PAGE>
Demise Premises shall, under any circumstances, be liable for the
payment of any expenses incurred or for the value of any such work
done or material furnished to the Demised Premises or any part
thereof, but all such alterations, changes, additions, improvements
and repairs and materials and labor shall be at Tenant's expense and
Tenant shall be solely and wholly responsible to contractors,
laborers, and materialmen furnishing labor and material to said
premises and building, or any part thereof, for or on behalf of
Tenant.
B. Tenant shall not suffer or permit any mechanic's liens to be filed
against the fee ownership of the Demised Premises nor against Tenant's
leasehold interest in said premises, by reason of work, labor,
services or materials supplied or claimed to have been supplied to
Tenant or to any occupant of the Demised Premises. If any such
mechanic's lien shall at any time be filed against the Demised
Premises or the building and improvements thereon, Tenant shall, at
its own cost and expense, cause the same to be cancelled and
discharged of record by surety bond or appropriate cash deposit within
thirty (30) days after the date of filing the same and notice thereof
to Tenant, and Tenant shall indemnify and save harmless Owner from and
against any and all costs, expenses, claims, losses or damages
resulting therefrom or by reasons thereof.
C. Tenant shall also defend on behalf of Owner, at Tenant's sole cost and
expense, any action, suit or proceedings which may be brought thereon
or for the enforcement of such liens or orders, and Tenant shall pay
any damages and satisfy and discharge any judgment entered thereon and
save harmless Owner from any claim or damage resulting therefrom.
D. If Tenant shall fail to discharge such mechanic's lien within such
period, then, in addition to any other right or remedy of Owner, Owner
may, but shall not be obligated to, discharge the same, either by
paying the amount claimed to be due or by procuring the discharge of
such lien by deposit in court or bonding, and in any such event, Owner
shall be entitled, if Owner so elects, to compel the prosecution of an
action for the foreclosure of such mechanic's lien by the lienor and
to pay the amount of the judgment, if any, in favor of the lienor,
with interest, costs and allowances.
E. Any amount paid by Owner for any of the aforesaid charges and all
reasonable legal and other expenses of Owner, including reasonable
counsel fees, in defending any such
8
<PAGE>
action in procuring the discharge of said lien, with all necessary
disbursements in connection therewith, with interest thereon at the
then legal rate of imputed interest from the date of payment, shall be
repaid within a period of twenty (20) days after written demand
therefor by Owner to Tenant, and may be treated as Additional Rent
payable with the next installment of Annual Basic Rent.
F. Prior to the commencement of any work in the Demised Premises by any
general contractor employed by Tenant or by any sub-contractors
employed by such general contractor, or sub-contractors employed by
Tenant, Tenant shall:
(1) furnish Owner with Tenant's written statement setting forth the
name and business address of the Tenant's general contractor or
sub-contractors employed by Tenant;
(2) obtain and furnish to Owner a written list of all sub-
contractors employed or to be employed by Tenant's general
contractor and certified by the general contractor.
48. Owner's Exculpation/No Recourse
-------------------------------
If the Owner or any successor-in-interest be an individual, joint venture,
tenancy-in-common, co-partnership, unincorporated association, limited
partnership or other unincorporated group of individuals, or a corporation
(all of which are referred to below, individually, and collectively, as an
"Owner Entity"), then, anything herein to the contrary notwithstanding,
Tenant shall look solely to the interest of such Owner Entity in the
building in satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by
Owner, in the event of any default or breach by Owner with respect to any
of the terms, covenants and conditions of this Lease to be observed and/or
performed by Landlord, and no other property or assets of such Owner Entity
or any member thereof, shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies.
49. Parties' Certificates
---------------------
The Parties each shall, without charge at any time, and from time to time,
within ten (10) days after request by the other, certify to any mortgagee,
proposed assignee of any mortgagee, or proposed purchaser or any other
person, firm or corporation specified by the requesting party:
9
<PAGE>
a) That this Lease is unmodified and in full force and effect (or, if
there has been modification, that the same is in full force and effect
as modified and stating the modifications);
b) Whether or not there are then existing any set-offs or defenses
against the enforcement of any of the agreements, terms, covenants or
conditions hereof upon the part of the Tenant to be performed or
complied with (and, if so, specifying the same); and
c) The dates, if any, to which the rental and other charges hereunder
have been paid in advance.
50. Liability Insurance and Indemnification
---------------------------------------
A. During the term hereof, Tenant shall, at its own cost and expense:
1) Obtain, maintain and keep in force, for the benefit of Owner,
Managing Agent and Tenant, comprehensive general liability
insurance covering the risks in the limits set forth below, on
or about the Demised Premises (which shall include Tenant's
signs, if any):
a) Bodily Injury:
Each person...........$1,000,000.00
Each Occurrence ......$1,000,000.00
b) Property Damage:
Each Occurrence.......$ 500,000.00
c) Completed operations and contractual liability with the
same bodily injury and property damage limits stated in
(a) and (b) above.
d) Fire and extended coverage for Tenant's fixtures,
alterations and inventory in an amount adequate to cover
the cost of replacement, but not less than $100,000.00.
B. Owner and its managing agent, Et-Al Management Corp., shall be named
as an additional insured in said policies, as their interests may
appear, and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be
issued by insurance companies reasonably satisfactory to Owner and
which are authorized to do business in the State of New York. Tenant
shall deliver to Owner the policies of
10
<PAGE>
insurance, together with evidence of the payment of premiums thereon
within ten (10) days of taking occupancy of the Demised Premises and
furnish to Owner at least twenty (20) days prior to the expiration of
any such policies, a new policy, with evidence of the payment or
premiums thereon. The parties hereto agree that the payment of said
premiums may be financed, as long as same are made and kept current.
Said policies shall also provide that the insurer will give Owner at
least thirty (30) days prior written notice of cancellation of said
policy.
C. Notwithstanding the limits of insurance specified in this Article,
Tenant agrees to indemnify Owner, its agents, servants and employees
against all damage, loss or liability resulting from any of the risks
referred to in this Article. Such indemnification shall operate
whether or not Tenant has placed and maintained the insurance
specified in this Article and whether or not such proceeds from such
insurance actually are collectible from one or more of the insurance
companies; provided, however, that Tenant shall be relieved of its
obligations of indemnity herein Pro Tanto of the amount actually
recovered from one or more of the insurance companies by reason of
injury or damage to, or loss sustained on the Premises.
D. Tenant shall pay all premiums and charges for all of said policies,
and if Tenant shall fail to make any payment when due or carry any
such policy, Owner may, but shall not be obligated to, make such
payment or carry such policy, and the amount paid by Owner, with
interest thereon, shall be repaid to Owner by Tenant on demand, and
all such amounts so repayable, together with such interest, shall be
considered as Additional Rent payable hereunder for the collection of
which Owner shall have all of the remedies herein or by law provided
for the collection of rent. Payment by Owner of any such premium or
the carrying by Owner of any such policy, shall not be deemed to waive
or release the default of Tenant with respect thereto.
Tenant must provide evidence of coverages prior to taking occupancy of
leased space.
E. Tenant acknowledges that Owner will not carry insurance of any kind on
Tenant's furniture, furnishings, finishes, or wall coverings and/or
fixtures, equipment, and improvements, and agrees that Owner shall not
be obligated to repair any damage thereto or to replace the same.
11
<PAGE>
F. Landlord will maintain same type of liability insurance for all public
spaces in building and will indemnify and defend Tenant for events
which occur in the buildings common space due to Landlord/Owner's
negligence.
51. Tenant's Conduct of Business
----------------------------
Tenant covenants and agrees:
A. To do all things necessary to keep the Demised Premises clean,
orderly and neat at all times, and to prevent odors, all at Tenant's
sole cost and expense, and to conduct its business in a proper
manner.
B. That Tenant shall conduct its operations in the Demised Premises in
an orderly and proper manner so as not to annoy, disturb or be
offensive to others.
C. That Tenant shall not, at any time, discharge into the plumbing,
sewage or drainage system, any waste materials which will result in
the creation of a blockage in said system or otherwise adversely
affect the proper and clean maintenance and operation thereof.
D. That Tenant, at its sole cost and expense, shall provide regular
exterminating and pest control services using Landlord's exterminator
in the Demised Premises at a regular intervals, in order to prevent
the occurrence of any vermin in or about the Demised Premises.
52. Adjustment of Rent for Increases in Real Estate Tax
---------------------------------------------------
See Paragraph 83.
53. Assignment and Sub-letting Provisions
-------------------------------------
Tenant may not assign this Lease under any circumstances without the prior
written consent of Owner, which consent may be withheld for any reason or
for no reason whatsoever.
54. Rent Arrears, Etc.: Supplementing Article 25 of the printed form of lease:
-------------------
A. Owner, at Owner's option, shall have the right, when Tenant is in
default in the payment of Fixed Rent or Additional Rent, to demand
payment by certified, bank or teller's check, or by postal money
order.
B. In the event that any payment under this Lease shall be made in the
form of a check from any person, firm or corporation other than the
person, firm or corporation named in this Lease, the acceptance of
same by Owner shall not, under any circumstances, be deemed
recognition
12
<PAGE>
of a sub-letting or any assignment of this Lease, regardless of the
number of times that such payment shall be made by such other person,
firm or corporation.
C. Late Charge. If Tenant shall fail to pay all or any part of any
installment of Fixed Rent or Additional Rent for more than ten
(10) days after the same shall have become due and payable (including
the dishonor of a payment made by check, even if such check was
tendered in a timely manner), Tenant shall pay as Additional Rent
hereunder to Owner a late charge of six (6) cents for each dollar of
the amount of such Fixed Rent or Additional Rent which
shall not have been paid to Owner within said ten (10) day period, in
addition to any other right or remedy available due to such late
payment.
D. In the event that any check paid by or for the benefit of Tenant to
Owner is dishonored, Tenant shall pay Owner as Additional Rent
hereunder a charge of One Hundred Dollars ($100.00) in addition to any
other late charge or right or remedy available due to such dishonored
payment.
55. Additional Rent
---------------
A. All payments, other than Minimum Annual Rent required to be made by
Tenant pursuant to this Lease (including, but not limited to,
escalation charges, and any and all damages, interest, costs, fees and
expenses caused by Tenant's default) shall be deemed additional rent
and, in the event of any non-payment thereof, Owner shall have all
rights and remedies provided for herein and by law for non-payment of
Minimum Annual Rent in addition to whatever other remedies may be
available to Owner.
B. Unless expressly provided otherwise in this Lease, the amount shown as
due to Owner (or Owner's agent) in all bills, invoices and statements
to Tenant shall be due and payable by Tenant upon receipt without
further demand. Any delay or failure of Owner or its agent to prepare
and deliver any bill, statement or invoice shall not constitute a
waiver of the right to collect any payment which may have become due
during the term of this Lease, including without limitation,
retroactive payments for any and all amounts unbilled.
C. All payments of Minimum Annual Rent and additional rent pursuant to
this Lease shall be made by Tenant with checks drawn upon a New York
City bank. If Owner receives from Tenant any payment less than the
full amount of the Minimum Annual Rent and additional rent then due
and owing, Tenant hereby waives its right, if
13
<PAGE>
any, to designate the items to which such payment shall be applied
and agrees that Owner, in its sole discretion, may apply such payment
in whole or in part to any Minimum Annual Rent, any additional rent or
to any combination thereof then due and payable hereunder.
D. The losing party in any action or proceeding between Owner and Tenant
shall pay the reasonable attorneys' fees, costs and disbursements of
the prevailing party for such action or proceeding upon the assignment
thereof by the Court or on demand. If a default of Tenant causes Owner
to prosecute or defend an action or proceeding with a third party,
Tenant shall pay the reasonable attorneys' fees, costs and
disbursements of Owner for such action or proceeding on demand. If
Owner suffers, pays or incurs any damages, losses, fees or expenses
(including without limitation, reasonable attorneys' fees and
disbursements) due to a default, act, omission or request of Tenant,
Tenant shall pay the total amount thereof to Owner on demand.
E. If all rent is not paid in full and actually received by Owner within
fifteen (15) days after it is due and payable hereunder, Tenant shall
pay Owner a late fee of 2% per month as additional rent. However, if
the collection of such late fee at the rate specified herein would be
usurious or otherwise unenforceable, interest on late payments shall
accrue at the highest enforceable rate.
F. References in this Lease to "rent," "Rent," "rents," "Rents,"
"rental," "Rental," "rentals" and "Rentals" shall mean and include
Minimum Annual Rent and additional rent. The Minimum Annual Rent is
the minimum rental due and payable without prior demand, offset or
deduction. No decrease in any additional rent for any period shall
yield an offset or deduction in any other rental or for any other
period. References in this Lease to Tenant being "in default" and/or
Tenant's "breach" or "default" shall mean and include each and every
default, breach, misfeasance, nonfeasance, non-payment, or any other
failure of Tenant to perform any of its obligations hereunder. If
Owner gives notice of default and Tenant seeks declaratory relief and
Tenant's time to cure is extended pending the outcome of such
declaratory judgment action, Tenant shall be deemed to be "in
default" under this Lease during the pendency of such action for the
purposes of those rights that are exercisable by Tenant only if it is
not "in default". All of Tenant's obligations to pay rent, to
indemnify Owner and to obtain insurance shall survive the expiration
of the term or sooner termination of this Lease.
14
<PAGE>
G. Owner's managing agent, Et-Al Management Corp., may give notices,
demands, invoices, statements and/or bills to Tenant in Owner's
behalf; any such notice, statement, invoice, demand or bill shall be
deemed to have been given by Owner.
H. The provisions of this Article shall supplement (not limit) other
provisions of this Lease pertaining to the same matters as this
Article and related matters.
56. Owner's Right of Entry
----------------------
A. Tenant shall permit Owner to erect, use, maintain and repair pipes,
cables, conduits, plumbing, vents and wiring in, to and through the
Demised Premises, as and to the extent that Owner may now or hereafter
deem to be necessary or appropriate for the proper operation and
maintenance of the building of which the Demised Premises are a part.
All such work shall be done, so far as practicable, in such manner as
to avoid interference with Tenant's use of the Demised Premises, and
as expeditiously as possible. The liability of Owner, if any, under
this Article shall be limited to the prompt repair, at the sole cost
and expense of Owner, of any damage caused to the Demised Premises by
the Owner in the course of doing work under this paragraph.
B. Upon providing forty-eight (48) hours advance written notice, Owner,
or its agents or assignees, shall have the right to enter the Demised
Premises during business hours for the purpose of making such repairs
or alterations as Owner shall be required or shall have the right to
make by the provision of this Lease. Owner shall attempt to do all
such work at a time, and in a manner, that will not unreasonably
inconvenience Tenant, significantly diminish Tenant's floor area or
significantly disrupt Tenant's architectural layout. Owner shall be
allowed to take all material into and upon the Demised Premises that
may be required for repairs or alterations, without constituting an
eviction of Tenant, in whole or in part, so long as any repair work by
Owner is diligently prosecuted to completion. Owner shall also have
the right, without prior written notice, to enter the Demised Premises
at such other times as such entry may be required by circumstances of
emergency affecting the Demised Premises or the building containing
the same. In addition, Owner, or its agents or assignees, shall have
the right to enter the Demised Premises upon providing twenty-four
(24) hours prior written notice during business hours for the purpose
of inspecting the general condition and state of repair of the
Premises and the showing of the Premises to any prospective purchaser
or
15
<PAGE>
mortgagee, such entry and inspection to be conducted in a manner
calculated to not unreasonably interfere with the operation of
Tenant's business or its customers.
C. The rights granted to Owner by the terms of this Article shall be
deemed supplementary to the provisions set forth in Article 13 of the
printed portion of this Lease.
57. Suspension of Services
----------------------
Anything in this Lease to the contrary notwithstanding, Owner reserves the
right to suspend the service of any utilities, when necessary by reason of
accident or of repairs, alterations or improvements necessary to be made in
the Demised Premises or the building of which it is a part, until such
repairs, alterations or improvements shall have been completed, and Owner
shall have no responsibility or liability for such suspension of services,
provided Owner proceeds with diligence and continuity to complete such
repairs, alterations or improvements and uses its best efforts to restore
such services as soon as practicable. The foregoing shall not be deemed to
impose upon Owner any obligations for the furnishing of any service,
maintenance or repair other than is specifically set forth in this Lease.
Owner will provide 72 hours advance notice of any planned service
suspension which is for regular maintenance purposes. No notice shall be
required for emergency suspension of service resulting from an accident or
other unanticipated event.
58. Condemnation
------------
A. If the whole of the Demised Premises shall be taken under the power of
eminent domain of any public or private authority, then this
Lease and the term thereof shall cease and terminate, as of the date
of such taking and any unearned rent or other charges, if any,
paid in advance, shall be refunded to Tenant.
B. In the event that only a portion of the Demised Premises shall be
taken under the power of eminent domain by any public or private
authority, then this Lease and the term thereof shall continue in full
force and effect, at option of either the Owner or the Tenant,
provided, however, that Owner shall, at its expense forthwith restore
what may remain of the Demised Premises to substantially the same
condition as prior to the condemnation. There shall be a pro rata
abatement of basic rent hereunder to the extent that the amount of
floor space so taken compares to the amount of floor space prior to
such condemnation, to compensate Tenant for its loss of use of such
portion of the Demised Premises. The minimum rent reserved herein, and
any
16
<PAGE>
other charges payable to Tenant hereunder, shall be suspended
(provided Tenant is not then using the Demised Premises) for the
period from the date of the taking until the remainder of the Demised
Premises shall have been restored as aforesaid.
C. Tenant shall not be entitled to any award for the loss of or loss in
value of the leasehold, but only to an award for loss of or damage to
its fixtures and/or equipment and to moving expenses, all to the
extent allowed and solely in the event that such allowance does not,
in any way, diminish the award to Owner. The respective damages to
which Owner and Tenant are entitled by reason of any such taking shall
be fixed and paid, respectively, to Owner and Tenant, as their
interests appear, and in no event shall there be a merger of interest.
D. Within fifteen (15) days after Owner receives written notice of any
such taking or intention to take under power of eminent domain, Owner
shall forward a copy thereof to Tenant.
59. Damage or Destruction
---------------------
A. If the Demised Premises shall be partially damaged by fire or other
casualty, the damaged portions of the Demised Premises (but not
Tenant's trade fixtures or personal property) shall be repaired by and
at the expense of Owner (unless such fire or casualty resulted, in
whole or in part, from any act or omission, whether negligent or
otherwise, of Tenant or his agents, servants, contractors, employees,
invitees, or assigns, in which case such repairs shall be at the cost
and expense of Tenant), and the rent until such repairs shall be made
shall be apportioned according to the part of the Demised Premises
which is usable by Tenant. If Tenant shall have paid rent in advance,
Owner shall repay to Tenant an amount equal to that portion of rent so
paid in advance, payment of which is abated.
B. If the Demised Premises are totally damaged or are rendered wholly
untenantable by fire or other casualty, Owner shall, within sixty (60)
days after such fire or other casualty, give Tenant written notice of
Owner's election whether:
1) To terminate this Lease and thereupon the term of this Lease
shall expire by lapse of time upon the third (3rd) day after such
notice is given, and Tenant shall vacate the Demised Premises and
surrender the same to Owner. If Tenant shall not be in default
under this Lease, or if any monetary
17
<PAGE>
default existing at the time of the giving of such a notice is cured
in full within three (3) days after delivery of said notice, then upon
the termination of this Lease under the conditions provided for in the
sentence immediately preceding, Tenant's liability for rent accruing
subsequent to the fire or casualty shall cease and be apportioned as
of the day following such fire or casualty, or
2) To restore or rebuild the Demised Premises in character, layout, area
and equipment (but not Tenant's trade fixtures or personal property)
substantially equal to the premises damaged or destroyed immediately
prior to such damage or destruction, and it is agreed that in such
event, this Lease shall continue in full force and effect, but the
rent, the additional rent, and all other payments and obligations of
Tenant shall abate as of the date of such fire or other casualty,
until the Demised Premises shall have been fully and completely
restored or rebuilt by Owner and possession thereof shall have been
delivered to Tenant.
Should Owner elect to send Tenant written notice under subparagraph
(1) of this Article 56B, and thereafter, within one (1) year of the
giving of such notice, act nevertheless to restore or rebuild the
Demised Premises in character, layout, area and equipment (but not
Tenant's trade fixtures or personal property) substantially equal to
the premises damaged or destroyed immediately prior to such damage or
destruction, then and in such event, Owner agrees to give Tenant a
thirty (30) day unilateral option to be exercised by Tenant in the
method and manner otherwise set forth in this Lease, to resume
occupancy for the remaining balance of the original lease term under
all of the other terms and conditions set forth in this Lease.
C. Owner shall not be liable for reasonable delay under the foregoing
subparagraphs A or B if such delay arises by reason of adjustment of
insurance on the part of Owner and/or Tenant or the reasonable delay on
account of any cause beyond the control of Owner or contractors employed by
Owner, including, but not limited to strikes, labor disputes and shortages
of material.
D. Tenant hereby expressly waives the provisions of Section 227 of the Real
Property Law and of any law now in force or hereafter enacted which, in
substance, provides for termination of a lease of real property by reason
of
18
<PAGE>
destruction or untenantability of the Premises demised thereunder
caused by fire or other casualty and agrees that the provisions of
this Article 57 shall govern and control in lieu of any such
provisions of law.
60. Signs
-----
A. Tenant shall not, without Owner's prior written consent, place or
install any sign on the exterior of the Demised Premises, or the
building of which it is a part, or on the inner or outer faces of the
windows or doors of the Demised Premises. Tenant shall be permitted to
install and maintain, at its own cost and expense, an exterior sign,
provided the same receives the prior approval of Owner as to
dimensions, shape, design, size, color, wording, material of
composition and location. Tenant agrees that any exterior sign
approved by Owner shall not be installed until all approvals and
permits are first obtained by Tenant from governmental agencies having
jurisdiction thereover and that all fees payable in connection with
such installation, maintenance and permits shall be paid by Tenant.
B. Tenant shall not place in the windows or in any display or other area
visible to public view from the outside of the Demised Premises any
flashing, blinking or animated sign or one which otherwise has
variations in the intensity of illumination without first obtaining
Owner's prior written approval.
C. Tenant shall not, after having obtained the approval of Owner, change
or alter any sign in any respect whatsoever, including but not limited
to size, material of composition or location, without first obtaining
the prior written approval of Owner, except that Tenant may change the
phraseology in a sign previously approved by Owner without additional
approval.
D. In the event that Owner shall deem it necessary to remove any sign of
Tenant in order to make any repairs, alterations or improvements in,
to or upon the Demised Premises, or the building of which it is a
part, Owner shall have the right to do so, provided the same be
removed and replaced at Owner's expense, promptly upon completion of
such repair, alteration or improvements.
61. Replacement of Plate Glass
--------------------------
Tenant shall, at its own cost and expense, replace any and all plate or
other glass damaged or broken from any cause whatsoever in and about the
Demised Premises. Tenant shall, at its own cost and expense, either insure
and keep insured
19
<PAGE>
all such glass in stock companies authorized to do business in the State of
New York, naming the Owner as a party insured thereunder, or may act as a
self-insurer for plate glass.
62. Holdover by Tenant
------------------
Tenant will have no right to remain in possession of all or any part of the
Demised Premises after the expiration of the term. If Tenant remains in
possession of all or any part of the Demised Premises after the end of said
term, with the express or implied consent of Owner: (a) such tenancy will
be deemed to be a periodic tenancy from month-to-month only; (b) such
tenancy will not constitute a renewal or extension of this Lease for any
further term; and (c) such tenancy may be terminated by Owner upon the
earlier of thirty (30) days prior written notice or the earliest date
permitted by law. In such event, monthly rent (the reasonable value of use
and occupancy) will be increased to an amount equal to one-half (l/2) of
the sum of the Minimum Annual Rent plus all additional rentals payable
during the last year of the term, and any other sums due for additional
rent under this Lease will be payable in the amount and at the times
specified in this Lease. Such month-to-month tenancy will be subject to
every other term, condition and covenant contained in this Lease. Neither
the billing nor the collection of use and occupancy in the above amount
shall be deemed a waiver of any right of Owner to collect damages for
Tenant's failure to vacate the Demised Premises after the expiration or
sooner termination of this Lease. The provisions of this Article shall
survive the expiration or sooner termination of this Lease. In the event a
renewal lease is executed by all parties within ninety (90)days of the
expiration date and all rent has been paid timely, the rent will be
adjusted retroactively to the renewal rate.
63. Broker
------
Tenant and Owner covenant, warrant and represent to each other that neither
has had any dealings with any real estate broker, agent or finder in
consummating the Lease other than Aegis Realty, Equis, and Sholom
& Zuckerbrot and that no conversation or prior negotiations were had with
any individual or entity other than Aegis Realty, Eguis, and Sholom
& Zuckerbrot concerning the renting of the Demised Premises. In reliance
upon such representation, Owner agrees to pay any commission due to Aegis
Realty, Eguis, Shalom & Zuckerbrot. The parties agree to hold each other
harmless from and against any claims for brokerage commissions arising out
of any conversation of negotiations had by The Tenant with any other
broker.
20
<PAGE>
64. Subordination and Attornment
----------------------------
A. This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all mortgages and building
loan agreements, including without limitation, mortgages and building
loan agreements and leasehold mortgages which may now or hereafter
affect the Land and/or the Building and/or any of such Leases, whether
or not such mortgages shall also cover other lands and/or buildings,
to each and every advance made or hereafter to be made under such
mortgages and/or building loan agreements, and to all renewals,
modifications, replacements, assignments, and extensions of such
Leases, building loan agreements, mortgages and spreaders and
consolidations of such mortgages. This Article shall be self-operative
and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly, at its sole
cost and expense, execute and deliver any instrument in recordable
form that Owner, the lessor of any such Lease or the holder of any
such mortgage or any of their respective assigns or successors in
interest may reasonably request to evidence such subordination and the
Tenant hereby constitutes and appoints Owner the attorney-in-fact for
Tenant to execute any such instrument for and on behalf of Tenant in
the event Tenant fails to execute such instrument within ten (10)
days following delivery of written request therefor. The Leases to
which this Lease is, at the time referred to, subject and subordinate
pursuant to this Article, are hereinafter sometimes called "Superior
Leases" and the mortgages to which this Lease is, at the time
referred to, subject and subordinate, are hereinafter called "Superior
Mortgages" and the Lessor of a Superior Lease or its successor in
interest at the time referred to is sometimes hereinafter called a
"Lessor" and the holder of a Superior Mortgage or its successor in
interest at the time referred to is sometimes hereinafter called a
"Holder". This provision supplements Article 7 of this Lease.
B. In the event of any act or omission of Owner which would give Tenant
the right, immediately or after lapse of a period of time, to cancel
or terminate this lease, or to claim a partial or total eviction,
Tenant shall not exercise such right (l) until it has given written
notice of such act or omission to the holder of each Superior Mortgage
of record as of the date of the execution of this Lease, or of
which Owner has given Tenant written notice, and (2) unless such act
or omission shall be one which is not capable of being remedied by
Owner or such Holder within a reasonable period of time, until a
21
<PAGE>
reasonable period of time for remedying such act or omission shall
have elapsed following the giving of such notice and following the
time when such Holder shall have become entitled under such Superior
Mortgage to remedy the same (which reasonable period shall in no event
be less than the period to which Owner would be entitled under this
Lease or otherwise, after similar notice, to effect such remedy),
provided such Holder shall, with due diligence give Tenant written
notice of its intention to, and commence and continue to, remedy such
act or omission. As of the date hereof, the parties entitled to
receive notice under this Paragraph 63C are as follows:
45-18 Court Square LLC and 45-18 Equity, at
60 Morrow Avenue
Scarsdale, NY 10583
In the event of any changes, notification will be given to tenant.
C. If the fee owner of the building which includes the Demised Premises,
or the Holder of a Superior Mortgage, shall succeed to the rights of
Owner under this Lease, whether through possession or foreclosure
action or through termination for any reason of the leasehold estate
covering the building which includes the Demised Premises or by
delivery of a new lease or deed, then, at the request of such party so
succeeding to Owner's rights (herein sometimes called "Successor
Owner") and upon such a Successor Owner's written agreement to accept
Tenant's attornment, Tenant shall attorn to and recognize such
Successor Owner as Tenant's Landlord under this Lease. The foregoing
provisions shall inure to the benefit of any such Successor Owner, and
shall be self-operative upon any such demand, without requiring any
further instrument to give effect to said provisions. Tenant, however,
upon demand of any such Successor Owner, agrees to execute, from time
to time, an instrument in confirmation of such attornment which is
satisfactory to such Successor Landlord. Upon such attornment, this
Lease shall continue in full force and effect for the remainder of the
term originally demised under this Lease, as or as if it were a direct
lease between the Successor Owner and Tenant upon all of the terms,
covenants, conditions, agreements and provisions, as are set forth in
this Lease, except that the Successor Owner shall not:
1) be subject to any offset not expressly provided for in this
Lease.
22
<PAGE>
2) be bound by any previous modification of this Lease not expressly
provided for in this Lease, or by any previous pre-payment of
more than one month's rent, unless such modification or
prepayment shall have been expressly approved in writing by the
Successor Owner through or by reason of which the Successor
Landlord shall have succeeded to the rights of Owner under this
lease.
D. Owner covenants and represents that it knows of no outstanding
lawsuits, claims or judgments affecting or limiting Owner's right or
authority to perform under this lease.
65. Left Blank Intentionally
------------------------
66. Modification - Financing
------------------------
If, in connection with Owner's obtaining financing for the Real Property or
any portion thereof, a bank, insurance company or other lending institution
shall request reasonable modifications of 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 adversely affect the leasehold interest
hereby created or otherwise and adversely affect Tenant's rights hereunder.
67. Conditional Limitation
----------------------
In the event that in any twelve (12) month period (A)a nonmonetary default
of the kind set forth in Article 17(l) shall have occurred or (B) Tenant
shall have defaulted in the prompt payment of Minimum Annual Rent or
Additional Rent, or any part of either, and Owner shall have commenced a
summary proceeding to dispossess Tenant in each such instance, then,
notwithstanding that such defaults may have been cured at any time after
the commencement of such summary proceeding, any two (2) further defaults
by Tenant within the ensuing twenty-four (24) month period shall be deemed
to be a violation of a substantial obligation of this Lease by Tenant and
Owner may serve a written three (3) days, notice of cancellation of this
Lease upon Tenant and, upon the expiration of said three (3) days, this
Lease and the term shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely
fixed for the end and expiration of this Lease and the term and Tenant
shall then quit and surrender the Demised Premises to Owner, but Tenant
shall remain liable as elsewhere provided in this Lease. Tenant's payment
of Minimum Annual Rent and/or Additional Rent shall be considered "prompt"
if received by Owner within ten (10) days of the date that same is due.
23
<PAGE>
68. Bankruptcy
----------
Without limiting any of the provisions of Article 16, 17 or 18 hereof, if
pursuant to the Bankruptcy Code of 1978 and the Bankruptcy Code of 1986, as
the same may be amended, Tenant is permitted to assign this Lease in
disregard of the restrictions contained in Article 11 or any other
provision of this Lease. Tenant agrees that adequate assurance of future
performance by the assignee permitted under such Code shall mean deposit of
cash security with Owner in an amount equal to the sum of one year's
Minimum Base Rent then reserved hereunder plus an amount equal to all
additional rent payable under the provisions of this Lease for the calendar
year preceding the year in which such assignment is intended to become
effective, which deposit shall be held by Owner, without interest, for the
balance of the term of this Lease as security for the full and faithful
performance of all of the obligations under this Lease on the part of
Tenant yet to be performed. If Tenant receives or is to receive any
valuable consideration for such an assignment of this Lease, such
consideration, after deducting therefrom (A) the brokerage commissions, if
any, and other expenses reasonably incurred by Tenant for such assignment
and (B) any portion cf such consideration reasonably designated by the
assignee as paid for the purchase of Tenant's property in the demised
premises, shall be and become the sole and exclusive property cf Owner and
shall be paid over to Owner directly by such assignee. In addition,
adequate assurance shall mean that any such assignee of this Lease shall
have a net worth, exclusive of good will, equal to at least fifteen
(15) times the aggregate of the Minimum Annual Rent reserved hereunder plus
all additional rent for the preceding calendar year as aforesaid.
69. Hazardous Materials
-------------------
A. For purposes of this Lease, "hazardous materials" means any explosives,
radioactive materials, hazardous wastes, or hazardous substances,
including without limitation, substances defined as "hazardous substances"
in the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. #9601-9657; the Hazardous Materials
Transportation Act of 1975, 49 U.S.C. #1801-1812; the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. #6901-6987; or any other similar laws
(collectively, "hazardous materials laws").
B. Tenant will not cause or permit the storage, use, generation, or
disposition of any hazardous materials in, on, or about the demised
premises or the Building by Tenant, its agents, employees or contractors.
Tenant will not permit the Demised Premises to be used or operated in a
manner that may cause the Demised Premises
24
<PAGE>
or the Building to be contaminated by any hazardous materials in violation
of any hazardous materials laws. Tenant will immediately advise Owner in
writing of (1) any and all enforcement, cleanup, remedial, removal, or
other governmental or regulatory actions instituted, completed or
threatened pursuant to any hazardous materials laws relating to any
hazardous materials affecting the Demised Premises; and (2) all claims made
or threatened by any third party against Tenant, Owner, or the Demised
Premises relating to damage, contribution, cost recovery, compensation,
loss, or injury resulting from any hazardous materials on or about the
Demised Premises. Without Owner's prior written consent, Tenant will not
take any remedial action or enter into any agreements or settlements in
response to the presence of any hazardous materials in, on or about the
Demised Premises.
C. Tenant will be solely responsible for and will defend, indemnify and hold
Owner, its agents and employees, harmless from and against all claims,
costs and liabilities, including attorneys' fees and costs, arising out
of or in connection with Tenant's breach of its obligations in this
Article, including, but not limited to, the removal, cleanup and
restoration work and materials necessary to return the Demised Premises and
any other property of whatever nature located on the Building to their
condition existing prior to the appearance of Tenant's hazardous
materials on the Demised Premises. Tenant's obligations under this Article
will survive the expiration or other termination of this Lease.
70. Left Blank Intentionally
------------------------
71. Occupancy Prior to Commencement Date
------------------------------------
In the event that Owner permits Tenant to occupy the Demised Premises prior
to the commencement date, such occupancy shall be upon all of the terms and
conditions contained in this Lease except that Tenant shall pay a pro-rated
rent for the period to the commencement date and shall be responsible for
all other charges provided for under the Lease.
72. Waste Removal, Etc.
------------------
Tenant shall, at its own cost and expense, promptly dispose of all garbage,
ashes and waste arising from the conduct of its business in the
Demised Premises at such times and in such manner so as to avoid any
obnoxious or offensive smells or odors therefrom or otherwise
materially interfering with the comfort and quiet enjoyment of the other
occupants of the
25
<PAGE>
building. Tenant further covenants and agrees, at the Tenant's own cost
and expense, to keep the drain waste and connections with mains free from
obstruction to the reasonable satisfaction of the Landlord, its agents and
all authorities having jurisdiction thereof. Tenant further covenants and
agrees that Tenant will, at Tenant's own cost and expense, keep and
maintain the interior in good order and repair. (See paragraph 45(i) of
Rider).
73. Irrespective of the place of execution or performance, this agreement shall
be governed by and construed in accordance with the laws of the State of
New York. This agreement shall be construed without regard to any
presumption or other rules requiring construction against the party causing
this agreement to be drafted. If any words or phrases in this agreement
shall have been stricken out or otherwise eliminated, whether or not any
other words or phrases have been added, this agreement shall be construed
as if the words or phrases so stricken out or otherwise eliminated were
never included in this agreement and no implication or inference shall be
drawn from the fact that said words or phrases were so stricken out or
otherwise eliminated. All terms and words used in this agreement,
regardless of the number or gender in which they are used, shall be deemed
to include any other number and any other gender, as the context may
require.
74. Left Blank Intentionally
------------------------
75. Notice of Owner's Default
-------------------------
In the event of any alleged default in the obligation of Owner under this
Lease, Tenant will deliver to Owner written notice listing the reasons for
Owner's default and Owner will have thirty (30) days following receipt of
such notice to cure such alleged default or, in the event that the alleged
default cannot reasonably be cured within a thirty (30) day period, to
commence action and proceed diligently to cure such alleged default. A copy
of such notice to Owner wil1 be sent to any holder of a mortgage or other
superior lien on the Building or this Lease of which Tenant has been
notified in writing, and any such holder will also have the same time
periods to cure such alleged default.
76. Modifications Requested by Mortgagee
------------------------------------
If any actual or prospective holder of a fee or mortgage interest in the
Building, the improvements thereon, the land thereunder or any leasehold
interest in either, requires the modification of this Lease in such manner
as does not materially lessen Tenant's rights or increase its obligations
26
<PAGE>
hereunder, Tenant shall not withhold or delay its consent to such
modification and shall execute and deliver such confirming documents
therefor as such holder requires.
77. Conflict Between Rider and Printed Lease
----------------------------------------
If and to the extent that any of the provisions of any Rider to this Lease
conflict or are otherwise inconsistent with any of the printed provisions
of this Lease, whether or not such inconsistency is expressly noted in the
Rider, the provisions of the Rider shall prevail. The description of a
particular right or remedy of Owner shall not be deemed exclusive or
otherwise limit, waive or impair Owner's resort to any or all other rights
and remedies available. The terms "Owner" and "Landlord" whenever used
in this Lease shall have the same meaning. The meaning and effect of this
Lease shall not be determined subject to any presumption against Owner as
drafter. The doctrine of "ejusdem generis" shall not be applied to limit a
general description to the same class or category of things or matters
contained in the list (or specific description) which the general
description follows or otherwise relates to. If a word or phrase contained
in a prior draft of this Lease was deleted intentionally, the meaning and
effect of this Lease shall be determined as if the language stricken had
not been included in any prior draft.
78. Rider Governs
-------------
If any provision contained in this Rider is inconsistent or in conflict
with any printed provision of this Lease, the provision contained in this
Rider shall supersede said printed provision and shall be paramount and
superior.
79. Partial Invalidity/Joint Liability
----------------------------------
If any provision of this Lease or the application thereof to any person or
circumstance shall, to any extent be held void, unenforceable or invalid,
then the remainder of this Lease or the application of such provisions to
persons or circumstances other than those to which it is held void,
unenforceable or invalid shall be valid and enforced to the fullest extent
permitted by law. If there shall be more than one Tenant, they shall all be
bound, jointly and severally, by the terms, covenants and conditions of
this Lease.
80. Indemnity: Supplementing Article 8 of the printed form of this lease.
---------
A. Tenant agrees to indemnify and save harmless Owner from and against
(a) all claims of whatever nature against Owner arising from any
negligent or improper act or omission of Tenant, its contractors,
licensees, agents,
27
<PAGE>
servants, employees, invitees or visitors, (b) all claims against
Owner arising from any accident, injury or damage whatsoever caused to
any person or to the property of any person and occurring during the
Term in or about the Demised Premises, and (c) all claims against
Owner arising from any accident, injury or damages which result or are
claimed to have resulted from an act or omission of Tenant or Tenant's
contractors, agents, servants, employees, invitees or visitors. This
indemnity shall not apply to the extent that any of the claims
described above are caused by the negligent act or omission of
Landlord, its contractors, agents, servants or employees. This
indemnity and hold harmless agreement shall include indemnity from and
against any and all liabilities, fines, suits, demands, costs and
expenses (including without limitation, reasonable attorneys' fees) of
any kind or nature incurred in or in conjunction with any such claim
or proceeding brought thereon, and the defense thereof.
B. Tenant's indemnity set forth in this Article 80 shall extend and apply
to each Superior Lessor and Superior Mortgagee.
81. Requirements of Law
-------------------
Supplementing Article 6 of the printed form of Lease, Tenant's obligation
to comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions
and boards relating to Tenant's manner of use of the Demised Premises shall
include, but shall not be limited to, all requirements relating to
environmental matters by reason of Tenant's manner of use of the Demised
Premises (whether or not such requirement would otherwise be the
responsibility of Owner under said laws, orders or regulations) including,
but not limited to, the storage, treatment, handling or transportation of
hazardous waste.
82. Restrictions on Tenant's Use
----------------------------
Under no circumstances may the Demised Premises or any portion thereof be
used for residential purposes. Tenant understands that any such use shall
be a material default under the Lease and, notwithstanding anything herein
to the contrary, shall entitle Landlord to immediately send Tenant a notice
of cancellation of this Lease. Tenant further understands and acknowledges
that the Building is not, has not been and is not intended to be an Interim
Multiple Dwelling within the meaning of Section 280 et seq. of the New York
Multiple Dwelling Law or any other type of multiple dwelling.
28
<PAGE>
83. Tax Escalation
--------------
The rent payable by Tenant during each lease year shall be adjusted in
accordance with this Article:
A) Definitions: For the purpose of this Article, the following
definitions shall apply:
1. The term "Base Tax Year" shall mean the fiscal year commencing
July 1, 1998 and ending June 30, 1999.
The term "Tax Year" shall mean any year commencing July 1st and
ending June 30th which covers any portion of the term of this
Lease.
2. The term "Percentage" shall mean 6%.
3. The term "Building" shall mean the land and building known as:
45-18 Court Square, Queens, N.Y. a/k/a 45-17 Pearson Street,
Queens, N.Y.
4. The term "Real Estate Taxes" shall mean all taxes levied,
assessed or imposed at any time by any governmental authority
upon or against the Building and also any tax or assessment
levied, assessed or imposed at any time by any governmental
authority in connection with the receipt of income or rents from
the Building to the extent that same shall be in lieu of all or a
portion of any of the aforesaid taxes upon or against the
Building.
B. Real Estate Taxes
1. In the event that the Real Estate Taxes payable during any Tax
Year subsequent to the Base Tax Year shall exceed the amount of
Real Estate Taxes payable during the Base Tax Year (whether
any such excess results from a higher tax rate or an increase
in the assessed valuation of the Building, or both), Tenant shall
pay to Landlord, as additional rent for such subsequent Tax Year,
an amount equal to The Percentage of the excess. After receipt of
the tax bills which indicate that Real Estate Taxes payable for
any subsequent Tax Year will exceed the Real Estate Taxes for the
Base Year, Landlord shall furnish to Tenant a statement of the
additional rent payable under this subdivision (B).
The percentage is defined as Tenant's portion of space in
building, specifically, 6%.
29
<PAGE>
such statement shall set forth the Real Estate Taxes payable for such
subsequent Tax Year and shall show an amount equal to The Percentage
of the said excess, which amount shall be due from Tenant to Landlord,
as additional rent, within ten (10) business days after receipt of the
aforesaid statement; copies of the tax bills of the City of New York
shall be sufficient evidence of the amount due under this Article,
upon request.
2. The amount of Real Estate Taxes actually payable by Landlord during
the Base Tax Year shall be used in the computation of the amount of
additional rent payable under this subdivision, (B) until the amount
of the Real Estate Taxes payable during the Base Tax Year be reduced
by final determination of legal proceedings, settlement or otherwise.
In the event of such reduction, the reduced amount of such taxes shall
thereafter determine the amount of additional rent payable by Tenant
pursuant to this subdivision (B), the additional rent theretofore paid
or payable hereunder shall be recomputed on the basis of such
reduction.
3. If Landlord shall receive a refund of any portion of the Real Estate
Taxes payable during any Tax Year after the Base Tax Year, based upon
which Tenant shall have paid additional rent as provided in this
subdivision (B), then as a result of such a reduction of said Real
Estate Taxes by final determination of legal proceedings, settlement
or otherwise, Landlord shall, within ten (10) business days after
receiving the refund, pay to Tenant the Percentage of the refund, less
the percentage of reasonable expenses (including but not limited to
attorneys' and appraisers' fees) incurred in connection with any such
application or proceeding.
C. In no event shall the annual fixed rent under the Lease (exclusive of the
additional rents under this Article) be reduced.
D. All of the additional rent payments required under this Article shall be
appropriately prorated for any partial Tax Year occurring during the first
and last years of the term of this Lease. Landlord's failure to prepare and
deliver any of the foregoing tax bills, statements or bills of Landlord's
failure to make a demand, shall not in any way waive or cause the Landlord
to forfeit or surrender its rights to collect the additional rent required
to be paid under this Article.
30
<PAGE>
E. In the event of a default by Tenant of any of the terms, covenants and
conditions of the Lease on the part of Tenant to be performed,
Landlord shall terminate the Lease as a result thereof, Landlord shall
have any and all of the rights and remedies available to Landlord
under the provisions of the Lease or otherwise with regard to the
collection of the additional rent required to be paid by Tenant under
the terms of this Article "83".
84. A. "Operating Expenses" shall consist of expenses that are directly
--------------------
attributable to the operation, maintenance, management and repair of
the Real Property. Tenant shall pay 6% of the increase in Operating
Expenses ("Expense Increase") incurred in connection with the Real
Property over the base year of the calendar year 1998 as and for
additional rent.
B. Operating Expenses shall exclude:
a. Capital Improvements.
b. The cost of any repair made by the Landlord because of the
total or partial destruction of the Real Property or the
condemnation of a portion of the Real Property.
C. Any costs which are reimbursed by insurance proceeds or any other
source.
d. Expenses of Landlord in curing its defaults or performing work
expressly provided for in the Lease to be borne at Landlord's
expense (including work for other tenant(s) in the Real
Property).
e. The cost of marketing and leasing the Real Property, including
leasing commissions, advertising and other marketing costs, and
related legal, accounting and other professional services;
costs to prepare space for occupancy by any tenants of the Real
Property and for renovating, repainting, decorating,
redecorating, planning, designing space for any tenants
(including Tenant) and the cost of any credits, allowances, or
other payments or rent waivers or concessions granted to any
tenant (including Tenant).
f. Landlord's cost of electricity and other services sold to
tenants, including retail tenants and the
31
<PAGE>
parking garage operator, if any, which services are not standard
for the Premises, or are not available to Tenant without the
necessity of paying a separate additional charge.
g. Costs incurred by Landlord in exercising remedies against tenants
of the Real Property who violate terms of their leases.
h. Sums paid by Landlord for any indemnity, damages, fines, late
charges, penalties or interest for late payment, or to correct
violations of building codes or other laws or regulations
relative to the Real Property which are not Tenant's obligation
under the Lease.
i. Any costs incurred to remedy defects in the structure or systems
of the building located on the Real Property which are not
Tenant's obligations under the Lease.
j. Costs incurred to investigate and respond to hazardous materials
contamination, exposure or release (including hazardous
substances in the ground water or soil, provided the hazardous
material was not stored, used or disposed of by Tenant in
violation of law).
k. Any employee salaries and other compensation and/or health
benefits or other such benefits for the personnel of Landlord
above the level of building manager.
l. Costs of goods or services furnished by entities affiliated with
Landlord to the extent that such costs exceed the cost that would
have been incurred in an arm's length transaction with an
unrelated party.
m. Costs of Landlord's general overhead and general administrative
expenses (individual, partnership or corporate, as the case may
be), which costs would not be chargeable to operating expenses of
the Real Property under generally accepted accounting principles
consistently applied.
n. Payments of principal, interest, ground rent or any other
financing or refinancing costs on any mortgages, deeds of trust,
ground leases or other
32
<PAGE>
encumbrances, whether secured or unsecured on the Real Property,
including any equipment, fixtures or improvements therein, or any
penalties or late charges relating thereto.
o. Depreciation and amortization of the building or any fixtures or
improvements located on the Real Property; and
C. Upon request, Landlord will provide accountant's breakdown of
operating costs compared against Base Year for any year in which an
additional charge is billed to Tenant.
D. Any additional rent charged may be used as an estimate for the next
year's billings and will be paid by Tenant in twelve (12) equal
installments together with all other rent charges. Any adjustments
will be made based upon the following year's actual costs.
E. If Tenant disputes figures provided by Landlord's accountant, Tenant,
at Tenant's sole cost, upon reasonable notice, may review the books
and records within thirty (30) days receipt of accountants'
certification of costs. All reviews shall take place at Landlord's
place of business during normal working hours. The books and records
shall be kept in accord with generally accepted accounting principles
consistently applied.
In no event shall any rent adjustment hereunder result in a decrease
in the fixed/minimum annual rent.
85. ICIP Abatement
--------------
The Landlord and Tenant agree to cooperate in an application for ICIP
Abatement of Taxes.
86. Capital Improvements
--------------------
In the event any new law, rule, ordinance or regulation takes effect after
the date hereof and requires the Landlord to do any work of a capital
nature in the Demise Premises and/or the building, the Tenant shall pay, in
equal monthly installments over the remainder of the lease term to the
Landlord, 1/6th of the cost multiplied by the remaining months under the
Lease divided by one hundred twenty (120). The monthly payments shall
commence within thirty (30) days after written demand together with a copy
of the applicable invoice as for additional rent.
33
<PAGE>
87. Notices
-------
Supplementing the terms of Article 27 hereof, a copy of any notice by
Tenant to Owner shall be sent to:
Et-Al Management Corp.
60 Morrow Avenue
Scarsdale, New York 10583
and to:
Seymour Hurwitz, Esq.
36 West 44th Street
New York, New York 10036
and a copy of any notice by Owner to Tenant shall also be sent to:
Coaxicom, Inc. (dba Community Telephone)
48-18 Court Square
Long Island City, N.Y. 11101
88. Lease Not Binding Unless Executed and Delivered
-----------------------------------------------
This lease shall not bind Owner unless and until it has been (i) signed and
delivered by Tenant; (ii) received and accepted by Owner; and (iii) then
countersigned and redelivered by Owner to Tenant. The execution and
delivery of this Lease by Tenant shall constitute its irrevocable offer to
enter into this Lease. The Owner warrants and represents, upon which
warranty and representation that he understands that the Tenant shall rely
in the execution of this Lease, that Owner has the full right and lawful
authority to execute this Lease for the term thereof.
At Tenant's option, lease shall not be binding and all deposits and all
advance payments will be returned to Tenant if space is not ready for
occupancy by August 1 due to Landlord's unexcusable delay. Landlord agrees
to make best efforts to provide space as soon as possible.
89. Tenant's Federal Tax I.D. Number
---------------------------------
Tenant states that its Federal Tax Identification Number (the "Number") is
11-331-0798. From time to time, upon Owner's request, Tenant shall confirm
in writing that the Number provided by Tenant is correct and, if it is
missing or incorrect, what the correct number is. Tenant shall indemnify
Owner from and against any and all liability for any claim, fine, penalty,
cost or expense (including attorneys' fees) paid, suffered or incurred by
reason of Tenant's failure to Comply with this Article.
34
<PAGE>
90. Miscellaneous
-------------
A. No Offer.
This Lease is offered to signature by Tenant and it is understood that
this Lease shall not be binding upon Landlord unless and until
Landlord shall have executed and delivered a fully executed copy of
this Lease to Tenant.
B. Signatories.
If more than one person executes this Lease as Tenant, each of them
understands and hereby agrees that the obligations of each of them
under this Lease are and shall be joint and several, that the term
"Tenant" as used in this Lease shall mean and include each of them
jointly and severally and that the act of or notice from, or notice
or refund to, or the signature of, any one or more of them, with
respect to the tenancy and/or this Lease, including, but not limited
to any renewal, extension, expiration, termination or modification of
this Lease, shall be binding upon each and all of the persons
executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted or so given or received such notice
or refund or so signed.
C. Authority.
If Tenant is a corporation or partnership, each individual executing
this Lease on behalf of Tenant a hereby represents and warrants that
Tenant is a duly formed and validly existing entity qualified to do a
business in the State of New York and that Tenant has full right and
authority to execute and deliver this a Lease and that each person
signing on behalf of Tenant is authorized to do so.
D. Merger.
This Lease represents the entire understanding of the parties hereto
and all prior understandings or agreements between the parties are
merged in this agreement.
E. Pornographic Uses Prohibited.
Tenant agrees that the value of the Demised Premises and the
reputation of the Owner will be seriously injured if the premises are
used for any obscene or pornographic purposes or any sort of
commercial sex establishment or
35
<PAGE>
for certain other purposes. Tenant agrees that Tenant will not bring
or permit any obscene or pornographic material on the premises and
shall not permit or conduct any obscene, nude or semi-nude live
performances on the premises, nor permit use of the premises for nude
modeling, rap sessions, or as a so-called "rubber goods shop", or as a
sex club of any sort, or as a "massage parlor", nor shall the Demised
Premises be used for erotic dancing, a night club or for the
preparation or serving of food or beverages. Tenant further agrees
that Tenant will not permit any of these uses by any sublessee
or assignee of the premises. This Article shall directly bind any
successors in interest to the Tenant. Tenant agrees that if, at any
time, Tenant violates any of the provisions of this Article, such
violation shall be deemed a breach of a substantial obligation of the
terms of this Lease and objectionable conduct. "Pornographic material"
is defined for purposes of this Article as any written or pictorial
matter with prurient appeal or any objects or instruments that are
primarily concerned with lewd or prurient sexual activity.
91. Left Intentionally Blank.
92. Rent Commencement. The sooner of January 1, 1999 or upon substantial
-----------------
completion of Tenant's installation. See Paragraph 40.
93. Left Intentionally Blank.
94. Left Intentionally Blank.
95. Left Intentionally Blank.
96. Building Services. building shall be operated with all services and common
-----------------
area maintenance as normally provided for similar office buildings in the
area during normal business hours (including HVAC, janitorial services,
electric current, etc.). Tenant shall have 24-hours access seven (7) days a
week except for freight elevator as indicated hereinabove. Building is
managed by Landlord.
97. Left Intentionally Blank.
98. Landlord covenants and agrees to reasonably maintain the building in a
neat, orderly, safe, and sanitary manner, including but not limited to,
cleaning and maintaining the common areas and exterior of the building, bag
and remove all garbage, snow and ice removal, pest and rodent extermination
for common areas.
36
<PAGE>
99. Landlord has installed a central security system in the building with
electronic card entry. Landlord shall provide sufficient entry cards to
Tenant and Tenant's employees, not to exceed 10, at no charge to Tenant.
Additional cards can be purchased by Tenant at ten (10%)percent above
Landlord's cost. Landlord shall also provide to Tenant, upon Tenant's
request, security printouts and videotape, if any, at no charge to Tenant--
not to exceed three (3)times per year.
100. Landlord represents to the best of its knowledge that the Building
currently complies with the American Disabilities Act of 1990, and any
amendments or regulations promulgated thereunder or any related or similar
law (the "ADA"), and that throughout the term of this Lease Landlord shall
make any and all necessary repairs and alterations to the Building,
including the Demised Premises, required to comply with the ADA.
101. Left Blank Intentionally.
102 By executing this lease, Owner represents that as of the date hereof, it
has the resources to fulfill its obligations hereunder.
103 By executed this lease, Tenant represents that as of the date hereof, it
has the resources to full its obligations hereunder.
104. With the signing of the lease, Tenant shall pay first month's rent in the
amount of $11,759.83 and two month's security in the amount of $23,519.66
as agreed.
105. Landlord will furnish additional security at each entry door to Tenant's
space in the form of card swipe or keypad systems, the cost of which to be
shared equally by Landlord and Tenant.
a. Landlord agreed to give his "Best effort" to have a security guard in
place by 3/1/99. The landlord also agreed to position security cameras
at the front and rear entrance of the building (within a relative time
after lease commencement.)
106. The walls for the new offices will be gypsum board to slab for improved
acoustical privacy.
37
<PAGE>
WITNESSES: OWNER: 45-18 COURT SQUARE, LLC
/s/
_____________________________ BY: --------------------------
TENANT: COAXICOM, INC.
(dba COMMUNITY TELEPHONE)
/s/ /s/
_____________________________ BY: --------------------------
38
<PAGE>
RIDER TO LEASES BETWEEN 45-18 COURT SQUARE ASSOC., LANDLORD AND COAXICOM, INC.
(DBA COMMUNITY TELEPHONE), AS TENANTS TO BE ATTACHED TO LEASES FOR OFFICE 502
AND OFFICE 403.
It is hereby agreed that Paragraph 101 is deleted from both leases dated May 27,
1998 and March 27, 1997 for offices located at 45-18 Court Square, Long Island
City.
45-18 COURT SQUARE, LLC
/s/
BY: -------------------------
LANDLORD
COAXICOM, INC.
DBA COMMUNITY TELEPHONE
/s/
BY: -------------------------
TENANT
2
<PAGE>
EXHIBIT 10.3
[LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
Existing Lease Abstract
Building: 45 - 18 Court Square -- LIC 3/rd/ Fl
Lease Date: April 28, 1999
Landlord: 45 - 18 Court Square, LLC
Tenant: Community Networks
Premises: Entire 3/rd/Floor
Rentable Area: Approximately 20,000 RSF
Lease Term: Five (5)Years
Lease Commencement: Upon substantial completion of Landlord's work -
estimated to be 9/1999
Lease Expiration: Five (5)years from substantial completion of Landlord'
work
Rent Commencement: Upon substantial completion of Landlord's work -
estimated to be 9/1999
Base Rent: Years 1 - 3: $18.50 pRSF
Years 4 - 5: $19.50 pRSF
Electricity: Sub-meter plus a 3% administrative fee.
Real Estate Taxes: Tenant shall pay their proportionate share of a
direct pass-through of actual Real Estate Tax
increases over and above a 1999/2000 fiscal year.
Proportionate Share: 16 2/3%
Operating Expense: Tenant shall pay their proportionate share of a direct
pass-through of actual operating expense increases in
excess of the 1999 calendar year.
Use: General Office
Sublet/Assignment: Tenant may sublet all or a portion of the premises or
assign the lease with prior written consent of owner,
which may not be unreasonably withheld or delayed.
Landlord shall have the right to half of the sublease
profits.
Termination Option(s): N/A
Expansion Option(s): Tenant shall have an ongoing Right of First Offer on
any vacant space in the building.
Security Deposit: $32,500
Renewal Option(s): Tenant shall have a five (5) year renewal option.
Equis
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD APPEARS HERE]
June 23, 1999
Mr. Scott Matukas
Community Networks
45-18 Court Square
Long Island City, NY 11101
RE: Lease for Third Floor
Dear Scott:
Enclosed please find one executed copy of the lease for the above referenced
premises. We have already started the filing process to obtain the Permit so
that this work may commence as soon as possible.
Immediately upon receipt of the specifications for the electric work in the
"Network Room" I will price same and forward on to you for payment in accordance
with our understanding.
I am very please that we were able to work this out and look forward to a long
relationship with you and your company in the future.
Very truly yours,
/s/ Alan Zaretsky/RR
Alan Zaretsky
45-18 COURT SQUARE LLC
kk
Enc.
Via Federal Express
<PAGE>
================================================================================
STANDARD FORM OF OFFICE LEASE
================================================================================
Agreement of Lease, made as of this 28th day of April 1999, between 45-18 Court
Square, LLC having an office at 60 Morrow Ave., Scarsdale, New York 10583
Party of the first part, hereinafter referred to as OWNER, and Coaxicom, Inc.
(dba Community Network/Community Telephone)
Party of the second part, hereinafter referred to as TENANT:
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
approximately 20,000 square feet (the entire third floor) as per attached plan
designated Suite 300
in the building known as 45-18 Court Square
in the Borough of Queens, city of New York, for the term of Five (5) years
(or until such term shall sooner cease and expire as hereinafter provided)
to commence on []
1st day of * nineteen hundred and ninety-nine, and to end on []
day of * 2004
both dates inclusive, at an annual rental rate of *
* See Rider annexed, Article 40.
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof
(unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or With Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby convenant
as follows:
Rent 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy 2. Tenant shall use and occupy demised premises for general offices
and for no other purpose.
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant at Tenant's expense, may
make alterations, installations, additions or improvements which are non-
structural and which do not affect utility services or plumbing and electrical
lines, in or to the interior of the demised premises by using contractors or
mechanics first approved by Owner. Tenant shall, before making any alterations,
additions, installations or improvements, at its expense, obtain all permits,
approvals and certificates required by any governmental or quasi-governmental
bodies and (upon completion) certificates of final approval thereof and shall
deliver promptly duplicates of all such permits, approvals and certificates to
Owner and Tenant agrees to carry and will cause Tenant's contractors and sub-
contractors to carry such workman's compensation, general liability, personal
and property damage insurance as Owner may require. If any mechanic's lien is
filed against the demised premises, or the building of which the same forms a
part, for work claimed to have been done for, or materials furnished to, Tenant,
whether or not done pursuant to this article, the same shall be discharged by
Tenant within thirty days thereafter, at Tenant's expense, by filing the bond
required by law. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Owner in Tenant's behalf, shall, upon installation, become the property of Owner
and shall remain upon and the surrendered with the demised premises unless
Owner, by notice to Tenant no late than twenty days prior to the date fixed as
the termination of this lease, elects to relinquish Owner's right thereto and to
have them removed by Tenant, in which event the same shall be removed from the
premises by Tenant prior to the expiration of the lease, at Tenant's expense.
Nothing in this Article shall be construed to give Owner title to or to prevent
Tenant's removal of trade fixtures, moveable office furniture and equipment, but
upon removal of any such from the premises or upon removal of other
installations as may be required by Owner, Tenant shall immediately and at its
expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or may be removed from the premises by Owner, at tenant's
expense.
Maintenance and Repairs
4. Tenant shall, throughout the term of this lease, take good care of the
demised premises and the fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other part
of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor, service
or equipment done for or supplied to Tenant or any subtenant or arising out of
the installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only the contractor for
the trade or trades in sugestion, selected from a list of at least two
contactors per trade submitted by Owner. Any other repairs in or to the building
or the facilities and systems thereof for which Tenant is responsible shall be
performed by Owner at the Tenant's expense. Owner shall maintain in good working
order and repair the exterior and the structural portions of the building,
including the structural portions of its demised premises, and the public
portions of the building interior and the building plumbing, electrical, heating
and ventilating systems (to the extent such systems presently exist) serving
the demised premises. Tenant agrees to give prompt notice of any defective
condition in the premises for which Owner may be responsible hereunder. There
shall be no allowance to Tenant for diminution of rental value and no liability
on the part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner or others making repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. It is specifically
agreed that Tenant shall not be entitled to any setoff or reduction of rent by
reason of any failure of Owner to comply with the covenants of this or any other
article of this Lease. Tenant agrees that Tenant's sole remedy at Law in such
instance will be by way of an action for damages for breach of contract. The
provisions of this Article 4 shall not apply in the case of fire or other
casualty which are dealt with in Article 9 hereof.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in the
demised premises to be cleaned from the outside in violation of Section 202 of
the Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in possession,
and at all times thereafter, Tenant, at Tenant's sole cost and expense, shall
promptly comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters, Insurance
Services Office, or any similar body which shall impose any violation, order or
duty upon Owner or Tenant with respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof, (including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's
<PAGE>
use of manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised or method of operation therein, violated any such laws, ordinances,
orders, rules, regulations or equipments with respect thereto Tenant may, alter
seeming Owner to Owner's satisfaction against all damages, interest, penalties
and expenses, including, but not limited to, reasonable attorney's fees, by cash
deposit or by surety bond in an amount and in a company satisfactory to Owner,
contest and appeal any such laws, ordinances, orders, rules, regulations or
requirements provided same is done with all reasonable promptness and provided
such appeal shall not subject Owner to prosecution for a criminal offense or
constitute a default under any lease or mortgage under which Owner may be
obligated, or cause the demised premises or any part thereof to be condemmed or
vacated. Tenant shall not do or permit any act or thing to be done in or to the
demised premises which is contrary to law, or which will invalidate or be in
conflict with public liability, fire or other policies of insurance at any time
carried by or for the benefit of Owner with respect to the demised premises or
the building of which the demised premises form a part, or which shall or might
subject Owner to any liability or responsibility to any person or for property
damage. Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire
Insurance Rating Organization or other authority having jurisdiction, and then
only in such manner and such quantity as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy.
Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be
imposed upon Owner by reason of Tenant's failure to comply with the provisions
of this article and if by reason of such failure the fire insurance rate shall,
at the beginning of the lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or "make
up" of rate for the building or demised premises issued by the New York Fire
Insurance Exchange, or other body making fire insurance rates applicable to said
premises shall be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rates then applicable to said
premises. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient, in Owner's judgement, to absorb and prevent vibration,
noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property - Loss, Damage, Reimbursement, Indemnity:
8. Owner or its agents shall not be liable for any damage to property
of Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees. Owner or its agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or caused by operations
in construction of any private, public or quasi public work. If at any time any
windows of the demised premises are temporary closed, darkened or bricked up (or
permanently closed, darkened or bricked up, if required by law) for any reason
whatsoever including, but not limited to Owner's own acts, Owner shall not be
liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligation, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable attorneys
fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's
agents, contractors, employees, invitees, or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenant. Tenant's agents, contractors, employees, invitees or licenses
Tenant's liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-
tenant. In case any action or proceeding is brought against Owner by reason of
any such claim. Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unnreasonably withheld.
Destruction, Use and Other Casualty:
9. (a) if the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give immediate notice thereof to Owner and
this lease shall continue in full force and effect except as hereinafter set
forth. (b) if the demised premises are partially damaged or tendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) if the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject in Owner's right to elect not to restore
the same as hereinafter provided. (d) if the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall decide to demolish
it or to rebuild it, then, in any of such events, Owner may effect to terminate
this lease by written notice to Tenant, given within 90 days after such fire or
casualty, specifying a date for the expiration of the lease, which date shall
not be more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrenders and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenants salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectibale and to the extent permitted by law, Owner and Tenant each hereby
releases and waivers all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner wil not be obligated to
repair any damage thereto or replace the same. (1) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired
or condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim for
the value of any unexpired Term of said lease and assigns to Owner. Tenant's
entire interest in any such award.
Assignment, Mortgage, Etc:
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, not
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under-tenant or occupant, as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric Current:
12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other Tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss damages or expenses which Tenant may
sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises. In any emergency at any other other
reasonable times, to examine the same and to make such repairs, replacements and
improvements as Owner may deem necessary and reasonably desirable to the demised
premises or to any other portion of the building or which Owner may elect to
perform. Tenant shall permit Owner to use and maintain and replace pipes and
conduits in and through the demised premises and to erect new pipes and conduits
therein provided they are concealed within the walls, floor, or ceiling. Owner
may, during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
<PAGE>
same to prospective purchasers or mortgages of the building, and during the last
six months of the term for the purpose of showing the same to prospective
tenants. If Tenants is not present to open and permit an entry into the
premises, Owner of Owner's agents may enter the same whenever such entry may be
necessary or permissible by master key or forcibly and provided reasonable care
is exercised to safeguard Tenant's property, such entry shall not render Owner
or its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitations or abatement or rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is leased hereunder,
anything contained in or indicated on any sketch, blue print or plan, or
anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises
in violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and accepts
them as is, subject to the riders annexed hereto with respect to Owner's work,
if any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment of any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the fair and reasonable rental value of the demised premises
for the same period. In the computation of such damages the difference between
any installment of rent becoming due thereunder after the date of termination
and the fair and reasonable rental value of the demised premises for the period
for which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be fair and reasonable rental value for the part or the whole
of the premises so re-let during the term of the re-letting. Nothing herein
contained shall limit or prejudice the right of the Owner to prove for and
obtain as liquidated damages by reason of such termination, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or additional rent;
or if the demised premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be take or occupied by someone other than Tenant; or
if this lease be rejected under SS215 of Title II of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written five (5) days
notice upon Tenant specifying the nature of said default and upon the expiration
of said five (5) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said five (5) day
period, and if Tenant shall not have diligently commenced during such default
within such five (5) day period, and shall not thereafter with reasonable
diligence and in good faith, proceed to remedy or cure such default, then Owner
may serve a written three (3) days' notice of cancellation of this lease upon
Tenant, and upon the expiration of said three (3) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner but Tenant shall remain liable as
hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid; of if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effect and hold the premises as if
this lease had not been made, and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that end. If Tenant
shall make default hereunder prior to the date fixed as the commencement of any
renewal or extention of this lease, Owner may cancel and terminate such renewal
or extension agreement by written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent shall become
due thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part or parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with re-letting, such as legal expenses,
attorneys' fees, brokerage, advertising and of keeping the demised premises in
good order or for preparing the same for re-letting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
months shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re-rental may, at
Owner's option, make such alterations, repairs, replacements, and/or decorations
in the demised premises as Owner, in Owner's sole judgment, considers advisable
and necessary for the purpose of re-letting the demised premises, and the making
of such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid. Owner
shall in no event be liable in any way whatsoever for failure to re-let the
demised premises, or in the event that the demised premises are re-let, for
failure to collect the rent thereof under such re-letting, and in no event shall
Tenant be entitled to receive any excess, if any, of such net rents collected
over the sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed for
any cause, or in the event of Owner obtaining possession of demised premises, by
reason of the violation by Tenant of any of the covenants and conditions of this
lease, or otherwise.
Fees and Expenses:
19. If Tenant shall default in the observance or performance of any
term of covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of this lease, then,
unless otherwise provided elsewhere in this lease, Owner may immediately or at
any time thereafter and without notice perform the obligation of Tenant
thereunder. If Owner, in connection with the foregoing or in connection with any
default by Tenant in the covenant to pay rent hereunder, makes any expenditures
or incurs any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures of incurring of such obligations, such
sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building
may be known. There shall be no allowance to Tenant for diminution of rental
value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or other Tenants making any
repairs in the building or any such alterations, additions and improvements.
Furthermore, Tenant shall not have any claim against Owner by reason of Owner's
imposition of such controls of the manner of access to the building by Tenant's
social or business visitors as the Owner may deem necessary for the security of
the building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owner's agents have made any representations
or promises with respect to the physical condition of the building, the land
upon which
<PAGE>
it is erected on the demised premises, the rents, leases, expenses of operation
or any other matter or thing affecting or related to the premises except as
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of
it in whole or in part, unless such executory agreement is in writing and signed
by the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease, Tenant
shall quit and surrender to Owner the demised premises, broom clean, in good
order and condition, ordinary wear and damages which Tenant is not required to
repair as provided elsewhere in this lease excepted, and Tenant shall remove all
its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this lease. If the last day of
the term of this Lease or any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and
addition rent and observing and performing all the terms, covenants and
conditions, on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 31
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the date of
the commencement of the term hereof, because of the holding-over or retention of
possession of any tenant, undertenant or occupants or if the demised premises
are located in a building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy or because of
the fact that a certificate of occupancy has not been procured or for any other
reason, Owner shall not be subject to any liability for failure to give
possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to
extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. The provisions
of this article are intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New York Real
Property Law.
No Waiver:
25. The failure of Owner to seek redress for violation of, or to insist upon the
strict performance of any covenant or condition of this lease or of any of the
Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent
a subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach and no provision of this lease shall be deemed to have
been waived by Owner unless such waiver be in writing signed by Owner. No
payment by Tenant or receipt by Owner of a lesser amount than the monthly rent
herein stipulate shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy in
this lease provided. No act or thing done by Owner or Owner's agents during the
term hereby demised shall be deemed an acceptance of a surrender of said
premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other (except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever including, but not limited to, government
preemption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill, statement, notice or
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or tendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first herein-
above given or at such other address as Owner shall designate by written notice.
Services Provided by Owners:
29. As long as Tenant is not in default under any of the covenants of this
lease, Owner shall provide: (a) necessary passenger elevator facilities on
business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m. and
have one elevator subject to call at all other times; (b) heat to the demised
premises when and as required by law, on business days from 8 a.m. to 6 p.m. and
on Saturdays from 8 a.m. to 1 p.m.; (c) water for ordinary lavatory purposes,
but if Tenant uses or consumes water for any other purposes or in unusual
quantities (of which fact Owner shall be the sole judge), Owner may install a
water meter at Tenant's expense which Tenant shall thereafter maintain at
Tenant's expense in good working order and repair to register such water
consumption and Tenant shall pay for water consumed as shown on said meter as
additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Tenant's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner satisfactory to
Owner and no one other than persons approved by Owner shall e permitted to enter
said premises or the building of which they are a part for such purpose. Tenant
shall pay Owner the cost of removal of any of Tenant's refuse and rubbish from
the building; (e) if the demised premises are serviced by Owner's air
conditioning/cooling and ventilating system, air conditioning/cooling will be
furnished to tenant from May 15th through September 30th on business days
(Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m., and
ventilation will be furnished on business days during aforesaid hours except
when air conditioning/cooling is being furnished as aforesaid. If Tenant
requires air conditioning/cooling or ventilation for more extended hours or on
Saturdays, Sundays or on holidays, as defined under Owner's contract with
Operating Engineers Local 94-94A, Owner will furnish the same at Tenant's
expense. RIDER to be added in respect to rates and conditions for such
additional service; (f) Owner reserves the right to stop services of the
heating, elevators, plumbing, air conditioning, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owners for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually-operated
service elevator, Owner at any time may substitute automatic-control elevator
service and upon ten days' written notice to Tenant, proceed with alterations
necessary therefor without in any wise affecting this lease or the obligation of
Tenant hereunder. The same shall be done with a minimum of inconvenience to
Tenant and Owner shall pursue the alteration with due diligence.
Captions:
30. The Captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this lease nor the intent
of any provisions thereof.
Definitions:
31. The term "office", or "offices", wherever used in this lease, shall not be
construed to mean premises used as a store or stores, for the sale or display,
at any time, of goods, wares or merchandise, of any kind, or as a restaurant,
shop, booth, boothblack or other stand, barber shop, or for other similar
purposes or for manufacturing. The term "Owner" means a landlord or lessor, and
as used in this lease means only the owner, or the mortgagee in possession, for
the time being of the land and building (or the owner of a lease of the building
or of the land and building) of which the demised premises form a part, so that
in the event of any sale or sales of said land and building or of said lease,
or in the event of a lease of said building, or of the land and building, the
said Owner shall be and hereby is entirely freed and relieved of all covenants
and obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner, hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term
"business days" as used in this lease shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 29 hereof). Sundays
and all days observed by the State or Federal Government as legal holidays and
those designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with respect
to HVAC service.
<PAGE>
authorized to cause such excavation license to enter upon the demised premises
for the purpose of doing such work as said person shall deem necessary to
preserve the wall of the building of which demised premises form a part from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity against Owner, or diminution or abatement of rent.
Rules and regulations
33. Tenant and Tenant's servants, employees, agents, visitors, and licensees
shall observe faithfully, and comply strickly with, the Rules and Regulations
and such other and further reasonable Rules and Regulations as Owner or Owner's
agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
question of the reasonableness of such Rule or Regulation for decision to the
New York office of the American Arbitration Association, whose determination
shall be final and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulation upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of a notice, In
writing upon Owner within ten (10) days after the giving of notice thereof.
Nothing in this lease contained shall be construed to impose upon Owner any duty
or obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Owner shall not
be liable to Tenant for violation of the same by any other tenant, its servants,
employees, agents, visitors or licensees.
Security:
*
34. Tenant has deposited with Owner the sum of $ 31,250.00 as security for
the faithful performance and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease,
including, but not limited to, the payment of rent and additional rent, Owner
may use, apply or retain the whole or any part of the security so deposited to
the extent required for the payment of any rent and additional rent or any other
sum,
[ILLEGIBLE]
including but not limited to, any damages or deficiency in the re-letting
of the premises whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by Owner. In the event that Tenant shall
fully and faithfully comply with all of the terms, provisions, covenant and
conditions of this lease, the security shall be returned to Tenant after the
date fixed as the end of the Lease and after delivery of entire possesion of the
demised premises to Owner. In the event of a sale of the land and building or
leasing of the building, of which the demised premises form a part, Owner shall
have the right to transfer the security to the vendee or lessee and Owner shall
thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look to the new Owner solely for the return of
said security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Owner. Tenant further
convenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Owner nor its
successors on assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
Estoppel Certificate
35. Tenant, at any time, and from time to time, upon at least 10 days'
prior notice by Owner, shall execute acknowledge and deliver to Owner, and/or to
any other person, firm or corporation specified by Owner, a statement certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates to which the rent and additional
rent have been paid, and stating whether or not there exists any default by
Owner under this Lease, and, if so, specifying each such default.
Successors and Assigns:
36. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as
otherwise provided in this lease, their assigns.
- -------------------------
* Space to be filled in or deleted
In Witness Thereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner: 45-18 COURT SQUARE LLC
---------------------------------
/s/ Katrine Krasovic BY: /s/
- -------------------------------- ---------------------------------
Alan Zaretsky
Witness for Tenant: COAXICOM DBA COMMUNITY TELEPHONE
---------------------------------
/s/ Susan B. Smith BY: /s/ Scott Matukus
- -------------------------------- ---------------------------------
Tenant
ACKNOWLEDGMENTS
CORPORATE OWNER
STATE OF NEW YORK, S.S.:
County of
On this day of , 19 , before me
personally came
to me known, who being by me duly sworn, did depose and say that he resides
in :
that he is the of
the corporation described in and which executed the foregoing, as OWNER; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation, and that he signed his name thereto by like
order.
------------------------------------------------------------
INDIVIDUAL OWNER
STATE OF NEW YORK, S.S.:
County of
On this day of , 19 , before me
personally came
to me known and known to me to be the individual
described in and who, as OWNER, executed the foregoing instrument and
acknowledged to me that he executed the same.
------------------------------------------------------------
CORPORATE TENANT
STATE OF NEW YORK, S.S.:
County of
On this day of , 19 , before me
personally came
to me known, who being by me duly sworn, did depose and say that he resides
in :
that he is the of
the corporation described in and which executed the foregoing instrument, as
TENANT; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
------------------------------------------------------------
INDIVIDUAL TENANT
STATE OF NEW YORK, S.S.:
County of
On this day of , 19 , before me
personally came
to me known and known to me to be the individual
described in and who, as TENANT, executed the foregoing instrument and
acknowledged to me that he executed the same.
------------------------------------------------------------
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Owner making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non payment, non performance, or non observance,
or proof, or notice, or demand, whereby to charge the undersigned therefor, all
of which the undersigned hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Owner against Tenant of any of the rights or remedies reserved to Owner pursuant
to the provisions of the within lease. The undersigned further covenants and
agrees that this guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of this lease and during any period
when Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner and
the undersigned covenant and agree that in any action or proceeding brought by
either Owner or the undersigned against the other on any matters whatsoever
arising out of, under, or by virtue of the terms of this lease or of this
guarantee that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated: ................................19.......................
................................................................
Guarantor
................................................................
Witness
................................................................
Guarantor's Residence
................................................................
Business Address
................................................................
Firm Name
STATE OF NEW YORK ) ss.:
COUNTY OF )
On this day of , 19 , before me personally came
..................................................... to me known and known to
me to be the individual described in, and who executed the foregoing Guaranty
and acknowledged to me that he executed the same.
.....................................
Notary
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than for ingress or egress from the demised
premises and for delivery of merchandise and equipment in a prompt and efficient
manner using elevators and passageways designated for such delivery by Owner.
There shall not be used in any space, or in the public hall of the building,
either by any Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and
sideguards. If said premises are situated on the ground floor of the building,
Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in
front of said premises clean and free from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window of
the building; and no Tenant shall sweep or throw or permit to be swept or thrown
from the demised premises any dirt or other substances into any of the corridors
or halls, elevators, or out of the doors or windows or stairways of the building
and Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the demised premises, or permit or suffer the demised
premises to be occupied or used in a manner offensive or objectionable to Owner
or other occupants of the building by reason of noise, odors, and/or
vibrations, or interfere in any way with other Tenants or those having business
therein, nor shall any animals or birds be kept in or about the building.
Smoking or carrying lighted cigars or cigarettes in the elevators of the
building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of the
building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises of the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability, and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of the
demised premises of the building of which they form a part. No boring, cutting
or stringing of wires shall be permitted, except with the prior written consent
of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other
similar floor covering, so that the same shall come in direct contact with the
floor of the demised premises, and, if linoleum or other similar floor covering
is desired to be used an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building between the hours of
6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons.
11. Owner shall have the right to prohibit any advertising by any Tenant which
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustible or explosive fluid, material, chemical
or substance, or cause or permit any odors of cooking or other processes, or any
unusual or other objectionable odors to permeate in or emanate from the demised
premises.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of New York and all other laws and regulations
applicable thereto and shall be done during such hours as Owner may designate.
Address
Premises
=================================================
TO
=================================================
STANDARD FORM OF
[SEAL] OFFICE [SEAL]
LEASE
The Real Estate Board of New York, Inc.
(C)Copyright 1983. All rights Reserved.
Reproduction in whole or in part prohibited.
=================================================
Dated 19
Rent per Year
Rent per Month
Term
From
To
Drawn by..................Checked by.............
Entered by................Approved by............
=================================================
<PAGE>
RIDER ANNEXED TO LEASE
DATED APRIL 28, 1999
BY AND BETWEEN
45-18 COURT SQUARE, LIC, AS LANDLORD
AND
COMMUNITY NETWORKS, INC.
AS TENANT
40. Minimum Annual Rent
-------------------
A. The term of this lease shall commence on the date the Landlord's Work
(as hereinafter defined) is Substantially Completed (as hereinafter
defined), which date is estimated to be the ninetieth (90th) day after
the date Tenant has delivered Tenant's Plans (as hereinafter defined)
to Landlord and Landlord has approved Tenant's Plans (the
"Commencement Date") and shall expire, unless sooner terminated, on
the last day of the calendar month in which occurs the fifth (5th)
anniversary of the Commencement Date, unless the Commencement Date
shall be the first day of a calendar month, in which event the term of
this lease shall expire on the last day of the immediately preceding
calendar month (the "Expiration Date").
B. Left Blank Intentionally.
C. Tenant covenants and agrees to pay to Landlord as Minimum Annual Rent
on the first day of each month during the term hereof, the following
sums:
(i) Years 1 through 3 - Three hundred seventy thousand
($370,000) dollars and no cents per annum payable in equal
monthly installments of Thirty thousand eight hundred
thirty-three dollars ($30,833.33) and thirty-three cents per
month. (See Brokerage Agreement)
(ii) Years 4 and 5 - Three hundred ninety thousand
($390,000) dollars and no cents per annum payable in equal
monthly installments of Thirty-two thousand five hundred
dollars ($32,500.00) and no cents per month. (See Brokerage
Agreement)
D. Rent due for partial month(s) shall be prorated.
E. The above annual sums shall be paid in equal monthly installments, in
advance, on the first day of each month during said term at the office
of Owner or at such other place as Owner may designate, without offset
or deduction whatsoever.
1
<PAGE>
F. Tenant shall pay the first month's rent, in the sum of $30,833.33 upon
the execution of this lease, the receipt of which is hereby
acknowledged.
41. Security Deposit
----------------
Simultaneous with entry into possession of the Demised Premises, Tenant
shall deposit with Owner the sum of $32,500.00 (See Article 94) as security
for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this Lease. It is agreed that in the event
Tenant defaults in respect of any of the terms, provisions and conditions
of this Lease, including, but not limited to, the payment of rent and
additional rent, owner may use, apply or retain the whole or any part of
the security so deposited to the extent required for the payment of any
rent and additional rent or any other sum to which Tenant is in default or
for any sum which Owner may expend or may be required by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this
Lease, including but not limited to, any damages or deficiency in the re-
letting of the premises, whether such damages or deficiency accrued before
or after summary proceedings or other re-entry by Owner. Within thirty
(30)days after receipt of written notice that Owner has made application of
all or any part of the said security deposit, Tenant shall deposit with
Owner such additional funds as are necessary to restore the security
deposit to its original amount. In the event that Tenant shall fully and
faithfully comply with all of the non-monetary terms, provisions, covenants
and conditions of this Lease, the security not required to cure any
monetary default or otherwise deducted as a result of the physical
condition of the premises shall be returned to Tenant after the date fixed
as the end of the Lease and after delivery of entire possession of the
Demised Premises to Owner. In the event of a sale of the land and building
or leasing of the building, of which the Demised Premises form a part,
Owner shall have the right to transfer the security to the vendee or lessee
and Owner shall thereupon be released by Tenant from all liability for the
return of such security, and Tenant agrees to look to the new Owner solely
for the return of said security; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to
a new Owner. Tenant further covenants that, other than in connection with a
valid disposition of this Lease in compliance with the terms of Article 64
hereof, it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Owner nor its
successor or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
2
<PAGE>
Tenant shall, at all times, maintain a rent security deposit equal to one
(1) month's rent. On each base rent increase date, Owner shall invoice
Tenant for, and Tenant shall deposit, such further sums with Owner as are
necessary to satisfy this obligation.
42. Restrictions on Use of the Demised Premises
-------------------------------------------
A. Subject to the provisions of this Lease, Tenant shall use the Demised
Premises only as offices in accordance with the Certificate of
Occupancy and for no other purposes.
B. Tenant shall not use or permit the use of the Demised Premises or any
part thereof in any way that would violate any of the covenants,
agreements, terms, provisions and conditions of this Lease or for any
unlawful purpose or in any unlawful manner or in violation of the
Certificate of Occupancy for the Demised Premises or the Building, and
Tenant shall not suffer or permit the Demised Premises or any part
thereof to be used in any manner or for anything to be done therein or
anything to be brought into or be kept therein that, in the judgment
of Owner, shall in any way threaten to impair or adversely affect the
character, reputation or appearance of the Building, the proper and
economical operation of the Building or any systems, facilities or
services used to operate or clean all or any part of the Building or
the Demised Premises, or the use of any of the areas of the Building
by Owner or any of the other Tenants or occupants of the Building.
Tenant shall not install or use any equipment that, in the judgment of
Landlord, could cause any adverse effect on the Demised Premises, the
Building and/or the comfort and convenience of other Tenants and
occupants of the Building.
43. Landlord shall construct offices in accordance with the attached
layout/sketch to be provided by tenant to The Milowitz Group, all finishes
to building standard and in accordance with Building Codes. Any
additions/changes required by Tenant must be agreed to in writing by both
parties and shall be at Tenant's sole cost to be paid upon written
agreement.
A. Landlord shall supply and install carpet and rubber base cove at
Landlord's cost. Tenant shall have option of choosing carpet from
Landlord's samples.
B. Any work performed by Tenant or Tenant's contractors shall be
performed in a good and workmanlike manner and shall comply with all
rules and regulations of all
3
<PAGE>
Governmental Authorities having jurisdiction therein. If Tenant is
providing build-out of space or makes any alterations to the space,
the following paragraphs apply:
C. Tenant, or any contractor or contractors employed by Tenant, or any
other persons who will do work or install equipment for Tenant, shall
be fully covered by Workmen's Compensation Insurance, and the
Certificate by Tenant or any such contractor or persons as aforesaid.
Tenant further covenants, at its own cost and expense, to take out and
maintain at all times during the progress of such work and until
completion thereof, public liability insurance policies covering Owner
in compliance with the limits and such other conditions as set forth
in Article 49 hereof, and certificates evidencing the policies shall
be delivered to Owner prior to the commencement of any work hereunder.
D. Tenant's contracts with its contractors and/or other persons who will
perform work for the Tenant shall require said persons to look solely
to the Tenant for payment and will hold Owner and the Building free
from all liens and claims of all persons furnishing labor or
materials therefor.
E. Subject to the provisions of this Article, any and all machinery,
equipment and fixtures installed by Tenant, which are not replacements
of fixtures either furnished by Owner as part of Owner's work or pre-
existing in the Demised Premises at the time of the commencement of
this Lease (sometimes herein referred to as "Tenant's Property")shall
remain personalty, notwithstanding the fact that it may be affixed or
attached to the realty, and shall, during the term of this Lease or
any extension thereof, belong to and be removable by Tenant, provided
that (a)Tenant shall remove said installations prior to the expiration
of such term, and shall repair any damage caused by said removal and
shall deliver the Demised Premises to Owner in the same, or better
condition, as upon the commencement of the term hereof, reasonable
wear and tear excepted. Prior to the expiration of the term or sooner
termination thereof, Tenant shall at its own cost and expense remove,
from the Demised Premises, all of Tenant's property, except such items
thereof as Tenant shall have expressly agreed in writing with Owner
are to become the property of the Owner and Tenant shall repair any
damage to the Demised Premises resulting from such removal. Any
Tenant's property remaining in the Demised Premises after termination
of this Lease (except such items as Owner and Tenant have expressly
agreed in writing are to remain and become the property of Owner)
shall be deemed to have been abandoned by Tenant or any
4
<PAGE>
sub-Tenant and either may be retained by Owner as its property or may
be removed from the premises by Owner at Tenant's expense.
F. Machinery, fixtures, chattels or equipment, if any, furnished or
installed by Tenant, the cost of which is borne by Owner, shall become
the property of Owner upon payment therefor by Owner, or reimbursement
of Tenant by Owner, as the case may be, and shall not be removed by
Tenant. Anything herein contained to the contrary notwithstanding, it
is understood and agreed that all structural improvements, all
plumbing lines and equipment (other than fixtures), all electrical
wiring, conduit and equipment (other than free-standing lighting
fixtures), all heating and ventilating installations made by Tenant,
whether with or without contribution or reimbursement by Owner, shall
forthwith become part of the Building and property of Owner.
Tenant's failure to comply with any of the items and conditions of
this Article will be deemed a default pursuant to Article 17 hereof.
44. Utilities
---------
A. Electricity Service
-------------------
(1) Landlord shall contract directly with the public utility company
for electric service for the Demised Premises. Tenant shall be
responsible for the payment of the cost of such electric service.
Such electric service may be furnished to Tenant by means of the
then existing electrical facilities serving the Premises to the
extent that the same are available, suitable and safe for such
purposes. Landlord will, prior to the commencement date, install
a sub-meter to measure Tenant's electric usage and Tenant shall
pay for such electric usage at the same rate charged to Landlord
by the utility company plus a three percent administrative fee.
(2) Any additional feeders or risers to be installed to supply
Tenant's additional electrical requirements, and all other
equipment proper and necessary in connection with such feeders or
risers shall be, at Landlord's option, installed by Landlord upon
Tenant's request, at the sole cost and expense of Tenant
(including a connection fee of Three Hundred Fifty Dollars
($350.00) per kilovolt ampere, provided that, in Landlord's
reasonable judgment, such additional feeders or risers are
necessary and are permissible under applicable laws and insurance
5
<PAGE>
regulations and the installation of such feeders or risers will
not cause permanent damage or injury to the Building or the
Premises or cause or create a dangerous or hazardous condition or
entail excessive or unreasonable alterations or materially
interfere with or disturb other tenants or occupants of the
Building. Tenant covenants that, at no time, shall the use of
electrical energy in the Premises exceed the capacity of the
existing feeders or wiring installations then serving the
Premises. Tenant shall not make or perform or permit the making
or performance of any alterations to wiring installations or
other electrical facilities in or serving the Premises or any
additions to the business machines, office equipment or other
appliances in the Premises which utilize electrical energy
without the prior consent of Landlord in each instance, which
consent shall not be unreasonably withheld or delayed.
(3) Landlord shall not be liable to Tenant in any way for any
interruption, curtailment or failure, or defect in the supply or
character of electricity furnished to the Premises by reason of
any requirement, act or omission of Landlord or of any public
utility or other company servicing the Building with electricity
or for any other reason, except if caused by Landlord's
negligence or willful misconduct.
Landlord reserves the right to estimate electric costs and Tenant
specifically agrees to pay estimated costs per submeter which
shall be confirmed by an outside source monthly.
Landlord is willing to allow Tenant, at its own cost and expense,
to install an approved direct meter for service to the space if
it is determined to be possible to do so.
45. Services
--------
(1) Cleaning services by Landlord at the additional charges of $1.50 per
square foot, to building standards. No medical waste shall be removed
by Landlord.
(2) HVAC - Landlord shall install the HVAC system and Landlord shall
maintain and repair same during the term of the Lease at the
Landlord's sole cost and expense. Landlord shall install a
Supplementary HVAC System in the 18'X 30' room (as hereinafter
defined), which Supplementary HVAC System shall be maintained and
6
<PAGE>
repaired at Tenant's sole cost and expense using a contractor
selected by Landlord and on the termination of the Lease, Tenant
shall deliver the Premises with the Supplementary HVAC system in
working order, free and clear of all liens and encumbrances. Landlord
shall supply Tenant with Tenant's own heat and cooling, at Landlord's
sole cost and expense, through the HVAC system.
Heating is to be supplies from September 15 through May 14th and air
conditioning from May 15th through September 14th. Landlord shall
provide at least 68 degrees Ferenheit with respect to the heating of
the Premises and maintain 74 degrees Ferenheit with respect to the
cooling of the Premises.
Landlord shall provide heating and cooling as described in the lease
document. Landlord shall provide HVAC to Tenant's space based upon
the building standard hours as follows:
Monday through Friday: 8:00 AM to 6:00 PM
Saturday: 8:00 AM to 2:00 PM
Overtime HVAC can be supplied with prior notice at $75.00 per hour.
Additionally, the separate air conditioning unit previously described
shall be under the sole control of Tenant through the Supplementary
HVAC System.
(3) Service elevator other than Monday through Friday, 8:00 AM through
4:00 PM, at the rate of $50.00 per hour, subject to 48-hour written
notice.
46. Security Agreements
-------------------
A. Tenant covenants and agrees that no security agreement, whether by
way of conditional bill of sale, chattel, mortgage or instrument of
similar import, shall be placed upon any improvement made by Tenant
which is affixed to the realty.
B. In the event that any of the machinery, fixtures, furniture and
equipment installed by Tenant in the Demised Premises are purchased
or acquired by Tenant subject to a chattel, mortgage, conditional
sale agreement or other title retention or security agreement, Tenant
undertakes and agrees (1) that no such chattel, mortgage, conditional
sales agreement or other title retention or security agreement or
Uniform Commercial Code filing statement shall be permitted to be
filed as a lien against the building and real property of which
7
<PAGE>
the Demised Premises form a part, and (2) to cause to be inserted in
any of the above-described title retention, chattel, mortgage or
security agreements the following provision:
"Notwithstanding anything to the contrary herein, this chattel,
mortgage, conditional sale agreement, title retention agreement or
security agreement shall not create or be filed as a lien against the
land, building and improvements comprising the real property in which
the goods, machinery, equipment, appliances or other personal
property covered hereby are to be located or installed."
C. If any such lien or UCC financing statement, based on an agreement as
above described, is filed against the building and improvements, of
which the Demised Premises form a part, Tenant will, upon at least
ten (10) days' prior written notice thereof from Owner, cause such
lien or notice to be removed or discharged at Tenant's cost and
expense, and Tenant's failure to do so shall constitute a breach of a
material provision of this Lease.
47. Mechanic's Liens
----------------
A. Tenant shall have no power to do any act or make any contract which
may create or be the foundation for any lien upon the reversion of
Owner, the Premises herein Demised or Owner's building and
improvements, it being agreed that should Tenant cause any
alterations, changes, additional improvements or repairs to be made
to the Demised Premises, or material furnished or labor performed
therein or thereon, neither Owner for the Demise Premises shall,
under any circumstances, be liable for the payment of any expenses
incurred or for the value of any such work done or material furnished
to the Demised Premises or any part thereof, but all such
alterations, changes, additions, improvements and repairs and
materials and labor shall be at Tenant's expense and Tenant shall be
solely and wholly responsible to contractors, laborers, and
materialmen furnishing labor and material to said premises and
building, or any part thereof, for or on behalf of Tenant.
B. Tenant shall not suffer or permit any mechanic's liens to be filed
against the fee ownership of the Demised Premises nor against
Tenant's leasehold interest in said premises, by reason of work,
labor, services or materials supplied or claimed to have been
supplied to Tenant or to any occupant of the Demised Premises. If
any such mechanic's lien shall at any time be filed against the
8
<PAGE>
Demised Premises or the building and improvements thereon, Tenant
shall, at its own cost and expense, cause the same to be cancelled
and discharged of record by surety bond or appropriate cash deposit
within thirty (30) days after the date of filing the same and notice
thereof to Tenant, and Tenant shall indemnify and save harmless Owner
from and against any and all costs, expenses, claims, losses or
damages resulting therefrom or by reasons thereof.
C. Tenant shall also defend on behalf of Owner, at Tenant's sole cost
and expense, any action, suit or proceedings which may be brought
thereon or for the enforcement of such liens or orders, and Tenant
shall pay any damages and satisfy and discharge any judgment entered
thereon and save harmless Owner from any claim or damage resulting
therefrom.
D. If Tenant shall fail to discharge such mechanic's lien within such
period, then, in addition to any other right or remedy of Owner,
Owner may, but shall not be obligated to, discharge the same, either
by paying the amount claimed to be due or by procuring the discharge
of such lien by deposit in court or bonding, and in any such event,
Owner shall be entitled, if Owner so elects, to compel the
prosecution of an action for the foreclosure of such mechanic's lien
by the lienor and to pay the amount of the judgment, if any, in favor
of the lienor, with interest, costs and allowances.
E. Any amount paid by Owner for any of the aforesaid charges and all
reasonable legal and other expenses of Owner, including reasonable
counsel fees, in defending any such action in procuring the discharge
of said lien, with all necessary disbursements in connection
therewith, with interest thereon at the then legal rate of imputed
interest from the date of payment, shall be repaid within a period of
twenty (20) days after written demand therefor by Owner to Tenant,
and may be treated as Additional Rent payable with the next
installment of Annual Basic Rent.
F. Prior to the commencement of any work in the Demised Premises by any
general contractor employed by Tenant or by any sub-contractors
employed by such general contractor, or sub-contractors employed by
Tenant, Tenant shall:
(1) furnish Owner with Tenant's written statement setting forth the
name and business address of the Tenant's general contractor or
sub-contractors employed by Tenant;
9
<PAGE>
(2) obtain and furnish to Owner a written list of all sub-
contractors employed or to be employed by Tenant's general
contractor and certified by the general contractor.
48. Owner's Exculpation/No Recourse
-------------------------------
If the Owner or any successor-in-interest be an individual, joint
venture, tenancy-in-common, co-partnership, unincorporated association,
limited partnership or other unincorporated group of individuals, or a
corporation (all of which are referred to below, individually, and
collectively, as an "Owner Entity"), then, anything herein to the
contrary notwithstanding, Tenant shall look solely to the interest of
such Owner Entity in the building in satisfaction of Tenant's remedies
for the collection of a judgment (or other judicial process) requiring
the payment of money by Owner, in the event of any default or breach by
Owner with respect to any of the terms, covenants and conditions of this
Lease to be observed and/or performed by Landlord, and no other property
or assets of such Owner Entity or any member thereof, shall be subject to
levy, execution or other enforcement procedure for the satisfaction of
Tenant's remedies.
49. Parties' Certificates
---------------------
The Parties each shall, without charge at any time, and from time to
time, within ten (10) days after request by the other, certify to any
mortgagee, proposed assignee of any mortgagee, or proposed purchaser or
any other person, firm or corporation specified by the requesting party:
a) That this Lease is unmodified and in full force and effect (or, if
there has been modification, that the same is in full force and effect
as modified and stating the modifications);
b) Whether or not there are then existing any set-offs or defenses
against the enforcement of any of the agreements, terms, covenants or
conditions hereof upon the part of the Tenant to be performed or
complied with (and, if so, specifying the same); and
c) The dates, if any, to which the rental and other charges hereunder
have been paid in advance.
50. Liability Insurance and Indemnification
---------------------------------------
A. During the term hereof, Tenant shall, at its own cost and expense:
10
<PAGE>
1) Obtain, maintain and keep in force, for the benefit of Owner,
Managing Agent and Tenant, comprehensive general liability
insurance covering the risks in the limits set forth below, on or
about the Demised Premises (which shall include Tenant's assigns,
if any):
a) Bodily Injury:
Each person...........$1,000,000.00
Each Occurrence.......$1,000,000.00
b) Property Damage:
Each Occurrence........$ 500,000.00
c) Completed operations and contractual liability with the same
bodily injury and property damage limits stated in (a) and (b)
above.
d) Fire and extended coverage for Tenant's fixtures, alterations
and inventory in an amount adequate to cover the cost of
replacement, but not less than $100,000.00.
B. Owner and its managing agent, Et-Al Management Corp., shall be named
as an additional insured in said policies, as their interests may
appear, and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be
issued by insurance companies reasonably satisfactory to Owner and
which are authorized to do business in the State of New York. Tenant
shall deliver to Owner the policies of insurance, together with
evidence of the payment of premiums thereon within ten (10) days of
taking occupancy of the Demised Premises and furnish to Owner at least
twenty (20) days prior to the expiration of any such policies, a new
policy, with evidence of the payment or premiums thereon. The parties
hereto agree that the payment of said premiums may be financed, as
long as same are made and kept current. Said policies shall also
provide that the insurer will give Owner at least thirty (30) days
prior written notice of cancellation of said policy. If tenant fails
to obtain such insurance, Landlord may do so and charge Tenant for the
cost thereof, as additional rent.
C. Notwithstanding the limits of insurance specified in this Article,
Tenant agrees to indemnify Owner, its agents, servants and employees
against all damage, loss or liability resulting from any of the risks
referred to in this Article. Such indemnification shall operate
whether
11
<PAGE>
or not Tenant has placed and maintained the insurance specified in
this Article and whether or not such proceeds from such insurance
actually are collectible from one or more of the insurance companies;
provided, however, that Tenant shall be relieved of its obligations of
indemnity herein Pro Tanto of the amount actually recovered from one
or more of the insurance companies by reason of injury or damage to,
or loss sustained on the Premises.
D. Tenant shall pay all premiums and charges for all of said policies,
and if Tenant shall fail to make any payment when due or carry any
such policy, Owner may, but shall not be obligated to, make such
payment or carry such policy, and the amount paid by Owner, with
interest thereon, shall be repaid to Owner by Tenant on demand, and
all such amounts so repayable, together with such interest, shall be
considered as Additional Rent payable hereunder for the collection of
which Owner shall have all of the remedies herein or by law provided
for the collection of rent. Payment by Owner of any such premium or
the carrying by Owner of any such policy, shall not be deemed to waive
or release the default of Tenant with respect thereto.
E. Tenant acknowledges that Owner will not carry insurance of any kind on
Tenant's furniture, furnishings, finishes, or wall coverings and/or
fixtures, equipment, and improvements, and agrees that Owner shall not
be obligated to repair any damage thereto or to replace the same.
51. Tenant's Conduct of Business
----------------------------
Tenant covenants and agrees:
A. To do all things necessary to keep the Demised Premises clean, orderly
and neat at all times, and to prevent odors, all at Tenant's sole cost
and expense, and to conduct its business in a proper manner.
B. That Tenant shall conduct its operations in the Demised Premises in an
orderly and proper manner so as not to annoy, disturb or be offensive
to others.
C. That Tenant shall not, at any time, discharge into the plumbing,
sewage or drainage system, any waste materials which will result in
the creation of a blockage in said system or otherwise adversely
affect the proper and clean maintenance and operation thereof.
12
<PAGE>
D. That Tenant, at its sole cost and expense, shall provide regular
exterminating and pest control services in the Demised Premises using
Landlord's exterminator at regular intervals, in order to prevent the
occurrence of any vermin in or about the Demised Premises.
52. Adjustment of Rent for Increases in Real Estate Tax
---------------------------------------------------
See Paragraph 83
53. Assignment and Sub-Subletting Provisions
----------------------------------------
Tenant shall have the right to assign or sublease to a parent, affiliate,
or subsidiary with notice to the Landlord. Any permission required for
other assignments or subletting shall not be unreasonably withheld or
delayed by the Landlord. If Owner shall give its consent to any assignment
of this lease or to any sublease, Tenant shall, in consideration therefor,
pay to Owner, as additional rent:
A. In the case of an assignment, 50% of all sums and other considerations
paid to Tenant by the assignee for or by reason of such assignment
(including, but not limited to, any "Tenant Improvement Payment" as
hereinafter defined).
B. In the case of a sublease, 50% of all rents, additional charges or
other consideration payable under the sublease to Tenant by the
subtenant (including, but not limited to any Tenant Improvement
Payment) which is in excess of the Fixed Rent and additional rent
accruing during the term of the sublease in respect of the sublet
portion (at the rate per square foot payable by Tenant hereunder)
pursuant to the terms of this lease.
C. Any sums payable pursuant to this section shall be paid to Owner as
and when, and to the extent, paid by the assignee or subtenant (as the
case may be) to Tenant.
D. For the purposes hereof, the term "Tenant Improvement Payment" shall
mean sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture, furnishings or other personal
property, less, in the case of a sale thereof, the then fair market
value, and in the case of a rental, the then fair rental value.
Any assignee or transferee shall assume and be deemed to have assumed this
lease and shall be and remain liable jointly and severally with Tenant for
the payment of the rent and additional rent and for the due performance of
all the terms, covenants, conditions, and agreements herein contained on
Tenant's part to be performed for the term of this lease. No
13
<PAGE>
assignment shall be binding on Owner unless such assignee or Tenant shall
deliver to Owner a duplicate original of the instrument or assignment in
form reasonably satisfactory to Owner, containing a covenant of assumption
by the assignee of all of the obligations aforesaid and shall obtain from
Owner the aforesaid written consent, prior thereto.
54. Rent Arrears, Etc.: Supplementing Article 25 of the printed form of lease:
-----------------
A. Owner, at Owner's option, shall have the right, when Tenant is in
default in the payment of Fixed Rent or Additional Rent, to demand
payment by certified, bank or teller's check, or by postal money
order.
B. In the event that any payment under this Lease shall be made in the
form of a check from any person, firm or corporation other than the
person, firm or corporation named in this Lease, the acceptance of
same by Owner shall not, under any circumstances, be deemed
recognition of a sub-letting or any assignment of this Lease,
regardless of the number of times that such payment shall be made by
such other person, firm or corporation.
C. Left Blank Intentionally.
D. In the event that any check paid by or for the benefit of Tenant to
Owner is dishonored, Tenant shall pay Owner as Additional Rent
hereunder a charge of One Hundred Dollars ($100.00) in addition to any
other late charge or right or remedy available due to such dishonored
payment.
55. Additional Rent
---------------
A. All payments, other than Minimum Annual Rent required to be made by
Tenant pursuant to this Lease (including, but not limited to,
escalation charges, and any and all damages, interest, costs, fees and
expenses caused by Tenant's default) shall be deemed additional rent
and, in the event of any non-payment thereof, Owner shall have all
rights and remedies provided for herein and by law for non-payment of
Minimum Annual Rent in addition to whatever other remedies may be
available to Owner.
B. Unless expressly provided otherwise in this Lease, the amount shown as
due to Owner (or Owner's agent) in all bills, invoices and statements
to Tenant shall be due and payable by Tenant upon receipt without
further demand. Any delay or failure of Owner or its agent to prepare
and deliver any bill, statement or invoice shall not
14
<PAGE>
constitute a waiver of the right to collect any payment which may have
become due during the term of this Lease, including without
limitation, retroactive payments for any and all amounts unbilled.
C. All payments of Minimum Annual Rent and additional rent pursuant to
this Lease shall be made by Tenant with checks drawn upon a New York
City bank. If Owner receives from Tenant any payment less than the
full amount of the Minimum Annual Rent and additional rent then due
and owing, Tenant hereby waives its right, if any, to designate the
items to which such payment shall be applied and agrees that Owner, in
its sole discretion, may apply such payment in whole or in part to any
Minimum Annual Rent, any additional rent or to any combination thereof
then due and payable hereunder.
D. The losing party in any action or proceeding between Owner and Tenant
shall pay the reasonable attorneys' fees, costs and disbursements of
the prevailing party for such action or proceeding upon the assignment
thereof by the Court or on demand. If a default of Tenant causes Owner
to prosecute or defend an action or proceeding with a third party,
Tenant shall pay the reasonable attorneys' fees, costs and
disbursements of Owner for such action or proceeding on demand. If
Owner suffers, pays or incurs any damages, losses, fees or expenses
(including without limitation, reasonable attorneys' fees
and disbursements) due to a default, act, omission or request of
Tenant, Tenant shall pay the total amount thereof to Owner on demand.
E. If all rent is not paid in full and actually received by Owner within
fifteen (15) days after it is due and payable hereunder, Tenant shall
pay Owner a late fee of 2% per month as additional rent. However, if
the collection of such late fee at the rate specified herein would be
usurious or otherwise unenforceable, interest on late payments shall
accrue at the highest enforceable rate.
F. References in this Lease to "rent," "Rent," "rents," "Rents,"
"rental," "Rental," "rentals" and "Rentals" shall mean and include
Minimum Annual Rent and additional rent. The Minimum Annual Rent is
the minimum rental due and payable without prior demand, offset or
deduction. No decrease in any additional rent for any period shall
yield an offset or deduction in any other rental or for any other
period. References in this Lease to Tenant being "in default" and/or
Tenant's "breach" or "default" shall mean and include each and every
default, breach, misfeasance, nonfeasance, non-payment, or any other
15
<PAGE>
failure of Tenant to perform any of its obligations hereunder. If
Owner gives notice of default and Tenant seeks declaratory relief and
Tenant's time to cure is extended pending the outcome of such
declaratory judgment action, Tenant shall be deemed to be "in default"
under this Lease during the pendency of such action for the purposes
of those rights that are exercisable by Tenant only if it is not "in
default". All of Tenant's obligations to pay rent, to indemnify Owner
and to obtain insurance shall survive the expiration of the term or
sooner termination of this Lease.
G. Owner's managing agent, Et-Al Management Corp., may give notices,
demands, invoices, statements and/or bills to Tenant in Owner's
behalf; any such notice, statement, invoice, demand or bill shall be
deemed to have been given by Owner.
H. The provisions of this Article shall supplement (not limit) other
provisions of this Lease pertaining to the same matters as this
Article and related matters.
56. Owner's Right of Entry
----------------------
A. Tenant shall permit Owner to erect, use, maintain and repair pipes,
cables, conduits, plumbing, vents and wiring in, to and through the
Demised Premises, as and to the extent that Owner may now or hereafter
deem to be necessary or appropriate for the proper operation and
maintenance of the building of which the Demised Premises are a part.
All such work shall be done, so far as practicable, in such manner as
to avoid interference with Tenant's use of the Demised Premises, and
as expeditiously as possible. The liability of Owner, if any, under
this Article shall be limited to the prompt repair, at the sole cost
and expense of Owner, of any damage caused to the Demised Premises by
the Owner in the course of doing work under this paragraph.
B. Upon providing forty-eight (48) hours advance written notice, Owner,
or its agents or assignees, shall have the right to enter the Demised
Premises during business hours for the purpose of making such
repairs or alterations as Owner shall be required or shall have the
right to make by the provision of this Lease. Owner shall attempt to
do all such work at a time, and in a manner, that will not
unreasonably inconvenience Tenant, significantly diminish Tenant's
floor area or significantly disrupt Tenant's architectural layout.
Owner shall be allowed to take all material into and upon the Demised
Premises that may be required for repairs or alterations, without
constituting an eviction of Tenant, in whole or in part,
16
<PAGE>
so long as any repair work by Owner is diligently prosecuted to
completion. Owner shall also have the right, without prior written
notice, to enter the Demised Premises at such other times as such
entry may be required by circumstances of emergency affecting the
Demised Premises or the building containing the same. In addition,
Owner, or its agents or assignees, shall have the right to enter the
Demised Premises upon providing twenty-four (24) hours prior written
notice during business hours for the purpose of inspecting the general
condition and state of repair of the Premises and the showing of the
Premises to any prospective purchaser or mortgagee, such entry and
inspection to be conducted in a manner calculated to not unreasonably
interfere with the operation of Tenant's business or its customers.
C. The rights granted to Owner by the terms of this Article shall be
deemed supplementary to the provisions set forth in Article 13 of the
printed portion of this Lease.
57. Suspension of Services
----------------------
Anything in this Lease to the contrary notwithstanding, Owner reserves the
right to suspend the service of any utilities, when necessary by reason of
accident or of repairs, alterations or improvements necessary to be made in
the Demised Premises or the building of which it is a part, until such
repairs, alterations or improvements shall have been completed, and Owner
shall have no responsibility or liability for such suspension of services,
provided Owner proceeds with diligence and continuity to complete such
repairs, alterations or improvements and uses its best efforts to restore
such services as soon as practicable. The foregoing shall not be deemed to
impose upon Owner any obligations for the furnishing of any service,
maintenance or repair other than is specifically set forth in this Lease.
58. Condemnation
------------
A. If the whole of the Demised Premises shall be taken under the power of
eminent domain of any public or private authority, then this Lease and
the term thereof shall cease and terminate, as of the date of such
taking and any unearned rent or other charges, if any, paid in
advance, shall be refunded to Tenant.
B. In the event that only a portion of the Demised Premises shall be
taken under the power of eminent domain by any public or private
authority, then this Lease and the term thereof shall continue in full
force and effect, at option of either the Owner or the Tenant,
provided, however, that Owner shall, at its expense forthwith
17
<PAGE>
restore what may remain of the Demised Premises to substantially the
same condition as prior to the condemnation. There shall be a pro rata
abatement of basic rent hereunder to the extent that the amount of
floor space so taken compares to the amount of floor space prior to
such condemnation, to compensate Tenant for its loss of use of such
portion of the Demised Premises. The minimum rent reserved herein, and
any other charges payable to Tenant hereunder, shall be suspended
(provided Tenant is not then using the Demised Premises) for the
period from the date of the taking until the remainder of the Demised
Premises shall have been restored as aforesaid.
C. Tenant shall not be entitled to any award for the loss of or loss in
value of the leasehold, but only to an award for loss of or damage to
its fixtures and/or equipment and to moving expenses, all to the
extent allowed and solely in the event that such allowance does not,
in any way, diminish the award to Owner. The respective damages to
which Owner and Tenant are entitled by reason of any such taking shall
be fixed and paid, respectively, to Owner and Tenant, as their
interests appear, and in no event shall there be a merger of interest.
D. Within fifteen (15) days after Owner receives written notice of any
such taking or intention to take under power of eminent domain, Owner
shall forward a copy thereof to Tenant.
59. Damage or Destruction
---------------------
A. If the Demised Premises shall be partially damaged by fire or other
casualty, the damaged portions of the Demised Premises (but not
Tenant's trade fixtures or personal property) shall be repaired by and
at the expense of Owner (unless such fire or casualty resulted, in
whole or in part, from any act or omission, whether negligent or
otherwise, of Tenant or his agents, servants, contractors, employees,
invitees, or assigns, in which case such repairs shall be at the cost
and expense of Tenant), and the rent until such repairs shall be made
shall be apportioned according to the part of the Demised Premises
which is usable by Tenant. If Tenant shall have paid rent in advance,
Owner shall repay to Tenant an amount equal to that portion of rent so
paid in advance, payment of which is abated.
18
<PAGE>
B. If the Demised Premises are totally damaged or are rendered wholly
untenantable by fire or other casualty, Owner shall, within sixty (60)
days after such fire or other casualty, give Tenant written notice of
Owner's election whether:
1) To terminate this Lease and thereupon the term of this Lease shall
expire by lapse of time upon the third (3rd) day after such notice
is given, and Tenant shall vacate the Demised Premises and
surrender the same to Owner. If Tenant shall not be in default
under this Lease, or if any monetary default existing at the time
of the giving of such a notice is cured in full within three
(3) days after delivery of said notice, then upon the termination
of this Lease under the conditions provided for in the sentence
immediately preceding, Tenant's liability for rent accruing
subsequent to the fire or casualty shall cease and be apportioned
as of the day following such fire or casualty, or
2) To restore or rebuild the Demised Premises in character, layout,
area and equipment (but not Tenant's trade fixtures or personal
property) substantially equal to the premises damaged or destroyed
immediately prior to such damage or destruction, and it is agreed
that in such event, this Lease shall continue in full force and
effect, but the rent, the additional rent, and all other payments
and obligations of Tenant shall abate as of the date of such fire
or other casualty, until the Demised Premises shall have been
fully and completely restored or rebuilt by Owner and possession
thereof shall have been delivered to Tenant.
Should Owner elect to send Tenant written notice under
subparagraph (1) of this Article 56B, and thereafter, within one
(1) year of the giving of such notice, act nevertheless to restore
or rebuild the Demised Premises in character, layout, area and
equipment (but not Tenant's trade fixtures or personal
property) substantially equal to the premises damaged or destroyed
immediately prior to such damage or destruction, then and in such
event, Owner agrees to give Tenant a thirty (30) day unilateral
option to be exercised by Tenant in the method and manner
otherwise set forth in this Lease, to resume occupancy for the
remaining balance of the original lease term under all of the
other terms and conditions set forth in this Lease.
19
<PAGE>
C. Owner shall not be liable for reasonable delay under the foregoing
subparagraphs A or B if such delay arises by reason of adjustment of
insurance on the part of Owner and/or Tenant or the reasonable delay
on account of any cause beyond the control of Owner or contractors
employed by Owner, including, but not limited to strikes, labor
disputes and shortages of material.
D. Tenant hereby expressly waives the provisions of Section 227 of the
Real Property Law and of any law now in force or hereafter enacted
which, in substance, provides for termination of a lease of real
property by reason of destruction or untenantability of the Premises
demised thereunder caused by fire or other casualty and agrees that
the provisions of this Article 57 shall govern and control in lieu of
any such provisions of law.
60. Signs
-----
A. Tenant shall not, without Owner's prior written consent, place or
install any sign on the exterior of the Demised Premises, or the
building of which it is a part, or on the inner or outer faces of the
windows or doors of the Demised Premises. Tenant shall be permitted to
install and maintain, at its own cost and expense, an exterior sign,
provided the same receives the prior approval of Owner as to
dimensions, shape, design, size, color, wording, material of
composition and location. Tenant agrees that any exterior sign
approved by Owner shall not be installed until all approvals and
permits are first obtained by Tenant from governmental agencies having
jurisdiction thereover and that all fees payable in connection with
such installation, maintenance and permits shall be paid by Tenant.
B. Tenant shall not place in the windows or in any display or other area
visible to public view from the outside of the Demised Premises any
flashing, blinking or animated sign or one which otherwise has
variations in the intensity of illumination without first obtaining
Owner's prior written approval.
C. Tenant shall not, after having obtained the approval of Owner, change
or alter any sign in any respect whatsoever, including but not limited
to size, material of composition or location, without first obtaining
the prior written approval of Owner, except that Tenant may change the
phraseology in a sign previously approved by Owner without additional
approval.
D. In the event that Owner shall deem it necessary to remove any sign of
Tenant in order to make any repairs,
20
<PAGE>
alterations or improvements in, to or upon the Demised Premises, or
the building of which it is a part, Owner shall have the right to do
so, provided the same be removed and replaced at Owner's expense,
promptly upon completion of such repair, alteration or improvements.
61. Replacement of Plate Glass
--------------------------
Tenant shall, at its own cost and expense, replace any and all plate or
other glass damaged or broken from any cause whatsoever in and about the
Demised Premises. Tenant shall, at its own cost and expense, either insure
and keep insured all such glass in stock companies authorized to do
business in the State of New York, naming the Owner as a party insured
thereunder, or may act as a self-insurer for plate glass.
62. Holdover by Tenant
------------------
Tenant will have no right to remain in possession of all or any part of the
Demised Premises after the expiration of the term. If Tenant remains in
possession of all or any part of the Demised Premises after the end of said
term, with the express or implied consent of Owner: (a) such tenancy will
be deemed to be a periodic tenancy from month-to-month only; (b) such
tenancy will not constitute a renewal or extension of this Lease for any
further term; and (c) such tenancy may be terminated by Owner upon the
earlier of thirty (30) days prior written notice or the earliest date
permitted by law. In such event, monthly rent (the reasonable value of use
and occupancy) will be increased to an amount equal to one-half (l/2) of
the sum of the Minimum Annual Rent plus all additional rentals payable
during the last year of the term, and any other sums due for additional
rent under this Lease will be payable in the amount and at the times
specified in this Lease. Such month-to-month tenancy will be subject to
every other term, condition and covenant contained in this Lease. Neither
the billing nor the collection of use and occupancy in the above amount
shall be deemed a waiver of any right of Owner to collect damages for
Tenant's failure to vacate the Demised Premises after the expiration or
sooner termination of this Lease. The provisions of this Article shall
survive the expiration or sooner termination of this Lease.
63. Broker
------
Tenant and Owner covenant, warrant and represent to each other that neither
has had any dealings with any real estate broker, agent or finder in
consummating the Lease other than Aegis Realty Corp. and Equis and that no
conversation or prior negotiations were had with any individual or entity
other than Aegis Realty Corp. and Equis concerning the renting of the
21
<PAGE>
Demised Premises. In reliance upon such representation, Owner agrees to pay
any commission due to Aegis Realty Corp. and Equis. Pursuant to a separate
agreement between Equis and the Landlord, Equis shall receive one (1) full
commission based upon the net additional rentals arising from the
transaction less $10,000.
The parties agree to hold each other harmless from and against any claims
for brokerage commissions arising out of any conversation of negotiations
had by The Tenant with any other broker.
64. Subordination and Attornment
----------------------------
A. This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all mortgages and building
loan agreements, including without limitation, mortgages and building
loan agreements and leasehold mortgages which may now or hereafter
affect the Land and/or the Building and/or any of such Leases, whether
or not such mortgages shall also cover other lands and/or buildings,
to each and every advance made or hereafter to be made under such
mortgages and/or building loan agreements, and to all renewals,
modifications, replacements, assignments, and extensions of such
Leases, building loan agreements, mortgages and spreaders and
consolidations of such mortgages. This Article shall be self-operative
and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly, at its sole
cost and expense, execute and deliver any instrument in recordable
form that Owner, the lessor of any such Lease or the holder of any
such mortgage or any of their respective assigns or successors in
interest may reasonably request to evidence such subordination and
the Tenant hereby constitutes and appoints Owner the attorney-in-fact
for Tenant to execute any such instrument for and on behalf of Tenant
in the event Tenant fails to execute such instrument within ten (10)
days following delivery of written request therefor. The Leases to
which this Lease is, at the time referred to, subject and subordinate
pursuant to this Article, are hereinafter sometimes called "Superior
Leases" and the mortgages to which this Lease is, at the time referred
to, subject and subordinate, are hereinafter called "Superior
Mortgages" and the Lessor of a Superior Lease or its successor in
interest at the time referred to is sometimes hereinafter called a
"Lessor" and the holder of a Superior Mortgage or its successor in
interest at the time referred to is sometimes hereinafter called a
"Holder". This provision supplements Article 7 of this Lease.
22
<PAGE>
B. In the event of any act or omission of Owner which would give Tenant
the right, immediately or after lapse of a period of time, to cancel
or terminate this lease, or to claim a partial or total eviction,
Tenant shall not exercise such right (1) until it has given written
notice of such act or omission to the holder of each Superior Mortgage
of record as of the date of the execution of this Lease, or of which
Owner has given Tenant written notice, and (2) unless such act or
omission shall be one which is not capable of being remedied by Owner
or such Holder within a reasonable period of time, until a reasonable
period of time for remedying such act or omission shall have elapsed
following the giving of such notice and following the time when such
Holder shall have become entitled under such Superior Mortgage to
remedy the same (which reasonable period shall in no event be less
than the period to which Owner would be entitled under this Lease or
otherwise, after similar notice, to effect such remedy), provided such
Holder shall, with due diligence give Tenant written notice of its
intention to, and commence and continue to, remedy such act or
omission. As of the date hereof, the parties entitled to receive
notice under this Paragraph 63C are as follows:
45-18 Court Square LLC and 45-18 Equity, at
60 Morrow Avenue
Scarsdale, NY 10583
C. If the fee owner of the building which includes the Demised Premises,
or the Holder of a Superior Mortgage, shall succeed to the rights of
Owner under this Lease, whether through possession or foreclosure
action or through termination for any reason of the leasehold estate
covering the building which includes the Demised Premises or by
delivery of a new lease or deed, then, at the request of such party so
succeeding to Owner's rights (herein sometimes called "Successor
Owner") and upon such Successor Owner's written agreement to accept
Tenant's attornment, Tenant shall attorn to and recognize such
Successor Owner as Tenant's Landlord under this Lease. The foregoing
provisions shall inure to the benefit of any such Successor Owner, and
shall be self-operative upon any such demand, without requiring any
further instrument to give effect to said provisions. Tenant, however,
upon demand of any such Successor Owner, agrees to execute, from time
to time, an instrument in confirmation of such attornment which is
satisfactory to such Successor Landlord. Upon such attornment, this
Lease shall continue in full force and effect for the remainder of the
term originally demised under this Lease, as or as
23
<PAGE>
if it were a direct lease between the Successor Owner and Tenant upon
all of the terms, covenants, conditions, agreements and provisions, as
are set forth in this Lease, except that the Successor Owner shall
not:
1) be subject to any offset not expressly provided for in this Lease.
2) be bound by any previous modification of this Lease not expressly
provided for in this Lease, or by any previous pre-payment of more
than one month's rent, unless such modification or prepayment
shall have been expressly approved in writing by the Successor
Owner through or by reason of which the Successor Landlord shall
have succeeded to the rights of Owner under this lease.
D. Owner covenants and represents that it knows of no outstanding
lawsuits, claims or judgments affecting or limiting Owner's right or
authority to perform under this lease.
65. Left Blank Intentionally
------------------------
66. Modification - Financing
------------------------
If, in connection with Owner's obtaining financing for the Real Property
or any portion thereof, a bank, insurance company or other lending
institution shall request reasonable modifications of 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 adversely affect the
leasehold interest hereby created or otherwise and adversely affect
Tenant's rights hereunder.
67. Conditional Limitation
----------------------
In the event that in any twelve (12) month period (A) a non-monetary
default of the kind set forth in Article 17(l) shall have occurred or (B)
Tenant shall have defaulted in the prompt payment of Minimum Annual Rent or
Additional Rent, or any part of either, and Owner shall have commenced a
summary proceeding to dispossess Tenant in each such instance, then,
notwithstanding that such defaults may have been cured at any time after
the commencement of such summary proceeding, any two (2) further defaults
by Tenant within the ensuing twenty-four (24) month period shall be deemed
to be a violation of a substantial obligation of this Lease by Tenant and
Owner may serve a written three (3) days' notice of cancellation of this
Lease upon Tenant and, upon the expiration of said three (3) days, this
Lease and the term shall end and expire as fully
24
<PAGE>
and completely as if the expiration of such three (3) day period were the
day herein definitely fixed for the end and expiration of this Lease and
the term and Tenant shall then quit and surrender the Demised Premises to
Owner, but Tenant shall remain liable as elsewhere provided in this Lease.
Tenant's payment of Minimum Annual Rent and/or Additional Rent shall be
considered "prompt" if received by Owner within ten (10) days of the date
that same is due.
68. Bankruptcy
----------
Without limiting any of the provisions of Article 16, 17 or 18 hereof, if
pursuant to the Bankruptcy Code of 1978 and the Bankruptcy Code of 1986, as
the same may be amended, Tenant is permitted to assign this Lease in
disregard of the restrictions contained in Article 11 or any other
provision of this Lease. Tenant agrees that adequate assurance of future
performance by the assignee permitted under such Code shall mean deposit of
cash security with Owner in an amount equal to the sum of one year's
Minimum Base Rent then reserved hereunder plus an amount equal to all
additional rent payable under the provisions of this Lease for the calendar
year preceding the year in which such assignment is intended to become
effective, which deposit shall be held by Owner, without interest, for the
balance of the term of this Lease as security for the full and faithful
performance of all of the obligations under this Lease on the part of
Tenant yet to be performed. If Tenant receives or is to receive any
valuable consideration for such an assignment of this Lease, such
consideration, after deducting therefrom (A) the brokerage commissions, if
any, and other expenses reasonably incurred by Tenant for such assignment
and (B) any portion of such consideration reasonably designated by the
assignee as paid for the purchase of Tenant's property in the demised
premises, shall be and become the sole and exclusive property of Owner and
shall be paid over to Owner directly by such assignee. In addition,
adequate assurance shall mean that any such assignee of this Lease shall
have a net worth, exclusive of good will equal to at least fifteen
(15) times the aggregate of the Minimum Annual Rent reserved hereunder plus
all additional rent for the preceding calendar year as aforesaid.
69. Hazardous Materials
-------------------
A. For purposes of this Lease, "hazardous materials" means any
explosives, radioactive materials, hazardous wastes, or hazardous
substances, including without limitation, substances defined as
"hazardous substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. #9601-
9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C.
#1801-1812; the Resource Conservation and Recovery
25
<PAGE>
Act of 1976, 42 U.S.C. #6901-6987; or any other similar laws
(collectively, "hazardous materials laws").
B. Tenant will not cause or permit the storage, use, generation, or
disposition of any hazardous materials in, on, or about the demised
premises or the Building by Tenant, its agents, employees or
contractors. Tenant will not permit the Demised Premises to be used or
operated in a manner that may cause the Demised Premises or the
Building to be contaminated by any hazardous materials in violation of
any hazardous materials laws. Tenant will immediately advise Owner in
writing of (1) any and all enforcement, cleanup, remedial, removal, or
other governmental or regulatory actions instituted, completed or
threatened pursuant to any hazardous materials laws relating to any
hazardous materials affecting the Demised Premises; and (2) all claims
made or threatened by any third party against Tenant, Owner, or the
Demised Premises relating to damage, contribution, cost recovery,
compensation, loss, or injury resulting from any hazardous materials
on or about the Demised Premises. Without Owner's prior written
consent, Tenant will not take any remedial action or enter into any
agreements or settlements in response to the presence of any hazardous
materials in, on or about the Demised Premises.
C. Tenant will be solely responsible for and will defend, indemnify and
hold Owner, its agents and employees, harmless from and against all
claims, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with Tenant's breach of its
obligations in this Article, including, but not limited to, the
removal, cleanup and restoration work and materials necessary to
return the Demised Premises and any other property of whatever nature
located on the Building to their condition existing prior to the
appearance of Tenant's hazardous materials on the Demised Premises.
Tenant's obligations under this Article will survive the expiration or
other termination of this Lease.
70. Left Blank Intentionally
------------------------
71. Occupancy Prior to Commencement Date
------------------------------------
In the event that Owner permits Tenant to occupy the Demised Premises prior
to the commencement date, such occupancy shall be upon all of the terms and
conditions contained in this Lease except that Tenant shall pay a pro-rated
rent for the period to the commencement date and shall be responsible for
all other charges provided for under the Lease.
26
<PAGE>
72. Waste Removal, Etc.
-------------------
Tenant shall, at its own cost and expense, promptly dispose of all garbage,
ashes and waste arising from the conduct of its business in the Demised
Premises at such times and in such manner so as to avoid any obnoxious or
offensive smells or odors therefrom or otherwise materially interfering
with the comfort and quiet enjoyment of the other occupants of the
building. Tenant further covenants and agrees, at the Tenant's own cost and
expense, to keep the drain waste and connections with mains free from
obstruction to the reasonable satisfaction of the Landlord, its agents and
all authorities having jurisdiction thereof. Tenant further covenants and
agrees that Tenant will, at Tenant's own cost and expense, keep and
maintain the interior in good order and repair. (See paragraph 45(l) of
Rider).
73. Irrespective of the place of execution or performance, this agreement shall
be governed by and construed in accordance with the laws of the State of
New York. This agreement shall be construed without regard to any
presumption or other rules requiring construction against the party causing
this agreement to be drafted. If any words or phrases in this agreement
shall have been stricken out or otherwise eliminated, whether or not any
other words or phrases have been added, this agreement shall be construed
as if the words or phrases so stricken out or otherwise eliminated were
never included in this agreement and no implication or inference shall be
drawn from the fact that said words or phrases were so stricken out or
otherwise eliminated. All terms and words used in this agreement,
regardless of the number or gender in which they are used, shall be deemed
to include any other number and any other gender, as the context may
require.
74. Left Blank Intentionally
------------------------
75. Notice of Owner's Default
-------------------------
In the event of any alleged default in the obligation of Owner under this
Lease, Tenant will deliver to Owner written notice listing the reasons for
Owner's default and Owner will have thirty (30) days following receipt of
such notice to cure such alleged default or, in the event that the alleged
default cannot reasonably be cured within a thirty (30) day period, to
commence action and proceed diligently to cure such alleged default. A copy
of such notice to Owner will be sent to any holder of a mortgage or other
superior lien on the Building or this Lease of which Tenant has been
notified in writing, and any such holder will also have the same time
periods to cure such alleged default.
27
<PAGE>
76. Modifications Requested by Mortgagee
------------------------------------
If any actual or prospective holder of a fee or mortgage interest in the
Building, the improvements thereon, the land thereunder or any leasehold
interest in either, requires the modification of this Lease in such manner
as does not materially lessen Tenant's rights or increase its obligations
hereunder, Tenant shall not withhold or delay its consent to such
modification and shall execute and deliver such confirming documents
therefor as such holder requires.
77. Conflict Between Rider and Printed Lease
----------------------------------------
If and to the extent that any of the provisions of any Rider to this Lease
conflict or are otherwise inconsistent with any of the printed provisions
of this Lease, whether or not such inconsistency is expressly noted in the
Rider, the provisions of the Rider shall prevail. The description of a
particular right or remedy of Owner shall not be deemed exclusive or
otherwise limit, waive or impair Owner's resort to any or all other rights
and remedies available. The terms "Owner" and "Landlord" whenever used in
this Lease shall have the same meaning. The meaning and effect of this
Lease shall not be determined subject to any presumption against Owner as
drafter. The doctrine of "ejusdem generis" shall not be applied to limit a
general description to the same class or category of things or matters
contained in the list (or specific description) which the general
description follows or otherwise relates to. If a word or phrase contained
in a prior draft of this Lease was deleted intentionally, the meaning and
effect of this Lease shall be determined as if the language stricken had
not been included in any prior draft.
78. Left Intentionally Blank
------------------------
79. Partial Invalidity/Joint Liability
----------------------------------
If any provision of this Lease or the application thereof to any person or
circumstance shall, to any extent be held void, unenforceable or invalid,
then the remainder of this Lease or the application of such provisions to
persons or circumstances other than those to which it is held void,
unenforceable or invalid shall be valid and enforced to the fullest extent
permitted by law. If there shall be more than one Tenant, they shall all be
bound, jointly and severally, by the terms, covenants and conditions of
this Lease.
80. Indemnity: Supplementing Article 8 of the printed form of this lease.
---------
A. Tenant agrees to indemnify and save harmless Owner from and against
(a) all claims of whatever nature against
28
<PAGE>
Owner arising from any negligent or improper act or omission of
Tenant, its contractors, licensees, agents, servants, employees,
invitees or visitors, (b) all claims against Owner arising from any
accident, injury or damage whatsoever caused to any person or to the
property of any person and occurring during the Term in or about the
Demised Premises, and (c) all claims against Owner arising from any
accident, injury or damages which result or are claimed to have
resulted from an act or omission of Tenant or Tenant's contractors,
agents, servants, employees, invitees or visitors. This indemnity
shall not apply to the extent that any of the claims described above
are caused by the negligent act or omission of Landlord, its
contractors, agents, servants or employees. This indemnity and hold
harmless agreement shall include indemnity from and against any and
all liabilities, fines, suits, demands, costs and expenses (including
without limitation, reasonable attorneys' fees) of any kind or nature
incurred in or in conjunction with any such claim or proceeding
brought thereon, and the defense thereof.
B. Tenant's indemnity set forth in this Article 80 shall extend and apply
to each Superior Lessor and Superior Mortgagee.
81. Requirements of Law
-------------------
Supplementing Article 6 of the printed form of Lease, Tenant's obligation
to comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions
and boards relating to Tenant's manner of use of the Demised Premises shall
include, but shall not be limited to, all requirements relating to
environmental matters by reason of Tenant's manner of use of the Demised
Premises (whether or not such requirement would otherwise be the
responsibility of Owner under said laws, orders or regulations) including,
but not limited to, the storage, treatment, handling or transportation of
hazardous waste.
82. Restrictions on Tenant's Use
----------------------------
Under no circumstances may the Demised Premises or any portion thereof be
used for residential purposes. Tenant understands that any such use shall
be a material default under the Lease and, notwithstanding anything herein
to the contrary, shall entitle Landlord to immediately send Tenant a notice
of cancellation of this Lease. Tenant further understands and
29
<PAGE>
acknowledges that the Building is not, has not been and is not intended to
be an Interim Multiple Dwelling within the meaning of Section 280 et seq.
of the New York Multiple Dwelling Law or any other type of multiple
dwelling.
83. Tax Escalation
--------------
The rent payable by Tenant during each lease year shall be adjusted in
accordance with this Article:
A) Definitions: For the purpose of this Article, the following
definitions shall apply:
1. The term "Base Tax Year" shall mean the fiscal year commencing
July 1, 1999 and ending June 30, 2000.
The term "Tax Year" shall mean any year commencing July 1st and
ending June 30th which covers any portion of the term of this
Lease.
2. The term "Percentage" shall mean sixteen and two-thirds (16-
2/3%)percent.
3. The term "Building" shall mean the land and building known as:
45-18 Court Square, Queens, N.Y. a/k/a 45-17 Pearson Street,
Queens, N.Y.
4. The term "Real Estate Taxes" shall mean all taxes levied,
assessed or imposed at any time by any governmental authority
upon or against the Building and also any tax or assessment
levied, assessed or imposed at any time by any governmental
authority in connection with the receipt of income or rents from
the Building to the extent that same shall be in lieu of all or a
portion of any of the aforesaid taxes upon or against the
Building.
B. Real Estate Taxes
1. In the event that the Real Estate Taxes payable during any Tax
Year subsequent to the Base Tax Year shall exceed the amount of
Real Estate Taxes payable during the Base Tax Year (whether any
such excess results from a higher tax rate or an increase in the
assessed valuation of the Building, or both), Tenant shall pay to
Landlord, as additional rent for such subsequent Tax Year, an
amount equal to The Percentage of the excess. After receipt of
the tax bills which indicate that Real Estate Taxes payable for
any subsequent Tax
30
<PAGE>
Year will exceed the Real Estate Taxes for the Base Year,
Landlord shall furnish to Tenant a statement of the additional
rent payable under this subdivision (B).
Such statement shall set forth the Real Estate Taxes payable for
such subsequent Tax Year and shall show an amount equal to The
Percentage of the said excess, which amount shall be due from
Tenant to Landlord, as additional rent, within ten (10) business
days after receipt of the aforesaid statement; copies of the tax
bills of the City of New York shall be sufficient evidence of the
amount due under this Article, upon request.
2. The amount of Real Estate Taxes actually payable by Landlord
during the Base Tax Year shall be used in the computation of the
amount of additional rent payable under this subdivision,
(B) until the amount of the Real Estate Taxes payable during the
Base Tax Year be reduced by final determination of legal
proceedings, settlement or otherwise. In the event of such
reduction, the reduced amount of such taxes shall thereafter
determine the amount of additional rent payable by Tenant
pursuant to this subdivision (B), the additional rent theretofore
paid or payable hereunder shall be recomputed on the basis of
such reduction.
3. If Landlord shall receive a refund of any portion of the Real
Estate Taxes payable during any Tax Year after the Base Tax Year,
based upon which Tenant shall have paid additional rent as
provided in this subdivision (B), then as a result of such a
reduction of said Real Estate Taxes by final determination of
legal proceedings, settlement or otherwise, Landlord shall,
within ten (10) business days after receiving the refund, pay to
Tenant the Percentage of the refund, less the percentage of
reasonable expenses (including but not limited to attorneys' and
appraisers' fees) incurred in connection with any such
application or proceeding.
C. In no event shall the annual fixed rent under the Lease (exclusive of
the additional rents under this Article) be reduced.
D. All of the additional rent payments required under this Article shall
be appropriately prorated for any partial Tax Year occurring during
the first and last years of the term of this Lease. Landlord's failure
to prepare and deliver any of the foregoing tax bills, statements or
31
<PAGE>
bills of Landlord's failure to make a demand, shall not in any way
waive or cause the Landlord to forfeit or surrender its rights to
collect the additional rent required to be paid under this Article.
E. In the event of a default by Tenant of any of the terms, covenants and
conditions of the Lease on the part of Tenant to be performed,
Landlord shall terminate the Lease as a result thereof, Landlord shall
have any and all of the rights and remedies available to Landlord
under the provisions of the Lease or otherwise with regard to the
collection of the additional rent required to be paid by Tenant under
the terms of this Article.
84. A. "Operating Expenses" shall consist of expenses that are directly
------------------
attributable to the operation, maintenance, management and repair of
the Real Property. Tenant shall pay 1/6th of the increase in Operating
Expenses (" Expense Increase") incurred in connection with the Real
Property over the base year of 1999 as and for additional rent.
B. Operating Expenses shall exclude:
a. Capital Improvements.
b. The cost of any repair made by the Landlord because of the total
or partial destruction of the Real Property or the condemnation
of a portion of the Real Property.
c. Any costs which are reimbursed by insurance proceeds or any other
source.
d. Expenses of Landlord in curing its defaults or performing work
expressly provided for in the Lease to be borne at Landlord's
expense (including work for other tenant(s) in the Real
Property).
e. The cost of marketing and leasing the Real Property, including
leasing commissions, advertising and other marketing costs, and
related legal, accounting and other professional services; costs
to prepare space for occupancy by any tenants of the Real
Property and for renovating, repainting, decorating,
redecorating, planning, designing space for any tenants
(including Tenant) and the cost of any credits, allowances, or
other payments or rent waivers or concessions granted to any
tenant (including Tenant).
f. Landlord's cost of electricity and other services sold to
tenants, including retail tenants and the
32
<PAGE>
parking garage operator, if any, which services are not standard
for the Premises, or are not available to Tenant without the
necessity of paying a separate additional charge.
g. Costs incurred by Landlord in exercising remedies against tenants
of the Real Property who violate terms of their leases.
h. Sums paid by Landlord for any indemnity, damages, fines, late
charges, penalties or interest for late payment, or to correct
violations of building codes or other laws or regulations
relative to the Real Property which are not Tenant's obligation
under the Lease.
i. Any costs incurred to remedy defects in the structure or systems
of the building located on the Real Property which are not
Tenant's obligations under the Lease.
j. Costs incurred to investigate and respond to hazardous materials
contamination, exposure or release (including hazardous
substances in the ground water or soil, provided the hazardous
material was not stored, used or disposed of by Tenant in
violation of law).
k. Any employee salaries and other compensation and/or health
benefits or other such benefits for the personnel of Landlord
above the level of building manager.
l. Costs of goods or services furnished by entities affiliated with
Landlord to the extent that such costs exceed the cost that would
have been incurred in an arm's length transaction with an
unrelated party.
m. Costs of Landlord's general overhead and general administrative
expenses (individual, partnership or corporate, as the case may
be), which costs would not be chargeable to operating expenses of
the Real Property under generally accepted accounting principles
consistently applied.
n. Payments of principal, interest, ground rent or any other
financing or refinancing costs on any mortgages, deeds of trust,
ground leases or other
33
<PAGE>
encumbrances, whether secured or unsecured on the Real Property,
including any equipment, fixtures or improvements therein, or any
penalties or late charges relating thereto.
o. Depreciation and amortization of the building or any fixtures or
improvements located on the Real Property; and
C. Upon request, Landlord will provide accountant's a breakdown of
operating costs compared against Base Year for any year in which an
additional charge is billed to Tenant.
D. Any additional rent charged may be used as an estimate for the next
year's billings and will be paid by Tenant in twelve (12) equal
installments together with all other rent charges. Any adjustments
will be made based upon the following year's actual costs.
E. If Tenant disputes figures provided by Landlord's accountant, Tenant,
at Tenant's sole cost, upon reasonable notice, may review the books
and records within thirty (30) days receipt of accountants'
certification of costs. All reviews shall take place at Landlord's
place of business during normal working hours. The books and records
shall be kept in accord with generally accepted accounting principles
consistently applied.
In no event shall any rent adjustment hereunder result in a decrease
in the fixed/minimum annual rent.
85. ICIP Abatement
--------------
The Landlord and Tenant agree to cooperate in an application for ICIP
Abatement of Taxes.
86. Capital Improvements
--------------------
In the event any new law, rule, ordinance or regulation takes effect after
the date hereof and requires the Landlord to do any work of a capital
nature in the Demised Premises and/or the building, the Tenant shall pay,
in equal monthly installments over the remainder of the lease term to the
Landlord, of the cost multiplied by the remaining months under the Lease
divided by one hundred twenty (120). The monthly payments shall commence
within thirty (30) days after written demand together with a copy of the
applicable invoice as for additional rent.
34
<PAGE>
87. Notices
-------
Supplementing the terms of Article 27 hereof, a copy of any notice by
Tenant to Owner shall be sent to:
Et-Al Management Corp.
60 Morrow Avenue
Scarsdale, New York 10583
and to:
Seymour Hurwitz, Esq.
36 West 44th Street
New York, New York 10036
and a copy of any notice by Owner to Tenant shall also be sent to:
Community Network, Inc.
48-18 Court Square
Long Island City, N.Y. 11101
and a courtesy copy (it being agreed that the failure to deliver such
courtesy copy shall not vitiate any notice otherwise properly given) to:
Littman, Krooks, Roth & Ball, P.C.
655 Madison Avenue
New York, NY 10017
Att: Stuart S. Ball, Esq.
88. Lease Not Binding Unless Executed and Delivered
-----------------------------------------------
This lease shall not bind Owner unless and until it has been (i) signed and
delivered by Tenant; (ii) received and accepted by Owner; and (iii) then
countersigned and redelivered by Owner to Tenant. The execution and
delivery of this Lease by Tenant shall constitute its irrevocable offer to
enter into this Lease. The Owner warrants and represents, upon which
warranty and representation that he understands that the Tenant shall rely
in the execution of this Lease, that Owner has the full right and lawful
authority to execute this Lease for the term thereof.
89. Tenant's Federal Tax I.D. Number
---------------------------------
Tenant states that its Federal Tax Identification Number (the "Number") is
11-331-0798. From time to time, upon Owner's request, Tenant shall confirm
in writing that the Number provided by Tenant is correct and, if it is
missing or incorrect, what the correct number is. Tenant shall indemnify
Owner from and against any and all liability for any claim,
35
<PAGE>
fine, penalty, cost or expense (including attorneys' fees) paid, suffered
or incurred by reason of Tenant's failure to comply with this Article.
90. Miscellaneous
-------------
A. No Offer.
This Lease is offered to signature by Tenant and it is understood that
this Lease shall not be binding upon Landlord unless and until
Landlord shall have executed and delivered a fully executed copy of
this Lease to Tenant.
B. Signatories.
If more than one person executes this Lease as Tenant, each of them
understands and hereby agrees that the obligations of each of them
under this Lease are and shall be joint and several, that the term
"Tenant" as used in this Lease shall mean and include each of them
jointly and severally and that the act of or notice from, or notice or
refund to, or the signature of, any one or more of them, with respect
to the tenancy and/or this Lease, including, but not limited to any
renewal, extension, expiration, termination or modification of this
Lease, shall be binding upon each and all of the persons executing
this Lease as Tenant with the same force and effect as if each and all
of them had so acted or so given or received such notice or refund or
so signed.
C. Authority.
If Tenant is a corporation or partnership, each individual executing
this Lease on behalf of Tenant hereby represents and warrants that
Tenant is a duly formed and validly existing entity qualified to do
business in the State of New York and that Tenant has full right and
authority to execute and deliver this Lease and that each person
signing on behalf of Tenant is authorized to do so.
D. Merger.
This Lease represents the entire understanding of the parties hereto
and all prior understandings or agreements between the parties are
merged in this agreement.
36
<PAGE>
E. Pornographic Uses Prohibited.
Tenant agrees that the value of the Demised Premises and the
reputation of the Owner will be seriously injured if the premises are
used for any obscene or pornographic purposes or any sort of
commercial sex establishment or for certain other purposes. Tenant
agrees that Tenant will not bring or permit any obscene or
pornographic material on the premises and shall not permit or conduct
any obscene, nude or semi-nude live performances on the premises, nor
permit use of the premises for nude modeling, rap sessions, or as a
so-called "rubber goods shop", or as a sex club of any sort, or as a
"massage parlor", nor shall the Demised Premises be used for erotic
dancing, a night club or for the preparation or serving of food or
beverages. Tenant further agrees that Tenant will not permit any of
these uses by any sublessee or assignee of the premises. This Article
shall directly bind any successors in interest to the Tenant. Tenant
agrees that if, at any time, Tenant violates any of the provisions of
this Article, such violation shall be deemed a breach of a substantial
obligation of the terms of this Lease and objectionable conduct.
"Pornographic material" is defined for purposes of this Article as any
written or pictorial matter with prurient appeal or any objects or
instruments that are primarily concerned with lewd or prurient sexual
activity.
91. Landlord's Work
---------------
Landlord shall, at Landlord's cost and expense, provide a "Turn-key"
buildout of the Demised Premises utilizing the Building standard
specifications and finishings, including, without limitation, providing
tie-ins to the Building fire and life safety systems, a sprinkler system,
one (1) supplemental HVAC system for a "network room" of not more than five
hundred and forty (540) square feet and ductwork for the HVAC System
("Landlord's Work") based on mutually accepatable design, construction,
mechanical and electrical plans to be provided by Tenant within thirty (30)
days after the date hereof ("Tenant's Plans") or attached hereto.
Notwithstanding the foregoing, Owner shall not be required to expend more
than Twenty-five ($25.00/sq.ft.) Dollars per square foot to perform
Landlord's Work ("Landlord's Maximum Cost"). This is exclusive of any
direct meter installation costs should Tenant install same under Paragraph
44(3). If the cost of Landlord's Work, as reasonably determined by Landlord
after receipt of Tenant's Plans, would exceed Landlord's Maximum Cost,
and/or exceeds Building standards, Tenant shall either (a) revise Tenant's
Plans to reduce the cost of Landlord's Work or (b) agree to pay the excess
to
37
<PAGE>
Landlord, as additional rent. If Landlord has not, for any reason, approved
Tenant's Plans by the close of business on June 21, 1999, this lease may be
terminated by Landlord by written notice to Tenant and, upon the return to
Tenant of all sums paid by Tenant to Landlord on the execution hereof. This
lease shall become null and void and of no further force or effect and each
of the parties released and relieved from any further obligation hereunder.
Tenant shall be entitled to utilize a portion of Landlord's Maximum Cost to
pay the reasonable and standard fees of Barry Milowitz and Tenant's design
consultant, in which event such fees shall be deducted from the amount
Landlord would otherwise be required to expend to perform Landlord's Work.
Landlord's Work shall be deemed to have been substantially completed
("Substantial Completion" or "Substantially Completed") when Landlord's
Work is so completed that Tenant may use the Demised Premises for the
performance of such work in the Demised Premises as Tenant shall determine
is necessary for Tenant's use of the Demised Premises, without material
interference.
If Landlord has not Substantially Completed Landlord's Work within one
hundred twenty (120) days after Tenant's Plans have been submitted to and
approved by Landlord, Tenant shall be entitled to a credit against the next
installment of the Minimum Annual Rent of one (1) day for each day after
such one hundred twentieth (120th) day.
92. Right of First Offer - In the event any space becomes available for lease
--------------------
by Landlord (the "Availability"). Landlord shall offer same to Tenant or on
the same terms at which Landlord intends to offer it to others. Said terms
("the Offer Terms") shall be incorporated into a letter ("the Offer
Letter") to be sent to Tenant by facsimile. The date the Offer Letter is
sent shall be the Offer Date. Within two weeks of the Offer Date Tenant may
notify Landlord in writing of its intention to accept the offer ("the
Acceptance"), in which event Landlord and Tenant shall in good faith enter
into negotiations to execute a lease document based upon the Offer Terms.
If Tenant does not tender the Acceptance or if within three weeks of the
date of the Acceptance Landlord and Tenant are unable to execute a lease
document, then neither party shall have any further obligation to each
other with regard to the Availability.
See also Paragraph 94D.
93. Building Security - Upon Tenant's occupancy of the third floor, Landlord
-----------------
will install security cameras at the front and rear entrances of the
building and provide a security guard or concierge by the front door during
normal business hours.
38
<PAGE>
94. Existing Leases
---------------
A. The term of that certain lease between Landlord and Tenant for Suite
502 of the Building (the "502 Lease") shall terminate on the
Commencement Date or such later date that Tenant vacates and
surrenders Suite 502. Tenant shall vacate and surrender Suite 502 in
the manner provided for in the 502 Lease on the date Tenant commences
the operation of Tenant's business in the Demised Premises.
Notwithstanding such termination, Tenant shall remain liable for all
of the obligations of Tenant under the 502 Lease to and including the
date Tenant vacates Suite 502 and the same shall constitute Additional
Rent hereunder.
B. The term of that certain lease between Landlord and Tenant for Suite
403 of the Building (the "403 Lease") shall terminate on the
Commencement Date or such later date that Tenant vacates and
surrenders Suite 403. Tenant shall vacate and surrender Suite 403 in
the manner provided for in the 403 Lease on the date Tenant commences
the operation of Tenant's business in the Demised Premises.
Notwithstanding such termination, Tenant shall remain liable for all
of the obligations of Tenant under the 403 Lease to and including the
date Tenant vacates Suite 403 and the same shall constitute Additional
Rent hereunder. In consideration of Landlord's agreement to terminate
the 403 Lease, Tenant hereby waives the repayment from Landlord of the
$24,846.81 refund Tenant is due for overbilling of electric charges.
C. The $20,831.50 security deposit held by Landlord under the 502 and 403
Leases (the "Existing Deposits") shall be applied by Landlord toward
the security deposit provided for under Article 41 hereof; as such,
Tenant shall be required to deposit $11,668.50 on execution of this
Lease. Notwithstanding the foregoing, in the event Landlord applies
any portion of the existing deposits as a result of Tenant's default
under the 502 Lease, the 403 Lease, or this Lease, Tenant shall be
obligated to pay to Landlord any such sum so applied.
D. Notwithstanding the above, Tenant shall be granted First Right of
Refusal the first time Suite 403 and/or 502 are marketed for rental.
Upon notification by Landlord of its intent to rerent the space
together with the termination for said rental, Tenant shall have ten
days in which to respond in writing via Certified Mail of its
39
<PAGE>
intent to lease Suites 403 and 502 in its entirety or separately.
Failure to notify Landlord timely shall be deemed a waiver of this
First Right of Refusal.
See also Paragraph 92.
95. Miscellaneous - Landlord will make reasonable efforts to provide Tenant
-------------
with an acceptable Non-Disturbance Agreement. Landlord will provide access
24 hours a day, 7 days a week.
96. Option To Extend Term
---------------------
A. Provided Tenant is not then in default at the time of exercising the
option herein or at the time of the commencement of the extension
period, Tenant shall have the option to extend the Term for an
additional period of five (5) years (an "Extension Period"), such
Extension Period to begin immediately upon the expiration of the
original Term. All of the terms, covenants, and provisions of this
Lease shall apply to each such Extension Period, except that the Fixed
Annual Rent shall be as set for in Paragraph B of this Article and
Tenant shall have no further right to extend the Term.
B. The Minimum Annual Rent payable during the Extension Period shall be
the greater of (a) Four Hundred Twenty Thousand ($420,000) Dollars per
annum or (b) the then fair market rental value of the Demised Premises
in its then "as is" condition, taking into account new carpeting and
painting as called for in Paragraph 96D herein, after receipt of
Tenant's notice of Tenant's election to extend the Term, Landlord and
Tenant shall attempt to agree upon the Minimum Annual Rent for the
Extension Period. If the parties are unable to agree, either party
may, on notice to the other, submit the matter to the American
Arbitration Association in New York City for a determination before a
single arbitrator. As a part of such arbitration, each party shall
submit a statement setting forth its determination as to the fair
market rental value of the Demised Premises. The arbitrator shall
select either Landlord's determination or Tenant's determination (it
being agreed that any other determination by an arbitrator shall be
null and void) and the party whose determination is not selected by
the arbitrator shall pay the costs and expenses of the arbitration.
Each party shall bear the expense of its attorneys, appraisers, and
expert witnesses.
C. The option to extend the Term hereof shall be exercisable only by
Tenant's serving written notice of its exercise
40
<PAGE>
thereof upon Owner in the manner herein contained for the giving of
notices, no less than one (1) year and no more than thirteen
(13) months prior to the expiration of the initial Term, time being of
the essence.
D. On the commencement of the Renewal Term, Landlord shall paint and
recarpet the Demised Premises using Building standard paint and
carpeting.
WITNESSES: OWNER: 45-18 COURT SQUARE
LONG ISLAND CITY, N.Y.
[ILLEGIBLE] BY: [ILLEGIBLE]
- ---------------------------- ----------------------------
TENANT: COAXICOM, INC.
(dba COMMUNITY TELEPHONE)
[ILLEGIBLE] BY: Scott Matukas
- ---------------------------- ----------------------------
41
<PAGE>
EXHIBIT 10.4
Existing Lease Abstract
Building: 45-18 Court Square
Lease Date: March 27, 1997
Landlord: 45-18 Court Square, LLC
Tenant: Coaxicom, Inc. (Community Networks)
Premises: Part of the fifth floor (Suite 502)
Rentable Area: 2,900 RSF
Lease Term: 3 year
Lease Commencement: May 1, 1997
Lease Expiration: April 30, 2000
Rent Commencement: May 1, 1997
Base Rent: Year one - $38,000 per annum ($3,166.67 per month)
Year two - $39,000 per annum ($3,250.00 per month)
Year three - $40,000 per annum ($3,333.33 per month)
Electricity: Landlord contracts directly with the public utility
company for electric service. Tenant is responsible
for the cost of such electric service. Landlord had
the right, prior to the Commencement Date, to
install a sub-meter to measure the Tenant's electric
usage.
Real Estate Taxes: Tenant shall pay their proportionate share of Real
Estate Taxes over and above a base year. The Base
Tax Year shall mean the fiscal year commencing July
1, 1996 and ending July 30, 1997. The Tax Year shall
mean any year commencing July 1/st/ and ending June
30/th/. The Tenant's proportionate share equals
2.2%.
Operating Expense: Tenant shall pay their proportionate share of
Operating Expenses over and above a base year. The
Base Year for Operating Expenses shall be the
calendar year 1997. Tenant shall pay 2.2% of the
increase in Operating Expenses over the Base Year.
<PAGE>
Tenant's Proportionate
Share (for above): 2.2%
Security Deposit: $6,666.66
Use: General Office Use
Sublet/Assignment: Cannot assign the lease without prior written
consent of owner, which may be withheld for any
reason or for no reason whatsoever.
Termination Option(s): If Tenant has notified the Landlord in writing via
certified mail of a need for additional space, but
Landlord cannot provide such additional space within
the building, Tenant will have the option to
terminate this lease upon thirty (30) days written
notice.
Expansion Option(s): See Termination Option
Right of First Refusal: N/A
Renewal Option(s): N/A
Holdover: Tenant shall have no right to remain in possession
of the Demised Premises after the expiration of the
term. If the Tenant remains in possession of the
Demised Premises with the expressed or implied
consent of Owner, such tenancy will be deemed a
periodic tenancy from month to month. Monthly rent
will be increased to one-half (l/2) of the sum of
the Minimum Annual Rent plus all additional rentals
payable during the last year of the term, and any
other sums due for additional rent under this Lease
and will be payable in the amount and at the times
specified in this Lease.
<PAGE>
[LOGO APPEARS HERE]
<PAGE>
[LETTERHEAD APPEARS HERE]
January 17, 2000
Mr. Scott Matukas
Broadview Networks
45-18 Court Square
Long Island City, NY 11101
RE: 45-18 Court Square, Suite 502
Long Island City, NY 11101
Dear Scott:
Enclosed please find letter which will act as a Memo of Understanding for the
month-to-month lease on Suite 502.
In the absence of any questions, please initial all pages of this Memo of
Understanding and sign where indicated. Please return to me by Fax and an
original by mail together with a check in the amount of $12,961.25. The
breakdown is as follows:
First month's rent $ 6,040.00
Security 6,040.00
Estimated electric usage (l/15-1/31/2000) 700.00*
Cleaning (l/15-l/31/2000) 181.25
----------
Total Due $12,961.25
*Electric usage estimated at $1,400 as has been done previously with Suite 502.
If You have any questions, please do not hesitate to contact either myself or
Katherine of my office.
Very truly Yours
Alan. Zaretsky
45-18 COURT SQUARE LLC
kk
Enc.
Via Fax (718-706-9575)
and Regular Mail
<PAGE>
[LETTERHEAD APPEARS HERE]
January 18, 2000
Mr. Scott Matukas
Broadview Networks
45-18 Court Square
Long Island City, NY 11101
RE: Suite 502
45-18 Court Square, Long Island City
Dear Scott:
Per your request I am pleased to offer you a short term lease for the above
referenced space. Below please find the changes to the existing lease which
terminated as of September 30, 1999:
1. The rental term shall commence February 1, 2000 but be adjusted for rent
payment effective January 15, 2000 and continue on a Month-to-Month basis to
no later then January 31, 2001 (no longer than a twelve month period).
2. Paragraph 40 will be deleted and replaced with the following terms:
A. Possession shall be deemed delivered as of January 15, 2000.
B. Left Blank Intentionally.
C. The minimum rent per month shall be Six thousand forty dollars and
($6,040.00)no cents.
E. Shall remain the same as the original lease.
F. The rent shall be $6,040.00.
3. Paragraph 41 the security deposit and reference to same shall be $6,040.00,
one full month's security.
4. Paragraph 43 shall be eliminated in its entirety and replace with "Space
shall be taken as is".
5. Paragraph 44 electric usage. Tenant shall pay for electric usage at same
rate charged to Landlord by the utility company plus a five (5%) percent
administrative fee.
6. Paragraph 63 shall be changed to read no broker. Broadview Networks shall
indemnify Landlord from any and all broker claims other then Aegis Realty.
<PAGE>
January 18, 2000
Mr. Scott Matukas
Broadview Networks
Page 2
RE: Suite 502
45-18 Court Square, Long Island City
7. Paragraph 83 the Base Year for Taxes shall be the fiscal year July 1, 2000
through June 30, 2001.
8. Paragraph 84 the Base Year for Operating Escalation shall be the Calendar
Year 2000.
9. Paragraph 92 shall be deleted in its entirety.
10. Paragraph 99 is modified indicating that the initial entry access cards have
already been supplied to Tenant.
11. Paragraph 101 is deleted in its entirety.
12. Paragraph 104 is modified to read the first month's rent in the amount of
$6,040.00 and one month's security in the amount of $6,040.00.
A minimum of sixty (60) days written notice of termination by Broadview Networks
via certified mail return receipt will be required prior to cancellation.
However, the terms of this short term lease will expire no later then January
31, 2001 without any required written notice.
If the above offer is acceptable to you, please sign both copies of this letter
and return one original to my offices together with the checks for the first
month's rent and one month security as soon as possible.
Upon its signing, this letter shall act as a short term lease, as modified
above, with all other terms and conditions of the original lease dated March
27, 1997 together with all Riders attached to said Lease.
Very truly yours,
Alan Zaretsky Agreed to:
45-18 COURT SQUARE LLC
kk Scott Matukas 1/18/00
--------------------------------
Via Fax (718-706-9575) Scott Matukas Dated
and Regular Mail Broadview Networks
<PAGE>
[LETTERHEAD APPEARS HERE]
December 3, 1999
Mr. Scott Matukas
Broadview Networks
45-18 Court Square
White Plains, NY 10601
RE: Suite 502
45-18 Court Square
Long Island City, NY 11101
Dear Scott:
Please be advised that per your request I am pleased to offer you the following
two alternatives regarding temporary/short term lease for Suite 502 at the above
referenced premises:
1. One Year Lease commencing immediately.
Base Rent: $5,555.00
Electric at cost (estimated at $1,000 per month) plus a five percent
administrative fee, electricity to be adjusted monthly based upon reading
of meters by Utility Programs and Metering, Inc.
Cleaning at building standard rate ($1.50 per square foot).
No renewal options, no escalations (Operating and Taxes)
2. Month-to-Month:
Base Rent: $6,040 per month for a maximum of 12 months.
Electric at cost (estimated at $1,000 per month) plus a five percent
administrative fee, electricity to be adjusted monthly based upon reading
of meters by Utility Programs and Metering, Inc.
Cleaning at building standard rate ($1.50 per square foot).
A minimum of 60 days written notice of termination by Broadview Networks
via certified mail return receipt will be required prior to cancellation.
As you are aware, this is the only vacant space I have left in my building at
this time. Accordingly, If you wish to utilize this space, I must receive an
answer from you within the next five days.
<PAGE>
December 3, 1999
Mr. Scott Matukas
Broadview Networks
Page 2
RE: Suite 502
45-18 Court Square
Long Island City
In addition, please forward to my office proper evidence of the name change to
Broadview Networks and please have the appropriate individual sign the attached
letter confirming the obligation of Broadview Networks for all leases at 45-l8
Court Square.
Finally, per our discussion and agreement please forward a check in the amount
of $6,500 for the work performed by Tando Electric pertaining to the
installation of your electric system contained within the furniture ordered by
your company. I am still reviewing the charge of $2,500 by Barry Milowitz to
your office and will advise you under separate cover of the status of same.
Your immediate attention to the above matters will be greatly appreciated and is
essential regarding providing you with the additional space that you need at
this time.
Very truly yours,
Alan Zaretsky
45-18 COURT SQUARE LLC
kk
Enc.
Via Fax (718-706-9575)
And Regular Mail
<PAGE>
================================================================================
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
================================================================================
Agreement of Lease, made as of this 27th day of March 1997, between 45-18 Court
Square, LLC having an office at 60 Morrow Ave., Scarsdale, New York 10583
party of the first part, hereinafter referred to as OWNER, and Coaxicom, Inc.
(dba Community Telephone)
party of the second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
approximately 2,900 rentable sq. ft. on the fifth floor as per the attached
plan designated Suite 502 in the building known as 45-18 Court Square in the
Borough of Queens, City of New York, for the term of three (3) years
(or until such term shall sooner cease and expire as hereinafter provided) to
commence on the 1st day of May nineteen hundred and 97, and to end on the
30th day of April 2000
both dates inclusive, at an annual rental rate of
See Rider annexed, Article 40.
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest. Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy 2. Tenant shall use and occupy demised premises for general offices
and for no other purpose.
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant at Tenant's expense, may
make alterations, installations, additions or improvements which are non-
structural and which do not affect utility services or plumbing and electrical
lines, in or to the interior of the demised premises by using contractors or
mechanics first approved by Owner. Tenant shall, before making any alterations
additions, installations or improvements, at its expense, obtain all permits,
approvals and certificates required by any governmental or quasi-governmental
bodies and (upon completion) certificates of final approval thereof and shall
deliver promptly duplicates of all such permits, approvals and certificates to
Owner and Tenant agrees to carry and will cause Tenant's contractors and sub-
contractors to carry such workman's compensation, general liability, personal
and property damage insurance as Owner may require. If any mechanic's lien is
filed against the demised premises, or the building of which the same forms a
part, for work claim or to have been done, or, materials furnished to, Tenant,
whether or not done pursuant to this article, the same shall be discharged by
Tenant within thirty days thereafter, at Tenant's expense, by filing the bond
required by law. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Owner in Tenant's behalf, shall, upon installation, become the property of Owner
and shall remain upon and be surrendered with the demised premises unless Owner,
by notice to Tenant no later than twenty days prior to the date fixed as the
termination of this lease, elects to relinquish Owner's right therein and to
have them removed by Tenant, in which event the same shall be removed from the
premises by Tenant prior to the expiration of the lease, at Tenant's expense.
Nothing in this Article shall be construed to give Owner title to or to prevent
Tenant's removal of trade fixtures, moveable office furniture and equipment, but
upon removal of any such from the premises or upon removal of other
installations as may be required by Owner, Tenant shall immediately and at its
expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or may be removed from the premises by Owner, at Tenant's
expense.
Maintenance and Repairs
4. Tenant shall, throughout the term of this lease, take good care of the
demised premises and the fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other part
of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor, service
or equipment done for or supplied to Tenant or any subtenant or arising out of
the installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only the contractor for
the trade or trades in question, selected from a list of at least two
contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating systems (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or reduction
of rent by reason of any failure of Owner to comply with the covenants of this
or any other article of this Lease. Tenant agrees that Tenant's sole remedy at
Law in such instance will be by way of an action for damages for breach of
contract. The provisions of this Article 4 shall not apply in the case of fire
or other casualty which are dealt with in Article 9 hereof.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in the
demised premises to be cleaned from the outside in violation of Section 202 of
the Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in possession,
and all times thereafter, Tenant, at Tenant's sole cost and expense, shall
promptly comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters, Insurance
Services Office, or any similar body which shall impose any violation, order or
duty upon Owner or Tenant with respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof, (including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's
<PAGE>
use or manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by security bond in an amount and in a
company satisfactory to Owner, contest and appeal any such laws, ordinances,
orders, rules, regulations or requirements provided same is done with all
reasonable promptness and provided such appeal shall not subject owner to
prosecution for a criminal offense or constitute a default under any lease or
mortgage under which owner may be obligated, or cause the demised premises or
any part thereof to be condemned or vacated. Tenant shall not do or permit any
act or thing to be done in or to the demised premises which is contrary to law,
or which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner with
respect for the demised premises or the building of which the demised premises
form a part, or which shall or might subject Owner to any liability or
responsibility to any person or for property damage. Tenant shall not keep
anything in the demised premises except as now or hereafter permitted by the
Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization
or other authority having jurisdiction, and then only in such manner and such
quantity so as not to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses,
fines, penalties, or damages, which may be imposed upon Owner by reason of
Tenant's failure to comply with the provisions of this article and if by reason
of such failure the fire insurance rate shall, at the beginning of the lease or
at any time thereafter, be higher than it otherwise would be, then Tenant shall
reimburse Owner, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant. In any action or proceeding wherein Owner and
Tenant are parties, a schedule or "make up" of rate for the building or demised
premises issued by the New York Fire Insurance Exchange, or other body making
fire insurance rates applicable to said premises shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rates then applicable to said premises. Tenant shall not place a load
upon any floor of the demised premises exceeding the floor load per square foot
area which it was designed to carry and which is allowed by law. Owner reserves
the right to prescribe the weight and position of all safes, business machines
and mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to
absorb and prevent vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases
and to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lesson or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property - Loss, Damage, Reimbursement, Indemnity:
8. Owner or its agents shall not be liable for any damage to property of Tenant
or of others entrusted to employees of the building, nor for loss of or damage
to any property of Tenant by theft or otherwise, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence of Owner, its agents, servants or employees. Owner
or its agents will not be liable for any such damage caused by other Tenants or
persons in, upon or about said building or caused by operations in construction
of any private, public or quasi public work. If at any time any windows of the
demised premises are temporarily closed, darkened or bricked up (or permanently
closed, darkened or bricked up, if required by law) for any reason whatsoever
including, but not limited to Owner's own acts, Owner shall not be liable for
any damage Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor nor abatement or diminution of rent nor shall the same
release Tenant from its obligations hereunder nor constitute an eviction. Tenant
shall indemnify and save harmless Owner against and from all liabilities,
obligation, damages, penalties, claims, costs and expenses for which Owner shall
not be reimbursed by insurance, including reasonable attorneys' fees, paid,
suffered or incurred as a result of any breach by Tenant, Tenant's agents,
contractors, employees, invitees, or licensees, of any covenant or condition of
this lease, or the carelessness, negligence of improper conduct of the Tenant,
Tenant's agents, contractors, employees, invitees or licenses Tenant's liability
under this lease extends to the acts and omissions of any sub-tenant, and any
agent, contractor, employee, invitee or licensee of any sub-tenant. In case any
action or proceeding is brought against Owner by reason of any such claim,
Tenant, upon written notice from Owner, will, at Tenant's expense, resist or
defend such action or proceeding by counsel approved by Owner in writing, such
approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) if the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall commence in full force and effect except as hereinafter set forth
(b) If the demised premises are partially damaged or rendered partially unusable
by fire or other casualty, the damages thereto shall be repaired by and at the
expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject to Owner's right to elect not to restore
the same as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall decide to demolish
it or to rebuild it, then, in any of such events, Owner may elect to terminate
this lease by written notice to Tenant, given within 90 days after such fire or
casualty, specifying a date for the expiration of the lease, which date shall
not be more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration, by removing from
the premises as promptly as reasonably possible, all of Tenants salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectible and to the extent permitted by law. Owner and Tenant each hereby
releases and waives all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired Term of said lease and assigns to Owner, Tenant's entire
interest in any such award.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that it shall
not assign, mortgage or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by others, without
the prior written consent of Owner in each instance. Transfer of the majority of
the stock of a corporate Tenant shall be deemed an assignment. If this lease be
assigned, or if the demised premises or any part thereof be underlet or occupied
by anybody other than Tenant, Owner may, after default by Tenant, collect rent
from the assignee, under Tenant or occupant, and apply the net amount collected
to the rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant or the acceptance of the
assignee, under Tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current:
12. Rates and conditions in respect to submetering or rent inclusion, as the
case may be, to be added in RIDER attached hereto. Tenant covenants and agrees
that at all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Owner's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other Tenants of the building. The change at any time of the character of
electric service shall in no wise make Owner liable or responsible to Tenant,
for any loss, damages or expenses which Tenant may sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be obligated) to
enter the demised premises in any emergency at any time, and, at other
reasonable times, to examine the same and to make such repairs, replacements and
improvements as owner may deem necessary and reasonably desirable to the demised
premises or to any other portion of the building or which Owner may elect to
perform. Tenant shall permit Owner to use and maintain and replace pipes and
conduits in and through the demised premises and to erect new pipes and conduits
therein provided they are concealed within the walls, floor, or ceiling. Owner
may, during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
- ------------------
Rider to be added if necessary.
<PAGE>
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the premises,
Owner or Owner's agents may enter the same whenever such entry may be necessary
or permissible by master key or forcibly and provided reasonable care is
exercised to safeguard Tenant's property, such entry shall not render Owner or
its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom, Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitations or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
Vault, Vault Space, Area:
14. No vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is leased hereunder,
anything contained in or indicated on any sketch, blue print or plan, or
anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or areas shall be paid by Tenant.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in violation
of the certificate of occupancy issued for the building of which the demised
premises are a part. Tenant has inspected the premises and accepts them as is,
subject to the riders annexed hereto with respect to Owner's work, if any. In
any event, Owner makes no representation as to the condition of the premises and
Tenant agrees to accept the same subject to violations, whether or not of
record.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this
lease may be cancelled by Owner by the sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
(b) It is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the fair and reasonable rental value of the demised premises
for the same period. In the computation of such damages the difference between
any installment of rent becoming due thereunder after the date of termination
and the fair and reasonable rental value of the demised premises for the period
for which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof, be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be fair and reasonable rental value for the part or the whole
of the premises so re-let during the term of the re-letting. Nothing herein
contained shall limit or prejudice the right of the Owner to prove for and
obtain as liquidated damages by reason of such termination, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceeding in which, such damages are to be proved, whether or
not such amount be greater, equal to, or less than the amount of the difference
referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of this lease
other than the covenants for the payment of rent or additional rent; of if the
demised premises become vacant or deserted; of if any execution or attachment
shall be issued against Tenant or any of Tenant's property whereupon the demised
premises shall be takess or occupied by someone other than Tenant; or if this
lease be rejected under SS215 of Title II of the U.S. Code (bankruptcy code); or
if Tenant shall fail to move into or take possession of the premises within
fifteen (15) days after the commencement of the term of this lease, then, in any
one or more of such events, upon Owner serving a written five (5) days notice
upon Tenant specifying the nature of said default and upon the expiration of
said five (5) days, if Tenant shall have failed to comply with or remedy such
default, of if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said five (5) day
period, and if Tenant shall not have diligently commenced during such default
within such five (5) day period, and shall not thereafter with reasonable
diligence and in good faith, proceed to remedy or cure such default, then Owner
may serve a written three (3) days' notice of cancellation of this lease upon
Tenant, and upon the expiration of said three (3) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner but Tenant shall remain liable as
hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the term
shall expire as aforesaid; or if Tenant shall make default in the payment of the
rent reserved herein or any item of additional rent herein mentioned or any part
of either or in making any other payment herein required; then and in any of
such events Owner may without notice, re-enter the demised premises either by
force or otherwise, and dispossess Tenant by summary proceedings or otherwise,
and the legal representative of Tenant or other occupant of demised premises and
remove their effects and hold the premises as if this lease had not been made,
and Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end. If Tenant shall make default hereunder
prior to the date fixed as the commencement of any renewal or extension of this
lease, Owner may cancel and terminate such renewal or extension agreement by
written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent shall become
due thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part or parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with re-letting, such as legal expenses,
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for re-letting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
months shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re-rental may, at
Owner's option, make such alterations, repairs, replacements, and/or decorations
in the demised premises as Owner, in Owner's sole judgment, considers advisable
and necessary for the purpose of re-letting the demised premises and the making
of such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid. Owner
shall in no event be liable in any way whatsoever for failure to re-let the
demised premises, or in the event that the demised premises are re-let for
failure to collect the rent thereof under such re-letting, and in no event shall
Tenant be entitled to receive any excess, if any, of such net rents collected
over the sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed for
any cause, or in the event of Owner obtaining possession of demised premises, by
reason of the violation by Tenant of any of the covenants and conditions of this
lease, or otherwise.
Fees and Expenses:
19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of this lease, then,
unless otherwise provided elsewhere in this lease, Owner may immediately or at
any time thereafter and without notice perform the obligation of Tenant
thereunder. If Owner, in connection with the foregoing or in connection with any
default by Tenant in the covenant to pay rent hereunder, makes any expenditures
or incurs any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefore to change the
arrangement and/or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number or designation by which the building may be known.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owner's agents have made any representations
or promises with respect to the physical condition of the building, the land
upon which
<PAGE>
it is erected on the demised premises, the rents, leases, expenses of operation
or any other matter or thing affecting or related to the premises except as
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of
it in whole or in part, unless such executory agreement is in writing and signed
by the party against whom enhancement of the change, modification, discharge or
abandonment is sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease, Tenant
shall quit and surrender to Owner the demised premises, broom clean, in good
order and condition, ordinary wear and damages which Tenant is not required to
repair as provided elsewhere in this lease excepted, and Tenant shall remove all
its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this lease. If the last day of
the term of this Lease or any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and
additional rent and observing and performing all the terms, covenants and
conditions, on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 11
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the date of
the commencement of the term hereof, because of the holding over or retention of
possession of any tenant, undertenant or occupants or if the demised premises
are located in a building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy or because of
the fact that a certificate of occupancy has not been procured or for any other
reason, Owner shall not be subject to any liability for failure to give
possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to
extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. The provisions
of this article are intended to constitute "an express provision to the
contrary" within the meaning of Section 221a of the New York Real Property Law.
No Waiver:
25. The failure of Owner to seek redress for violation of, or to insist upon the
strict performance of any covenant or condition of this lease or of any of the
Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent
a subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach and no provision of this lease shall be deemed to have
been waived by Owner unless such waiver be in writing signed by Owner. No
payment by Tenant or receipt by Owner of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy in
this lease provided. No act or thing done by Owner or Owner's agents during the
term hereby demised shall be deemed an acceptance of a surrender of said
premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other (except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever including, but not limited to, government
preemption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill, statement, notice or
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first herein-
above given or at such other address as Owner shall designate by written notice.
Services Provided by Owners:
29. As long as Tenant is not in default under any of the covenants of this
lease, Owner shall provide: (a) necessary elevator facilities on business days
from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m. and have one
elevator subject to call at all other times; (b) heat to the demised premises
when and as required by law, on business days from 8 a.m. to 6 p.m. and on
Saturdays from 8 a.m. to 1 p.m.; (c) water for ordinary lavatory purposes, but
if Tenant uses or consumes water for any other purposes or in unusual quantities
(of which fact Owner shall be the sole judge), Owner may install a water meter
at Tenant's expense which Tenant shall thereafter maintain at Tenant's expense
in good working order and repair to register such water consumption and Tenant
shall pay for water consumed as shown on said meter as additional rent as and
when bills are rendered; (d) cleaning service for the demised premises on
business days at Owner's expense provided that the same are kept in order by
Tenant. If, however, said premises are to be kept clean by Tenant, it shall be
done at Tenant's sole expense, in a manner satisfactory to Owner and no one
other than persons approved by Owner shall be permitted to enter said premises
or the building of which they are a part for such purpose. Tenant shall pay
Owner the cost of removal of any of Tenant's refuse and rubbish from the
building; (e) if the demised premises are serviced by Owner's air
conditioning/cooling and ventilating system, air conditioning/cooling will be
furnished to tenant from May 15th through September 30th on business days
(Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m., and
ventilation will be furnished on business days during the aforesaid hours except
when air conditioning/cooling is being furnished as aforesaid. If Tenant
requires air conditioning/cooling or ventilation for more extended hours or on
Saturdays, Sundays or on holidays, as defined under Owner's contract with
Operating Engineers Local 94-94A, Owner will furnish the same at Tenant's
expense. RIDER to be added in respect to rates and conditions for such
additional service; (f) Owner reserves the right to stop services of the
heating, elevators, plumbing, air conditioning, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually-operated
elevator service, Owner at any time may substitute automatic-control elevator
service and upon ten days' written notice to Tenant, proceed with alterations
necessary therefor without in any wise affecting this lease or the obligation of
Tenant hereunder. The same shall be done with a minimum of inconvenience to
Tenant and Owner shall pursue the alteration with due diligence.
Captions:
30. The Captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this lease nor the intent
of any provisions thereof.
Definitions:
31. The term "office", or "offices", wherever used in this lease, shall not be
construed to mean premises used as a store or stores, for the sale or display,
at any time, of goods, wares or merchandise, of any kind, or as a restaurant,
shop, booth, boothblack or other stand, barber shop, or for other similar
purposes or for manufacturing. The term "Owner" means a landlord or lessor, and
as used in this lease means only the owner, or the mortgagee in possession, for
the time being of the land and building (or the owner of a lease of the building
or of the land and building) of which the demised premises form a part, so that
in the event of any sale or sales of said land and building, or of said lease,
or in the event of a lease of said building, or of the land and building, the
said Owner shall be and hereby is entirely freed and relieved of all covenants
and obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner, hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term
"business days" as used in this lease shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 29 hereof). Sundays
and all days observed by the State or Federal Government as legal holidays and
those designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with respect
to HVAC service.
<PAGE>
RIDER ANNEXED TO LEASE
DATED MARCH 27, 1997
BY AND BETWEEN
45-18 COURT SQUARE, LIC, AS LANDLORD
AND
COAXICOM, INC. (DBA COMMUNITY TELEPHONE), AS TENANT
Landlord is defined as 45--18 Court Square, LLC, its partners, and successors in
interest.
40. Minimum Annual Rent
-------------------
A. Possession of the Demised Premises shall be deemed to have been delivered
upon delivery of keys by Landlord to Tenant at the address earlier set
forth, the premises to be broom clean and May 1, 1997 or upon substantial
completion as hereinafter set forth (hereinafter the "Possession Delivery
Date").
B. Left Blank Intentionally
C. Tenant covenants and agrees to pay to Landlord as Minimum Annual Rent on
the first day of each month during the term hereof, the following sums:
(i) Year 1 -- Thirty--eight thousand dollars ($38,000) and no cents
per annum, payable in equal monthly installments of Three thousand
one hundred sixty-six dollars and ($3,166.67) sixty-seven cents
per month.
(ii) Year 2 -- Thirty-nine thousand dollars ($39,000) and no cents per
annum, payable in equal monthly installments of Three thousand two
hundred fifty dollars and ($3,250.00) no cents per month.
(iii) Year 3 -- Forty thousand dollars ($40,000) and no cents per annum,
payable in equal monthly installments of Three thousand three
hundred thirty-three dollars and ($3,333.33) thirty-three cents
per month.
D. Rent due for partial month(s) shall be prorated.
E. The above annual sums shall be paid in equal monthly installments, in
advance, on the first day of each month during said term at the office of
Owner or at such other place as Owner may designate, without offset or
deduction whatsoever.
1
<PAGE>
F. Tenant shall pay the first month's rent, in the sum of $3,166.67 upon the
execution of this lease, the receipt of which is hereby acknowledged. The
payment of the first month's rent will be applied to the first full month
following expiration of the abatement period.
41. Security Deposit
----------------
Simultaneous with entry into possession of the Demised Premises, Tenant
shall deposit with Owner the sum of $6,666.66 as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions
of this Lease. It is agreed that in the event Tenant defaults in respect of
any of the terms, provisions and conditions of this Lease, including, but
not limited to, the payment of rent and additional rent, owner may use,
apply or retain the whole or any part of the security so deposited to the
extent required for the payment of any rent and additional rent or any other
sum to which Tenant is in default or for any sum which Owner may expend or
may be required by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this Lease, including but not limited to,
any damages or deficiency in the re-letting of the premises, whether such
damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. Within thirty (30) days after receipt of written notice
that Owner has made application of all or any part of the said security
deposit, Tenant shall deposit with Owner such additional funds as are
necessary to restore the security deposit to its original amount. In the
event that Tenant shall fully and faithfully comply with all of the non-
monetary terms, provisions, covenants and conditions of this Lease, the
security not required to cure any monetary default or otherwise deducted as
a result of the physical condition of the premises shall be returned to
Tenant after the date fixed as the end of the Lease and after delivery of
entire possession of the Demised Premises to Owner. In the event of a sale
of the land and building or leasing of the building, of which the Demised
Premises form a part, Owner shall have the right to transfer the security to
the vendee or lessee and Owner shall thereupon be released by Tenant from
all liability for the return of such security, and Tenant agrees to look to
the new Owner solely for the return of said security; and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that, other than in
connection with a valid disposition of this Lease in compliance with the
terms of Article 64 hereof, it will not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and that neither
Owner nor its successor or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
2
<PAGE>
Tenant shall, at all times, maintain a rent security deposit equal to two
(2) month's rent. On each base rent increase date, Owner shall invoice
Tenant for, and Tenant shall deposit, such further sums with Owner as are
necessary to satisfy this obligation.
42. Restrictions on Use of the Demised Premises
-------------------------------------------
A. Subject to the provisions of this Lease, Tenant shall use the Demised
Premises only as offices in accordance with the Certificate of Occupancy
and for no other purposes.
B. Tenant shall not use or permit the use of the Demised Premises or any
part thereof in any way that would violate any of the covenants,
agreements, terms, provisions and conditions of this Lease or for any
unlawful purpose or in any unlawful manner or in violation of the
Certificate of Occupancy for the Demised Premises or the Building, and
Tenant shall not suffer or permit the Demised Premises or any part
thereof to be used in any manner or for anything to be done therein or
anything to be brought into or be kept therein that, in the judgment of
Owner, shall in any way threaten to impair or adversely affect the
character, reputation or appearance of the Building, the proper and
economical operation of the Building or any systems, facilities or
services used to operate or clean all or any part of the Building or the
Demised Premises, or the use of any of the areas of the Building by
Owner or any of the other Tenants or occupants of the Building. Tenant
shall not install or use any equipment that, in the judgment of
Landlord, could cause any adverse effect on the Demised Premises, the
Building and/or the comfort and convenience of other Tenants and
occupants of the Building.
43. Landlord shall construct offices in accordance with the attached layout
drawn by Milowitz Group, all finishes to building standard and in accordance
with Building Codes. Any additions/changes required by Tenant must be agreed
to in writing by both parties and shall be at Tenant's sole cost to be paid
upon written agreement.
A. Landlord shall supply and install carpet and base at Landlord's cost.
Tenant shall have option of choosing carpet from Landlord's samples.
B. Landlord shall supply six foot high movable partitions sufficient to
create five additional offices of approximately 10' X 10'. Owner will
allow tenant to participate in selection of partitions. Partitions shall
at all time remain the property of Landlord. Tenant to be responsible
for damages beyond normal wear and tear.
3
<PAGE>
C. Any work performed by Tenant or Tenant's contractors shall be performed
in a good and workmanlike manner and shall comply with all rules and
regulations of all Governmental Authorities having jurisdiction therein.
If Tenant is providing build-out of space or makes any alterations to
the space, the following paragraphs apply:
D. Tenant, or any contractor or contractors employed by Tenant, or any
other persons who will do work or install equipment for Tenant, shall be
fully covered by Workmen's Compensation Insurance, and the Certificate
by Tenant or any such contractor or persons as aforesaid. Tenant further
covenants, at its own cost and expense, to take out and maintain at all
times during the progress of such work and until completion thereof,
public liability insurance policies covering Owner in compliance with
the limits and such other conditions as set forth in Article 49 hereof,
and certificates evidencing the policies shall be delivered to Owner
prior to the commencement of any work hereunder.
E. Tenant's contracts with its contractors and/or other persons who will
perform work for the Tenant shall require said persons to look solely to
the Tenant for payment and will hold Owner and the Building free from
all liens and claims of all persons furnishing labor or materials
therefor.
F. Subject to the provisions of this Article, any and all machinery,
equipment and fixtures installed by Tenant, which are not replacements
of fixtures either furnished by Owner as part of Owner's work or pre-
existing in the Demised Premises at the time of the commencement of this
Lease (sometimes herein referred to as "Tenant's Property") shall remain
personally, notwithstanding the fact that it may be affixed or attached
to the realty, and shall, during the term of this Lease or any extension
thereof, belong to and be removable by Tenant, provided that (a) Tenant
shall remove said installations prior to the expiration of such term,
and shall repair any damage caused by said removal and shall deliver the
Demised Premises to Owner in the same, or better condition, as upon the
commencement of the term hereof, reasonable wear and tear excepted.
Prior to the expiration of the term or sooner termination thereof,
Tenant shall at its own cost and expense remove, from the Demised
Premises, all of Tenant's property, except such items thereof as Tenant
shall have expressly agreed in writing with Owner are to become the
property of the Owner and Tenant shall repair any damage to the Demised
Premises resulting from such removal. Any Tenant's property remaining in
the Demised
4
<PAGE>
Premises after termination of this Lease (except such items as Owner and
Tenant have expressly agreed in writing are to remain and become the
property of Owner) shall be deemed to have been abandoned by Tenant or
any sub-Tenant and either may be retained by Owner as its property or
may be removed from the premises by Owner at Tenant's expense.
G. Machinery, fixtures, chattels or equipment, if any, furnished or
installed by Tenant, the cost of which is borne by Owner, shall become
the property of Owner upon payment therefor by Owner, or reimbursement
of Tenant by Owner, as the case may be, and shall not be removed by
Tenant. Anything herein contained to the contrary notwithstanding, it is
understood and agreed that all structural improvements, all plumbing
lines and equipment (other than fixtures), all electrical wiring,
conduit and equipment (other than free-standing lighting fixtures), all
heating and ventilating installations made by Tenant, whether with or
without contribution or reimbursement by Owner, shall forthwith become
part of the Building and property of Owner.
Tenant's failure to comply with any of the items and conditions of this
Article will be deemed a default pursuant to Article 17 hereof.
44. Utilities
---------
A. Electricity Service
-------------------
(1) Landlord shall contract directly with the public utility company for
electric service for the Demised Premises. Tenant shall be
responsible for the payment of the cost of such electric service.
Such electric service may be furnished to Tenant by means of the
then existing electrical facilities serving the Premises to the
extent that the same are available, suitable and safe for such
purposes. Landlord may, prior to the commencement date, install a
sub-meter to measure Tenant's electric usage and Tenant shall pay
for such electric usage at the same rate charged to Landlord by the
utility company.
(2) Any additional feeders or risers to be installed to supply Tenant's
additional electrical requirements, and all other equipment proper
and necessary in connection with such feeders or risers shall be, at
Landlord's option, installed by Landlord upon Tenant's request, at
the sole cost and expense of Tenant (including a connection fee of
Three Hundred
5
<PAGE>
Fifty Dollars ($350.00) per kilovolt ampere, provided that, in
Landlord's reasonable judgment, such additional feeders or risers
are necessary and are permissible under applicable laws and
insurance regulations and the installation of such feeders or risers
will not cause permanent damage or injury to the Building or the
Premises or cause or create a dangerous or hazardous condition or
entail excessive or unreasonable alterations or materially interfere
with or disturb other tenants or occupants of the Building. Tenant
covenants that, at no time, shall the use of electrical energy in
the Premises exceed the capacity of the existing feeders or wiring
installations then serving the Premises. Tenant shall not make or
perform or permit the making or performance of any alterations to
wiring installations or other electrical facilities in or serving
the Premises or any additions to the business machines, office
equipment or other appliances in the Premises which utilize
electrical energy without the prior consent of Landlord in each
instance, which consent shall not be unreasonably withheld or
delayed.
(3) Landlord shall not be liable to Tenant in any way for any
interruption, curtailment or failure, or defect in the supply or
character of electricity furnished to the Premises by reason of any
requirement, act or omission of Landlord or of any public utility or
other company servicing the Building with electricity or for any
other reason, except if caused by Landlord's negligence or willful
misconduct.
Landlord reserves the right to estimate electric costs and Tenant
specifically agrees to pay estimated costs which shall be confirmed
by an outside source no less than twice yearly.
45. Services
--------
(1) Cleaning services by Landlord at the additional charges of $1.50 per
square foot, to building standards plus actual increases from outside
cleaning company. No medical waste shall be removed by Landlord.
(2) HVAC - Landlord shall install the HVAC system and Landlord shall
maintain and repair same during the term of the Lease at the Landlord's
sole cost and expense and on the termination of the Lease, Tenant shall
deliver the Premises with the HVAC system in working order, free and
6
<PAGE>
clear of all liens and encumbrances. Tenant shall pay for electricity
for its own cooling, at its sole cost and expense, through the HVAC
system.
(3) Service elevator other than Monday through Friday, 8:00 AM through 4:00
PM, at the rate of $50.00 per hour, subject to 48-hour written notice.
46. Security Agreements
-------------------
A. Tenant covenants and agrees that no security agreement, whether by way
of conditional bill of sale, chattel, mortgage or instrument of similar
import, shall be placed upon any improvement made by Tenant which is
affixed to the realty.
B. In the event that any of the machinery, fixtures, furniture and
equipment installed by Tenant in the Demised Premises are purchased or
acquired by Tenant subject to a chattel, mortgage, conditional sale
agreement or other title retention or security agreement, Tenant
undertakes and agrees (1) that no such chattel, mortgage, conditional
sales agreement or other title retention or security agreement or
Uniform Commercial Code filing statement shall be permitted to be filed
as a lien against the building and real property of which the Demised
Premises form a part, and (2) to cause to be inserted in any of the
above-described title retention, chattel, mortgage or security
agreements the following provision:
"Notwithstanding anything to the contrary herein, this chattel,
mortgage, conditional sale agreement, title retention agreement or
security agreement shall not create or be filed as a lien against the
land, building and improvements comprising the real property in which
the goods, machinery, equipment, appliances or other personal property
covered hereby are to be located or installed."
C. If any such lien or UCC financing statement, based on an agreement as
above described, is filed against the building and improvements, of
which the Demised Premises form a part, Tenant will, upon at least ten
(10) days' prior written notice thereof from Owner, cause such lien or
notice to be removed or discharged at Tenant's cost and expense, and
Tenant's failure to do so shall constitute a breach of a material
provision of this Lease.
7
<PAGE>
47 Mechanic's Liens
----------------
A. Tenant shall have no power to do any act or make any contract which may
create or be the foundation for any lien upon the reversion of Owner,
the Premises herein Demised or Owner's building and improvements, it
being agreed that should Tenant cause any alterations, changes,
additional improvements or repairs to be made to the Demised Premises,
or material furnished or labor performed therein or thereon, neither
Owner for the Demise Premises shall, under any circumstances, be liable
for the payment of any expenses incurred or for the value of any such
work done or material furnished to the Demised Premises or any part
thereof, but all such alterations, changes, additions, improvements and
repairs and materials and labor shall be at Tenant's expense and Tenant
shall be solely and wholly responsible to contractors, laborers, and
materialmen furnishing labor and material to said premises and building,
or any part thereof, for or on behalf of Tenant.
B. Tenant shall not suffer or permit any mechanic's liens to be filed
against the fee ownership of the Demised Premises nor against Tenant's
leasehold interest in said premises, by reason of work, labor, services
or materials supplied or claimed to have been supplied to Tenant or to
any occupant of the Demised Premises. If any such mechanic's lien shall
at any time be filed against the Demised Premises or the building and
improvements thereon, Tenant shall, at its own cost and expense, cause
the same to be cancelled and discharged of record by surety bond or
appropriate cash deposit within thirty (30) days after the date of
filing the same and notice thereof to Tenant, and Tenant shall indemnify
and save harmless Owner from and against any and all costs, expenses,
claims, losses or damages resulting therefrom or by reasons thereof.
C. Tenant shall also defend on behalf of Owner, at Tenant's sole cost and
expense, any action, suit or proceedings which may be brought thereon or
for the enforcement of such liens or orders, and Tenant shall pay any
damages and satisfy and discharge any judgment entered thereon and save
harmless Owner from any claim or damage resulting therefrom.
D. If Tenant shall fail to discharge such mechanic's lien within such
period, then, in addition to any other right or remedy of Owner, Owner
may, but shall not be obligated to, discharge the same, either by paying
the amount claimed to be due or by procuring the discharge of such lien
by deposit in court or bonding, and in any such
8
<PAGE>
event, Owner shall be entitled, if Owner so elects, to compel the
prosecution of an action for the foreclosure of such mechanic's lien by
the lienor and to pay the amount of the judgment, if any, in favor of
the lienor, with interest, costs and allowances.
E. Any amount paid by Owner for any of the aforesaid charges and all
reasonable legal and other expenses of Owner, including reasonable
counsel fees, in defending any such action in procuring the discharge of
said lien, with all necessary disbursements in connection therewith,
with interest thereon at the then legal rate of imputed interest from
the date of payment, shall be repaid within a period of twenty (20) days
after written demand therefor by Owner to Tenant, and may be treated as
Additional Rent payable with the next installment of Annual Basic Rent.
F. Prior to the commencement of any work in the Demised Premises by any
general contractor employed by Tenant or by any sub-contractors employed
by such general contractor, or sub-contractors employed by Tenant,
Tenant shall:
(1) furnish Owner with Tenant's written statement setting forth the name
and business address of the Tenant's general contractor or sub-
contractors employed by Tenant;
(2) obtain and furnish to Owner a written list of all sub-contractors
employed or to be employed by Tenant's general contractor and
certified by the general contractor
48. Owner's Exculpation/No Recourse
-------------------------------
If the Owner or any successor-in-interest be an individual, joint venture,
tenancy-in-common, co-partnership, unincorporated association, limited
partnership or other unincorporated group of individuals, or a corporation
(all of which are referred to below, individually, and collectively, as an
"Owner Entity"), then, anything herein to the contrary notwithstanding,
Tenant shall look solely to the interest of such Owner Entity in the
building in satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by
Owner, in the event of any default or breach by Owner with respect to any of
the terms, covenants and conditions of this Lease to be observed and/or
performed by Landlord, and no other property or assets of such Owner Entity
or any member thereof, shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies.
9
<PAGE>
49. Parties' Certificates
---------------------
The Parties each shall, without charge at any time, and from time to time,
within ten (10) days after request by the other, certify to any mortgagee,
proposed assignee of any mortgagee, or proposed purchaser or any other
person, firm or corporation specified by the requesting party:
a) That this Lease is unmodified and in full force and effect (or, if there
has been modification, that the same is in full force and effect as
modified and stating the modifications);
b) Whether or not there are then existing any set-offs or defenses against
the enforcement of any of the agreements, terms, covenants or conditions
hereof upon the part of the Tenant to be performed or complied with
(and, if so, specifying the same); and
c) The dates, if any, to which the rental and other charges hereunder have
been paid in advance.
50. Liability Insurance and Indemnification
---------------------------------------
A. During the term hereof, Tenant shall, at its own cost and expense:
1) Obtain, maintain and keep in force, for the benefit of Owner,
Managing Agent and Tenant, comprehensive general liability insurance
covering the risks in the limits set forth below, on or about the
Demised Premises (which shall include Tenant's signs, if any):
a) Bodily Injury:
Each person .......... $1,000,000.00
Each Occurrence ....... $1,000,000.00
b) Property Damage:
Each Occurrence....... $ 500,000.00
c) Completed operations and contractual liability with the same
bodily injury and property damage limits stated in (a) and (b)
above.
d) Fire and extended coverage for Tenant's fixtures, alterations
and inventory in an amount adequate to cover the cost of
replacement, but not less than $100,000.00.
10
<PAGE>
B. Owner and its managing agent, Et-Al Management Corp., shall be named
as an additional insured in said policies, as their interests may
appear, and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be
issued by insurance companies reasonably satisfactory to Owner and
which are authorized to do business in the State of New York. Tenant
shall deliver to Owner the policies of insurance, together with
evidence of the payment of premiums thereon within ten (10) days of
taking occupancy of the Demised Premises and furnish to Owner at least
twenty (20) days prior to the expiration of any such policies, a new
policy, with evidence of the payment or premiums thereon. The parties
hereto agree that the payment of said premiums may be financed, as
long as same are made and kept current. Said policies shall also
provide that the insurer will give Owner at least thirty (30) days
prior written notice of cancellation of said policy.
C. Notwithstanding the limits of insurance specified in this Article,
Tenant agrees to indemnify Owner, its agents, servants and employees
against all damage, loss or liability resulting from any of the risks
referred to in this Article. Such indemnification shall operate
whether or not Tenant has placed and maintained the insurance
specified in this Article and whether or not such proceeds from such
insurance actually are collectible from one or more of the insurance
companies; provided, however, that Tenant shall be relieved of its
obligations of indemnity herein Pro Tanto of the amount actually
recovered from one or more of the insurance companies by reason of
injury or damage to, or loss sustained on the Premises.
D. Tenant shall pay all premiums and charges for all of said policies,
and if Tenant shall fail to make any payment when due or carry any
such policy, Owner may, but shall not be obligated to, make such
payment or carry such policy, and the amount paid by Owner, with
interest thereon, shall be repaid to Owner by Tenant on demand, and
all such amounts so repayable, together with such interest, shall be
considered as Additional Rent payable hereunder for the collection of
which Owner shall have all of the remedies herein or by law provided
for the collection of rent. Payment by Owner of any such premium or
the carrying by Owner of any such policy, shall not be deemed to waive
or release the default of Tenant with respect thereto.
Tenant must provide evidence of coverages prior to taking occupancy of
leased space.
11
<PAGE>
E. Tenant acknowledges that Owner will not carry insurance of any kind on
Tenant's furniture, furnishings, finishes, or wall coverings and/or
fixtures, equipment, and improvements, and agrees that Owner shall not
be obligated to repair any damage thereto or to replace the same.
F. Landlord will maintain same type of liability insurance for all public
spaces in building and will indemnify and defend Tenant for events
which occur in the buildings common space due to Landlord/Owner's
negligence.
51. Tenant's Conduct of Business
----------------------------
Tenant covenants and agrees:
A. To do all things necessary to keep the Demised Premises clean, orderly
and neat at all times, and to prevent odors, all at Tenant's sole cost
and expense, and to conduct its business in a proper manner.
B. That Tenant shall conduct its operations in the Demised Premises in an
orderly and proper manner so as not to annoy, disturb or be offensive
to others.
C. That Tenant shall not, at any time, discharge into the plumbing,
sewage or drainage system, any waste materials which will result in
the creation of a blockage in said system or otherwise adversely
affect the proper and clean maintenance and operation thereof.
D. That Tenant, at its sole cost and expense, shall provide regular
exterminating and pest control services in the Demised Premises at
regular intervals, in order to prevent the occurrence of any vermin in
or about the Demised Premises.
52. Adjustment of Rent for Increases in Real Estate Tax
---------------------------------------------------
See Paragraph 83.
53. Assignment and Sub-letting Provisions
-------------------------------------
Tenant may not assign this. Lease under any circumstances without the prior
written consent of Owner, which consent may be withheld for any reason or
for no reason whatsoever.
54. Rent Arrears, Etc.: Supplementing Article 25 of the printed form of lease:
-------------------
A. Owner, at Owner's option, shall have the right, when Tenant is in
default in the payment of Fixed Rent or
12
<PAGE>
Additional Rent, to demand payment by certified, bank or teller's check, or
by postal money order.
B. In the event that any payment under this Lease shall be made in the form of
a check from any person, firm or corporation other than the person, firm or
corporation named in this Lease, the acceptance of same by Owner shall not,
under any circumstances, be deemed recognition of a sub- letting or any
assignment of this Lease, regardless of the number of times that such
payment shall be made by such other person, firm or corporation.
C. Late Charge. If Tenant shall fail to pay all or any part of any installment
of Fixed Rent or Additional Rent for more than ten (10) days after the same
shall have become due and payable (including the dishonor of a payment made
by check, even if such check was tendered in a timely manner), Tenant shall
pay as Additional Rent hereunder to Owner a late charge of six (6) cents
for each dollar of the amount of such Fixed Rent or Additional Rent which
shall not have been paid to Owner within said ten (10) day period, in
addition to any other right or remedy available due to such late payment.
D. In the event that any check paid by or for the benefit of Tenant to Owner
is dishonored, Tenant shall pay Owner as Additional Rent hereunder a charge
of One Hundred Dollars ($100.00) in addition to any other late charge or
right or remedy available due to such dishonored payment.
55. Additional Rent
---------------
A. All payments, other than Minimum Annual Rent required to be made by
Tenant pursuant to this Lease (including, but not limited to,
escalation charges, and any and all damages, interest, costs, fees and
expenses caused by Tenant's default) shall be deemed additional rent
and, in the event of any non--payment thereof, Owner shall have all
rights and remedies provided for herein and by law for non--payment of
Minimum Annual Rent in addition to whatever other remedies may be
available to Owner.
B. Unless expressly provided otherwise in this Lease, the amount shown as
due to Owner (or Owner's agent) in all bills, invoices and statements
to Tenant shall be due and payable by Tenant upon receipt without
further demand. Any delay or failure of Owner or its agent to prepare
and deliver any bill, statement or invoice shall not constitute a
waiver of the right to collect any payment which may have become due
during the term of this Lease, including without limitation,
retroactive payments for any and all amounts unbilled.
13
<PAGE>
C. All payments of Minimum Annual Rent and additional rent pursuant to
this Lease shall be made by Tenant with checks drawn upon a New York
City bank. If Owner receives from Tenant any payment less than the
full amount of the Minimum Annual Rent and additional rent then due
and owing, Tenant hereby waives its right, if any, to designate the
items to which such payment shall be applied and agrees that Owner, in
its sole discretion, may apply such payment in whole or in part to any
Minimum Annual Rent, any additional rent or to any combination thereof
then due and payable hereunder.
D. The losing party in any action or proceeding between Owner and Tenant
shall pay the reasonable attorneys' fees, costs and disbursements of
the prevailing party for such action or proceeding upon the assignment
thereof by the Court or on demand. If a default of Tenant causes Owner
to prosecute or defend an action or proceeding with a third party,
Tenant shall pay the reasonable attorneys' fees, costs and
disbursements of Owner for such action or proceeding on demand. If
Owner suffers, pays or incurs any damages, losses, fees or expenses
(including without limitation, reasonable attorneys' fees and
disbursements) due to a default, act, omission or request of Tenant,
Tenant shall pay the total amount thereof to Owner on demand.
E. If all rent is not paid in full and actually received by Owner within
fifteen (15) days after it is due and payable hereunder, Tenant shall
pay Owner a late fee of 2% per month as additional rent. However, if
the collection of such late fee at the rate specified herein would be
usurious or otherwise unenforceable, interest on late payments shall
accrue at the highest enforceable rate.
F. References in this Lease to "rent," "Rent," "rents," "Rents,"
"rental," "Rental," "rentals" and "Rentals" shall mean and include
Minimum Annual Rent and additional rent. The Minimum Annual Rent is
the minimum rental due and payable without prior demand, offset or
deduction. No decrease in any additional rent for any period shall
yield an offset or deduction in any other rental or for any other
period. References in this Lease to Tenant being "in default" and/or
Tenant's "breach" or "default" shall mean and include each and every
default, breach, misfeasance, nonfeasance, non- payment, or any other
failure of Tenant to perform any of its obligations hereunder. If
Owner gives notice of default and Tenant seeks declaratory relief and
Tenant's time to cure is extended pending the outcome of such
declaratory judgment action, Tenant shall be deemed to be "in default"
under
14
<PAGE>
this Lease during the pendency of such action for the purposes of
those rights that are exercisable by Tenant only if it is not "in
default". All of Tenant's obligations to pay rent, to indemnify Owner
and to obtain insurance shall survive the expiration of the term or
sooner termination of this Lease.
G. Owner's managing agent, Et-Al Management Corp., may give notices,
demands, invoices, statements and/or bills to Tenant in Owner's
behalf; any such notice, statement, invoice, demand or bill shall be
deemed to have been given by Owner.
H. The provisions of this Article shall supplement (not limit) other
provisions of this Lease pertaining to the same matters as this
Article and related matters.
56. Owner's Right of Entry
----------------------
A. Tenant shall permit Owner to erect, use, maintain and repair pipes,
cables, conduits, plumbing, vents and wiring in, to and through the
Demised Premises, as and to the extent that Owner may now or hereafter
deem to be necessary or appropriate for the proper operation and
maintenance of the building of which the Demised Premises are a part.
All such work shall be done, so far as practicable, in such manner as
to avoid interference with Tenant's use of the Demised Premises, and
as expeditiously as possible. The liability of Owner, if any, under
this Article shall be limited to the prompt repair, at the sole cost
and expense of Owner, of any damage caused to the Demised Premises by
the Owner in the course of doing work under this paragraph.
B. Upon providing forty-eight (48) hours advance written notice, Owner,
or its agents or assignees, shall have the right to enter the Demised
Premises during business hours for the purpose of making such repairs
or alterations as Owner shall be required or shall have the right to
make by the provision of this Lease. Owner shall attempt to do all
such work at a time, and in a manner, that will not unreasonably
inconvenience Tenant, significantly diminish Tenant's floor area or
significantly disrupt Tenant's architectural layout. Owner shall be
allowed to take all material into and upon the Demised Premises that
may be required for repairs or alterations, without constituting an
eviction of Tenant, in whole or in part, so long as any repair work by
Owner is diligently prosecuted to completion. Owner shall also have
the right, without prior written notice, to enter the Demised Premises
at such other times as such entry may be required by circumstances of
emergency affecting the
15
<PAGE>
Demised Premises or the building containing the same. In addition,
Owner, or its agents or assignees, shall have the right to enter the
Demised Premises upon Providing twenty-four (24) hours prior written
notice during business hours for the purpose of inspecting the general
condition and State of repair of the Premises and the showing of the
Premises to any prospective purchaser or mortgagee, such entry and
inspection to be conducted in a manner calculated to not unreasonably
interfere with the operation of Tenant's business or its customers.
C. The rights granted to Owner by the terms of this Article shall be
deemed supplementary to the provisions set forth in Article 13 of the
printed portion of this Lease.
57. Suspension of Services
----------------------
Anything in this Lease to the contrary notwithstanding, Owner reserves the
right to suspend the service of any utilities, when necessary by reason of
accident or of repairs, alterations or improvements necessary to be made in
the Demised Premises or the building of which it is a part, until such
repairs, alterations or improvements shall have been completed, and Owner
shall have no responsibility or liability for such suspension of services,
provided Owner proceeds with diligence and continuity to complete such
repairs, alterations or improvements and uses its best efforts to restore
such services as soon as practicable. The foregoing shall not be deemed to
impose upon Owner any obligations for the furnishing of any service,
maintenance or repair other than is specifically set forth in this Lease.
Owner will provide 72 hours advance notice of any planned service
suspension which is for regular maintenance purposes. No notice shall be
required for emergency suspension of service resulting from an accident or
other unanticipated event.
58. Condemnation
------------
A. If the whole of the Demised Premises shall be taken under the power of
eminent domain of any public or private authority, then this Lease and
the term thereof shall cease and terminate, as of the date of such
taking and any unearned rent or other charges, if any, paid in
advance, shall be refunded to Tenant.
B. In the event that only a portion of the Demised Premises shall be
taken under the power of eminent domain by any public or private
authority, then this Lease and the term thereof shall continue in full
force and effect, at option of either the Owner or the Tenant,
provided, however, that Owner shall, at its expense forthwith restore
what may remain of the Demised Premises to
16
<PAGE>
substantially the same condition as prior to the condemnation. There
shall be a pro rata abatement of basic rent hereunder to the extent
that the amount of floor space so taken compares to the amount of
floor space prior to such condemnation, to compensate Tenant for its
loss of use of such portion of the Demised Premises. The minimum rent
reserved herein, and any other charges payable to Tenant hereunder,
shall be suspended (provided Tenant is not then using the Demised
Premises) for the period from the date of the taking until the
remainder of the Demised Premises shall have been restored as
aforesaid.
C. Tenant shall not be entitled to any award for the loss of or loss in
value of the leasehold, but only to an award for loss of or damage to
its fixtures and/or equipment and to moving expenses, all to the
extent allowed and solely in the event that such allowance does not,
in any way, diminish the award to Owner. The respective damages to
which Owner and Tenant are entitled by reason of any such taking shall
be fixed and paid, respectively, to Owner and Tenant, as their
interests appear, and in no event shall there be a merger of interest.
D. Within fifteen (15) days after Owner receives written notice of any
such taking or intention to take under power of eminent domain, Owner
shall forward a copy thereof to Tenant.
59. Damage or Destruction
---------------------
A. If the Demised Premises shall be partially damaged by fire or other
casualty, the damaged portions of the Demised Premises (but not
Tenant's trade fixtures or personal property) shall be repaired by and
at the expense of Owner (unless such fire or casualty resulted, in
whole or in part, from any act or omission, whether negligent or
otherwise, of Tenant or his agents, servants, contractors, employees,
invitees, or assigns, in which case such repairs shall be at the cost
and expense of Tenant), and the rent until such repairs shall be made
shall be apportioned according to the part of the Demised Premises
which is usable by Tenant. If Tenant shall have paid rent in advance,
Owner shall repay to Tenant an amount equal to that portion of rent so
paid in advance, payment of which is abated.
B. If the Demised Premises are totally damaged or are rendered wholly
untenantable by fire or other casualty, Owner shall, within sixty (60)
days after such fire or other casualty, give Tenant written notice of
Owner's election whether:
17
<PAGE>
1) To terminate this Lease and thereupon the term of this Lease shall
expire by lapse of time upon the third (3rd) day after such notice is
given, and Tenant shall vacate the Demised Premises and surrender the
same to Owner. If Tenant shall not be in default under this Lease, or
if any monetary default existing at the time of the giving of such a
notice is cured in full within three (3) days after delivery of said
notice, then upon the termination of this Lease under the conditions
provided for in the sentence immediately preceding, Tenant's liability
for rent accruing subsequent to the fire or casualty shall cease and
be apportioned as of the day following such fire or casualty, or
2) To restore or rebuild the Demised Premises in character, layout, area
and equipment (but not Tenant's trade fixtures or personal property)
substantially equal to the premises damaged or destroyed immediately
prior to such damage or destruction, and it is agreed that in such
event, this Lease shall continue in full force and effect, but the
rent, the additional rent, and all other payments and obligations of
Tenant shall abate as of the date of such fire or other casualty,
until the Demised Premises shall have been fully and completely
restored or rebuilt by Owner and possession thereof shall have been
delivered to Tenant.
Should Owner elect to send Tenant written notice under subparagraph
(1) of this Article 56B, and thereafter, within one (1) year of the
giving of such notice, act nevertheless to restore or rebuild the
Demised Premises in character, layout, area and equipment (but not
Tenant's trade fixtures or personal property) substantially equal to
the premises damaged or destroyed immediately prior to such damage or
destruction, then and in such event, Owner agrees to give Tenant a
thirty (30) day unilateral option to be exercised by Tenant in the
method and manner otherwise set forth in this Lease, to resume
occupancy for the remaining balance of the original lease term under
all of the other terms and conditions set forth in this Lease.
C. Owner shall not be liable for reasonable delay under the foregoing
subparagraphs A or B if such delay arises by reason of adjustment of
insurance on the part of Owner and/or Tenant or the reasonable delay on
account of any
18
<PAGE>
cause beyond the control of Owner or contractors employed by Owner,
including, but not limited to strikes, labor disputes and shortages of
material.
D. Tenant hereby expressly waives the provisions of Section 227 of the
Real Property Law and of any law now in force or hereafter enacted
which, in substance, provides for termination of a lease of real
property by reason of destruction or untenantability of the Premises
demised thereunder caused by fire or other casualty and agrees that
the provisions of this Article 57 shall govern and control in lieu of
any such provisions of law.
60. Signs
-----
A. Tenant shall not, without Owner's prior written consent, place or
install any sign on the exterior of the Demised Premises, or the
building of which it is a part, or on the inner or outer faces of the
windows or doors of the Demised Premises. Tenant shall be permitted to
install and maintain, at its own cost and expense, an exterior sign,
provided the same receives the prior approval of Owner as to
dimensions, shape, design, size, color, wording, material of
composition and location. Tenant agrees that any exterior sign
approved by Owner shall not be installed until all approvals and
permits are first obtained by Tenant from governmental agencies having
jurisdiction thereover and that all fees payable in connection with
such installation, maintenance and permits shall be paid by Tenant.
B. Tenant shall not place in the windows or in any display or other area
visible to public view from the outside of the Demised Premises any
flashing, blinking or animated sign or one which otherwise has
variations in the intensity of illumination without first obtaining
Owner's prior written approval.
C. Tenant shall not, after having obtained the approval of Owner, change
or alter any sign in any respect whatsoever, including but not limited
to size, material of composition or location, without first obtaining
the prior written approval of Owner, except that Tenant may change the
phraseology in a sign previously approved by Owner without additional
approval.
D. In the event that Owner shall deem it necessary to remove any sign of
Tenant in order to make any repairs, alterations or improvements in,
to or upon the Demised Premises, or the building of which it is a
part, Owner
19
<PAGE>
shall have the right to do so, provided the same be removed and
replaced at Owner's expense, promptly upon completion of such repair,
alteration or improvements.
61. Replacement of Plate Glass
--------------------------
Tenant Shall, at its own cost and expense, replace any and all plate or
other glass damaged or broken from any cause whatsoever in and about the
Demised Premises. Tenant shall, at its own cost and expense, either insure
and keep insured all such glass in stock companies authorized to do
business in the State of New York, naming the Owner as a party insured
thereunder, or may act as a self-insurer for plate glass.
62. Holdover by Tenant
------------------
Tenant will have no right to remain in possession of all or any part of the
Demised Premises after the expiration of the term. If Tenant remains in
possession of all or any part of the Demised Premises after the end of said
term, with the express or implied consent of Owner: (a) such tenancy will
be deemed to be a periodic tenancy from month-to-month only; (b) such
tenancy will not constitute a renewal or extension of this Lease for any
further term; and (c) such tenancy may be terminated by Owner upon the
earlier of thirty (30) days prior written notice or the earliest date
permitted by law. In such event, monthly rent (the reasonable value of use
and occupancy) will be increased to an amount equal to one-half (1/2) of
the sum of the Minimum Annual Rent plus all additional rentals payable
during the last year of the term, and any other sums due for additional
rent under this Lease will be payable in the amount and at the times
specified in this Lease. Such month-to-month tenancy will be subject to
every other term, condition and covenant contained in this Lease. Neither
the billing nor the collection of use and occupancy in the above amount
shall be deemed a waiver of any right of Owner to collect damages for
Tenant's failure to vacate the Demised Premises after the expiration or
sooner termination of this Lease. The provisions of this Article shall
survive the expiration or sooner termination of this Lease. In the event a
renewal lease is executed by all parties within ninety (90) days of the
expiration date and all rent has been paid timely, the rent will be
adjusted retroactively to the renewal rate.
63. Broker
------
Tenant and Owner covenant, warrant and represent to each other that neither
has had any dealings with any real estate broker, agent or finder in
consummating the Lease other than Sholom & Zuckerbrot Realty Corp./Alan
Levy and that no conversation or prior negotiations were had with any
individual or entity
20
<PAGE>
EXHIBIT 10.5
[LOGO OF COMMUNITY NETWORKS]
- --------------------------------------------------------------------------------
Existing Lease Abstract
Building: 37-18 Northern Blvd.
Lease Date: March 19,1999
Landlord: Standard Motor Products
Tenant: Community Networks
Premises: Portion of the 2nd floor (Westerly half of floor)
Rentable Area: Approximately 21,112 RSF
Lease Term: Ten years and four months
Lease Commencement: March 19, 1999
Lease Expiration: July 18, 2009
Rent Commencement: July 19,1999
Base Rent: Year 1: $102,000.00 / year
Year 2: $102,000.00 / year
Year 3: $144,500.00 / year
Year 4: $148,835.00 / year
Year 5: $153,300.05 / year
Year 6: $157,899.05 / year
Year 7: $162,635.02 / year
Year 8: $167,516.72 / year
Year 9: $172,542.22 / year
Year 10: $177,718.49 / year
Electricity: $1500 per month, subject to survey
Real Estate Taxes: Tenant shall pay their proportionate share of a
direct pass-through of actual Real Estate Tax
increases over and above a 1998/1999 fiscal year.
Operating Expense: Tenant shall pay their proportionate share of a
direct pass-through of actual operating expense
increases in excess of the 1999 calendar year.
Use: Telecommunications services, telephone switching
stations, general, executive and sales offices and
uses incidental hereto.
Sublet/Assignment: Tenant may sublet all or a portion of the premises
or assign the lease with prior written consent of
owner, which may not be unreasonably withheld or
delayed.
Termination Option(s): N/A
Expansion Option(s): N/A
Equis
- --------------------------------------------------------------------------------
09/01/99
<PAGE>
[LOGO OF COMMUNITY NETWORKS]
- --------------------------------------------------------------------------------
Security Deposit: $125,000, to be reduced annually by $15,000 each
year until the deposit reaches $36,000.
Right of First Refusal: N/A
Renewal Option(s): Tenant shall have two consecutive five (5) year
renewal options.
Equis
- --------------------------------------------------------------------------------
09/01/99
<PAGE>
INSERTS TO STANDARD FORM OF OFFICE LEASE
(REB OF NY FORM 2/94)
between
STANDARD MOTOR PRODUCTS, INC. ("Owner")
and
COMMUNITY NETWORKS, INC. ("Tenant")
for a portion of the 2nd Floor in the Building at
37-18 Northern Boulevard, Long Island City, New York
("demised premises" or "Demised Premises")
================================================================================
1. approximately ten (10) years and four (4) months to commence on the
date on which Owner notifies Tenant that it has delivered vacant
possession of the Demised Premises to Tenant free of all tenants and
other occupants and with all of Owner's Work (hereinafter defined)
substantially completed (the "Commencement Date") and to end on the
last day of the month in which the tenth (10th) anniversary of the
Rent Commencement Date (hereinafter defined) occurs,
2. telecommunications services, telephone switching stations, general,
executive and sales offices and uses incidental thereto
Article 3
- ---------
3. , which consent shall not be unreasonably withheld or delayed.
3A. Tenant may make non-structural alterations which do not effect
Building facilities and which cost in the aggregate less than $50,000
without the prior consent of Owner but only upon giving notice to
Owner. Owner agrees that with respect to Tenant's initial alterations
Owner shall notify Tenant of its consent or that it is not consenting
within ten (10) days of actual receipt of Tenant's plans and
specifications.
4. reasonably
4A. With respect to any installations which require the prior consent of
Owner, Tenant may request that Owner make a determination at that time
whether Owner will require that said installation be removed upon
expiration or earlier termination of the Lease.
4B. reasonable
Article 4
- ---------
5. , provided that Owner agrees that during the exercise of any right of
entry or making any repairs, replacements or improvements or
performing any work in the Demised Premises under any of the
provisions of this Lease, Owner shall use reasonable efforts (but
shall not be required to do any word on an overtime basis) under the
circumstances, to minimize interference with the conduct of Tenant's
business and its use of the Demised Premises.
6. Notwithstanding anything to the contrary, Tenant shall not be
responsible for any damage or injury to the demised premises or the
Building caused by or resulting from the negligence or willful
misconduct of Owner, its agents, employees or servants or by the
breach of or failure to perform any covenants, obligations or
agreements of Owner, its agents, employees or servants under this
Lease.
Article 6
- ---------
7. Owner represents to Tenant that the floor load per square foot area
of the demised premises is 120 pounds per square foot.
<PAGE>
8. Notwithstanding anything to the contrary contained in this Lease,
Owner shall be responsible, at Owner's expense, to comply with any
legal requirements relating to the physical condition of all parts of
the Demised Premises if there is a change in the applicable legal
requirements and the changed legal requirements apply to all real
estate generally and not just to the specific manner of use of the
Demised Premises by Tenant, and Owner shall be responsible, at Owner's
expense, for compliance with any governmental law, order, regulation
or requirement relating to the removal, encapsulation, or other
treatment of any asbestos containing materials or hazardous materials
located within or about the Demised Premises, and for the removal of
any asbestos or asbestos containing materials or other hazardous
materials within or about the Demised Premises, unless the presence of
any such asbestos or hazardous materials was caused by Tenant.
Article 9
- ---------
8A. not
Article 13
- ----------
9. upon at least forty-eight (48) hours notice--
10. Notwithstanding anything to the contrary contained in this Lease,
Tenant and its employees shall have access to the Demised Premises 24
hours per day, seven days a week.
Article 14
- ----------
11. to the extent such vault is use by Tenant. Notwithstanding anything to
the contrary contained in this Lease, Tenant shall be entitled to
trench outside the Building, at Tenant's expense, to access area fiber
optic hook-ups. Tenant agrees to indemnify Owner for any costs on
expenses incurred by Owner on account of the above Tenant work.
Article 15
- ----------
11A. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall have no obligations to cure violations that are of record
as of the Commencement Date, if any, which shall be the responsibility
of Owner at its sole cost and expense.
Article 17
- ----------
12. twenty (20)
13. business
14. and such default shall continue for more than five (5) days after
notice thereof has been given to Tenant,
15. further
Article 18
- ----------
16. beyond the applicable notice and cure period,
17. reasonable
Article 24
- ----------
18. Notwithstanding anything to the contrary contained in this Lease, if
Owner does not deliver vacant possession of the Demised Premises to
Tenant with all of Owner's Work substantially completed on or before
May 1, 1999, Tenant, at its option, may terminate this Lease upon
thirty (30) days notice to Owner, in which event this Lease shall
terminate unless Owner delivers vacant possession of the
2
<PAGE>
demised premises to Tenant with all of Owner's Work substantially
completed within said thirty (30) day period.
Article 25
- ----------
19. or Tenant
20. or payment by Tenant
21. or Tenant, as the case may be,
22. the party to be charged with such waiver
Article 27
- ----------
22A. the obligations of Owner and Tenant to
22B. Owner and
22C. or Tenant
22D. or Tenant
Article 28
- ----------
23. Whenever a provision is made under this Lease for any demand, notice
or declaration of any kind, or where it is deemed desirable or
necessary by either party to give or serve any such notice, demand or
declaration to the other party, it shall be in writing and served
either by hand delivery against written receipt, or nationally
recognized overnight courier providing for written evidence of
delivery, or sent by United States certified mail, return receipt
requested, postage prepaid, addressed at the addresses set forth below
or at such other address as either party may advise the other from
time to time: Notices given by certified mail shall be deemed given
three (3) business days after deposit in the United States mail as
aforesaid; notices given by hand delivery or overnight courier shall
be deemed given upon receipt (or refusal of receipt) during regular
business hours.
If to Tenant:
Community Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Mr. Scott Matukas
with a duplicate copy to:
Littman Krooks Roth & Ball P.C.
655 Third Avenue, 20th Floor
New York, New York 10017-5617
Attention: Stuart S. Ball, Esq.
If to Owner:
Standard Motor Products, Inc.
37-18 Northern Boulevard
Long Island City, New York 11101
Attention: Michael Paulus
------------------
Article 33
- ----------
23A. All Rules and Regulations set forth herein shall be applied to all
tenants of the Building in a non-discriminatory manner. In the event
of a conflict between the
3
<PAGE>
terms of this Lease and the Rules and Regulations, the terms of the Lease
shall govern.
Article 34
- ----------
24. beyond the applicable notice and cure period
25. the Security Deposit shall be maintained in an interest bearing
account and all interest shall accrue and be added to and become a
part of the Security Deposit less a 1% per annum administrative fee to
Owner.
Article 35
- ----------
26. twenty (20)
27. , to Tenant's actual knowledge
STANDARD MOTOR PRODUCTS, INC.
By: /s/ David Kerner
-------------------------
Name: DAVID KERNER
Title: TREASURER
COMMUNITY NETWORKS, INC.
By: /s/ Scott M. Matukas
--------------------------
Name: Scott M. Matukas
Title: VP - HR & Admin
4
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED March 19, 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
37. Rental Payments:
---------------
37.1 Supplementing the second unnumbered paragraph of this Lease,
Tenant shall pay to Owner the base annual rent (the "Base Rent") for the demised
premises as set forth below and additional rent for the demised premises as
herein set forth. Additional rent shall consist of all other sums of money as
shall become due and payable by Tenant to Owner pursuant to the terms of this
Lease, for default in payment of which Owner shall have the same remedies as a
default in the payment of Base Rent. Tenant shall pay to Owner Base Rent as
follows:
(a) One Hundred Two Thousand and 00/100 Dollars ($102,000) per annum
($8,500 per month) for the period commencing on the Rent Commencement Date
(hereinafter defined) and continuing thereafter until the second
anniversary of the Rent Commencement Date;
(b) One Hundred Forty Four Thousand Five Hundred and 00/100 Dollars
($144,500.00) per annum ($12,041.67 per month) for the period commencing on
the day after the second anniversary of the Rent Commencement Date and
continuing thereafter until the third anniversary of the Rent Commencement
Date;
(c) One Hundred Forty Eight Thousand Eight Hundred Thirty Five and
00/100 Dollars ($148,835.00) per annum ($12,402.92 per month) for the
period commencing on the day after the third anniversary of the Rent
Commencement Date and continuing thereafter until the fourth anniversary of
the Rent Commencement Date;
(d) One Hundred Fifty Three Thousand Three Hundred and 05/100
Dollars ($153,300.05) per annum ($12,775.00 per month) for the period
commencing on the day after the fourth anniversary of the Rent Commencement
Date and continuing thereafter until the fifth anniversary of the Rent
Commencement Date;
(e) One Hundred Fifty Seven Thousand Eight Hundred Ninety Nine and
05/100 Dollars ($157,899.05) per annum ($13,158.25 per month) for the
period commencing on the day after the fifth anniversary of the Rent
Commencement Date and continuing thereafter until the sixth anniversary of
the Rent Commencement Date;
(f) One Hundred Sixty Two Thousand Six Hundred Thirty Six and 02/100
Dollars ($162,635.02) per annum ($13,553.00 per month) for the period
commencing on the day after the sixth anniversary of the Rent Commencement
Date and continuing thereafter until the seventh anniversary of the Rent
Commencement Date;
(g) One Hundred Sixty Seven Thousand Five Hundred Sixteen and 72/100
Dollars ($167,516.72) per annum ($13,959.73 per month) for the period
commencing on the day after the seventh anniversary of the Rent
Commencement Date and continuing thereafter until the eighth anniversary of
the Rent Commencement Date;
(h) One Hundred Seventy Two Thousand Five Hundred Forty Two and
22/100 Dollars ($172,542.22) per annum ($14,378.52 per month) for the
period commencing on the day after the eighth anniversary of the Rent
Commencement Date and continuing thereafter until the ninth anniversary of
the Rent Commencement Date; and
-1-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
(i) One Hundred Seventy Seven Thousand Seven Hundred Eighteen and
49/100 Dollars ($177,718.49) per annum ($14,809.87 per month) for the
period commencing on the day after the ninth anniversary of the Rent
Commencement Date and continuing thereafter until the tenth anniversary of
the Rent Commencement Date.
Tenant shall be entitled to an abatement of the monthly Base Rent
during the four month period commencing on the Commencement Date and ending four
months thereafter ("Abatement Period"), provided that Tenant shall not be in
default beyond applicable notice and cure period under any term or condition of
this Lease either at the commencement of the Abatement Period or at any time
during the Abatement Period. If Tenant shall be in default beyond applicable
notice and cure period under any term or condition of this Lease at any time
during the Abatement Period, such Abatement Period shall terminate as of the
date of such default beyond applicable notice and cure period. The day after the
last day of the Abatement Period shall be deemed to be the Rent Commencement
Date.
37.2 Rent shall be calculated on a per diem basis for any partial calendar
month.
38. Electric Current:
----------------
38.1 (a) As of the date of this Lease, the monthly electricity fee
("MEF") is $1,500.00 per month, which amount has been based upon Tenant's
projected electricity costs taking into account Tenant's use of the
Premises as a telecommunications services provider with telephone switching
stations in the Premises. Within ninety (90) days after Tenant has
commenced the operation of its business at the Premises, Owner, at its cost
sole and expense, shall cause a survey to be made by a reputable
independent electrical engineer or consultant selected by Owner ("Survey")
to determine Tenant's actual electrical usage and demand requirements.
After such Survey has been made, Owner shall deliver a copy thereof to
tenant and the MEF shall be retroactively adjusted to reflect the actual
cost incurred by Owner in connection with Tenant's electrical usage at the
Premises, and if such actual cost is more than the initial MEF, Tenant
shall pay the difference to Owner, and if such actual cost is less than the
initial MEF, Owner shall pay the difference to Tenant.
(b) In the event Tenant shall disagree with the Survey, Tenant
shall so notify Owner within thirty (30) days after receiving such Survey,
setting forth in reasonable detail the items of the Survey that tenant
disputes. If within thirty (30) days from Tenant's notice to Owner that it
disputes the Survey, Owner and Tenant have not resolved the dispute,
Tenant, at the expense of Tenant, may select and retain a different
independent reputable engineer, reasonably acceptable to Owner, to make its
own electrical Survey (hereinafter called "Tenant's Survey") of the
Premises. Tenant shall send Tenant's Survey to Owner and to the engineer
who made Owner's Survey. In the event that within thirty (30) days from
said receipt of tenant's Survey, Owner and tenant still have not settled
the dispute, then the adjusted MEF shall be determined by a third (3rd)
engineer or expert selected by the two (2) initial engineers. If the
adjusted MEF shall be determined by the third engineer or expert, the fee
of such third engineer or expert shall be paid by whichever of Owner of
Tenant whose Survey is more at variance with the determination of such
third engineer or expert. If, however, the parties settle or compromise the
dispute, the fee of any such third engineer or expert shall be equally
divided between the parties. In the event of any such dispute, tenant
agrees to pay to Owner the adjusted MEF based on Owner's Survey as if no
dispute existed, but if Owner and tenant subsequently agree to a lesser
amount, or if the above mentioned third engineer or expert determines that
a lesser amount is due, then Owner shall thereafter promptly reimburse
tenant to the extent of any overpayments, retroactive to the commencement
date.
-2-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
(c) Notwithstanding anything to the contrary contained in this
Lease, it is the intention of the parties hereto, and the aforementioned
engineer(s) shall take same into account when conducting any Survey, that
no profit whatsoever shall be made by Owner in connection with electricity
charges to Tenant, and Tenant shall be entitled to the benefit of any and
all reductions, abatements and/or discounts received by Owner.
(d) In the event that the cost of electric current shall increase
or decrease or Tenant's use of electric current materially increases or
decreases at any time during the term hereof, both Owner and Tenant agree
to make a corresponding adjustment to the monthly fee charged to Tenant for
the use of such electric current. In the event that bills hereunder are not
paid within twenty (20) days after the same are rendered, Owner may,
without further notice, discontinue the service of electric current to the
demised premises without releasing Tenant from any liability under this
Lease and without Owner or Owner's agent incurring any liability for any
damage or loss sustained by Tenant by such discontinuance of service.
Tenant shall permit the Meter Reading Firm to have access to the demised
premises from time to time during normal business hours.
38.2 Owner, at Owner's sole cost and expense, shall be responsible
for any repair, maintenance and replacement of any electric meter, panel board
and all wires, wiring, feeders and risers serving the demised premises. Tenant
shall not make or perform, or permit the making or performance of, any
alterations to wiring installations or other electrical facilities in or serving
the demised premises or any additions to the business machines, office equipment
or other appliances (other than typewriters and similar low energy consuming
office machines) in the demised premises which utilize electrical energy,
without the prior consent of Owner in each instance, which consent shall not be
unreasonably withheld or delayed.
38.3 Tenant covenants that Tenant's use and consumption of electric
current shall not at any time exceed the capacity of any of the electrical
facilities and installations in or otherwise serving or being used in the
demised premises. Owner represents that it will provide 400 amps of electric
power to the demised premises. ln order to insure that such capacity is not
exceeded and to avert any possible adverse effect upon the electrical facilities
and installations of the Building, Tenant shall, upon the submission by Owner to
Tenant of written notice, promptly cease the use of any of Tenant's Electrical
Facilities which Owner reasonably believes will cause Tenant to violate the
preceding sentence of this Paragraph 38.3.
38.4 Owner shall not in any way be liable or responsible to Tenant
for any loss, damage or expense which Tenant may sustain or incur as a result of
an interruption in the supply of electric current to the demised premises or a
change in the quantity or character of such current.
38.5 Tenant shall furnish and install, at Tenant's sole cost and
expense, all original and replacement lighting tubes, lamps, bulbs, fixtures and
ballasts as Tenant may require in the demised premises. Owner shall leave for
Tenant's use, all replacement lighting tubes, lamps, bulbs, fixtures and
ballasts presently existing in the demised premises.
39. Real Estate Tax Escalation:
--------------------------
39.1 Definitions: For the purposes of this Article 39:
39.1.1 "Taxes" shall mean the aggregate of the following items
assessed, levied, confirmed or imposed at any time by any taxing or other
authority, on, against, or in respect of, or which may be or become a lien upon,
the Building and/or the land upon which the Building is located: (a) real estate
taxes; (b) assessments (including, without limitation, assessments for public
improvements or benefits, whether or not commenced or
-3-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
completed during the term of this Lease); (c) water charges; (d) sewer rents;
(e) vault taxes; (f) any other tax, levy, impost, charge or assessment, however
designated; and (g) any tax, levy, impost, charge or assessment, however
designated, general, special, ordinary or extraordinary, foreseen or unforeseen,
levied, assessed or imposed by any taxing or other authority, against or with
respect to such land and/or Building, the occupancy thereof, or the rents or
profits therefrom or the collection thereof, to the extent that the same shall
be in substitution of or in lieu of all or any portion of any item set forth
herein, or in lieu of any addition or increase in any item or any portion
thereof set forth herein. Notwithstanding the foregoing, Real Estate Taxes shall
not include (a) any inheritance, estate, succession, transfer, gift, franchise
or capital stock tax; (b) any income taxes arising out of or related to
ownership and operation of income-producing real estate; (c) any excise taxes
imposed upon Owner based upon gross or net rentals or other income received by
it; or (d) assessments for improvements completed prior to the Commencement
Date.
39.1.2 "Base Tax Year" shall mean the fiscal year commencing
July 1, 1998 and ending June 30, 1999.
39.1.3 "Base Tax" shall mean the amount of Taxes, as finally
determined, payable by Owner for the Base Tax Year.
39.1.4 "Tax Year" shall mean each twelve (12) month period
falling wholly or partly within the term of this Lease and commencing on the
first day next succeeding the Base Tax Year or any anniversary of said date.
39.1.5 "Tenant's Proportionate Share" shall mean, and the
parties hereto agree that the same shall be, five and sixty-five hundredths
percent (5.65%).
39.2 If the Taxes for any Tax Year shall be greater than the Base
Tax (the amount of such excess being hereinafter referred to as the "Tax
Excess"), Tenant shall pay Owner as additional rent for such Tax Year, in
addition to any other additional rent required under this Lease, commencing on
the later of(a) July 1, 1999, or (b) the Rent Commencement Date, an amount equal
to Tenant's Proportionate Share of such Tax Excess (such amount of additional
rent being hereinafter referred to as the "Tax Payment"). The Tax Payment shall
be prorated, if necessary, for the first and final Tax Years. Tenant shall pay
the Tax Payment based on the Taxes (which, to the extent necessary, may be
estimated by Owner in its sole discretion) as initially assessed, levied or
imposed, subject to an adjustment, if any.
39.3 Before or after the beginning of each Tax Year, Owner shall
submit to Tenant a written statement (hereinafter referred to as the "Tax
Statement") with respect to such Tax Year, which Tax Statement shall set forth
the following: (a) the Tax Year covered by the Tax Statement; (b) the Base Tax;
(c) the Taxes (which, to the extent necessary, may be estimated by Owner in its
sole discretion) for the Tax Year covered by the Tax Statement; (d) the Tax
Excess; and (e) a computation of Tenant's Proportionate Share of the Tax Excess
(the Tax Payment) for the Tax Year covered by the Tax Statement and the amount
of the equal monthly installments thereof.
39.4 After Owner has submitted to Tenant the Tax Statement with
respect to any Tax Year, Tenant shall pay Owner, as additional rent for such Tax
Year, the Tax Payment shown on such Tax Statement as due Owner for such Tax
Year, in equal monthly installments, in advance, on the first day of each and
every month, together with the monthly installments of fixed rent, commencing
with the installment of fixed rent next due after the date of submission of such
Tax Statement but not prior to the Rent Commencement Date. Each installment of
such Tax Payment due shall be in an amount equal to one-twelfth (1/12th) of such
Tax Payment.
39.5 If a Tax Statement showing a Tax Payment due Owner for any Tax
Year is submitted by Owner to Tenant after the commencement of the Tax Year in
respect of which such Tax Statement is rendered, and after the time when one or
more installments thereof
-4-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED ___, 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
would have otherwise been due and payable had such Tax Statement been submitted
to Tenant at or prior to the commencement of such Tax Year, Tenant shall pay
Owner, as additional rent, within twenty (20) days after the submission of such
Tax Statement, an amount equal to the total of all the monthly installments that
are unpaid and due for the period elapsed prior to the first day of the month
next succeeding the month during which such Tax Statement is submitted. Such
amount due shall be equal to the product obtained by multiplying the Tax Payment
due for such Tax Year by a fraction, the denominator of which shall be twelve
(12), and the numerator of which shall be the number of months of such Tax Year
elapsed prior to the first day of the month next succeeding the month during
which such Tax Statement is submitted. Appropriate credit, if any, against such
amount due shall be given in accordance with the provisions of Paragraph 39.6
hereof.
39.6 Until submission by Owner to Tenant of the Tax Statement for the
second and each subsequent Tax Year, Tenant shall continue to pay Owner, as
additional rent, on the first day of each and every month of the then current
Tax Year until the first day of the month next succeeding the month during which
such Tax Statement is submitted, the monthly installment of the Tax Payment for
the Tax Year immediately preceding such current Tax Year. The total amount of
such monthly payments paid during such current Tax Year shall be credited
towards the Tax Payment due Owner for such current Tax Year or towards the
amount due Owner pursuant to the provisions of Paragraph 39.5 hereof, and
appropriate adjustment, as of the end of the month during which such Tax
Statement is submitted, shall be made between Owner and Tenant.
39.7 If during the term of this Lease, the Taxes (or any portion
thereof) for any Tax Year shall be payable, in full or in quarterly or other
installments, on any date or dates other than as required on the date hereof,
the Tax Payment due Owner hereunder for such Tax Year shall be due and payable
in full within twenty (20) days after the submission by Owner to Tenant of a
statement therefor.
39.8 If the Base Tax is reduced as a result of a final determination
of any appropriate proceeding, settlement or otherwise, then the Base Tax, as
finally determined, shall be regarded as the Base Tax, and the Tax Payment
theretofore paid or payable by Tenant hereunder with respect to any Tax Year
shall be adjusted on the basis of such reduction. In such event, Tenant shall
pay Owner, as additional rent, within ten (10) days after receipt of a written
statement from Owner setting forth the amount and basis of such adjustment, any
deficiency between the amount of such Tax Payment as theretofore computed and
the amount thereof due as a result of such adjustment. If Owner shall receive a
refund of Taxes for any Tax Year during which Tenant has paid a Tax Payment, as
a result of a final determination of any proceeding, settlement or otherwise,
then the proceeds of such refund, less reasonable attorneys' fees and all other
fees, costs and expenses incurred in securing the same, shall be applied and
allocated to the period for which such refund was obtained, and Owner shall
either pay Tenant Tenant's Proportionate Share of such net amount allocated to
said period or, at Owner's sole option, credit the amount thereof against any
amount then or thereafter becoming due to Owner under the provisions of this
Lease or otherwise. Tenant's Proportionate Share of such net amount shall be
limited to the amount of additional rent paid by Tenant to Owner for such period
pursuant to this Article 39 on the basis of the initial assessment prior to such
reduction.
39.9 Owner shall be under no obligation to contest the Taxes for any
Tax Year or to refrain from contesting the same, and may settle any such contest
on such terms as Owner in its sole discretion shall consider proper.
39.10 If the first day of the term of this Lease is not the first day
of a Tax Year, or if the final day of the term of this Lease is not the final
day of a Tax Year, then the Tax Payment due as additional rent hereunder for
such first or final Tax Year shall be equal to the product obtained by
multiplying the Tax Payment for such Tax Year, calculated in accordance with the
provisions of this section, by a fraction, the denominator of which shall be
twelve (12), and the numerator of which shall be the number of months commencing
in such first or final Tax Year. If a Tax Statement is submitted to Tenant at or
after the expiration or termination of this
-5-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED ___,1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
Lease, Tenant shall pay Owner the Tax Payment due within twenty (20) days after
such submission.
40. Owner's Work:
------------
40.1 Owner shall, at Owner's sole cost and expense, in accordance
with the plan attached hereto as Schedule B (the "Owner's Work"), perform
Owner's Work. It is acknowledged that Owner and Tenant will both be performing
work in the demised premises prior to the Commencement Date. Each party shall
use its best efforts to avoid interfering with the performance by the other
party of its work. As used herein, the terms "substantial completion" shall mean
that Owner shall have substantially completed the work, subject only to punch
list items which do not prevent Tenant's use of the demised premises for the
conduct of Tenant's business without unreasonable interference.
40.2 Owner may make minor changes to the plan attached hereto as
Schedule B without the consent of Tenant, but only if required in order to
obtain necessary governmental approvals to perform the work shown thereon and
provided that none of such changes shall materially affect the use and operation
of the Demised Premises for the conduct of Tenant's business.
40.3 Tenant acknowledges that from time to time Owner may make
alterations, additions, installations or improvements in or to the Building or
any part thereof (whether or not Owner is required to make the same pursuant to
this Lease or otherwise), and that such work may continue for some time. Tenant
may suffer inconveniences and may possibly be deprived of full enjoyment of
Building areas, facilities or services, due to noise, debris, blocking of such
areas, temporary loss of facilities or services or for any other reason. In no
such event shall Owner be liable to Tenant solely by reason of the making of any
such alterations, additions, installations or improvements, or by reason of the
manner thereof, nor shall Tenant be entitled to any abatement of rent in
connection therewith, and the same shall not constitute an eviction, either
actual or constructive. Owner shall endeavor to be diligent with respect to all
such work and shall endeavor to the extent practical to perform such work,
except in cases of emergency, at times and in such manner as will minimize any
inconvenience to Tenant to the extent practical to perform such work, except in
cases of emergency, at times and in such manner as will minimize any
inconvenience to Tenant.
41. "As-Is" Condition:
----------------
Tenant has examined and inspected the demised premises, and except for
Owner's Work agrees to accept said demised premises in their condition existing
on the Commencement Date of the term hereof. Owner shall not be obligated to
perform any work within the demised premises unless otherwise expressly provided
herein. Owner warrants that as of the Commencement Date of this Lease the
demised premises shall be free of any Hazardous Substances and to the best
knowledge of Owner, the demised premises are in compliance with the Americans
with Disability Act (as defined below).
42. Indemnity, Liability Insurance:
------------------------------
42.1 Tenant shall indemnify and hold Owner and Owner's managing agent
harmless from and against any and all claims by or on behalf of any person, firm
or corporation, arising from any work or thing whatsoever done by or on behalf
of Tenant in or about the demised premises, and shall indemnify and hold Owner
and Owner's managing agent harmless from and against any and all claims arising
from any breach or default on the part of Tenant in the performance of any
covenant or agreement on the part of Tenant to be performed or observed pursuant
to the terms of this Lease, or arising from any act or negligence of Tenant, or
any of its agents, contractors, servants, employees or licensees, and from and
against all costs, losses, injuries, expenses and liabilities, including,
without limitation, reasonably attorneys' fees, resulting from any such claim or
action or proceeding brought thereon; and in the event that any action or
proceeding is brought against Owner or Owner's managing agent by reason of any
such
-6-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED ___, 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
claim, Tenant, upon notice from Owner, shall resist or defend, at Tenant's sole
cost and expense, such action or proceeding by counsel satisfactory to Owner.
42.1.1 Owner shall indemnify and hold Tenant harmless from and
against any and all claims by or on behalf of any person, firm or corporation,
arising from any work or thing whatsoever done by or on behalf of Owner in or
about the Building and shall hold Tenant harmless from and against any and all
claims arising from any breach or default on the part of Owner in the
performance of any covenant or agreement on the part of Owner to be observed or
performed pursuant to the terms of this Lease, or arising from any act or
negligence of Owner or any of its agents, contractors, servants, employees or
licensees, and from and against all costs, losses, injuries, expenses and
liabilities, including, without limitation, reasonable attorneys' fees,
resulting from any such claim or action or proceeding brought thereon; and in
the event that any action or proceeding is brought against Tenant by reason of
such claim, Owner, upon notice from Tenant, shall result or defend, at Owner's
sole cost and expense, such action or proceeding with counsel satisfactory to
Tenant.
42.2 Tenant shall, at its sole cost and expense, provide on or before
the Commencement Date of this Lease and keep in force at all times during the
term of this Lease, for the benefit of Owner, Owner's managing agent and Tenant,
a policy of commercial general liability insurance protecting Owner, Owner's
managing agent and Tenant against any liability whatsoever occasioned by
accident on or about the demised premises or any appurtenances thereto, and an
endorsement to such policy whereby the insurer shall insure Tenant's indemnity
obligation pursuant to Article 8 and Paragraph 42.1 hereof. Such policy shall be
written by good and solvent United States insurance companies doing and licensed
to do business in the State of New York and reasonably satisfactory to Owner,
and the limits of liability thereunder shall not be less than the amount of One
Million Dollars ($1,000,000) in respect of any one person, in the amount of Two
Million Dollars ($2,000,000) in respect of any one accident, and in the amount
of Two Million Dollars ($2,000,000) in respect of property damage. Prior to the
Commencement Date of the term of this Lease, Tenant shall deliver to Owner a
certificate evidencing such policy and endorsement. Such policy or certificate
shall require the insurer to give at least thirty (30) days written notice to
Owner prior to the cancellation, expiration or material modification thereof.
Such insurance may be carried under a blanket policy covering the demised
premises and other locations, if any, of Tenant, provided such blanket policy
conforms in amounts and all other respects to the provisions of this Lease. Each
insurance policy maintained by Tenant pursuant to this Article 42.2 shall
expressly provide that no act or omission of Tenant shall affect the validity of
such policy, its enforceability by Owner or Owner's managing agent, or the
continued responsibility thereunder, as regards Owner and Owner's managing
agent, of the insurer. Owner shall be named as an additional insured on each
insurance policy.
42.3 The provisions of this Article 42 shall be in addition to and
not in limitation of the provisions of Article 8 hereof.
42.4 Owner shall maintain during the term of this Lease, insurance
against loss or damage by fire and such other risk and hazards as are insurable
under present and future standard forms of fire and extended coverage insurance
policies, to the Building for the full insurable value thereof. Tenant shall
pay, as additional rent, its proportionate share of any increase in fire
insurance premiums (excluding any increase which are the direct result of any
acts or omissions of other tenants in the Building) applicable to the Building
after December 31, 1999 over the cost thereof for the 1999 calendar year. Each
such payment shall be made to Owner within twenty (20) days after demand by
Owner thereof. Owner and Tenant agree that Tenant's proportionate share shall be
five and sixty-five hundredths percent (5.65%). Owner shall maintain throughout
the term of the Lease general liability insurance for the entire Building.
42.5 This Lease shall contain a mutual waiver of subrogation for all
insured losses.
-7-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
43. Tenant's Alterations:
--------------------
In accordance with the provisions of Article 3 hereof, Tenant shall
not make, or permit the making of, any alterations, additions, installations or
improvements in or to the Building or any part thereof except with the prior
written consent of Owner. Owner acknowledges that Tenant may desire to make
certain interior alterations, additions, installations and improvements in and
to the demised premises (including the construction of offices, doors, interior
windows, interior signs and any construction required under Article 38 hereof)
and Owner agrees not to unreasonably withhold or delay its consent provided that
such changes do not affect the structural integrity of or utility systems in the
Building and do not materially or adversely affect the value of the demised
premises. Tenant shall have the right to erect exterior signs subject to Owner's
approval as to size, location and content, which approval shall not be
unreasonably withheld. All alterations, additions, installations and
improvements made pursuant to Article 3 hereof and this Article 43 shall be made
(a) at Tenant's sole cost and expense, (b) in accordance with the plans approved
by Owner which approval shall not be unreasonably withheld or delayed and (c) at
such times and in such manner as Owner may designate, and shall otherwise be
made in accordance with the terms and conditions set forth in Article 3 hereof
and this Article 43. All materials and equipment incorporated in the demised
premises pursuant to Article 3 hereof and this Article 43 shall be new and of
first quality and no such materials or equipment shall create a lien or
encumbrance against the Property. In the event of a conflict between the
provisions of this Section 43 and the provisions of Insert 3A to Section 3 of
the Lease, Insert 3A shall govern.
44. Fuel:
----
Tenant shall pay to Owner, as additional rent, Tenant's proportionate
share of all fuel and heat-related costs which Owner shall actually incur with
respect to the Building during the term of this Lease as set forth in this
Article 44. On the first day of each calendar month, Tenant shall pay to Owner
an amount ("Tenant's Share") equal to one twelfth (1/12) of Tenant's
proportionate share of increases in fuel and heat-related costs over the 1999
base year amount (which shall be an amount not less than $55,290.15) which will
be incurred actually by Owner with respect to the Building as estimated by Owner
in a statement delivered from time to time by Owner to Tenant. Commencing
January 1, 2000, and after the end of each calendar year, Owner shall deliver to
Tenant copies of all fuel and heat-related bills received by Owner in connection
with the Building for such calendar year, together with a written statement
reflecting Tenant's proportionate share thereof and the amount paid by Tenant
toward Tenant's Share for such calendar year. Owner and Tenant agree that
Tenant's proportionate share shall be five and sixty-five hundredths percent
(5.65%). If Tenant's proportionate share of such actual costs shall exceed the
amount paid by Tenant toward Tenant's Share for such calendar year, Tenant shall
pay to Owner the amount of such excess within twenty (20) days after receipt of
said statement. If said amount paid toward Tenant's Share shall exceed Tenant's
proportionate share of such actual costs, Owner shall reimburse Tenant for the
amount of said excess within twenty (20) days after submission of such statement
or shall credit the amount of said excess to succeeding payments by Tenant of
Tenant's Share.
45. Water and Sewer:
---------------
Owner shall deliver to Tenant a copy of all water and sewer bills
received by Owner for the Building. Within twenty (20) days after submission by
Owner to Tenant of said bills, Tenant shall pay, as additional rent, its
proportionate share of any increase in each water and sewer bill received by
Owner over a 1999 base year. Owner and Tenant agree that the Tenant's
proportionate share shall be five and sixty-five hundredths percent (5.65%).
46. Sprinklers:
----------
Owner shall maintain a sprinkler system to protect the Building from
the risks and hazards of fire. Owner shall deliver to Tenant a copy of the bills
reflecting the actual sprinkler maintenance charges for the Building. Within
twenty (20) days after submission by
-8-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
Owner to Tenant of said bills, Tenant shall pay, as additional rent, its
proportionate share of any increase in the sprinkler maintenance charges over a
1999 base year. Owner and Tenant agree that the Tenant's proportionate share
shall be five and sixty-five hundredths percent (5.65%).
47. Parking:
-------
Owner shall provide Tenant with the exclusive use of six (6)
automobile parking spaces available in the parking lot at the corner of 38th
Street and 36th Avenue in Queens, New York. Said spaces shall be specifically
designated as "reserved" for Tenant and used solely for passenger vehicles (but
not for the storage thereof). Owner may at any time move said spaces to another
area within said parking lot.
48. Intentionally Omitted
49. Limitation of Liability:
-----------------------
Whether Owner or any successor in interest be an individual, joint
venture, tenancy in common, co-partnership, unincorporated association or other
unincorporated aggregate of individuals or a corporation (all of which are
referred to herein, individually and collectively, as the "Owner"), then,
anything elsewhere to the contrary notwithstanding, if at any time Owner shall
be or shall become liable to Tenant under the terms of this Lease or otherwise,
such liability of Owner shall be limited to Owner's interest in the demised
premises and no other property or assets of Owner shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
claims.
50. Saving Provision:
----------------
If any provision of this Lease, or its application to any situation,
shall be invalid or unenforceable to any extent, the remainder of this Lease, or
the application thereof to situations other than those as to which it is invalid
or unenforceable, shall not be affected thereby, and every provision of this
Lease shall be valid and enforceable to the fullest extent permitted by law.
51. Lease Not Binding Unless Executed:
---------------------------------
Submission by Owner of this Lease for execution by Tenant shall confer
no rights nor impose any obligations on either party unless and until both Owner
and Tenant shall have executed this Lease and duplicate originals thereof shall
have been delivered by each party to the other.
52. Interest on Late Payments:
-------------------------
If Owner shall not have received any payment due Owner from Tenant
under the provisions of this Lease, including, without limitation, any payment
of fixed rent, additional rent or any portion, installment or adjustment
thereof, then interest shall become due and owing to Owner on such payment from
the date which is ten (10) days after when it was due, and the amount thereof
shall constitute additional rent under the terms of this Lease and shall be
collectible as such. The interest shall be computed at the rate of five percent
(5%) per annum over the prime rate of The Chase Manhattan Bank, N.A., or its
successor in interest, then in effect, but in no event shall such interest be
computed at a rate in excess of the maximum legal rate of interest then
chargeable to Tenant in the State of New York. The payment of interest as
provided in this Article 52 shall be without prejudice, and in addition, to any
of Owner's rights and remedies under this Lease or at law for the default by
Tenant in fulfilling the covenant to pay fixed or additional rent beyond the
applicable notice and cure period.
53. Intentionally Omitted
54. Intentionally Omitted
-9-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
55. Security:
--------
55.1 Supplementing Article 34 hereof, Tenant shall deposit with Owner
as a security deposit, upon the execution of this Lease, the sum of Sixty Two
Thousand Five Hundred and 00/100 Dollars ($62,500.00) and upon the Rent
Commencement Date an additional Sixty Two Thousand Five Hundred and 00/100
Dollars ($62,500.00) for a total security deposit of One Hundred Twenty Five
Thousand and 00/100 Dollars ($125,000.00), to be paid and delivered to Owner.
The deposit shall be reduced annually on the anniversary of the Commencement
Date by $15,000.00 each year until the Security Deposit is reduced to
$36,000.00.
55.2 Said deposit shall be held by Owner, with interest, as security
for the faithful performance by Tenant of all of the terms, covenants and
conditions of this Lease by Tenant to be performed, observed and/or complied
with hereunder. It is agreed that in the event Tenant defaults beyond the
applicable notice and cure period in respect of any of the terms, covenants or
conditions of this Lease, including, but not limited to, the payment of Base
Rent, additional rent or any other sum or charge to be paid by Tenant hereunder
Owner may (but shall not be required to) use, apply or retain the whole or any
part of said deposit to the extent required for the payment of Base Rent,
additional rent reserved hereunder or any other sum or charge to be paid by
Tenant hereunder, or for any costs, expenses (including, but not limited to, any
damages or deficiency in the reletting of the demised premises, whether such
damages or deficiency accrued before or after summary proceedings or other re-
entry by Owner) paid, incurred or suffered by Owner.
55.3 Should all or any portion of said deposit be used, applied,
retained or drawn by Owner, Tenant shall, upon the written demand by Owner,
forthwith remit to Owner an amount in cash sufficient to restore said deposit to
the then applicable amount. Tenant's failure to so restore within twenty (20)
days after the date of the giving of such demand shall constitute a default
under this Lease.
55.4 In the event that Tenant shall fully and faithfully observe,
perform and comply with all of its obligations hereunder, said deposit, together
with all interest accrued thereon, shall be returned in full to Tenant after the
date fixed as the date of the termination or expiration of this Lease by the
terms, covenants and conditions hereof, and after delivery of entire possession
of the demised premises to Owner in accordance with the terms of this Lease.
55.5 Owner may deliver or assign its rights to and interest in said
deposit to the purchaser or lessee of Owner's interest in the demised premises
in the event such interest be sold, transferred, assigned, Leased or otherwise
conveyed, and thereupon Owner shall be released and discharged from any further
liability to Tenant or otherwise with respect to said deposit.
55.6 In the event that Tenant desires that the Security Deposit be in
the form of a letter of credit, Tenant may deliver to Owner a clean,
unconditional and irrevocable letter of credit (the "Letter of Credit") in the
amount of the then required Security Deposit, issued in favor of Owner by a bank
reasonably acceptable to Owner. Tenant shall deliver a certificate of renewal or
replacement Letter of Credit to Owner at least thirty (30) days prior to the
expiration of the Letter of Credit then being held by Owner.
56. Assignment and Subletting:
-------------------------
Tenant may sublet all or a portion of the demised premises or assign
this Lease with Owner's prior written consent which shall not be unreasonably
withheld or delayed provided that:
(a) Tenant shall furnish Owner with the name and business address of
the proposed subtenant or assignee, a counterpart of the proposed subleasing or
assignment
-10-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
agreement, and reasonably satisfactory information with respect to the nature
and character of the business of the proposed subtenant or assignee together
with current financial information and references reasonably satisfactory to
Owner.
(b) In the reasonable judgment of the Owner the proposed subtenant
or assignee is financially responsible with respect to its proposed obligations
under the proposed agreement and is of a character and engaged in a business
which is in keeping with the standards of the Building.
(c) An executed duplicate original in a form reasonably satisfactory
to Owner for review by Owner's counsel of such subleasing or assignment
agreement shall be delivered to Owner at least thirty (30) days prior to the
effective date thereof. In the event of any assignment, Tenant will deliver to
Owner at least thirty (30) days prior to the effective date thereof an
assumption agreement wherein the assignee agrees to assume all of the terms,
covenants and conditions of this Lease to be performed by Tenant hereunder and
which provides that Tenant named herein and such assignee shall, after the
effective date of such assignment, be jointly and severally liable for the
performance of all of the terms, covenants and conditions of this Lease.
(d) Without limiting the terms upon which Tenant may assign or
sublet, Tenant further agrees that it shall not at any time publicly advertise
at a rental rate less than the fixed rent plus any additional rent then payable
hereunder, for assignment or sublease of all or part of the demised premises
(but listing of the Demised Premises with a broker shall not violate this
section).
(e) Tenant shall have no right to assign this Lease or sublet the
same to any party who is dealing with or has dealt with Owner or Owner's agent
with respect to space then still available for rent in the Building within the
twelve (12) months immediately preceding Owner's receipt of Tenant's notice
pursuant to Section (h) of this Article 56.
(f) Tenant shall not be in default beyond the applicable notice and
cure period with respect to its obligations under this Lease and shall have
complied and shall comply with each of the provisions in this Article 56 and
Owner shall not have made any election as provided in Section (h) of this
Article 56.
(g) The consent by Owner to any assignment, subletting or occupancy
shall not in any wise be construed to relieve Tenant from obtaining the express
consent in writing of Owner to any further assignment or subletting.
(h) If Tenant shall desire to assign this Lease or sublet the
demised premises, Tenant shall send Owner written notice thereof at least ninety
(90) days prior to the intended date thereof, which notice shall contain the
terms and conditions of any such proposed assignment or subletting. Provided
that the assignee or subtenant's proposed use for the demised premises differs
in any material way from the current use. Owner shall have the right within
sixty (60) days after receipt of Tenant's notice to cancel this Lease with
respect to the portion of the demised premises to be assigned or sublet, Owner
shall notify Tenant in writing of such cancellation, in which event, such
cancellation shall become effective upon the proposed date of such assignment or
subletting and such date shall then be deemed to be the expiration of the term
of this Lease with respect to the portion of the demised premises to be assigned
or sublet subject to all the provisions hereof relating thereto and Tenant shall
be responsible for all obligations and payments to be made by it accruing prior
to such expiration date. Provided that the assignee or subtenant's proposed use
for the demised premises differs in any material way from the current use, in
the event Tenant proposes to assign or sublet seventy-five percent (75%) or more
of the demised space, Owner shall have the right to cancel this Lease, in its
entirety with respect to the demised premises in the manner set forth above.
(i) If Tenant should sublet the entire demised premises for a rental
in excess of the sum of fixed rent stipulated herein and additional rent arising
hereunder, then
-11-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED ___, 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
Tenant shall pay to Owner fifty (50%) of the excess amount actually paid to
Tenant less "Transfer Expenses". "Transfer Expenses" shall mean (i) the
reasonable out-of-pocket costs and expenses of Tenant in making such sublease
such as brokers' fees, attorneys' fees and advertising fees, (ii) any fees paid
to Owner pursuant to the terms of this Lease, (iii) the cost of improvements or
alterations made by Tenant expressly for the purpose of preparing the Demised
Premises for such subtenant, and (iv) the unamortized cost of any Tenant's
property leased to and used by such subtenant. in determining Transfer Expenses,
the costs set forth in clauses (i), (ii) and (iii) shall be amortized on a
straight-line basis over the term of the sublease and the costs set forth in
clause (iv) shall be amortized on a straight-line basis over the greater of (x)
the longest useful life of such improvements, alterations or property (as
permitted pursuant to the Internal Revenue Code of 1986, as amended) or (y) the
term of the sublease.
(j) Tenant hereby waives any claim against Owner for money damages
which it may have based upon any assertion that Owner has unreasonably withheld
or unreasonably delayed any consent to an assignment or subletting pursuant to
this Article 56. Tenant agrees that its sole remedy shall be an action or
proceeding to enforce such provision or for specific performance.
(k) Tenant shall reimburse Owner within twenty (20) days after
demand for any reasonable costs, fees and expenses that may be incurred by Owner
in connection with such sublease or assignment, including but not limited to the
cost of making investigations as to the acceptability of the proposed subtenant
or assignee and reasonable legal costs incurred in connection with the granting
of any requested consent.
(l) No sublease or assignment shall be valid and no sublessee or
assignee shall take possession of the demised premises or any part thereof,
until an executed counterpart of such sublease or assignment has been delivered
to Owner.
(m) Each sublease and assignment shall provide that it is subject
and subordinate to this Lease and to matters to which this Lease is or shall be
subordinate, and shall further provide that in the event of termination, re-
entry or dispossession by Owner under this Lease, Owner may, at its option take
over all of the right, title and interest of Tenant, as sublessor or assignor
under such sublease or assignment, and such subtenant or assignee shall, at
Owner's option, attorn to Owner pursuant to the then executory provisions of
such sublease or assignment except that Owner shall not (i) be liable for any
previous act or omission of Tenant under such sublease or assignment (ii) be
subject to any offset not expressly provided in such sublease or assignment
which therefore accrued to such subtenant or assignee against Tenant or (iii) be
bound by any previous modification of such sublease or assignment (unless
previously consented to by Owner) or by any previous prepayment of more than one
month's rent or equivalent assignment consideration.
(n) In the case of all subleases and assignments under this Article
56, Tenant shall and will remain fully liable for the payment of the fixed rent
and any additional rent due or to become due hereunder and for the performance
of al the covenants, agreements, terms, provisions and conditions contained in
this Lease on the part of the Tenant to be performed and all acts and omissions
of any subtenant or assignee or anyone claiming through or under any subtenant
or assignee, which shall be in violation of any of the obligations of this
Lease, shall be deemed to be a violation of Tenant.
(o) For the purposes hereof, it is understood that a sale, transfer
or other disposition by Tenant of control of Tenant by transfer of a majority of
the shares of stock of Tenant shall be subject to Owner's consent, which consent
shall not be unreasonably withheld or delayed.
(p) Notwithstanding anything to the contrary contained in this
Lease, Tenant may, upon ten (10) days written notice to Owner but without
Owner's prior written consent, and without Owner having any right to terminate
this Lease or share in any consideration or profit therefor, assign or transfer
its entire interest in this Lease and the
-12-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
leasehold estate hereby created, or sublease the entire demised premises, to a
successor corporation of Tenant, which for the purposes of this Lease shall mean
either (a) any corporation or other business entity which controls, is
controlled by, or under common control with, Tenant (a "related corporation"),
or (b) a corporation or other business entity into which or with which Tenant,
its corporate successors or assigns, is merged or consolidated, in accordance
with applicable statutory provisions for the merger or consolidation of
corporations, provided that by operation of law or by effective provisions
contained in the instruments of merger or consolidation the liabilities of the
corporations or other business entities participating in such merger or
consolidation, or (c) a corporation or other business entity acquiring
substantially all of Tenant's assets located in the Demised Premises, or (d) any
successor to a successor corporation becoming such by any of the methods
described in subdivisions (a), (b) and (c) above; provided, however, that Tenant
shall have no such right to assign or transfer to a successor corporation unless
Tenant shall not be in default in the performance of any of its obligations
under this Lease beyond the applicable notice and cure period and with respect
to subdivision (c) above, as of the date of such transfer, the purchaser has the
reasonable financial ability to perform its obligations with respect to this
Lease and/or the Demised Premises. For the purposes hereof "control" shall be
deemed to mean ownership of not less than fifty percent (50%) of all of the
voting stock of such corporation, or not less than fifty percent (50%) of all of
the legal and equitable interest in any other business entity, or the possession
of the power, directly or indirectly, to direct or cause the direction of
management and policy of a corporation or other business entity, whether through
the ownership of voting securities, common directors or officers, the
contractual right to manage the business affairs of such business entity, or
otherwise. Notwithstanding anything to the contrary contained in this Lease (x)
any sale or transfer of Tenant's capital stock through any public exchange, or
redemption or issuance of additional stock of any class, shall not be deemed an
assignment, subletting or any other transfer of this Lease or the Demised
Premises and (y) any successor corporation may use the demised premises for any
lawful use.
57. Survival of Obligations:
-----------------------
The following obligations of Owner and Tenant shall survive the
expiration or earlier termination of this Lease: (i) Tenant's obligation to pay
fixed and additional rent under this Lease and Owner's obligation to refund any
excess payments of additional rent under this Lease (including but not limited
to, said obligations of Owner and Tenant under Articles 37, 38, 39, 40, 43, 45,
46 and 47 hereof) and (ii) the obligations of Owner and Tenant pursuant to
Article 58 hereof.
58. Brokers:
-------
Owner and Tenant represent and warrant that it has dealt with no
broker, finder, agent or any other person in connection with the negotiation or
execution of this Lease or the showing or leasing of the demised premises other
than Greiner-Maltz and Equis of New York, Inc. (collectively, the "Broker") and
Owner and Tenant shall indemnify and hold the other harmless from and against
any and all liability, cost or expense (including, without limitation,
reasonable attorneys' fees) resulting from any claims of whatsoever nature of
any broker, finder, agent or any other person claiming to have been involved in
any manner whatsoever other than Greiner-Maltz and Equis of New York, Inc. in
the leasing of the demised premises, in the execution of this Lease or in the
negotiation thereof. Owner shall be responsible to pay the Broker pursuant to a
separate agreement.
59. Environmental Compliance:
------------------------
(a) (i) Tenant agrees to comply with all applicable environmental
laws, rules and regulations ("Environmental Laws") regarding Tenant's use of the
demised premises.
(ii) Owner agrees to comply with all applicable Environmental
Laws regarding Owner's use of the building.
-13-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED 1999, BETWEEN STANDARD
MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS TENANT,
COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18 NORTHERN
BOULEVARD, LONG ISLAND CITY, NEW YORK
(b) Tenant shall bear all costs and expenses incurred by Owner
associated with any required compliance resulting solely and directly from (i)
Tenant's use of the demised premises, (ii) the presence, use of storage of any
Hazardous Substance (as defined below) on or under or in the demised premises,
or the spill, discharge or release of any Hazardous Substance from the demised
premises including, but not limited to, state agency fees, engineering fees,
clean-up costs, filing fees, suretyship expenses and costs and expenses to third
parties caused solely and directly by Tenant. The foregoing undertaking shall
survive the termination or sooner expiration of this Lease and surrender of the
demised premises and shall also survive sale, or lease or assignment of the
demised premises by Owner. Tenant shall promptly provide Owner with copies of
all correspondence, reports, notices, orders, findings, declarations and other
materials relevant to Tenant's compliance with applicable Environmental Laws.
Tenant hereby agrees to execute such documents Owner reasonably deems necessary
and to make such applications as Owner reasonably requires to assure compliance
with Environmental Laws, by Tenant.
(c) Tenant shall not generate, store, manufacture, refine,
transport, treat, dispose of, or otherwise permit to be present on or about the
demised premises, any Hazardous Substances. As used herein, Hazardous Substances
shall be defined as any "hazardous chemical", "hazardous substance" or similar
term as defined in the Comprehensive Environmental Responsibility Compensation
and Liability Act, as amended (43 U.S.C. 960J et seq.), any rules or regulations
-- ---
promulgated thereunder, or in any other present or future applicable legal
requirement dealing with environmental protection (except for commercial
reasonable amounts of Hazardous Substances used for cleaning and other uses
customary in commercial Buildings, with respect to which Tenant shall comply
with all present or future applicable legal requirements dealing with
environmental protection and all Environmental Laws).
(d) Tenant and Owner shall defend, indemnify and hold harmless each
other and each mortgagee of the demised premises from and against any and all
claims, fines, penalties, liabilities, losses, damages, judgments, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses)
which may be incurred by Tenant or Owner or any such mortgagee or threatened
against Tenant or Owner or any such mortgagee, relating to or arising out of any
breach by Tenant or Owner of their respective obligations hereunder of this
Article 59, which indemnification shall survive the expiration or sooner
termination of this Lease.
(e) Owner acknowledges that Tenant is installing a generator and
fuel tank at the Building of which the demised premises forms a part and Tenant
agrees to maintain same in compliance with the terms hereof.
60. Tenant may at its own cost and expense access fiber optic cables to
the demised premises. All work plans with respect to the access of fiber optic
cables must be approved by Owner, such approval not to be unreasonably withheld,
and Tenant shall be responsible for repairing any and all damage to the Building
and the property upon which it is situated.
61. Renewal Option:
--------------
In the event Tenant is not in default beyond the applicable notice and
cure period of any terms of this Lease, Tenant shall have an option to renew
this Lease for two (2) consecutive additional five (5) year periods upon the
condition that Tenant gives to Owner notice at least one hundred twenty (120)
days prior to the expiration of the then existing initial term or renewal term
of said Lease of its intention to renew; the amount of rent for said renewal
periods shall be equal to the fair market rental value for the demised premises.
In the event Owner and Tenant cannot agree on the fair market rental value then
same shall be submitted to arbitration.
-14-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITy NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18
NORTHERN BOULEVARD, LONG ISLAND CITY, NEW YORK
62. Fair Market Rent/Determination:
------------------------------
For purposes of determining the Fair Market Rent, the following
procedure shall apply:
(i) Owner and Tenant shall each contemporaneously deliver to the
other a written notice (each a "Rent Notice") on a date mutually
agreed upon, but in no event later than one hundred twenty (120) days
prior to the Expiration Date and, if no date is mutually agreed upon,
then on the one hundred twentieth 9120th) day prior to the Expiration
date, which Rent Notice shall set forth each of their respective
determinations of the Fair Market Rent (Owner's determination of the
Fair Market Rent is referred to as "Owner's Determination" and
Tenant's determination of the Fair Market Rent is referred to as
"Tenant's Determination"). If Owner shall fail or refuse to give such
Rent Notice as aforesaid, Owner's Determination shall be deemed to be
equal to the Fixed Annual Rent then payable by Tenant on the
Expiration Date, and if Tenant shall fail or refuse to give such Rent
Notice as aforesaid, Tenant's Determination shall be deemed to be
equal to the Fixed Annual Rent then payable by Tenant on the
Expiration Date. If neither Owner nor Tenant shall deliver a Rent
Notice as aforesaid, the Fair Market Rent shall be deemed to be equal
to the Fixed Annual Rent then payable by Tenant on the Expiration
Date.
(ii) If Owner's Determination and Tenant's Determination are not
equal and Tenant's Determination is lower than Owner's Determination,
and either Determination exceeds an amount equal to the Fixed Annual
Rent then payable by Tenant on the Expiration Date, Owner and Tenant
shall attempt to agree upon the Fair Market Rent. If Tenant's
Determination is higher than Owner's Determination, the Fixed Annual
Rent for the applicable Renewal Term shall be equal to Owner's
Determination. If Owner and Tenant shall mutually agree upon the
determination (the "Mutual Determination") of the Fair Market Rent,
their determination shall be the Fixed Annual Rent for the Renewal
Term, and shall be final and binding upon the parties. If Owner and
Tenant shall be unable to reach a Mutual Determination within ten (10)
days after delivery of both Determinations to each party, Owner and
Tenant shall jointly select an independent real estate appraiser (the
"Appraiser") whose fee shall be borne equally by Owner and Tenant. In
the event that Owner and Tenant shall be unable to jointly agree on
the designation of the Appraiser within five (5) days after they are
requested to do so by either party, then the parties agree to allow
the American Arbitration Association, or any successor organization to
designate the Appraiser in accordance with the rules, regulations
and/or procedures then obtaining of the American Arbitration
Association or any successor organization.
(iii) The Appraiser shall conduct such heatings and
investigations as he may deem appropriate and shall, within thirty
(30) days after the date of designation of the Appraiser, choose
either Owner's or Tenant's Determination and such choice by the
Appraiser shall be conclusive and binding upon Owner and Tenant. Each
party shall pay its own counsel fees and expenses, if any, in
connection with any arbitration under this Article 62. The Appraiser
appointed pursuant to this Article 62 shall be an independent real
estate appraiser with at least ten (10) years experience in leasing
and valuation of properties which are similar in character to the
Building, and a member of the American Institute of Appraisers of the
National Association of Real Estate Boards and a member of the Society
of Real Estate Appraisers. The Appraiser shall not have the power to
add to, modify or change any of the provisions of this Lease.
(iv) It is expressly understood that in connection with any
determination of the Fair Market Rent pursuant to this Article 62, the
following criteria shall be considered, among other things, in the
determination:
-15-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED______, 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18
NORTHERN BOULEVARD, LONG ISLAND CITY, NEW YORK
(A) the fact that the Base Tax Year provided herein
shall not change for the purpose of calculating the Tax
Payment payable pursuant to this Lease;
(B) the fact that Tenant shall have no further right to
renew this Lease except as set forth herein;
(C) the fact that Owner shall not obligated to perform
any work in the Demised Premises to prepare the same for
Tenant's occupancy;
(D) the fact that Tenant shall not be entitled to any
free rent or other similar credit against the Fixed Annual
Rent; and
(E) whether or not Owner is or is not obligated to pay
a brokerage commission with respect to the applicable
Renewal Term.
After a determination has been made of the Rental Value for the
applicable Renewal Term, the parties shall execute and deliver to
each other an instrument setting forth the Fixed Annual Rent for
the applicable Renewal Term as hereinabove determined.
63. Owner's Interests.
-----------------
Owner represents and warrants to Tenant that as of the date
hereof, (i) Owner is authorized to execute this Lease, (ii) no consent of
any third party (other than any governmental authority, as applicable) is
required in connection with any of Tenant's rights under this Lease,
including, without limitation, Tenant's right to make alterations, install
and maintain signage, assign this Lease or sublet the Demised Premises, and
(iii) fee title to the Building of which the demised premises forms a part
is held by the New York City Industrial Development Authority (the "IDA")
pursuant to a financing arrangement with the IDA, upon repayment of certain
moneys borrowed by Owner from the IDA, title will revert back to Owner.
Owner agrees to hold Tenant harmless and indemnify Tenant for any loss,
costs or expenses incurred by Tenant as a result of the failure of such
representation and warranty to be true.
64. Subordination.
-------------
This Lease is subject and subordinate to that certain mortgage
between the New York City Industrial Development Agency and the United
States Trust Company of New York. Owner's right and privilege to
subordinate this Lease is conditioned upon Owner procuring from any such
mortgagee a written agreement (hereinafter referred to as a "Non-
Disturbance Agreement"), which shall be delivered to Tenant, providing in
substance that (i) so long as Tenant substantially performs the obligations
imposed upon tenant hereunder with the applicable notice or cure period,
its tenancy will not be disturbed, nor its rights under this Lease affected
by, any default under such mortgage nor shall tenant be named as a
defendant in any foreclosure proceeding, (ii) any such mortgagee or
purchaser of Owner's interest through foreclosure sale or deed in lieu
thereof shall permit any insurance proceeds or condemnation award to be
used as provided under applicable sections hereof and in the event of any
foreclosure under any such mortgage or deed of trust, or a granting of a
deed in lieu thereof, shall otherwise assume the obligations of Owner under
this Lease and (iii) that the Non-Disturbance Agreement shall be binding
upon and inure to the benefit of the successors or assigns of the parties
thereto. Owner shall use Owner's best efforts to obtain a Non-Disturbance
Agreement from the current mortgagees, if any.
65. It is expressly agreed and understood that neither Owner nor
Tenant shall be liable or responsible to the other for any consequential
damages, including but not limited to, loss of business which Tenant or
Owner may sustain or incur as a result of an interruption of services being
supplied to the Building or any default by Owner or Tenant under the Lease.
-16-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18
NORTHERN BOULEVARD, LONG ISLAND CITY, NEW YORK
IN WITNESS WHEREOF, Owner and Tenant have respectively executed this
Lease as of the day and year first above written.
STANDARD MOTOR PRODUCTS, INC.,
as Owner
By:/s/ David Kerner
----------------------------
Name: DAVID KERNER
Title: TREASURER
COMMUNITY NETWORKS, INC., as Tenant
By:/s/ Scott M. Matukas
----------------------------
Name: SCOTT M. MATUKAS
Title: VP HR & ADMIN
-17-
<PAGE>
RIDER ANNEXED TO AND FORMING PART OF LEASE DATED , 1999, BETWEEN
STANDARD MOTOR PRODUCTS, INC., AS OWNER, AND COMMUNITY NETWORKS, INC., AS
TENANT, COVERING A PORTION OF THE SECOND FLOOR IN THE BUILDING AT 37-18
NORTHERN BOULEVARD, LONG ISLAND CITY, NEW YORK
SCHEDULE B
Owner's Work/Base Building
. Provide tie-ins to the Building fire and life safety systems
. Provide main sprinkler loop outside the demised premises, Tenant, at
Tenant's expense, will provide a pre-action valve system.
. Isolate HVAC system servicing demised space from other systems.
. Provide pad space for Tenant's diesel emergency generator and day tank
and access to same from rear platform.
. Provide access way for an electrical conduit from generator to
Tenant's ATS switch located at the Tenant's service breaker as
designated by the Owner.
. Provide demising partitions and access ways in accordance with all
codes having jurisdiction (to be defined further subject to
architectural plans).
. Provide all interior demo (Tenant to provide a Demolition Plan).
. Provide the right and access to install horizontal and vertical
conduit for fiber optics, subject to Owner's approval, which shall not
be unreasonably withheld.
. Provide one ADA compliant lavatory.
. Deliver premises in broom cleaning condition.
-18-
<PAGE>
EXHIBIT A
---------
[GRAPHIC]
FLOOR PLAN
<PAGE>
[GRAPHIC]
CERTIFICATE OF OCCUPANCY
<PAGE>
[GRAPHIC]
FLOOR PLAN
<PAGE>
[GRAPHIC]
FLOOR PLAN
<PAGE>
[GRAPHIC]
FLOOR PLAN
<PAGE>
EXHIBIT 10.6
[LOGO OF BROADVIEW NETWORKS]
- --------------------------------------------------------------------------------
Existing Lease Abstract -- Downtown Manhattan
Building: 59 Maiden Lane -- Manhattan
Lease Date: December 30,1999
Landlord: 59 Maiden Lane Associates, LLC
Tenant: Broadview Networks, Inc.
Premises: Entire 27th Floor
Rentable Area: Approximately 17,625 RSF
Lease Term: Ten (10) Years
Lease Commencement: Upon completion of Landlord's work, estimated to be May
1, 2000
Lease Expiration: Estimated to be April 30, 2010
Rent Commencement: Three (3) months after Lease Commencement
Base Rent: Years 1-5: $33.00 pRSF
Years 6-10: $36.00 pRSF
Electricity: Sub-metered
Real Estate Taxes: Tenant shall pay its proportionate share of increases
over a 1999-2000 Base Year.
Operating Expense: Tenant shall pay its proportionate share of increases
over a 2000 Base Year.
Use: General and executive offices.
Sublet/Assignment: Tenant may sublet all or a portion of the premises or
assign the lease with prior written consent of owner,
which may not be unreasonably withheld or delayed.
There shall be 50% profit sharing.
Termination Option(s): Tenant shall have the right to terminate if the
Landlord's work is not completed 270 days from when the
plans are submitted.
Expansion Option(s): Tenant shall have the Expansion Rights on an additional
floor In the same elevator bank as the 27th floor (i.e.
21st through 31st floors). Written notice to expand
must be given by March 31, 2000.
Security Deposit: $363,515.63
Renewal Option(s): Tenant shall have one (1) five (5) year renewal option
with twelve (12) months written notice.
Holdover: 150%
Eguis
- --------------------------------------------------------------------------------
01/14/00
<PAGE>
LEASE
between
59 MAIDEN LANE ASSOCIATES, LLC
Landlord
and
BROADVIEW NETWORKS, INC.
Tenant
December 30, 1999
PREMISES:
59 Maiden Lane
New York, New York 10038
Entire 27th Floor
<PAGE>
Page:
----
ARTICLE 1 Term and Fixed Rent .............................................. 1
ARTICLE 2 Delivery and Use of Premises ..................................... 4
ARTICLE 3 Escalations ..................................................... 13
ARTICLE 4 Security ........................................................ 22
ARTICLE 5 Subordination, Notice to Superior Lessors and Mortgagees ........ 23
ARTICLE 6 Quiet Enjoyment ................................................. 26
ARTICLE 7 Assignment, Subletting and Mortgaging ........................... 26
ARTICLE 8 Compliance with Laws ............................................ 35
ARTICLE 9 Insurance ....................................................... 37
ARTICLE 10 Rules and Regulations ........................................... 39
ARTICLE 11 Alterations ..................................................... 40
ARTICLE 12 Landlord's and Tenant's Property ................................ 44
ARTICLE 13 Repairs and Maintenance ......................................... 45
ARTICLE 14 Electricity ..................................................... 46
ARTICLE 15 Landlord's Services ............................................. 51
ARTICLE 16 Access and Name of Building ..................................... 56
ARTICLE 17 Notice of Occurrences ........................................... 59
ARTICLE 18 Non-Liability and Indemnification ............................... 59
ARTICLE 19 Damage or Destruction ........................................... 60
ARTICLE 20 Eminent Domain .................................................. 63
i
<PAGE>
ARTICLE 21 Surrender ........................................................ 64
ARTICLE 22 Conditions of Limitation ......................................... 65
ARTICLE 23 Reentry by Landlord .............................................. 69
ARTICLE 24 Damages .......................................................... 70
ARTICLE 25 Affirmative Waivers .............................................. 72
ARTICLE 26 No Waivers ....................................................... 73
ARTICLE 27 Curing Tenant's Defaults ......................................... 73
ARTICLE 28 Broker ........................................................... 74
ARTICLE 29 Notices .......................................................... 75
ARTICLE 30 Estoppel Certificates ............................................ 76
ARTICLE 31 Memorandum of Lease .............................................. 77
ARTICLE 32 No Representations by Landlord ................................... 77
ARTICLE 33 Intentionally Omitted ............................................ 77
ARTICLE 34 Holdover ......................................................... 77
ARTICLE 35 Miscellaneous Provisions and Definitions ......................... 79
ARTICLE 36 Partnership Tenant ............................................... 87
ARTICLE 37 Good Guy Guaranty ................................................ 87
ARTICLE 38 Extension of Term ................................................ 90
ARTICLE 39 Additional Space ................................................. 94
Exhibit A: Description of Land
Exhibit B: Floor Plan of Premises
Exhibit C: Work Letter
Exhibit D: Rules and Regulations
Exhibit E: Tenant Construction Approval Procedures
Exhibit F: Standard Form: Subordination, Non-disturbance and Attornment
Agreement
ii
<PAGE>
LEASE (herein called this "Lease"), dated as of December 30, 1999, between
59 MAIDEN LANE ASSOCIATES, LLC, a New York limited liability company, having an
office at c/o AmTrust Realty Corp., 250 Broadway, New York, New York 10007
(herein called "Landlord") and, BROADVIEW NETWORKS, INC., a New York
corporation, having an office at 45-18 Court Square, Long Island City, New York
11101 (herein called "Tenant").
Landlord and Tenant do hereby covenant and agree as follows:
ARTICLE 1
Term and Fixed Rent
-------------------
1.01. Landlord hereby leases to Tenant. and Tenant hereby hires from
Landlord, upon and subject to the terms, covenants, provisions and conditions of
this Lease, the premises described in Section 1.02 in the building (herein
called the "Building") known as 59 Maiden Lane (a/k/a 41-65 Maiden Lane. a/k/a
50-66 John Street, a/k/a 85-109 Williams Street) in the City, County and State
of New York. The Building is located on the land (herein called the "Land")
described in Exhibit A annexed hereto and made a part hereof.
1.02. The premises (herein called the "Premises") leased to Tenant consists
of the entire 27th floor of the Building, substantially as shown on the floor
plan attached hereto as Exhibit B and made a part hereof. Landlord and Tenant
hereby covenant and agree that the Premises shall be deemed to contain 17,625
rentable square feet. Landlord hereby grants to Tenant the non-exclusive right
to use, in common with others, the public areas of the Building to the extent
required for access to the Premises or use of the Premises for general and
executive offices, including, without limitation, common hallways on the floor
on which the Premises are located, stairways, restrooms on the floor on which
the Premises are located, and the Building lobby, subject to the terms,
covenants, provisions and conditions of this Lease.
1.03. The term of this Lease (a) shall commence on the Commencement Date
(as defined in Section 1.05 hereof) and (b) shall end at 11:59 p.m. on the last
day of the month in which the ten (10) year, three (3) month anniversary of the
day preceding the Rent Commencement Date occurs (herein called the "Expiration
Date") or on such earlier date upon which the term of this Lease shall expire or
be canceled or terminated pursuant to any of the conditions or covenants of this
Lease or pursuant to law.
1.04. The rents shall be and consist of:
(a) fixed rent (herein called "Fixed Rent") for the Premises at the
following rates during the following periods:
<PAGE>
(i) FIVE HUNDRED EIGHTY-ONE THOUSAND SIX HUNDRED TWENTY-FIVE
AND 00/100 ($581,625.00) DOLLARS per annum during the
period commencing on the Rent Commencement Date and ending
on the day preceding the fifth (5th) anniversary of the
Rent Commencement Date; and
(ii) SIX HUNDRED THIRTY-FOUR THOUSAND FIVE HUNDRED AND 00/100
DOLLARS ($634,500.00) per annum during the period
commencing on the fifth (5th) anniversary of the Rent
Commencement Date ending on the Expiration Date, which
Fixed Rent shall be payable in equal monthly installments
in advance on the first day of each and every calendar
month during the term of this Lease, except for the first
installment of Fixed Rent (i.e. $48,468.75) shall be paid
by Tenant upon the execution of this Lease; and
(b) additional rent (herein called "Additional Charges") consisting
of Tax Payments (hereinafter defined), Operating Payments
(hereinafter defined), charges for electricity furnished to
Tenant and all other sums of money as shall become due from and
payable by Tenant to Landlord hereunder;
all to be paid in lawful money of the United States to Landlord at its office,
or such other place, or to Landlord's agent and at such other place, as Landlord
shall designate by notice to Tenant.
1.05. The "Commencement Date" shall be the earlier to occur of: (i) the
date on which "Landlord's Work" (as such term is defined in Section 2.01(a)
hereof) shall be "Substantially Completed" (as such term is defined in Section
2.01(c) hereof) or shall be deemed to be Substantially Completed pursuant to the
provisions of Section 2.01(g) hereof, or (ii) the date Tenant or anyone claiming
under or through Tenant, first occupies the Premises, or any part thereof, for
the preparation of the Premises for Tenant's occupancy or for the conduct of its
business or for any other purpose. Tenant and Landlord shall, upon the demand of
either Tenant or Landlord, execute, acknowledge and deliver an instrument in
form reasonably satisfactory to Landlord confirming the Commencement Date and
Expiration Date of this Lease; provided, however, that the failure of Tenant or
Landlord to execute, acknowledge and deliver such instrument shall not affect in
any manner whatsoever the validity of the Commencement Date, as determined
pursuant to the first sentence of this Section 1.05. Notwithstanding anything to
the contrary contained herein, Landlord agrees to allow Tenant (and its
contractors and design consultants) access to the Premises upon reasonable
advance notice to Landlord prior to the Commencement Date to the extent
necessary for the sole purpose of taking measurements and preparing plans in
connection with any alterations or fixtures to be installed by Tenant in the
Premises, subject to the provisions of this Lease and provided that such access
by Tenant will not interfere with or delay the Substantial Completion of
Landlord's Work. In connection with such
2
<PAGE>
access. Tenant agrees (i) to cease promptly upon request by Landlord any
activity or work which, in Landlord's good faith judgment, shall interfere with
or delay Landlord's prosecution or completion of Landlord's Work; (ii) that
Tenant shall comply promptly with all procedures and regulations reasonably
prescribed by Landlord for coordinating such work and activities with any other
activity or work in the Premises or the Building; (iii) that Tenant and its
contractors shall work harmoniously with the contractors and subcontractors
performing Landlord's Work, (iv) that such access shall be at the sole risk of
Tenant and shall be deemed to be a license on all of the same terms and
conditions contained in this Lease other than the obligation of pay Fixed Rent
or recurring Additional Charges payable in connection with Articles 3 or 14
hereof; (v) that prior to exercising such right, Tenant shall deliver to
Landlord the policies of insurance required by this Lease; (vi) that Tenant's
indemnity set forth in Article 18 of this Lease shall be effective and (vii)
that to the extent that any such access causes actual delay in the Substantial
Completion of Landlord's Work, such delay shall be deemed to be a Tenant Delay.
1.06. Tenant shall have no obligation to pay any Fixed Rent and
Additional Charges hereunder during the period commencing on the Commencement
Date and ending on the day immediately preceding the Rent Commencement Date.
Tenant covenants and agrees to pay Fixed Rent and Additional Charges promptly
when due without notice or demand therefor and without any abatement, deduction
or setoff for any reason whatsoever, except as may be expressly provided in this
Lease. Unless otherwise instructed by Landlord, Fixed Rent and Additional
Charges shall be paid by good and sufficient check (subject to collection) drawn
on a New York City bank which is a member of the New York Clearing House
Association or a successor thereto.
1.07. If the Rent Commencement Date or the Expiration Date occurs on
a day other than the first day of a calendar month (in the case of the Rent
Commencement Date) or the last day of a calendar month (in the case of the
Expiration Date), the Fixed Rent and Additional Charges for the partial calendar
month in which the Rent Commencement Date or the Expiration Date, as the case
may be, occurs shall be prorated. The Fixed Rent for any partial calendar month
in which the Rent Commencement Date occurs shall be paid on the Rent
Commencement Date.
1.08. No payment by Tenant or receipt or acceptance by Landlord of a
lesser amount than the correct Fixed Rent or Additional Charges 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 an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance or pursue any other remedy
in this Lease or at law provided.
1.09. Any apportionments or prorations of Fixed Rent or Additional
Charges to be made under this Lease shall be computed on the basis of a 360-day
year (based on 12 months of 30 days each).
3
<PAGE>
1.10. If any of the Fixed Rent or Additional Charges payable under
the terms and provisions of this Lease shall be or become uncollectible, reduced
or required to be refunded because of any act or law enacted by a governmental
authority, Tenant shall enter into such agreement(s) and take such other steps
(without additional expense to Tenant) as Landlord may reasonably request and as
may be legally permissible to permit Landlord to collect the maximum rents which
from time to time during the continuance of such legal rent restriction may be
legally permissible (but not in excess of the amounts reserved therefor under
this Lease). Upon the termination of such legal rent restriction, (a) the Fixed
Rent and/or Additional Charges shall become and thereafter be payable in
accordance with the amounts reserved herein for the periods following such
termination, and (b) Tenant shall pay to Landlord promptly upon being billed, to
the maximum extent legally permissible, an amount equal to (i) the Fixed Rent
and/or Additional Charges which would have been paid pursuant to this Lease but
for such legal rent restriction less (ii) the rents paid by Tenant during the
period such legal rent restriction was in effect.
1.11. Additional Charges shall be deemed to be rent and Tenant's
failure to pay Additional Charges shall be considered a failure to pay Fixed
Rent hereunder and Landlord shall be entitled to all the rights and remedies
provided herein or by law for a default in the payment of Additional Charges as
for a default in the payment of Fixed Rent (notwithstanding the fact that Tenant
may not then also be in default in the payment of Fixed Rent).
1.12. Notwithstanding the provisions of Section 1.04 hereof, and
provided Tenant is not in default hereunder beyond any applicable notice or cure
period, the Fixed Rent shall be abated for the ninety (90) day period commencing
on the Commencement Date and ending on the day eighty-nine (89) days thereafter
(the "Rent Abatement Period"). The date immediately following the expiration of
such Rent Abatement Period is sometimes referred to herein as the "Rent
Commencement Date".
ARTICLE 2
Delivery and Use of Premises
----------------------------
2.01. (a) For purposes of this Section 2.01, the following terms
shall have the following meanings:
"Base Building Work" shall mean:
(i) demolition of the existing tenant improvements located in the
Premises;
(ii) delivery of an ACP-5 to Tenant;
4
<PAGE>
(iii) performance of the following work in the existing core
restrooms located on the twenty-seventh (27th) floor of the
Building: (a) repair or replacement of broken or missing light
fixtures, (b) repair or replacement of damaged or missing
ceiling tiles, (c) repair or replacement of broken fixtures,
(d) repair or replacement of broken or damaged toilet
partitions, and (e) repair or replacement of worn flush valves,
toilet seats and handles and flushometers;
(iv) installation of one (1) Building Standard, unisex, disabled
accessible toilet facility containing one (1) sink and one (1)
water closet, on the twenty-seventh (27th) floor of the
Building in the location as shown on Exhibit C-1 annexed
hereto, which shall comply with the ADA (as hereinafter
defined);
(v) performance of such work necessary to connect the main HVAC
source duct to the Premises;
(vi) performance of such work necessary to connect the main
sprinkler loop to the Premises;
(vii) performance of such work necessary to provide electricity with
an average capacity of six (6) watts per usable square foot
demand load to a disconnect switch in the Premises; and
(viii) delivery of the Premises in "broom" clean condition.
"Extra Work" shall mean any work or material requested by Tenant that
is in excess of the quantity of such work or material provided for in the Work
Letter (as such term is hereinafter defined) or is set forth in the Work Letter
as an item to be installed at Tenant's option or at Tenant's cost and expense.
"Extra Work Costs" shall mean the actual costs incurred by Landlord in
connection with the performance of Extra Work, plus Landlord's Profit and
Overhead.
"Landlord's Profit and Overhead" shall mean, for purposes of computing
Extra Work Costs and Special Work Costs either:
(x) if Landlord is performing the Extra Work or Special Work in question,
profit in the amount of ten (10%) percent of the cost of labor and
materials, and overhead in the amount of ten (10%) percent of the cost
of labor and materials, or
5
<PAGE>
(y) if a contractor or subcontractor is performing the Extra Work or
Special Work in question, profit in the amount of five (5%) percent of
the cost of labor and materials, and overhead in the amount of five
(5%) percent of the cost of labor and materials.
"Landlord's Work" shall mean the aggregate of the Base Building Work
and Tenant's Work.
"Long-Lead Work" shall mean (i) work which requires the performance of
work, labor or services or the application of skills not generally utilized in
the performance of tenant improvement work for normal office occupancy in
comparable office buildings in downtown Manhattan or (ii) any item of work,
materials and/or equipment, including, without limitation, cooling towers and
related equipment, emergency generators and related equipment, electrical switch
gear and related equipment, furnishings, cafeteria equipment, and U.P.S.
systems, which requires a lead time of more than sixty (60) days prior to the
date such item is required on site.
"Special Work" shall mean any work or material of a quality or nature
that is not specified in the Work Letter, including, without limitation, Long-
Lead Work and Tenant Change Orders.
"Special Work Costs" shall mean the actual costs incurred by Landlord
in connection with the performance of Special Work plus Landlord's Profit and
Overhead.
"Tenant Debits" shall mean the aggregate of all Extra Work Costs and
Special Work Costs.
"Tenant Change Orders" shall mean changes to the Tenant Work Final
Plans initiated by Tenant.
"Tenant's Contribution" shall mean the aggregate amount of Tenant
Debits.
"Tenant Delay" shall have the meaning provided in Section 2.01(g)
hereof.
"Tenant's Work" shall mean all work shown on the Tenant Work Final
Plans, as such Tenant Work Final Plans may be modified from time to time
pursuant to the provisions of this Section 2.01.
"Work Letter" shall mean the work letter and design layout plans
annexed hereto and made a part hereof as Exhibit C.
(b) (i) Except as expressly provided to the contrary in
this Section 2.01, Tenant shall accept the Premises "as is" on the Commencement
Date and Landlord
6
<PAGE>
shall not thereafter be required to perform any work or install any fixtures or
equipment to make the Building or the Premises ready or suitable for Tenant's
use or occupancy. Notwithstanding the foregoing, Landlord shall perform the Base
Building Work in a manner using materials of a manufacture, material, design,
capacity and finish and otherwise in a manner selected by Landlord as the
standard of the Building ("Building Standard") and subject to the provisions of
this Section 2.01.
(ii) In addition to the Base Building Work, Landlord
agrees to perform, at Landlord's sole cost and expense, Tenant's Work (which
will be performed in a Building Standard manner, except as otherwise set forth
in the Work Letter, and subject to the provisions of this Section 2.01 and
Exhibit C attached hereto and made a part hereof), but only to the extent that
the Tenant Work Final Plans do not call for (i) Special Work and/or (ii) Extra
Work. Landlord further agrees to perform Tenant's Work to the extent that the
Tenant Work Final Plans do call for (i) Special Work and/or (ii) Extra Work, but
only to the extent that Tenant agrees to (x) be responsible for any Tenant Delay
in connection with such Special Work and/or Extra Work and (y) reimburse
Landlord for (i) the Special Work Costs in connection with such Special Work
and/or (ii) the Extra Work Costs in connection with such Extra Work, in
accordance with the terms hereinafter set forth.
(c) Landlord's Work shall be deemed "Substantially Completed"
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment, or decoration remain (including items set forth on the
punchlist, as such term is hereinafter defined) to be performed, the non-
completion of which do not materially interfere with Tenant's use of the
Premises, subject to Landlord's obligation to complete Landlord's Work at
Landlord's cost and expense.
(d) Tenant shall, at its sole cost and expense, cause (i) a
professionally recognized architect, reasonably acceptable to Landlord, to
prepare a scaled and dimensioned signed and sealed set of working drawings and
specifications for Tenant's Work, and (ii) a professional engineer licensed in
New York State, reasonably acceptable to Landlord, to prepare all mechanical,
electrical, plumbing and structural signed and sealed drawings that may be
required in connection with Tenant's Work. All such working drawings and
specifications are herein called the "Tenant Work Final Plans" and shall reflect
the scope and quantity of work set forth in the Work Letter. Tenant shall submit
the Tenant Work Final Plans for Landlord's approval on or before the date
occurring twenty (20) days after Landlord delivers a fully-executed counterpart
of this Lease to Tenant (the "Final Plan Date"). Landlord shall, within ten (10)
Business Days after receipt of the Tenant Work Final Plans, notify Tenant of its
approval or disapproval thereof and, if Landlord disapproves all or any portion
of the Tenant Work Final Plans, then (i) such notice shall specify in reasonable
detail the grounds for such disapproval, and (ii) Tenant shall revise all or any
such portion of the Tenant Work Final Plans in accordance with Landlord's
objections thereto and resubmit such revised portion(s) of the Tenant Work Final
7
<PAGE>
Plans to Landlord within five (5) Business Days after Tenant's receipt of
Landlord's notice of disapproval of all or any portion of the Tenant Work Final
Plans.
(e) At the time Landlord notifies Tenant of its approval of
the Tenant Work Final Plans, Landlord shall submit a statement, in reasonable
detail, setting forth all of the Special Work Costs and Extra Work Costs, if
any, based on the Tenant Work Final Plans. With respect to any work for which a
Tenant's Contribution is due, Landlord shall invoice Tenant on a monthly basis,
in an amount equal to (i) the total amount of Tenant's Contribution due with
respect to such work, multiplied by (ii) the percentage of such work that has
been completed, less (iii) any payments theretofore made by Tenant with respect
to such work.
(f) 1. In the event that Tenant wishes to make any changes
to the Tenant Work Final Plans including, without limitation, substitutions,
additions or deletions of materials. Tenant shall so notify Landlord and
Landlord shall not unreasonably withhold or delay its consent to such changes,
subject to the provisions of Article 11 hereof. Any objection by Landlord shall
be in writing and shall set forth in reasonable detail the grounds for such
objection. Landlord shall not be deemed to be unreasonable in refusing to
consent to any changes to the Tenant Work Final Plans proposed by Tenant to the
extent that the same would require work or materials which do not comply with
applicable Legal Requirements or which would adversely affect the proper
functioning of Building systems. Changes to the Tenant Work Final Plans shall
constitute Tenant Change Orders.
2. Subject to (i) Tenant's right to withdraw a Tenant
Change Order and (ii) the provisions of Paragraph 3 of this Section 2.01(f),
the submission by Tenant to Landlord of a Tenant Change Order shall constitute
Tenant's agreement to be liable for all Extra Work Costs, Special Work Costs and
delays in the Substantial Completion of Landlord's Work (which delays shall
constitute Tenant Delay) resulting from such Tenant Change Order, and to pay for
such costs on a monthly basis, in an amount equal to (i) the total amount of
such costs due with respect to such work, multiplied by (ii) the percentage of
such work that has been completed, less (iii) any payments theretofore made by
Tenant with respect to such work. Landlord's notice to Tenant approving a Tenant
Change Order shall indicate (x) the amount of the Tenant Debit, if any,
associated with such Tenant Change Order and (y) the number of days of Tenant
Delay, if any, associated with such Tenant Change Order. Landlord shall use all
commercially reasonable efforts to obtain any work which is the subject of a
Tenant Change Order at a commercially reasonable cost to Tenant. Landlord's
version of any Tenant Debit shall, subject to the provisions of Paragraph 3 of
this Section 2.01(f), be controlling. Landlord's determination of the number of
days, if any, of Tenant Delay shall (i) be made in Landlord's reasonable
discretion and (ii) be controlling.
3. (A) In the event that Landlord's notice approving
a Tenant Change Order (herein called "Landlord's Change Order Approval Notice")
---------------------------------------
claims a Tenant Debit and/or Tenant Delay in connection with such Tenant Change
Order, within five (5)
8
<PAGE>
days after Tenant's receipt of such Landlord's Change Order Approval Notice,
Tenant shall give Landlord either (i) a written notice electing to withdraw its
request for such Tenant Change Order, (ii) a written notice electing to proceed
with such Tenant Change Order, in which event Tenant shall be deemed to have
accepted Landlord's determination as to any Tenant Debit or Tenant Delay in
connection with such Tenant Change Order, or (iii) a written notice (herein
called "Tenant's Change Order Dispute Right Notice") electing to proceed with
------------------------------------------
such Tenant Change Order, subject to Tenant's right to dispute Landlord's
determination as to the amount of the Tenant Debit set forth in Landlord's
Change Order Approval Notice in accordance with the procedures set forth in
Paragraph 3(B) of this Section 2.01(f), in which event (i) such Tenant's Change
Order Dispute Right Notice shall state Tenant's commercially reasonable opinion
as to the amount of the Tenant Debit and (ii) Tenant shall be deemed to have
accepted Landlord's determination as to any Tenant Delay in connection with such
Tenant Change Order. In the event that Tenant does not respond to any Landlord's
Change Order Approval Notice within five (5) days after Tenant's receipt
thereof, Tenant will be deemed to have elected to withdraw its request for such
Tenant Change Order.
(B) In the event that Tenant shall dispute
Landlord's determination as to the amount of any Tenant Debit set forth in any
Landlord's Change Order Approval Notice, provided that Tenant shall have given
Landlord a Tenant's Change Order Dispute Right Notice with respect to such
dispute in accordance with the provisions of Paragraph 3(A) of this Section
2.01(f), Tenant shall have the right to submit such dispute to arbitration upon
further notice given to Landlord following the Substantial Completion of
Landlord's Work, setting forth the Tenant Debits which are in dispute at such
time and which Tenant elects to have determined by arbitration, provided that
Tenant's dispute with respect to all the Tenant Debits included in Tenant's
notice shall be resolved in a single arbitration proceeding. Such arbitration
proceeding shall be conducted in New York City in accordance with the then-
prevailing Commercial Arbitration Rules of the American Arbitration Association
(or any successor organization) and the provisions of this Lease. The decision
and award of the arbitrator(s) shall be in writing, shall be final and
conclusive, and counterpart copies thereof shall be delivered to each of the
parties. In rendering such decision and awards, the arbitrator(s) shall not add
to, subtract from or otherwise modify the provisions of this Lease. Judgment may
be had on the decision and award of the arbitrator(s) so rendered in any court
of competent jurisdiction. Any arbitrator acting under this Paragraph 3(B) of
this Section 2.0 1(f) shall be an independent licensed professional architect
with at least ten (10) years experience in the design and construction of office
space in first-class office buildings in New York County. If such arbitration
shall result in a determination that Tenant is entitled to a refund of any costs
theretofore paid by Tenant in connection with any Tenant Change Order, Landlord
shall, at Landlord's option, either promptly pay such amount to Tenant or credit
such amount against future installments of Fixed Rent and Additional Charges
next coming due hereunder.
(g) To the extent Landlord shall be actually delayed in
Substantially Completing Landlord's Work, in either case, as a result of: (i)
Tenant's failure to submit the
9
<PAGE>
Tenant Work Final Plans for Landlord's approval on or before the Final Plan
Date, (ii) Tenant's failure to revise the Tenant Work Final Plans in accordance
with Landlord's objections thereto within five (5) Business Days after Tenant's
receipt of Landlord's notice of disapproval thereof, (iii) Tenant's failure to
adequately revise the Tenant Work Final Plans in accordance with Landlord's
objections thereto, thus requiring Landlord to provide Tenant with one or more
notices of objection to the Tenant Work Final Plans, (iv) Tenant's delay, after
the expiration of a reasonable period, in submitting information reasonably
requested by Landlord or Landlord's contractor or required to be submitted
hereunder by Tenant, (v) Tenant Change Orders, (vi) any request by Tenant that
Landlord delay the completion of any portion of Landlord's Work, (vii) the
inclusion in the Tenant Work Final Plans, as same may be modified in accordance
with the terms hereof from time to time, of any work that is Long-Lead Work,
Special Work and/or Extra Work, and/or (viii) any negligent or wrongful act of
Tenant or its officers, agents, servants or contractors, then any such delay
shall be deemed to be a "Tenant Delay", and Landlord's Work shall be deemed to
have been Substantially Completed on the date on which such Landlord's Work
would have been Substantially Completed but for such Tenant Delay. If a delay in
the Substantial Completion of Landlord's Work or any substantial portion of such
delay is the result of a strike or other labor trouble, fire or other casualty,
governmental preemption or priorities or other controls in connection with a
national or other public emergency or shortages of fuel, supplies or labor
resulting therefrom, or any other cause beyond Landlord's reasonable control,
and such delay would not have occurred but for a delay described in the
preceding sentence of this Section 2.01(g), such delay shall be deemed added to
the Tenant Delay hereinbefore described.
(h) Landlord shall permit a representative of Tenant to
inspect the progress of the performance of Landlord's Work at intervals
appropriate to the state of construction, to familiarize Tenant with the
progress of Landlord's Work.
(i) Landlord shall, in accordance with the provisions of this
Section 2.01 fix the Commencement Date and shall notify Tenant of the date so
fixed. When the Commencement Date has so been determined, the parties shall,
within ten (10) days thereafter, at either party's request therefor, execute a
written agreement confirming such date as the Commencement Date. Any failure of
the parties to execute such written agreement shall not affect the validity of
the Commencement Date as fixed and determined as aforesaid.
(j) Subject to the terms and provisions of Section 2.01(c)
hereof, if and when Tenant shall take actual possession of the Premises, it
shall be conclusively presumed that the same were in satisfactory condition as
of the date of such taking of possession, unless within ten (10) Business Days
after such date Tenant shall give Landlord notice (hereinafter called the
"punchlist") specifying the respects in which Landlord's Work was not
satisfactorily performed or completed. With respect to latent defects not
visually discoverable by Tenant in such walk-through inspection of the Premises,
Tenant shall give Landlord notice thereof within forty-five (45) days after the
Commencement Date specifying the items which were not in
10
<PAGE>
satisfactory condition, which items would not be disclosed in such walk-through
inspection of the Premises. Landlord agrees to diligently complete all items set
forth in the punchlist as soon as reasonably practicable, at Landlord's sole
cost and expense, provided that in no event shall Landlord be required to
perform the same on an overtime or premium-pay basis.
(k) (i) If for any reason whatsoever, Landlord shall be
unable to deliver possession of the Premises on the Commencement Date, then
notwithstanding anything to the contrary hereinbefore contained, the term of
this Lease shall commence on, and the Commencement Date shall be, the date on
which Landlord is able to so deliver possession of the Premises. If Landlord
does not cause the Commencement Date to occur on or prior to the day (the
"Outside Date") one hundred eighty (180) days after the date that Tenant has
provided Landlord with the "Tenant Work Final Plans" in form acceptable to and
approved by Landlord and in form acceptable for filing with the Buildings
Department of the City of New York (which date shall be extended by one day for
each day that Landlord is prevented from delivering possession of the Premises
to Tenant by reason of Force Majeure Causes or Tenant Delay), the length of the
Rent Abatement Period (as such term is defined in Section 1.12 hereof) shall be
increased by one day by each day in the period commencing on the Outside Date
and ending on the Commencement Date [by way of example, in the event that the
Commencement Date shall occur on the date which is five (5) days following the
Outside Date (as the same may be extended as hereinabove set forth), the Rent
Abatement Period shall be deemed to be the ninety-five (95) day period
commencing on the Commencement Date and ending on the day ninety-four (94) days
thereafter]. Landlord shall not be subject to any liability for failure to give
possession on the date that Landlord's Work is Substantially Completed and the
validity of this Lease shall not be impaired under such circumstances, nor the
same be construed in any way to extend the term of this Lease.
(ii) Notwithstanding anything contained in this
Section 2.01(k) to the contrary, in the event that the Commencement Date shall
not have occurred on or before the date that is two hundred seventy (270) days
after the date that Tenant has provided Landlord with the Tenant Work Final
Plans in form acceptable to and approved by Landlord and in form acceptable for
filing with the Buildings Department of the City of New York, which date shall
be extended by one day for each day that Landlord is prevented from delivering
possession of the Premises to Tenant by reason of Force Majeure Causes or Tenant
Delay (such date, as same may be so extended, is herein called the "Rescission
Date"), then Landlord shall not be subject to any liability for failure to give
possession on such date and the validity of this Lease shall not be impaired
under such circumstances, nor the same be construed in any way to extend the
term of this Lease, but Tenant shall have the right to terminate this Lease by
written notice (the "Rescission Notice") given to Landlord within five (5) days
after the Rescission Date (time being of the essence with respect to the giving
of the Rescission Notice within such five (5) day period), and such termination
shall be effective on the fifteenth (15th) day after the date that Tenant shall
give the Rescission Notice to Landlord (such date being herein called the
"Termination Date"), unless the Commencement Date shall occur before the
Termination Date.
11
<PAGE>
If Tenant fails to give the Rescission Notice to Landlord within such five (5)
day period after the Rescission Date, the provisions of this clause (ii) shall
be null and void and Tenant shall have no further right to terminate this Lease.
If Tenant exercises such option to terminate this Lease, then upon such
termination, neither Landlord nor Tenant shall have any further obligations to
the other hereunder except that Landlord shall promptly thereafter return to
Tenant all rent theretofore paid by Tenant to Landlord hereunder.
(iii) Tenant hereby waives any right to rescind this
Lease under the provisions of Section 223(a) of the Real Property Law of the
State of New York, and agrees that the provisions of this Section 2.01(k) are
intended to constitute "an express provision to the contrary" within the meaning
of said Section 223(a).
2.02. Tenant shall use and occupy the Premises for general and
executive offices, and for no other purpose.
2.03. If any governmental license or permit (other than a Certificate
of Occupancy for the entire Building) shall be required for the proper and
lawful conduct of Tenant's business in the Premises or any part thereof, Tenant,
at its expense, shall duly procure and thereafter maintain such license or
permit and submit the same to Landlord for inspection. Tenant shall at all times
comply with the terms and conditions of each such license or permit.
Additionally, should Alterations, Tenant's use of the Premises for other than
executive and general offices or Tenant's use of any portion of the Premises for
a public assembly use require any modification or amendment of any Certificate
of Occupancy for the Building, Tenant shall, at its expense, take all actions
reasonably requested by Landlord in order to procure any such modification or
amendment and shall reimburse Landlord (as Additional Charges) for all
reasonable costs and expenses Landlord incurs in effecting said modifications or
amendments. The foregoing provisions are not intended to be deemed Landlord's
consent to any Alterations or to a use of the Premises not otherwise permitted
hereunder nor to require Landlord to effect such modifications or amendments of
any Certificate of Occupancy.
2.04. Tenant shall not at any time use or occupy the Premises or the
Building, or suffer or permit anyone to use or occupy the Premises, or do
anything in the Premises or the Building, or suffer or permit anything to be
done in, brought into or kept on the Premises, which in any manner (a) violates
the Certificate of Occupancy for the Premises or for the Building; (b) causes or
is liable to cause injury to the Premises or the Building or any equipment,
facilities or systems therein; (c) constitutes a violation of the laws and
requirements of any public authorities or the requirements of insurance bodies,
provided such insurance requirements do not prohibit the use of the Premises for
the purposes permitted under Section 2.02 hereof; (d) impairs the character,
reputation or appearance of the Building as a first-class office building; (e)
impairs the proper and economic maintenance, operation and repair of the
Building and/or its equipment, facilities or systems; (f) annoys or
inconveniences other tenants or occupants of the Building; (g) constitutes a
nuisance, public or private; (h) makes unobtainable from reputable insurance
12
<PAGE>
companies authorized to do business in New York State all-risk property
insurance, or liability, elevator, boiler or other insurance at standard rates
required to be furnished by Landlord under the terms of any mortgages covering
the Premises; or (i) discharges objectionable fumes, vapors or odors into the
Building's flues or vents or otherwise.
2.05. Tenant shall not use, or suffer or permit anyone to use, the Premises
or any part thereof, for (a) a banking, trust company, or safe deposit business,
(b) a savings bank, a savings and loan association, or a loan company operating
an "off the street" business to the general public at the Premises, (c) the sale
of travelers' checks and/or foreign exchange, (d) a stock brokerage office or
for stock brokerage purposes, (e) a restaurant and/or bar and/or the sale of
confectionery and/or soda and/or beverages and/or sandwiches and/or ice cream
and/or baked goods. (f) the business of photographic reproductions and/or offset
printing (except that Tenant and its permitted assignees, subtenants and
occupants may use part of the Premises for photographic reproductions and/or
offset printing in connection with, either directly or indirectly, its own
business and/or activities), (g) an employment or travel agency, (h) a school or
classroom, (i) medical or psychiatric offices, (j) conduct of an auction, (k)
gambling activities or (1) the conduct of obscene, pornographic or similar
disreputable activities. Further, the Premises may not be used by (i) an agency,
department or bureau of the United States Government, any state or municipality
within the United States or any foreign government, or any political subdivision
of any of them, (ii) any charitable, religious, union or other not-for-profit
organization, or (iii) any tax exempt entity within the meaning of Section
168(j)(4)(A) of the Internal Revenue Code of 1986, as amended, or any successor
or substitute statute, or rule or regulation applicable thereto (as same may be
amended).
ARTICLE 3
Escalations
-----------
3.01. The terms defined below shall for the purposes of this Lease have the
meanings herein specified:
(a) "Base Operating Amount" shall mean the Operating Expenses for the
Base Operating Year.
(b) "Base Operating Year" shall mean the calendar year commencing on
January 1,2000.
(c) "Base Tax" shall mean the amount determined by multiplying (i)
the amount for which the Building and the Land are assessed by the City of New
York for purposes of establishing Taxes to be paid by Landlord for the Tax Year
commencing on
13
<PAGE>
July 1, 1999, and ending on June 30, 2000, as finally determined, by (ii) the
applicable real property tax rate for the Borough of Manhattan with respect to
such Tax Year.
(d) "Escalation Statement" shall mean a statement setting forth the
amount payable by Tenant for a specified Tax Year or Operating Year (as the case
may be) pursuant to this Article 3.
(e) "Operating Expenses" shall mean all expenses paid or incurred by
Landlord and Landlord's affiliates and/or on their behalf in respect of the
repair, replacement, maintenance, operation and/or security of the Real Property
(hereinafter defined) and the services provided tenants therein, including,
without limitation, (i) salaries, wages, medical, surgical. insurance
(including, without limitation, group life and disability insurance) of
employees of Landlord or Landlord's affiliates and/or the managing agent for the
Building (if any), union and general welfare benefits, pension benefits,
severance and sick day payments, and other fringe benefits of employees of
Landlord and Landlord's affiliates and/or the managing agent for the Building
(if any) and their respective contractors engaged in such repair, replacement,
maintenance, operation and/or security; (ii) payroll taxes, worker's
compensation, uniforms, dry cleaning and related expenses (whether direct or
indirect) for such employees; (iii) the cost of fuel, gas, steam, electricity,
heat, ventilation, air conditioning, chilled and condenser water, water, sewer
and other utilities, together with any taxes and surcharges on, and fees paid in
connection with the calculation and billing of such utilities; (iv) the cost of
painting and/or decorating all areas of the Real Property, excluding, however,
any space contained therein which is demised or to be demised to tenant(s); (v)
the cost of casualty, liability, fidelity, rent and all other insurance
regarding the Real Property and/or any property on, below or above the Real
Property, and the repair, replacement, maintenance, operation and/or security
thereof; (vi) the cost of all supplies, tools, materials and equipment, whether
by purchase or rental, used in the repair, replacement, maintenance, operation
and/or security of the Real Property, and any sales and other taxes thereon;
(vii) the rental value of the Landlord's Building office utilized by the
personnel of either Landlord or Landlord's affiliates, in connection with the
repair, replacement, maintenance, operation and/or security thereof, and all
Building office expenses, such as telephone, utility, stationery and similar
expenses incurred in connection therewith; (viii) the cost of cleaning,
janitorial and security services, including, without limitation, glass cleaning,
snow and ice removal and garbage and waste collection and/or disposal; (ix) the
cost of all interior and exterior landscaping and all temporary exhibitions
located at or within the Real Property; (x) the cost of alterations and
improvements made or installed after the expiration of the Base Operating Year
by reason of the laws and requirements of any public authorities or the
requirements of insurance bodies and all tools and equipment related thereto;
(xi) the cost of all other alterations, repairs, replacements and/or
improvements made or installed after the expiration of the Base Operating Year
by Landlord or Landlord's affiliates, at their respective expense, whether
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen,
and whether or not required by this Lease, and all tools and equipment related
thereto; provided, however, that if under generally accepted accounting
principles consistently applied, any of the costs referred to
14
<PAGE>
in clause (x) or this clause (xi) are required to be capitalized, then such
capitalized costs (and, at Landlord's option, any other costs included in
Operating Expenses), together with interest thereon at the Base Rate (as defined
in subsection 35.05(j) hereof) in effect as of December 31 of the year in which
such expenditure is made, shall be amortized or depreciated, as the case may be,
over a period of time which shall be the shorter of: (A) the useful life of the
item in question, as reasonably determined by Landlord; or (B) ten (10) years;
provided however that with respect to any capital improvement and/or any
machinery or equipment which is made or becomes operational, as the case may be,
after the Base Operating Year, and which has the effect of reducing the expenses
which otherwise would be included in Operating Expenses, the amount included in
Operating Expenses in any Operating Year until such improvement and/or machinery
or equipment has been fully amortized or depreciated, as the case may be, shall
be an amount which is the greater of: (X) the amortization or depreciation as
the case may be, of such capital improvement and/or machinery or equipment,
which would have been included in Operating Expenses pursuant to the foregoing
provisions; or (Y) the amount of savings, as reasonably estimated by Landlord,
resulting from the installation and operation of such improvement and/or
machinery or equipment; (xii) management fees, provided, however, that if
Landlord or an affiliate of Landlord is the managing agent of the Building then
the annual management fee shall be equal to two and one-half (2-1/2%) percent of
rents and additional rents payable by those tenants of the Building which are
leasing space therein; (xiii) all rents and additional rents (other than Taxes)
under Superior Leases (as defined in Section 5.01 hereof); (xiv) costs relating
to the elevators and escalators, (xv) all reasonable costs and expenses of
legal, bookkeeping, accounting and other professional and consulting services
incurred in connection with the operation, and management of the Real Property
except as hereinafter excluded; (xvi) fees, dues and other contributions paid by
or on behalf of Landlord or Landlord's affiliates to civic or other real estate
organizations provided same do not exceed the level customarily paid by owners
of first-class office buildings in Downtown Manhattan comparable to the
Building; and (xvii) all other fees, costs, charges and expenses properly
allocable to the repair, replacement, maintenance, operation and/or security of
the Real Property, in accordance with then prevailing customs and practices of
the real estate industry in the Borough of Manhattan, City of New York. The term
"Operating Expenses", as used and defined under this subsection (d), shall not,
however, include the following items: (1) interest on and amortization of debts
(and costs and charges incurred in connection with such financings); (2) the
cost of tenant improvements made for new or existing tenant(s) of the Building
or allowances in lieu thereof; (3) brokerage commissions; (4) financing or
refinancing costs; (5) Taxes; (6) salaries and fringe benefits for officers,
employees and executives above the grade of Building Manager; (7) the cost of
any items to the extent Landlord is actually reimbursed by proceeds of insurance
or condemnation, warranties or guarantees, or otherwise compensated, including
direct reimbursement by any tenant (including Tenant) for specific services
performed for such tenant (other than through Operating Payments or comparable
payments made pursuant to operating expense escalation provisions of a tenant's
lease); (8) the costs of work performed or services provided for other tenants
of the Building to the extent the same exceed both the level of work or services
required to be performed or provided to other tenants of the Building and to
Tenant under this Lease; (9) depreciation (except
15
<PAGE>
as provided above in this Section 3.01(e); (10) costs arising from Landlord's
charitable or political contributions; (11) the costs of repairs or restoration
necessitated by casualty or condemnation; (12) the costs of alterations and
improvements made to cure conditions existing on the date of this Lease, which
conditions, as of the date of this Lease, constitute a violation of any laws and
requirements of any public authorities or the requirements of insurance bodies
(hereinafter called "Legal Requirements") currently in effect and applicable to
the Building, provided, however, that costs to comply with any reinterpretation,
amendment or modification of such Legal Requirements which are enacted after the
date of this Lease shall be included in Operating Expenses; (13) attorneys'
fees, leasing commissions, advertising expenses and other professional expenses
to the extent incurred in connection with the negotiation and preparation of
leases in the Building; (14) rents and additional rents under any ground lease
or Superior Lease (as defined in Section 5.01 hereof); (15) attorneys' fees or
accountants' or other consultants' fees to the extent incurred in connection
with disputes with Tenant or other tenants or occupants of the Building (other
than disputes with tenants who are disturbing other tenants in the Building by
reason of such tenant's breach of its lease and except as specifically provided
in this Lease); (16) the cost of Landlord's general administrative and overhead
expenses; and (17) capital expenditures other than those which are incurred
after the expiration of the Base Operating Year and which (i) are occasioned by
the necessity of compliance with Legal Requirements, (ii) are reasonably
intended to reduce Operating Expenses, (iii) relate to replacements or
alterations or improvements (hereinafter collectively called "replacement or
replacements") made in lieu of repairs when such replacement is reasonably
necessary in accordance with sound management and operating principles,
notwithstanding that the replacement item is of superior quality, design or
utility to the item being replaced, or (iv) relate to changes or improvements
made to the Building systems (such as the installation of remote-operated
security cameras and monitors), which changes or improvements are made to
upgrade the Building systems to the then-current standard of other first-class
office buildings similar to the Building. No item of expense shall be counted
more than once either as an inclusion in or an exclusion from Operating
Expenses, and any expense which should be allocated, in accordance with
generally accepted accounting principles, between the Land and the Building, on
the one hand, and any other property owned by Landlord or an affiliate of
Landlord, on the other hand, shall be properly allocated in accordance
therewith.
(f) "Operating Year" shall mean each calendar year in which occurs
any part of the term of this Lease following the end of the Base Operating Year.
(g) "Real Property" shall mean, collectively, the Building (together
with all personal property located therein and all fixtures, facilities,
machinery and equipment used in the operation thereof, including, but not
limited to, all cables, fans, pumps, boilers, heating and cooling equipment,
wiring and electrical fixtures and metering, control and distribution equipment,
component parts of the HVAC, electrical, plumbing, elevator and any life or
property protection systems (including, without limitation, sprinkler systems),
window washing equipment and snow removal equipment), the Land, any property
beneath the Land, the
16
<PAGE>
curbs, sidewalks and plazas on and/or immediately adjoining the Land, and all
easements, air rights, development rights and other appurtenances to the
Building or the Land or both the Land and the Building.
(h) "Taxes" shall mean (A) all real estate and personal property
taxes, vault taxes, assessments and special assessments, sewer rents and water
charges, governmental levies, municipal taxes, county taxes, business
improvement district assessments, special ad valorem levies, and any other
governmental charges levied, assessed or imposed upon or with respect to the
Real Property, by any federal, state, municipal or other governments or
governmental bodies or authorities, and (B) all taxes assessed or imposed with
respect to the rentals payable to Landlord other than general income and gross
receipts taxes. If at any time during the term of this Lease the methods of
taxation prevailing on the date hereof shall be altered so that in lieu of or
as an addition to or as a substitute for, the whole or any part of such taxes,
assessments, charges and levies now imposed on real estate, there shall be
levied, assessed or imposed (x) a tax, assessment, levy, imposition, license fee
or charge wholly or partially as a capital levy or otherwise on the rents
received therefrom, or (y) any other such additional or substitute tax,
assessment, levy, imposition, fee or charge, then all such taxes, assessments,
levies, impositions, fees or charges or the part thereof so measured or based,
to the extent imposed in lieu of, or as an addition to or as a substitute for,
the whole or any part of such taxes, assessments, charges or levies, shall be
deemed to be included within the term "Taxes" for the purposes hereof. The term
"Taxes" shall, notwithstanding anything to the contrary contained herein,
exclude (i) any of the foregoing which are assessed or imposed with respect to
any asset of Landlord other than the Real Property or (ii) any net income,
franchise or "value added" tax, inheritance tax or estate tax imposed or
constituting a lien upon Landlord or all or any part of the Land or Building,
except to the extent that any of the foregoing are hereafter assessed against
owners or lessors of real property in their capacity as such (as opposed to any
such taxes which are of general applicability).
(i) "Tax Year" shall mean each period of twelve months, commencing on
the first day of July of each such period, in which occurs any part of the term
of this Lease, or such other period of twelve months occurring during the term
of this Lease as hereafter may be duly adopted as the fiscal year for real
estate tax purposes of the City of New York.
(j) "Tenant's Share" shall mean 1.76 (1.76%) percent.
3.02. (a) Tenant shall pay as Additional Charges for each Tax Year a sum
(herein called a "Tax Payment") equal to Tenant's Share of the amount by which
the Taxes for such Tax Year exceed the amount of the Base Tax. Any amount due to
Landlord as a result of the preceding sentence shall be due and payable within
thirty (30) days after Landlord shall have submitted to Tenant an Escalation
Statement with respect thereto, together with copies of paid tax bills.
Commencing on July 1, 2000, Tenant shall also make payments to Landlord on
account of estimated increases in Taxes towards the following Tax Year upon
submission of an
17
<PAGE>
Escalation Statement and copies of paid tax bills for the then current Tax Year.
The payments shall be made in advance, as Additional Charges, in equal monthly
installments on the first day of each month during the term hereof. The
installments for each month of each Tax Year shall be equal to Tenant's Share of
the difference between (x) the Taxes for the current Tax Year minus (y) the
amount of the Base Tax, divided into twelve (12) equal installments. Thus, for
example, if the amount of the Base Tax is $4.00 per rentable square foot and the
Taxes for the Tax Year commencing on July 1, 1999 are $4.12 per rentable square
foot:
(i) Pursuant to the first sentence of this Section 3.02(a), Tenant
will make a payment of $0.12 per rentable square foot (or two
or more equal payments aggregating $0.12 per rentable square
foot if Landlord pays Taxes in two or more equal installments)
to Landlord in respect of the Tax Year commencing on July 1.
2000 within thirty (30) days after submission to Tenant of an
Escalation Statement and copies of paid tax bills for such Tax
Year; and
(ii) Pursuant to the third through fifth sentences of this Section
3.02(a), commencing on July 1, 2000, Tenant will make estimated
monthly payments of $0.01 per rentable square foot to Landlord
in respect of the Tax Year commencing on July 1, 2001.
In the event the total amount paid by Tenant for any Tax Year shall be less than
the actual amount due from Tenant based on the actual tax bills paid by, for or
on behalf of Landlord, Tenant will pay to Landlord in a lump sum that amount by
which the actual amount due from Tenant exceeds the total amount of Tenant's
monthly payments within 30 days from the date Landlord presents such bills to
Tenant. If the total amount of monthly payments paid by Tenant exceeds the
actual amount due from Tenant based on the actual tax bills, then Landlord shall
credit the amount of such excess against the next installment of Fixed Rent due
under this Lease, provided that if Tenant is in default hereunder at such time
(after notice and the expiration of any applicable cure periods), Tenant shall
not receive such credit until such time as such default has been cured by
Tenant.
(b) Tenant shall pay to Landlord upon demand, as Additional Charges,
Tenant's Share of any expenses incurred by Landlord (including, without
limitation, appraisal, accounting, consulting and legal fees and disbursements)
in contesting Taxes or the assessed valuation of all or any part of the Land
and/or the Building or in seeking or collecting any refund of Taxes or in filing
for the benefits and/or complying with the terms of any program providing for a
tax abatement, refund or reduction, including, without limitation, the
Industrial and Commercial Incentive Program provided for in Title 2-D of Article
4 of the New York Real Property Tax Law (the foregoing expenses being herein
collectively called "Tax Reduction Expenses").
18
<PAGE>
(c) If Landlord shall receive a refund of Taxes (herein called a "Tax
Refund") for any Tax Year, Landlord shall permit Tenant to credit against
subsequent payments under this Section 3.02 Tenant's Share of the Tax Refund,
after deducting from the Tax Refund all Tax Reduction Expenses incurred by
Landlord in obtaining such Tax Refund which have not previously been recovered
by Landlord, but not to exceed Tenant's Tax Payment paid for such Tax Year.
Notwithstanding anything to the contrary contained in this Lease, in the event
that Landlord receives any refund or abatement of Taxes pursuant to (x) Title 4
of Article 4 of the New York Real Property Tax Law (the "Lower Manhattan Plan")
or (y) another tax benefit program for which Landlord or the Building or the
Land may be eligible and under which Landlord is prohibited from paying all or
any portion of such refund or abatement to Tenant and/or Landlord is required to
pay all or any portion of such refund or abatement to specified tenant(s) or
occupant(s) of the Building, then, in such event, (i) Tenant shall not be
entitled to any payment or credit under this Lease in connection with such
refund or abatement (unless Tenant is otherwise entitled to such payment or
credit pursuant to a certificate of abatement issued pursuant to the Lower
Manhattan Plan or a similar certificate or document issued pursuant to such
other program establishing Tenant's entitlement to a portion of such refund or
abatement). and (ii) for purposes of computing Tenant's Tax Payment, there shall
not be deducted from Taxes all or any portion of such refund or abatement.
(d) Nothing contained in this Lease shall obligate Landlord to bring
any application or proceeding seeking a reduction in Taxes or assessed valuation
and, in the event that Landlord shall bring any such application or proceeding,
Landlord shall have the right to settle same on such terms as Landlord shall, in
its sole discretion, deem proper. Tenant, for itself and its immediate and
remote subtenants and successors in interest hereunder, hereby waives, to the
extent permitted by law, any right Tenant may now or in the future have to
protest or contest any Taxes or to bring any application or proceeding seeking a
reduction in Taxes or assessed valuation or otherwise challenging the
determination thereof.
(e) The benefit of any discount for the early payment or prepayment
of Taxes shall accrue solely to the benefit of Landlord and such discount shall
not be subtracted from Taxes.
(f) If the Taxes comprising the Base Tax are reduced as a result of a
certiorari proceeding or otherwise, the Taxes as so reduced shall, for all
purposes be deemed to be the Base Tax and Landlord shall give notice to Tenant
of the amount by which the Tax Payments previously made were less than the Tax
Payments required to be made under this Section 3.02, and Tenant shall pay the
amount of the deficiency in such Tax Payments within twenty (20) days after
demand therefor.
(g) If the real estate tax fiscal year of The City of New York shall
be changed during the term of this Lease, any Taxes for such fiscal year, a part
of which is included within a particular Tax Year and a part of which is not so
included, shall be apportioned on the
19
<PAGE>
basis of the number of days in such fiscal year included in the particular Tax
Year for the purpose of making the computations under this Section 3.02.
(h) Tenant shall pay to Landlord upon demand, as Additional Charges,
any occupancy tax or rent tax now in effect or hereafter enacted, if payable by
Landlord in the first instance or hereafter required to be paid by Landlord.
3.03. (a) For each Operating Year, subsequent to the Base Operating Year,
any part of which shall occur during the term of this Lease, Tenant shall pay an
amount (herein called "Operating Payment") equal to the sum of Tenant's Share of
the amount by which the Operating Expenses for such Operating Year exceed the
Operating Expenses for the Base Operating Year.
(b) Landlord shall furnish to Tenant, prior to the commencement of
each Operating Year a written statement setting forth in reasonable detail
Landlord's reasonable estimate of the Operating Payment for such Operating Year.
Tenant shall pay to Landlord on the first day of each month during the Operating
Year in which the Operating Payment will be due, an amount equal to one-twelfth
(1/12th) of Landlord's reasonable estimate of the Operating Payment for such
Operating Year. If, however, Landlord shall not furnish any such estimate for an
Operating Year or if Landlord shall furnish any such estimate for an Operating
Year subsequent to the commencement thereof, then (i) until the first day of the
month following the month in which such estimate is furnished to Tenant, Tenant
shall pay to Landlord on the first day of each month an amount equal to the
monthly sum payable by Tenant to Landlord under this Article 3 in respect of the
last month of the preceding Operating Year; (ii) after such estimate is
furnished to Tenant, Landlord shall give notice to Tenant stating whether the
installments of the Operating Payment previously made for such Operating Year
were greater or less than the installments of the Operating Payment to be made
for the Operating Year in which the Operating Payment will be due in accordance
with such estimate, and (A) if there shall be a deficiency, Tenant shall pay the
amount thereof within ten (10) days after demand therefor, or (B) if there shall
have been an overpayment, Landlord shall within 30 days of such notice refund to
Tenant the amount thereof; and (iii) on the first day of the month following the
month in which such estimate is furnished to Tenant and monthly thereafter
throughout the remainder of such Operating Year Tenant shall pay to Landlord an
amount equal to one-twelfth (1/12th) of the Operating Payment shown on such
estimate. Landlord may, during each Operating Year, furnish to Tenant a revised
statement of Landlord's reasonable estimate of the Operating Payment for such
Operating Year, and in such case, the Operating Payment for such Operating Year
shall be adjusted and paid or refunded or credited as the case may be,
substantially in the same manner as provided in the preceding sentence.
(c) Landlord shall furnish to Tenant an Escalation Statement for each
Operating Year (and shall endeavor to do so within one hundred eighty (180) days
after the end of each Operating Year). Such statement shall set forth in
reasonable detail the Operating
20
<PAGE>
Expenses for such Operating Year. If the Operating Statement shall show that the
sums paid by Tenant, if any, under subsection 3.03(b) exceeded the Operating
Payment to be paid by Tenant for the Operating Year for which such Escalation
Statement is furnished, Landlord shall refund to Tenant the amount of such
excess; and if the Operating Statement for such Operating Year shall show that
the sums so paid by Tenant were less than the Operating Payment to be paid by
Tenant for such Operating Year, Tenant shall pay the amount of such deficiency
within ten (10) days after demand therefor.
(d) Tenant, upon reasonable notice given within one hundred eighty
(180) days of the receipt of such Escalation Statement, may elect to have
Tenant's designated (in such notice) Certified Public Accountant (who may be an
employee of Tenant) examine such of Landlord's books and records (collectively
"Records") as are directly relevant to the Escalation Statement in question,
together with reasonable supporting data therefor. In making such examination,
Tenant agrees, and shall cause its designated Certified Public Accountant to
agree, to keep confidential (i) any and all information contained in such
Records and (ii) the circumstances and details pertaining to such examination
and any dispute or settlement between Landlord and Tenant arising out of such
examination; and Tenant will confirm and cause its Certified Public Accountant
to confirm such agreement in a separate written agreement, if requested by
Landlord. If Tenant shall not give such notice within such one hundred eighty
(180) day period, then the Escalation Statement as furnished by Landlord shall
be conclusive and binding upon Tenant. Pending the resolution of any contest
pursuant to the terms hereof, Tenant shall continue to pay all sums as
determined to be due in the first instance by such Escalation Statement and upon
the resolution of such contest, suitable adjustment shall be made in accordance
therewith with appropriate refund to be made by Landlord to Tenant if required
thereby.
3.04. (a) In any case provided in this Article 3 in which Tenant is
entitled to a refund, Landlord may, in lieu of allowing such refund, credit
against the next due installments of Fixed Rent and Additional Charges any
amounts to which Tenant shall be entitled. Nothing in this Article 3 shall be
construed so as to result in a decrease in the Fixed Rent hereunder. If this
Lease shall expire before any such credit shall have been fully applied, then
(provided Tenant is not in default hereunder beyond any applicable notice and
grace periods) Landlord shall refund to Tenant the unapplied balance of such
credit.
(b) The expiration or termination of this Lease during any Tax Year
or Operating Year (for any part or all of which there is a Tax Payment or
Operating Payment under this Article 3) shall not affect the rights or
obligations of the parties hereto respecting such payment and any Escalation
Statement relating to such payment may be sent to Tenant subsequent to, and all
such rights and obligations shall survive, any such expiration or termination.
Any payments due under such Escalation Statement shall be payable within twenty
(20) days after such statement or bill is sent to Tenant.
21
<PAGE>
(c) The parties agree that the computations under this Article 3 are
intended to constitute a formula for agreed rental escalation and may or may not
constitute an actual reimbursement to Landlord for Taxes and other costs and
expenses paid by Landlord with respect to the Real Property.
3.05. In the event that the Commencement Date shall be other than the first
day of a Tax Year or an Operating Year or the date of the expiration or other
termination of this Lease shall be a day other than the last day of a Tax Year
or an Operating Year, then in such event in applying the provisions of this
Article 3 with respect to any Tax Year or Operating Year in which such event
shall have occurred, appropriate adjustments shall be made to reflect the
occurrence of such event on a basis consistent with the principles underlying
the provisions of this Article 3 taking into consideration the portion of such
Tax Year or Operating Year which shall have elapsed after the term hereof
commences in the case of the Commencement Date, and prior to the date of such
expiration or termination in the case of the Expiration Date or other
termination.
3.06. Landlord's failure to render or delay in rendering an Escalation
Statement with respect to any Tax Year or Operating Year or any component of an
Operating Payment or any installment of a Tax Payment shall not prejudice
Landlord's right to thereafter render an Escalation Statement with respect
thereto or with respect to any subsequent Tax Year or Operating Year or
subsequent component of an Operating Payment or subsequent installment of a Tax
Payment, nor shall the rendering of an Escalation Statement for any Tax Year or
Operating Year prejudice Landlord's right to thereafter render a corrected
Escalation Statement for such Tax Year or Operating Year.
ARTICLE 4
Security
--------
4.01. Tenant has deposited with Landlord the sum of $363,515.63 as security
for the full and faithful performance and observance by Tenant of Tenant's
covenants and obligations under this Lease. If Tenant defaults in the full and
prompt payment and performance of any of Tenant's covenants and obligations
under this Lease beyond notice and the expiration of any applicable cure
periods, including, but not limited to, the payment of Fixed Rent and Additional
Charges, Landlord may, but shall not be required to, use, apply or retain the
whole or any part of the security so deposited and the interest accrued thereon,
if any, to the extent required for the payment of any Fixed Rent and Additional
Charges or any other sums as to which Tenant is in default or for any sum which
Landlord may expend or may be required to expend by reason of Tenant's default
in respect of any of the terms, covenants and conditions of this Lease,
including, but not limited to, any damages or deficiency in the reletting of the
Premises, whether such damages or deficiency accrue before or after summary
proceedings or other re-entry by Landlord. If Landlord shall so use, apply or
retain the whole or any part of the security or the interest accrued thereon, if
any, Tenant shall upon demand immediately deposit with Landlord a sum equal to
the amount so used, applied or retained, as security as aforesaid failing which
Landlord shall have the same rights and remedies as for the non-payment of Fixed
Rent beyond the applicable grace period.
4.02. In lieu of the cash security deposit provided for in Section 4.01
hereof, Tenant may at any time during the term hereof deliver to Landlord and,
shall, except as otherwise provided herein, maintain in effect at all times
during the term hereof, an irrevocable letter of credit, substantially in the
form annexed hereto as Exhibit G and otherwise reasonably satisfactory to
Landlord in the amount of the security required pursuant to this Lease issued by
a banking corporation reasonably satisfactory to Landlord and having its
principal place of business or a duly licensed branch or agency in the City and
State of New York. Such letter of credit shall have an expiration date no
earlier than the first anniversary of the date of issuance thereof and shall be
automatically renewed from year to year unless terminated by the issuer thereof
by notice to Landlord given not less than 45 days prior to the expiration
thereof. Except as otherwise provided herein, Tenant shall, throughout the term
of this Lease deliver to Landlord, in the event of the termination of any such
letter of credit, replacement letters of credit in lieu thereof (each such
letter of credit and such extensions or replacements thereof, as the case may
be, is hereinafter referred to as a "Security Letter") no later than 30 days
prior to the expiration date of the preceding Security Letter. The term of each
such Security Letter shall be not less than one year, shall be automatically
renewable from year to year as aforesaid, and shall not be subject to a final
expiration date. Notwithstanding the foregoing, in the event that (x) Landlord
shall elect, in its discretion, to accept a Security Letter which is subject to
a final expiration date, and (y) the Expiration Date of this Lease shall be
determined pursuant to Section 1.03 hereof to be a date occurring after the date
which is one (1) month prior to such final expiration date, Tenant shall, in
such event, within ninety (90) days after the Commencement Date (as determined
pursuant to Section 1.05 hereof), deliver to Landlord a replacement of or an
amendment to such Security Letter extending such final expiration date to a date
occurring at least one (1) month following the Expiration Date of this Lease. If
Tenant shall fall to obtain any replacement of or amendment to a Security Letter
within any of the applicable time limits set forth in this Section 4.02,
Landlord may draw down the full amount of the existing Security Letter and
retain the same as security hereunder.
4.03. In the event Tenant defaults in respect to any of the terms,
provisions, covenants and conditions of this Lease beyond notice and the
expiration of any applicable cure periods, including, but not limited to, the
payment of Fixed Rent and Additional Charges, Landlord may, at its election,
draw down the entire Security Letter or any portion thereof and use, apply or
retain the whole or any part of the security so deposited to the extent required
for the payment of any Fixed Rent and Additional Charges or any other sum as to
which Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
provisions, covenants, and conditions of this Lease, including but not limited
to, any damages or deficiency accrued before or after summary proceedings or
other re-entry by Landlord. To insure that Landlord may utilize the security
represented by the Security Letter in the manner, for the purpose, and to the
extent provided in this Article 4, each Security Letter shall provide that the
full amount thereof may be drawn down by Landlord upon the presentation to the
issuing bank of Landlord's draft drawn on the issuing bank without accompanying
memoranda on statement of beneficiary.
4.04. In the event that Tenant defaults in respect of any of the
terms, provisions, covenants and conditions of the Lease beyond notice and the
expiration of any applicable cure periods and Landlord utilizes all or any part
of the security represented by the Security Letter but does not terminate this
Lease as provided in Article 22 hereof, Landlord may, in addition to exercising
its rights as provided in Section 4.03 hereof, retain the unapplied and unused
balance of the principal amount of the Security Letter as security for the
faithful performance and observance by Tenant thereafter of the terms,
provisions, and conditions of this Lease, and may use, apply, or retain the
whole or any part of said balance to the extent required for payment of Fixed
Rent, Additional Charges, or any other sum as to which Tenant is in default or
for any sum which Landlord may expend or be required to expend by reason of
Tenant's default in respect of any of the terms, covenants, and conditions of
this Lease. In the event Landlord applies or retains any portion or all of the
security delivered hereunder, Tenant shall forthwith restore the amount so
applied or retained so that at all times the amount deposited shall be not less
than the security required by Section 4.01 hereof.
4.05. If Tenant shall fully and faithfully comply with all of
Tenant's covenants and obligations under this Lease, the security or any balance
thereof to which Tenant is entitled [together with the interest earned thereon
(less any administrative fee to which Landlord may be entitled under applicable
Legal Requirements), if and to the extent that such security is held in cash
form] shall be returned or paid over to Tenant after the date fixed as the end
of this Lease and after delivery to Landlord of entire possession of the
Premises. In the event of any sale, transfer or leasing of Landlord's interest
in the Building whether or not in connection with a sale, transfer or leasing of
the Land to a vendee, transferee or lessee, Landlord shall have the right to
transfer the unapplied part of the security and the interest thereon, if any, to
which Tenant is entitled, to the vendee, transferee or lessee and, upon the
giving to Tenant of notice that the Building has been sold, transferred or
leased (as the case may be) and the actual transfer of the security to such
vendee, transferee or assignee (as the case may be), Landlord shall thereupon be
released by Tenant from all liability for the return or payment thereof, and
Tenant shall look solely to the new landlord for the return or payment of the
same. The provisions of the preceding
22
<PAGE>
sentence shall apply to every subsequent sale, transfer or leasing of the
Building, and any successor of Landlord may, upon a sale, transfer, leasing or
other cessation of the interest of such successors in the Building, whether in
whole or in part, pay over any unapplied part of said security to any vendee,
transferee or lessee of the Building and shall thereupon be relieved of all
liability with respect thereto. In the event of any such sale, transfer or
leasing, Landlord shall have the right to transfer the Security Letter to the
new landlord or, in the alternative, to require Tenant to deliver a replacement
Security Letter naming the new landlord as beneficiary, and, upon such delivery
by Tenant of such replacement Security Letter, Landlord shall return the
existing Security Letter to Tenant. If Tenant shall fail to timely deliver such
replacement Security Letter, Landlord shall have the right to draw down the
existing Security Letter and retain the proceeds as security hereunder until a
replacement Security Letter is delivered. Landlord and Tenant hereby agree that,
in connection with the transfer by Landlord or its successors or assigns
hereunder of Landlord's interest in the Security Letter, Tenant shall be solely
liable to pay any and all actual expenses of the issuing bank as billed to
Landlord (other than the issuing bank's transfer commission) in connection with
any such transfer of the Security Letter, as Additional Charges hereunder, upon
Landlord's demand therefor. Except in connection with a permitted assignment of
this Lease, Tenant shall not assign or encumber or attempt to assign or encumber
the monies deposited herein as security or any interest thereon to which Tenant
is entitled, and neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. In any event, in the absence of evidence satisfactory to Landlord
of an assignment of the right to receive the security, or the remaining balance
thereof, Landlord may return the security to the original Tenant regardless of
one or more assignments of this Lease.
ARTICLE 5
Subordination, Notice to Superior Lessors and Mortagees
-------------------------------------------------------
5.01. The estate of this Lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate to all ground leases, overriding leases and
underlying leases of the Land and/or the Building and/or that portion of the
Building of which the Premises are a part, now or hereafter existing and to the
liens of all mortgages which may now or hereafter affect the Land and/or the
Building and/or that portion of the Building of which the Premises are a part
and/or any of such leases, whether or not such mortgages shall also cover other
lands and/or buildings and/or leases, to each and every advance made or
hereafter to be made under such mortgages, and to all renewals, modifications,
replacements and extensions of such leases and such mortgages and spreaders and
consolidations of such mortgages. This Section 5.01 shall be self-operative and
no further instrument of subordination shall be required. In confirmation of
such subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that
23
<PAGE>
Landlord, the lessor under any such lease or the holder of any such mortgage or
any of their respective successors in interest may reasonably request to
evidence such subordination. Any lease to which this Lease is, at the time
referred to, subject and subordinate is herein called "Superior Lease" and the
lessor of a Superior Lease or its successor in interest, at the time referred
to, is herein called "Superior Lessor"; and any mortgage to which this Lease is,
at the time referred to, subject and subordinate is herein called "Superior
Mortgage" and the holder of a Superior Mortgage is herein called "Superior
Mortgagee."
5.02. If any act or omission of Landlord would give Tenant the right,
immediately or after lapse of a period of time, to cancel or terminate this
Lease, or to claim a partial or total eviction, Tenant shall not exercise such
right (a) until it has given written notice of such act or omission to Landlord
and each Superior Mortgagee and each Superior Lessor whose name and address
shall previously have been furnished to Tenant, and (b) until a reasonable
period for remedying such act or omission shall have elapsed following the
giving of such notice and following the time when such Superior Mortgagee or
Superior Lessor shall have become entitled under such Superior Mortgage or
Superior Lease. as the case may be, to remedy the same (which reasonable period
shall in no event be less than the period to which Landlord would be entitled
under this Lease or otherwise, after similar notice, to effect such remedy),
provided such Superior Mortgagee or Superior Lessor shall with due diligence
give Tenant notice of intention to, and commence and continue to, remedy such
act or omission.
5.03. If any Superior Lessor or Superior Mortgagee, or any designee of any
Superior Lessor or Superior Mortgagee, shall succeed to the rights of Landlord
under this Lease, whether through possession or foreclosure action or delivery
of a new lease or deed, then at the request of such party so succeeding to
Landlord's rights (herein called "Successor Landlord") and upon such Successor
Landlord's written agreement to accept Tenant's attornment, Tenant shall attom
to and recognize such Successor Landlord as Tenant's landlord under this Lease
and shall promptly execute and deliver any instrument that such Successor
Landlord may reasonably request to evidence such attornment, Upon such
attornment this Lease shall continue in full force and effect as a direct lease
between the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease, except that the Successor Landlord
shall not be:
(a) liable for any previous act or omission of Landlord (or its
predecessors in interest);
(b) responsible for any monies owing by Landlord to the credit of
Tenant;
(c) subject to any credits, offsets, claims, counterclaims, demands
or defenses which Tenant may have against Landlord (or its predecessors in
interest);
24
<PAGE>
(d) bound by any payments of rent which Tenant might have made for
more than one (1) month in advance of the date such payment is due under this
Lease to Landlord (or its predecessors in interest);
(e) bound by any covenant to undertake or complete any construction
of the Premises or any portion thereof;
(f) required to account for any security deposit other than any
security deposit actually delivered to the Successor Landlord;
(g) bound by any obligation to make any payment to Tenant or grant or
be subject to any credits, except for services, repairs, maintenance and
restoration provided for under this Lease to be performed after the date of
attornment and which landlords of like properties ordinarily perform at the
Landlord's expense, it being expressly understood, however, that the Successor
Landlord shall not be bound by an obligation to make payment to Tenant with
respect to construction performed by or on behalf of Tenant at the Premises;
(h) bound by any modification of this Lease, including without
limitation, any modification which reduces the Fixed Rent or Additional Charges
or other charges payable under this Lease, or shortens the term thereof, or
otherwise materially adversely affects the rights of the lessor thereunder, made
without the written consent of the Successor Landlord; or
(i) required to remove any person occupying the Premises or any part
thereof.
5.04. Landlord agrees that the provisions of Section 5.01 hereof shall be
conditioned upon the execution and delivery by and between Tenant and Capacity
Funding Company, LLC, the holder of the existing Superior Mortgage affecting the
Real Property (the "Existing Superior Mortgagee"), of a subordination,
non-disturbance and attornment agreement (herein called the "SNDA Agreement"),
substantially in the form of Exhibit F annexed hereto, Tenant shall execute
concurrently with the execution of this Lease six (6) counterparts of the SNDA
Agreement, which SNDA Agreement Landlord shall promptly deliver to the Existing
Superior Mortgagee for counter-execution. If Tenant shall fail to execute,
acknowledge and return the SNDA Agreement to Landlord concurrently with the
execution by Tenant of this Lease, then (x) the provisions of Section 5.01 shall
apply and (y) this Lease shall be subordinate to such existing Superior Mortgage
pursuant to the terms and conditions of such SNDA Agreement, and Tenant shall be
deemed to have executed and delivered the SNDA Agreement to the Existing
Superior Mortgagee, notwithstanding the fact that Tenant has not, in fact,
executed and delivered such SNDA Agreement.
25
<PAGE>
5.05. With respect to future Superior Mortgages and future Superior Leases
affecting the Building, Landlord agrees (subject to the qualifications
hereinafter set forth) to use reasonable efforts to obtain from the holders of
any such future Superior Mortgages and future Superior Leases, an SNDA Agreement
in favor of Tenant on such Superior Mortgagee's or Superior Lessor's standard
form, which Tenant agrees to execute and deliver to Landlord within ten (10)
days after receipt thereof; provided, however, Landlord shall have no liability
to Tenant and this Lease shall not be affected in the event that Landlord is
unable, despite such reasonable efforts, to obtain such an SNDA Agreement.
Landlord shall in no event be required to expend any monies or commence or
prosecute litigation or reject financing which is otherwise satisfactory to it
to obtain such an SNDA Agreement, and Tenant agrees to be liable for any
reasonable attorneys' fees of the holders of such superior instruments actually
charged in connection with obtaining such SNDA Agreement.
ARTICLE 6
Ouiet Enjoyment
---------------
6.01. So long as Tenant pays all of the Fixed Rent and Additional
Charges and observes and performs all of Tenant's other obligations hereunder,
Tenant shall peaceably and quietly have, hold and enjoy the Premises without
hindrance, ejection or molestation by Landlord or any person lawfully claiming
through or under Landlord, subject, nevertheless, to the provisions of this
Lease and to Superior Leases and Superior Mortgages. This covenant shall be
construed as a covenant running with the Land, and is not, nor shall it be
construed as, a personal covenant of Landlord, except to the extent of
Landlord's interest in the Real Property and only so long as such interest shall
continue, and thereafter Landlord shall be relieved of all liability hereunder
thereafter arising and this covenant shall be binding only upon subsequent
successors in interest of Landlord's interest in this Lease, to the extent of
their respective interests, as and when they shall acquire the same, and so long
as they shall retain such interest.
ARTICLE 7
Assignment, Subletting and Mortgaging
-------------------------------------
7.01. Subject to the rights of Tenant set forth in the following Sections
of this Article 7, Tenant shall not, whether voluntarily, involuntarily, or by
operation of law or otherwise (a) assign in whole or in part or otherwise
transfer in whole or in part this Lease or the term and estate hereby granted,
or advertise to do so, (b) sublet the Premises or any part thereof, or offer or
advertise to do so, or allow the same to be used, occupied or utilized by anyone
other than Tenant and Tenant's Affiliates (as such term is defined in Section
7.02 hereof), (c) mortgage, pledge, encumber or otherwise hypothecate this Lease
or the Premises or any part
26
<PAGE>
thereof in any manner whatsoever or (d) permit the Premises or any part thereof
to be occupied, or used for desk space, mailing privileges or otherwise, by any
person other than Tenant, without in each instance obtaining the prior written
consent of Landlord (which consent shall be granted or withheld in accordance
with the following provisions of this Article 7).
7.02. If Tenant (or any subtenant) is a corporation, the provisions of
subdivision (a) of Section 7.01 shall apply to a transfer, whether by a single
transaction or by a series of related or unrelated transactions), of stock
(other than a transfer though the "over the counter market" or through any
recognized stock exchange by persons who are not deemed "insiders" within the
meaning of the Securities Exchange Act of 1934, as amended) or any other
mechanism, such as the issuance of additional stock, a stock voting agreement or
change in class(es) of stock, which results in a change of control of Tenant (or
such subtenant) as if such transfer of stock or other mechanism which results in
a change of control of Tenant (or such subtenant) were an assignment of this
Lease, and if Tenant (or such subtenant) is a partnership, joint venture or
limited liability company, said provisions shall apply with respect to a
transfer, by one or more transfers, of an interest in the distributions of
profits and losses of such partnership, joint venture or limited liability
company (or other mechanism, such as the creation of additional general
partnership or limited partnership interests) which results in a change of
control of such partnership, joint venture or limited liability company, as if
such transfer of an interest in the distributions of profits and losses of such
partnership, joint venture or limited liability company which results in a
change of control of such partnership, joint venture or limited liability
company were an assignment of this Lease; provided, however, the provisions of
subdivision (a) of Section 7.01 shall not apply to transactions with a
corporation into or with which Tenant (or any permitted subtenant of Tenant) is
merged or consolidated or to transactions with a corporation or partnership to
which substantially all of Tenant's assets are transferred or to any corporation
(herein collectively called "Tenant's Affiliates") which controls or is
controlled by Tenant or is under common control with Tenant, provided that in
any of such events:
(i) the successor to Tenant or transferee is a reputable entity of good
character and has a net worth computed in accordance with generally
accepted accounting principles at least equal to the greater of(l) the
net worth of Tenant thirty (30) days prior to such merger,
consolidation or transfer, or (2) the net worth of the Tenant herein
named on the date of this Lease,
(ii) proof reasonably satisfactory to Landlord of such net worth shall have
been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction,
(iii) a duplicate original instrument of assignment in form and substance
reasonably satisfactory to Landlord, duly executed by Tenant, shall
have been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction,
27
<PAGE>
(iv) an instrument in form and substance reasonably satisfactory to
Landlord, duly executed by the assignee, in which such assignee
assumes (as of the Commencement Date) observance and performance of,
and agrees to be personally bound by, all of the terms, covenants and
conditions of this Lease on Tenant's part to be performed and observed
shall have been delivered to Landlord at least ten (10) days prior to
the effective date of any such transaction, and
(v) such merger, consolidation or transfer shall be for a good business
purpose and not principally for the purpose of transferring this
Lease.
Furthermore, the provisions of Section 7.01 shall not be deemed to prohibit the
simultaneous occupancy of the Premises by, or a subletting of all or a portion
of the Premises to, a Tenant's Affiliate, provided, however that (i) Landlord
shall be given not less than ten (10) days prior written notice of any such
sublease or occupancy arrangement accompanied by reasonable evidence of such
affiliate relationship, and (ii) the cessation of such affiliate relationship
while such sublease or occupancy is continuing shall be deemed a transaction to
which all of the terms of this Article 7 shall apply. For purposes of this
Section 7.02, the term "control" shall mean, in the case of a corporation,
ownership or voting control, directly or indirectly, of at least fifty percent
(50%) of all the voting stock, and in case of a joint venture, partnership or
limited liability company, or similar entity, ownership, directly or indirectly,
of at least fifty percent (50%) of all the general or other partnership or
membership (or similar) interests therein. Any agreement pursuant to which (x)
Tenant is relieved from the obligation to pay, or a third party agrees to pay on
Tenant's behalf, all or a part of Fixed Rent or Additional Charges under this
Lease, and/or (y) such third party undertakes or is granted any right to assign
or attempt to assign this Lease or sublet or attempt to sublet all or any
portion of the Premises, shall be deemed an assignment of this Lease and subject
to the provisions of Section 7.01.
7.03. If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Premises or any part thereof are sublet or used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant, and expiration of Tenant's time to cure such default, collect
rent from the subtenant or occupant. In either event, Landlord may apply the net
amount collected to the Fixed Rent and Additional Charges herein reserved, but
no such assignment, subletting, occupancy or collection shall be deemed a waiver
of any of the provisions of Section 7.01, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to a
particular assignment, mortgaging, subletting or use or occupancy by others
shall not in any way be considered a consent by Landlord to any other or further
assignment, mortgaging or subletting or use or occupancy by others not expressly
permitted by this Article 7. References in this Lease to use or occupancy by
others (that is, anyone other than Tenant) shall not be construed as limited to
subtenants and those claiming under or through
28
<PAGE>
subtenants but shall also include licensees and others claiming under or through
Tenant, immediately or remotely.
7.04. Any assignment or transfer, whether made with Landlord's consent
pursuant to Sections 7.01 or 7.11 hereof or without Landlord's consent pursuant
to Section 7.02 hereof, shall be made only if, and shall not be effective until,
the assignee shall execute, acknowledge and deliver to Landlord an agreement in
form and substance reasonably satisfactory to Landlord whereby the assignee
shall assume the obligations of this Lease on the part of Tenant to be performed
or observed and whereby the assignee shall agree that the provisions in Section
7.01 shall, notwithstanding such assignment or transfer, continue to be binding
upon it in respect of all future assignments and transfers. The original named
Tenant covenants that, notwithstanding any assignment or transfer, whether or
not in violation of the provisions of this Lease, and notwithstanding the
acceptance of Fixed Rent and/or Additional Charges by Landlord from an assignee,
transferee, or any other party, the original named Tenant shall remain fully and
jointly and severally liable with such assignee, transferee or other party for
the payment of the Fixed Rent and Additional Charges and for the performance and
observance of other obligations of this Lease on the part of Tenant to be
performed or observed.
7.05. The joint and several liability of Tenant and any immediate or remote
successor in interest of Tenant and the due performance of the obligations of
this Lease on Tenant's part to be performed or observed shall not be discharged,
released or impaired in any respect by any agreement or stipulation made by
Landlord extending the time of, or modifying any of the obligations of, this
Lease, or by any waiver or failure of Landlord to enforce any of the obligations
of this Lease.
7.06. The listing of any name other than that of Tenant, whether on the
doors of the Premises or the Building directory, or otherwise, shall not operate
to vest any right or interest in this Lease or in the Premises, nor shall it be
deemed to be the consent of Landlord to any assignment or transfer of this Lease
or to any sublease of the Premises or to the use or occupancy thereof by others.
7.07. Notwithstanding anything to the contrary contained in this Article 7,
if Tenant shall at any time or times during the term of this Lease desire to
assign this Lease or sublet all or part of the Premises, Tenant shall give
notice thereof to Landlord, which notice shall set forth (i) in the case of a
proposed subletting, the area proposed to be sublet, and, in the case, of a
proposed assignment such notice shall set forth Tenant's intention to assign
this Lease, (ii) the proposed dates of the commencement and the expiration of
the term of the proposed sublease or the effective date of the proposed
assignment, as the case may be, (iii) the full consideration to be paid by the
proposed assignee to Tenant, or by Tenant to the proposed assignee (as the case
may be), in connection with any proposed assignment, or the proposed subrental
rate and any periods of rent-free occupancy, in the case of a proposed
subletting, and all other material provisions that are proposed to be included
in the transaction, (iv) any work contributions and any sums paid for
29
<PAGE>
the sale or rental of any of Tenant's leasehold improvements, furniture,
fixtures, equipment or other personal property to be purchased or rented by the
proposed assignee or subtenant, (v) the identity of the proposed assignee or
subtenant, the nature of its business and its proposed use of the Premises, all
in reasonable detail, (vi) current financial information with respect to the
proposed assignee or subtenant, including, without limitation, its most recent
financial report and (vii) such other information as Landlord may reasonably
request. Except for any assignment or sublease which does not require Landlord's
consent pursuant to Section 7.02 hereof, such notice shall be deemed an
irrevocable offer from Tenant to Landlord whereby Landlord (or Landlord's
designee) may, at its option, (i) terminate this Lease in the case of an
assignment or a sublease covering all or a portion of the Premises or, in the
event that the Premises shall include more than one (1) floor of the Building, a
sublease covering all or a portion of each floor of the Premises, or (ii) in the
case of a sublease which does not include space on each and every floor of the
Premises (in the event that the Premises shall include more than one (1) floor
of the Building), terminate this Lease with respect to only the entire portion
of the Premises located on the floor(s) included in such sublease. Either of the
foregoing options may be exercised by Landlord by notice to Tenant at any time
within 30 days after such notice has been given by Tenant to Landlord and
Landlord shall have received all other information required to be furnished to
Landlord by Tenant pursuant to the provisions of this Article 7; and during such
30-day period Tenant shall not assign this Lease or sublet such space to any
person.
7.08. If Landlord exercises its option to terminate this Lease in the
circumstances described in clause (i) of the penultimate sentence of Section
7.07 hereof, then this Lease shall end and expire on the date that such
assignment or sublet was to be effective or commence, as the case may be (but in
no event shall this Lease expire sooner than sixty (60) days after the date on
which Landlord exercises its option to terminate this Lease unless Landlord
waives this condition in its sole discretion), and the Fixed Rent and Additional
Charges shall be paid and apportioned to such date.
7.09. If Landlord exercises its option to terminate this Lease with respect
to a portion of the Premises in the circumstances described in clause (ii) of
the penultimate sentence of Section 7.07 hereof, then (a) this Lease shall end
and expire with respect to such part of the Premises on the date that the
proposed sublease was to commence (but in no event shall this Lease expire with
respect to such part of the Premises sooner than sixty (60) days after the date
on which Landlord exercises its option to terminate this Lease with respect to
such part of the Premises unless Landlord waives this condition in its sole
discretion) and (b) from and after such date the Fixed Rent and Additional
Charges shall be adjusted, based upon the proportion that the rentable area of
the Premises remaining bears to the total rentable area of the Premises.
7.10. Intentionally Omitted.
7.11. In the event Landlord does not exercise either of its options
pursuant to Section 7.07 to so terminate (in whole or in part) this Lease and
provided that Tenant is not in
30
<PAGE>
default of any of Tenant's obligations under this Lease after the giving of
notice and the expiration of any applicable cure period, Landlord's consent
(which must be in writing, in form satisfactory to Landlord and signed by
Landlord, Tenant and the proposed assignee or subtenant) to the proposed
assignment or sublease shall not be unreasonably withheld, provided and upon
condition that:
(a) Tenant shall have complied with the provisions of Section 7.07
and Landlord shall not have exercised any of its options under said Section 7.07
within the time permitted therefor and Tenant shall have delivered to Landlord a
duplicate original of the sublease or assignment instrument and all other
documents to be executed in connection therewith:
(b) In Landlord's reasonable judgment the proposed assignee or
subtenant is engaged in a business and the Premises, or the relevant part
thereof, will be used in a manner which (i) is in keeping with the then
standards of the Building, and (ii) will not violate any negative covenant as to
use contained in any other lease of space in the Building (and Landlord shall
advise Tenant of any such negative covenants in writing promptly after written
request therefor by Tenant made in connection with a proposed subletting or
assignment);
(c) The proposed assignee or subtenant is a reputable person or
entity of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof;
(d) Neither (i) the proposed assignee or sublessee nor (ii) any
person which, directly or indirectly, controls, is controlled by, or is under
common control with, the proposed assignee or sublessee or any person who
controls the proposed assignee or sublessee, is then an occupant of any part of
the Building or a party who dealt with Landlord or Landlord's agent (directly or
through a broker) with respect to space in the Building during the six (6)
months immediately preceding Tenant's request for Landlord's consent;
(e) The form of the proposed sublease or assignment instrument shall
be reasonably satisfactory to Landlord and shall comply with the applicable
provisions of this Article 7;
(f) The Premises shall not be subdivided into more than 2 separate
units;
(g) Tenant shall reimburse Landlord on demand for any reasonable and
actual out-of-pocket costs that may be incurred by Landlord in connection with
said assignment or sublease, including, without limitation, the costs of making
investigations as to the acceptability of the proposed assignee or subtenant,
and reasonable legal costs incurred in connection with the granting of any
requested consent; and
31
<PAGE>
(h) Tenant shall not have (i) advertised the availability of the
Premises without prior notice to and approval by Landlord, nor shall any
advertisement state the name (as distinguished from the address) of the Building
or the proposed rental nor (ii) listed the Premises for subletting, whether
through a broker, agent, representative, or otherwise at a rental rate less than
the Fixed Rent and Additional Charges at which Landlord is then offering to
lease other space in the Building, but nothing contained in this Article 7 shall
be deemed to prohibit Tenant from listing with brokers the availability of the
Premises for sublet or assignment.
7.12. (a) In the event that in connection with Tenant's request for
Landlord's consent pursuant to Section 7.11 hereof, the proposed sublease or
proposed assignment delivered to Landlord contains (i) economic terms which are
"substantially different from" (as hereinafter defined) the economic terms set
forth in the notice delivered to Landlord pursuant to Section 7.07 hereof
[including, without limitation, in the case of a sublease, with respect to the
subrental rate (giving effect to the financial value of any abatements,
concessions, credits or improvements for the benefit of the subtenant), the
sublet term, the sublet space or, in the case of an assignment, with respect to
the consideration and all other sums being paid in connection with such
assignment], or (ii) material non-economic terms that are different from the
material noneconomic terms set forth in the notice delivered to Landlord
pursuant to Section 7.07 hereof, then in such event. Tenant's request for
consent pursuant to Section 7.11 hereof shall be deemed to be an irrevocable
offer from Tenant to Landlord as to which Landlord shall have all of the options
set forth in Section 7.07 hereof and Tenant shall again comply with all of the
provisions and conditions of Section 7.07 hereof before entering into such
sublease or assignment. The economic terms of a proposed sublet or proposed
assignment shall be deemed "substantially different from" the economic terms set
forth in the notice delivered to Landlord pursuant to Section 7.07 hereof if the
economic terms of such proposed sublease or assignment on an aggregate basis
differ by more than eight (8%) percent from the terms contained in the terms set
forth in the notice delivered to Landlord pursuant to Section 7.07 hereof.
(b) In the event that Landlord fails to exercise either of its
options under Section 7.07 hereof, and Tenant fails to request Landlord's
consent to an assignment or sublease on the terms and conditions set forth in
the notice delivered to Landlord pursuant to Section 7.07 hereof within three
(3) months from the date of Landlord's response to such notice, Tenant shall
again comply with all of the provisions and conditions of Section 7.07 hereof
before assigning this Lease or subletting all or part of the Premises.
7.13. With respect to each and every sublease or subletting authorized by
Landlord under the provisions of this Lease, it is further agreed that:
(a) No subletting shall be for a term (including any renewal or
extension options contained in the sublease) ending later than one day prior to
the expiration date of this Lease;
32
<PAGE>
(b) No sublease shall be valid, and no subtenant shall take
possession of the Premises or any part thereof, until an executed counterpart of
such sublease (and all ancillary documents executed in connection with, with
respect to or modifying such sublease) has been delivered to Landlord;
(c) Each sublease shall provide that it is subject and subordinate to
this Lease and to any matters to which this Lease is or shall be subordinate,
and that in the event of termination, reentry or dispossess by Landlord under
this Lease Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublessor, under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that Landlord shall not be (i) liable for
any previous act or omission of Tenant under such sublease, (ii) subject to any
credit, offset, claim, counterclaim, demand or defense which such subtenant may
have against Tenant, (iii) bound by any previous modification of such sublease
or by any previous prepayment of more than one (1) month's rent, (iv) bound by
any covenant of Tenant to undertake or complete any construction of the Premises
or any portion thereof, (v) required to account for any security deposit of the
subtenant other than any security deposit actually delivered to Landlord by
Tenant, (vi) bound by any obligation to make any payment to such subtenant or
grant any credits, except for services, repairs, maintenance and restoration
provided for under the 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 Premises or any
part thereof; and
(d) Each sublease shall provide that the subtenant may not assign its
rights thereunder or further sublet the space demised under the sublease, in
whole or in part, except in compliance with all of the termns of provisions of
this Article 7.
7.14. (a) If Landlord shall give its consent to any assignment of this
Lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as Additional Charges an amount equal to fifty (50%) percent of any
Assignment Profit (hereinafter defined) or Sublease Profit (hereinafter
defined), as the case may be.
(b) For purposes of this Section 7.14, the term "Assignment Profit"
shall mean an amount equal to all sums and other considerations paid to Tenant
by the assignee for or by reason of such assignment (including, but not limited
to, sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture, furnishings or other personal property,
less, in the case of a sale thereof, the then net unamortized or undepreciated
portion (determined on the basis of Tenant's federal income tax returns) of the
amount, if any, by which the original cost thereof exceeded any amounts paid for
or contributed by Landlord which were applied by Tenant against such original
cost pursuant to the terms of this Lease).
(c) For purposes of this Section 7.14, the term "Sublease Profit"
shall mean in any year of the term of this Lease (i) any rents, additional
charges or other consideration
33
<PAGE>
payable under the sublease to Tenant by the subtenant which is in excess of
the Fixed Rent and Additional Charges accruing during such year of the term
of this Lease in respect of the subleased space (at the rate per square
foot payable by Tenant hereunder) pursuant to the terms hereof, and (ii)
all sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture or other personal property, less, in the
case of the sale thereof, the then net unamortized or undepreciated portion
(determined on the basis of Tenant's federal income tax returns) of the
amount, if any, by which the original cost thereof exceeded any amounts
paid for or contributed by Landlord which were applied by Tenant against
such original cost pursuant to the terms of this Lease), which net
unamortized amount shall be deducted from the sums paid in connection with
such sale in equal monthly installments over the balance of the term of the
sublease (each such monthly deduction to be in an amount equal to the
quotient of the net unamortized amount, divided by the number of months
remaining in the term of this Lease).
(d) Notwithstanding any of the foregoing provisions of this Section
7.14 to the contrary, before the calculation of any Assignment Profit or
Subletting Profit, there shall be subtracted therefrom Tenant's subletting or
assignment costs. "Tenant's subletting or assignment costs" shall mean, with
respect to each subletting by Tenant of the Premises or portions thereof or any
assignment of this Lease, any brokerage commissions, reasonable counsel fees and
advertising fees incurred by Tenant in connection with such subletting or
assignment, payments to Landlord pursuant to Section 7.11(g) hereof, and the
costs of any alterations performed to prepare the Premises or the sublet portion
thereof for occupancy by any subtenant or assignee (the costs of such
alterations to be amortized ratably over the term of the sublease in question or
over the remainder of the term of the Lease, in the case of an assignment).
(e) The sums payable under this Section 7.14 shall be paid to
Landlord as and when paid by the assignee or subtenant to Tenant.
7.15. Except for any subletting by Tenant to Landlord or its designee
pursuant to the provisions of this Article 7, each subletting shall be subject
to all of the covenants, agreements, terms, provisions and conditions contained
in this Lease. Notwithstanding any such subletting to Landlord or any such
subletting to any other subtenant and/or acceptance of rent or additional rent
by Landlord from any subtenant, but subject to the provisions of Section 7.10(d)
and (e) hereof to the extent applicable, Tenant shall and will remain fully
liable for the payment of the Fixed Rent and Additional Charges due and to
become due hereunder and for the performance of all the covenants, agreements,
terms, provisions and conditions contained in this Lease on the part of Tenant
to be performed and all acts and omissions of any licensee or subtenant or
anyone claiming under or through any subtenant which shall be in violation of
any of the obligations of this Lease, and any such violation shall be deemed to
be a violation by Tenant. Tenant further agrees that notwithstanding any such
subletting, no other and further subletting of the Premises by Tenant or any
person claiming through or under Tenant (except as provided in Section 7.10
hereof) shall or will be made except upon compliance with and subject to the
provisions of this Article. If Landlord shall decline to give its consent to any
proposed
34
<PAGE>
assignment or sublease, or if Landlord shall exercise any of its options under
Section 7.07 hereof, Tenant shall indemnify, defend and hold harmless Landlord
against and from any and all loss, liability, damages, costs and expenses
(including, but not limited to, reasonable counsel fees) resulting from any
claims that may be made against Landlord by the proposed assignee or sublessee
or by any brokers or other persons claiming a commission or similar compensation
in connection with the proposed assignment or sublease.
ARTICLE 8
Compliance with Laws
---------- ---- ----
8.01. (a) Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of any public authority with
respect to the Premises or the use or occupation thereof. Tenant shall, at
Tenant's expense, comply with all present and future laws and requirements of
any public authorities in respect of the Premises or the use and occupation
thereof, or the abatement of any nuisance in, on or about the Premises;
provided, however, that Tenant shall not be obligated to make structural repairs
or alterations or repairs or alterations to Building systems installed by
Landlord unless the need for same arises out of one or more of the causes set
forth in clauses (i) through (iii) of the next succeeding sentence. Tenant shall
also be responsible for the cost of compliance with all present and future laws
and requirements of any public authorities in respect of the Real Property
arising from (i) Tenant's particular manner of use of the Premises or operation
of its installations, equipment or other property therein (other than the mere
use of the Premises as generic executive and general offices), (ii) any cause or
condition created by or at the instance of Tenant, or (iii) the breach of any of
Tenant's obligations hereunder, whether or not such compliance arising from any
of the causes set forth in this sentence requires work which is structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen. Tenant shall
pay all the costs, expenses, fines, penalties and damages which may actually be
imposed upon Landlord or any Superior Lessor by reason of or arising out of
Tenant's failure to fully and promptly comply with and observe the provisions of
this Section 8.01. Without limiting the generality of the foregoing, it is
specifically agreed that Tenant shall comply with all laws that require the
installation, modification or maintenance within the Premises of (i) any fire-
rated partitions, gas, smoke, or fire detector or alarm, any emergency signage
or lighting system, or any sprinkler or other system to extinguish fires or (ii)
any handicap facilities; provided that the foregoing shall not be deemed to
limit any of Landlord's obligations expressly set forth in Section 2.01 or
Exhibit C hereof. However, Tenant need not comply with any such law or
requirement of any public authority so long as Tenant shall be contesting the
validity thereof, or the applicability thereof to the Premises, in accordance
with Section 8.02 hereof.
(b) Notwithstanding anything to the contrary contained in Section
8.01(a) hereof, in the event that Landlord shall receive a notice of violation
of any Legal
35
<PAGE>
Requirement with respect to the Premises arising in connection with the
performance by Landlord of Landlord's Work, Landlord shall cause such violation
to be cured or otherwise removed of record, except to the extent that (i)
compliance with such Legal Requirement is the obligation of Tenant pursuant to
this Section 8.01 or (ii) such violation was caused by any acts or omissions of
Tenant, its agents, contractors or employees or, notwithstanding any approval by
Landlord of the Work Letter or the Tenant Work Final Plans, by any defects in
the Tenant Work Final Plans.
(c) Except to the extent otherwise provided in Section 2.01 or
Exhibit C hereof and subject to the proviso set forth in the second sentence of
Section 8.0 1(a) hereof, Tenant shall perform all work necessary to place and
maintain the Premises (including without limitation the entry door to the
Premises) in compliance with Local Law 58 and the Americans with Disabilities
Act of 1990 ("ADA"), and Landlord shall be responsible for compliance with Local
Law 58 and the ADA with respect to the common areas of the Building.
Notwithstanding anything contained in the preceding sentence to the contrary,
Landlord shall not be responsible for compliance with the ADA (i) with respect
to the bathrooms in the Premises (except to the extent otherwise provided in
Section 2.01 or Exhibit C hereof) or (ii) to the extent same is required as a
result of Tenant's manner of use of the Premises.
8.02. Tenant, at its expense, after notice to Landlord, may contest, by
appropriate proceedings prosecuted diligently and in good faith, the validity,
or applicability to the Premises, of any law or requirement of any public
authority, provided that (a) Landlord shall not be subject to criminal penalty
or to prosecution for a crime, or any other fine or charge, nor shall the
Premises or any part thereof or the Building or Land, or any part thereof, be
subject to being condemned or vacated, nor shall the Building or Land, or any
part thereof, be subjected to any lien (unless Tenant shall remove such lien by
bonding or otherwise) or encumbrance, by reason of non-compliance or otherwise
by reason of such contest; (b) before the commencement of such contest, Tenant
shall furnish to Landlord a cash deposit or other security in amount, form and
substance reasonably satisfactory to Landlord and shall indemnify Landlord
against the cost thereof and against all liability for damages, interest,
penalties and expenses (including reasonable attorneys' fees and expenses),
resulting from or incurred in connection with such contest or non-compliance;
(c) such non-compliance or contest shall not constitute or result in any
violation of any Superior Lease or Superior Mortgage, or if any such Superior
Lease and/or Superior Mortgage shall permit such non-compliance or contest on
condition of the taking of action or furnishing of security by Landlord, such
action shall be taken and such security shall be furnished at the expense of
Tenant; (d) such noncompliance or contest shall not prevent Landlord from
obtaining any and all permits and licenses in connection with the operation of
the Building; and (e) Tenant shall keep Landlord advised as to the status of
such proceedings. Without limiting the application of the above, Landlord shall
be deemed subject to prosecution for a crime if Landlord, or its managing agent,
or any officer, director, partner, shareholder or employee of Landlord or its
managing agent, as an individual, is charged with a crime of any kind or degree
whatever, whether by service of a summons or otherwise, unless such charge is
withdrawn before
36
<PAGE>
Landlord or its managing agent, or such officer, director, partner, shareholder
or employee of Landlord or its managing agent (as the case may be) is required
to plead or answer thereto.
ARTICLE 9
Insurance
---------
9.01. Tenant shall not violate, or permit the violation of, any condition
imposed by any insurance policy then issued in respect of the Real Property and
shall not do, or permit anything to be done, or keep or permit anything to be
kept in the Premises which would subject Landlord, any Superior Lessor or any
Superior Mortgagee to any liability or responsibility for personal injury or
death or property damage, or which would increase any insurance rate in respect
of the Real Property over the rate which would otherwise then be in effect or
which would result in insurance companies of good standing refusing to insure
the Real Property in amounts reasonably satisfactory to Landlord, or which would
result in the cancellation of or the assertion of any defense by the insurer in
whole or in part to claims under any policy of insurance in respect of the Real
Property; provided, however, that in no event shall the mere use of the Premises
for customary and ordinary office purposes, as opposed to the manner of such
use, constitute a breach by Tenant of the provisions of this Section 9.01.
9.02. If, by reason of any failure of Tenant to comply with the provisions
of this Lease, the premiums on Landlord's insurance on the Real Property shall
be higher than they otherwise would be, and Landlord shall notify Tenant of such
fact and, if Tenant shall not within 15 days thereafter, rectify such failure so
as to prevent the imposition of such increase in premiums, then Tenant shall
reimburse Landlord, on demand and as Additional Charges, for that part of such
premiums attributable to such failure on the part of Tenant. A schedule or "make
up" of rates for the Real Property or the Premises, as the case may be, issued
by the New York Fire Insurance Rating Organization or other similar body making
rates for insurance for the Real Property or the Premises, as the case may be,
shall be conclusive evidence of the facts therein stated and of the several
items and charges in the insurance rate then applicable to the Real Property or
the Premises, as the case may be.
9.03. Tenant, at its expense, shall maintain at all times during the term
of this Lease (a) "all risk" property insurance covering all present and future
Tenant's Property and Tenant's improvements and betterments installed by or on
behalf of Tenant (including Tenant's Work) to a limit of not less than the full
replacement value thereof, such insurance to include a replacement cost
endorsement, and (b) commercial general liability insurance, including
contractual liability, in respect of the Premises and the conduct or operation
of business therein, with Landlord and its managing agent, if any, and each
Superior Lessor and Superior Mortgagee whose name and address shall previously
have been furnished to Tenant, as additional insureds, with limits of not less
than Three Million ($3,000,000) Dollars combined single limit for bodily
37
<PAGE>
injury and property damage liability in any one occurrence, (c) steam boiler,
air-conditioning or machinery insurance, if there is a boiler or pressure object
or similar equipment in the Premises, with Landlord and its managing agent, if
any, and each Superior Lessor and Superior Mortgagee whose name and address
shall previously have been furnished to Tenant, as additional insureds, with
limits of not less than Three Million ($3,000,000) Dollars and (d) when
Alterations are in progress, the insurance specified in Section 11.05 hereof.
The limits of such insurance shall not limit the liability of Tenant. Tenant
shall deliver to Landlord and any additional insureds, at least ten (10) days
prior to the Commencement Date, such fully paid-for certificates of insurance,
in form reasonably satisfactory to Landlord issued by the insurance company or
its authorized agent. Such insurance may be carried in a blanket policy covering
the Premises and other locations of Tenant, if any, provided that each such
policy shall in all respects comply with this Article 9 and shall specify that
the portion of the total coverage of such policy allocated to the Premises is in
the amounts required pursuant to this Section 9.03. Tenant shall procure and pay
for renewals of such insurance from time to time before the expiration thereof,
and Tenant shall deliver to Landlord and any additional insureds a certificate
of renewal at least thirty (30) days before the expiration of any existing
policy. All such policies shall be issued by companies of recognized
responsibility licensed to do business in New York State and rated by Best's
Insurance Reports or any successor publication of comparable standing and
carrying a rating of A VIII or better or the then equivalent of such rating, and
all such policies shall contain a provision whereby the same cannot be canceled
or modified unless Landlord and any additional insureds are given at least
thirty (30) days prior written notice of such cancellation or modification. The
proceeds of policies providing "all risk" property insurance of Tenant's
improvements and betterments shall be payable to Landlord, Tenant and each
Superior Lessor and Superior Mortgagee as their interests may appear. The
parties shall cooperate with each other in connection with the collection of any
insurance monies that may be due in the event of loss and Tenant shall execute
and deliver to Landlord such proofs of loss and other instruments which may be
reasonably required to recover any such insurance monies.
9.04. Each party agrees to have included in each of its insurance policies
(insuring the Building and any other Landlord's property therein in case of
Landlord, and insuring Tenant's Property (hereinafter defined) and improvements
and betterments in the case of Tenant, against loss, damage or destruction by
fire or other casualty) a waiver of the insurer's right of subrogation against
the other party during the term of this Lease or, if such waiver should be
unobtainable or unenforceable, (i) an express agreement that such policy shall
not be invalidated if the assured waives the right of recovery against any party
responsible for a casualty covered by the policy before the casualty or (ii) any
other form of permission for the release of the other party. If such waiver,
agreement or permission shall not be, or shall cease to be, obtainable from
either party's then current insurance company, the insured party shall so notify
the other party promptly after learning thereof, and shall use its best efforts
to obtain the same from another insurance company described in Section 9.03
hereof. Each party hereby releases the other party, with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party, for loss, damage or destruction with respect to its property
38
<PAGE>
occurring during the term of this Lease to the extent to which it is, or is
required to be, insured under a policy or policies containing a waiver of
subrogation or permission to release liability, as provided in the preceding
subdivisions of this Section. Nothing contained in this Section shall be deemed
to relieve either party of any duty imposed elsewhere in this Lease to repair,
restore or rebuild or to nullify any abatement of rents provided for elsewhere
in this Lease.
9.05. Landlord may from time to time require that the amount of the
insurance to be maintained by Tenant under Section 9.03 hereof be reasonably
increased, so that the amount thereof adequately protects Landlord's interest;
provided, however, that the amount to which such insurance requirements may be
increased shall not exceed an amount then being required by landlords of
comparable first-class office buildings in lower Manhattan.
9.06. Landlord shall maintain in respect of the Building at all times
during the term of this Lease fire and casualty insurance covering the Building
and Landlord's property in amounts of coverage required by any institutional
mortgagee of the Building, or, if there is no institutional mortgagee of the
Building, then in amounts comparable to the amounts carried by owners of first-
class office buildings in lower Manhattan comparable to the Building.
ARTICLE 10
Rules and Regulations
---------------------
10.01. Tenant and its employees and agents shall faithfully observe
and comply with the rules and regulations annexed hereto as Exhibit D, and such
reasonable changes therein (whether by modification, elimination or addition) as
Landlord at any time or times hereafter may make and communicate to Tenant,
which, in Landlord's reasonable judgment, shall be necessary for the reputation,
safety, care and appearance of the Real Property, or the preservation of good
order therein, or the operation or maintenance of the Real Property, and which
do not unreasonably affect the conduct of Tenant's business in the Premises
(such rules and regulations as changed from time to time being herein called
"Rules and Regulations"); provided, however, that in case of any conflict or
inconsistency between the provisions of this Lease and any of the Rules and
Regulations, the provisions of this Lease shall control.
10.02. Nothing in this Lease contained shall be construed to impose
upon Landlord any duty or obligation to enforce the Rules and Regulations
against Tenant or any other tenant or any employees or agents of Tenant or any
other tenant, and Landlord shall not be liable to Tenant for violation of the
Rules and Regulations by another tenant or its employees, agents, invitees or
licensees. Landlord shall not discriminate against Tenant in enforcing the Rules
and Regulations.
39
<PAGE>
ARTICLE II
Alterations
-----------
11.01. Tenant shall have the right to make improvements, changes and
alterations in or to the Premises ("Alterations") with Landlord's written
approval, which approval Landlord shall not unreasonably withheld or delay;
provided, however, that (i) Landlord's approval shall not be required with
respect to painting, wall covering, carpeting and other minor alterations which
do not require a building alteration permit, do not affect Building systems and
involve a scope of work for which plans and specifications are not generally
prepared in comparable office buildings in lower Manhattan (herein collectively
called "Minor Alterations") and (ii) notwithstanding anything to the contrary
contained in this Lease, Landlord may withhold its approval of Major Alterations
(hereinafter defined) in Landlord's sole discretion, which discretion Landlord
hereby agrees to exercise in good faith. A "Major Alteration" is an Alteration
which (a) is not limited to the interior of the Premises or which affects the
exterior (including the appearance) of the Building, (b) adversely affects the
strength or structural integrity of the Premises or the Building, (c) adversely
affects the usage or the proper functioning of the mechanical, electrical,
sanitary, heating, ventilating, air-conditioning or other service systems of the
Building, or (d) requires the consent of any Superior Mortgagee or Superior
Lessor and such consent is withheld by such Superior Mortgagee or Superior
Lessor, as the case may be. Notwithstanding anything to the contrary contained
in this Lease, Tenant shall have the non-exclusive right to use, in common with
others, the common areas of the Building to the extent required to support
Tenant's use of the Premises for general and executive offices, including,
without limitation, the right to tie in to and/or connect with the water risers
and ducts of the Building in connection with any Alterations performed by Tenant
to prepare the Premises for its initial occupancy thereof, subject to the
provisions of this Article 11 and Exhibit E annexed hereto and all other
applicable terms, covenants, provisions and conditions of this Lease.
11.02. (a) Before proceeding with any Alteration (other than Minor
Alterations), Tenant shall submit to Landlord, for Landlord's approval, plans
and specifications for the work to be done, and Tenant shall not proceed with
such work until it obtains Landlord's written approval of such plans and
specifications, which approval shall not be unreasonably withheld or delayed
(except with respect to Major Alterations, the approval of which by Landlord is
subject to the provisions of Section 11.01 hereof).
(b) Tenant shall pay to Landlord within ten (10) days after
demand, as Additional Charges, Landlord's reasonable costs and expenses
(including, without limitation, the fees of any architect or engineer employed
by Landlord or any Superior Lessor or Superior Mortgagee for such purpose) for
(i) reviewing said plans and specifications (not to exceed $5,000.00 for each
set of plans and specifications) and (ii) inspecting the Alterations to
determine whether the same are being performed in accordance with the approved
plans and specifications,
40
<PAGE>
the provisions of any Superior Lease or Superior Mortgage and all laws and
requirements of public authorities.
(c) Tenant agrees that any review or approval by Landlord of
any plans and/or specifications with respect to any Alterations is solely for
Landlord's benefit, and without any representation or warranty whatsoever to
Tenant with respect to the adequacy, correctness or efficiency thereof or
otherwise.
11.03. (a) Before proceeding with any Alteration which will cost
more than $100,000 (exclusive of the costs of decorating work and items
constituting Tenant's Property), as estimated by a reputable contractor
designated by Landlord, Tenant shall furnish to Landlord one of the following:
(i) a cash deposit or (ii) a performance bond and a labor and materials payment
bond (issued by a corporate surety licensed to do business in New York
reasonably satisfactory to Landlord), or (iii) an irrevocable, unconditional,
negotiable letter of credit, issued by and drawn on a bank or trust company
which is a member of the New York Clearing House Association in a form
reasonably satisfactory to Landlord; each to be in an amount equal to one
hundred twenty-five (125%) percent of the cost of the Alteration, estimated as
set forth above. Any such letter of credit shall be for one year and shall be
renewed by Tenant each and every year until the Alteration in question is
completed and shall be delivered to Landlord not less than thirty (30) days
prior to the expiration of the then current letter of credit. Failure to deliver
such new letter of credit on or before said date shall be a material breach of
this Lease and Landlord shall have the right, inter alia, to present the then
current letter of credit for payment.
(b) Upon (i) the completion of the Alteration in accordance
with the terms of this Article 11 and (ii) the submission to Landlord of proof
evidencing the payment in full for said Alteration, the security deposited with
Landlord (or the balance of the proceeds thereof, if Tenant has furnished cash
or a letter of credit and if Landlord has drawn on the same) shall be returned
to Tenant.
(c) Upon Tenant's failure to properly perform, complete and
fully pay for the said Alteration, which failure continues after the giving of
notice and the expiration of applicable grace period, Landlord shall be entitled
to draw on the security deposited under this Article 11 to the extent Landlord
reasonably deems necessary in connection with the said Alteration, the
restoration and/or protection of the Premises or the Real Property and the
payment or satisfaction of any costs, damages or expenses in connection with the
foregoing and/or Tenant's obligations under this Article 11.
11.04. Tenant, in connection with any Alterations, shall fully and
promptly comply with and observe the Tenant Construction Approval Procedures set
forth as Exhibit E hereto and made a part hereof.
41
<PAGE>
11.05. Tenant, at its expense, shall obtain (and furnish true and
complete copies to Landlord of) all necessary governmental permits and
certificates for the commencement and prosecution of Alterations and for final
approval thereof upon completion, and shall cause Alterations to be performed in
compliance therewith, with all applicable laws and requirements of public
authorities, with all applicable requirements of insurance bodies and with the
plans and specifications approved by Landlord. Alterations shall be diligently
performed in a good and workmanlike manner, using new materials and equipment at
least equal in quality and class to the better of(i) the original installations
of the Building or (ii) the then standards for the Building established by
Landlord. Alterations shall be performed by contractors first approved by
Landlord, which approval shall not be unreasonably withheld or delayed;
provided, however, that any Alterations in or to the mechanical, electrical,
sanitary, heating, ventilating, air-conditioning, life safety or other systems
of the Building shall be performed only by the contractor(s) designated by
Landlord. Alterations shall be performed in such manner as not to unreasonably
interfere with or delay and as not to impose any additional expense upon
Landlord in the construction, maintenance, repair or operation of the Building;
and if any such additional expense shall be incurred by Landlord as a result of
Tenant's performance of any Alterations, Tenant shall pay such additional
expense within twenty (20) days after demand as Additional Charges. Throughout
the performance of Alterations, Tenant, at its expense, shall carry, or cause to
be carried, worker's compensation insurance in statutory limits, all risk
"Builders Risk" insurance and general liability insurance, with completed
operation endorsement, for any occurrence in or about the Real Property, under
which Landlord and its agent and any Superior Lessor and Superior Mortgagee
whose name and address shall previously have been furnished to Tenant shall be
named as parties insured, in such limits as Landlord may reasonably require,
with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord
with reasonably satisfactory evidence that such insurance is in effect at or
before the commencement of Alterations and, on request, at reasonable intervals
thereafter during the continuance of Alterations. No Alterations shall involve
the removal of any fixtures, equipment or other property in the Premises which
are not Tenant's Property without Landlord's prior written consent, unless such
fixtures, equipment or other property shall be promptly replaced at Tenant's
expense with new fixtures, equipment or other property of like utility and at
least equal value.
11.06. Tenant agrees that the exercise of its rights pursuant to the
provisions of this Article 11 or of any other provisions of this Lease or the
Exhibits hereto shall not be done in a manner which would violate Landlord's
union contracts affecting the Real Property, or create any work stoppage,
picketing, labor disruption or dispute or disharmony or any interference (beyond
a de minimis extent) with the business of Landlord or any tenant or occupant of
the Building. Tenant shall immediately stop work or other activity if Landlord
notifies Tenant that continuing such work or activity would violate Landlord's
union contracts affecting the Real Property, or create any work stoppage,
picketing, labor disruption or dispute or disharmony or any interference (beyond
a de minimis extent) with the business of Landlord or any tenant or occupant of
the Building. Landlord agrees that it shall not discriminate as against Tenant
in
42
<PAGE>
enforcing the foregoing prohibition against interfering with the business of
Landlord or other tenants in the Building.
11.07. Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from
or otherwise connected with Alterations, or any other work, labor, services or
materials done for or supplied to Tenant, or any person claiming through or
under Tenant (other than Landlord's Work, subject to the provisions of Section
8.01(b) hereof, or any other work, labor, services or materials done for or
supplied by Landlord or its affiliates, agents, representatives or contractors),
which shall be issued by the Department of Buildings of the City of New York or
any other public authority having or asserting jurisdiction. Tenant shall
defend, indemnify and save harmless Landlord from and against any and all
mechanic's and other liens and encumbrances filed in connection with
Alterations, or any other work, labor, services or materials done for or
supplied to Tenant, or any person claiming through or under Tenant, including,
without limitation, security interests in any materials, fixtures or articles so
installed in and constituting part of the Premises and against all costs,
expenses and liabilities incurred in connection with any such lien or
encumbrance or any action or proceeding brought thereon. Tenant, at its expense,
shall procure the satisfaction or discharge of record of all such liens and
encumbrances within thirty (30) days after Tenant shall have received notice of
the filing thereof. However, nothing herein contained shall prevent Tenant from
contesting, in good faith and at its own expense, any notice of violation,
provided that Tenant shall comply with the provisions of Section 8.02 hereof.
11.08. Tenant will promptly upon the completion of an Alteration
(excluding Landlord's Work) deliver to Landlord "as-built" drawings of any
Alterations Tenant has performed or caused to be performed in the Premises which
cost in excess of $50,000.
11.09. All fixtures and equipment installed or used by Tenant in the
Premises shall be fully paid for by Tenant in cash and shall not be subject to
conditional bills of sale, chattel mortgage or other title retention agreements.
11.10. Tenant shall keep records of Tenant's Alterations costing in
excess of $50,000 and of the cost thereof. Tenant shall, within forty-five (45)
days after demand by Landlord, furnish to Landlord copies of such records and
cost if Landlord shall require same in connection with any proceeding to reduce
the assessed valuation of the Real Property, or in connection with any
proceeding instituted pursuant to Article 8 hereof or for any other reasonable
purpose.
43
<PAGE>
ARTICLE 12
Landlord's and Tenant's Property
-------------- -----------------
12.01. All fixtures, equipment, improvements and appurtenances
attached to or built into the Premises at the commencement of or during the term
of this Lease, whether or not by or at the expense of Tenant, shall be and
remain a part of the Premises, shall, upon the expiration or sooner termination
of this Lease, be deemed the property of Landlord and shall not be removed by
Tenant, except as provided in Section 12.02. Further, any carpeting or other
personal property in the Premises on the Commencement Date, unless installed and
paid for by Tenant, shall be and shall remain Landlord's property and shall not
be removed by Tenant. Notwithstanding the foregoing provisions, upon notice to
Tenant no later than thirty (30) days prior to the Expiration Date or upon
reasonable notice with respect to such earlier date upon which the term of this
Lease shall expire, Landlord may require Tenant to remove all or part of the
foregoing fixtures, equipment, improvements and appurtenances attached to or
built into the Premises during the term of this Lease; provided, however, that
(i) Tenant shall not be obligated to remove any such fixtures, equipment,
improvements and appurtenances installed prior to the date of this Lease, and
(ii) Tenant's obligation to remove fixtures, equipment, improvements and
appurtenances installed after the date of this Lease shall be limited to non-
standard items such as kitchens, vaults, private restrooms, raised or reinforced
flooring, or other items which are unusually difficult or expensive to remove.
Tenant shall remove any such items required by Landlord pursuant to the
preceding sentence from the Premises prior to the expiration of this Lease at
Tenant's expense. Upon such removal Tenant shall immediately and at its expense,
repair and restore the Premises to the condition existing prior to installation
and repair any damage to the Premises or the Building due to such removal.
12.02. All movable partitions, furniture systems, special cabinet
work, business and trade fixtures, machinery and equipment, communications
equipment (including, without limitation, telephone system, security system and
wiring) and office equipment, whether or not attached to or built into the
Premises, which are installed in the Premises by or for the account of Tenant
without expense to Landlord and can be removed without structural damage to the
Building, and all furniture, furnishings and other articles of movable personal
property owned by Tenant and located in the Premises (herein collectively called
"Tenant's Property") shall be and shall remain the property of Tenant and may be
removed by Tenant at any time during the term of this Lease; provided that if
any of Tenant's Property is removed, Tenant shall repair or pay the cost of
repairing any damage to the Premises or to the Building resulting from the
installation and/or removal thereof. Any equipment or other property for which
Landlord shall have granted any allowance or credit to Tenant shall not be
deemed to have been installed by or for the account of Tenant without expense to
Landlord, shall not be considered Tenant's Property and shall be deemed the
property of Landlord.
44
<PAGE>
12.03. At or before the Expiration Date of this Lease (or within 15
days after any earlier termination of this Lease) Tenant, at its expense, shall
remove from the Premises all of Tenant's furniture, equipment (including,
without limitation, telecommunications equipment and wiring and cabling) and
other moveable personal property not affixed or attached to the Premises (except
for such items thereof as Landlord shall have expressly permitted to remain,
which property shall become the property of Landlord), and Tenant shall repair
any damage to the Premises or the Building resulting from any installation
and/or removal of Tenant's Property.
12.04. Any other items of Tenant's Property which shall remain in the
Premises after the Expiration Date of this Lease, or within 15 days following an
earlier termination date, may at the option of Landlord, be deemed to have been
abandoned, and in such case such items may be retained by Landlord as its
property or disposed of by Landlord, without accountability, in such manner as
Landlord shall determine, at Tenant's expense.
ARTICLE 13
Repairs and Maintenance
-----------------------
13.01. Tenant shall, at its expense, throughout the term of this
Lease, take good care of and maintain in good order and condition the Premises
and the fixtures and improvements therein including, without limitation, the
property which is deemed Landlord's pursuant to Section 12.01 hereof and
Tenant's Property, except as otherwise expressly provided in the last sentence
of this Section 13.01. Tenant shall be responsible for all repairs, interior and
exterior, structural (except as provided in the last sentence of this Section
13.01) and non-structural, ordinary and extraordinary, foreseen or unforeseen,
in and to the Premises, and shall be responsible for the cost of all repairs,
interior and exterior, structural (except as provided in the last sentence of
this Section 13.01) and non-structural, ordinary and extraordinary, foreseen or
unforeseen, in and to the Building and the facilities and systems thereof, to
the extent the need for same arises out of (a) the performance or existence of
Alterations (excluding Landlord's Work), (b) the installation, use or operation
of the property which is deemed Landlord's, pursuant to Sections 12.01 and 12.02
hereof and Tenant's Property, (c) the moving of the property which is deemed
Landlord's pursuant to Sections 12.01 and 12.02 hereof and Tenant's Property in
or out of the Building, (d) the act, omission, misuse or neglect of Tenant or
any of its subtenants or its or their employees, agents, contractors or invitees
or (e) design flaws in any of Tenant's plans and specifications regardless of
the fact that such Tenant's plans may have been approved by Landlord. Tenant, at
its expense, shall promptly replace all scratched, damaged or broken doors and
glass (and the solar film, if any, attached to the window glass) in and about
the Premises, including, without limitation, entrance doors and shall be
responsible for all repairs, maintenance and replacement of wall and floor
coverings in the Premises and for all the repair, maintenance and replacement of
all horizontal portions of the systems and facilities of the Building within or
exclusively serving the Premises, including without limitation the sanitary
45
<PAGE>
and electrical fixtures and equipment therein. All repairs in or to the Premises
for which Tenant is responsible shall be promptly performed by Tenant in a
manner which will not interfere with the use of the Building by other occupants;
provided, however, any repairs in and to the Building and the facilities and
systems thereof for which Tenant is responsible shall be performed by Landlord
at Tenant's expense which expense shall be commercially reasonable. The exterior
walls of the Building, the portions of any window sills outside the windows, and
the windows are not part of the premises demised by this Lease and Landlord
reserves all rights to such parts of the Building. Notwithstanding the foregoing
provisions of this Section 13.01, Tenant shall not be responsible for repairs to
or replacements of any structural elements of the Premises or the Building,
except to the extent the need for such repairs or replacements arises from the
matters set forth in clauses (a), (c), (d) or (e) of the second sentence of this
Section 13.01 or from the negligence or willful misconduct of Tenant, its
employees, agents or contractors.
13.02. Tenant shall give Landlord prompt notice of any defective
condition in any plumbing, heating, air-conditioning or ventilation system or
electrical lines located in, servicing or passing through the Premises of which
it has actual knowledge. Following such notice, Landlord shall remedy the
conditions, but at the expense of Tenant if Tenant is responsible for same under
the provisions of this Article 13.
13.03. Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant, nor shall Tenant's covenants and obligations
under this Lease be reduced or abated in any manner whatsoever, by reason of any
inconvenience, annoyance, interruption or injury arising from Landlord's making
any repairs or changes which Landlord is required or permitted by this Lease, or
required by law, to make in or to the fixtures, equipment or appurtenances of
the Building or the Premises; provided, however, that Landlord shall use
reasonable efforts to the extent practicable to make such repairs and changes at
such times and in such manner as to minimize interference with the conduct of
Tenant's business in the Premises, provided that Landlord shall not be required
to perform any such work on an overtime or premium-pay basis.
ARTICLE 14
Electricity
-----------
14.01. If and to the extent the Premises is comprised of an entire
floor or floors, Tenant agrees to purchase from Landlord or from a meter company
designated by Landlord all electricity consumed, used or to be used in such
entire floor(s). The amount to be paid by Tenant for electricity consumed shall
be determined by meter or meters and related equipment installed (or, if
existing, retrofitted) by Landlord as part of Tenant's Work and billed
separately according to each meter. Bills for electricity consumed by Tenant,
which Tenant hereby agrees to pay, shall be rendered by Landlord or the meter
company to Tenant at such time as Landlord may
46
<PAGE>
elect, and shall be payable as an Additional Charge, within fifteen (15) days
after rendition of any such bill. Tenant shall make no material changes or
additions to the electrical equipment, wiring and/or appliances in the Premises
(beyond that on Tenant's approved plans for initial occupancy) without
submission of plans for the prior written consent of Landlord.
14.02. The amount to be charged to Tenant by Landlord per "KW" and
"KWHR" pursuant to this Article for electricity consumed within the Premises,
whether shown on the meters measuring Tenant's consumption of electricity or
determined by survey as herein elsewhere provided, shall be 108% of the amount
at which Landlord from time to time purchases each KW and KWHR of electricity
for the same period from the utility company, which amount (herein, as adjusted
from time to time, called "Landlord's Rate") shall be determined by dividing the
cost established by said utility company (averaged separately for KWs and KWHRs)
during each respective billing period by the number of KWs and KWHRs consumed by
the Building appearing on the utility company invoice for such period. In no
event shall the Additional Charge made to Tenant pursuant to this Article 14 for
submetered electricity supplied to the Premises (or the charge pursuant to
Section 14.04 hereof in the event electricity is supplied on a rent inclusion
basis) be less than Landlord's actual cost therefor. If Tenant shall occupy the
Premises for business purposes (including, without limitation, the testing or
operation of its computers) and consume electricity prior to the installation of
meters in the Premises, then Tenant agrees to pay Landlord the sum of $2.75 per
rentable square foot per annum for electricity pursuant to Section 14.04 hereof
until such time as said meters are installed.
14.03. In the event that the "submetering" of electricity in the
Building is hereafter prohibited by any law hereafter enacted, or by any order
or ruling of the Public Service Commission of the State of New York, or by any
judicial decision of any appropriate court, at the request of Landlord, Tenant
shall, unless Tenant elects to require Landlord to provide electricity pursuant
to Section 14.04 hereof, apply within five (5) days to the appropriate public
utility company servicing the Building for direct electric service and bear all
costs and expenses necessary to comply with all rules and regulations of such
public utility company pertinent thereto, and Landlord and/or the meter company
theretofore designated by Landlord shall be relieved of any further obligation
to furnish electricity to Tenant pursuant to this Article 14, except Landlord
shall permit its wires, conduits and electrical equipment, to the extent
available and safely capable, to be used for such purpose. Any additional riser
or risers or feeders or service, to the extent available and reasonably
feasible, to supply Tenant's electrical requirements will be installed by
Landlord, at the sole cost and expense of Tenant, if in Landlord's reasonable
judgment the same are necessary and will not cause permanent damage or injury to
the Building or the Premises or cause or create a dangerous or hazardous
condition or unreasonably interfere with or disturb other tenants or occupants.
In addition to the installation of such riser or risers, Landlord will also, at
the sole cost and expense of Tenant, install at reasonably competitive rates all
other equipment proper and necessary in connection therewith, subject to the
aforesaid terms and conditions, and subject to Landlord's prior approval of
Tenant's plans therefor which shall not be unreasonably withheld or delayed.
47
<PAGE>
14.04. (a) If(i) submetering of electricity is prohibited as
described in Section 14.03 hereof and Tenant does not elect to obtain
electricity from the public utility company, or (ii) if and to the extent that
the Premises or any portion of Tenant's electric consumption (KW and KWHR) is
measured on a meter that also measures the electric consumption of another
tenant occupying space in the Building, then in any such case Landlord shall
furnish electricity to Tenant on the basis that Tenant's consumption (KW and
KWHR) of electricity shall be measured by electric survey made from time to time
by Landlord's consultant. Pending an initial survey made by Landlord's
consultant, effective as of the date when Landlord has commenced furnishing
electricity to Tenant pursuant to this Section 14.04 (with suitable proration
for any period of less than a full calendar month), the Fixed Rent specified in
Section 1.04 hereof shall be increased by an amount (the "Initial Charge") which
shall be at the rate of $2.75 per rentable square foot per annum, or in the
event the reason is (i) above. then, if there has been twelve (12) months
charges of submetered electric, an amount equal to the average of the prior
twelve (12) months' charges for submetered electric. After completion of the
electrical survey made by Landlord's consultant of Tenant's consumption (KW and
KWHR) of electricity, said consultant shall apply 100% of Landlord's Rate as
provided in Section 14.02 hereof to arrive at an amount (herein called the
"Actual Charge") and the Fixed Rent shall be appropriately adjusted
retroactively to reflect any amount by which the Actual Charge exceeds the
Initial Charge. Tenant shall pay that portion of such amount which would have
been paid to the date of the determination of the Actual Charge within ten (10)
days after being billed therefor. Thereafter and from time to time during the
term of this Lease, Landlord may cause additional surveys of Tenant's electrical
usage to be made by Landlord's consultant. Tenant from time to time may request
Landlord to have a survey made of Tenant's electrical usage, and the fees of
Landlord's consultant making such survey(s) at Tenant's request shall be paid by
Tenant. In the event any of the foregoing surveys shall determine that there has
been an increase or decrease in Tenant's usage of electricity, then effective as
of the date of such change in usage the then current Actual Charge to Tenant by
reason of the furnishing of electricity to Tenant, as same may have been
previously increased pursuant to the terms hereof, shall be increased or
decreased (subject to the last sentence of subsection 14.04(b) hereof) in
accordance with such survey determination with appropriate credit allowed to
Tenant in the event of a decrease in usage and in the event of an increase in
such usage Tenant shall pay the increased amount therefor from the date of such
change in usage to the date of such survey determination within ten (10) days
after being billed therefor and thereafter as part of the increased monthly
charge for electricity by reason of such survey determination.
(b) In the event from time to time after the initial survey
or a subsequent survey any additional electrically operated equipment is
installed in the Premises by Tenant, or if Tenant shall increase its hours of
operation, or if the charges by the utility company supplying electric current
to Landlord are increased or decreased after the date thereof, then and in any
of such events the monthly charge shall be increased or decreased accordingly on
account of such additional electricity consumed by such newly installed
electrically operated equipment and/or increase in Tenant's hours of operation
and/or on account of such increased or decreased
48
<PAGE>
Landlord's Rate. The amount of such increase or decrease in the monthly charge
shall be determined in the first instance by Landlord's consultant. In addition,
the monthly rate will be increased or decreased quarterly in accordance with
calculations by Landlord's consultant to reflect changes in the fuel adjustment
component of the utility company charge. Tenant shall pay the amount of any
increase in the monthly charge retroactively (subject to Tenant's right to
contest in the same manner as in Section 14.06 hereof provided) from the date of
the installation of all newly installed electrically operated equipment and/or
from the date when the increased charges to Landlord from the utility company
become effective and/or from the date of any increase in Tenant's hours of
operation, as the case may be, such amount to be paid promptly upon billing
therefor by Landlord. Notwithstanding anything to the contrary contained in
Section 14.04, in no event shall the Actual Charge be decreased to an amount
which is less than the Initial Charge per rentable square foot per annum.
14.05. All survey determinations (including the first survey made by
Landlord's consultant) shall be subject to contest by Tenant as provided in
Section 14.06 hereof. Surveys made of Tenant's electrical consumption shall be
based upon the use of electricity between the hours of 8:00 a.m. to 6:00 p.m.,
Mondays through Fridays, on Saturdays and such other days and hours when Tenant
(or Tenant's agents, employees and/or contractors) uses electricity for lighting
and for the operation of the machinery, appliances and equipment used by Tenant
in the Premises; and if cleaning services are provided by Landlord, such survey
shall include Landlord's normal cleaning hours of five (5) hours per day (which
shall not be subject to reduction) for lighting within the Premises and for
electrical equipment normally used for such cleaning.
14.06. In the event electricity shall be furnished to Tenant as
contemplated in Section 14.04 hereof, then Tenant, within sixty (60) days after
notification from Landlord of the determination of Landlord's utility consultant
(in accordance with the provisions of Section 14.04 hereof), shall have the
right to contest, at Tenant's cost and expense, such determination by submitting
to Landlord a like survey determination prepared by a utility consultant of
Tenant's selection, which will highlight the differences between Landlord's
survey and Tenant's survey. If the determination of Tenant's consultant does not
vary from the determination of Landlord's consultant by more than five percent
(5%), then Landlord's determination shall be deemed binding and conclusive. If
the determination of Tenant's consultant varies by more than five percent (5%)
and if Landlord's consultant and Tenant's consultant shall be unable to reach
agreement within thirty (30) days, then such two consultants shall designate a
third consultant to make the determination, and the determination of such third
consultant shall be binding and conclusive on both Landlord and Tenant. If the
determination of such third consultant shall substantially confirm the findings
of Landlord's consultant (i.e., within five percent (5%)), then Tenant shall pay
---
the cost of such third consultant. If such third consultant shall substantially
confirm the determination of Tenant's consultant (i.e., within five percent
---
(5%)), then Landlord shall pay the cost of such third consultant. If such third
consultant shall make a determination substantially different from that of both
Landlord's and Tenant's consultants (or is within ten percent (10%) of both such
determinations), then the cost of such third consultant shall be borne
49
<PAGE>
equally by Landlord and Tenant. In the event that Landlord's consultant and
Tenant's consultant shall be unable to agree upon the designation of a third
consultant within thirty (30) days after Tenant's consultant shall have made its
determination (different from that of Landlord's consultant), then either party
shall have the right to request The Real Estate Board of New York, Inc. (or,
upon their failure or refusal to act, the American Arbitration Association in
the City of New York) to designate a third consultant whose decision shall be
conclusive and binding upon the parties, and the costs of such third consultant
shall be borne as hereinbefore provided in the case of a third consultant
designated by the Landlord's and Tenant's consultants. Pending the resolution of
any contest pursuant to the terms hereof, Tenant shall pay the Additional Charge
on account of electricity determined by Landlord's consultant, and upon the
resolution of such contest, appropriate adjustment in accordance with such
resolution of such Additional Charge payable by Tenant on account of electricity
shall be made retroactive to the date of the determination of Landlord's
consultant.
14.07. If pursuant to any law, ruling, order or regulation the amount
which Landlord is permitted to charge to Tenant for the purchase of electricity
pursuant to this Article 14 shall be reduced below that which Landlord would
otherwise be entitled to charge Tenant hereunder, then Tenant shall pay the
difference between such amounts to Landlord as an Additional Charge within ten
(10) days after being billed therefor by Landlord, as compensation for the use
of the Building's electric distribution system.
14.08. Tenant covenants and agrees that at all times its installations
and use of electricity shall never exceed the capacity of feeders to or
electrical vaults of the Building or the risers or wiring serving the Premises.
If (i) in Landlord's reasonable opinion Tenant's installation overloads the
electrical vaults/feeders or any riser(s) and/or switch(es) in or servicing the
Building or (ii) Tenant requests additional power in addition to that which is
being supplied by Landlord on the date of initial occupancy, then if and to the
extent allocated power is available in the Building for use by Tenant without
resulting in allocation to Tenant of a disproportionate amount of allocated
power, Landlord shall, at Tenant's cost and expense, provide and install in
conformity with law any additional riser or risers and/or any and all switch or
switches to connect additional power to the Premises, and Tenant agrees to pay
Landlord its then-established connection charge for each additional amp of power
or portion hereof so supplied to the Premises, together with the cost of
installing such additional risers, switches and related equipment.
14.09. Landlord shall not in any way be liable or responsible to
Tenant for any loss, damage or expense which Tenant may sustain or incur if (i)
the supply of electric energy to the Premises is temporarily interrupted or (ii)
the quantity or character of electric service is changed or is no longer
available or suitable for Tenant's requirements, except to the extent resulting
from Landlord's willful misconduct or gross negligence.
50
<PAGE>
14.10. At Landlord's option, Landlord shall furnish and install all
replacement lighting, tubes, lamps, bulbs and ballasts required in the Premises;
and in such event, Tenant shall pay to Landlord or its designated contractor
upon demand the then established reasonable charges therefor of Landlord or its
designated contractor, as the case may be.
ARTICLE 15
Landlord's Services
-------------------
15.01. (a) Landlord will provide after the term of this Lease shall
have commenced provided Tenant shall have taken occupancy of the Premises for
the conduct of its business the following services to the Premises in the manner
hereinafter more particularly set forth: (i) heat, ventilation and air
conditioning; (ii) elevator service; (iii) domestic hot and cold water; and (iv)
cleaning.
(b) As used herein, the terms "Business Hours" shall mean the
hours between 8:00 a.m. and 6:00 p.m., and "Business Days" shall mean all days
except Saturdays, Sundays, New Year's Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, the day following Thanksgiving, and
Christmas, and any other days which shall be either (i) observed by both the
federal and the state governments as legal holidays or (ii) designated as a
holiday by the applicable Building Service Union Employee Service contract or by
the applicable Operating Engineers contract.
15.02. (a) (i) Landlord shall furnish heating, ventilation and air
conditioning to the Premises during Business Hours on Business Days by way of
the existing base Building heating, ventilation and air conditioning equipment
(herein called the "Base Building HVAC Equipment") which shall not include any
supplemental air conditioning units installed by or on behalf of Tenant, so as
to be capable of meeting the following specifications:
(x) providing air conditioning during the summer months at an
average inside design temperature of seventy-five (75)
degrees Fahrenheit dry bulb (+ or - 2 degrees) and a room
relative humidity of fifty percent (50%) (+ or - 5%) when
the outside temperature is ninety-two (92) degrees
Fahrenheit dry bulb coincident with a wet bulb
temperature of seventy-four (74) degrees Fahrenheit; and
(y) providing heating during the winter months at an average
inside design temperature of seventy-two (72) degrees
Fahrenheit dry bulb when the outside temperature is
eleven (11) degrees Fahrenheit dry bulb with a wind
velocity of fifteen (15) miles per
51
<PAGE>
hour. HVAC System includes Economizer cycle (air
side/water side) for year-round use.
The Base Building HVAC Equipment shall be capable of meeting the
specifications set forth in the immediately preceding paragraph provided and on
the condition that:
(i) occupancy does not exceed one person per 125 square feet of
rentable floor area within the Premises;
(ii) Tenant's total connected electrical load does not exceed 6
watts per rentable square foot (exclusive of base building
HVAC) for all power consumed within the Premises including,
without limitation, lighting, and business equipment;
(iii) Tenant substantially complies with all of the reasonable and
customary Rules and Regulations of the Building relating to
heating, ventilating and air conditioning including, without
limitation, the requirements that windows be kept shut at all
times and blinds be kept lowered during the operation of air
conditioning equipment.
(ii) Any use of the Premises, or any part thereof, or
rearrangement of partitioning in a manner that interferes with normal operation
of the heat and air-conditioning systems servicing the same, may require changes
in such systems. Such changes, so occasioned, shall be made by Tenant, at its
expense, subject to Landlord's prior written approval of such changes, which
approval may be withheld for any reason. Tenant shall not make any change,
alteration, addition or substitution to the air-conditioning system without
Landlord's prior written approval, which approval may be withheld for any
reason.
(b) If Landlord shall make steam available for Tenant's use
within the Premises for any additional heating or permitted kitchen use, the
cost of such steam as well as the cost of piping and other equipment or
facilities required to supply steam to and distribute steam within the Premises
shall be paid by Tenant. Landlord may install and maintain at Tenant's expense,
meters to measure Tenant's consumption of steam and Tenant shall reimburse
Landlord, on demand, for the quantities of steam shown on such meters at
Landlord's reasonable charges.
(c) (i) Landlord shall provide passenger elevator service
to each floor of the Premises at all times during Business Hours of Business
Days and at least one of such passenger elevators shall be subject to call at
all other times. Landlord shall provide freight elevator service to the Premises
on a first come-first served basis (i.e., no advance scheduling) and at no
charge to Tenant between the hours of 8:00 A.M. and 11:30 A.M. and 1:00 P.M. and
4:30 P.M. on Business Days. Freight elevator service shall also be provided to
the Premises on a reserved basis at all other times, upon the payment of
Landlord's then established charges
52
<PAGE>
therefor which shall be Additional Charges hereunder; provided, however, that
with respect to (x) the performance of any Alterations by Tenant during the
ninety (90) day period following the Commencement Date to prepare the Premises
for Tenant's initial occupancy thereof and (y) Tenant's initial move into the
Premises, Tenant shall only be required to reimburse Landlord for its actual
out-of-pocket costs of providing such freight elevator service, without profit
to Landlord. The use of all elevators shall be on a non-exclusive basis and
shall be subject to the Rules and Regulations.
(ii) At any time or times all or any of the elevators in
the Building may, at the option of Landlord, be manual and/or automatic
elevators, and Landlord shall be under no obligation to furnish an elevator
operator for any automatic elevator. If Landlord shall at any time or times
furnish any elevator operator for any automatic elevator, Landlord may
discontinue furnishing such elevator operator without any diminution, reduction
or abatement of rent.
(d) Landlord shall furnish reasonable quantities of hot and
cold water to the floor(s) on which the Premises are located for core lavatory,
cleaning and drinking purposes only. If Tenant shall require water for any other
purpose, Landlord need only furnish cold water at the Building core riser
through a capped outlet located on the floor of the Premises, and the cost of
heating such water as well as piping and supplying such water to the Premises
shall be paid by Tenant. Landlord may install and maintain, at Tenant's expense,
meters to measure Tenant's consumption of such cold water and/or hot water for
such other purposes. Tenant shall pay to Landlord at Landlord's standard charges
for the quantities of cold water and hot water shown on such meters (including
Landlord's charge for the production of such hot water, if Landlord shall have
produced such hot water) within ten (10) days after demand.
(e) (i) Except as otherwise provided below, Landlord shall
provide cleaning and janitorial services to the Premises on Business Days.
Tenant shall pay to Landlord within ten (10) days after demand the actual costs
incurred by Landlord for (x) extra cleaning work in the Premises required
because of (i) misuse or neglect on the part of Tenant or its subtenants or its
or their employees or visitors, (ii) interior glass partitions or unusual
quantity of interior glass surfaces (if cleaning thereof is requested by
Tenant), and (iii) non-building standard materials or finishes installed by
Tenant or at its request (if cleaning thereof is requested by Tenant), (y)
removal from the Premises and the Building of any refuse and rubbish of Tenant
in excess of that ordinarily accumulated in business office occupancy,
including, without limitation, kitchen refuse, or at times other than Landlord's
standard cleaning times, and (z) the use of the Premises by Tenant other than
during Business Hours on Business Days, to the extent that Landlord incurs
actual increases in costs as a result of such use. Notwithstanding the
foregoing, Landlord shall not be required to clean any portions of the Premises
used for preparation, serving or consumption of food or beverages, training
rooms, data processing or reproducing operations, private lavatories or toilets
or other special purposes requiring greater or more difficult cleaning work than
office areas and, if Tenant requires the cleaning of such areas,
53
<PAGE>
Tenant agrees, at Tenant's expense, to retain Landlord's cleaning contractor to
perform such cleaning.
(ii) Landlord, its cleaning contractor and their respective
employees shall have access to the Premises after 6:00 p.m. and before 8:00 a.m.
and shall have the right to use, without charge therefor, all light, power and
water in the Premises reasonably required to clean the Premises as required
under this subsection 15.02(e).
(iii) Tenant shall not clean, nor require, permit, suffer or
allow any windows in the Premises to be cleaned, from the outside in violation
of Section 202 of the Labor Law, or any other applicable law.
15.03. If Tenant shall require heat or air-conditioning services at any
time other than as set forth in subsection 15.02(a), Landlord shall furnish such
service for such times upon reasonable advance notice from Tenant. and Tenant
shall pay to Landlord within ten (10) days after demand as Additional Charges
hereunder Landlord's then established charges therefor.
15.04. Except as otherwise expressly provided above, Landlord shall not be
required to provide any services to the Premises.
15.05. Subject to the provisions of Section 15.09 and Articles 19 and 20
hereof, Landlord reserves the right, without liability to Tenant and without it
being deemed a constructive eviction, to stop or interrupt any heating,
elevator, escalator, lighting, ventilating, air-conditioning, steam, power,
electricity, water, cleaning or other service and to stop or interrupt the use
of any Building facilities and systems at such times as may be necessary and for
as long as may reasonably be required by reason of accidents, strikes, or the
making of repairs, alterations or improvements, or inability to secure a proper
supply of fuel, gas, steam, water, electricity, labor or supplies, or by reason
of any other similar or dissimilar cause beyond the reasonable control of
Landlord. Subject to the provisions of Section 15.09 and Articles 19 and 20
hereof, no such stoppage or interruption shall result in any liability from
Landlord to Tenant or entitle Tenant to any diminution or abatement of rent or
other compensation nor shall this Lease or any of the obligations of Tenant be
affected or reduced by reason of any such stoppage or interruption. Except in
emergency circumstances, Landlord shall give Tenant reasonable prior notice
(which notice need not be in writing) of its intention to make any repairs,
alterations or improvements referred to in this Section 15.05 or any other
stoppages of services of which Landlord has prior notice and shall use
reasonable efforts in making such repairs, alterations or improvements and in
dealing with such other stoppages of service so as to minimize interference with
Tenant's business operations, provided that Landlord shall not be required to
perform any such work on an overtime or premium-pay basis.
15.06. Only Landlord or persons approved by Landlord shall be permitted to
furnish or sell laundry, linen, towels, drinking water, ice, food, beverages,
bootblacking,
54
<PAGE>
barbering and other similar supplies and services to tenants. Landlord may fix
the circumstances under which such supplies and services are to be furnished or
sold. Landlord expressly reserves the right at any time to act as or to
designate an exclusive supplier of all or any one or more of said supplies and
services, provided that the quality thereof and the charges therefor shall be
reasonably comparable to that of other suppliers in the downtown area of
Manhattan in the City of New York. Landlord expressly reserves the right to
exclude from the Building any person not so designated by Landlord. However,
Tenant, its regular office employees or invitees may personally bring food or
beverages into the Building for consumption within the Premises solely by
Tenant, its regular office employees or invitees.
15.07. In addition to any remedies which Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies contained elsewhere in this Lease, if there shall be a default
hereunder by Tenant which shall not have been remedied within the applicable
grace period, Landlord shall not be obligated to furnish to Tenant or the
Premises any services outside of Business Hours on Business Days; and the
discontinuance of any one or more such services shall be without liability by
Landlord to Tenant and shall not reduce, diminish or otherwise affect any of
Tenant's covenants and obligations under this Lease.
15.08. If and for so long as Landlord maintains a Building directory,
Landlord, at Tenant's request, shall maintain listings on such directory of the
names of Tenant, or its permitted subtenants, assignees or affiliates and the
names of any of their officers and employees, provided that the names so listed
shall not use more than Tenant's Share of the space on the Building directory.
The actual cost to Landlord for making any changes in such listings requested by
Tenant shall be paid by Tenant to Landlord within twenty (20) days after
delivery of an invoice therefor.
15.09. Notwithstanding anything to the contrary contained in this Lease,
but subject to the provisions of Articles 19 and 20 hereof to the extent
applicable, if for a period of seven (7) consecutive Business Days after notice
by Tenant to Landlord, (i) Landlord fails to provide services required under
this Lease to be provided to the Premises or (ii) Landlord fails to make repairs
required under this Lease to be made by Landlord, and (w) the cause of such
failure shall not be Force Majeure Causes or the act or omission of Tenant, its
agents, representatives, contractors or employees, and (x) the Premises (or, in
the event that the Premises shall include more than one (1) floor of the
Building, any affected portion of the Premises which includes all of the space
leased by Tenant on the same floor of the Building) shall be rendered
untenantable thereby and (y) Tenant shall vacate the Premises or such affected
portion thereof, as the case may be, throughout such period of untenantability
and (z) Tenant shall concurrently therewith give notice of such fact to
Landlord, then, in such event, the Fixed Rent payable pursuant to this Lease
which is allocable to the Premises or such affected portion thereof, as the case
may be, shall be abated for the period commencing on the day immediately
succeeding the expiration of such seven (7) consecutive Business Day period and
ending on the date that the Premises or such
55
<PAGE>
affected portion thereof shall be rendered tenantable (or such earlier date, if
any, as Tenant shall reoccupy the Premises or such affected portion thereof for
the conduct of its business).
15.10. At Tenant's request, Landlord will make available condenser water
for the operation of supplemental air-conditioning units installed by Tenant in
an amount of up to twenty (20) tons in the aggregate. Landlord's charge for
providing such condenser water to Tenant shall be at the rate of $400 per ton
per year, which charge will be subject to increase for each Operating Year
during the term hereof and shall be paid by Tenant as Additional Charges
hereunder within twenty (20) days after demand. Tenant shall also pay to
Landlord as Additional Charges hereunder, within twenty (20) days after demand,
a one-time tap-in charge of $2,000 per tap, for providing condenser water
pursuant to this Section 15.10. Landlord may install and maintain at Tenant's
cost, meters to measure Tenant's consumption of such condenser water. It is
understood and agreed that Landlord shall have no responsibility with respect to
the operation, maintenance and or repair of Tenant's supplemental air-
conditioning units and all equipment relating thereto. In the event Tenant
installs supplemental air-conditioning units to serve the Premises. Tenant
covenants and agrees, at its sole cost and expense, (i) to obtain and maintain
all permits required in connection therewith and (ii) to maintain in full force
and effect for so long as such air-conditioning unit remains in the Building, a
maintenance agreement for the periodic maintenance of such unit on customary
terms with a contractor reasonably acceptable to Landlord and to furnish a copy
of said contract and all extensions thereof to Landlord within ten (10) days
after demand. Landlord shall perform routine testing and maintenance of the
Building condenser water tower and shall give Tenant reasonable prior notice of
such testing. Landlord shall cooperate with Tenant in order to schedule such
testing so as to minimize material interference with the conduct of Tenant's
business. Any supplemental air-conditioning units installed by Tenant shall,
upon expiration or earlier termination of this Lease, become and remain the
property of Landlord and shall be surrendered by Tenant with the Premises.
15.11. Subject to applicable Legal Requirements, requirements of insurance
bodies. Force Majeure Causes (as such term is defined in Section 35.04 hereof)
and Landlord's reasonable security measures for the Building, Tenant shall have
access to the Premises on a twenty-four (24) hour-per-day, seven (7)
day-per-week basis.
ARTICLE 16
Access and Name of Building
---------------------------
16.01. Except for the space within the inside surfaces of all walls, hung
ceilings, floors, windows and doors bounding the Premises, all of the Building,
including, without limitation, exterior and atrium Building walls, core corridor
walls and doors and any core corridor entrance, any terraces or roofs adjacent
to the Premises, and any space in or adjacent to the Premises used for shafts,
stacks, pipe, conduits, fan rooms, ducts, electric or other utilities,
56
<PAGE>
sinks or other Building facilities, and the use thereof, as well as access
thereto through the Premises for the purposes of operation, maintenance,
decoration and repair, are reserved to Landlord and persons authorized by
Landlord. Tenant acknowledges that Landlord has installed or is planning to
install in the Building on the inside of the windows thereof a film to reduce
the usage of energy in the Building. Tenant agrees that the foregoing provisions
of this Section 16.01 shall apply to the installation, maintenance or
replacement of such film.
16.02. Landlord reserves the right, and Tenant shall permit Landlord and
persons authorized by Landlord, to install, erect, use and maintain pipes, ducts
and conduits in and through the Premises; provided that (a) if installed
adjacent to the Premises then such installations shall be, at Landlord's cost
and expense, located in boxed enclosures and appropriately furred, and (b) in
performing such installation work, Landlord shall use reasonable efforts not to
interfere with Tenant's use of the Premises without any obligation to employ
overtime services. Any damage to the Premises resulting from Landlord's exercise
of the foregoing right shall be repaired promptly by Landlord, at Landlord's
expense.
16.03. Landlord and persons authorized by Landlord shall have the right,
upon reasonable advance notice, except in cases of emergency, to enter and/or
pass through the Premises at reasonable times provided Landlord shall use
reasonable efforts to minimize any interference with Tenant's business
operations (without obligation to make such visits during non-business hours)
and shall be accompanied by a designated representative of Tenant if Tenant
shall have made such representative available to Landlord, (a) to examine the
Premises and to show them to actual and prospective Superior Lessors, Superior
Mortgagees, or prospective purchasers, mortgagees or lessees of the Building,
(b) to make such repairs, alterations, additions and improvements in or to the
Premises and/or in or to the Building or its facilities and equipment as
Landlord or persons authorized by Landlord is or are required or desires to
make, and (c) to read any utility meters located therein. Landlord and such
authorized persons shall be allowed to take all materials into and upon the
Premises that may be required in connection therewith, without any liability to
Tenant and without any reduction of Tenant's covenants and obligations
hereunder.
16.04. If at any time any windows of the Premises are either temporarily
darkened or obstructed by reason of any repairs, improvements, maintenance
and/or cleaning in or about the Building (or permanently darkened or obstructed
if required by law) or covered by any translucent material for the purpose of
energy conservation, or if any part of the Building, other than the Premises, is
temporarily or permanently closed or inoperable, the same shall be without
liability to Landlord and without any reduction or diminution of Tenant's
obligations under this Lease.
16.05. During the time period referred to in subsection 7.07 and during the
period of twelve (12) months prior to the expiration date of this Lease,
Landlord and persons authorized by Landlord may exhibit the Premises to
prospective tenants.
57
<PAGE>
16.06. If, during the last month of the term of this Lease, Tenant has
removed all or substantially all of Tenant's property from the Premises,
Landlord or persons authorized by Landlord may, without notice to Tenant,
immediately enter the Premises and alter, renovate and decorate the same,
without liability to Tenant and without reducing or otherwise affecting Tenant's
covenants and obligations hereunder.
16.07. Landlord reserves the right, at any time, without it being deemed a
constructive eviction and without incurring any liability to Tenant therefor, or
affecting or reducing any of Tenant's covenants and obligations hereunder, to
make or permit to be made such changes, alterations, additions and improvements
in or to the Building and the fixtures and equipment thereof, as well as in or
to the street entrances, atrium, doors, halls, passages, elevators, escalators
and stairways thereof, and other public parts of the Building, as Landlord shall
deem necessary or desirable. Landlord agrees that any changes, alterations,
additions or improvements performed pursuant to this Section shall not, when
completed, unreasonably interfere with the access to or use of the Premises by
Tenant or materially diminish any services to be provided by Landlord hereunder,
and in the event of any such interference, Tenant shall have the rights and
remedies provided for in Section 15.09 hereof, to the extent applicable.
16.08. Landlord reserves the right to name the Building and to change the
name or address of the Building at any time and from time to time. Landlord
shall endeavor to give Tenant reasonable prior notice of any change in the
address of the Building. Neither this Lease nor any use by Tenant shall give
Tenant any easement or other right in or to the use of any door or any passage
or any concourse or any plaza connecting the Building with any subway or any
other building or to any public conveniences, and the use of such doors,
passages, concourses, plazas and conveniences may without notice to Tenant, be
regulated or discontinued at any time by Landlord.
16.09. If Tenant shall not be personally present to open and permit an
entry into the Premises at any time when for any reason an entry therein shall
be urgently necessary by reason of fire or other emergency, Landlord or
Landlord's agents may forcibly enter the same without rendering Landlord or such
agents liable therefor (if during such entry Landlord or Landlord's agents shall
accord reasonable care to Tenant's property) and without in any manner affecting
the obligations and covenants of this Lease.
16.10. Any damage to the Premises resulting from the exercise by Landlord
of its rights granted under this Article 16 shall be promptly repaired by
Landlord at Landlord's expense.
58
<PAGE>
ARTICLE 17
Notice of Occurrences
---------------------
17.01. Tenant shall give prompt notice to Landlord of(a) any occurrence in
or about the Premises for which Landlord might be liable, (b) any fire or other
casualty in the Premises, (c) any damage to or defect in the Premises, including
the fixtures, equipment and appurtenances thereof, for the repair of which
Landlord might be responsible, and (d) any damage to or defect in any part or
appurtenance of the Building's sanitary, electrical, heating, ventilating,
air-conditioning, elevator or other systems located in or passing through the
Premises or any part thereof, if and to the extent that Tenant shall have
knowledge of any of the foregoing matters.
ARTICLE 18
Non-Liability and Indemnification
---------------------------------
18.01. Neither Landlord, any Superior Lessor or any Superior Mortgagee, nor
any partner, director, officer, shareholder, principal, agent, servant or
employee of Landlord, any Superior Lessor or any Superior Mortgagee (in any case
whether disclosed or undisclosed), shall be liable to Tenant for any loss,
injury or damage to Tenant or to any other person, or to its or their property,
irrespective of the cause of such injury, damage or loss, nor shall the
aforesaid parties be liable for any damage to property of Tenant or of others
entrusted to employees of Landlord nor for loss of or damage to any such
property by theft or otherwise except to the extent caused by or resulting from
the willful misconduct or negligence of Landlord, its agents, servants,
employees in the operation or maintenance of the Premises or the Real Property.
Further, neither Landlord, any Superior Lessor or any Superior Mortgagee, nor
any partner, director, officer, principal, shareholder, agent, servant or
employee of Landlord, any Superior Lessor or any Superior Mortgagee, shall be
liable (a) for any such damage caused by other tenants or persons in, upon or
about the Building or the Real Property, or caused by operations in construction
of any private, public or quasi-public work; or (b) even if negligent, for
consequential damages arising out of any loss of use of the Premises or any
equipment, facilities or other Tenant's Property therein by Tenant or any person
claiming through or under Tenant.
18.02. Subject to the terms of Section 9.04 hereof relating to waivers of
subrogation (to the extent that such waivers of subrogation shall be applicable
in any case), Tenant shall indemnify and hold harmless Landlord and all Superior
Lessors and Superior Mortgagees and its and their respective partners,
directors, officers, principals, shareholders, agents and employees from and
against any and all claims arising from or in connection with (a) the conduct or
management of the Premises or of any business therein, or any work or thing
whatsoever done, or any condition created (other than by Landlord, its agents,
or employees) in
59
<PAGE>
or about the Premises during the term of this Lease or during the period of
time, if any, prior to the Commencement Date that Tenant may have been given
access to the Premises; (b) any act, omission or negligence of Tenant or any of
its subtenants or licensees or its or their partners, directors, principals,
shareholders, officers, agents, employees or contractors; (c) any accident,
injury or damage whatever (except to the extent caused by Landlord's negligence
or the negligence of Landlord's agents, employees, or contractors) occurring in,
at or upon the Premises; and (d) any breach or default by Tenant in the full and
prompt payment and performance of Tenant's obligations under this Lease;
together with all reasonable costs, expenses and liabilities incurred in or in
connection with each such claim or action or proceeding brought thereon,
including, without limitation, all reasonable attorneys' fees and expenses. In
case any action or proceeding be brought against Landlord and/or any Superior
Lessor or Superior Mortgagee and/or its or their partners, directors, officers,
principals, shareholders, agents and/or employees by reason of any such claim,
Tenant upon notice from Landlord or such Superior Lessor or Superior Mortgagee,
shall resist and defend such action or proceeding (by counsel reasonably
satisfactory to Landlord or such Superior Lessor or Superior Mortgagee).
ARTICLE 19
Damage or Destruction
---------------------
19.01. If the Building or the Premises shall be partially or totally
damaged or destroyed by fire or other casualty (and if this Lease shall not be
terminated as in this Article 19 hereinafter provided), (a) Landlord shall
repair the damage to and restore and rebuild the Building and the Premises
(including Tenant's improvements and betterments but excluding the property
which is deemed Tenant's Property pursuant to Section 12.01 hereof) with
reasonable dispatch after notice to it of the damage or destruction and the
collection of the insurance proceeds attributable to such damage, and (b) Tenant
shall repair the damage to and restore and repair the property which is deemed
Tenant's Property pursuant to Section 12.01 hereof with reasonable dispatch
after such damage or destruction. Such work by Tenant shall be deemed
Alterations for the purposes of Article 11 hereof. The proceeds of policies
providing coverage for Tenant's improvements and betterments shall be paid to
Landlord. Concurrently with the collection of any insurance proceeds
attributable to the damage of Tenant's improvements and betterments, Tenant
shall pay to Landlord (i) the amount of any deductible under the policy insuring
Tenant's improvements and betterments and (ii) the amount, if any, by which the
cost of repairing and restoring Tenant's improvements and betterments as
estimated by a reputable contractor designated by Landlord exceeds the available
insurance proceeds therefor. The amounts due in accordance with subparagraphs
(i) and (ii) above shall be Additional Charges under this Lease and payable by
Tenant to Landlord upon demand. The proceeds of Tenant's insurance policies with
respect to Tenant's Property shall be payable to Tenant.
60
<PAGE>
19.02. Subject to the provisions of Section 19.05 hereof, if all or part of
the Premises shall be damaged or destroyed or rendered completely or partially
untenantable on account of fire or other casualty, the Fixed Rent and the
Additional Charges under Article 3 hereof shall be abated in the proportion that
the untenantable area of the Premises bears to the total area of the Premises,
for the period from the date of the damage or destruction to (i) the date the
damage to the Premises shall be substantially repaired (provided, however, that
if such repairs would have been substantially completed at an earlier date but
for Tenant's having failed to reasonably cooperate with Landlord in effecting
such repair, then the Premises shall be deemed to have been repaired
substantially on such earlier date and any reduction or abatement shall cease)
or (ii) if the Building and not the Premises is so damaged or destroyed, the
date on which the Premises shall be made tenantable; provided, however, should
Tenant or any of its subtenants reoccupy a portion of the Premises during the
period the repair work is taking place and prior to the date that the Premises
are substantially repaired or made tenantable for the conduct of its or their
business (which shall not include entry upon and occupancy of the Premises with
the prior written consent of Landlord for the purpose of performing restoration
and/or repair to Tenant's Property, improvements and finish work), the Fixed
Rent and the Additional Charges allocable to such reoccupied portion, based upon
the proportion which the area of the reoccupied portion of the Premises bears to
the total area of the Premises, shall be payable by Tenant from the date of such
occupancy.
19.03. (a) If the Building shall be totally damaged or destroyed by fire or
other casualty, or if the Building shall be so damaged or destroyed by fire or
other casualty (whether or not the Premises are damaged or destroyed) that its
repair or restoration requires more than two hundred seventy (270) days or the
expenditure of more than thirty (30%) percent of the full insurable value of the
Building immediately prior to the casualty (as estimated in any such case by a
reputable contractor, registered architect or licensed professional engineer
designated by Landlord), and provided Landlord shall terminate leases covering
no less than 50% of the office space in the Building then leased to tenants
(including Tenant) in the Building, then in such case Landlord may terminate
this Lease by giving Tenant notice to such effect within one hundred twenty
(120) days after the date of the casualty. For the purpose of this Section only,
"full insurable value" shall mean replacement cost less the cost of footings,
foundations and other structures below the street and first floors of the
Building.
(b) If the Premises or any part thereof or the means of access
thereto or Building systems servicing same shall be damaged by fire or other
casualty, and Landlord is required to or elects to repair and restore the
Premises, Landlord shall, within one-hundred twenty (120) days after such damage
or destruction, provide Tenant with a written notice of the estimated date on
which the restoration of the Premises shall be substantially completed. If such
estimated date is more than eighteen (18) months after the date of such damage
or destruction, Tenant may terminate this Lease by notice to Landlord, which
notice shall be given within thirty (30) days after the date Landlord provides
the notice required by the preceding sentence, and such termination shall be
effective upon the giving of Tenant's notice.
61
<PAGE>
Failure by Tenant to provide such notice within such thirty (30) day period
shall be deemed an election by Tenant not to terminate this Lease. If Tenant
elects not to terminate this Lease or is deemed to have so elected, and if
Landlord has not substantially completed the required repairs and restored the
Premises within the period originally estimated by Landlord or within such
period thereafter (not to exceed 3 months) as shall equal the aggregate period
Landlord may have been delayed in commencing or completing such repairs by Force
Majeure Causes, then Tenant shall have the further right to elect to terminate
this Lease upon written notice to Landlord and such election shall be effective
upon the expiration of thirty (30) days after the date of such notice, unless
Landlord substantially completes such restoration within such thirty (30) day
period.
19.04. Except as expressly provided in Section 19.03(b) hereof, Tenant
shall not be entitled to terminate this Lease and Landlord shall have no
liability to Tenant for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Premises or of the Building
pursuant to this Article 19. Landlord shall use reasonable efforts to make such
repair or restoration promptly and in such manner as not unreasonably to
interfere with Tenant's use and occupancy of the Premises, but Landlord shall
not be required to do such repair or restoration work except during Business
Hours of Business Days.
19.05. Notwithstanding any of the foregoing provisions of this Article 19,
if by reason of some act or omission on the part of Tenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors of which Landlord shall have given Tenant notice and a
reasonable opportunity to cure either, Landlord or any Superior Lessor or any
Superior Mortgagee shall be unable to collect all of the insurance proceeds
(including, without limitation, rent insurance proceeds) applicable to damage or
destruction of the Premises or the Building by fire or other casualty, then,
without prejudice to any other remedies which may be available against Tenant,
there shall be no abatement or reduction of the Fixed Rent or Additional
Charges.
19.06. Landlord will not carry insurance of any kind on Tenant's Property
and improvements and betterments, and, except as provided by law or by reason of
Landlord's negligence or wilful misconduct or its breach of any of its
obligations hereunder, shall not be obligated to repair any damage to or replace
Tenant's Property. Tenant agrees to look first to its insurance for recovery of
any damage to or loss of Tenant's Property. If Tenant shall fail to maintain
such insurance, and such failure shall continue for five (5) Business Days after
notice by Landlord to Tenant specifying same, Landlord shall have the right to
obtain insurance on Tenant's Property and the cost thereof shall be Additional
Charges under this Lease and payable by Tenant to Landlord on demand.
19.07. The provisions of this Article 19 shall be deemed an express
agreement governing any case of damage or destruction of the Premises by fire or
other casualty, and
62
<PAGE>
Section 227 of the Real Property Law of the State of New York, providing for
such a contingency in the absence of an express agreement, and any other law of
like import, now or hereafter in force, shall have no application in such case.
ARTICLE 20
Eminent Domain
--------------
20.01. If the whole of the Building or the Premises shall be taken by
condemnation or in any other manner for any public or quasi-public use or
purpose, this Lease and the term and estate hereby granted shall terminate as of
the date of vesting of title on such taking (herein called "Date of the
Taking"), and the Fixed Rent and Additional Charges shall be prorated and
adjusted as of such date.
20.02. If more than forty (40%) percent of the Building shall be so taken,
this Lease shall be unaffected by such taking, except that (a) Landlord may, at
its option, provided that Landlord shall terminate leases of no less than fifty
(50%) percent of the office space then leased to tenants in the Building upon
which the effect of such taking shall have been substantially similar to the
effect of same upon the Premises, terminate this Lease by giving Tenant notice
to that effect within ninety (90) days after the Date of the Taking, and (b) if
twenty (20%) percent or more of the Premises shall be so taken and the remaining
area of the Premises shall not be sufficient, in Tenant's reasonable judgment,
for Tenant to continue the operation of its business, Tenant may terminate this
Lease by giving Landlord notice to that effect within 90 days after the Date of
the Taking. This Lease shall terminate on the date that such notice from
Landlord or Tenant to the other shall be given, and the Fixed Rent and
Additional Charges shall be prorated and adjusted as of such termination date,
except that with respect to any portion of the Premises which is the subject of
the taking, if earlier, as of the Date of the Taking. Upon such partial taking
and this Lease continuing in force as to any part of the Premises, the Fixed
Rent and Additional Charges shall be adjusted according to the rentable area
remaining.
20.03. 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 except as
hereinafter expressly provided in this Article 20. Tenant hereby expressly
assigns to Landlord all of its right, title and interest in and to every such
award or payment; provided, however, that Tenant shall have the right to make a
separate claim for its moving expenses and to the extent the award otherwise
payable to Landlord shall not be diminished thereby, for any of Tenant's
Property taken.
20.04. If the temporary use or occupancy of all or any part of the Premises
shall be taken by condemnation or in any other manner for any public or
quasi-public use or purpose during the term of this Lease, Tenant shall be
entitled, except as hereinafter set forth, to receive
63
<PAGE>
that portion of the award or payment for such taking which represents
compensation for the use and occupancy of the Premises, for the taking of
Tenant's Property and for moving expenses, and Landlord shall be entitled to
receive that portion which represents reimbursement for the cost of restoration
of the Premises. This Lease shall be and remain unaffected by such taking and
Tenant shall continue to be responsible for all of its obligations hereunder
insofar as such obligations are not affected by such taking and shall continue
to pay in full the Fixed Rent and Additional Charges when due. If the period of
temporary use or occupancy shall extend beyond the Expiration Date of this
Lease, that part of the award which represents compensation for the use and
occupancy of the Premises (or a part thereof) shall be divided between Landlord
and Tenant so that Tenant shall receive so much thereof as represents the period
up to and including such Expiration Date and Landlord shall receive so much
thereof as represents the period after such Expiration Date. All monies paid as,
or as part of an award for temporary use and occupancy for a period beyond the
date to which the Fixed Rent and Additional Charges have been paid shall be
received, held and applied by Landlord as a trust fund for payment of the Fixed
Rent and Additional Charges becoming due hereunder.
20.05. In the event of a taking of less than the whole of the Building
and/or the Land which does not result in termination of this Lease, or in the
event of a taking for a temporary use or occupancy of all or any part of the
Premises which does not result in a termination of this Lease, (a) Landlord, at
its expense, and whether or not any award or awards shall be sufficient for the
purpose, shall proceed with reasonable diligence to repair the remaining parts
of the Building and the Premises (other than those parts of the Premises which
are deemed Landlord's property pursuant to Section 12.01 hereof and Tenant's
Property) to substantially their former condition to the extent that the same
may be feasible (subject to reasonable changes which Landlord shall deem
desirable) and so as to constitute a complete and rentable Building and Premises
and (b) Tenant, at its expense, and whether or not any award or awards shall be
sufficient for the purpose, shall proceed with reasonable diligence to repair
the remaining parts of the Premises which are deemed Landlord's property
pursuant to Section 12.01 hereof (excluding any structural elements of the
Premises) and Tenant's Property, to substantially their former condition to the
extent that the same may be feasible, subject to reasonable changes which shall
be deemed Alterations.
ARTICLE 21
Surrender
---------
21.01. On the Expiration Date or upon any earlier termination of this
Lease, or upon any reentry by Landlord upon the Premises, Tenant shall quit and
surrender the Premises to Landlord "broom-clean" and in good order, condition
and repair, except for ordinary wear and tear and such damage or destruction as
Landlord is required to repair or restore under this Lease,
64
<PAGE>
and Tenant shall remove all of the Tenant's Property therefrom except as
otherwise expressly provided in this Lease.
21.02. No act or thing done by Landlord or its agents shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept such
surrender shall be valid unless in writing and signed by Landlord and each
Superior Lessor and Superior Mortgagee whose lease or mortgage, as the case may
be, provides that no such surrender may be accepted without its consent.
ARTICLE 22
Conditions of Limitation
------------------------
22.01. This Lease and the term and estate hereby granted are subject to the
limitation that whenever Tenant, or any guarantor of Tenant's obligations under
this Lease, shall make an assignment for the benefit of creditors, or shall file
a voluntary petition under any bankruptcy or insolvency law, or an involuntary
petition alleging an act of bankruptcy or insolvency shall be filed against
Tenant or such guarantor under any bankruptcy or insolvency law, or whenever a
petition shall be filed by or against Tenant or such guarantor under the
reorganization provisions of the United States Bankruptcy Code or under the
provisions of any law of like import, or whenever a petition shall be filed by
Tenant, or such guarantor, under the arrangement provisions of the United States
Bankruptcy Code or under the provisions of any law of like import, or whenever a
permanent receiver of Tenant, or such guarantor, or of or for the property of
Tenant, or such guarantor, shall be appointed, then Landlord (a) if such event
occurs without the acquiescence of Tenant, or such guarantor, as the case may
be, at any time after the event continues for ninety (90) days, or (b) in any
other case at any time after the occurrence of any such event, may give Tenant a
notice of intention to end the term of this Lease at the expiration of five days
from the date of service of such notice of intention, and upon the expiration of
said five-day period this Lease and the term and estate hereby granted, whether
or not the term shall theretofore have commenced, shall terminate with the same
effect as if that day were the expiration date of this Lease, but Tenant shall
remain liable for damages as provided in Article 24 hereof.
22.02. This Lease and the term and estate hereby granted are subject to the
further limitations that:
(a) if Tenant shall default in the payment of any Fixed Rent or
Additional Charges, and such default shall continue for ten (10) days after
written notice thereof has been given to Tenant, or
65
<PAGE>
(b) if Tenant shall, whether by action or inaction, be in default of
any of its obligations under this Lease (other than a default in the
payment of Fixed Rent or Additional Charges) and such default shall
continue and not be remedied as soon as practicable and in any event within
twenty (20) days after Landlord shall have given to Tenant a notice
specifying the same, or, in the case of a default which cannot with due
diligence be cured within a period of twenty (20) days and the continuance
of which for the period required for cure will not (i) subject Landlord or
any Superior Lessor or any Superior Mortgagee to prosecution for a crime or
any other fine or charge, (ii) subject the Premises or any part thereof or
the Building or Land, or any part thereof, to being condemned or vacated,
(iii) subject the Building or Land, or any part thereof, to any lien or
encumbrance which is not removed or bonded within the time period required
under this Lease, or (iv) result in the termination of any Superior Lease
or foreclosure of any Superior Mortgage, if Tenant shall not (x) within
said twenty (20) day period advise Landlord of Tenant's intention to take
all steps reasonably necessary to remedy such default, (y) duly commence
within said 20-day period, and thereafter diligently prosecute to
completion all steps reasonably necessary to remedy the default and (z)
complete such remedy within a reasonable time after the date of said notice
of Landlord, or
(c) if any event shall occur or any contingency shall arise whereby
this Lease or the estate hereby granted or the unexpired balance of the
term hereof would, by operation of law or otherwise, devolve upon or pass
to any person, firm or corporation other than Tenant, except as expressly
permitted by Article 7 hereof, or
(d) if Tenant shall abandon the Premises, or
(e) if there shall be any default by Tenant under any other lease with
Landlord (or any person which, directly or indirectly, controls, is
controlled by, or is under common control with, Landlord) covering space in
the Building which shall not be remedied within the applicable grace
period, if any, provided therefor under such other lease, or if Tenant
holds over in the premises demised under such other lease,
then in any of said cases Landlord may give to Tenant a notice of intention to
end the term of this Lease at the expiration of five days from the date of the
service of such notice of intention, and upon the expiration of said five days
this Lease and the term and estate hereby granted, whether or not the term shall
theretofore have commenced, shall terminate with the same effect as if that day
was the day herein definitely fixed for the end and expiration of this Lease,
but Tenant shall remain liable for damages as provided in Article 24 hereof.
66
<PAGE>
22.03. (a) If Tenant shall have assigned its interest in this Lease, and
this Lease shall thereafter be disaffirmed or rejected in any proceeding under
the United States Bankruptcy Code or under the provisions of any Federal, state
or foreign law of like import, or in the event of termination of this Lease by
reason of any such proceeding, the assignor or any of its predecessors in
interest under this Lease, upon request of Landlord given within ninety (90)
days after such disaffirmance or rejection shall (a) pay to Landlord all Fixed
Rent and Additional Charges then due and payable to Landlord under this Lease to
and including the date of such disaffirmance or rejection and (b) enter into a
new lease as lessee with Landlord of the Premises for a term commencing on the
effective date of such disaffirmance or rejection and ending on the Expiration
Date, unless sooner terminated as in such lease provided, at the same Fixed Rent
and Additional Charges and upon the then executory terms, covenants and
conditions as are contained in this Lease, except that (i) the rights of the
lessee under the new lease, shall be subject to any possessory rights of the
assignee in question under this Lease and any rights of persons claiming through
or under such assignee, (ii) such new lease shall require all defaults existing
under this Lease to be cured by the lessee with reasonable diligence, and (iii)
such new lease shall require the lessee to pay all Additional Charges which, had
this Lease not been disaffirmed or rejected, would have become due after the
effective date of such disaffirmance or rejection with respect to any prior
period. If the lessee shall fail or refuse to enter into the new lease within
ten (10) days after Landlord's request to do so, then in addition to all other
rights and remedies by reason of such default, under this Lease, at law or in
equity, Landlord shall have the same rights and remedies against the lessee as
if the lessee had entered into such new lease and such new lease had thereafter
been terminated at the beginning of its term by reason of the default of the
lessee thereunder.
(b) If pursuant to the Bankruptcy Code Tenant is permitted to assign
this Lease in disregard of the restrictions contained in Article 7 hereof (or if
this Lease shall be assumed by a trustee), the trustee or assignee shall cure
any default under this Lease and shall provide adequate assurance of future
performance by the trustee or assignee including (a) of the source of payment of
rent and performance of other obligations under this Lease [for which adequate
assurance shall mean the deposit of cash security with Landlord in an amount
equal to the sum of one year's Fixed Rent then reserved hereunder plus an amount
equal to all Additional Charges payable under Article 3 for the calendar year
preceding the year in which such assignment is intended to become effective
(such cash security being herein called the "Adepuate Assurance Security"),
---------------------------
which deposit shall be held by Landlord, without interest, for the balance of
the term as security for the full and faithful performance of all of the
obligations under this Lease on the part of Tenant yet to be performed] and that
any such assignee of this Lease shall have a net worth exclusive of good will,
computed in accordance with generally accepted accounting principles, equal to
at least ten (10) times the aggregate of the annual Fixed Rent reserved
hereunder plus all Additional Charges for the preceding calendar year as
aforesaid and (b) that the use of the Premises shall in no way diminish the
reputation of the Building as a first-class office building or impose any
additional burden upon the Building or increase the services to be provided by
Landlord. Notwithstanding anything to the contrary set forth in the
67
<PAGE>
preceding sentence, the security deposited by Tenant pursuant to Article 4
hereof (or any remaining balance thereof then held by Landlord) may be applied
in partial satisfaction of the obligation of the trustee or the assignee (as the
case may be) to deposit the Adequate Assurance Security, provided that the
trustee or assignee (as the case may be) shall give notice to Landlord of its
election to effect such application and provided further that such application
shall not be prohibited pursuant to the United States Bankruptcy Code or other
applicable Federal, state or foreign law of like import. If all defaults are not
cured and such adequate assurance is not provided within 60 days after there has
been an order for relief under the Bankruptcy Code, then this Lease shall be
deemed rejected, Tenant or any other person in possession shall vacate the
Premises, and Landlord shall be entitled to retain any rent or security deposit
previously received from Tenant and shall have no further liability to Tenant or
any person claiming through Tenant or any trustee. If Tenant receives or is to
receive any valuable consideration for such an assignment of this Lease, such
consideration, after deducting therefrom (a) the brokerage commissions, if any,
and other expenses reasonably incurred by Tenant for such assignment and (b) any
portion of such consideration reasonably designed by the assignee as paid for
the purchase of Tenant's Property in the Premises shall be and become the sole
exclusive property of Landlord and shall be paid over to Landlord directly by
such assignee. If Tenant's trustee, Tenant or Tenant as debtor-in-possession
assumes this Lease and proposes to assign the same (pursuant to Title 11 U.S.C.
Section 365, as the same may be amended) to any person, including, without
limitation, any individual, partnership or corporate entity, who shall have made
a bona fide offer to accept an assignment of this Lease on terms acceptable to
the trustee, Tenant or Tenant as debtor-in-possession, then notice of such
proposed assignment, setting forth (x) the name and address of such person, (y)
all of the terms and conditions of such offer, and (z) the adequate assurance to
be provided Landlord to assure such person's future performance under this
Lease, including, without limitation, the assurances referred to in Title 11
U.S.C. Section 365(b)(3) (as the same may be amended), shall be given to
Landlord by the trustee, Tenant or Tenant as debtor-in-possession no later than
twenty (20) days after receipt by the trustee, Tenant or Tenant as debtor-in-
possession of such offer, but in any event no later than ten (10) days prior to
the date that the trustee, Tenant or Tenant as debtor-in-possession shall make
application to a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption, and Landlord shall thereupon have the
prior right and option, to be exercised by notice to the trustee, Tenant or
Tenant as debtor-in-possession, given at any time prior to the effective date
of such proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions which may be payable
out of the consideration to be paid by such person for the assignment of this
Lease.
68
<PAGE>
Reentry by Landlord
-------------------
23.01. If Tenant shall default in the payment of any Fixed Rent or
Additional Charges, and such default shall continue for ten (10) days after
written notice thereof has been given to Tenant, or if this Lease shall
terminate as provided in Article 22 hereof, Landlord or Landlord's agents and
employees may immediately or at any time thereafter reenter the Premises, or any
part thereof, either by summary dispossess proceedings or by any suitable action
or proceeding at law, or otherwise as permitted by law (but in no event by
force), without being liable to indictment, prosecution or damages therefor, and
may repossess the same, and may remove any person therefrom, to the end that
Landlord may have, hold and enjoy the Premises. The word "reenter," as used
herein, is not restricted to its technical legal meaning. If this Lease is
terminated under the provisions of Article 22, or if Landlord shall reenter the
Premises under the provisions of this article, or in the event of the
termination of this Lease, or of reentry, by or under any summary dispossess or
other proceeding or action or any provision of law by reason of default
hereunder on the part of Tenant beyond notice and the expiration of any
applicable cure periods. Tenant shall thereupon pay to Landlord the Fixed Rent
and Additional Charges payable up to the time of such termination of this Lease,
or of such recovery of possession of the Premises by Landlord, as the case may
be, and shall also pay to Landlord damages as provided in Article 24 hereof.
23.02. In the event of a breach or threatened breach by Tenant of any of
its obligations under this Lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time and Landlord may invoke any remedy
allowed at law or in equity as if specific remedies were not provided for
herein.
23.03. If this Lease shall terminate under the provisions of Article 22
hereof, or if Landlord shall reenter the Premises under the provisions of this
Article 23, or in the event of the termination of this Lease, or of reentry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant beyond notice and
the expiration of any applicable cure periods, Landlord shall be entitled to
retain all monies, if any, paid by Tenant to Landlord, whether as advance rent,
security or otherwise, but such monies shall be credited by Landlord against any
Fixed Rent or Additional Charges due from Tenant at the time of such termination
or reentry or, at Landlord's option, against any damages payable by Tenant under
Article 24 hereof or pursuant to law.
69
<PAGE>
ARTICLE 24
Damages
-------
24.01. If this Lease is terminated under the provisions of Article 22
hereof, or if Landlord shall reenter the Premises under the provisions of
Article 23 hereof, or in the event of the termination of this Lease, or of
reentry, by or under any summary dispossess or other proceeding or action or any
provision of law by reason of default hereunder on the part of Tenant, Tenant
shall pay to Landlord as damages, at the election of Landlord, either:
(a) a sum which at the time of such termination of this Lease or at
the time of any such reentry by Landlord, as the case may be, represents
the then value of the excess, if any (assuming a discount at a rate per
annum equal to the interest rate then applicable to 7-year Federal Treasury
Bonds), of (i) the aggregate amount of the Fixed Rent and the Additional
Charges under Article 3 hereof which would have been payable by Tenant
(conclusively presuming the average monthly Additional Charges under
Article 3 hereof to be the same as were payable for the last 12 calendar
months, or if less than 12 calendar months have then elapsed since the
Commencement Date, all of the calendar months immediately preceding such
termination or reentry) for the period commencing with such earlier
termination of this Lease or the date of any such reentry, as the case may
be, and ending with the date contemplated as the expiration date hereof if
this Lease had not so terminated or if Landlord had not so reentered the
Premises, over (ii) the aggregate fair market rental value of the Premises
for the same period, or
(b) sums equal to the Fixed Rent and the Additional Charges under
Article 3 hereof which would have been payable by Tenant had this Lease not
so terminated, or had Landlord not so reentered the Premises, payable upon
the due dates therefor specified herein following such termination or such
reentry and until the date contemplated as the expiration date hereof if
this Lease had not so terminated or if Landlord had not so reentered the
Premises, provided, however, that if Landlord shall relet the Premises
during said period, Landlord shall credit Tenant with the net rents
received by Landlord from such reletting, such net rents to be determined
by first deducting from the gross rents as and when received by Landlord
from such reletting the expenses incurred or paid by Landlord in
terminating this Lease or in reentering the Premises and in securing
possession thereof, as well as the reasonable expenses of reletting,
including, without limitation, altering and preparing the Premises for new
tenants, brokers' commissions, reasonable legal fees, and all other
expenses properly chargeable against the Premises and the rental therefrom,
it being understood that any such reletting may be for a period shorter or
longer than the remaining term of this
70
<PAGE>
Lease; but in no event shall Tenant be entitled to receive any excess of
such net rents over the sums payable by Tenant to Landlord hereunder, nor
shall Tenant be entitled in any suit for the collection of damages pursuant
to this subdivision to a credit in respect of any net rents from a
reletting, except to the extent that such net rents are actually received
by Landlord. If the Premises or any part thereof should be relet in
combination with other space, then proper apportionment on a square foot
basis shall be made of the rent received from such reletting and of the
expenses of reletting.
If the Premises or any part thereof be relet by Landlord for the unexpired
portion of the term of this Lease, or any part thereof, before presentation of
proof of such damages to any court, commission or tribunal, the amount of rent
reserved upon such reletting shall, prima facie, be the fair and reasonable
rental value for the Premises, or part thereof, so relet during the term of the
reletting. Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Premises or any part thereof, or if the Premises or any
part thereof are relet, for its failure to collect the rent under such
reletting, and no such refusal or failure to relet or failure to collect rent
shall release or affect Tenant's liability for damages or otherwise under this
Lease.
24.02. Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not been
so terminated under the provisions of Article 22 hereof, or had Landlord not
reentered the Premises. Nothing herein contained shall be construed to limit or
preclude recovery by Landlord against Tenant of any sums or damages to which, in
addition to the damages particularly provided above, Landlord may lawfully be
entitled by reason of any default hereunder on the part of Tenant beyond notice
and the expiration of any applicable cure periods. Nothing herein contained
shall be construed to limit or prejudice the right of Landlord to prove for and
obtain as damages by reason of the termination of this Lease or reentry on the
Premises for the default of Tenant under this Lease an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved whether or not
Such amount be greater than any of the sums referred to in Section 24.01 hereof.
24.03. In addition, if this Lease is terminated under the provisions of
Article 22 hereof, or if Landlord shall, reenter the Premises under the
provisions of Article 23 hereof, Tenant agrees that:
(a) the Premises then shall be in the condition in which Tenant has
agreed to surrender the same to Landlord at the expiration of the term hereof;
71
<PAGE>
(b) Tenant shall have performed prior to any such termination any
covenant of Tenant contained in this Lease for the making of any Alterations or
for restoring or rebuilding the Premises or the Building, or any part thereof;
and
(c) for the breach of any covenant of Tenant set forth above in this
Section 24.03, Landlord shall be entitled immediately, without notice or other
action by Landlord, to recover, and Tenant shall pay, as and for liquidated
damages therefor, the actual cost of performing such covenant (as estimated by
an independent contractor selected by Landlord).
24.04. In addition to any other remedies Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies under Article 22, if any Fixed Rent, Additional Charges or damages
payable hereunder by Tenant to Landlord are not paid within seven (7) days after
the due date thereof, the same shall bear interest at the rate of one and one-
half (1 1/2%) percent per month or the maximum rate permitted by law, whichever
is less, from the due date thereof until paid, and the amount of such interest
shall be an Additional Charge hereunder. For the purposes of this Section 24.04,
a rent bill sent by first class mail, to the address to which notices are to be
given under this Lease, shall be deemed a proper demand for the payment of the
amounts set forth therein.
ARTICLE 25
Affirmative Waivers
-------------------
25.01. Tenant, on behalf of itself and any and all persons claiming through
or under Tenant, does hereby waive and surrender all right and privilege which
it, they or any of them might have under or by reason of any present or future
law, to redeem the Premises or to have a continuance of this Lease after being
dispossessed or ejected therefrom by process of law or under the terms of this
Lease or after the termination of this Lease as provided in this Lease.
25.02. If Tenant is in arrears in payment of Fixed Rent or Additional
Charges, Tenant waives Tenant's right, if any, to designate the items to which
any payments made by Tenant are to be credited, and Tenant agrees that Landlord
may apply any payments made by Tenant to such items as Landlord sees fit,
irrespective of and notwithstanding any designation or request by Tenant as to
the items which any such payments shall be credited.
25.03. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
including, without limitation, any claim of injury or damage, and any emergency
and other statutory remedy with respect thereto.
72
<PAGE>
25.04. Tenant shall not interpose any counterclaim of any kind in any
action or proceeding commenced by Landlord to recover possession of the Premises
(other than compulsory counterclaims).
ARTICLE 26
No Waivers
----------
26.01. The failure of either party to insist in any one or more instances
upon the strict performance of any one or more of the obligations of this Lease,
or to exercise any election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations of this Lease or of the right to exercise such election, and such
right to insist upon strict performance shall continue and remain in full force
and effect with respect to any subsequent breach, act or omission. The receipt
by Landlord of Fixed Rent or partial payments thereof or Additional Charges or
partial payments thereof with knowledge of breach by Tenant of any obligation of
this Lease shall not be deemed a waiver of such breach.
26.02. If there be any agreement between Landlord and Tenant providing for
the cancellation of this Lease upon certain provisions or contingencies and/or
an agreement for the renewal hereof at the expiration of the term, the right to
such renewal or the execution of a renewal agreement between Landlord and Tenant
prior to the expiration of the term shall not be considered an extension thereof
or a vested right in Tenant to such further term so as to prevent Landlord from
canceling this Lease and any such extension thereof during the remainder of the
original term; such privilege, if and when so exercised by Landlord, shall
cancel and terminate this Lease add any such renewal or extension; any right
herein contained on the part of Landlord to cancel this Lease shall continue
during any extension or renewal hereof; any option on the part of Tenant herein
contained for an extension or renewal hereof shall not be deemed to give Tenant
any option for a further extension beyond the first renewal or extended term.
ARTICLE 27
Curing Tenant's Defaults
------------------------
27.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, Landlord, any Superior Lessor or any Superior
Mortgagee without thereby waiving such default, may (but shall not be obligated
to) perform the same for the account and at the expense of Tenant, without
notice in a case of emergency, and in any other case only if such default
continues after the expiration of the applicable grace period, if any. If
Landlord effects such cure by bonding any lien which Tenant is required to bond,
Tenant shall obtain and
73
<PAGE>
substitute a bond for Landlord's bond at its sole cost and expense and reimburse
Landlord for the cost of Landlord's bond.
27.02. Bills for any expenses incurred by Landlord or any Superior Lessor
or any Superior Mortgagee in connection with any such performance by it for the
account of Tenant, and bills for all costs, expenses and disbursements of every
kind and nature whatsoever, including reasonable counsel fees, involved in
collecting or endeavoring to collect the Fixed Rent or Additional Charges or any
part thereof or enforcing or endeavoring to enforce any rights against Tenant or
Tenant's obligations hereunder, under or in connection with this Lease or
pursuant to law, including any such cost, expense and disbursement involved in
instituting and prosecuting summary proceedings or in recovering possession of
the Premises after default by Tenant or upon the expiration or sooner
termination of this Lease, and interest on all sums advanced by Landlord or such
Superior Lessor or Superior Mortgagee under this Section 27.02 and/or Section
27.01 (at the Interest Rate or the maximum rate permitted by law, whichever is
less) may be sent by Landlord or such Superior Lessor or Superior Mortgagee to
Tenant monthly, or immediately, at its option, and such amounts shall be due and
payable as Additional Charges in accordance with the terms of such bills.
Notwithstanding anything to the contrary contained in this Section, Tenant shall
have no obligation to pay Landlord's costs, expenses, or disbursements in any
proceeding in which there shall have been rendered a final judgment against
Landlord, and the time for appealing such final judgment shall have expired.
ARTICLE 28
Broker
------
28.01. Tenant covenants, warrants and represents that no broker except
Equis of New York, Inc. and Newmark & Company, Inc. (herein called the "Broker")
was instrumental in bringing about or consummating this Lease and that Tenant
had no conversations or negotiations with any broker except the Broker
concerning the leasing of the Premises. Landlord covenants, warrants and
represents that no broker except the Broker was instrumental in bringing about
or consummating this Lease and that Landlord had no conversations or
negotiations with any broker purporting to represent Tenant, other than Equis of
New York, Inc., concerning the leasing of the Premises. Tenant agrees to
indemnify and hold harmless Landlord 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
expenses, arising out of any conversations or negotiations had by Tenant with
any broker other than the Broker. Landlord agrees to indemnify and hold harmless
Tenant 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 expenses, arising out of conversations or
negotiations had by Landlord with any broker purporting to represent Tenant and
with whom Tenant shall
74
<PAGE>
have had no dealings. Landlord shall pay any commission due the Broker pursuant
to separate agreement(s) between Landlord and the Broker.
ARTICLE 29
Notices
-------
29.01. Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to this Lease or pursuant to any applicable law or requirement of public
authority (collectively, "notices") shall be in writing (whether or not so
stated elsewhere in this Lease) and shall be deemed to have been properly given,
rendered or made only if sent by overnight delivery by a nationally recognized
overnight courier service (such as Federal Express) providing for receipted
delivery or by registered or certified mail, return receipt requested, posted in
a United States post office station or letter box in the continental United
States, addressed to the other party as follows:
If to Landlord:
59 Maiden Lane Associates, LLC
c/o AmTrust Realty Corp.
250 Broadway
New York, New York 10007
Attention: Mr. Nathan Aber
with a copy to:
Bachner Tally & Polevoy LLP
380 Madison Avenue
New York, New York 10017
Attention: Martin D. Polevoy, Esq.
and if to Tenant as follows:
Broadview Networks
45-18 Court Square, Suite 300
Long Island City, New York 11101
Attention: Mr. Scott Matukas
with a copy to:
75
<PAGE>
Littman Krooks Roth & Ball P.C.
655 Third Avenue, 20th Floor
New York, New York 10017
Attention: Stuart S. Ball, Esq.
(except that after the Commencement Date, Tenant's address, unless Tenant shall
give notice to the contrary, shall be the Building), and shall be deemed to have
been given, rendered or made when received or when receipt is refused, if sent
by nationally recognized overnight courier service, or on the second business
day following the day mailed, if mailed by registered or certified mail, unless
mailed to a location outside of the State of New York, in which case it shall be
deemed to have been given, rendered or made on the third business day after the
day so mailed. Either party may, by notice as aforesaid, designate a different
address or addresses for notices intended for it. Notwithstanding the foregoing,
with respect to an occurrence presenting imminent danger to the health or safety
of persons or damage to property in, on or about the Building or during a postal
strike, notices may be hand delivered to a party at the address to which notices
to that party are to be sent, provided that the same notice is also sent in the
manner set forth above.
29.02. Notices hereunder from Landlord may be given by Landlord's managing
agent, if one exists, or by Landlord's attorney. Notices hereunder from Tenant
may be given by Tenant's attorney.
29.03. In addition to the foregoing, either Landlord or Tenant may, from
time to time, request in writing that the other party serve a copy of any notice
on one other person or entity designated in such request, such service to be
effected as provided in Section 29.01 or 29.02 hereof.
ARTICLE 30
Estoppel Certificates
---------------------
30.01 Each party agrees, at any time and from time to time, as requested by
the other party with not less than 10 days' prior notice, to execute and deliver
to the other a statement certifying that this Lease is unmodified and in full
force and effect (or if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), certifying the
dates to which the Fixed Rent and Additional Charges have been paid, stating
whether or not, to the best knowledge of the signer, the other party is in
default in performance of any of its obligations under this Lease, and if so,
specifying each such default of which the signer shall have knowledge, and
stating whether or not, to the best knowledge of the signer, any event has
occurred which with the giving of notice or passage of time, or both, would
constitute such a default, and, if so, specifying each such event, it being
intended that any such statement delivered
76
<PAGE>
pursuant hereto shall be deemed a representation and warranty to be relied upon
by the party requesting the certificate and by others with whom such party may
be dealing, regardless of independent investigation. Tenant also shall include
in any such statement such other information concerning this Lease as Landlord
may reasonably request.
ARTICLE 31
Memorandum of Lease
-------------------
31.01. Tenant shall not record this Lease or any memorandum thereof.
ARTICLE 32
No Representations by Landlord
------------------------------
32.01. Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease, is
not relying upon, any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in this Lease or in
any other written agreement which may be made between the parties concurrently
with the execution and delivery of this Lease and shall expressly refer to this
Lease. All understandings and agreements heretofore had between the parties are
merged in this Lease and any other written agreement(s) made concurrently
herewith, which alone fully and completely express the agreement of the parties
and which are entered into after full investigation, neither party relying upon
any statement or representation not embodied in this Lease or any other written
agreement(s) made concurrently herewith.
ARTICLE 33
Intentionally Omitted
---------------------
ARTICLE 34
Holdover
--------
34.01. (a) In the event this Lease is not renewed or extended or a new
lease is not entered into between the parties, and if Tenant shall then hold
over after the expiration of the term of this Lease, and if Landlord shall then
not proceed to remove Tenant from the Premises in the manner permitted by law
(or shall not have given written notice to Tenant that Tenant must
77
<PAGE>
vacate the Premises) irrespective of whether or not Landlord accepts rent from
Tenant for a period beyond the Expiration Date, the parties hereby agree that
Tenant's occupancy of the Premises after the expiration of the term shall be
under a month-to-month tenancy commencing on the first day after the expiration
of the term, which tenancy shall be upon all of the terms set forth in this
Lease except Tenant shall pay on the first day of each month of the holdover
period as Fixed Rent (i) for the first three (3) months of such month-to-month
tenancy, an amount equal to the product of (x) 150% and (y) one-twelfth (1/12)
of the sum of the Fixed Rent and Additional Charges payable by Tenant during the
last year of the term of this Lease (i.e., the year immediately prior to the
holdover period) (the amount described in the preceding clause (y) being
hereinafter referred to as the "Escalated Monthly Rent"; and (ii) thereafter,
an amount equal to the higher of (x) the product of 200% and the Escalated
Monthly Rent and (y) the then market rental value for the Premises as shall be
established by Landlord giving notice to Tenant of Landlord's good faith
estimate of such market rental value. Tenant may dispute such market rental
value for the Premises as estimated by Landlord by giving notice to Landlord
within but in no event after twenty (20) days after the giving of Landlord's
notice to Tenant (as to the giving of which notice to Landlord, time shall be
deemed of the essence). Enclosed with such notice, Tenant shall be required to
furnish to Landlord the written opinion of a reputable New York licensed real
estate broker having leasing experience in the Borough of Manhattan, for a
period of not less than ten (10) years setting forth said broker's good faith
opinion of the market rental value of the Premises. If Tenant and Landlord are
unable to resolve any such dispute as to the market rental value for the
Premises then an independent arbitrator who shall be a real estate broker of
similar qualifications and shall be selected from a listing of not less than
three (3) brokers furnished by the American Arbitration Association (or any
successor thereto) to Tenant and Landlord (at the request of either Landlord or
Tenant). If Landlord and Tenant are unable to agree upon the selection of the
individual arbitrator from such listing, then the first arbitrator so listed by
the American Arbitration Association (or any successor thereto) shall be
conclusively presumed to have been selected by both Landlord and Tenant and the
decision of such arbitrator shall be conclusive and binding upon the parties as
to the market rental value for the Premises. Pending the determination of the
market rental value of the Premises upon the expiration of the term of this
Lease, Tenant shall pay to Landlord as Fixed Rent an amount computed in
accordance with clauses (i) or (ii) of this subsection 34.01(a) (as Landlord
shall then elect), and upon determination of the market rental value of the
Premises in accordance with the preceding provisions hereof appropriate
adjustments and payments shall be effected. Further, Landlord shall not be
required to perform any work, furnish any materials or make any repairs within
the Premises during the holdover period. It is further stipulated and agreed
that if Landlord shall, at any time after the expiration of the original term or
after the expiration of any term created thereafter, proceed to remove Tenant
from the Premises as a holdover, the Fixed Rent for the use and occupancy of the
Premises during any holdover period shall be calculated in the same manner as
set forth above. In addition to the foregoing, Landlord shall be entitled to
recover from Tenant any losses or damages arising from such holdover as provided
in Section 34.01(c) hereof.
78
<PAGE>
(b) Notwithstanding anything to the contrary contained in this Lease,
the acceptance of any rent paid by Tenant pursuant to subsection 34.01(a) above
shall not preclude Landlord from commencing and prosecuting a holdover or
summary eviction proceeding, and the preceding sentence shall be deemed to be an
"agreement expressly providing otherwise" within the meaning of Section 223-c of
the Real Property Law of the State of New York.
(c) If Tenant shall hold-over or remain in possession of any portion
of the Premises beyond the Expiration Date, Tenant shall be subject not only to
summary proceeding and all damages related thereto, but also to any damages
arising out of any lost opportunities (and/or new leases) by Landlord to re-let
the Premises (or any part thereof) in accordance with and subject to the
following provisions of this Section 34.01(c). In the event that Landlord shall
enter into one or more leases for all or any portion of the Premises which
either (i) is for a term that is scheduled to commence within six (6) months
after the Expiration Date of this Lease or (ii) is for a term that is scheduled
to commence within twelve (12) months after the Expiration Date of this Lease
and which requires Landlord to perform any demolition, tenant improvement work
or any other work as a precondition to the commencement of such term (any such
lease is hereinafter referred to as a "Qualifying Lease"), Landlord may give
Tenant a written notice thereof (the "Qualifying Lease Notice"), which
Qualifying Lease Notice may be given at any time prior to or following the
Expiration Date. In the event that Landlord shall have given Tenant a Qualifying
Lease Notice and Tenant shall hold-over or remain in possession of any portion
of the Premises beyond the date which is ninety (90) days following the later of
(i) the Expiration Date or (ii) the date on which Landlord shall have given such
Qualifying Lease Notice to Tenant, Tenant shall be subject to all damages
arising out of any lost opportunities (and/or new leases) by Landlord to re-let
all or any part of the Premises covered by a Qualifying Lease Notice given at
least ninety (90) days prior to the date on which Landlord incurs such damages,
including without limitation any such damages in connection with Landlord's
inability to deliver the premises leased pursuant to such Qualifying Lease to
the tenant under such Qualifying Lease. All damages to Landlord by reason of
such holding over by Tenant may be the subject of a separate action and need not
be asserted by Landlord in any summary proceedings against Tenant.
ARTICLE 35
Miscellaneous Provisions and Definitions
----------------------------------------
35.01. No agreement shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, including, without limitation, this Section 35.01, unless such
agreement is in writing, refers expressly to this Lease and is signed by the
party against whom enforcement of the change, modification, waiver, release,
discharge, termination or effectuation of the abandonment is sought. If Tenant
shall at
79
<PAGE>
any time request Landlord to sublet the Premises for Tenant's account, Landlord
or its agent is authorized to receive keys for such purposes without releasing
Tenant from any of its obligations under this Lease, and Tenant hereby releases
Landlord of any liability for loss or damage to any of the Tenant's Property in
connection with such subletting unless caused by or resulting from the
negligence or willful act of Landlord, its agents, servants, contractors, or
employees.
35.02. Except as otherwise expressly provided in this Lease, the
obligations of this Lease shall bind and benefit the successors and assigns of
the parties hereto with the same effect as if mentioned in each instance where a
party is named or referred to; provided, however, that (a) no violation of the
provisions of Article 7 shall operate to vest any rights in any successor or
assignee of Tenant and (b) the provisions of this Article 35 shall not be
construed as modifying the conditions of limitation contained in Article 22.
35.03. Tenant shall look only to Landlord's estate and property in
the Land and the Building for the satisfaction of Tenant's remedies, for the
collection of a judgment (or other judicial process) requiring the payment of
money by Landlord in the event of any default by Landlord hereunder, and no
other property or assets of Landlord or its partners, officers, directors,
shareholders or principals, disclosed or undisclosed, shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this Lease, the relationship of Landlord and
Tenant hereunder or Tenant's use or occupancy of the Premises.
35.04. (a) Except as expressly provided in Articles 19 and 20 hereof,
the obligations of Tenant hereunder shall be in no wise affected, impaired or
excused, nor shall Landlord have any liability whatsoever to Tenant, nor shall
it be deemed a constructive eviction because (a) Landlord is unable to fulfill,
or is delayed in fulfilling, any of its obligations under this Lease by reason
of strike, lock-out or other labor trouble, governmental preemption of
priorities or other controls in connection with a national or other public
emergency or shortages of fuel, supplies or labor resulting therefrom, or any
other cause, whether similar or dissimilar, beyond Landlord's reasonable
control; or (b) of any failure or defect in the supply, quantity or character of
electricity or water furnished to the Premises, by reason of any requirement,
act or omission of the public utility or others serving the Building with
electric energy, steam, oil, gas or water, or for any other reason whether
similar or dissimilar, beyond Landlord's reasonable control (the foregoing
circumstances described in this Section 35.04 being herein called "Force Majeure
Causes").
(b) If by reason of strike, lock-out or other labor trouble,
governmental preemption of priorities or other controls in connection with a
national or other public emergency or shortages of fuel, supplies or labor
resulting therefrom, or any other cause beyond Tenant's reasonable control,
Tenant shall be unable to fulfill its non-monetary obligations under this Lease
(i.e., obligations other than with respect to the payment of Fixed Rent and
Additional Charges), then for so long as such circumstances continue to prevent
such fulfillment, Tenant shall have no
80
<PAGE>
liability in connection therewith and this Lease shall not be affected or
impaired thereby. In no event or under any circumstance shall any such delay or
failure by Tenant in performing such non-monetary obligations be deemed to
relieve Tenant of any of its monetary obligations under this Lease.
35.05. For the purposes of this Lease, the following terms have the
meanings indicated:
(a) The term "mortgage" shall include a mortgage and/or a deed of
trust, and the term "holder of a mortgage" or "mortgagee" or words of similar
import shall include a mortgagee of a mortgage or a beneficiary of a deed of
trust.
(b) The term "laws and requirements of any public authorities" and
words of a similar import shall mean laws and ordinances of any or all of the
federal, state, city, town, county, borough and village governments including,
without limitation. The Americans with Disabilities Act of 1990, as amended, and
rules, regulations, orders and directives of any and all departments,
subdivisions, bureaus, agencies or offices thereof, and of any other
governmental, public or quasi-public authorities having jurisdiction over the
Building and/or the Premises, and the direction of any public officer pursuant
to law, whether now or hereafter in force.
(c) The term "requirements of insurance bodies" and words of similar
import shall mean rules, regulations, orders and other requirements of the New
York Board of Underwriters and/or the New York Fire Insurance Rating
Organization and/or any other similar body performing the same or similar
functions and having jurisdiction or cognizance over the Building and/or the
Premises, whether now or hereafter in force.
(d) The term "Tenant" shall mean the Tenant herein named or any
assignee or other successor in interest (immediate or remote) of the Tenant
herein named, which at the time in question is the owner of the Tenant's estate
and interest granted by this Lease; but the foregoing provisions of this
subsection shall not be construed to permit any assignment of this Lease or to
relieve the Tenant herein named or any assignee or other successor in interest
(whether immediate or remote) of the Tenant herein named from the full and
prompt payment, performance and observance of the covenants, obligations and
conditions to be paid, performed and observed by Tenant under this Lease.
(e) The term "Landlord" shall mean only the owner at the time in
question of Landlord's interest in the Land or a lease of the Land and the
Building or a lease thereof so that in the event of any transfer or transfers of
Landlord's interest in the Land or a lease thereof or the Building the
transferor shall be and hereby is relieved and freed of all obligations of
Landlord under this Lease accruing after such transfer, and it shall be deemed,
without further agreement that such transferee has assumed and agreed to perform
and observe
81
<PAGE>
all obligations of Landlord herein during the period it is the holder of
Landlord's interest under this Lease.
(f) The terms "herein,""hereof" and "hereunder," and words of
similar import, shall be construed to refer to this Lease as a whole, and not to
any particular article or section, unless expressly so stated.
(g) The term "and/or" when applied to one or more matters or things
shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
(h) The term "person" shall mean any natural person or persons, a
partnership, a corporation, and any other form of business or legal association
or entity.
(i) The terms "Landlord shall have no liability to Tenant" or "the
same shall be without liability to Landlord" or "without incurring any liability
to Tenant therefor", or words of similar import shall mean that Tenant is not
entitled to terminate this Lease, or to claim actual or constructive eviction,
partial, or total, or to receive any abatement or diminution of rent, or to be
relieved in any manner of any of its other obligations hereunder, or to be
compensated for loss or injury suffered or to enforce any other right or kind of
liability whatsoever against Landlord under or with respect to this Lease or
with respect to Tenant's use or occupancy of the Premises.
(j) The term "Interest Rate," when used in this Lease, shall mean an
interest rate equal to two percent (2%) above the so-called annual "Base Rate"
of interest established and approved by Citibank, N.A., New York, New York, from
time to time, as its interest rate charged for unsecured loans to its corporate
customers, but in no event greater than the highest lawful rate from time to
time in effect.
35.06. Upon the expiration or other termination of this Lease neither party
shall have any further obligation or liability to the other except as otherwise
expressly provided in this Lease and except for such obligations as by their
nature or under the circumstances can only be, or by the provisions of this
Lease, may be, performed after such expiration or other termination; and, in any
event, unless otherwise expressly provided in this Lease, any liability for a
payment (including, without limitation, Additional Charges under Article 3)
which shall have accrued to or with respect to any period ending at the time of
expiration or other termination of this Lease shall survive the expiration or
other termination of this Lease.
35.07. (a) If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any damages
for any withholding by Landlord of its consent, it being intended that Tenant's
sole remedy shall be an action for specific performance or injunction, and that
such remedy shall be available only in those cases
82
<PAGE>
where Landlord has expressly agreed in writing not to unreasonably withhold its
consent or where as a matter of law Landlord may not unreasonably withhold its
consent.
(b) If Tenant desires to determine any dispute between Landlord and
Tenant as to the reasonableness of Landlord's decision to refuse to consent or
approve any item as to which Landlord has specifically agreed that its consent
or approval shall not be unreasonably withheld, such dispute shall be settled
and finally determined by arbitration in The City of New York in accordance with
the following provisions of this subsection 35.07(b). Within ten (10) Business
Days next following the giving of any notice by Tenant stating that it wishes
such dispute to be so determined, Landlord and Tenant shall each give notice to
the other setting forth the name and address of an arbitrator designated by the
party giving such notice. If the two arbitrators shall fail to agree upon the
designation of a third arbitrator within five (5) Business Days after the
designation of the second arbitrator then either party may apply to the American
Arbitration Association in New York City for the designation of such arbitrator
and if he is unable or refuses to act within ten (10) Business Days, then either
party may apply to the Supreme Court in New York County or to any other court
having jurisdiction for the designation of such arbitrator. The three
arbitrators shall conduct such hearings as they deem appropriate, making their
determination in writing and giving notice to Landlord and Tenant of their
determination as soon as practicable, and if possible, within five (5) Business
Days after the designation of the third arbitrator; the concurrence of or, in
the event no two of the arbitrators shall render a concurring determination,
then the determination of the third arbitrator designated, shall be binding upon
Landlord and Tenant. Judgment upon any decision rendered in any arbitration held
pursuant to this subsection 35.07(b) shall be final and binding upon Landlord
and Tenant, whether or not a judgment shall be entered in any court. Each party
shall pay its own counsel fees and expenses, if any, in connection with any
arbitration under this subsection 35.07(b), including the expenses and fees of
any arbitrator selected by it in accordance with the provisions of this
subsection 35.07(b), and the parties shall share all other expenses and fees of
any such arbitration. The arbitrators shall be bound by the provisions of this
Lease, and shall not add to, subtract from or otherwise modify such provisions.
The sole remedy which may be awarded by the arbitrators in any proceeding
pursuant to this Section 35.07 is an order compelling Landlord to consent to or
approve the matter in dispute, and the arbitrators may not award damages or
grant any monetary award or any other form of relief.
35.08. If any Superior Mortgagee shall require any modification(s) of this
Lease, Tenant shall, at Landlord's request, promptly execute and deliver to
Landlord such instruments effecting such modification(s) as Landlord shall
require, provided that such modification(s) do not decrease any of Tenant's
rights under this Lease, or increase any of Tenant's obligations under this
Lease, in either case beyond a de minimis extent.
35.09. If an excavation shall be made upon land adjacent to or under the
Building, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter the Premises
for the purpose of performing
83
<PAGE>
such work as said person shall deem necessary or desirable to preserve and
protect the Building from injury or damage to support the same by proper
foundations, without any claim for damages or liability against Landlord and
without reducing or otherwise affecting Tenant's obligations under this Lease.
35.10. Tenant shall not place a load upon any floor of the Premises which
violates applicable law or the certificate of occupancy of the Building or which
exceeds the floor load per square foot which such floor was designed to carry.
All heavy material and/or equipment must be placed by Tenant, at Tenant's
expense, so as to distribute the weight. Business machines and mechanical
equipment shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient in Landlord's reasonable judgment to absorb and prevent
vibration, noise and annoyance. If the Premises be or become infested with
vermin as a result of the use or any misuse or neglect of the Premises by
Tenant, its agents, employees, visitors or licensees, Tenant shall at Tenant's
expense cause the same to be exterminated from time to time to the reasonable
satisfaction of Landlord and shall employ such exterminators and such
exterminating company or companies as shall be reasonably approved by Landlord.
35.11. The submission by Landlord of this Lease in draft form shall be
deemed submitted solely for Tenant's consideration and not for acceptance and
execution. Such submission shall have no binding force or effect and shall
confer no rights nor impose any obligations, including brokerage obligations, on
either party unless and until both Landlord and Tenant shall have executed this
Lease and duplicate originals thereof shall have been delivered to the
respective parties.
35.12. Irrespective of the place of execution or performance, this Lease
shall be governed by and construed in accordance with the laws of the State of
New York. If any provisions of this Lease or the application thereof to any
person or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Lease and the application of that provision
to other persons or circumstances shall not be affected but rather shall be
enforced to the extent permitted by law. The table of contents, captions,
headings and titles in this Lease are solely for convenience of references and
shall not affect its interpretation. This Lease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Lease to be drafted. Each covenant, agreement, obligation or other
provision of this Lease on Tenant's part to be performed, shall be deemed and
construed as a separate and independent covenant of Tenant, not dependent on any
other provision of this Lease. All terms and words used in this Lease, shall be
deemed to include any other number and any other gender as the context may
require.
35.13. If under the terms of this Lease Tenant is obligated to pay Landlord
a sum in addition to the Fixed Rent under this Lease and no payment period
therefor is specified, Tenant shall pay Landlord the amount due within twenty
(20) days after being billed.
84
<PAGE>
35.14. Notwithstanding anything to the contrary contained in this Lease,
during the continuance of any default by Tenant after the giving of notice and
the expiration of any applicable grace periods hereunder, Tenant shall not be
entitled to exercise any rights or options, or to receive any funds or proceeds
being held, under or pursuant to this Lease.
35.15. Tenant represents and warrants that this Lease has been duly
authorized, executed and delivered by Tenant.
35.16. Tenant acknowledges that it has no rights to any development rights,
"air rights" or comparable rights appurtenant to the Real Property, and
consents, without further consideration, to any utilization of such rights by
Landlord and agrees to promptly execute and deliver any instruments which may be
requested by Landlord, including instruments merging zoning lots, evidencing
such acknowledgment and consent. The provisions of this Section 35.16 shall be
deemed to be and shall be construed as an express waiver by Tenant of any
interest Tenant may have as a "party in interest" (as such quoted term is
defined in Section 12-10 Zoning Lot of the Zoning Resolution of the City of New
York) in the Real Property.
35.17. If any sales or other tax is payable with respect to any cleaning or
other services which Tenant obtains or contracts for directly from any third
party or parties, Tenant shall file any required tax returns and shall pay any
such tax, and Tenant shall indemnify and hold Landlord harmless from and against
any loss, damage or liability suffered or incurred by Landlord on account
thereof.
35.18. If the Premises or any additional space to be included within the
Premises shall not be available for occupancy by Tenant on the specific date
hereinbefore designated for the commencement of the term of this Lease or for
the inclusion of such space for any reason whatsoever, then, except as otherwise
provided in Section 2.01(k) hereof, this Lease shall not be affected thereby
but, in such case, said specific date shall be deemed to be postponed until the
date when the Premises or such additional space shall be available for occupancy
by Tenant, and Tenant shall not be entitled to possession of the additional
space until the same are available for occupancy by Tenant; provided, however,
Tenant shall have no claim against Landlord, and Landlord shall have no
liability to Tenant by reason of any such postponement of said specific date,
and the parties hereto further agree that any failure to have the Premises or
such additional space available for occupancy by Tenant on said specific date or
on the Commencement Date shall in no way affect the obligations of Tenant
hereunder nor shall the same be construed in any way to extend the term of this
Lease. This Section 35.18 shall be deemed to be an express provision to the
contrary of Section 223-a of the Real Property Law of the State of New York and
any other law of like import now or hereafter in force.
35.19. In connection with any examination by Tenant of Landlord's books and
records, Tenant agrees to treat, and to instruct its employees, accountants and
agents to treat, all information as confidential and not disclose it to any
other person, except as may be required (i)
85
<PAGE>
by applicable legal requirements or (ii) by a court of competent jurisdiction or
arbitrator or in connection with any action or proceeding before a court of
competent jurisdiction or arbitrator, or (iii) to Tenant's attorneys,
accountants and other professionals in connection with any dispute between
Landlord and Tenant; and Tenant will confirm or cause its agents and accountants
to confirm such agreement in a separate written agreement if requested by
Landlord.
35.20. (a) Tenant shall not cause or permit "Hazardous Materials" (as
defined below) to be used, transported, stored, released, handled, produced or
installed in, on or from, Tenant's premises or the Building. The term "Hazardous
Materials" shall, for the purposes hereof, mean any flammable explosives,
radioactive materials, hazardous wastes, hazardous and toxic substances, or
related materials, asbestos or any material containing asbestos, or any other
substance or material, as defined by any federal, state or local environmental
law, ordinance, rule or regulation including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, and in the regulations adopted and
publications promulgated pursuant to each of the foregoing. In the event of a
breach of the provisions of this Section 35.20, Landlord shall, in addition to
all of its rights and remedies under this Lease and pursuant to law, require
Tenant to remove any such Hazardous Materials from the Premises in the manner
prescribed for such removal by Legal Requirements. The provisions of this
Section 35.20 shall survive the termination of this Lease.
(b) In the event that at any time during the term of this Lease any
asbestos or asbestos-containing materials (collectively, "ACM") or materials
which are known to constitute Hazardous Materials as of the date hereof shall be
discovered in the Premises which ACM or Hazardous Materials are required under
applicable Legal Requirements to be removed, encapsulated or abated, Landlord
shall have no liability to Tenant in connection therewith, except that, unless
such ACM or Hazardous Materials were placed in or introduced into the Premises
by Tenant or Tenant's employees, agents or contractors, or the requirement for
such removal, encapsulation or abatement arose in connection with any
Alterations performed by or on behalf of Tenant, Landlord shall, at Landlord's
cost and expense, promptly remove, encapsulate or abate such ACM or Hazardous
Materials in accordance with applicable Legal Requirements. In such event,
Tenant shall permit Landlord, its agents, employees and contractors, such access
to the Premises as is reasonably required to effectuate such removal,
encapsulation or abatement.
35.21. Notwithstanding anything to the contrary contained in this Lease, in
the event that this Lease shall grant to Tenant any option or right to extend or
renew the original term of this Lease and/or any option or right to add
additional space to the Premises originally demised hereunder (the foregoing
options and rights are herein collectively called "Tenant's Options"), any such
Tenant's Options shall inure exclusively to the benefit of the Tenant named
herein and shall be exercisable only by the Tenant named herein.
86
<PAGE>
ARTICLE 36
Partnership Tenant
------------------
36.01. If Tenant is a partnership (or is comprised of two (2) or more
persons, individually and/or as co-partners of a partnership) or if Tenant's
interest in this Lease shall be assigned to a partnership (or to two (2) or more
persons, individually and/or as co-partners of a partnership) pursuant to this
Article 36 (any such partnership and such persons are referred to in this
Article 36 as "Partnership Tenant"), the following provisions of this Article 36
shall apply to such Partnership Tenant: (a) the liability of each of the parties
comprising Partnership Tenant shall be joint and several, (b) each of the
parties comprising Partnership Tenant hereby consents in advance to, and agrees
to be bound by, any written instrument which may hereafter be executed,
changing, modifying or discharging this Lease, in whole or in part, or
surrendering all or any part of the Premises to Landlord or renewing or
extending this Lease and by any notices, demands, requests or other
communications which may hereafter be given, by Partnership Tenant or by any of
the parties comprising Partnership Tenant, (c) any bills, statements, notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of the parties comprising Partnership Tenant shall be deemed
given or rendered to Partnership Tenant and to all such parties and shall be
binding upon Partnership Tenant and all such parties, (d) if Partnership Tenant
shall admit new partners, all of such new partners shall, by their admission to
Partnership Tenant, be deemed to have assumed performance of all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed, (e) Partnership Tenant shall give prompt notice to Landlord of the
admission of any partner or partners, and upon demand of Landlord, shall cause
each such partner to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner shall assume performance
of all of the terms, covenants and conditions of this Lease on Tenant's part to
be observed and performed (but neither Landlord's failure to request any such
agreement nor the failure of any such new partner to execute or deliver any such
agreement to Landlord shall vitiate the provisions of subdivision (d) of this
section) and (f) on each anniversary of the Commencement Date, Partnership
Tenant shall deliver to Landlord a list of all partners together with their
current residential addresses.
ARTICLE 37
Good Guy Guaranty
-----------------
37.01 (a) In order to induce Landlord to enter into this Lease and in
consideration of Landlord's entering into this Lease, the individual executing
this Article at the foot hereof (hereinafter referred to as "Guarantor") hereby
guaranties, unconditionally and absolutely, to Landlord, its successors and
assigns (without requiring any notice of nonpayment, nonkeeping, nonperformance
or nonobservance or proof of notice or demand whereby to charge Guarantor, all
87
<PAGE>
of which Guarantor hereby expressly waives), the full and faithful keeping,
performance and observance of all the covenants, agreements, terms, provisions
and conditions of this Lease provided to be kept, performed and observed by
Tenant (expressly including, without being limited to, the payment as and when
due of the fixed annual rent, additional rent, charges and damages payable by
Tenant under this Lease) and the payment of any charges for use and occupancy
and all other damages for which Tenant shall be liable by reason of any act or
omission contrary to any of said covenants, agreements, terms, provisions or
conditions. Guarantor's liability pursuant to this Article (hereinafter
sometimes referred to as this "Guaranty") shall be limited to: (i) the
performance of those obligations and the payment of such fixed annual rent,
additional rent and other charges as accrue up to the date that Tenant vacates
and surrenders the demised premises in the condition required under this Lease,
free of claims of occupancy by third parties, and removes its property
therefrom, delivers the key to Landlord and gives written notice, executed by
Tenant, to Landlord that it is surrendering possession of the demised premises,
(ii) the payment of all costs and expenses referred to in subparagraph (c)(vii)
below, plus (iii) the payment of all costs and expenses incurred by Landlord,
including, without limitation, reasonable attorneys fees and expenses, in
connection with enforcing the terms and provisions of this Lease or exercising
any remedy permitted thereunder or at law or in equity as against Tenant.
(b) As a further inducement to Landlord to enter into this Lease and
in consideration thereof, Guarantor represents and warrants that Guarantor is
the owner and holder of all of the capital stock of Tenant.
(c) As a further inducement to Landlord to enter into this Lease and
in consideration thereof, Guarantor hereby expressly covenants and acknowledges
as follows:
(i) The obligations hereunder of Guarantor shall not be terminated
or affected in any way or manner whatsoever by reason of Landlord's resort, or
Landlord's omission to resort, to any summary or other proceedings, actions or
remedies for the enforcement of any of Landlord's rights under this Lease or
with respect to the demised premises or by reason of any extensions of time or
indulgences granted by Landlord, or by reason of the assignment or surrender of
all or any part of this Lease or the term and estate thereby granted or all or
any part of the demised premises. The liability of Guarantor is coextensive with
that of Tenant and also joint and several. If Guarantor consists of more than
one individual, then the liability of each of the individuals comprising
Guarantor is individual, joint and several. Action or suit may be brought
against Guarantor and carried to final judgment and/or completion and recovery
had, either with or without making Tenant a party thereto. Insofar as the
payment by Tenant of any sums of money to Landlord is involved, this Guaranty is
a guaranty of payment and not of collection and shall remain in full force and
effect until payment in full to Landlord of all sums payable under this Lease,
subject to the provisions of the last sentence of Section 37.01(a) hereof.
Guarantor waives any right to require that any action be brought against Tenant
or to require that resort be had to any security or to any other credit in favor
of Tenant or to claim, if there is resort
88
<PAGE>
to any security, that resort thereto reduces Guarantor's obligations hereunder
in the amount of such application.
(ii) If, pursuant to law or to any option granted by this Lease,
this Lease shall be renewed, or its term extended, for any period beyond the
date specified in this Lease for the expiration of said term, or if pursuant to
any such option, additional space shall be included in, or substituted for all
or any part of, the demised premises, or if this Lease be modified by agreement
between Landlord and Tenant in any other similar or dissimilar respect, the
obligations hereunder of Guarantor shall extend and apply with respect to the
full and faithful keeping, performance and observance of all of the covenants,
agreements, terms, provisions and conditions which under such renewal of this
Lease or extension of its term and/or with respect to any such additional space,
or which under any supplemental indenture or new lease or modification
agreement, entered into for the purpose of expressing or confirming any such
renewal, extension, inclusion, substitution or modification, are to be kept,
performed and observed by Tenant (expressly including, without being limited to,
the payment as and when due of fixed annual rent, additional rent, charges and
damages provided for thereunder) and the payment of any and all other damages
for which Tenant shall be liable by reason of any act or omission contrary to
any of said covenants, agreements, terms, provisions or conditions.
(iii) Neither the giving nor the withholding by Landlord of any
consent or approval provided for in this Lease shall affect in any way the
obligations hereunder of Guarantor.
(iv) Neither Guarantor's obligation to make payment in accordance
with the terms of this Guaranty nor any remedy for the enforcement thereof shall
be impaired, modified, changed, stayed, released or limited in any manner
whatsoever by any impairment, modification, change, release, limitation or stay
of the liability of Tenant or its estate in bankruptcy or any remedy for the
enforcement thereof, resulting from the operation of any present or future
provision of the Bankruptcy Act of the United States or other statute or from
the decision of any court interpreting any of the same, and Guarantor shall be
obligated under this Guaranty as if no such impairment, stay, modification,
change, release or limitation had occurred.
(v) This Guaranty, and all of the terms hereof, shall be binding
on Guarantor and the successors, assigns, and legal representatives of
Guarantor.
(vi) Guarantor hereby waives the right to trial by jury in any
action or proceeding that may hereafter be instituted by Landlord against
Guarantor in respect of this Guaranty.
(vii) Guarantor will pay to Landlord all Landlord's expenses,
including, but not limited to, reasonable attorneys' fees and expenses, in
enforcing this Guaranty.
(viii) This Guaranty shall survive the termination of this Lease;
however, the foregoing shall not be deemed to modify the provisions of the last
sentence of Section 37.01(a) hereof.
89
<PAGE>
(ix) This Guaranty and Guarantor's obligations hereunder are and
shall at all times continue to be absolute, present, primary, and unconditional
in all respects, and shall at all times be valid and enforceable irrespective of
any other agreements or circumstances of any nature whatsoever which might
otherwise constitute a defense to this Guaranty and the obligations of Guarantor
under this Guaranty or the obligations of any other person or party (including,
without limitation, Tenant) relating to this Guaranty or the obligations of
Guarantor hereunder or otherwise with respect to the Lease. This Guaranty sets
forth the entire agreement and understanding of Landlord and Guarantor, and
Guarantor absolutely, unconditionally and irrevocably waives any and all right
to assert any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guaranty or the obligations of any other person
or party (including, without limitation, Tenant) relating to this Guaranty or
the obligations of any other person or party (including, without limitation,
Tenant) relating to this Guaranty or the obligations of Guarantor hereunder or
otherwise with respect to the Lease in any action or proceeding brought by
Landlord with respect to the Lease or the obligations of Guarantor hereunder. No
oral or other agreements, understandings, representations or warranties exist
with respect to this Guaranty or with respect to the obligations of Guarantor
hereunder except as specifically set forth in this Guaranty.
The undersigned Guarantor has executed this Article of the Lease for
the purposes set forth herein.
/s/ Scott M. Matukas
- ------------------------
Name: Scott M. Matukas
Address: 109 Sheaffer Road
Mount Kisco NY 10549
Social Security No.: 048 23 2321
ARTICLE 38
Extension of Term
------------ ----
38.01. (a) Subject to the provisions of Section 38.04 hereof, Tenant,
at Tenant's sole option, shall have the right to extend the term of this Lease
for an additional term of five (5) years commencing on the day following the
last day of the initial term of this Lease (hereinafter referred to as the
"Commencement Date of the Extension Term") and ending on the last day of the
month in which the fifth (5th) anniversary of the day preceding the Commencement
Date of the Extension Term occurs (such additional term is hereinafter called
the "Extension Term") provided that:
90
<PAGE>
(i) Tenant shall give Landlord notice (hereinafter called the
"Extension Notice") of its election to extend the term of the Lease not later
than twelve (12) months prior to the Expiration Date, and
(ii) Tenant shall not be in default under this Lease after
notice and the expiration of any applicable cure periods either as of the time
of the giving of the Extension Notice or the Commencement Date of the Extension
Term (which requirement Landlord may waive in its sole and absolute discretion),
and
(iii) The Tenant named herein shall, as of the date of the
giving of the Extension Notice and as of the Commencement Date of the Extension
Term, be in actual occupancy of one hundred (100%) percent of the rentable
square foot area of the Premises, provided that such occupancy requirement may
be waived by Landlord in its sole discretion at any time.
(b) The Fixed Rent payable by Tenant to Landlord during the
Extension Term shall be the higher of(i) the fair market rent for the Premises
as determined by Landlord and set forth in a written notice to Tenant, which
determination shall be as of the date (hereinafter called the "Determination
Date") occurring six (6) months prior to the Commencement Date of the Extension
Term and which determination shall be made by Landlord and given in writing to
Tenant within a reasonable period of time after the occurrence of the
Determination Date, or (ii) an amount equal to twelve (12) times the sum of the
monthly Fixed Rent, Operating Payment, and Tax Payment payable by Tenant with
respect to the Premises for the last full month of the initial term of this
Lease, without giving effect to any abatement, credit -or offset then in effect
(hereinafter called the "Original Term Escalated Rent").
For the purposes of determining the fair market rent for the
Premises during the Extension Term pursuant to this Article 38, the
determination shall take into account all then-relevant factors.
Effective as of the Commencement Date of the Extension Term,
(1) the Base Operating Amount shall be the Operating Expenses for the calendar
year immediately preceding the calendar year in which occurs the Commencement
Date of the Extension Term; and (2) the Base Tax Amount shall be the taxes for
the last complete Tax Year ending immediately prior to the occurrence of the
Commencement Date of the Extension Term, as finally determined.
38.02. (a) In the event Tenant gives the Extension Notice in
accordance with the provisions of Section 38.01 hereof and Tenant disputes the
fair market rent as determined by Landlord pursuant to Section 38.01(b) hereof,
then at any time on or before the date occurring thirty (30) days after Tenant
has been notified by Landlord of Landlord's determination of the fair market
rent, Tenant may initiate the arbitration process provided for herein by giving
notice
91
<PAGE>
to that effect to Landlord, and if Tenant so initiates the arbitration process
such notice shall specify the name and address of the person designated to act
as an arbitrator on its behalf. If Tenant fails to initiate the arbitration
process as provided above, time being of the essence, then Landlord's
determination of the Fixed Rent during the Extension Term shall be conclusive.
Within thirty (30) days after the Landlord's receipt of notice of the
designation of Tenant's arbitrator, Landlord shall give notice to Tenant
specifying the name and address of the person designated to act as an arbitrator
on its behalf. If Landlord fails to notify Tenant of the appointment of its
arbitrator within the time above specified, then Tenant shall provide an
additional notice to Landlord requiring Landlord's appointment of an arbitrator
within twenty (20) days after Landlord's receipt thereof. If Landlord fails to
notify Tenant of the appointment of its arbitrator within the time specified by
the second notice, the appointment of the second arbitrator shall be made in the
same manner as hereinafter provided for the appointment of a third arbitrator in
a case where the two arbitrators appointed hereunder and the parties are unable
to agree upon such appointment. The two arbitrators so chosen shall meet within
ten (10) days after the second arbitrator is appointed, and if, within sixty
(60) days after the second arbitrator is appointed, the two arbitrators shall
not agree upon a determination of the Fixed Rent for the Extension Term, they
shall together appoint a third arbitrator. In the event of their being unable to
agree upon such appointment within eighty (80) days after the appointment of the
second arbitrator, the third arbitrator shall be selected by the parties
themselves if they can agree thereon within a further period of fifteen (15)
days. If the parties do not so agree, then either party, on behalf of both and
on notice to the other, may request such appointment by the American Arbitration
Association (or any organization successor thereto) in accordance with its rules
then prevailing or if the American Arbitration Association (or such successor
organization) shall fail to appoint said third arbitrator within fifteen (15)
days after such request is made, then either party may apply, on notice to the
other, to the Supreme Court, New York County, New York (or any other court
having jurisdiction and exercising functions similar to those now exercised by
said Court) for the appointment of such third arbitrator. The majority of the
arbitrators shall determine the fair market rent of the Premises for the
Extension Term and render a written certified report of their determination to
both Landlord and Tenant within sixty (60) days of the appointment of the first
two arbitrators or sixty (60) days from the appointment of the third arbitrator,
if such third arbitrator is appointed pursuant to this Section 38.02; and the
fair market rent, so determined, shall be applied to determine the Fixed Rent
for the Premises during the Extension Term; provided, however that in no event
shall the Fixed Rent for the Extension Term be less than the Original Term
Escalated Rent.
(b) Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the fees and
expenses of the third arbitrator and all other expenses (not including the
attorneys fees, witness fees and similar expenses of the parties which shall be
borne separately by each of the parties) of the arbitration shall be borne by
the parties equally.
92
<PAGE>
(c) Each of the arbitrators selected as herein provided shall
have at least ten (10) years experience in the leasing and renting of office
space in first class office buildings in New York County.
(d) In the event the Tenant initiates the aforesaid arbitration
process and as of the Commencement Date of the Extension Term the amount of the
fair market rent has not been determined, Tenant shall pay the amount determined
by Landlord to be the fair market rent for the Premises and when the
determination has actually been made, an appropriate retroactive adjustment
shall be made as of the Commencement Date of the Extension Term. In the event
that such determination shall result in an overpayment by Tenant of any Fixed
Rent, such overpayment shall be paid by Landlord to Tenant promptly after such
determination.
38.03. Except as provided in Section 38.01 hereof, Tenant's occupancy
of the Premises during the Extension Term shall be on the same terms and
conditions as are in effect immediately prior to the expiration of the initial
term of this Lease; provided, however, Tenant shall have no further right to
extend the term of this Lease pursuant to this Article 38 and Tenant shall not
be entitled to any rental abatement or work allowance provided herein.
38.04. If Tenant does not timely send the Extension Notice pursuant to
the provisions of Section 38.01 hereof, this Article 38 shall have no force or
effect and shall be deemed deleted from this Lease. Time shall be of the essence
with respect to the giving of the Extension Notice. The termination of this
Lease during the initial term hereof shall also terminate and render void any
option or right on Tenant's part to extend the term of this Lease pursuant to
this Article 38 whether or not such option or right shall have theretofore been
exercised. None of Tenant's options or elections set forth in this Article 38
may be severed from this Lease or separately sold, assigned or transferred.
38.05. If Tenant exercises its right to extend the term of this Lease
for the Extension Term pursuant to this Article 38, the phrases "the term of
this lease" or "the term hereof' as used in this Lease, shall be construed to
include the Extension Term, and the Expiration Date shall be construed to be the
date of the expiration of the Extension Term.
38.06. if this Lease is renewed for the Extension Term, then Landlord
or Tenant can request the other party hereto to execute, acknowledge and deliver
an instrument in form for recording setting forth the exercise of Tenant's right
to extend the term of this Lease and the last day of the Extension Term.
93
<PAGE>
ARTICLE 39
Additional Space
----------------
39.01. (a) The "Additional Space" shall mean the entire rentable area
of any one (1) floor of the Building located not lower than the twenty-first (2
1st) floor and not higher than the thirty-first (31st) floor and in the same
elevator bank as the premises originally demised hereunder, as designated by
Landlord in Landlord's sole discretion in the Additional Space Notice (as such
term is hereinafter defined).
(b) Provided that Tenant is not then in default of any of the
terms, provisions and conditions of this Lease on the part of Tenant to be
performed, after notice and the expiration of any applicable cure periods,
either as of the "Inclusion Date" or as of the giving of Tenant's Notice (as
such terms are hereinafter defined), then Tenant shall have the option to
include the entire Additional Space within the Premises upon the terms and
subject to the conditions of this Lease (including without limitation the
provisions of Article 3 and the Base Operating Amount and Base Tax set forth
therein) and to such additional terms and conditions as are hereinafter set
forth. Any such option shall be effected by a written notice (hereinafter called
"Tenant's Notice") from Tenant to Landlord, given not later than March 31,2000.
In the event that Tenant shall give a Tenant's Notice to Landlord, Landlord
shall give a written notice to Tenant (the "Additional Space Notice")
designating the Additional Space by the later to occur of (x) thirty (30) days
following Landlord's receipt of Tenant's Notice or (y) March 1, 2000, and the
Additional Space shall be added to and included in the Premises effective as of
the Inclusion Date (as such term is hereinafter defined).
(c) The Additional Space shall be added to and included within
the Premises on the date (the "Inclusion Date") which shall be the earlier to
occur of: (i) the date on which Landlord's Work with respect to the Additional
Space shall be Substantially Completed or shall be deemed to be Substantially
Completed pursuant to the provisions of Section 2.01(g) hereof, or (ii) the date
Tenant or anyone claiming under or through Tenant, first occupies the Additional
Space, or any part thereof, for the preparation of the Additional Space for
Tenant's occupancy or for the conduct of its business or for any other purpose.
(d) Promptly following the Inclusion Date, at the request of
Landlord, Landlord and Tenant shall enter into a supplementary agreement with
respect thereto, but their failure to do so shall not affect any of the rights
and obligations of the parties hereunder.
39.02. Effective as of the Inclusion Date:
(a) the Fixed Rent hereunder shall be increased by the
following amounts per annum during the following periods:
94
<PAGE>
(x) the product obtained by multiplying (A) the number of
rentable square feet comprising the Additional Space, and
(B) $33.00, for the period commencing on the Inclusion
Date and ending on the day preceding the fifth (5th)
anniversary of the Rent Commencement Date; and
(y) the product obtained by multiplying (A) the number of
rentable square feet comprising the Additional Space, and
(B) $36.00 during the period commencing on the fifth
(5th) anniversary of the Rent Commencement Date ending on
the Expiration Date.
(b) Tenant's Share, as defined in Subsection 3.01(j) hereof,
shall be increased by the percentage obtained by dividing the number of rentable
square feet comprising the Additional Space by 1,000,904; and
(C) The security required to be maintained pursuant to
Article 4 hereof shall be increased by an amount equal to the product of (x)
$20.63 (i.e. 7 1/2 months rent based on an annual rental rate of $33.00 per
rentable square foot), multiplied by (y) the number of rentable square feet
comprising the Additional Space (such amount being herein called the "Additional
Space Security"), and Tenant shall, on the Inclusion Date, deliver the
Additional Space Security to Landlord in the form of either a cash deposit or a
replacement of or amendment to the Security Letter theretofore delivered to
Landlord increasing such Security Letter by the amount of the Additional
Security.
(d) Notwithstanding anything to the contrary contained
herein, provided Tenant is not in default hereunder beyond any applicable notice
or cure period, the Fixed Rent attributable to the Additional Space shall be
abated for the ninety (90) day period commencing on the Inclusion Date and
ending on the day eighty-nine (89) days thereafter (the "Additional Space Rent
Abatement Period").
39.03. Section 2.01 of this Lease shall apply to the Additional Space,
except that the following changes shall apply to Section 2.01 as it is applied
to the Additional Space (Section 2.01 shall not be modified by this Article 39
as it applies to the Premises originally set forth in this Lease):
(a) The "Work Letter" shall be deemed to mean the work letter
annexed hereto and made a part hereof as Exhibit C and shall be deemed to
exclude the design layout plans included in Exhibit C;
(b) The "Final Plan Date" shall be deemed be the date that is
twenty (20) days after the delivery by Landlord of the Additional Space Notice;
(c) "Extra Work" shall be deemed to mean any work or material
requested by Tenant that (i) is in excess of the quantity of such work or
material required to be provided by Landlord in Connection with the Tenant's
Work performed in the premises originally
95
<PAGE>
demised hereunder (hereinafter called the "Original Premises Tenant's Work") as
-------------------------------
set forth in the Work Letter applicable thereto (which quantity shall be
determined on a per rentable square foot basis in the case of any costs which
vary in relation to the rentable square foot area of the premises in question)
or (ii) is set forth in the Work Letter as an item to be installed at Tenant's
option or at Tenant's cost and expense. By way of example, in the event that the
Work Letter in connection with the Original Premises Tenant's Work requires
Landlord to install three duplex outlets for every 100 rentable square feet of
individual offices throughout the Premises and the Tenant Work Final Plans with
respect to the Tenant's Work to be performed in the Additional Space
(hereinafter called the "Additional Space Tenant's Work") require Landlord to
------------------------------
install four duplex outlets for every 100 rentable square feet of individual
offices throughout the Additional Space, the installation of the fourth outlet
for every 100 rentable square feet of individual offices throughout the
Additional Space shall, for purposes of the application of Section 2.01 hereof
to the Additional Space, be deemed to be Extra Work;
(d) "Special Work" shall be deemed to mean any work or material
which is of a different quality or nature, or involves greater complexity, than
the work or material required to be provided by Landlord in connection with the
Original Premises Tenant's Work, as set forth in the Work Letter applicable
thereto, including, without limitation, Long-Lead Work and Tenant Change Orders;
(e) All references to the 27th floor of the Building shall be
deemed to be references to the floor of the Building where the Additional Space
is located; and
(f) All references to the Commencement Date and the
determination of the Commencement Date shall be deemed references to the
"Inclusion Date".
39.04. (a) The provisions of Section 2.01(k) hereof shall be
inapplicable to the Additional Space. If for any reason whatsoever, Landlord
shall be unable to deliver possession of the Additional Space on the Inclusion
Date, then notwithstanding anything to the contrary hereinbefore contained, the
Additional Space shall be added to and included within the Premises on, and the
Inclusion Date shall be, the date on which Landlord is able to so deliver
possession of the Additional Space. If Landlord does not cause the Inclusion
Date to occur on or prior to the day (the "Additional Space Outside Date") which
shall be the later to occur of (i) October 1, 2000 or (ii) the date occurring
one hundred eighty (180) days after the date Tenant has provided Landlord with
the Tenant Work Final Plans with respect to the Additional Space Tenant's Work
in form acceptable to and approved by Landlord and in form acceptable for filing
with the Buildings Department of the City of New York (which date shall be
extended by one day for each day that Landlord is prevented from delivering
possession of the Additional Space to Tenant by reason of Force Majeure Causes
or Tenant Delay), the length of the Additional Space Rent Abatement Period (as
such term is defined in Section 39.02(d) hereof) shall be increased by one day
by each day in the period commencing on the Additional Space Outside Date and
ending on the Inclusion Date [by way of example, in the event that the Inclusion
Date
96
<PAGE>
shall occur on the date which is five (5) days following the Additional Space
Outside Date (as the same may be extended as hereinabove set forth), the
Additional Space Rent Abatement Period shall be deemed to be the ninety-five
(95) day period commencing on the Inclusion Date and ending on the day ninety-
four (94) days thereafter]. Landlord shall not be subject to any liability for
failure to give possession on the date that Landlord's Work with respect to the
Additional Space is Substantially Completed and the validity of this Lease shall
not be impaired under such circumstances, nor the same be construed in any way
to extend the term of this Lease.
(b) Notwithstanding anything contained in this Section 39.04 to
the contrary, in the event that the Inclusion Date shall not have occurred on or
before the date which shall be the later to occur of (i) December 26, 2000 or
(ii) the date occurring two hundred seventy (270) days after the date that
Tenant has provided Landlord with the Tenant Work Final Plans with respect to
the Additional Space Tenant's Work in form acceptable to and approved by
Landlord and in form acceptable for filing with the Buildings Department of the
City of New York, which date shall be extended by one day for each day that
Landlord is prevented from delivering possession of the Additional Space to
Tenant by reason of Force Majeure Causes or Tenant Delay (such date as the same
may be so extended, is herein called the "Additional Space Rescission Date"),
then Landlord shall not be subject to any liability for failure to give
possession of the Additional Space on such date and the validity of this Lease
shall not be impaired under such circumstances, nor the same be construed in any
way to extend the term of this Lease, but Tenant shall have the right to
terminate this Lease with respect to the Additional Space only by written notice
(herein called the "Additional Space Rescission Notice") given to Landlord
within five (5) days after the Additional Space Rescission Date (time being of
the essence with respect to the giving of the Additional Space Rescission Notice
within such five (5) day period), and such termination shall be effective on the
fifteenth (15th) day after the date that Tenant shall give the Additional Space
Rescission Notice to Landlord (such date being herein called the "Additional
Space Termination Date"), unless the Inclusion Date shall occur before the
Additional Space Termination Date. If Tenant fails to give the Additional Space
Rescission Notice to Landlord within such five (5) day period after the
Additional Space Rescission Date, the provisions of this Section 39.04(b) shall
be null and void and Tenant shall have no further right to terminate this Lease
with respect to the Additional Space. If Tenant exercises such option to
terminate this Lease with respect to the Additional Space, then upon such
termination, neither Landlord nor Tenant shall have any further obligations to
the other hereunder with respect to the Additional Space except that Landlord
shall promptly thereafter return to Tenant all rent theretofore paid by Tenant
to Landlord hereunder with respect to the Additional Space.
(c) Tenant hereby waives any right to rescind this Lease under
the provisions of Section 223(a) of the Real Property Law of the State of New
York, and agrees that the provisions of this Section 39.04 are intended to
constitute "an express provision to the contrary" within the meaning of said
Section 223(a).
97
<PAGE>
39.05. The provisions of this Article 39 shall be effective only if on
the Inclusion Date, the named Tenant herein shall be in actual occupancy of
eighty (80%) percent of the Premises.
39.06. The termination of this Lease during the term of this Lease
shall also terminate and render void all of Tenant's options or elections under
this Article 39 whether or not the same shall have been exercised; and nothing
contained in this Article shall prevent Landlord from exercising any right or
action granted to or reserved by Landlord in this Lease to terminate this Lease.
None of Tenant's options or elections set forth in this Article 39 may be
severed from this Lease or separately sold, assigned or transferred.
39.07. If Tenant within the applicable time period, time being of the
essence, does not send Tenant's Notice pursuant to the provisions of this
Article 39, then this Article 39 shall have no further force and effect and
shall be deemed deleted from this Lease, and Tenant shall have forever waived
and relinquished its right to the Additional Space and Landlord shall at any and
all times thereafter be entitled to lease such Additional Space to others at
such rental and upon such terms and conditions as Landlord in its sole
discretion may desire.
98
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of
the day and year first above written.
59 MAIDEN LANE ASSOCIATES, LLC, Landlord
By: Nathan Aber
--------------------------------
Name: Nathan Aber
Title: Manager
BROADVIEW NETWORKS, INC., Tenant
By: Scott M. Matukas
--------------------------------
Name: Scott M. Matukas
Title: VP-Admin
Tenant's Federal Identification Number:
16-1401082
----------
99
<PAGE>
TENANT ACKNOWLEDGMENT
---------------------
State of New York )
):ss
County of Westchester )
On the 30 day of December in the year 1999, before me, the undersigned, a Notary
Public in and for said state, personally appeared Scott M. Matukas personally
known to me or proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies) as VP of Admin., and that by his/her/their signature(s) on the
instrument, the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
Jacquelyn E. MacMahon
-------------------------
Notary Public
JACQUELYN E. MacMAHON
Notary Public, State of New York
No. 01MA6000748
Qualified in Putnam County
Commission Expires December 22, 2001
100
<PAGE>
EXHIBIT 10.8
STANDARD
OFFICE SPACE LEASE
------------------
The Syracuse Building
224 Harrison Street
Syracuse, New York
LANDLORD: 224 Harrison Associates, LLC
TENANT: Community Networks, Inc.
DATE OF LEASE: June 16, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 Premises............................................. 1
ARTICLE 2 Term of Lease....................................... 2
ARTICLE 3 Rent, Taxes, Lease Year and Parking.................. 3
ARTICLE 4 Construction, Financing an Alterations............... 4
ARTICLE 5 Use of Premises..................................... 4
ARTICLE 6 Operating Costs..................................... 5
ARTICLE 7 Energy Costs and Water............................... 5
ARTICLE 8 Repairs.............................................. 6
ARTICLE 9 Indemnity............................................ 6
ARTICLE 10 Insurance............................................ 7
ARTICLE 11 Damage by Fire, Theft and Water Damage............... 7
ARTICLE 12 Eminent Domain....................................... 7
ARTICLE 13 Bankruptcy and Default Provisions.................... 7
ARTICLE 14 Mechanic's Liens..................................... 10
ARTICLE 15 Mortgages, Assignments, Subleasesand Transfers of
Tenant'.............................................. 10
ARTICLE 16 Subordination of Lease............................... 12
ARTICLE 17 Entry to Premises.................................... 13
ARTICLE 18 Notices and Certificates............................. 14
ARTICLE 19 Covenant of Quiet Enjoyment.......................... 15
ARTICLE 20 Services............................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 21 Certain Rights Reserved to Landlord.................. 16
ARTICLE 22 Miscellaneous Provisions............................. 17
EXHIBIT "A" FLOOR PLAN(S)........................................ 26
EXHIBIT "C" LANDLORD'S WORK...................................... 27
EXHIBIT "D" TENANT'S WORK and TENANT'S INSURANCE
REQUIREMENTS..................................... 28
EXHIBIT E RULES AND REGULATIONS................................ 30
2ND EXHIBIT "C" LANDLORD'S WORK...................................... 34
2ND EXHIBIT "D" TENANT'S WORK and TENANT'S INSURANCE
REQUIREMENTS..................................... 35
EXHIBIT "F" GUARANTY OF LEASE.................................... 36
JF REAL ESTATE, INC., LEASE MODIFICATION AGREEMENT NO. 1................ 40
</TABLE>
ii
<PAGE>
STANDARD
OFFICE SPACE LEASE
224 HARRISON STREET, 5TH FLOOR
SYRACUSE, NEW YORK
------------------
AGREEMENT made as of this 16 day of June, 1999, by and between the
following parties: 224 Harrison Associates, LLC, a New York limited liability
company, having an office at 4 Clinton Square, Syracuse, New York 13202
("Landlord"), and Community Networks, Inc corporation duly organized under the
laws of the State of New York having its principal office at 45-18 Court Square,
Long Island City, NY 11101 Attention: Scott Matukas (the "Tenant").
WITNESSETH:
----------
ARTICLE 1
Premises
--------
1.01 - Premises
- ----- --------
Landlord hereby leases to Tenant and Tenant hereby leases and hires
from Landlord those certain premises in AS IS condition except as otherwise
expressly provided herein the building commonly known as "The Syracuse Building"
(the "Building") which is located at 224 Harrison Street in the City of
Syracuse, County of Onondaga and State of New York, which premises are outlined
on the plan attached as Exhibit "A" (the "Premises"), together with the right to
use, in common with others, the Building Commons Areas and Outside Common Areas
as hereinafter defined. For purposes of this Paragraph 1.01, the sum of the
square feet in the Premises and Tenant's share of Building Common Areas (as
defined Paragraph 1.02 hereof) shall be the aggregate of 8,000 square feet on
the sixth floor of the Building. The Premises shall include the area bounded
by: the center line of any walls common to adjacent tenants, the Building
Common Area side of any wall adjoining Building Common Areas (but not the
surface thereof), the line established by the exterior face of the exterior
walls of the Building and the exterior face of any windows in the exterior walls
of the Building, the concrete floor surface of the Premises and the lower
surface of the next higher floor (or roof). Landlord reserves unto itself, its
successors and assigns, the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires and structural elements leading through the
Premises in locations which will not materially interfere with Tenant's use of
the Premises. Except as set forth herein, no right to use any part of the
exterior of the Building and no easement for light or air are included in the
lease of the Premises hereby made.
1.02 - Definition of Building Common Areas
- ----- -----------------------------------
"Building Common Areas" shall be defined to mean all areas, space,
equipment, signs and special services provided by Landlord specifically for the
Building or for the common or joint use and benefit of all the tenants in the
Building, their employees, agents, customers, visitors and other invitees,
including without limitation hallways, corridors, trash rooms, mechanical and
<PAGE>
electrical rooms, storage rooms, stairways, entrances, elevators, rest rooms,
lobbies, stairs, loading docks, pedestrian walks, roofs and basements, janitor's
and storage closets within the Building and all other common rooms and common
facilities within the Building.
1.03 - Definition of Outside Common Areas
- ----- ----------------------------------
The term "Outside Common Areas" is defined to mean the land described
on Exhibit "B" attached hereto and made a part hereof, or such portion thereof
as may from time to time devoted to uses associated with the Building, and any
adjacent or contiguous land which may from time to time be devoted to such uses,
together with such improvements as may from time to time be erected upon or
under any of such lands, including, but not limited to, surface and subsurface
parking areas, lighting facilities, utility lines, sidewalks, covered walkways,
underground walkways, driveways, plazas, courts, sidewalks, retaining walls,
access roads, truck service ways, landscaped areas, signs, and equipment.
ARTICLE 2
Term of Lease
--------------
2.01 - Term
- ----- ----
The term of this Lease shall be for TEN (10) years and THREE (3)
months.
2.02 - Term Commencement
- ----- -----------------
The term of this Lease shall commence on completion of Landlord's work
which will be the 15th day of July 1999, and shall end on the 14th day of
October 2009; provided LL has substantially completed Landlord's work. If
Landlord has not substantially completed Landlord's work the term commencement
date is the date the Landlord has substantially completed Landlord's work. The
date of commencement of the term of this Lease is herein referred to as the
"Term Commencement Date." The word "term" shall, unless otherwise expressly
provided to the contrary, be deemed to include the initial and any renewal term.
2.03 - Rent Commencement
- ----- -----------------
The rent shall commence three (3) months after the term commencement
date.
2.04 - Condition of Premises
- ----- ---------------------
Tenant's taking possession shall be conclusive evidence as against
Tenant that the Premises were in good order and satisfactory condition when
Tenant took possession, subject to latent defects and punch list items. At the
expiration or sooner termination of this Lease, Tenant shall return the Premises
broomclean and in as good condition as when Tenant took possession, ordinary
wear and loss by fire or other casualty excepted, failing which the Landlord may
restore
2
<PAGE>
the Premises to such condition and Tenant shall pay the cost thereof.
ARTICLE 3
Rent, Taxes, Lease Year and Parking
-----------------------------------
3.01 - Fixed Annual Rent
- ----- -----------------
Tenant agrees to pay to Landlord at the offices of Landlord, or at
such other place designated by Landlord, without any prior demand therefor and
without any deduction or set-off whatsoever, except as set forth in this lease,
as fixed annual rent, the sum of $96,000.00 per annum (computed as follows:
8,000 square feet at $12.00 per square foot), payable in equal monthly
installments of $8,000.00 each (the "fixed monthly rent"), payable in advance
upon the first day of each calendar month during the term hereof. The monthly
installments shall be deemed to have been paid upon such first day only if
actually received by such first day.
If the term shall commence or expire upon a day other than the first
(or in the case of termination the last) day of a calendar month, Tenant shall
pay, upon the Term Commencement Date, and on the first day of the last [text
missing] a per diem basis with respect to such fractional calendar month based
upon the actual number of days in those months.
The fixed annual rent shall increase by two percent (2%) per annum commencing on
the first anniversary of the rent commencement.
3.02 - Taxes
- ----- -----
(a) Landlord shall in the first instance, during the term of this
Lease, pay to the public officers charged with the collection thereof, all
Building Taxes as hereinafter defined.
The term "Building Taxes" shall be deemed to include (i) all real
property taxes (which shall be deemed to include all property taxes and
assessments, water and sewer rents, rates and charges, parking and environmental
surcharges and any other governmental charges, general and special, ordinary and
extraordinary), which may be levied or assessed by any lawful authority against
the Building, the Building Common Areas and the Outside Common Areas. The
amount required to be paid by Landlord pursuant to any Payment-in-Lieu-of-Tax
Agreement between Landlord and any taxing authority having jurisdiction over the
Building shall, for the purpose of this Lease, be deemed to be a real property
tax obligation and included within the definition of Building Taxes.
(b) Tenant shall at all times be responsible for and pay, before
delinquency, all municipal, county, state or federal taxes assessed against its
leasehold interest or any fixtures, furnishings, equipment, stock-in-trade or
other personal property of any kind owned, installed or used in or on the
Premises.
3
<PAGE>
(c) Tenant shall not be responsible to pay for any building (real
estate) taxes.
3.03 - Past Due Rent
- ----- -------------
If, during the term of this Lease, Tenant shall fail to pay any
installment of the fixed monthly rent or additional rent or any other charge
hereunder within ten (10) days after the same is due and payable, then interest
at the rate of two percent (2%) per month shall accrue from and after the date
on which such sum was due and payable, and such interest, together with a late
charge of $50.00 for each past-due payment to cover the extra expense of
handling such delinquency, shall be paid to Landlord as additional rent and
liquidated damages at the time of payment of such past-due sum. Landlord shall
have the right to apply any payments made by Tenant first to any deficiency in
the payment of the interest and Late Charge provided for herein. Nothing
contained in this Paragraph 3.03 shall be construed to be a limitation of or in
substitution of Landlord's rights and remedies under Article 13 of this Lease.
3.04 - Definition of Lease Year and Partial Lease Year
- ----- -----------------------------------------------
The term "lease year" is defined to mean a period of twelve (12)
consecutive calendar months, the first full lease year commencing on the first
day of the first full calendar month following the Term Commencement Date (if
other than on the first day of a month), and each succeeding lease year
commencing on the anniversary of the commencement of the first full lease year.
Any portion of the term which is less than a lease year shall be deemed a
"partial lease year" and computations requiring proration shall be pro-rated on
a per diem basis using 365 day year.
3.05 - Security Deposit
- ----- ----------------
Intentionally Deleted
ARTICLE 4
Construction, Financing and Alterations
---------------------------------------
4.01 - Landlord's Obligation
- ---- ---------------------
Landlord has constructed the Premises for Tenant's use and occupancy
and Landlord shall have no further obligation to construct the Premises, except
as otherwise provided in Exhibit "C" attached hereto and made a part hereof.
4.02 - Financing
- ---- ---------
If Landlord can obtain mortgage financing or refinancing only upon the
basis of modifications of the terms and provisions of this Lease, then Tenant
shall not unreasonably withold or delay it's consent thereto, provided, the
lease modifications referred to herein shall not relate to those provisions
pertaining to length of the term of the lease, amount of rent, additional rent,
and other charges.
In the event of a refinancing or a bona fide sale of the Building by
the Landlord, Tenant shall, promptly upon request therefor, provide to Landlord
a balance sheet, and a statement of income and expenses for Tenant's last fiscal
year, for which a statement has been prepared.
4.03 - Tenant's Obligation
- ---- -------------------
Subject to Landlord's work, Tenant is leasing the Premises in AS IS
CONDITION and Tenant shall perform such work therein as is described in Exhibit
"D" attached hereto and made a part hereof.
4.04 - Alterations, Additions and Improvements
- ---- ---------------------------------------
Tenant shall not make any alterations, additions or improvements in or
to the Premises without the prior written consent of Landlord, which consent
shall not be unreasonably witheld or delayed, and then only by contractors
approved by Landlord which approval shall not be unreasonably witheld or
delayed. Landlord represents to Tenant and Tenant acknowledges the existence of
certain covenants affecting the Building and the Premises including those
portions of the architecturally or historically significant interior features of
the Building which may limit the construction of, or removal, as the case may
be, of certain alterations, additions or improvements in or to the Premises,
notwithstanding the requirement of consent thereto by Landlord. If Landlord
shall grant its consent, Tenant shall provide Landlord with certificates
evidencing the insurance coverages and limits required by Exhibit "F" to the
commencement of any such work. Tenant shall not make nor permit any defacement,
injury or waste in, to or about said Premises or any part of the Building.
Tenant agrees that any improvements as may be installed within the Premises by
Tenant pursuant to this paragraph 4.04 shall, at the option of Landlord, remain
as part of the Premises at the expiration of the Lease or any extension or
renewal thereof except any equipment installed by Tenant that is a part of
Tenant's operation. Landlord, however, shall have the right to require Tenant to
remove any alterations, additions or improvements so made. Tenant shall, at its
expense, repair or cause to be repaired any damage to the Premises caused by
such removal.
4.05 - Signs, Awnings and Canopies
- ---- ---------------------------
Tenant will not place or maintain or suffer to be placed or maintained
on or in an exterior door, wall or window of the Premises any sign, awning or
canopy, decoration, lettering or advertising matter without first obtaining the
written consent of Landlord thereto, which consent shall not be unreasonably
witheld or delayed. In the event such consent is received, then Tenant
shall maintain such sign, awning, canopy, decoration, lettering or advertising
matter as may be approved in good condition and repair at all times during the
term of this Lease.
ARTICLE 5
Use of Premises
---------------
5.01 - Use of Premises
- ----- ---------------
Tenant shall occupy and use the Premises during the term for its
telecommunication sale and services and uses incidental thereto and no other
purpose whatsoever. Tenant further agrees
4
<PAGE>
to comply with the rules and regulations set forth in Exhibit "E" attached
hereto and made a part hereof and with such reasonable modifications thereof and
additions thereto as Landlord may hereafter from time to time make for the
Building, the Building Common Areas or the Outside Common Areas. Landlord shall
not be responsible for the nonobservance by any other tenant of any said rules
and regulations and shall not be responsible to Tenant for any violation of the
rules and regulations, or the covenants or agreements contained in any other
lease, by any other tenant of the Building, or its agents or employees.
ARTICLE 6
Operating Costs
---------------
6.01 - Definitions
- ----- -----------
Not Applicable.
6.02 - Tenant to Share Increases in Operating Costs
- ----- --------------------------------------------
Not Applicable.
ARTICLE 7
Energy Costs and Water
----------------------
7.01 - Definitions
- ----- -----------
As used in this Lease, "Premises Electrical Energy Cost" shall mean
the cost of the electrical energy consumed by the lighting fixtures and
electrical convenience outlets within the Premises only. As used in this Lease,
"Energy Costs and Water" shall mean (i) the cost of all energy, including
electrical, oil, gas, solar, steam and any other energy and the cost of all
water used in or at the Building, the Building Common Areas and the Outside
Common Areas, excluding the Premises.
7.02 - Charge for Premises Electrical Energy Costs
- ----- -------------------------------------------
Tenant agrees to pay to Landlord, as additional rent, monthly within
ten (10) days after receipt of Landlord's estimate therefor (and thereafter on
the first day of each month without invoice), a charge for Premises Electrical
Energy Costs at a usage based upon plans and specifications for the Premises
during the hours set forth in Paragraph 20.01 of this Lease. Landlord reserves
the right to survey and calculate Tenant's connected electrical load and
hours of usage thereof from time to time during the term and to adjust the
monthly charge herein set forth by the amount of electrical energy usage
exceeding the waits per square foot and hours herein set forth. Tenant agrees to
pay to Landlord, as additional rent, the amount of such monthly charge, as
adjusted, within ten (10) days following Tenant's receipt of notice of the
adjustment and on the first day of each calendar month thereafter. A check meter
will be installed to provide an accurate measure of Tenant's electrical usage.
5
<PAGE>
ARTICLE 8
Repairs
-------
8.01 - Repairs
- ----- -------
Tenant shall give to Landlord prompt written notice of any damage to,
or defective condition in any part of or appurtenance to the Building's
plumbing, electrical, heating, ventilating, air-conditioning or other systems
serving, located in, or passing through the Premises. Subject to the provisions
of Article 11 of this Lease, Tenant shall, at Tenant's own expense, keep the
Premises, including everything therein (except the heating and air-conditioning
systems), in good order, condition and repair during the term. Landlord shall
maintain the heating, ventilating and air-conditioning walls, outside windows,
floors, and roof of the Building in good order and repair. Repairs made by
Landlord required solely and directly due to negligence or fault of Tenant, its
contractors, agents or employees shall be made at Tenant's expense plus a 10%
administrative charge.
Tenant, at Tenant's expense, shall comply with all laws or ordinances,
and all rules and regulations of all governmental authorities and of all
insurance bodies at any time in force, applicable to the Premises or to Tenant's
use thereof, except that Tenant shall not hereby be under any obligation to
comply with any law, ordinance, rule or regulation requiring any structural
alteration of the Premises or with respect to the Premises, unless such
alteration is required by reason of a condition which has been created by, or at
the instance of, Tenant, or is required by reason of a breach of any of Tenant's
covenants and agreements hereunder. All repairs made by Tenant shall be made
using contractors approved by Landlord which approval shall not be unreasonably
withheld or delayed.
ARTICLE 9
Indemnity
---------
9.01 - Indemnification by Tenant
- ----- -------------------------
Tenant does hereby indemnify and shall defend Landlord (and such other
persons as are in privity of estate with Landlord) and save it harmless from and
against any and all claims, actions, damages, liability and expense in
connection with loss of life, personal injury and/or damage to property arising
from or out of any occurrence in, upon or at the Premises, from or out of the
occupancy or use by Tenant of the Premises or any part thereof, or occasioned
wholly or in part by any act or omission of Tenant, its agents, contractors,
employees, lessees or concessionaires. In case Landlord (and such other persons
as are in privity of estate with Landlord) shall, without fault on its part, be
made a party to any litigation commenced by or against Tenant, then Tenant
agrees to protect and hold Landlord harmless and to pay all costs, expenses and
reasonable attorney's fees incurred or paid by Landlord in connection with such
litigation. Tenant agrees also to pay all costs, expenses and reasonable
attorney's fees that may be incurred or paid by Landlord in enforcing the
covenants and agreements in this Lease.
6
<PAGE>
ARTICLE 10
Insurance
---------
10.01 - Liability Insurance
- ----------------------------
At all times during the term of this Lease, Tenant shall, at its sole
cost and expense, for the mutual benefit of Landlord and Tenant, maintain
personal injury, death or property damage occurring on, in or about the Premises
during the term of this Lease in an amount of not less than Two Million Dollars
($2,000,000.00) with respect to personal injury, death or property damage and
including contractual indemnity coverage. In the event that Tenant shall not
have delivered to Landlord a policy or certificate evidencing such insurance
fifteen (15) days prior to the Term Commencement Date and fifteen (15) days
prior to the expiration dates of each expiring policy. Landlord upon ten (10)
days notice to Tenant may obtain such insurance as it may reasonably require to
protect its interest. The cost for such policies shall be paid by Tenant to
Landlord as additional rent upon demand, plus ten percent (10%) administrative
charge. All insurance policies required hereunder shall be issued by insurers
of recognized responsibility and licensed to conduct business in the State of
New York.
10.02 - All Risks and Difference in Conditions Insurance
- ---------------------------------------------------------
At all times during the term of this Lease, Landlord shall keep the
Building insured for the benefit of Landlord against loss or damage by risks now
or hereafter embraced by "All Risks," "Difference in Conditions", and loss of
rent coverages, and against such other risks as Landlord from time to time
reasonably may designate in amounts sufficient to prevent Landlord from becoming
a coinsurer.
In any event, the amount applicable to "All Risks" shall be ninety
percent (90%) of the then full replacement cost (being the cost of replacing the
Building, exclusive of the costs of excavations and footings below the lowest
grade level). Such full replacement cost shall be determined form time to time
(but not more frequently than once in any twelve (12) calender months) by an
appraiser, architect or other person or firm designated by Landlord.
The parties agree that Landlord shall not provide any insurance
coverage for Tenant's merchandise, trade fixtures, furnishings, equipment and
other personal property of Tenant.
10.03 - Insurance on Common Areas
- ----------------------------------
At all time during the term of this Lease, Landlord shall keep the
Common Areas insured for personal injury and property damage liability, "All
Risk" property coverage. "Difference in Conditions," workers' compensation,
employee's liability and any other casualty or risk insurance which Landlord or
Landlord's insurance carrier deems necessary or appropriate.
10.04 - Waiver of Subrogation
- ------------------------------
Each of the parties shall have a waiver of subrogation clause attached
to, and made a part of, its insurance policy or policies in the following or
equivalent form:
Waiver of Subrogation Clause
This insurance shall not be invalid should the insured waive in
writing, prior to a loss, any or all rights of recovery against any party for
loss occurring to the property described herein. Notice is hereby accepted that
the insured has agreed in writing, prior to a loss, to waive any and all of its
rights of recovery from (the Landlord or the Tenant as the case may be).
ARTICLE 11
Damage by Fire, Theft and Water Damage
--------------------------------------
11.01 - Untenantability
- ------------------------
If the Premises are made untenantable in whole or in part by fire or
other casualty, the fixed monthly rent, additional rent and other charges, until
repairs shall be made or the Lease terminated as hereinafter provided, shall be
apportioned on a per diem basis according to the part of the Premises which is
usable by Tenant. If such damage shall be so extensive that the Premises cannot
be restored by Landlord within a period of nine (9) months, Landlord or Tenant
shall have the right to cancel this Lease by notice to the other given at any
time within thirty (30) days after the date of such damage. If a portion of the
Building other than the Premises shall be so damaged that in the reasonable
opinion of Landlord the Building shall be restored in such a way as to alter the
Premises materially, Landlord may cancel this Lease by notice to Tenant given at
any time within thirty (30) days after the date of such damage. In the event of
giving effective notice pursuant to this paragraph, this Lease and the term and
the estate hereby granted shall expire on the date fifteen (15) days after the
giving of such notice as fully and completely as if such date were the date
hereinbefore set for the expiration of the term of this Lease. If this Lease is
not so terminated, Landlord will promptly (taking into account the time
necessary to effectuate a satisfactory settlement with Landlord's insurance
company) restore the damage insured by Landlord pursuant to Paragraph 10.02.
Tenant hereby expressly waives the provisions of Section 227 of the New York
Real Property Law and agrees that the foregoing provisions of this Paragraph
11.01 shall govern and control in lieu thereof.
11.02 - Loss of Property and Water Damage
- ------------------------------------------
Landlord shall not be responsible to Tenant for any loss or theft or
damage of or to any property left with any employee of Landlord, however
occurring. Landlord shall not be liable for any damage caused by water, rain,
snow or ice, or by breakage, stoppage or leakage of water, gas, heating, air
conditioning, sewer or other pipes or conduits, or arising from any other cause,
in, upon, about or adjacent to the Premises, or the Building in which said
Premises are located.
ARTICLE 12
Eminent Domain
--------------
12.01 - Eminent Domain
- -----------------------
(a) In the event that title to the whole or any part of the Premises
shall be lawfully condemned or taken in any manner for any public or
quasi-public use, this Lease and the term and estate hereby granted shall
forthwith cease and terminate as of the date of vesting of title and Landlord
shall be entitled to receive the entire award for the real property. Tenant
hereby assigning to Landlord Tenant's interest therein, if any, provided Tenant
may make a claim for the value of its property and Tenant's expenses Incurred.
(b) In the event that title to a part of the Building other than the
Premises shall be so condemned or taken and if in the opinion of Landlord, the
Building should be restored in such a way as to alter the Premises materially,
Landlord may terminate this Lease and the term and estate hereby granted by
notifying Tenant of such termination within sixty (60) days following the date
of vesting of title, and this Lease and the term and estate hereby granted shall
expire on the date specified in the notice of termination, which date shall be
not less than sixty (60) days after the giving of such notice, as fully and
completely as if such date were the date hereinbefore set for the expiration of
the term of this Lease, and the fixed monthly rent, additional rent, and other
charges hereunder shall be apportioned as if such date. In such event. Tenant
shall not be entitled to any portion of Landlord's award hereunder. if any, nor
shall Tenant have any claim against Landlord for the value of the unexpired
portion of the term.
ARTICLE 13
Bankruptcy and Default Provisions
---------------------------------
13.01 - Conditional Limitations
- --------------------------------
This Lease and the demised term are subject to the limitation that if,
at any time prior to or during the term, any one or more of the following events
(herein called an "event of default") shall occur, that is to say:
(a) If Tenant shall make an assignment for the benefit of its
creditors: or
(b) If the leasehold estate hereby created shall be taken on
execution or by other process of law; or
(c) If any petition shall be filed against Tenant in any court,
whether or not pursuant to any statute of the United States or of any State, in
any bankruptcy, reorganization, composition, extension, arrangement, or
insolvency proceedings, and Tenant shall thereafter be adjudicated bankrupt, or
such petition shall be approved by the court, or the court shall assume
jurisdiction of the subject matter and if such proceedings shall not be
dismissed within thirty (30) days after the institution of the same; or if any
such petition shall be so filed by the Tenant; or
7
<PAGE>
(d) If in any proceedings a receiver or trustee be appointed for
Tenant's property, and such receivership or trusteeship shall not be vacated or
set aside within thirty (30) days after the appointment of each receiver or
trustee; or
(e) If Tenant shall vacate or abandon the Premises and permit the
same to remain unoccupied or closed for business for more than thirty (30) days;
or
(f) If Tenant shall fail to pay any installment of the fixed monthly
rent or any part thereof when the same shall become due and payable, and such
failure shall continue for ten (10) days after notice thereof from Landlord; or
(g) If Tenant shall fail to pay any other charge required to be paid
by Tenant hereunder, and failure shall continue for ten (10) days after notice
thereof from Landlord to Tenant: or
(h) If Tenant shall fail to perform or observe any other requirement
of this Lease (not hereinbefore in this paragraph specifically referred to) on
the part of Tenant to be performed or observed, and such failure shall continue
for thirty (30) days after notice thereof from Landlord to Tenant, provided if
not susceptible of cure, Tenant not in default if it commences cure within
thirty (30) days and diligently pursues cure; then, upon the happening of any
one or more of the aforementioned events of default, and the expiration of the
period of time prescribed above, Landlord may give Tenant a notice (hereinafter
called "notice of termination") of its intention to end the term of this Lease
at the expiration of five (5) days from the date of service of such notice of
termination, and at the expiration of such five (5) days, provided the default,
has not been cured, this Lease and the term hereof, as well as all of the right,
title and interest of Tenant hereunder, shall wholly cease and expire in the
same manner and with the same force and effect as if the date of expiration of
such five (5) day period were the date originally specified herein for the
expiration of this Lease and the demised term, and Tenant shall then quit and
surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
13.02 - Landlord's Remedies
- ---------------------------
(a) If this Lease shall be terminated as in Paragraph 13.01 provided,
Landlord or Landlord's agents or employees may immediately or at any time
thereafter re-enter the Premises and remove therefrom Tenant, its agents,
employees, licensees, and any subtenants and other persons, firms or
corporations, and all or any of its or their property therefrom either by
summary dispossess proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable to indictment, prosecution or
damages therefor, and repossess and enjoy said Premises, together with all
alterations, additions and improvements thereto.
(b) In case of any such termination, re-entry or dispossess by summary
proceedings or otherwise, the rents and all other charges required to be paid up
to the time of such termination, re-entry or dispossess, shall be paid by Tenant
and Tenant shall also pay to Landlord all reasonable expenses which Landlord may
then or thereafter incur for legal expenses, attorneys' fees, brokerage
commissions and all other costs paid or incurred by Landlord for restoring the
8
<PAGE>
Premises to good order and condition and for altering and otherwise preparing
the same for reletting and for reletting thereof. Landlord may, at any time and
from time to time, relet the Premises, in whole or in part, for any rental then
obtainable either in its own name or as agent of Tenant, for a term of terms
which, at Landlord's option, may be for the remainder of the then current term
of this Lease or for any longer or shorter period.
(c) If this Lease be terminated as aforesaid, Tenant nevertheless
covenants and agrees, notwithstanding any entry or reentry by Landlord whether
by summary proceedings, termination, or otherwise, to pay and be liable for on
the days originally fixed herein for the payment thereof, amounts equal to the
several installments of fixed monthly rent, additional rent and other charges as
they would, under the terms of this Lease, become due if this Lease had not been
terminated or if Landlord had not entered or re-entered as aforesaid, and
whether the Premises be relet or remain vacant in whole or in part or for a
period less than the remainder of the term, and for the whole thereof, but in
the event the Premises be relet by Landlord, Tenant shall be entitled to a
credit in the net amount of rent received by Landlord in reletting the Premises
after deduction of all reasonable expenses and costs incurred or paid as
aforesaid in reletting the Premises and in collecting the rent in connection
therewith.
(d) Tenant hereby expressly waives, so far as permitted by law, the
service of any notice of intention to re-enter provided for in any statute, or
of the institution of legal proceedings to that end, and Tenant, for and on
behalf of itself and all persons claiming through or under Tenant also waives
any and all right of redemption or re-entry or repossession under present or
future laws including specifically but without limitation Section 761 of the New
York Real Property Actions and Proceedings law including any amendments
hereafter, or to restore the operation of this Lease. In case Tenant shall be
dispossessed by a judgment or by warrant of any court or judge or in case of re-
entry or repossession by Landlord or in case of any expiration or termination of
this Lease, Landlord and Tenant, so far as permitted by law, waive and will
waive trial by jury in any action, proceeding or counterclaim brought by either
of the parties hereto against the other on any matters whatsoever arising out of
or in any way connected with this Lease, the relationship of Landlord and
Tenant, Tenant's use or occupancy of said Premises, or any claim or injury or
damage. The terms "enter," "entry," or "re-entry" as used in this Lease are not
restricted to their technical legal meaning.
(e) No failure by Landlord to insist upon the strict performance of
any covenant, agreement, term or condition of this Lease or to exercise any
right or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such covenant, agreement, term and condition.
No waiver of any breach shall affect or alter this Lease, but each and every
covenant, agreement, term and condition of this Lease shall continue in full
force and effect with respect to any other than existing or subsequent breach
thereof. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly installments of rent or additional rent stipulated in this Lease
shall be deemed to be other than on account of the earliest stipulated rent nor
shall any endorsement or statement on any check or letter accompanying a check
for payment of rent be deemed any accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or to pursue any other remedy provided by this Lease.
9
<PAGE>
(f) In the event of any breach or threatened breach by Tenant of any
of the covenants, agreements, terms or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise.
(g) Each right and remedy of Landlord provided for in this Lease shall
be cumulative and shall be in addition to every other right or remedy provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise.
ARTICLE 14
Mechanic's Liens
----------------
14.01 - Mechanic's Liens
- ------------------------
Tenant agrees to pay when due all sums of money that may become due
for, or purporting to be due for, any labor, services, materials, supplies or
equipment alleged to have been furnished or to be furnished to or for Tenant in,
upon or about the Premises and/or Landlord's interest therein. If any
mechanic's lien shall be filed against the Premises or the Building based upon
any act of tenant or anyone claiming through Tenant, Tenant, after notice
thereof from Landlord (or any person in privity of estate with Landlord)
forthwith shall commence such action by bonding, deposit, payment or otherwise,
as will remove or satisfy such lien within fifteen (15) days. In the event
tenant does not remove or satisfy said lien with said fifteen (15) day period,
Landlord shall have the right to do so by posting a bond or undertaking and
Tenant agrees to reimburse Landlord for any and all expenses incurred by
Landlord in connection therewith within five (5) days after receipt by Tenant of
Landlord's invoice therefor. These expenses include, but are not limited to
filing fees, legal fees and bond premiums. However, nothing in this Article 14
shall be deemed or construed as (a) Landlord's consent to any person, firm or
corporation for the performance of any work or services or the supply of any
materials to the Premises, or (b) giving Tenant or any other person, firm or
corporation any right to contract for or to perform or supply any work, services
or materials that would permit or give rise to a lien against the Premises or
the Building.
ARTICLE 15
Mortgages, Assignments, Subleases and Transfers of Tenant's Interest
--------------------------------- ----------------------------------
15.01 - Limitation on Tenant's Rights
- -------------------------------------
Except as hereinafter otherwise provided, during the term of this
Lease, in each case, without the prior written consent of Landlord first had and
received, which consent shall not be unreasonably withheld or delayed, neither
this Lease nor the interest of Tenant in this Lease, or in any sublease, or in
any rentals under any sublease shall be sold, assigned, transferred, mortgaged,
10
<PAGE>
pledged, hypothecated or otherwise disposed of, whether by operation of law or
otherwise, nor shall the Premises be sublet.
It is understood and agreed between the parties that, should Tenant
request Landlord's consent to a proposed assignment of this Lease or a
subletting of all or any portion of the Premises, Landlord will, in addition to
any other requirements which may be imposed as conditions to Landlord's consent,
require that Tenant execute and deliver to Landlord an agreement whereby Tenant
obligates itself, as additional rent, to pay over to Landlord fifty percent
(50%) of all net rental profits, additional rent and any other consideration
paid by such assignee or sublessee to Tenant, excluding any amount paid for
Tenant's equipment and personal property, pursuant to such assignment or
sublease which is in excess of rent and additional rent due and payable from
time to time from Tenant to landlord pursuant to this Lease.
No consent by Landlord to an assignment of this Lease and no
assignment made as hereinafter permitted, shall be effective until there shall
have been delivered to Landlord (a) an agreement, in recordable form, executed
by Tenant and the proposed assignee, wherein and whereby such assignee assumes
due performance of the obligation on Tenant's part to be performed under this
Lease to the end of the term hereof, and (b) the written consent of such
assignment of the holder of any fee or leasehold mortgage to which this Lease is
then subject shall have been obtained and delivered to Landlord if so required
by the terms of such fee or leasehold mortgage.
In the event Tenant sublets or assigns this lease the, Tenant will be
released form its obligation and the sub-tenant or assignee will assume all
obligations for this lease.
Tenant has the right to assign this lease without consent to
affiliates, subsidiaries or successors, assuming the assignee has equal or
greater financial strength as Tenant. Tenant must still notify Landlord of such
potential assignment.
Any assignment, mortgage, pledge, sublease or hypothecation of this
Lease, or of the interest of Tenant hereunder, without full compliance with any
and all requirements set forth in this Lease shall be a breach of this Lease and
a default hereunder.
15.02 - Effect of Landlord's Consent
- ------------------------------------
Any consent by Landlord to a sale, assignment, sublease, mortgage,
pledge, hypothecation, or transfer of this Lease, shall apply only to the
specific transaction thereby authorized and shall not relieve Tenant from the
requirement of obtaining prior written consent of Landlord to any further sale,
assignment, sublease, mortgage, pledge, hypothecation, or transfer of this
Lease. In instances where the consent of Landlord is required hereunder to any
proposed assignment or sublease of this Lease, or to the mortgaging, pledging or
hypothecation of this Lease, contemporaneously with the request of Tenant
therefore Tenant shall submit in writing information reasonably sufficient to
enable Landlord to decide with respect thereto. Landlord shall reply to Tenant
within ten (10) days after receipt of the request as aforementioned.
With respect to any of the consents requested by Tenant under he
provisions of this
11
<PAGE>
Article 15, whether or not the Landlord shall have consented thereto, Tenant
shall pay to the Landlord all reasonable counsel fees and other out-of-pocket
expenses incurred by the Landlord in connection therewith.
ARTICLE 16
Subordination of Lease
----------------------
16.01 - Subordination to Mortgages and Ground Leases/Non-Disturbance
- --------------------------------------------------------------------
This Lease and all the rights of Tenant hereunder are and shall be
automatically subject and subordinate to the lien of any ground or underlying
leases and to any mortgage or mortgages, whether fee or leasehold mortgages,
which may now or hereafter affect the Premises or the Building or the land under
the Building and to all renewals, modifications, consolidations, replacements
and extensions thereof, and advances thereunder. In order to confirm such
subordination, Tenant shall execute and deliver such instruments as may be
requested by any ground lessor or mortgagee and in the event Tenant fails to do
so within ten (10) days after written demand therefor, Tenant does hereby make,
constitute and irrevocably appoint Landlord as its attorney-in-fact to execute
same in its name and on its behalf.
12
<PAGE>
Landlord will use its best efforts to provide Tenant with a non-
disturbance agreement from any existing or future lender of the building.
16.02 - Other Agreed Matters
- ----------------------------
Tenant will not do, suffer or permit any act, happening or occurrence
or any condition to occur or remain which may be prohibited under the terms or
provisions of any ground or underlying lease or mortgage to which this Lese is
subject or which will create a default thereunder except that Tenant shall not
be obligated to pay the principal indebtedness or any installment thereof or
interest thereon. Landlord represents that Tenant's use hereunder is not
prohibited.
So long as any such mortgage or lese shall remain a lien on the
Premises, Tenant agrees simultaneously with the giving of any notice of default
to Landlord which is required to be given by this Lease to give a duplicate copy
thereof to any mortgagee or ground lessor, notice of whose name and address have
been given to Tenant. Further, Tenant agrees that if Landlord defaults in the
performing of any of its covenants under this Lease and if such default allows
Tenant to cancel or surrender said Lease, the mortgagee or ground lessor may
cure said default with the same effect as if cured by Landlord, and if
necessary, enter upon the Premises for the purpose of curing any such default,
provided that the mortgagee or ground lessor must cure the default within the
time which Landlord is obligated to cure such default in the Lease. The giving
of any such notice to Landlord shall not be properly given under the terms of
this Lease and shall not be of any force and effect until a duplicate copy
thereof shall also have been given to the mortgagee or ground lessor pursuant to
this paragraph.
ARTICLE 17
Entry to Premises
-----------------
17.01 - Entry to Premises by Landlord
- -------------------------------------
Provided that at all times Landlord will minimize the interference
with Tenant's business, Landlord shall have the right to enter the Premises at
all reasonable times for the purpose of:
(a) Inspecting the same, and
(b) making any repairs to the Premises and performing any work
therein that may be necessary by reason of Tenant's default under the terms of
this Lease continuing beyond the applicable periods of grace,
(c) exhibiting the Premises for the purpose of sale, ground lease or
mortgage, and
13
<PAGE>
(d) exhibiting the Premises to prospective tenants within six (6)
months prior to the expiration of the term hereof.
ARTICLE 18
Notices and Certificates
------------------------
18.01 - Notices
- ---------------
Any notice, statement, certificate, request or demand required or
permitted to be given in this Lease shall be in writing sent by recognized
overnight courier service providing for a receipt upon delivery, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed, as the case may be, to Landlord at the mailing address shown at the
beginning of this Lease, and to Tenant at the address shown at the beginning of
this Lease or to such other addresses as Landlord or Tenant shall designate in
the manner herein provided. Such notice, statement, certificate, request or
demand shall be deemed to have been given one business day after the date
deposited with such courier or three business days after being mailed as
aforesaid in any post office or branch post office regularly maintained by the
United States Government, except for notice of change of address or revocation
of a prior notice, which shall only be effective upon receipt.
At any time or times when Tenant's interest herein shall be vested in
more than one person, firm or corporation, jointly in common or in severally, a
notice given by Landlord to any one such person, firm or corporation shall be
conclusively deemed to have been given to all such persons, firms or
corporations. Any notice by Tenant pursuant to the provisions hereof shall be
void and ineffective unless signed by all such persons, firms and corporations,
unless all such persons, firms and corporations shall have previously given
notice to Landlord, signed by each of them designating and authorizing one or
more of them to give the notice referred to, and such notice shall then be
unrevoked by any notice to Landlord.
Notices must be mailed to the following addresses and shall only be
sent to another address if requested in writing by party changing address:
TENANT: Community Networks, Inc.
Attn: Scott Matukas
45-18 Court Square
Long Island City, NY 11101
LANDLORD: 224 Harrison Street Associates
Attn: John Funiciello
4 Clinton Square
Syracuse, NY 13202
14
<PAGE>
18.02 - Certificate by Tenant
- -----------------------------
Within fifteen (15) days after request by Landlord, Tenant from time
to time and without charge shall deliver to Landlord or to a person, firm or
corporation, specified by Landlord, a duly executed and acknowledged instrument
certifying:
(a) that this Lease is unmodified and in full force and effect, or if
there has been any modification, that the Lease is in full force and effect, as
modified, and identifying the date of any such modification; and
(b) whether Tenant knows or does not know, as the case may be, of any
default by Landlord in the performance by Landlord of the terms, covenants, and
conditions of this Lease, and specifying the nature of such defaults, if any;
and
(c) whether or not there are any then existing set-offs or defenses by
Tenant to the enforcement by Landlord of the terms, covenants and conditions of
this Lease and any modification thereof, and if so, specifying them; and
(d) the date to which the fixed monthly rent has been paid.
ARTICLE 19
Covenant of Quiet Enjoyment
---------------------------
19.01 - Covenant of Quiet Enjoyment
- -----------------------------------
Tenant, subject to the terms and provisions of this Lease, on payment
of the rent and observing, keeping and performing all the terms and provisions
of this Lease on its part to be observed, kept and performed shall lawfully,
peaceably and quietly have, hold and enjoy the Premises during the term hereof
on and after the Term Commencement Date without hindrance or ejection by
Landlord and any persons lawfully claiming under Landlord, subject nevertheless
to terms and conditions of this Lease and to any ground or underlying lease
and/or mortgage(s); but it is understood and agreed that this covenant, and any
and all covenants of Landlord contained in this Lease shall be binding upon
Landlord and its successors only with respect to breaches occurring during its
and their respective ownership of Landlord's interest hereunder.
ARTICLE 20
Services
--------
20.01 - Services
- ----------------
During the term of this Lease, while Tenant is not in default
hereunder beyond the
15
<PAGE>
applicable notice and cure period hereunder, Landlord shall furnish to the
Premises electricity, lighting, heating, ventilating, air conditioning, elevator
service, and water to the plumbing fixtures, if any, on Monday through Friday
from 8:00 A.M. to 6:00 P.M. and on Saturday from 9:00 A.M. to 1:00 P.M.,
principal legal holidays excepted. The following temperature ranges shall be
maintained during the term of this lease: from 73 degrees to 75 degrees when
outside temperatures are 80 degrees or higher, and settings shall range from 70
degrees to 73 degrees when outside temperatures are 32 degrees or lower. Use of
these services by Tenant outside these days and hours could result in an
additional charge to Tenant which shall be paid by Tenant to Landlord, as
additional rent, within fifteen (15) days following the receipt of an invoice.
Landlord shall also furnish janitorial service consisting of cleaning floors and
removing waste paper each business day. Tenant shall have twenty-four (24) hour
per day, seven (7) day per week access to the building and tenant premises.
20.02 - Interruption of Service
- -------------------------------
No diminution or abatement of rent or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the making of
repairs or improvements to the Building or its appurtenances. There shall be no
diminution or abatement of rent or any other compensation for interruption or
curtailment of any service or utility herein expressly or impliedly agreed to be
furnished by Landlord when such interruption or curtailment shall be due to
accident, alterations, repairs desirable or necessary, or to inability or
difficulty in securing supplies or labor, or to some other cause not gross
negligence on the part of Landlord. No such interruption or curtailment shall
be deemed a constructive eviction. Tenant agrees that Landlord shall not be
responsible for interruption of utility service caused by any utility company or
governmental regulatory agency.
ARTICLE 21
Certain Rights Reserved to Landlord
-----------------------------------
21.01 - Certain Rights Reserved to Landlord
- -------------------------------------------
Landlord reserves the following rights:
(a) To name the Building and to change the name or street address of
the Building;
(b) To install and maintain a sign or signs on the exterior or
interior of the Building;
(c) To designate all sources furnishing sign painting, and lettering,
ice, drinking water, towels, toilet supplies, shoe shining, vending machines,
mobile vending service, catering, and like services used on the Premises;
16
<PAGE>
(d) During the last ninety (90) days of the term, if during or prior
to that time Tenant vacates the Premises, to decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy, including the placing of a
notice of reasonable size on or in the Premises offering said Premises "For
Rent" or "For Lease", all without affecting Tenant's obligation to pay rental
for the Premises;
(e) To constantly have pass keys to the Premises;
(f) At any time in the event of an emergency, or otherwise at
reasonable times, to take any and all measures, including inspections, repairs,
alterations, additions and improvements to the Premises or to the Building, as
may be necessary or desirable for the safety, protection or preservation of the
Premises or the Building or the Landlord's interests, or as may be necessary or
desirable in the operations or improvement of the Building or in order to comply
with all laws, orders and requirements of governmental or other authority; and
(g) At any reasonable time and from time to time throughout the term
of the Lease show the Premises to persons wishing to purchase the Building.
Nothing in this Lease shall imply any duty on the part of the Landlord
to do work which, under any of the provisions of this Lease Tenant may be
required to perform, and the performance thereof by Landlord shall not
constitute a constructive eviction nor a waiver of Tenant's default in failing
to so perform. In the event Landlord performs or causes any such work to be
performed, Tenant shall pay the cost thereof to landlord forthwith as additional
rent upon receipt of Landlord's invoice therefor. No exercise by Landlord of
any rights provided in this paragraph 21.01 or elsewhere in this Lease shall
entitle Tenant to any damages for inconvenience, disturbance, loss of business
or other damage to Tenant occasioned thereby nor to any abatement of rent or
additional rent.
ARTICLE 22
Miscellaneous Provisions
------------------------
22.01 - Holdover
- ----------------
Should Tenant continue to occupy the Premises after the expiration of
the term hereof or after a forfeiture incurred, whether with or against the
consent of Landlord, such tenancy shall be from month-to-month, and such month-
to-month tenancy shall be under all the terms, covenants and conditions of this
Lease, and at double the rent reserved herein. However, if Tenant notifies
Landlord in writing upon three months prior notice, Tenant may holdover for
three months at the Tenant's then escalated rent. Tenant shall pay 125% of
their then escalated rent thereafter.
17
<PAGE>
22.02 - Limitation on Personal Liability
- ----------------------------------------
(a) It is understood and agreed that Tenant shall look solely to the
estate and property of Landlord in the Building for the satisfaction of Tenant's
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default or breach by
Landlord with respect to any of the terms, covenants and conditions of this
Lease to be observed and/or performed by Landlord and any other obligation of
Landlord created by or under this Lease and no other property or assets of
Landlord or of its partners, beneficiaries, co-tenants, shareholders, or
principals (as the case may be) shall be subject to levy, execution or other
enforcement procedures.
(b) The term "Landlord," as used in subparagraph 22.02(a) above and
throughout this Lease, so far as covenants and agreements on the part of the
Landlord are concerned, shall be limited to mean and include only the owner or
owners at the time in question of the Building and Lease. Further, in the event
of any transfer or transfers of the title to the said Lease and/or the Building,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor), including each of its partners, beneficiaries, co-tenants,
shareholders, or principals (as the case may be), shall be automatically freed
and relieved from and after the date of such transfer and conveyance of all
liability as respects the performance of any covenants and agreements on the
part of Landlord. Landlord or the grantor shall turn over to the grantee all
monies and security, if any, then held by Landlord or such grantor on behalf of
Tenant and shall assign to such grantee all right, title and interest of
Landlord or such grantor thereto, it being intended that the covenants and
agreements contained in this Lease on the part of Landlord to be performed
shall, subject as aforesaid, be binding on Landlord, its successors and assigns.
22.03 - No Representation by Landlord
- -------------------------------------
Landlord or Landlord's agents have made no representations or promises
with respect to the Building, the land upon which the Building is erected or the
Premises except as herein expressly set forth in the provisions of this Lease.
22.04 - Lease Binding
- ---------------------
All covenants in this Lease which are binding upon Tenant shall be
construed to be equally applicable to and binding upon Tenant's agents,
employees and others claiming the right to be in the Premises or in the Building
through or under Tenant.
If more than one individual, firm or corporation shall join as Tenant,
the singular context shall be construed to be plural wherever necessary and the
covenants of Tenant shall be the joint and several obligations of each party
signing as Tenant, and, when the parties signing as Tenant are partners, shall
be the joint and several obligations of the firm and of the individual members
thereof.
18
<PAGE>
22.05 - Vaults, Vault Space, Etc.
- ---------------------------------
No vaults, vault space or space not within the property line of the
Building is leased hereunder, anything contained in or indicated on any sketch,
blueprint or plan, or anything contained elsewhere in this Lease to the contrary
notwithstanding. Landlord makes no representations as to the location of the
property line of the Building. All vaults and vault space and all space not
within the property line of the Building, which Tenant may be permitted to use
and/or occupy, is to be used and/or occupied under a revocable license, and if
any such license be revoked, or if the amount of such space be diminished or
required by any Federal, State, Municipal Authority or public utility, Landlord
shall not be subject to any liability nor shall Tenant be entitled to any
compensation or diminution or abatement of rent, nor shall such revocation,
diminution or requisition be deemed constructive or actual eviction. Any fee or
charge of municipal authorities for such vault shall be paid by Tenant.
22.06 - Failure to Give Possession
- ----------------------------------
If Landlord shall not be able to turn space over substantially
completed to Tenant by October 1, 1999, then for each day of delay of
substantial completion Tenant shall receive three (3) additional days of rent
abatement.
22.07 - Force Majeure
- ---------------------
The period of time during which either party is prevented or delayed,
in the performance or the making of any improvements or repairs or fulfilling
any obligation other than the payment of fixed monthly rent or additional rent
required under this Lease due to unavoidable delays caused by fire, catastrophe,
strikes or labor trouble, civil commotion, Acts of God or the public enemy,
governmental prohibitions or regulation or inability to obtain materials by
reason thereof, or other causes beyond such party's reasonable control, shall be
added to such party's time for performance thereof, and such party shall have no
liability by reason thereof.
22.08 - Attornment by Tenant
- ----------------------------
If at any time during the term of this Lease Landlord hereunder shall
be the holder of a leasehold estate covering premises which include the Premises
and if such leasehold estate shall be canceled or otherwise terminated prior to
the expiration date thereof and prior to the expiration of the term of this
Lease or in the event of the surrender thereof whether voluntary, involuntary or
by operation of law, Tenant shall make full and complete attornment to the
lessor of such leasehold estate for the balance of the term of this Lease upon
the same covenants and conditions as are contained herein so as to establish
direct privity between such lessor and Tenant and with the same force and effect
as though this Lease was made directly from such lessor to the Tenant. Tenant
shall make all rent payments thereafter directly to such lessor. In the event
any proceedings are brought for the foreclosure of, or in the event of
conveyance by deed in lieu of foreclosure of, or in the event of exercises of
the power of sale under any mortgage or deed of trust made by Landlord covering
the leases Premises, or in the event Landlord sells, conveys or otherwise
transfers its interest in the Building or any portion thereof containing the
leased Premises, Tenant shall attorn to and hereby
19
<PAGE>
covenants and agrees to execute an instrument in writing reasonably satisfactory
to the new owner whereby Tenant attorns to such successor in interest and
recognizes such successor as the Landlord under this Lease.
22.09 - Landlord May Pay Tenant's Obligations
- ---------------------------------------------
All costs and expenses which Tenant assumes or agrees to pay under the
provisions of this Lease shall at Landlord's election be treated as additional
rent, and in the event of nonpayment, Landlord shall have all the rights and
remedies herein provided for in case of nonpayment of rent or of a breach of
covenant. If Tenant shall default, beyond the applicable notice and cure
period, in making any payment required to be made by Tenant (other than the
payment of rent as provided by Article 3 above) or shall default in performing
any term, covenant or condition of this Lease on the part of Tenant to be
performed which shall involve the expenditure of money by Tenant, Landlord at
Landlord's option may, but shall not be obligated to, make such payment or, on
behalf of Tenant, expend such sum as may be necessary to perform and fulfill
such term, covenant or condition, and any and all sums so expended by Landlord,
with interest thereon at the rate of one and one-half percent (1-1/2%) per month
from the date of such expenditure, shall be and be deemed to be additional rent,
in addition to the rent provided in Article 3 and shall be repaid by Tenant to
Landlord on demand, but no such payment or expenditures by Landlord shall be
deemed a waiver of Tenant's default nor shall it affect any other remedy for
Landlord by reason of such default.
22.10 - Effect of Captions
- --------------------------
The captions or legends on this Lease are inserted only for convenient
reference or identification of the particular paragraphs. They are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Lease, or any paragraph or provision thereof.
22.11 - Tenant Authorized to Do Business in New York
- ----------------------------------------------------
Tenant represents and covenants that it is and throughout the term of
this Lease shall be authorized to do business in the State of New York.
22.12 - Execution in Counterparts
- ---------------------------------
This Lease may be executed in one or more counterparts, any one or all
of which shall constitute but one agreement.
22.13 - Memorandum of Lease
- ---------------------------
Tenant agrees, if requested by Landlord, to execute a Memorandum of
Lease in recordable form pursuant to Section 291-c of the Real Property Law of
the State of New York.
20
<PAGE>
22.14 - Law Governing, Effect and Gender
- ----------------------------------------
This Lease shall be construed in accordance with the laws of the State
of New York and shall be binding upon the parties hereto and their respective
legal representatives, successors and assigns except as expressly provided
otherwise. Use of the neuter gender shall be deemed to include the masculine or
feminine, as the sense requires. Any reference to successors and assigns of
Tenant is not intended to constitute a consent to any assignment by Tenant but
has reference only to those instances in which Landlord may later give consent
to a particular assignment as required by the provisions of Article 15 hereof.
22.15 - Amendments
- ------------------
The parties hereto mutually agree that so long as a mortgage or any
extension thereof shall be a lien upon the Premises, they will not reduce the
rents from that provided for in this Lease, provide for payments of rents prior
to the time herein provided for, nor terminate said Lease, except as set forth
herein, prior to the end of the term, except as otherwise provided in this
Lease, without first obtaining the consent of the mortgagee in writing, and that
any such proposed modification or termination without said mortgagee's consent
shall be void as against said mortgagee.
22.16 - Complete Agreement
- --------------------------
This Lease contains and embraces the entire Agreement between the
parties hereto and it or any part of it may not be changed, altered, modified,
limited, terminated, or extended orally or by any agreement between the parties
unless such agreement be expressed in writing, signed and acknowledged by the
parties hereto, their legal representative, successors or assigns, except as may
be expressly otherwise provided herein.
22.17 - Invalidity of Particular Provisions
- -------------------------------------------
If any term or provision of this Lease or the application thereof to
any person or circumstances shall to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
22.18 - Execution of Lease by Landlord
- --------------------------------------
The submission of this document for examination and negotiation does
not constitute an offer to lease, or a reservation of, or option for, the
Premises and this document becomes effective and binding only upon the execution
and delivery hereof by Landlord and by Tenant. All negotiations,
considerations, representations and understandings between Landlord and Tenant
are incorporated herein and may be modified or altered only by agreement in
writing between Landlord and Tenant, and no act or omission of any employee or
other agent of Landlord shall alter, change or modify any of the provisions
hereof.
21
<PAGE>
22.19 - Relationship of the Parties
- -----------------------------------
Nothing contained herein shall be deemed or construed by the parties
hereto nor by any third party as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent nor any
other provision herein contained, nor any acts of the parties hereto, shall be
deemed to create any relationship between the parties hereto other than Landlord
and Tenant.
22.20 - Renewal Option
- ----------------------
Tenant shall have two (2) consecutive five (5) year lease renewal
options for up to 100% of Tenant's space then under lease at the lesser of 90%
of fair market or the then escalated rate. At the exercise of each option, the
space will be repainted and recarpeted at Landlord's expense. Replacement costs
including Landlord concessions and marketing time will be utilized to determine
fair market rent in each renewal period.
22.21 - Existing Tenant Obligation
- ----------------------------------
Landlord shall assume Community Network's, Inc. current lease
obligations at 205 South Salina Street, Syracuse, NY from the time of rent
commencement at 224 Harrison Street. Community Networks current lease at 205 S.
Salina Street expires 12/31/00. In the event Community Networks, Inc. Is
released from any or all of its rent obligation at 205 S. Salina Street prior to
lease expiration, then Landlord will cover only whatever obligation is left, if
any.
22.22 - Exterior Building Signage
- ---------------------------------
Landlord will agree to work with Tenant, and Tenant at Tenant's sole
cost and expense will be allowed to install a sign on the building. Location,
size, style, and design must all be approved by Landlord, which approval shall
not be unreasonably withheld or delayed.
22.23 - Right of First Refusal
- ------------------------------
Tenant shall have an ongoing Right of First Refusal on adjacent vacant
space in the building. Should Tenant exercise a refusal right, the rental rate
shall be at the same terms and conditions of the other offer.
22.24 - Additional Tenant Improvements
- --------------------------------------
Tenant, at Tenant's option, shall have the right to amortize up to an
additional $10.00 per rentable square feet over the entire lease term at an
interest rate of nine percent (9%). This allowance may be applied towards any
hard or soft, construction or moving-related costs, included but not limited to
construction furniture, telecommunications, professional fees or moving
expenses.
22.25 - Brokerage
- -----------------
Landlord and Tenant represent that Equis of N.Y. is the sole brokerage
company related to this lease agreement and Landlord will pay Equis of N.Y. a
real estate commission per a separate agreement between Equis of N.Y. and
Landlord.
22
<PAGE>
22.26 - Other Provisions
- ------------------------
Landlord will use its best efforts to provide Tenant with a
nondisturbance agreement from the lendor of the building.
Landlord shall provide a pad space outside the building approximately
10 feet by 10 feet for tenant's gas emergency generator and day tank.
23
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
LANDLORD:
--------
224 Harrison Associates, LLC
Date: /s/ By: /s/
----------------------- --------------------------------
General Partner
Date: 6/25/99 By: /s/
----------------------- --------------------------------
General Partner
TENANT:
------
Community Networks, Inc.
Date: 6/16/99 By: /s/ Scott Matukas- V P Admin.
------------------------- --------------------------------
Date: 6/16/99 By: /s/
-------------------------- --------------------------------
24
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF ONONDAGA )
On this 25th day of June, 1999, before me personally came Anthony
Fiorito, to me personally known, who, being by me duly sworn, did depose and say
that he resides in Liverpool, New York; that he is a Partner of 224 Harrison
Associates, LLC, that he is known to me to be one of the partners of the
Partnership that executed the within instrument; and he acknowledged to me that
he executed the same on behalf of and in the name of such Partnership as
Landlord.
/s/ Kristen Exner
-------------------------------------
Notary Public
STATE OF NEW YORK )
ss.:
COUNTY OF QUEENS )
On this 16th day of June, 1999, before me personally came Scott M.
Matukas, to me personally known, who, being by me duly sown, did depose and say
that he resides at 17 Laurelton Road, Mt. Kisco, New York; and who acknowledges
that he executed the within instrument as Tenant.
/s/ Racquel A. Brown
--------------------------------------
Notary Public
State of New York
Raquel A. Brown
ID# 01BR6019598
Exp. Feb. 08, 2001
STATE OF NEW YORK )
ss.:
COUNTY OF )
On this ___ day of ____________, 199__, before me personally came
__________________________, to me personally known, who, being by me duly sworn,
did depose and say that he resides in ______________________; that he is the
_____________________ of _____________________________________, the corporation
described in, and which executed the within instrument; that he signed his name
thereto by order of the Board of Directors of said corporation.
-------------------------------
Notary Public
25
<PAGE>
EXHIBIT "A"
FLOOR PLAN(S)
-------------
OUTLINING PREMISES
- ------------------
26
<PAGE>
EXHIBIT "C"
LANDLORD'S WORK
---------------
Landlord will provide Tenant with a twenty-five dollar ($25.00/sq.ft.) per
square foot buildout allowance for the demised space.
In addition to the $25.00/ sq.ft. allowance, Landlord shall do the following
work as Base Building Work:
. Deliver the premises demised and secure in broom
clean condition and ready for new tenant
construction.
. Comply with ADA and local building life safety codes
throughout the lease term.
. Provide pad space (10 x 10) for tenant's gas
emergency generator and access to same from
designated platform, size of pad space may vary.
. Provide access way for an electrical conduit from
generator to Tenant's ATC switch located at the
Tenants service breaker as designated by the
Landlord.
. Provide the right and access to install horizontal
and vertical conduit for fiber optics and for MCM
Ground, subject to Landlord's approval, which shall
not be unreasonably withheld.
. Provide freight elevator access capable of handcling
Tenant's switch and battery items. If freight
elevator and area is not capable of this requirement
then Landlord will be responsible for renting a crane
and booming the equipment into the demised premises.
Tenant and Landlord shall agree on rating
certification of crane.
. Provide a minimum of 125 lbs. per square foot floor
loading to the demised premises.
. From existing building electric service Landlord will
provide Tenant with 800 amp service.
Tenant and Landlord agree that Landlord will upgrade electric capacity by 1200
amps. This cost shall be divided accordingly, 2/3 of the cost to Tenant and 1/3
of the cost to Landlord. Landlord's cost is not part of the Base Building Work.
In conjunction with Landlord's work to be done by July 15, 1999, Landlord will
upgrade the fourth floor loading, beyond the 126 lbs. per square foot, in
designated areas. This cost shall not be part of Landlord's Base Building Work.
A floor plan is to be provided by Tenant as to the layout of the switch room.
27
<PAGE>
EXHIBIT "D"
TENANT'S WORK and
TENANT'S INSURANCE REQUIREMENTS
-------------------------------
TENANT'S WORK
-------------
Tenant to take the space in as is condition accept for the Base
Building items listed in Landlord's work in Exhibit "C". Tenant will be
responsible for all construction on the demised premises and will use the
landlord's buildout allowance to do the same. Any cost above and beyond the
landlord's buildout allowance will be at the cost of the tenant.
In fulfillment of its obligation pursuant to paragraph 4.03 of this
Lease, Tenant shall carry, at its own expense, and shall name Landlord as
additional insured upon the following insurance coverages in the following
amounts:
(a) Comprehensive General Liability including completed operations,
explosions, collapse and underground operations, if any; broad form property
damage including completed operations, protective liability, contractual
liability and indemnity:
$1,000,000 - Each Occurrence
(b) Personal Injury (with employment exclusion deleted and
contractual exclusion deleted):
$1,000,000 - Occurrence and Aggregate
(c) Auto Liability (including non-owned and hired vehicles):
$250,000/$500,000 - Bodily Injury
$250,000 - Property Damage
(d) Statutory Worker's Compensation, Employers' Liability and
Disability Benefits:
Unlimited
(e) Excess Liability, Umbrella Form: $1,000,000 and any other
special insurance as required by Landlord so as to fully protect Landlord
against loss or damage throughout the period during which the Tenant's Work is
being performed.
All of such insurance shall be written by a casualty insurance company
authorized under the laws of New York State, and satisfactory to the Landlord.
Tenant shall furnish Landlord, prior to commencement of Tenant's Work,
certificates and certified copies of such policies showing that the said
insurance will not be canceled or changed until after at least thirty (30) days
written notice to Landlord. In the event of the failure of Tenant to furnish
and maintain such insurance, Landlord shall have the right to procure and
maintain the said insurance for and in the name of the
28
<PAGE>
Tenant, and Tenant agrees to pay the cost thereof and to furnish all necessary
information to permit Landlord to procure and maintain such insurance for the
account of the Tenant. The cost of such policies shall be paid by Tenant to
Landlord as additional rent upon demand, plus 19% as an administrative charge.
Compliance by Tenant with the foregoing requirements to carry insurance and
furnish certificates shall not relieve Tenant from liability under any
provisions of this Lease.
29
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
---------------------
(a) Tenant shall not exhibit, sell or offer for sale on the Premise or
in the Building any article or thing except those articles and things
essentially connected with the stated use of the Premises by the Tenant without
the advance consent of Landlord, nor shall Tenant install or permit to be
installed any vending machines in the Premises, other than those vending
machines used solely by employees, customers, or visitors.
(b) Tenant will not make or permit to be made any use of the Premises
or any part thereof which would violate any of the covenants, agreements, terms,
provisions and conditions of this Lease or which directly or indirectly may be
dangerous to life, limb, or property, or which may invalidate or increase the
premium cost of any policy of insurance carried on the Building or covering its
operation, or which will suffer or permit the Premises or any part thereof to be
used in any manner including storage therein which, in the judgment of Landlord,
shall in any way impair the character, reputation or appearance of the Building
as a high quality office building, or which will impair or interfere with or
tend to impair or interfere with any of the services performed by Landlord for
the Building.
(c) Tenant shall not display, inscribe, print, paint, maintain or
affix on any place in or about the Building any sign, notice, legend, direction,
figure or advertisement, without consent of Landlord, which consent shall not be
unreasonably withheld. The listing of any name other than that of Tenant,
whether at the doors of the Premises, on the Building directory, or otherwise,
shall not operate to vest any right or interest in this Lease or in the Premises
or be deemed to be the written consent of Landlord mentioned in Article 12, it
being expressly understood that any such listing is a privilege extended by
Landlord revocable at will by written notice to Tenant. Tenant will be allowed
to place a sign on the outside sign directly below Eve's Cafe sign. Landlord
must approve of the size and color. Approval by Landlord not to be unreasonably
withheld.
(d) Tenant shall not advertise the business, profession or activities
of Tenant conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities, and shall
not use the name of the Building for any purpose other than that of the business
address of Tenant, and shall never use any picture or likeness of the Building
in any circulars, notices, advertisements or correspondence without the
Landlord's consent.
(e) No additional locks or similar devices shall be attached to any
door or window other than those provided in Exhibit A, attached hereto, without
Landlord's written consent. No keys for any door other than those provided by
the Landlord shall be made. If more than one key per employee for one lock is
desired, Landlord will provide the same upon payment by Tenant. All keys must
be returned to Landlord at the expiration or termination of this Lease.
(f) All persons entering or leaving the Building between the hours of
6 p.m. and 8 a.m., Monday through Friday, or any time on Saturdays, Sundays or
holidays, may be required to
30
<PAGE>
do so under such regulations as Landlord may impose. Landlord may exclude or
expel any peddler, unless specifically otherwise provided in the lease.
(g) Tenant shall not overload any floor. Landlord may direct the time
and manner of delivery, routing and removal of all items that are delivered to
the Building for the Tenant's use and may specify the location of safes and
other heavy articles. Fire proof files are located on Exhibit A, attached
hereto.
(h) Unless Landlord gives advance written notice, Tenant shall not
install or operate any steam or internal combustion engine, machinery,
refrigerating or heating device or air-conditioning apparatus in or about the
Premises, or carry on any mechanical business herein, or use the Premises for
housing accommodations or lodging or sleeping purposes, or do any cooking
therein or use any illumination other than electric light, or use or permit to
be brought into the building any flammable fluids such as gasoline, kerosene,
naphtha, bonzing and solvents, or any explosives, radioactive materials or other
articles deemed extra-hazardous to life, limb or property except in a manner
which would violate any ordinance or regulation or any condition imposed by the
standard fire insurance policy issued for office buildings in the municipality
where the Building is located, or do or permit anything to be done, or keep or
permit anything to be kept, in the Premises, which would increase the fire or
other casualty insurance rate on the Building or the property therein, or which
would result in insurance companies of good standing refusing to insure the
Building or any such property in amounts reasonably satisfactory to Landlord.
Tenant shall not use the Premises for any illegal or immortal purpose. Tenant
is allowed to have a microwave, soda machine, refrigerator, dishwasher and
coffee pot in office space for it's sole use.
(i) Tenant shall cooperate fully Landlord to assure the effective
operation of the Building's air-conditioning system, including the closing of
blinds and drapes, and if windows are operable to keep them closed when the air-
conditioning system is in use. Landlord shall provide heating and air
conditioning according to the standard Ashrae conditions except in the two
designated areas as noted on Exhibit D which need additional cooling.
(j) Tenant shall not contract for any work or service which might
involve the employment of labor unreasonably incompatible with the Building
employees or employees of contractor doing work or performing services by and on
behalf of Landlord, during the times when the Landlord is doing work.
(k) The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used for any purpose other than
for ingress to and egress from its Premises. The halls, passages, exits,
entrances, elevators, stairways and roof are not for the 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
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of Tenant's business unless such persons are engaged in
illegal activities. No tenant and no employees or invites of any tenant shall
go upon the roof or into the mechanical rooms of the Building.
31
<PAGE>
(l) Tenant shall not use, keep or permit to be used or kept any foul
or noxious gas or substance in the Premises, or permit or suffer the Premises to
be occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason or noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business herein, nor
shall any animals or birds be brought in or kept in or about the Premises of
the Building.
(m) With respect to the Premises Tenant shall see that the doors and
windows, if operable, are closed and securely locked before leaving the Building
and must observe strict care and caution that all water faucets or water
apparatus are entirely shut off before Tenant or Tenant's employees leave the
Building, and that all electricity shall likewise be carefully shut off so as to
prevent waste or damage, exception being that certain computers be left on 24
hours per day 7 days per week due to the nature of Tenant's business. The
building hours are from 7 a.m. to 6 p.m. Monday thru Friday. After these hours
Tenant will have access into the building with a "card-key" system.
(n) There shall not be used in any space, or in the public halls of
the Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the Landlord or its Manager may reasonably determine from time to time.
The Landlord reserves the right to exclude from the Building all freight which
violates any of the Rules and Regulations of the Lease of which those Rules and
Regulations are a part.
(o) Tenant shall have the non-exclusive right in common with others to
whom Landlord has or may hereafter grant rights, to use the Building Common
Areas and the Outside Common Areas as designated from time to time by Landlord,
subject to such reasonable regulations as Landlord may impose. All parking
areas in or about (per Exhibit C) the building provided by Landlord shall be
subject to the exclusive control and management of the Landlord, unless
specifically otherwise provided in the lease. Landlord shall have the right to
reasonably designate, from time to time, specific areas in which cars owned or
used by Tenant, its permitted officers, partners, employees, clients, visitors
and agents must be parked. If Landlord shall designate such specific parking
areas and if any car of Tenant or its permitted officers, partners, employees or
agents of Tenant is parked in any other portion of the parking area, then Tenant
shall pay to Landlord after being warned by Landlord in writing one prior time,
upon demand, the sum of Ten Dollars ($10.00) for each such car for each day, or
part thereof, such car is so parked, and Tenant hereby authorizes Landlord to
tow or cause any such car to be towed to the then designated parking area and
agrees to reimburse Landlord for the cost thereof, upon demand, and to otherwise
indemnify and hold Landlord harmless with respect thereto. Tenant agrees to
abide by such regulations and to use its best efforts to cause its permitted
partners, officers, employees, agents, customers and visitors to conform
thereto. Landlord may at any time close temporarily any Building or Outside
Common Area to make repairs or changes, to prevent the acquisition of public
rights therein, or to discourage unauthorized parking, and may do such other
acts in and to such Common Areas as in its judgment may be desirable to improve
the convenience thereof. Landlord will use its best effort to work after
regular business hours and sincerely attempt to not interfere with Tenant's
business. Landlord must notify Tenant well in advance of any work that needs to
be done.
32
<PAGE>
Tenant shall upon request furnish Landlord the license numbers and descriptions
of the cars operated by Tenant and its permitted partners, officers, agents and
employees. Tenant shall not at any time interfere with the rights of Landlord
and other tenants, its and their permitted officers, employees, agents,
customers, and visitors to use any part of the parking areas and other Common
Areas. Landlord may establish a system or systems of validation or other type of
operation, including without limitation a system of charges against nonvalidated
parking checks of users, charges based on impositions or taxes levied or
assessed by law or any governmental authority on the parking facilities within
the Common Areas, charges for parking if such parking facilities are used by law
or governmental authority in determining parking charges or taxes levied against
Landlord, and charges favoring carpooling if such charges are required by law or
governmental authority.
33
<PAGE>
2ND EXHIBIT "C"
LANDLORD'S WORK
---------------
Landlord will provide Tenant with a twenty-five dollar ($25.00/sq.
ft.) per square foot buildout allowance for the demised space.
In addition to the $25.00/sq. ft. allowance, Landlord shall do the
following work as Base Building Work:
. Deliver the premises in broom clean condition and ready for
new tenant construction.
. Comply with ADA and local building life safety codes
throughout the lease term.
. Provide pad space (10 x 10) for tenant's gas emergency
generator and access to same from designated platform, size
of Pad space may vary.
. Provide access way for an electrical conduit from generator
to Tenant's ATC switch located at the Tenants service
breaker as designated by the Landlord.
. Provide the right and access to install horizontal and
vertical conduit for fiber optics and for MCM Ground,
subject to Landlord's approval, which shall not be
unreasonably withheld.
. Provide freight elevator access capable of handling Tenant's
switch and battery items. If freight elevator and area is
not capable of this requirement then Landlord will be
responsible for renting a crane and booming the equipment
into the demised premises. Tenant and Landlord shall agree
on rating certification of crane.
. Provide a minimum of 125 lbs. Per square foot floor loading
to the demised premises.
. Provide a To Be Determined amount of dedicated electrical
service to Tenant for Tenant's use.
In conjunction with Landlord's work to be done by July 15, 1999,
Landlord will upgrade the fourth floor loading, beyond the 125 lbs. Per square
foot, in designated areas. This cost shall not be part of Landlord's Base
Building Work. A floor plan is to be provided by Tenant as to the layout of the
switch room.
34
<PAGE>
2ND EXHIBIT "D"
TENANT'S WORK and
TENANT'S INSURANCE REQUIREMENTS
-------------------------------
TENANT'S WORK
-------------
Tenant to take the space in as is condition except for the Base
Building items listed in Landlord's work in Exhibit "C". Tenant will be
responsible for all construction on the demised premises and will use the
landlord's buildout allowance to do the same. Any cost above and beyond the
landlord's buildout allowance will be at the cost of the tenant.
In fulfillment of its obligation pursuant to paragraph 4.03 of this
Lease, Tenant shall carry, at its own expense, and shall name Landlord as
additional insured upon the following insurance coverages in the following
amounts:
(a) Comprehensive General Liability including completed operations,
explosions, collapse and underground operations, if any; broad form property
damage including completed operations, protective liability, contractual
liability and indemnity:
$1,000,000 - Each Occurrence
(b) Personal Injury (with employment exclusion deleted and contractual
exclusion deleted):
$1,000,000 - Occurrence and Aggregate
(c) Auto Liability (including non-owned and hired vehicles):
$250,000/$500,000 - Bodily Injury
$250,000 - Property Damage
(d) Statutory Worker's Compensation, Employers' Liability and
Disability Benefits:
Unlimited
(e) Excess Liability, Umbrella Form: $1,000,000 and any other
special insurance as required by Landlord so as to fully protect Landlord
against loss or damage throughout the period during which the Tenant's Work is
being performed.
35
<PAGE>
EXHIBIT "F"
GUARANTY OF LEASE
The undersigned Coaxicom, Inc.,____________________________________
______________________________________________________________________________
a corporation organized and existing under the laws of the State of Delaware
with principal office or residence at: 45-18 Court Square, Suite 403, Long
Island City (Queens), New York 11101, Attention: Scott M. Matukas hereinafter
with its or his successors, assigns and legal representatives called the
"Guarantor", in consideration of the execution and delivery of the annexed and
foregoing Lease bearing date of June 17, 1999, a New York partnership, having
its office at ________________________________________________________________
_________________________________ (hereinafter referred to as "Landlord") has
leased to: ___________________________________________________________________
(Name of Tenant)
___________________________________________________________________
(Street Address)
___________________________________________________________________
(hereinafter and in said Lease called "Tenant") certain premises in the Building
known as The Syracuse Building (224 Harrison St.) as more fully described in
said Lease, and for other good and valuable consideration, the receipt and legal
sufficiency of which is hereby acknowledged, does hereby guarantee to Landlord
the full, prompt and punctual performance by Tenant of all of Tenant's
agreements, covenants and obligations under, and for the initial and any renewal
term of, said Lease, including the payment of all amounts that may be or become
payable by Tenant to or for the benefit of Landlord under said Lease.
Guarantor has been advised that Landlord requires, as a condition to
its execution of said Lease, that the undersigned guarantee the full, prompt and
punctual performance of Tenant's obligations under the Lease and Guarantor is
desirous that Landlord enter into said Lease with Tenant.
Guarantor hereby agrees with landlord that this Guaranty is
unconditional and irrevocable. Guarantor hereby consents to the jurisdiction of
the courts of the State of New York with venue located in Onondaga County and
hereby waives (a) notice of the acceptance or this Guaranty by Landlord; (b)
notice of default, demand or of non-payment of rent or any other monetary
obligation; (c) the right to require Landlord first to proceed against Tenant
prior to proceeding against Guarantor for enforcement of its or his obligation
under this Guaranty; (d) notice of any amendment or modification of the said
Lease or any of the provisions contained therein; (e) the benefit of any statute
of limitations affecting Guarantor's liability under this Guaranty, and (f) the
right to trial by jury in any action or proceeding that may be instituted by
Landlord against Guarantor hereunder.
Guarantor further agrees that: (i) the validity of this Guaranty and
its or his obligations hereunder shall in no wise be terminated, affected or
impaired by reason of the
36
<PAGE>
assertion by Landlord against Tenant of any of the rights or remedies reserved
to Landlord pursuant to the terms of said Lease; (ii) Guarantor's obligation
hereunder, if there is more than one guarantor of Tenant's obligations under the
Lease, is joint and several with any other guarantor(s) and shall not be
discharged, either fully or partially, by any waiver, compromise, settlement,
release or termination of any other guarantor's obligations; and (iii) Guarantor
will pay Landlord all of Landlord's costs and expenses including, but not
limited to, attorneys' fees incurred in the enforcement of this Guaranty.
If the Lease is modified (including any assignment or sublet thereof)
in any respect by agreement between Landlord and Tenant, the obligations of
Guarantor hereunder shall continue to extend and apply with respect to the full,
prompt and punctual performance by Tenant of all of the agreements, covenants
and obligations under the Lease as so modified.
If the Lease shall be renewed, or its terms extended, for any period
beyond the dates specified in the Lease for the expiration of said term either
pursuant to any option granted under the Lease or otherwise, or if the Tenant
holds over beyond the term of the Lease, or beyond such earlier date that the
Lease may be terminated, the obligations of Guarantor hereunder shall extend and
apply with respect to the full, prompt and punctual performance by Tenant of all
of the agreements, covenant and obligations of the Lease as renewed or extended.
Neither Guarantor's obligation to make payment in accordance with the
terms of this Guaranty nor any remedy for the enforcement thereof shall be
impaired, modified, released, or limited in any way by any impairment,
modification, release or limitation of liability of Tenant or Tenant's estate in
bankruptcy resulting from the operation of any present or future provision of
the bankruptcy code of the United States or from the decision of any court
interpreting the same.
The use of the singular shall include the plural if the sense requires
and if more than one individual or entity signs this instrument, the liability
of each signing party shall be joint and several liability.
This Guaranty shall be binding on Guarantor, its or his successors,
assigns and legal representatives and for the benefit of Landlord, its
successors, assigns and legal representatives.
37
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed on this 18 day of June, 1999.
/s/ Scott W. Tully
----------------------------------------
(Name of Guarantor)
VP - ADMIN
By: ____________________________________
(Duly Authorized Agent) (Title)
38
<PAGE>
(Acknowledgment of GUARANTOR of Corporation)
STATE OF NEW YORK )
ss.:
COUNTY OF QUEENS )
On this 18 day of June, 1999 before me personally came Scott M.
Matukas, to me personally known, who, being by me duly sworn, did depose and say
that he resides in 17 Laurelton Rd. Mt. Kisco, New York 10049 that he is the
Vice President of Administration of Coaxicom, Inc., the corporation described in
and which executed the within instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/ Racquel A. Brown
------------------------------------
Notary Public
State of New York
Racquel A. Brown
ID # 01BR6019598
Exp. Feb. 08, 2001
39
<PAGE>
JF Real Estate, Inc.
LEASE MODIFICATION AGREEMENT NO. 1
THIS LEASE MODIFICATION AGREEMENT NO. 1, made this ___ day of July,
1999, by and between 224 Harrison Associates, LLC, a New York general
Partnership, having its principal office at The Clinton Exchange, 4 Clinton
Square, Syracuse, NY 13202 (hereinafter called LANDLORD) and Community Networks,
Inc., a corporation having their principal office at 45-18 Court Square, Long
Island City, NY 11101 (hereinafter called TENANT),
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease dated on June 16,
1999 (the LEASE) for certain premises consisting of 8,000 square feet (the
PREMISES) on the sixth (6th) floor of the office building known as The Syracuse
Building, 224 Harrison Street, Syracuse, NY 13202 (the BUILDING); and
WHEREAS, the parties hereto are now desirous of entering into this
Lease Modification Agreement to provide for a relocation of Tenant's office
space from the sixth (6th) floor to the fifth (5th) floor under certain terms
and conditions;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereto agree to the following terms and conditions of
this Lease Modification Agreement:
1. The effective date of this Lease Modification Agreement shall be
the date listed above.
2. Landlord shall provide the same floor plan layout on the fifth
(5th) floor as has been agreed to on the sixth (6th) floor. The new location on
the fifth (5th) floor office space has the same dimensions and has the same
square footage as was on the sixth (6th) floor (directly below).
3. Except for the above stated amendments, the parties hereto agree
that all other terms, conditions, and provisions of the Lease dated on June 16,
1999 remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Modification Agreement as of the day and year first above written.
Tenant: Landlord:
COMMUNITY NETWORKS, INC. 224 HARRISON ASSOCIATES, LLC
BY: /s/ Scott M. Tully BY: /s/ John Finelli
-------------------------- -------------------------------
Date 7/29/99 Date: 7/30/99
------------------------- -----------------------------
40
<PAGE>
EXHIBIT 10.7
SALINA PLACE
LEASE
THIS AGREEMENT made this the 9 day of January, 1997 by and between
RAILROAD STREET PARTNERSHIP, a general partnership organized under the laws of
the State of New York, having its principal address at P.O. Box 865, Syracuse,
New York 13201 (hereinafter referred to as "Landlord"), and
Briar Joy Development Corp.
d/b/a SCC Telecommunications
108 East Washington Street
Syracuse, NY 13202
(hereinafter referred to as "Tenant"), herein set forth as follows:
ARTICLE 1 - Premises
1.01 - Premises
Landlord hereby leases to Tenant and Tenant hereby leases and rents from
Landlord those certain premises in the Salina Place office building development
(hereinafter called the "Building") which is located at 205-213 South Salina
Street in the City of Syracuse, in the County of Onondaga and State of New York,
which premises are on the second floor(s) of the Building and are outlined on
the floor plan(s) attached hereto and made a part hereof as Exhibit "A" (said
premises being hereinafter called the "Premises"), together with the right to
use, in common with others, the Building Common Areas, as defined in Section
1.02 hereof. The gross leasable area of the Premises, including Tenant's share
of Building Common Areas, is determined to be 4,163 square feet. The Premises
shall include the area bounded by: the center line of any walls common to
adjacent tenants, the Building Common Area side of any wall adjoining Building
Common Areas (but not the surface thereof), the line established by the exterior
face of the exterior walls of the Building, the floor surface and the lower
surface of the next higher floor (or roof). Landlord reserves unto itself, its
successors and assigns, the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires and structural elements leading throughout the
Premises in locations which will not materially interfere with Tenant's use of
the Premises. No right to use any part of the exterior of the Building and no
easement for light or air are included in the lease of the Premises hereby made.
1.02 - Definition of Building Common Areas and Building Common Facilities
"Building Common Areas" and "Building Common Facilities" are defined
jointly to mean all areas, space equipment, common utility, electrical and
mechanical lines, pipes or ducts, signs and special services provided by
Landlord specifically for the Building or for the common or joint use and
benefit of the tenants in the Building, their employees, agents, customers,
visitors and other invitees, including without limitation hallways, corridors,
trash rooms, mechanical and electrical
<PAGE>
rooms, storage rooms, stairways, entrances, elevators, rest rooms, lobbies,
stairs, loading docks, pedestrian walks, alley ways, roofs and basements,
janitor's storage closets and all other common rooms and common facilities
within the Building or appurtenant thereto.
ARTICLE 2 - Terms of Lease
2.01 - Term
The initial term of this Lease shall be Three years and Seven months (3
years 7 month).
2.02 - Commencement and Stipulation of Term
The term of this Lease shall commence on June 1, 1997 and shall terminate
on Dec. 31, 2000.
The date of commencement of the term of this Lease as set forth above is
herein referred to as the "Term Commencement Date". The word "term" shall,
unless otherwise expressly provided to the contrary, be deemed to include the
initial and any renewal term. The parties agree to execute and deliver a
written Stipulation of Term Agreement in the form attached hereto as Exhibit "F"
expressing the commencement and expiration dates of the term hereof when such
dates have been determined.
ARTICLE 3 - Rent, Taxes and Lease Year
3.01 - Fixed Monthly Rent
Tenant agrees to pay to Landlord at the offices of Landlord, or at such
other place designated by Landlord, without any prior demand thereof and without
any deduction or set-off whatsoever, and as fixed monthly rent, the sum of page
2a [information on page 4 of this document] Dollars ($______________________)
(sometimes referred to herein as "fixed monthly rent"), payable in advance upon
the first day of each calendar month during the term hereof. The monthly
installment shall be deemed to have been paid upon such first day only if
actually received by such first day.
If the term shall commence or terminate upon a day other than the first
(or in the case of termination the last) day of a calendar month. Tenant shall
pay, upon the Term Commencement Date, and on the first day of the last calendar
month of the term, a pro-rata portion of the fixed monthly rent for the first
and last fractional calendar month, respectively, prorated on a per diem basis
with respect to such fractional calendar month.
-2-
<PAGE>
3.02 - Taxes
(a) The term "Building Taxes" shall be deemed to include (i) all real
property taxes (which shall be deemed to include all property taxes and
assessment, water and sewer rents, rates and charges, parking and environmental
surcharges and any other governmental charges, general and special, ordinary and
extraordinary, and any payments required to be made to the City of Syracuse
pursuant to a "Payment in Lieu of Taxes" agreement) which may be levied or
assessed by any lawful authority against the Building, the Building Common Areas
or the Building Common Facilities.
(b) During the term of this Lease, Tenant agrees to pay to Landlord, as
additional rent, Tenant's Allocable Share (computed pursuant to Section 22.09
hereof) of the amount by which Building Taxes payable by Landlord for each lease
year exceeds the Building Taxes payable during the Tax Base Year as hereinafter
defined (said excess amount hereinafter called "increases in building Taxes").
The term "Tax Base Year" shall mean the period of January 1, 19 ______ through
December 31, 19 ______. At the beginning of each lease year, Landlord will
submit to Tenant Landlord's estimate of the increases in Building Taxes
anticipated for that lease year. Within ten (10) days after receipt of such
estimate, (and thereafter on the first day of each month without invoice) Tenant
shall pay to Landlord an amount equal to one twelfth (1/12) to Tenant's
Allocable Share of such estimated increases in Building Taxes. Following the
end of each lease year (or partial lease year), Landlord will furnish to Tenant
a comparative statement showing Tenant's Allocable Share of the actual increase
in Building Taxes payable for such lease year and the amounts paid by Tenant
(based on Landlord's estimate of increases in Building Taxes) attributable to
such lease year. Any overpayment or underpayment by Tenant shall be promptly
adjusted by payment, within fifteen (15) days, of the balance of any
underpayment for such year, or by applying any overpayment as a credit to the
next succeeding monthly installments of increases in Building Taxes.
(c) Should any governmental taxing authority acting under any present or
future law, ordinance or regulation, levy, assess or impose a tax, excise,
surcharge and/or assessment (other than a tax on net rental income or franchise
tax) upon or against the rents payable by Tenant to Landlord, or upon or against
the Building, the Building Common Areas or Building Common Facilities, either by
way of substitution for or in addition to any existing tax on land or buildings
or otherwise, Tenant shall be responsible for and shall pay Tenant's Allocable
Share of such tax, excise, surcharge and/or assessment in the manner provided in
subparagraph (b) above.
-3-
<PAGE>
3.01 Fixed Monthly Rent
Period Monthly Annual S.F.
06/01/97 - 12/31/97 $4,163.00 $49,956.00= $12.00/s.f.
01/01/98 - 12/31/98 $4,856.83 $58,282.00= $14.00/s.f.
01/01/99 - 12/31/99 $5,550.67 $66,608.00= $16.00/s.f.
01/01/00 - 12/31/00 $6,244.50 $74,934.00= $18.00/s.f.
(d) Landlord may seek a reduction in the assessed valuation (for real
estate tax purposes) of the Building by administrative or legal proceeding.
Tenant shall pay to Landlord Tenant's Allocable Share of Landlord's cost for
said proceedings including but not limited to special counsel, counsel's
reimbursable expenses, and special appraiser if required. Tenant's Allocable
Share of Landlord's costs being computed under Section 22.09. Upon receipt of
any refund relating to any period for which Tenant has paid Tenant's Allocable
Share of increases in Building Taxes under Section 3.02(b) above. Landlord
shall (after deducting Landlord's unreimbursed costs to obtain such refund)
recompute the amount that would have been due from Tenant (after subtracting
such refund) and pay to Tenant the amount by which the share of increases in
Building Taxes originally paid by Tenant exceed such recomputed amount.
3.03 - Past Due Rent
If during the term of this Lease, Tenant shall fail to pay the fixed
monthly minimum rent or additional rent when the same is due and payable, then
interest at the monthly rate of 2.0% shall accrue from and after the date on
which any such sum shall be due and payable and such interest shall be paid to
Landlord, as additional rent, at the time of payment of the delinquent sum.
Landlord shall have the right to apply any payments made by Tenant first to any
deficiency in the payment of the interest provided for hereunder.
3.04 - Definition of Lease Year and Partial Lease Year
The term "lease year" is defined to mean a period of twelve (12)
consecutive months, the first full lease year commencing on the first day of
January following the Term Commencement Date, and each succeeding lease year
commencing on the anniversary of the commencement of the first full lease year.
Any portion of the term which is less than a lease year shall be deemed a
"partial lease year" and computation requiring proration shall be pro-rated on a
per diem basis using a 365 day year.
-4-
<PAGE>
3.05 - Additional Rent
All rents, charges, costs, expenses, reimbursements, fees, interest and
other payments to be made by Tenant to Landlord under this Lease, other than
fixed monthly rent, shall be deemed to be "additional rent". In the event of
non-payment of any additional rent, Landlord shall have all the rights and
remedies provided for herein or otherwise available in case of non-payment of
rent or of a breach of covenant.
ARTICLE 4 - Construction of Improvements and Alterations
4.01 - Landlord's Work
Landlord, at its own cost and expense, shall perform all items of
Landlord's Work described in Exhibit "B" attached hereto and made a part hereof.
Any work in addition to the items specifically enumerated in said Exhibit "B"
shall be performed by Tenant at its own cost and expense.
4.02 - Tenant's Work
Tenant shall at its cost and expense perform the Tenant's Work described
in Exhibit "C" attached and made a part hereof in accordance with plans and
specifications for such work approved by Landlord's architect.
Tenant acknowledges its ability to perform Tenant's Work and no delay in
its performance shall cause or be deemed to cause any delay or postponement in
the commencement of the term of this Lease.
Any equipment or work which Landlord installs or constructs on Tenant's
behalf and at Tenant's cost shall be paid for by Tenant, as additional rent,
within fifteen (15) days after receipt of Landlord's invoice therefor.
4.03 - Alterations
Tenant shall make no alterations, additions or improvements in or to the
Premises, including, but not limited to, an air conditioning, heating,
electrical or plumbing system, unit or part thereof or other apparatus of like
or other nature, without Landlord's prior written consent. All alterations,
additions or improvements upon the Premises, made by either party, including all
paneling, decorations, partitions, railing, mezzanine floors, galleries and the
like shall unless Landlord expressly elects otherwise (which election shall be
made by giving a written notice to Tenant not less than thirty (30) days prior
to the expiration or other termination of the term of this Lease) become the
property of Landlord, and shall remain upon, and be surrendered with said
Premises as a part thereof at the end of the term. In the event the Landlord
shall elect otherwise, then such alterations, decorations, installations,
additions or improvements made by Tenant upon the Premises
-5-
<PAGE>
as the Landlord shall select shall be removed by the Tenant, and Tenant shall
prior to the expiration of the term repair any damage caused by such removal and
restore the Premises to their original condition, at Tenant's own cost and
expense.
4.04 - Signs, Awnings and Canopies
Tenant will not place or maintain or suffer to be placed or maintained on
or in an exterior door, wall or window of the Premises any sign, awning or
canopy, window shade or blind, decoration, lettering or advertising matter or
other thing of any kind without first obtaining Landlord's written approval.
Tenant further agrees to maintain such sign, awning, canopy, window shade or
blind, decoration, lettering, advertising matter or other thing as may be
approved in good condition and repair at all times.
ARTICLE 5 - Use of Premises
5.01 - Use of Premises
Tenant agrees to occupy and use the Premises for the following purpose
and for no other purpose whatsoever: long distance cellular and paging sales and
service. Tenant further agrees to comply with the rules and regulations set
forth in Exhibit "D" attached hereto and made a part hereof, and with such
reasonable modification thereof and additions thereto as Landlord may make, from
time to time. Landlord shall not be responsible for the non-observance by any
other tenant of any said rules and regulations and shall not be responsible to
Tenant for any violation of the rules and regulations, or the covenants or
agreements contained in any other lease, by any other tenant of the Building, or
its agents or employees.
ARTICLE 6 - Operating Costs
6.01 - Definitions
"Operating Costs" shall mean the total costs and expense incurred in
operating, managing and maintaining the Building, the Building Common Areas and
the Building Common Facilities, including but without limiting the generality of
the foregoing, the costs and expense of: planting, maintaining, replanting and
replacing flowers, plants and landscaping; parking area or sidewalk repair and
maintenance; water and sewerage charges; janitorial and cleaning services
(including labor, materials and supplies); insurance premiums; operation and
maintenance of lighting, sanitary control facilities, heating, ventilating and
air conditioning, elevators and Common Area equipment and utility systems;
repairs to the Building, the Building Common Areas and the Building Common
Facilities; painting and caulking; refinishing, glass and window cleaning and
repair; removal of snow, ice, trash, garbage and other refuse; fire protection
and sprinkler maintenance, security costs; depreciation of the capital cost of
and any rental for the leasing of any fixture, machinery or equipment (including
lighting, heating and air conditioning) or vehicles used in connection with use,
-6-
<PAGE>
operation or maintenance of the Building Common Areas and the Building Common
Facilities; repair and placement of water lines, sanitary and storm lines and
other utility systems serving the Building, all charges for utility service
related to the Building Common Areas and the Building Common Facilities;
personnel and management costs, fees for audits and accounting, permits and
licenses and other governmental impositions or surcharges; holiday and other
decorations, and a charge equal to eighteen percent (18%) of the Operating Costs
and the Building Taxes.
Operating Costs shall not include commissions or expenses for obtaining
leases, or the cost to prepare or renovate space for new tenancies.
6.02 - Increases In Operating Costs
During the term of this Lease, Tenant agrees to pay to Landlord, as
additional rent, Tenant's Allocable Share (computed pursuant to Section 22.09
hereof) of the amount by which Operating Costs for each lease year exceed the
Operating Costs for the Base Period as hereinafter defined (said excess amount
hereinafter called "increase in Operating Costs"). The "Operating Costs for the
Base Period" shall mean the amount of Operating Costs actually incurred during
the period from January 1, 1997 through December 31, 1997. At the beginning of
each lease year, Landlord will submit to Tenant Landlord's estimate of the
increase in Operating Costs anticipated for that lease year. Within ten (10)
days after receipt of such estimate, (and thereafter on the first day of each
month without invoice) Tenant shall pay to Landlord an amount equal to one
twelfth (1/12) of Tenant's Allocable Share of such estimated increases in
Operating Costs. Following the end of each lease year (or partial lease year),
Landlord shall furnish to Tenant a comparative statement showing Tenant's
Allocable Share of the actual increases in Operating Costs incurred during such
lease year and the amounts paid by Tenant (based on Landlord's estimate of
increases in Operating Costs) attributable to such year. Any overpayment or
underpayment by Tenant shall be promptly adjusted by payment by Tenant, within
fifteen (15) days, of the balance of any underpayment for such year or by
applying any overpayment as a credit to succeeding monthly installments of
increases in Operating Costs. All the Operating Costs shall be subject to audit
by Tenant upon reasonable notice, and Landlord and Tenant shall use their best
efforts to minimize such costs of operation, management and maintenance in a
manner consistent with generally accepted office building practices.
-7-
<PAGE>
ARTICLE 7 - Utility Costs
7.01 - Utility Costs
[THIS SECTION DELETED]
7.02 - Periodic Adjustments
The charges in Section 7.01 above, shall be adjusted periodically based
upon changes in usage, peak demand load, and changes in the cost of the utility
services following the date of this Lease, including but not limited to the
number of hours during which the Premises is used, connected load,
recalculations, water rate changes, rate changes imposed by utility companies,
and rate changes imposed by fuel companies (including, but not limited to, fuel
adjustment rates).
ARTICLE 8 - Repairs
8.01 - Repairs
Tenant shall, at Tenant's own expense, keep the Premises, including
everything therein, including all glass in windows and doors but excluding the
heating and air-conditioning systems, in good order, condition and repair during
the term. Landlord shall, as part of the Operating Costs set forth in Article 6,
maintain the heating and air-conditioning systems throughout the Building
(including the Premises) and the Common Area and Common Facilities of the
Building in good order and repair. Repairs made by Landlord required due to
negligence or fault of Tenant, its contractors, agents or employees shall be
made at Tenant's expense.
ARTICLE 9 - Indemnity
9.01 - Indemnity
Tenant does hereby indemnify Landlord (and such other persons as are in
privity of estate with Landlord) and save it harmless from and against any and
all claims, actions, damages, liability and expense in connection with loss of
life, personal injury or damage to property arising from or out of any
occurrence in, upon or at the Premises, from or out of the occupancy or use by
Tenant of the Premises or any part thereof, or occasioned wholly or in part by
any act or omission of Tenant, its agents, contractors, employees, lessees,
concessionaires or invitees. In case Landlord (and such other persons as are in
privity of estate with Landlord) shall be made a party to any litigation
commenced by or against Tenant, then Tenant agrees to protect and hold Landlord
harmless and to pay all costs, expenses and reasonable attorney's fees incurred
or paid by Landlord in connection with such litigation. Tenant agrees to pay all
costs, expenses and reasonable attorneys' fees that may be incurred or paid by
Landlord in enforcing the covenants and agreements in this Lease.
-8-
<PAGE>
ARTICLE 10 - Insurance
10.01 - Liability Insurance
At all times during the term of this Lease, Tenant, at its sole cost and
expense for the mutual benefit of Landlord and Tenant shall maintain personal
injury and property damage liability insurance against claims for personal
injury, death or property damage occurring on, in or about the Premises during
the term of this Lease of not less than One Million Dollars ($1,000,000.00) with
respect to personal injury, death or property damage and including contractual
indemnity coverage. Tenant's insurance policies shall name Landlord as an
additional insured as its interests may appear. In the event that Tenant shall
not have delivered to Landlord a policy or certificate evidencing such insurance
fifteen (15) days prior to the Term Commencement date and fifteen (15) days
prior to the expiration dates of each expiring policy, Landlord may obtain such
insurance as it may reasonably require to protect its interest. The cost for
such policies shall be paid by Tenant to Landlord as additional rent upon
demand. All insurance policies required hereunder shall be issued by insurers
of recognized responsibility which are licensed to do business in the State of
New York.
10.02 - Waiver of Subrogation
Each party hereto hereby waives on behalf of itself and the insurers of
such party's property any and all claims or rights of subrogation of any such
insurer against the other party hereto for loss of or damage to the property so
insured, and each party hereby agrees to maintain insurance upon its property
and to have a waiver of subrogation clause made a part of its insurance policies
in the standard form authorized by the New York State Insurance Department.
ARTICLE 11 - Damage by Fire or Casualty, Theft and Water Damage
11.01 - Untenantability
If the Premises are damaged by fire or other casualty such that the
Premises are made untenantable in whole or in part, then until repairs shall be
made or the Lease terminated as hereinafter provided, the fixed monthly rent
shall be apportioned on a per diem basis according to the part of the Premises
which is usable by Tenant. If the Building shall be so damaged that in the
opinion of Landlord the Building should not be restored or the Building should
be restored in such a way as to alter the Premises materially, Landlord may
cancel this Lease by notice to Tenant given at any time within sixty (60) days
after the date of such damage. If this Lease is not so terminated, Landlord
will promptly (taking into account the time necessary to effectuate a
satisfactory settlement with Landlord's insurance company) restore the damage.
Tenant hereby expressly waives the provision of Section 227 of the New York Real
Property Law and agrees that the foregoing provisions of this Section 11.01
shall govern and control in lieu thereof.
11.02 - Loss of Property and Water Damage
-9-
<PAGE>
Landlord shall not be responsible to Tenant for any loss or theft of
property in or from the Premises, or for any loss or theft or damage of or to
any property left with any employee of Landlord, however occurring. Landlord
shall not be liable for any damage caused by water, rain, snow or ice, or by
breakage, stoppage or leakage of water, gas, heating, air-conditioning, sewer or
other pipes or conduits, or arising from any other cause, in, upon, about or
adjacent to the Premises, or the Building in which said Premises are located.
ARTICLE 12 - Eminent Domain
12.01 - Eminent Domain
(a) In the event that any part of the Premises shall be condemned or
taken in any manner for any public or quasi-public use, at the option of
Landlord, or automatically if the whole of the Premises be so taken, this Lease
shall forthwith cease and terminate as of the date when possession of the
property so taken shall be required or when title shall vest in the taking
authority, whichever occurs first, and rent shall be paid up to that date.
Landlord shall be entitled to receive the entire award. Tenant hereby assigning
to Landlord Tenant's interest therein, if any. Tenant shall not be entitled to
any portion of the award with respect to any condemnation, nor shall Tenant have
any claim for the value of the unexpired portion of the term.
(b) In the event that title to a part of the Building other than the
Premises shall be condemned or taken and if in the opinion of Landlord the
Building should be restored in such a way as to alter the Premises materially,
Landlord may terminate this Lease and the term and estate hereby granted by
notifying Tenant of such termination within sixty (60) days following the date
of vesting of title.
ARTICLE 13 - Landlord's Remedies
13.01 - Conditional Limitations and Events of Default
This Lease and the demised term are subject to the limitation that if,
at any time prior to or during the term, any one or more of the following events
(herein called an "event of default") shall occur, that is to say:
(a) If Tenant shall make an assignment for the benefit of its
creditors; or
(b) If the leasehold estate hereby created shall be taken on execution
or by other processes of law;
(c) If any petition shall be filed against Tenant in any bankruptcy,
reorganization, composition, extension, arrangement, or insolvency
proceedings, and Tenant shall thereafter be adjudicated bankrupt, or
such petition shall be approved by the court, or the court shall
-10-
<PAGE>
assume jurisdiction of the subject matter and if such proceedings shall
not be dismissed within ninety (90) days after the institution of the
same; or if any such petition shall be so filed by the Tenant; or
(d) If in any proceedings a receiver or trustee be appointed for
Tenant's property, and such receivership or trusteeship shall not be
vacated or set aside within ninety (90) days after the appointment of
such receiver or trustee; or
(e) If there is a transfer or attempted transfer of this Lease or of
Tenant's interest therein or any sublease of the Premises or any portion
thereon in violation of the restrictions set forth in this Lease; or
(f) If Tenant shall fail to pay any installment of the fixed monthly
rent, or additional rent or any portion thereof when the same shall
become due and payable, and such failure shall continue for ten (10)
days after written notice from Landlord; or
(g) If Tenant shall vacate or abandon the Premises and permit same to
remain unoccupied or closed for business (other than temporarily in
connection with making permitted repairs or alterations); or
(h) If Tenant shall fail to perform or observe any other requirement of
this Lease (not hereinbefore in this paragraph specifically referred to)
on the part of Tenant to be performed or observed, and such failure
shall continue for twenty (20) days after written notice thereof from
Landlord to Tenant;
then, upon the happening of any one or more of the aforementioned events of
default, Landlord may give Tenant a notice (hereinafter called "notice of
termination") of its intention to end the term of this Lease at the expiration
of five (5) days from the date of service of such notice of termination, and at
the expiration of such five (5) days, this Lease and the term hereof, as well as
all of the right, title and interest of Tenant hereunder, shall wholly cease and
expire in the same manner and with the same force and effect as if the date of
expiration of such five (5) day period were the date originally specified herein
for the expiration of the demised term of this Lease, and Tenant shall then quit
and surrender the Premises to Landlord, but Tenant shall remain liable as herein
provided.
13.02 - Landlord's Remedies
(a) If this Lease shall be terminated as in Section 13.01 provided,
Landlord or Landlord's agents or employees may immediately or at any time
thereafter re-enter the Premises and remove therefrom Tenant, its agents,
employees, licensees, and any subtenants and other persons, firms or
corporations, and all or any of its or their property therefrom either by
summary dispossess proceedings or by any suitable action or proceeding at law or
by force, self-help or otherwise, without being liable to indictment,
prosecution or damages therefor, and repossess and enjoy said Premises, together
with all alterations, additions and improvements thereto. Landlord, in the
event
-11-
<PAGE>
of such re-entry and repossession, may store Tenant's property in a public
warehouse or elsewhere at the cost of and for the account of Tenant.
(b) In case of any such termination, re-entry or dispossess by summary
proceedings or otherwise, the rents and all other charges required to be paid up
to the time of such termination, re-entry or dispossess, shall be paid by Tenant
and Tenant shall also pay to Landlord all expenses which Landlord may then or
thereafter incur for legal expenses, attorney's fees, brokerage commissions and
all other costs paid or incurred by Landlord for restoring the Premises to good
order and condition and for altering and otherwise preparing the same for
reletting and for reletting thereof. Landlord may, at any time and from time to
time, relet the Premises, in whole or in part, for any rental then obtainable
either in its own name or as agent of Tenant, for a term or terms which, at
Landlord's option, may be for the remainder of the then current term of this
Lease or for any longer or shorter period.
(c) If this Lease be terminated as aforesaid, Tenant nevertheless
covenants and agrees notwithstanding any entry or re-entry by Landlord, whether
by summary proceedings, termination or otherwise, to pay and be liable for on
the days originally fixed herein for the payment thereof, the installments of
fixed monthly rent, additional rent and other charges, as under the terms of
this Lease would become due if this Lease had not been terminated or if Landlord
had not entered or re-entered as aforesaid, and regardless whether the Premises
be relet or remain vacant in whole or in part. In the event the Premises be
relet by the Landlord, Tenant shall be entitled to a credit (but not in excess
of the rent or other charges reserved under the terms of this Lease) in the net
amount of rent received by Landlord in reletting the Premises after deduction of
all expenses and costs incurred in reletting the Premises and in collecting the
rent in connection therewith. As an alternative, at the election of Landlord,
Tenant shall pay to Landlord as damages such a sum as at the time of such
termination represents the amount of excess, if any, of the then present value
of the total fixed monthly rent, additional rent and other benefits which would
have accrued to Landlord under the Lease for the remainder to the Lease term, if
the Lease terms had been fully complied with by Tenant, over and above the then
present rental value of the Premises for the balance of the term. Suit or suits
for the recovery of an deficiency or damages or for any installments or
installments of fixed monthly rent, additional rent or other charges hereunder,
or for a sum equal to any such installment or installments, may be brought by
Landlord at once or from time to time at Landlord's election and nothing in this
Lease shall be deemed to require Landlord to await the date whereon this Lease
or the term hereof would have expired by limitation had there been no such
default by Tenant or no such cancellation or termination.
(d) Tenant hereby expressly waives, so far as permitted by law, the
service of any notice of intention to re-enter provided for in any statute, or
of the institution of legal proceedings to that end, and Tenant, for and on
behalf of itself and all persons claiming through or under Tenant, also waives
any and all right of redemption or re-entry or repossession under present or
future laws, including specifically but without limitation Section 761 of the
New York Real Property Action and Proceedings Law including any amendments
hereafter. As an inducement to Landlord to make this Lease and in consideration
thereof, the Landlord and Tenant covenant and agree that in any action or
proceeding brought by either Landlord or Tenant against the other or any matter
whatsoever
-12-
<PAGE>
arising out of, or by virtue of the terms of this Lease or of Tenant's
occupancy, Landlord and Tenant shall and do hereby waive trial by jury. In the
event Landlord commences any proceedings for non-payment of rent, Tenant shall
not interpose any non-compulsory counterclaim in any such proceeding. This shall
not, however, be construed as a waiver of Tenant's rights to assert such claim
in any separate action or actions initiated by Tenant.
(e) No failure by Landlord to insist upon the strict performance of any
covenant, agreement, term or condition of this Lease or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of any
such breach or of such covenant, agreement, term or condition. No waiver of any
breach shall affect or alter this Lease, but each and every covenant, agreement,
term and condition of this Lease shall continue in full force and effect with
respect to any other then existing or subsequent breach thereof. No payment by
Tenant or receipt by Landlord of a lesser amount than the monthly installments
of rent or additional rent stipulated in this Lease shall be deemed to be other
than on account of the earliest amounts due nor shall any endorsement or
statement on any check or letter accompanying a check for payment of rent be
deemed any accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
additional rent or to pursue any other remedy provided by this Lease.
(f) Tenant hereby grants to Landlord a security interest in all
equipment, fixtures, improvements, merchandise, now or hereafter located in the
Premises, and all proceeds therefrom, to secure the payment and performance of
the Tenant's obligations set forth in this Lease. Upon request, Tenant agrees to
sign a Financing Statement simultaneously with the execution and delivery of
this Lease or at any time thereafter, and Landlord is hereby authorized to file
such Financing Statement as may be required under the Uniform Commercial Code to
perfect such security interest. Upon the occurrence of any "event of default",
pursuant to Section 13.01 hereof, Landlord shall be entitled to exercise all of
the rights and remedies of a secured party under the Uniform Commercial Code.
Reasonable attorney fees of the Landlord in enforcing any right or exercising
any remedy under this Security Agreement shall be deemed a part of the
obligations secured hereby.
(g) In the event of any breach or threatened breach by Tenant of any of
the covenants, agreements, terms or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity, by statute or
otherwise.
(h) Each right and remedy of Landlord provided for in this Lease shall
be cumulative and shall be in addition to every other right or remedy provided
for in this Lease or now or hereafter existing at law or in equity, by statute
or otherwise.
ARTICLE 14 - Mechanics' Liens
14.01 - Mechanics' Liens
-13-
<PAGE>
If any mechanics' lien shall be filed against the Premises, the Building
or any portion thereof based upon any act of Tenant or anyone claiming through
Tenant, Tenant after notice thereof from Landlord (or any person in privity of
estate with Landlord) forthwith shall commence such action by bonding, deposit,
payment or otherwise, as will remove or satisfy such lien within fifteen (15)
days. In the event Tenant does not remove or satisfy said lien within said
fifteen (15) day period, Landlord shall have the right to do so by posting a
bond or undertaking, and Tenant agrees to reimburse Landlord for any and all
expenses incurred by Landlord in connection therewith five (5) days after
receipt by Tenant of Landlord's invoice therefor. These expenses include, but
are not limited to filing fees, legal fees and bond premiums.
However, nothing in this Article 14 shall be deemed or construed as (a)
Landlord's consent to any person, firm or corporation for the performance of any
work or services or the supply of any materials to the Premises or any
improvement thereon, or (b) giving Tenant or any other person, firm or
corporation any right to contract for or to perform or supply any work, services
or materials that would permit or give rise to a lien against the Premises or
any part thereof.
ARTICLE 15 - Assignments, Subleases and Transfers of Tenant's
Interests
15.01 - Limitation on Tenant's Rights
Neither this Lease nor any interest of Tenant therein shall be sold,
assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed
of, nor shall the Premises or any part thereof be sublet or occupied by other
than Tenant, whether by act of Tenant, or by operation of law, or otherwise,
without the prior written consent of Landlord in each instance.
It is understood and agreed between the parties that, should Tenant
request Landlord's consent to a proposed assignment of this Lease or a
subletting of all or any portion of the Premises, Landlord will, in addition to
any other requirements which may be imposed as conditions to Landlord's consent,
require that Tenant execute and deliver to Landlord an agreement whereby Tenant
obligates itself, as additional rent, to pay over to Landlord the amount, if
any, of all rent, additional rent and any other consideration paid by such
assignee or sublessee to Tenant pursuant to such assignment or sublease which is
in excess of rent and additional rent due and payable from time to time from
Tenant to Landlord pursuant to this Lease.
No consent by Landlord to an assignment of this Lease and no assignment
made, shall be effective until there shall have been delivered to Landlord an
agreement, in recordable form, executed by Tenant and the proposed assignee,
wherein and whereby such assignee assumes due performance of the obligations on
Tenant's part to be performed under this Lease to the end of the term hereof.
Any assignment, mortgage, pledge, or hypothecation of these lease, or of
any interest of Tenant hereunder, and any sublease affecting the Premises shall
be subject to the full terms and conditions of this Lease. Regardless of the
assumption by an assignee of due performance, the
-14-
<PAGE>
Tenant named herein shall continue to be fully responsible for the due
performance of Tenant's obligations under this Lease in the same manner and to
the same extent as if no such assignment had been made.
Any assignment, mortgage, pledge, or hypothecation of this Lease, or of
any interest of Tenant hereunder, or any sublease affecting the Premises shall
be subject and subordinate to the full terms and conditions of this Lease.
Regardless of the assumption by an assignee of due performance, the Tenant named
herein shall continue to be fully responsible for the due performance of
Tenant's obligations under this Lease in the same manner and to the same extent
as if no such assignment had been made.
Any assignment, mortgage, pledge, or hypothecation of this Lease, or of
any interest of Tenant hereunder, or any sublease affecting the Premises,
without full compliance with all of the requirements set forth in this Lease,
shall be a breach of this Lease and an event of default hereunder.
15.02 - Landlord's Consent
Any consent by Landlord to a sale, assignment, sublease, mortgage,
pledge, hypothecation, or transfer of this Lease, shall apply only to the
specific transaction thereby authorized and shall not relieve Tenant from the
requirement of obtaining prior written consent of Landlord to any further sale,
assignment, sublease, mortgage, pledge, hypothecating, or transfer of this
Lease.
With respect to any of the consents requested by Tenant under the
provisions of this Article 15, whether or not the Landlord shall have consented
thereto, Tenant shall pay to the Landlord all reasonable counsel fees and other
out-of-pocket expenses incurred by the Landlord in connection therewith.
ARTICLE 16 - Subordination of Lease and Mortgagee's Rights
16.01 - Subordination
This Lease and all of the rights and interests of Tenant under this
Lease shall be subject and subordinate to any ground or underlying lease and to
any mortgage, whether fee or leasehold mortgage, now or hereafter affecting the
Premises or the Building or the land under the Building, and to any advances
made thereunder, and to the interest thereon, and to any renewal, modification,
consolidation, replacement, extension or refinancing thereof.
16.02 - Mortgagee's Rights
(a) So long as any ground lease or mortgage shall remain a lien on the
Premises, the Building, or the land under the Building, Tenant agrees that
simultaneously with the giving of any
-15-
<PAGE>
notice to Landlord which is required to be given by this Lease Tenant shall give
a duplicate copy thereof to the ground lessor or mortgagee. Further, Tenant
agrees that if Landlord defaults in its performance of any of the covenants
under the Lease, the ground lessor or mortgagee may cure said default within a
reasonable period of time beyond any time period permitted of Landlord, and if
necessary be permitted entry upon the Premises for the purpose of curing any
such default, all with the same effect as if cured by Landlord. The giving of
any such notice to Landlord shall not be properly given under the terms of this
Lease and shall be of no force and effect until a duplicate copy thereof shall
also have been given to the ground lessor or mortgagee pursuant to this Section
16.02.
(b) The parties hereto mutually agree that so long as a mortgage shall
be a lien upon the Premises, they will not reduce the rents from that provided
for in this Lease, provide for payments of rents prior to the time herein
provided for, nor terminate this lease prior to the end of the term, except as
otherwise expressly provided in this Lease, without first obtaining the consent
of the mortgagee in writing, and that any such proposed modifications or
terminations without said mortgagee's consent shall be void as against said
mortgagee.
ARTICLE 17 - Entry to Premises
17.01 - Entry to Premises by Landlord
Landlord shall have the right to enter Premises at all reasonable times
for the purpose of:
(i) inspecting the Premises;
(ii) making any repairs to the Premises or the Building Common
Facilities located in the Premises, or performing any work in the
Premises that may be necessary by reason of Tenant's default under the
terms of this Lease;
(iii) exhibiting the Premises for the purpose of sale, ground lease,
mortgage or other financing of the Building; and
(iv) exhibiting the Premises within nine (9) months prior to the
expiration of the term of this Lease to prospective tenants.
ARTICLE 18 - Notice and Certificates
18.01 - Notices and Certificates
Any notice, statement, certificate, request or demand required or
permitted to be given in this Lease shall be in writing sent by registered or
certified mail, postage prepaid, return receipt requested, addressed, as the
case may be, to the Landlord and to Tenant at the respective addresses shown at
the beginning of this Lease or to such other addresses as Landlord or Tenant
shall
-16-
<PAGE>
designate in the manner herein provided. Such notice, statement, certificate,
request or demand shall be deemed to have been given on the date mailed as
aforesaid in any post office or branch post office regularly maintained by the
United States Government, except for notice of change of address or revocation
of a prior notice, which shall only be effective upon receipt.
At any time or times when Tenant's interest herein shall be vested in
more than one person, firm or corporation, jointly, in common or in severalty, a
notice given by Landlord to any one such person, firm or corporation shall be
conclusively deemed to have been given to all such persons, firms, or
corporation. Any notice by Tenant pursuant to the provisions hereof shall be
void and ineffective unless signed by all such persons, firms or corporations
unless such persons, firms or corporations shall have previously given notice to
Landlord, signed by each of them designating and authorizing one or more of them
to give the notice referred to, and such notice shall then be unrevoked by any
notice to Landlord.
18.02 - Certificate by Tenant
Within ten (10) days after request by Landlord from time to time, Tenant
shall deliver to Landlord or to a person, firm or corporation, specified by
Landlord, a duly executed and acknowledged instrument, certifying:
(i) that this Lease is unmodified and in full force and effect, or if
there has been any modification, that the Lease is in full force and
effect, as modified, and identifying the date of any such modification.
(ii) whether Tenant knows or does not know, as the case may be, of any
default by Landlord of the terms, covenants, and conditions of this
Lease, and specifying the nature of such defaults, if any;
(iii) whether or not there are any then existing set-offs or defenses
by Tenant to the enforcement by Landlord of the terms, covenants, and
conditions of this Lease and any modification thereof, and if so,
specifying them; and
(iv) the amount of fixed monthly rent and additional rent due
hereunder and the date to which the fixed monthly rent and additional
rent has been paid.
ARTICLE 19 - Covenant of Quite Enjoyment
19.01 - Covenant of Quiet Enjoyment
Tenant, subject to the terms and provisions of this Lease, on payment of
the rent and observing, keeping and performing all of the terms and provisions
of this Lease on its part to be observed, kept and performed shall lawfully,
peaceably and quietly have, hold and enjoy the
-17-
<PAGE>
Premises during the term hereof on and after the Term Commencement Date without
hindrance or ejection by any persons lawfully claiming under Landlord.
ARTICLE 20 - Services
20.01 - Services
During the term of this Lease, while Tenant is not in default hereunder,
Landlord shall furnish to the Premises electricity, lighting, heating,
ventilating, air conditioning, elevator service and water to the plumbing
fixtures, if any, on Monday through Friday from 8 a.m. to 6 p.m. and on Saturday
from 8:30 a.m. to 1:30 p.m., principal legal holidays excepted. Landlord shall
also furnish janitorial services consisting of cleaning floors, removing waste
paper each business day and window cleaning.
20.02 - Interruption of Service
No diminution or abatement of rent or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the making of
repairs or improvements to the Building or its appurtenances. There shall be no
diminution or abatement of rent or any other compensation for interruption or
curtailment of any service or utility herein expressly or impliedly agreed to be
furnished by Landlord which such interruption or curtailment shall be due to
accident, alterations, repairs desirable or necessary, or to inability or
difficulty in securing supplies or labor, or to some other cause not gross
negligence on the part of Landlord. No such interruption or curtailment shall be
deemed a constructive eviction. Tenant agrees that Landlord shall not be
responsible for interruption of utility service caused by any utility company or
governmental regulatory agency or for other reasons beyond Landlord's reasonable
control.
ARTICLE 21 - Certain Rights Reserved to Landlord
21.01 - Certain Rights Reserved to Landlord
Landlord reserves the following rights:
(i) To Name the Building and to change the name or street address of
the Building;
(ii) To install and maintain a sign or signs on the exterior or
interior of the Building;
(iii) During the last ninety (90) days of the term, if during or prior
to that time Tenant vacates the Premises, to decorate, remodel, repair,
alter or otherwise prepare the Premises for reoccupancy, including the
placing of a notice of reasonable size on or in the Premises offering
said Premises "For Rent" or "For Lease", all without affecting Tenant's
obligation to pay rental for the Premises;
-18-
<PAGE>
(iv) To constantly have pass keys to the Premises; and
(v) At any time in the event of an emergency, or otherwise at
reasonable times, to take any and all measures, including inspections,
repairs, alterations, additions and improvements to the Premises or to
the Building, as may be necessary or desirable for the safety,
protection or preservation of the Premises or the Building or the
Landlord's interests, or as may be necessary or desirable in the
operations or improvement of the Building or in order to comply with all
laws, orders and requirements of governmental or other authority.
ARTICLE 22 - Miscellaneous Provisions
22.01 - Holdover
Should Tenant continue to occupy the Premises after the expiration or
earlier termination of this Lease, whether with or against the consent of
Landlord, such tenancy shall be from month-to-month, and such month-to-month
tenancy shall be under all the terms, covenants and conditions of this Lease,
and at double the fixed monthly rent reserved herein for the last year of the
term.
22.02 - Limitation on Personal Liability
It is understood and agreed that Tenant shall look solely to the estate
and property of Landlord, its successors and assigns, in the Building for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord, in the event of
any default or breach by Landlord with respect to any of the terms, covenants
and conditions of this Lease to be observed or performed by Landlord and any
other obligations or liability of Landlord created by or under this Lease, and
no other property or assets of Landlord, its successors and assigns, or of their
respective partners, beneficiaries, co-tenants, shareholders, or principals (as
the case may be) shall be subject to levy, execution or other enforcement
procedures for the satisfaction of Tenant's remedies.
22.03 - Definition of Landlord
The term "Landlord", as used in this Lease, shall be limited to mean and
include only the owner of the Building (or the owner of a lease of the
Building), at the time in question. In the event of any transfer or transfers
of the Landlord's interest in this Lease or the title to the Building (or in the
event of any lease of the Building or assignment of such lease). Landlord
herein named (and in case of any subsequent transfer or conveyance, the then
grantor), including each of its partners, beneficiaries, co-tenants,
shareholders, or principals (as the case may be), shall be automatically freed
and relieved, from and after the date of such transfer or conveyance, of all
obligation or liability as respects the performance of any covenants or
agreements on the part of Landlord to be performed.
22.04 - Force Majeure
-19-
<PAGE>
The period of time during which either party is prevented or delayed in
any performance or the making of any improvements or repairs or fulfilling any
obligation under this Lease, other than the payment of fixed monthly rent,
additional rent or any other required payment, due to unavoidable delays caused
by fire, catastrophe, strikes or labor trouble, civil commotion, Acts of God or
the public enemy, governmental prohibitions or regulations or inability to
obtain materials by reason thereof, or any other causes beyond such party's
reasonable control, shall be added to such party's time for performance, and
such party shall have no liability by reason thereof.
22.05 - Relocation of Tenant
Landlord reserves the right, and Tenant consents, to relocate Tenant to
other space with approximately the same square footage area within the Building
upon sixty (60) days written notice to Tenant. Such relocation shall be at
Landlord's cost and expense and shall in no way affect the obligation or duties
of either party hereunder.
-20-
<PAGE>
22.06 - Failure to Give Possession
If Landlord is unable to give possession of the Premises on the Term
Commencement Date by reason of the holding over or retention of possession of
any tenant, tenants, or occupants or for any other reason, or if repairs,
improvements or decoration of the Premises or of the Building are not completed,
such inability by Landlord shall not constitute a default under this Lease but
the Term Commencement Date shall be postponed until such date as such holdover
tenant or occupant shall give up possession of the Premises and the term of this
Lease shall be deemed to commence on such Term Commencement Date as postponed
(and the termination date of the term of the Lease shall be extended by the same
period as the Term Commencement Date is postponed)
22.07 - Surrender of Premises
At the expiration or sooner termination of this Lease, Tenant shall
return the Premises broom-clean and in as good a condition as when Tenant took
possession, ordinary wear and loss by fire or other casualty excepted, failing
which Landlord may restore the Premises to such condition and Tenant shall be
responsible to pay the cost thereof. Any personal property not removed within
three (3) days following the expiration or termination of this Lease shall, at
Landlord's option, become the property of Landlord.
22.08 - Attornment by Tenant
In the event any proceedings are brought for the foreclosure of, or in
the event of conveyance by deed in lieu of foreclosure of, or in the event of
the exercise of the power of sale under, any mortgage made by Landlord covering
the Premises, or in the event Landlord sells, conveys or otherwise transfers its
interest in the Building or any portion thereof containing the Premises. Tenant
shall attorn to and hereby covenants and agrees to execute an instrument in
writing reasonably satisfactory to the new owner whereby Tenant attorns to such
successor in interest and recognizes such successor as the Landlord under this
Lease.
22.09 - Definition of Tenant's Allocable Share
For purpose of determining Tenant's Allocable Share herein, such share
shall be the percentage resulting from dividing the number of square feet set
forth in Section 1.01 above, by the total number of square feet in the Building,
which are leased as of the beginning of each lease year or partial lease year,
less the area occupied by the Ida Benderson Center.
22.10 - Division of Costs
Landlord may construct or operate other office buildings located
adjacent to the Building. Tenant agrees that Landlord may treat the Building and
the adjacent office buildings as one unit for the purpose of purchasing and
providing energy and water, insurance and the common services included within
Operating Costs, Landlord shall equitably divide such costs between the Building
and any such adjacent office building for each lease year (or partial lease
year) and the allocation of such costs shall be subject to verification by
Tenant at Landlord's offices.
-21-
<PAGE>
22.11 - Complete Agreement
(a) This Lease contains and embraces the entire agreement between the
parties hereto, and it or any part of it may not be changed, altered, modified,
limited, terminated, or extended orally or by any agreement between the parties
unless such agreement is in writing, signed and acknowledged by the parties
hereto, their legal representatives, successors or assigns.
(b) Tenant acknowledges and agrees that neither Landlord nor any
representative of Landlord nor any broker has made any representation to or
agreement with Tenant relating to the Premises, this Lease, the Building, or
Tenant's operation of business in the Premises or the Building which is not
contained in the express terms of this Lease. Tenant acknowledges and agrees
that Tenant's execution and delivery of this Lease is based upon Tenant's
independent investigation and analysis of the business potential and expenses
represented by this Lease, and Tenant hereby expressly waives any and all claims
or defenses by Tenant against the enforcement of this Lease which are based upon
allegations or representations, projections, estimates, understandings or
agreements by Landlord or Landlord's representative that are not contained in
the express terms of this Lease. Tenant agrees that there are no rights,
easements or licenses which may be acquired by Tenant by implication or
otherwise except as expressly set forth in the provisions of this Lease.
22.12 - Memorandum of Lease
Each party agrees, if requested by the other, to execute a Memorandum of
Lease in recordable form.
22.13 - Law Governing, Effect and Gender
This Lease shall be construed in accordance with the laws of the State
of New York and shall be binding upon the parties hereto and their respective
legal representatives, successors and assigns except as expressly provided
otherwise. Use of the neuter gender shall be deemed to include the masculine or
feminine, as the sense requires. Any reference to successors and assigns of
Tenant is not intended to constitute a consent to any assignment by Tenant but
has reference only to those instances in which Landlord may later give consent
to a particular assignment as required by the provisions of Article 15 thereof.
22.14 - Invalidity of Particular Provisions
If any term or provisions of this Lease or the application thereof to
any person or circumstances shall, to any extent, be invalid or unenforceable,
the remainder of the Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
22.15 - Execution of Lease by Landlord
The submission of this document by either party for examination and
negotiation does not constitute an offer to lease, or a reservation of, or
option for, the Premises, and this document shall
-22-
<PAGE>
be effective and binding only upon the execution and delivery thereof by both
Landlord and Tenant.
22.16 - Assignment of Rents or Sale and Lease Back
(a) With reference to any assignment by Landlord of Landlord's interest
in this Lease, or the rents payable hereunder, conditional in nature or
otherwise, which assignment is made to the holder of a mortgage or ground lease
on property which includes the Premises, Tenant agrees:
(i) that the execution thereof by Landlord, and the acceptance
thereof by the holder of such mortgage, or the ground lessor shall
never be treated as an assumption by such holder or ground lessor of
any of the obligations of Landlord hereunder, unless such holder, or
ground lessor, shall, by notice sent to Tenant, specifically
otherwise elect; and
(ii) that except as aforesaid, such holder or ground lessor shall be
treated as having assumed Landlord's obligations hereunder upon
foreclosure of such holder's mortgage and the taking of possession
of the Premises, or, in the case of a ground lessor, the assumption
of Landlord's position hereunder by such ground lessor.
(b) Where a party acquires the lessor's interest in property (whether
land only, or land and buildings) which includes the Premises, and
simultaneously leases the same back, such acquisition shall not be treated as an
assumption of Landlord's position hereunder, and this Lease shall thereafter be
subject and subordinate at all times to such lease.
22.17 - Other Provisions
There are attached hereto and incorporated herein the following
provisions (insert below the paragraph number and heading of any additional
provisions; if there are none, write "NONE"):* **
NONE
- -------------------------
* SCC Telecommunications, Frank Caruso, has the right of first refusal on the
adjacent 1,600 sq. ft. space that they are vacating to occupy this 4,163 sq.
ft. space. Landlord must notify SCC Telecommunications in writing with a
bona fide offer and SCC Telecommunications has ten (10) days to match the
offer and commit to the 1,600 sq. ft. space in writing.
** Commencing June 1, 1997 the lease of 1,600 sq. ft. by and between Briar Joy
Development Corp. d/b/a/ SCC Telecommunications will be replaced by this new
lease.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date
first above written.
Briar Joy Development Corp. Railroad Street Partnership
d/b/a SCC Telecommunications (Name of Landlord)
By /s/ By /s/
------------------------------ ------------------------------
Frank S. Caruso, President (Partner)
SCC Telecommunications
----------------------
(Name of Tenant)
By /s/ Frank S. Caruso, President
-------------------------------
(Title)
-24-
<PAGE>
(Acknowledgment of LANDLORD)
STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA)
On this 9th day of January, 1997, before me personally came Anthony
Fiorito, to me personally known, who, being by me duly sworn, did depose and say
that he resides in 3940 Pawnee Drive, Liverpool, New York 13046, that he is one
of the Partners of the RAILROAD STREET PARTNERSHIP, that he is known to me to be
one of the Partners of such partnership that executed the within lease as
Landlord and he acknowledged to me that he executed the same in the name of and
on behalf of such partnership.
/s/ Kristen Fiorito
-------------------
(Notary Public)
KRISTEN FIORITO
Notary Public, State of New York
Qualified in Onondaga County
Reg. No. 01FlSOJ3373
Commission Expires 12/18/97
(Acknowledgment of TENANT if Corporation)
STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA)
On this 9th day of January, 1997, before me personally came Frank
Caruso, to me personally known, who, being by me duly sworn, did depose and say
that he resides in 207 Woodruff Avenue, Syracuse, New York 13203, that he is the
_______________ of __________________, the corporation described in, and which
executed the within Lease as Tenant; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
/s/ Kristen Fiorito
-------------------
(Notary Public)
-25-
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A.................................................... Floor Plan
EXHIBIT B............................................... Landlord's Work
EXHIBIT C................................................. Tenant's Work
EXHIBIT D......................................... Rules and Regulations
EXHIBIT E............................................. Guaranty of Lease
EXHIBIT F.................................. Stipulation of Term of Lease
-26-
<PAGE>
[EXHIBIT A]
[Floor Plan]
<PAGE>
EXHIBIT B
Landlord's Work
Tenant to take space in "as is" condition.
<PAGE>
EXHIBIT C
Tenant's Work
Tenant to take space in "as is" condition. Tenant shall be obligated
for any improvements needed for Tenant's use and occupancy of the Premises.
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
(a) Tenant shall not exhibit, sell or offer for sale on the Premises or in
the Building any article or thing except those articles and things essentially
connected with the stated use of the Premises by the Tenant without the advance
consent of Landlord, nor shall Tenant install or permit to be installed any
vending machines in the Premises.
(b) Tenant will not make or permit to be made any use of the Premises or
any part thereof which would violate any of the covenants, agreements, terms,
provisions and conditions of this Lease or which directly or indirectly are
forbidden by public law, ordinance or governmental regulation or which may be
dangerous to life, limb, or property, or which may invalidate or increase the
premium cost of any policy of insurance carried on the Building or covering its
operation, or which will suffer or permit the Premises or any part thereof to be
used in any manner including storage therein which, in the judgment of Landlord,
shall in any way impair or tend to impair the character, reputation or
appearance of the Building as a high quality office building, or which will
impair or interfere with or tend to impair or interfere with any of the services
performed by Landlord for the Building. Tenant shall not use the Premises for
any illegal or immoral purpose.
(c) Tenant shall not display, inscribe, print, paint, maintain or affix on
any place or in or about the Building any sign, notice, legend, direction,
figure or advertisement, except at the doors of the Premises and on the
Directory Board, and then only such name(s) and matter, and in such color, size,
style, place and materials, as shall first have been approved by the Landlord.
The listing of any name other than that of Tenant, whether at the doors of the
Premises, on the Building directory, or otherwise, shall not operate to vest any
right or interest in this Lease or in the Premises or be deemed to be the
written consent of Landlord mentioned in Article 15, it being expressly
understood that any such listing is a privilege extended by Landlord revocable
at will by written notice to Tenant.
(d) Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities, and shall
not use the name of the Building for any purposes other than that of the
business address of Tenant, and shall never use any picture or likeness of the
Building in any circulars, notices, advertisements or correspondence without
Landlord's consent.
(e) No additional locks or similar devices shall be attached to any door or
window without Landlord's written consent. No keys for any door other than
those provided by the Landlord shall be made. If more than one (1) key to the
Premises is desired, Landlord will provide the same upon payment by Tenant. All
keys must be returned to Landlord at the expiration or termination of this
Lease.
<PAGE>
(f) All persons entering or leaving the Building between the hours of 6
p.m. and 8 a.m., Monday through Friday, or any time on Saturday, Sunday or
holidays, may be required to do so under such regulations as Landlord may
impose. Landlord may exclude or expel any peddler.
(g) Tenant shall not overload any floor. Landlord may direct the time and
manner of delivery, routing and removal of all items that are delivered to the
Building for Tenant's use and may specify the location of safes and other heavy
articles.
(h) Unless Landlord gives advance written notice, Tenant shall not install
or operate any steam or internal combustion engine, machinery, refrigerating or
heating device or air-conditioning apparatus in or about the Premises, or carry
on any mechanical business herein, or use the Premises for housing
accommodations or lodging or sleeping purposes, or do any cooking therein
(except by using a microwave unit) or use any illumination other than electric
light, or use or permit to be brought into the Building any flammable fluids
such as gasoline, kerosene, naptha, benzine, and solvents, or any explosives,
radioactive materials or other hazardous materials or articles deemed hazardous
to life, limb or property except in a manner which would not violate any
ordinance or regulation or any condition imposed by standard fire insurance
policy issued for office buildings in the municipality where the Building is
located, or do or permit anything to be done, or keep or permit anything to be
kept, in the Premises, which would increase the fire or other casualty insurance
rate on the Building or the property therein, or which would result in insurance
companies of good standing refusing to insure the Building or any such property
in amounts reasonably satisfactory to Landlord.
(i) Tenant shall cooperate fully with Landlord to assure the effective
operation of the Building's air-conditioning systems, including the closing of
blinds and drapes, and if windows are operable to keep them closed when the air-
conditioning system is in use.
(j) Tenant shall not contract for any work or service which might involve
the employment of labor incompatible with the Building employees or employees of
contractors doing work or performing services by or on behalf of Landlord.
(k) The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used for any purpose other than
for ingress to and egress from its Premises. The halls, passages, exits,
entrances, elevators, stairways and roof are not for the 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
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of Tenant's business unless such persons are engaged in
illegal activities. No tenant and no employees or invitees of any tenant shall
go upon the roof or into the mechanical rooms of the Building.
(l) Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner
D-2
<PAGE>
offensive or objectionable to Landlord or other occupants of the Building by
reason of noise, odors and/or vibrations, or interfere in any way with other
tenants or those having business therein, nor shall any animals or birds by
brought in or kept in or about the Premises of the Building.
(m) With respect to the Premises and the Building Common Areas and Common
Facilities. Tenant shall see that the door, and windows, if operable, are
closed and securely locked before leaving the Building and shall observe strict
care and caution that all water faucets or water apparatus is entirely shut off
before Tenant or Tenant's employees leave the Building, and that all electricity
shall likewise be carefully shut off so as to prevent waste or damage. Tenant
shall install seven (7) day time clocks to automatically shut off any equipment
installed by Tenant which, by its nature, is not shut off by Tenant's employees
at the end of each business day.
(n) There shall not be used any space, or in the public halls of the
Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the Landlord or its Manager may determine from time to time. The Landlord
reserves the right to inspect all freight to be brought into the building and to
exclude from the building all freight which violates any of the Rules and
Regulations or the lease of which these Rules and Regulations are a part.
D-3
<PAGE>
Exhibit E
GUARANTY OF LEASE
The undersigned, Frank A. Caruso, individual (cross out whichever do not
apply) organized and existing under the laws of the State of New York, with
principal office at or resident at
207 Woodruff Ave., Syracuse, Onondaga, New York 13203
(Street Address) (City or Town), (County), (State), (Zip)
Attention Frank Caruso ........................................................
(Insert Name of Person or Office to receive Notice)
Hereinafter together with its or his successors, assigns and legal
representatives called the "Guarantor" in consideration of the execution and
delivery of the annexed and foregoing Lease bearing date of ...................
19__ wherein RAILROAD STREET PARTNERSHIP, a New York partnership, having its
principal address at P.O. Box 865, Syracuse, New York 13201(hereinafter and in
said Lease called "Landlord") has leased to Briar Joy Development Corp. d/b/a/
SCC Telecommunications ((Name of Tenant)
205 South Salina Street
...............................................................................
(Street Address)
.Syracuse.............Onondaga....................NY......................13203
(City or Town) (County) (State) (Zip)
(hereinafter and in said Lease called "Tenant") certain premises in the Building
known as SALINA PLACE as more fully described in said Lease, and for other good
and valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, does hereby guarantee to Landlord the full, prompt and punctual
performance by Tenant of all of Tenant's agreements, covenants and obligations
under and for the term of the Lease, including the payment of all amounts that
may be or become payable by Tenant to or for the benefit of Landlord under said
Lease and the payment of all damages or costs that arise in consequence of any
default by Tenant under the Lease.
Guarantor has been advised that Landlord requires, as a condition to its
execution of said Lease, that the undersigned guarantee the full, prompt and
punctual performance of Tenant's obligations under the Lease, and Guarantor is
desirous that Landlord enter into said Lease with Tenant.
Guarantor hereby agrees with Landlord that this Guaranty is unconditional
and irrevocable, and that Guarantor hereby waives (a) notice of the acceptance
of this Guaranty by Landlord, (b) notice of default, demand or of non-payment of
rent or any other monetary obligation, (c) the right to require Landlord first
to proceed against Tenant prior to proceeding against Guarantor for enforcement
of its or his obligation under this Guaranty and (d) notice of any amendment or
<PAGE>
modification of the said Lease or any of the provisions contained therein
including any amounts due thereunder. Guarantor further agrees that the
validity of this Guaranty and its or his obligations hereunder shall in no wise
be terminated, affected or impaired by reason of the assertion by Landlord
against Tenant of any rights or remedies reserved to Landlord pursuant to the
terms of said Lease. Guarantor further agrees that this Guaranty will continue
in full force and effect and remain unchanged by any bankruptcy, reorganization
or insolvency of Tenant or any successor or assignee of Tenant, or by any
disaffirmance, rejection or abandonment by a trustee of Tenant.
The use of the singular shall include the plural if the sense requires and
if more than one individual or entity signs this instrument the liability of
each signing party shall be joint and several liability.
This Guaranty shall be binding on Guarantor, its or his successors, assigns
and legal representatives and for the benefit of Landlord, its successors,
assigns and legal representatives.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly
executed on this ........ day of ....... 19...
Frank S. Caruso
(Name of Guarantor)
/s/
-------------------------------
E-2
<PAGE>
(Acknowledgment of Guarantor if Individual)
STATE OF .................)
} ss.
COUNTY OF.................)
On this...9.... day of ...January, .... 1997, before me personally came
........Frank Caruso......... to me personally known, who being by me duly
sworn, did depose and say that he resides at .....207 Woodruff Avenue, Syracuse,
NY 13203...... and who acknowledges that he executed the within Guaranty of
Lease as Guarantor.
/s/ Kristen Fiorito
--------------------------------------
(Notary Public)
<PAGE>
EXHIBIT F
STIPULATION OF TERM OF LEASE
AGREEMENT, made this ___ day of _________________, 2000, by and between the
following parties Landlord Railroad Street Partnership, a partnership organized
and existing under the laws of the State of New York with principal address at
P.O. Box 865, Syracuse, New York 13201, hereinafter referred to as the
"Landlord", and
Tenant,
a corporation/partnership/individual(s) (cross out whichever do not apply)
organized and existing under the laws of the State of _____________ with
principal office at or residence at:
...............................................................................
(Street Address)
...............................................................................
(City or Town) (County) (State) (Zip)
herein referred to as the "Tenant".
WHEREAS, Landlord and Tenant have entered into a Lease dated the .........
day of ......, 19.. relating to Premises containing approximately square feet
in the
Salina Place Building
located at 205-213 South Salina Street, Syracuse, New York as more fully
described in said Lease; and
WHEREAS, Landlord and Tenant now desire to stipulate and agree to the Term
Commencement Date and termination date of said Lease,
NOW THEREFORE, it is hereby mutually stipulated and agreed by the parties
hereto that the Term Commencement Date under the aforesaid Lease is the ....day
of ....... 19.. and that the term expires on the day of, 19... It is further
agreed and stipulated by Tenant that Tenant has accepted or does hereby accept
the Premises referred to in said Lease for occupancy, that Tenant has entered
into possession of the said Premises and that the rents under the said Lease
have become fully effective without offset or defense of any kind.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stipulation of
Term of Lease on the date first above written.
RAILROAD STREET PARTNERSHIP
(Name of Landlord)
By__________________________________
(Partner)
By__________________________________
(Name of Tenant)
By__________________________________
(Title)
<PAGE>
(Acknowledgment of Landlord)
STATE OF NEW YORK).)
} ss.
COUNTY OF ONONDAGA ))
On this ...... day of ..........., 19.. before me personally came
..........., to me personally known, who being by me duly sworn, did depose and
say that he resides at ................... that he is a Partner of RAILROAD
STREET PARTNERSHIP, that he is known to me to be one of the Partners of such
Partnership that executed the within Stipulation of Term of Lease as Landlord
and acknowledged to me that he executed the same on behalf of and in the name of
such Partnership.
________________________.
(Notary Public)
(Acknowledgment of Tenant if Corporation)
STATE OF .................... )
} ss.
COUNTY OF ................... )
On this ............... day of ........., 19.. before me personally came
..............., to me personally known, who being by me duly sworn, did depose
and say that he resides in ............. that he is the ................. of
...............the corporation described in, and which executed the within
Stipulation of Term of Lease as Tenant, that knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
________________________.
(Notary Public)
<PAGE>
(Acknowledgment of Tenant if Partnership)
STATE OF .................... )
} ss.
COUNTY OF ................... )
On this ............ day of ............., 19.. before me personally came
................, to me personally known, who being by me duly sworn, did depose
and say that he resides at ................ that he is a Partner of ............
............. that he is known to be one of the partners of the Partnership that
executed the within Stipulation of Term of Lease as Tenant and acknowledged to
me that he executed the same on behalf of and in the name of such Partnership.
________________________.
(Notary Public)
(Acknowledgment of Tenant if Individual)
STATE OF ..................... )
} ss.
COUNTY OF .................... )
On this ............... day of ........................, 19.. before me
personally came ..............., to me personally known, who being by me duly
sworn, did depose and say that he resides at ................. and who
acknowledges that he executed the within Stipulation of Term of Lease.
________________________.
(Notary Public)
<PAGE>
EXHIBIT 10.9
[LOGO OF COMMUNITY NETWORKS]
- --------------------------------------------------------------------------------
Existing Lease Abstract -- Switch Space
Building: 224 Harrison Street -- 4th Floor Syracuse
LeaseDate: June l6, 1999
Landlord: 224 Harrison Associates, LLC
Tenant: Community Networks
Premises: Partial 4th Floor
Rentable Area: Approximately 8,000 RSF
Lease Term: Ten (10) Years and Three (3) Months
Lease Commencement: July 15, 1999
Lease Expiration: October 14, 2009
Rent Commencement: Three (3) Months from Lease Commencement
Base Rent: $12.00 pRSF (to increase by 2% per annum)
Electricity: Direct Meter
Real Estate Taxes: Tenant shall pay a 2% increase in the rental rate in lieu
of paying Real Estate Taxes.
Operating Expense: Tenant shall pay a 2% increase in the rental rate in lieu
of paying Operating Expenses.
Use: Telecommunications services, telephone switching stations
and uses incidental hereto.
Sublet/Assignment: Tenant may sublet all or a portion of the premises or
assign the lease with prior written consent of owner,
which may not be unreasonably withheld or delayed.
Termination Option(s): N/A
Expansion Option(s): Tenant shall have an ongoing Right of First Refusal on
any adjacent vacant space in the building.
Security Deposit: No Security Deposit is required of Tenant.
Renewal Option(s): Tenant shall have two consecutive five (5) year renewal
options.
Equis
- --------------------------------------------------------------------------------
<PAGE>
STANDARD
OFFICE SPACE LEASE
------------------
The Syracuse Building
224 Harrison Street
Syracuse, New York
LANDLORD: 224 Harrison Associates, LLC
TENANT: Community Networks, Inc.
DATE OF LEASE: June 16, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Article
-------
Page
----
1. Premises......................
2. Term of Lease.....................
3. Rent, Taxes, Lease Year and Parking....................
4. Construction. Financing and Alterations...............
5. Use of Premises...............
6. Operating Costs...............
7. Energy Costs and Water..........
8. Repairs.............
9. Indemnity..............
10. Insurance................
11. Damage By Fire, Theft and Water Damage..............
12. Eminent Domain..............
13. Bankruptcy and Default Provisions..............
14. Mechanic's Liens............
15. Mortgages Assignments, Subleases and
Transfers of Tenant's Interest............
16. Subordination of Lease.............
17. Entry to Premises.................
18. Notices and Certificates..............
19. Covenant of Quiet Enjoyment...............
20. Services..............
21. Certain Rights Reserved to Landlord................
22. Miscellaneous Provisions...(Renewal Option, Signage, Existing
Tenant Obligation, Right of First Refusal, Additional Tenant
Improvements, Brokerage)...................
SCHEDULE OF EXHIBITS
--------------------
Exhibit "A" Floor Plan(s) Outlining Premises
Exhibit "B" Description/Plan of Land/Intentionally Omitted
Exhibit "C" Landlord's Work
Exhibit "D" Tenant's Work and Tenant's Insurance
Requirements
Exhibit "E" Rules and Regulations
<PAGE>
STANDARD
OFFICE SPACE LEASE
------------------
AGREEMENT made as of this 16th day of June, 1999, by and between the
following parties: 224 Harrison Associates, LLC. a New York limited liability
company, having an office at 4 Clinton Square, Syracuse, New York 13202
("Landlord"), and Community Networks, Inc a corporation duly organized under the
laws of the State of New York having its principal office at 45-18 Court Square,
Long Island City, NY 11101 Attention: Scott Matukas (the "Tenant").
WITNESSETH:
----------
ARTICLE 1
Premises
--------
1.01 - Premises
- ---------------
Landlord hereby leases to Tenant and Tenant hereby leases and hires
from Landlord those certain premises in AS IS condition except as otherwise
expressly provided herein the building commonly known as "The Syracuse Building"
(the "Building") which is located at 224 Harrison Street in the City of
Syracuse, County of Onondaga and State of New York, which premises are outlined
on the plan attached as Exhibit "A" (the "Premises"), together with the right to
use, in common with others, the Building Commons Areas and Outside Common Areas
as hereinafter defined. For purposes of this Paragraph 1.01, the sum of the
square feet in the Premises and Tenant's share of Building Common Areas (as
defined in Paragraph 1.02 hereof) shall be the aggregate of 8,000 square feet on
the fourth floor of the Building. The Premises shall include the area bounded
by: the center line of any walls common to adjacent tenants, the Building Common
Area side of any wall adjoining Building Common Areas (but not the surface
thereof), the line established by the exterior face of the exterior walls of the
Building and the exterior face of any windows in the exterior walls of the
Building, the concrete floor surface of the Premises and the lower surface of
the next higher floor (or roof). Landlord reserves unto itself, its successors
and assigns, the right to install, maintain, use, repair and replace pipes,
ducts, conduits, wires and structural elements leading through the Premises in
locations which will not materially interfere with Tenant's use of the Premises.
Except as set forth herein, no right to use any part of the exterior of the
Building and no casement for light or air are included in the lease of the
Premises hereby made.
1.02 - Definition of Building Common Areas
- ------------------------------------------
"Building Common Areas" shall be defined to mean all areas. space,
equipment, signs and special services provided by Landlord specifically for the
Building or for the common or joint use and benefit of all the tenants in the
Building, their employees, agents, customers, visitors and other invitees,
including without limitation hallways, corridors, trash rooms, mechanical and
electrical rooms, storage rooms, stairways, entrances, elevators, rest rooms,
lobbies, stairs, loading docks, pedestrian walks, roofs and basements, janitor's
and storage closets within the Building and all other common rooms and common
facilities within the Building.
1.03 - Definition of Outside Common Areas
- -----------------------------------------
The term "Outside Common Areas" is defined to mean the land described
on Exhibit "B" attached hereto and made a part hereof, or such
<PAGE>
portion thereof as may from time to time devoted to uses associated with the
Building, and any adjacent or contiguous land which may from time to time be
devoted to such uses, together with such improvements as may from time to time
be erected upon or under any of such lands, including, but not limited to,
surface and subsurface parking areas, lighting facilities, utility lines,
sidewalks, covered walkways, underground walkways, driveways, plazas, courts,
sidewalks, retaining walls, access roads, truck serviceways, landscaped areas,
signs, and equipment.
ARTICLE 2
Term of Lease
-------------
2.01 - Term
- -----------
The term of this Lease shall be for TEN (10) years and THREE (3)
months.
2.02 - Term Commencement
- ------------------------
The term of this Lease shalt commence on completion of Landlord's work
which will be the 15th day of July 1999, and shall end on the 14th day of
October 2009; provided LL has substantially completed Landlord's work. If
Landlord has not substantially completed Landlord's work the term commencement
date is the date the Landlord has substantially completed Landlord's work. The
date of commencement of the term of this Lease is herein referred to as the
"Term Commencement Date." The word "term" shalt, unless otherwise expressly
provided to the contrary, be deemed to include the Initial and any renewal term.
2.03 - Rent Commencement
- ------------------------
The rent shall commence three (3) months after the term commencement
date.
2.04 - Condition of Premises
- ----------------------------
Tenant's taking possession shall be conclusive evidence as against
Tenant that the Premises were in good order and satisfactory condition when
Tenant took possession, subject to latent defects and punch list items. At the
expiration or sooner termination of this Lease, Tenant shalt return the Premises
broomclean and in as good condition as when Tenant took possession, ordinary
wear and loss by fire or other casualty excepted, failing which the Landlord may
restore the Premises to such condition and Tenant shall pay the cost thereof.
ARTICLE 3
Rent, Taxes, Lease
------------------
Year end Parking
----------------
3.01 - Fixed Annual Rent
- ------------------------
Tenant agrees to pay to Landlord at the offices of Landlord, or at
such other place designated by Landlord, without any prior demand therefor and
without any deduction or set-off whatsoever, except as set forth in this lease,
as fixed annual rent, the sum of $96,000.00 per annum (computed as follows:
8,000 square feet at $12.00 per square foot), payable in equal monthly
Installments of $8,000.00 each (the "fixed monthly rent"), payable in advance
upon the first day of each calendar month during the term hereof. The monthly
installments shall be deemed to have been paid upon such first day only if
actually received by such first day.
<PAGE>
If the term shall commence or expire upon a day other than the first
(or in the case of termination the last) day of a calendar month. Tenant shall
pay, upon the Term Commencement Date, and on the first day of the last calendar
month, a pro rata portion of the fixed monthly rent and additional rent for the
first and last fractional calendar month, respectively, prorated on a per diem
basis with respect to such fractional calendar month based upon the actual
number of days in those months.
The fixed annual rent shalt increase by two percent (2%) per annum commencing on
the first anniversary of the rent commencement.
3.02 - Taxes
- ------------
(a) Landlord shall in the first instance, during the term of this
Lease, pay to the public officers charged with the collection thereof, all
Building Taxes as hereinafter defined.
The term "Building Taxes" shall be deemed to include (i) all real
property taxes (which shall be deemed to include all property taxes and
assessments, water and sewer rents, rates and charges, parking and environmental
surcharges and any other governmental charges, general and special, ordinary and
extraordinary), which may be levied or assessed by any lawful authority against
the Building, the Building Common Areas and the Outside Common Areas. The amount
required to be paid by Landlord pursuant to any Payment-in-Lieu-of-Tax Agreement
between Landlord and any taxing authority having jurisdiction over the Building
shall, for purposes of this Lease, be deemed to be a real property tax
obligation and included within the definition of Building Taxes.
(b) Tenant shall at all times be responsible for and pay, before
delinquency, all municipal, county, state or federal taxes assessed against its
leasehold interest or any fixtures, furnishings, equipment, stock-in-trade or
other personal property of any kind owned, installed or used in or on the
Premises.
(c) Tenant shall not be responsible to pay for any building (real
estate) taxes.
3.03 - Past Due Rent
- --------------------
If, during the term of this Lease, Tenant shall fail to pay any installment
of the fixed monthly rent or additional rent or any other charge hereunder
within ten (10) days after the same is due and payable, then interest at the
rate of two percent (2%) per month shall accrue from and after the date on which
such sum was due and payable, and such interest, together with a late charge of
$50.00 for each past-due payment to cover the extra expense of handling such
delinquency, shall be paid to Landlord as additional rent and liquidated damages
at the time of payment of such past-due sum. Landlord shall have the right to
apply any payments made by Tenant first to any deficiency in the payment of the
interest and Late Charge provided for herein. Nothing contained in this
Paragraph 3.03 shall be construed to be a limitation of or in substitution of
Landlord's rights and remedies under Article 13 of this Lease.
3.04 - Definition of Lease Year and Partial Lease Year
- ------------------------------------------------------
The term "lease year" is defined to mean a period of twelve (12)
consecutive calendar months, the first full lease year commencing on the first
day of the first full calendar month following the Term Commencement Date (if
other than on the first day of a month), and each succeeding lease year
commencing on the anniversary of the commencement of the first full lease year.
Any portion of the term which is less than a lease year shall be deemed a
"partial lease year" and computations requiring proration shall be pro-rated on
a per diem basis using 365 day year.
<PAGE>
3.05 - Security Deposit
- --------------------------
Intentionally Deleted
ARTICLE 4
Construction, Financing and
----------------------------
Alterations
-----------
4.01 - Landlord's Obligation
- -------------------------------
Landlord has constructed the Premises for Tenant's use and occupancy
and Landlord shall have no further obligation to construct the Premises, except
as otherwise provided in ExhibIt "C" attached hereto and made a part hereof,
4.02 - Financing
- ------------------
If Landlord can obtain mortgage financing or refinancing only upon the
basis of modifications of the terms and provisions of this Lease, then Tenant
shall not unreasonably withold or delay it's consent thereto, provided, the
lease modifications referred to herein shall not relate to those provisions
pertaining to length of the term of the lease, amount of rent, additional rent,
and other charges.
In the event of a refinancing or a bona fide sale of the Building by
the Landlord. Tenant shall, promptly upon request therefor, provide to Landlord
a balance sheet, and a statement of income and expenses for Tenant's last fiscal
year, for which a statement has been prepared.
4.03 - Tenant's Obligation
- ------------------------------
Subject to Landlord's work, Tenant is leasing the Premises in AS IS
CONDITION and Tenant shall perform such work therein as is described in Exhibit
"D" attached hereto and made a part hereof.
4.04 - Alterations, Additions and Improvements
- ------ ------------------------------------------
Tenant shall not make any alterations, additions or improvements in or to
the Premises without the prior written consent of Landlord, which consent shall
not be unreasonably witheld or delayed, and then only by contractors approved by
Landlord which approval shall not be unreasonably witheld or delayed. Landlord
represents to Tenant and Tenant acknowledges the existence of certain covenants
affecting the Building and the Premises including those portions of the
architecturally or historically significant interior features of the Building
which may limit the construction of, or removal, as the ease may be, of certain
alterations, additions or improvements in or to the Premises, notwithstanding
the requirement of consent thereto by Landlord. If Landlord shall grant its
consent, Tenant shall provide Landlord with certificates evidencing the
insurance coverages and limits required by Exhibit "F" to the commencement of
any such work. Tenant shall not make nor permit any defacement, injury or waste
in, so or about said Premises or any part of the Building. Tenant agrees that
any improvements as may be installed within the Premises by Tenant pursuant to
this paragraph 4.04 shall, at the option of Landlord, remain as part of the
Premises at the expiration of the Lease or any extension or renewal thereof
except any equipment installed by Tenant that is a part of Tenant's operation.
Landlord, however, shall have the right to require Tenant to remove any
alterations, additions or improvements so made. Tenant shall, at its expense,
repair or cause to be repaired any damage to the Premises caused by such
removal.
<PAGE>
4.05 - Signs, Awnings and Canopies
- ----------------------------------
Tenant will not place or maintain or suffer to be placed or maintained
on or in an exterior door, wall or window of the Premises any sign, awning or
canopy, decoration, lettering or advertising matter without first obtaining the
written consent of Landlord thereto, which consent shall not be unreasonably
witheld or delayed. In the event such consent is received, then Tenant shall
maintain such sign, awning, canopy, decoration, lettering or advertising matter
as may be approved in good condition and repair at all times during the term of
this Lease.
ARTICLE 5
Use of Premises
---------------
5.01 - Use of Premises
- ----------------------
Tenant shall occupy and use the Premises during the term for its
telecommunication services, telephone switching stations and uses incidental
thereto and no other purpose whatsoever. Tenant further agrees to comply with
the rules and regulations set forth in Exhibit "E" attached hereto and made a
part hereof and with such reasonable modifications thereof and additions thereto
as Landlord may hereafter from time to time make for the Building, the Building
Common Areas or the Outside Common Areas. Landlord shall not be responsible for
the nonobservance by any other tenant of any said rules and regulations and
shall not be responsible to Tenant for any violation of the rules and
regulations, or the covenants or agreements contained in any other lease, by any
other tenant of the Building, or its agents or employees.
ARTICLE 6
Operating Costs
---------------
6.01 - Definitions
- ------------------
Not Applicable
6.02 - Tenant to Share Increases in Operating Costs
- ---------------------------------------------------
Not Applicable
ARTICLE 7
Energy Costs and
----------------
Water
-----
7.01 - Definitions
- ------------------
As used in this Lease, "Premises Electrical Energy Cost" shall mean
the cost of the electrical energy consumed by the lighting fixtures and
electrical convenience outlets within the Premises only. As used in this Lease,
"Energy Costs and Water" shall mean (i) the cost of all energy, including
electrical, oil, gas, solar, steam and any other energy and the cost of all
water used in or at the Building, the Building Common Areas and the Outside
Common Areas, excluding the Premises.
7.02 - Charge for Premises Electrical Energy Costs
- --------------------------------------------------
Tenant agrees to pay to Landlord, as additional rent, monthly within
ten (10) days after receipt of Landlord's estimate therefor (and thereafter on
the first day of each month without invoice), a charge for Premises Electrical
Energy Costs at a usage based upon plans and specifications for the Premises
during the hours set forth in Paragraph 20.01 of this Lease. Landlord reserves
the right to survey and calculate Tenant's connected electrical load and hours
of usage thereof from time to time during the term
<PAGE>
and to adjust the monthly charge herein set forth by the amount of electrical
energy usage exceeding the walls per square root and hours herein set forth.
Tenant agrees to pay to Landlord, as additional rent, the amount of such monthly
charge, as adjusted, within ten (10) days following Tenant's receipt of notice
of the adjustment and on the first day of each calendar month thereafter. A
check meter will be installed to provide an accurate measure of Tenant's
electrical usage.
ARTICLE 8 Repairs
- -----------------
8.01 - Repairs
- --------------
Tenant shall give to Landlord prompt written notice of any damage to, or
defective condition in any part of or appurtenance to the Building's plumbing,
electrical, heating, ventilating, air-conditioning or other systems serving,
located in, or passing through the Premises. Subject to the provisions of
Article 11 of this Lease, Tenant shall, at Tenant's own expense, keep the
Premises, including everything therein (except the heating and air-conditioning
systems), in good order, condition and repair during the term. Landlord shall
maintain the heating, ventilating and air-conditioning systems throughout the
Building (including the Premises) and the outside walls, outside windows,
floors, and roof of the Building in good order and repair. Repairs made by
Landlord required solely and directly due to negligence or fault of Tenant, its
contractors, agents or employees shall be made at Tenant's expense plus a 10%
administrative charge.
Tenant, at Tenant's expense, shall comply with all laws or ordinances, and
all rules and regulations of all governmental authorities and of all insurance
bodies at any time in force, applicable to the Premises or to Tenant's use
thereof, except that Tenant shall not hereby be under any obligation to comply
with any law, ordinance, rule or regulation requiring any structural alteration
of the Premises or with respect to the Premises, unless such alteration is
required by reason of a condition which has been created by, or at the instance
of, Tenant, or is required by reason of a breach of any of Tenant's covenants
and agreements hereunder. All repairs made by Tenant shall be made using
contractors approved by Landlord which approval shall not be unreasonably
withheld or delayed.
ARTICLE 9 Indemnity
- -------------------
9.01 - Indemnification by Tenant
- --------------------------------
Tenant does hereby Indemnify and shall defend Landlord (and such other
persons as are in privity of estate with Landlord) and save it harmless from and
against any and all claims, actions, damages, liability and expense in
connection with loss of life, personal injury and/or damage to property arising
from or out of any occurrence in, upon or at the Premises, from out of the
occupancy or use by Tenant of the Premises or any part thereof, or occasioned
wholly or in part by any act or omission of Tenant, its agents, contractors,
employees, lessees or concessionaires. In case Landlord and such other persons
as are in privity of estate with Landlord) shall, without fault on its part be
made a party to any litigation commenced by or against Tenant, then Tenant
agrees to protect and hold Landlord harmless and to pay all costs, expenses and
reasonable attorney's fees incurred or paid by Landlord in connection with such
litigation. Tenant agrees also to pay all costs, expenses and reasonable
attorney's fees that may be incurred or paid by Landlord in enforcing the
covenants and agreements in this Lease.
<PAGE>
ARTICLE 10 Insurance
- --------------------
10.01 - Liability Insurance
- ---------------------------
At all during the term of this Lease, Tenant shall, at its sole cost and
expense, for the mutual benefit of Landlord and Tenant, maintain personal
injury, death or property damage occurring on, in or about the Premises during
the term of this Lease in an amount of not less than Two Million Dollars
($2,000,000.00) with respect to personal injury, death or property damage and
including contractual indemnity coverage. In the event that Tenant shall not
have delivered to Landlord a policy or certificate evidencing such insurance
fifteen (15) days prior to the Term Commencement Date and fifteen (15) days
prior to the expiration dates of each expiring policy, Landlord upon ten (10)
days notice to Tenant may obtain such insurance as it may reasonably require to
protect its interest. The cost for such policies shall be paid by Tenant to
Landlord as additional rent upon demand, plus ten percent (10%) administrative
charge. All insurance policies required hereunder shall be issued by insurers of
recognized responsibility and licensed to conduct business in the State of New
York.
10.02 - All Risks and Difference in Condition Insurance
- -------------------------------------------------------------
At all times during the term of this Lease, Landlord shall keep the
Building Insured for the benefit of Landlord against loss or damage by risks now
or hereafter embraced by "All Risks," "Difference in Conditions", and loss of
rent coverages, and against such other risks as Landlord from time to time
reasonably may designate in amounts sufficient to prevent Landlord from becoming
a coinsurer.
In any event, the amount applicable to "All Risks" shall be ninety percent
(90%) of the then full replacement cost (being the cost of replacing the
Building, exclusive of the costs of excavations and footings below the lowest
grade level). Such full replacement cost shall be determined From time to time
(but not more frequently than once in any twelve (12) calendar months) by an
appraiser, architect or other person or firm designated by Landlord.
The parties agree that Landlord shall not provide any insurance coverage
for Tenant's merchandise, trade fixtures, furnishings, equipment and other
personal property of Tenant.
10.03 - Insurance on Common Areas
- -----------------------------------
At all times during the term of this Lease, Landlord shall keep the
Common Areas insured for personal injury and property damage liability, "All
Risk" property coverage, "Difference in Conditions," workers' compensation,
employee's liability and any other casualty or risk insurance which Landlord
or Landlord's insurance carrier deems necessary or appropriate.
10.04 - Waiver of Subrogation
- -------------------------------
Each of the parties shall have a waiver of subrogation clause attached to,
and made a part of, its insurance policy or policies in the following or
equivalent form:
Waiver of Subrogation Clause
This insurance shall not be invalid should the insured waive in writing,
prior to a loss, any or all rights of recovery against any party for loss
occurring to the property described herein. Notice is hereby accepted that the
insured has agreed in writing, prior to a loss, to waive any and all of its
rights of recovery from (the Landlord or the Tenant as the case may be).
<PAGE>
ARTICLE 11 Damage by Fire Theft and Water Damage
- ------------------------------------------------
11.01 - Untenantability
- -----------------------
If the Premises are made untenantable in whole or in part by fire or other
casualty, the fixed monthly rent, additional rent and other charges, until
repairs shall be made or the Lease terminated as hereinafter provided, shall be
apportioned on a per diem basis according to the part or the Premises which is
usable by Tenant. If such damage shall be so extensive that the Premises cannot
be restored by Landlord within a period of nine (9) months, Landlord or Tenant
shall have the right to cancel this Lease by notice to the other given at any
time within thirty (30) days after the date of such damage. If a portion of the
Building other than the Premises shall be so damaged that in the reasonable
opinion of Landlord the Building should be restored in such a way as to alter
the Premises materially, Landlord may cancel this Lease by notice to Tenant
given at any time within thirty (30) days after the date of such damage. In the
event of giving effective notice pursuant to this paragraph, this Lease and the
term and the estate hereby granted shall expire on the date fifteen (15) days
after the giving of such notice as fully and complete as if such date were the
date hereinbefore set for the expiration of the term of this Lease. If this
Lease is not so terminated, Landlord will promptly, (talking into account the
time necessary to effectuate a satisfactory settlement with Landlord's insurance
company) restore the damage insured by Landlord pursuant to Paragraph 10.02.
Tenant hereby expressly waives the provisions of Section 227 of the New York
Real Property Law and agrees that the foregoing provisions of this Paragraph
11.01 shall govern and control in lieu thereof.
11.02 - Loss or Property and Water Damage
- -----------------------------------------
Landlord shall not be responsible to Tenant for any loss or theft or damage
of or to any property left with any employee of Landlord, however occurring.
Landlord shall net be liable for any damage caused by water, rain, snow or ice,
or by breakage, stoppage or leakage of water, gas, heating, air conditioning,
sewer or other pipes or conduits, or arising from any other cause, in, upon,
about or adjacent to the Premises, or the Building in which said Premises are
located.
ARTICLE 12 Eminent Domain
- -------------------------
12.01 - Eminent Domain
- --------------------
(a) In the event that title to the whole or any part of the Premises shall
be lawfully condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title and Landlord shall be entitled to
receive the entire award for the real property. Tenant hereby assigning to
Landlord Tenant's interest therein, if any, provided Tenant may make a claim for
the value of its property and Tenant's expenses incurred.
(b) In the event that title to a part of the Building other than the
Premises shall be so condemned or taken and if in the opinion of Landlord, the
Building should be restored in such a way as to alter the Premises materially,
Landlord may terminate this Lease and the term and estate hereby granted by
notifying Tenant of such termination within sixty (60) days following the date
of vesting of title, and this Lease and the term and estate hereby granted shall
expire on the date specified in the notice of termination, which date shall be
not less than sixty (60) days after the giving of such notice, as fully and
completely as if such date were the date hereinbefore set for the expiration of
the term of this Lease, and the fixed monthly rent, additional rent, and other
charges hereunder shall be apportioned as if such
<PAGE>
date. In such event, Tenant shall not be entitled to any portion of Landlord's
award hereunder, if any, nor shall Tenant have any claim against Landlord for
the value of the unexpired portion of the term.
ARTICLE 13
Bankruptcy and
--------------
Default Provisions
------------------
13.01 - Conditional Limitations
- -------------------------------
This Lease and the demised term are subject to the limitation that if, at
any time prior to or during the term, any one or more of the following events
(herein called an "event of default") shall occur, that is to say:
(a) If Tenant shall make an assignment for the benefit of its creditors; or
(b) If the leasehold estate hereby created shall be taken on execution or
by other process of law; or
(c) If any petition shall be filed against Tenant in any court, whether or
not pursuant to any statute of the United States or of any State, in any
bankruptcy, reorganization, composition, extension, arrangement, or insolvency
proceedings, and Tenant shall thereafter be adjudicated bankrupt, or such
petition shall be approved by the court, or the court shall assume jurisdiction
of the subject matter and if such proceedings shall not be dismissed within
thirty (30) days after the institution of the same; or if any such petition
shall be so filed by the Tenant; or
(d) If in any proceedings a receiver or trustee be appointed for Tenant's
property, and such receivership or trusteeship shall not be vacated or set
aside within thirty (30) days after the appointment of such receiver or
trustee; or
(e) If Tenant shall vacate or abandon the Premises and permit the same to
remain unoccupied or closed for business for more than thirty (30) days; or
(f) If Tenant shall fail to pay any installment of the fixed monthly rent
or any part thereof when the same shall become due and payable, and such failure
shall continue for ten (10) days after notice from Landlord; or
(g) If Tenant shall fail to pay any other charge required to be paid by
Tenant hereunder, and failure shall continue for ten (10) days after notice
thereof from Landlord to Tenant; or
(h) If Tenant shall fail to perform or observe any other requirement of
this Lease (not hereinbefore in this paragraph specifically referred to) on the
part of Tenant to be performed or observed, and such failure shall continue for
thirty (30) days after notice thereof from Landlord to Tenant, provided if not
susceptible of cure, Tenant not in default if it commences cure within thirty
(30) days and diligently pursues cure; then, upon the happening of any one or
more of the aforementioned events of default, and the expiration of the period
of time prescribed above, Landlord may give Tenant a notice (hereinafter
called "notice of termination") of its intention to end the term of this Lease
at the expiration of five (5) days from the date of service of such notice of
termination, and at the expiration of such five (5) days, provided the default
has not been cured, this Lease and the term hereof, as well as all of the right,
title and interest of Tenant hereunder, shall wholly cease and expire in the
same manner and with the same force and effect as if the date of expiration of
such five (5) day period were the date originally specified herein for the
expiration of this Lease and the demised term, and Tenant shall then
<PAGE>
quit and surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
13.02 - Landlord's Remedies
- ---------------------------
(a) If this Lease shall be terminated as in Paragraph 13.01 provided,
Landlord or Landlord's agents or employees may immediately or at any time
thereafter re-enter the Premises and remove therefrom Tenant, its agents,
employees, licensees, and any subtenants and other persons, firms or
corporations, and all or any of its or their property therefrom either by
summary dispossess proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable to indictment, prosecution or
damages therefor, and repossess and enjoy said Premises, together with all
alterations, additions and improvements thereto.
(b) In case of any such termination, re-entry or dispossess by summary
proceedings or otherwise, the rents and all other charges required to be paid up
to the time of such termination, re-entry or dispossess, shall be paid by
Tenant and Tenant shall also pay to Landlord all reasonable expenses which
Landlord may then or thereafter incur for legal expenses, attorneys' fees,
brokerage commissions and all other costs paid or incurred by Landlord for
restoring the Premises to good order and condition and for altering and
otherwise preparing the same for reletting and for reletting thereof. Landlord
may, at any time and from time to time, relet the Premises, in whole or in
part, for any rental then obtainable either in its own name or as agent of
Tenant, for a term of terms which, at Landlord's option, may be for the
remainder of the then current term of this Lease or for any longer or shorter
period.
(c) If this Lease be terminated as aforesaid. Tenant nevertheless covenants
and agrees, notwithstanding any entry or reentry by Landlord whether by summary
proceedings, termination, or otherwise, to pay and be liable for on the days
originally fixed herein for the payment thereof, amounts equal to the several
installments of fixed monthly rent, additional rent and other charges as they
would, under the terms of this Lease, become due if this Lease had not been
terminated or if Landlord had not entered or reentered as aforesaid, and
whether the Premises be relet or remain vacant in whole or in part or for a
period less than the remainder of the term, and for the whole thereof, but in
the event the Premises be relet by Landlord. Tenant shall be entitled to a
credit in the net amount of rent received by Landlord in reletting the Premises
after deduction of all reasonable expenses and costs incurred or paid as
aforesaid in reletting the Premises and in collecting the rent in connection
therewith.
(d) Tenant hereby expressly waives, so far as permitted by law, the service
of any notice of Intention to re-enter provided for in any statute, or of the
institution of legal proceedings to that end, and Tenant, for and on behalf of
itself and all persons claiming through or under Tenant also waives any and all
right of redemption or re-entry or repossession under present or future laws
including specifically but without limitation Section 761 of the New York Real
Property Actions and Proceedings law including any amendments hereafter, or to
restore the operation of this Lease. In case Tenant shall be dispossessed by a
judgment or by warrant of any court or judge or in case of re-entry or
repossession by Landlord or in case or any expiration or termination of this
Lease, Landlord and Tenant, so far as permitted by law, waive and will waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant.
Tenant's use or occupancy of said Premises, or any claim or injury or damage.
The terms "enter," "entry," or "re-entry" as used in this Lease are not
restricted to their technical legal meaning.
(e) No failure by Landlord to insist upon the strict performance of any
covenant, agreement, term or condition of this Lease or to
<PAGE>
exercise any right or remedy consequent upon a breach thereof, and no acceptance
of full or partial rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of such covenant, agreement, term
and condition. No waiver of any breach shall affect or alter this Lease, but
each and every covenant, agreement, term and condition of this Lease shall
continue in full force and effect with respect to any other than existing or
subsequent breach thereof. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly installments of rent or additional rent
stipulated in this Lease shall be deemed to be other than on account of the
earliest stipulated rent nor shall any endorsement or statement on any check or
letter accompanying a cheek for payment of rent be deemed any accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or to pursue any other
remedy provided by this Lease.
(f) In the event of any breach or threatened breach by Tenant of any of the
covenants, agreements, terms or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise.
(g) Each right and remedy of Landlord provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE 14
Mechanic's Liens
- -----------------
14.01 - Mechanic's Liens
- ------------------------
Tenant agrees to pay when due all sums of money that may become due for, or
purporting to be due for, any labor, services, materials, supplies, or equipment
alleged to have been furnished or to be furnished to or for Tenant in, upon or
about the Premises and/or Landlord's interest therein. If any mechanic's lien
shall be filed against the Premises or the Building based upon any act of Tenant
or anyone claiming through Tenant, Tenant, after notice thereof from Landlord
(or any person in privity of estate with Landlord) forthwith shall commence such
action by bonding, deposit, payment or otherwise, as will remove or satisfy such
lien within fifteen (15) days. In the event Tenant does not remove or satisfy
said lien with said fifteen (15) day period, Landlord shall have the right to do
so by posting a bond or undertaking and Tenant agrees to reimburse Landlord for
any and all expenses incurred by Landlord in connection therewith within five
(5) days after receipt by Tenant of Landlord's invoice therefor. These expenses
include, but are not limited to filing fees, legal fees and bond premiums.
However, nothing in this Article 14 shall be deemed or construed as (a)
Landlord's consent to any person, firm or corporation for the performance of any
work or services or the supply of any materials to the Premises, or (b) giving
Tenant or any other person, firm or corporation any right to contract for or to
perform or supply any work, services or materials that would permit or give rise
to a lien against the Premises or the Building.
ARTICLE 15
Mortgages, Assignments, Subleases and Transfers of Tenant's Interest
- --------------------------------------------------------------------
15.01 - Limitation on Tenant's Rights
- -------------------------------------
Except as hereinafter otherwise provided, during the term of this Lease, In
each case, without the prior written consent of Landlord first had
<PAGE>
and received, which consent shall not be unreasonably withheld or delayed,
neither this Lease nor the interest of Tenant In this Lease, or in any sublease,
or in any rentals under any sublease shall be sold, assigned, transferred,
mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation
of law or otherwise, nor shall the Premises be sublet.
It is understood and agreed between the parties that, should Tenant request
Landlord's consent to a proposed assignment of this Lease or a subletting of
all or any portion of the Premises, Landlord will, in addition to any other
requirements which may be imposed as conditions to Landlord's consent, require
that Tenant execute and deliver to Landlord an agreement whereby Tenant
obligates itself, as additional rent, to pay over to Landlord fifty percent
(50%) of all net rental profits, additional rent and any other consideration
paid by such assignee or sublessee to Tenant, excluding any amount paid for
Tenant's equipment and personal property, pursuant to such assignment or
sublease which is in excess of rent and additional rent due and payable from
time to time from Tenant to Landlord pursuant to this Lease.
No consent by Landlord to an assignment of this Lease and no assignment
made as hereinafter permitted, shall be effective until there shall have been
delivered to Landlord (a) an agreement, in recordable form, executed by Tenant
and the proposed assignee, wherein and whereby such assignee assumes due
performance of the obligation on Tenant's part to be performed under this Lease
to the end of the term hereof, and (b) the written consent of such assignment of
the holder of any fee or leasehold mortgage to which this Lease is then subject
shall have been obtained and delivered to Landlord if so required by the terms
of such fee or leasehold mortgage.
In the event Tenant sublets or assigns this lease the Tenant will be
released from its obligation and the sub-tenant or assignee will assume all
obligations for this lease.
Tenant has the right to assign this lease without consent to affiliates,
subsidiaries or successors, assuming the assignee has equal or greater
financial strength as Tenant. Tenant must still notify Landlord of such
potential assignment.
Any assignment, mortgage, pledge, sublease or hypothecation of this Lease,
or of the interest of Tenant hereunder, without full compliance with any and all
requirements set forth in this Lease shall be a breach of this Lease and a
default hereunder.
15.02 - Effect of Landlord's Consent
- ------------------------------------
Any consent Landlord sale, assignment, sublease, mortgage, pledge,
hypothecation, or transfer of this Lease, shall apply only to the specific
transaction thereby authorized and shall not relieve Tenant from the requirement
of obtaining prior written consent of Landlord to any further sale, assignment,
sublease, mortgage, pledge, hypothecation, or transfer of this Lease. In
instances where the consent of Landlord is required hereunder to any proposed
assignment or sublease of this Lease, or to the mortgaging, pledging or
hypothecation of this Lease, contemporaneously with the request of Tenant
therefor Tenant shall submit in writing information reasonably sufficient to
enable Landlord to decide with respect thereto. Landlord shall reply to Tenant
within ten (10) days after receipt of the request as aforementioned.
With respect to any of the consents requested by Tenant under the
provisions of this Article 15, whether or not the Landlord shall have consented
thereto, Tenant shall pay to the Landlord all reasonable counsel fees and other
out-of-pocket expenses incurred by the Landlord in connection therewith.
<PAGE>
ARTICLE 16 Subordination of Lease
- ---------------------------------
16.01 - Subordination to Mortgages and Ground Leases/Non-Disturbance
- --------------------------------------------------------------------
This Lease and all the rights of Tenant hereunder are and shall be
automatically subject and subordinate to the lien of any ground or underlying
leases and to any mortgage or mortgages, whether fee or leasehold mortgages,
which may now or hereafter affect the Premises or the Building or the land under
the Building and to all renewals, modifications, consolidations, replacements
and extensions thereof, and advances thereunder. In order to confirm such
subordination, Tenant shall execute and deliver such instruments as may be
requested by any ground lessor or mortgagee and in the event Tenant fails to
do so within ten (10) days after written demand therefor, Tenant does hereby
make, constitute and irrevocably appoint Landlord as its attorney-in-fact to
execute same in Its name and on its behalf.
Landlord will use its best efforts to provide Tenant with a non-
disturbance agreement from any existing or future lender of the building.
16.02 - Other Agreed Matters
- --------------------------------
Tenant will not do, suffer or permit any act, happening or occurrence or
any condition to occur or remain which may be prohibited under the terms or
provisions of any ground or underlying lease or mortgage to which this Lease is
subject or which will create a default thereunder except that Tenant shall not
be obligated to pay the principal indebtedness or any installment thereof or
interest thereon. Landlord represents that Tenant's use hereunder is not
prohibited.
So long as any such mortgage or lease shall remain a lien on the Premises,
Tenant agrees simultaneously with the giving of any notice of default to
Landlord which is required to be given by this Lease to give a duplicate copy
thereof to any mortgagee or ground lessor, notice of whose name and address have
been given to Tenant. Further, Tenant agrees that if Landlord defaults in the
performing of any of Its covenants under this Lease and if such default allows
Tenant to cancel or surrender said Lease, the mortgagee or ground lessor may
cure said default with the same effect as if cured by Landlord, and if
necessary, enter upon the Premises for the purpose of curing any such default,
provided that the mortgagee or ground lessor must cure the default within the
time which Landlord is obligated to cure such default In the Lease. The giving
of any such notice to Landlord shall not be properly given under the terms of
this Lease and shall not be of any force and effect until a duplicate copy
thereof shall also have been given to the mortgagee or ground lessor pursuant to
this paragraph.
ARTICLE 17 Entry to Premises
- ----------------------------
17.01 - Entry to Premises by Landlord
- -------------------------------------
Provided that at all times Landlord will minimize the interference with
Tenant's business, Landlord shall have the right to enter the Premises at all
reasonable times for the purpose of:
(a) Inspecting the same, and
(b) making any repairs to the Premises and performing any work therein that
may be necessary by reason of Tenant's default under the terms of this Lease
continuing beyond the applicable periods of grace,
<PAGE>
(c) exhibiting the Premises for the purpose of sale, ground lease or
mortgage, and
(d) exhibiting the Premises to prospective tenants within six (6) months
prior to the expiration of the term hereof.
ARTICLE 18 Notices and Certificates
- -----------------------------------
18.01 - Notices
- ---------------
Any notice. statement, certificate, request or demand required or permitted
to be given in this Lease shall be in writing sent by recognized overnight
courrier service providing for a receipt upon delivery, or by registered or
certified mail, postage prepaid, return receipt requested, addressed, as the
case may be, to Landlord at the mailing address shown at the beginning of this
Lease, and to Tenant at the address shown at the beginning of this Lease or to
such other addresses as Landlord or Tenant shall designate in the manner herein
provided. Such notice, statement, certificate, request or demand shall be deemed
to have been given one business day after the date deposited with such courrier
or three business days after being mailed as aforesaid in any post office or
branch post office regularly maintained by the United States Government, except
for notice of change of address or revocation of a prior notice, which shall
only be effective upon receipt.
At any time or times when Tenant's interest herein shall be vested in
more than one person, firm or corporation, jointly in common or in severally, a
notice given by Landlord to any one such person, firm or corporation shall be
conclusively deemed to have been given to all such persons, firms or
corporations. Any notice by Tenant pursuant to the provisions hereof shall be
void and ineffective unless signed by all such persons, firms and
corporations, unless all such persons, firms and corporations shall have
previously given notice to Landlord, signed by each of them designating and
authorizing one or more of them to give the notice referred to, and such notice
shall then be unrevoked by any notice to Landlord.
Notices must be mailed to the following addresses and shall only be sent to
another address if requested in writing by party changing address:
TENANT: Community Networks, Inc
Attn: Scott Matukas
45-18 Court Square
Long Island City, NY 11101
LANDLORD: 224 Harrison Street Associates
Attn: John Funicleilo
4 Clinton Square
Syracuse, NY 13202
18 02 - Certificate by Tenant
- -----------------------------
Within fifteen (15) days after request by Landlord, Tenant from time to
time and without charge shall deliver to Landlord or to a person, firm or
corporation, specified by Landlord, a duly executed and acknowledged instrument
certifying:
(a) that this Lease is unmodified and in full force and effect, or if
there has been any modification, that the Lease is in full force and effect, as
modified, and identifying the date of any such modification; and
(b) whether Tenant knows or does not know, as the case may be, of any
default by Landlord in the performance by Landlord of the terms,
<PAGE>
covenants, and conditions of this Lease, and specifying the nature of such
defaults, if any; and
(c) whether or not there are any then existing set-offs or defenses by
Tenant to the enforcement by Landlord of the terms, covenants and conditions
of this Lease and any modification thereof, and if so, specifying them; and
(d) the date to which the fixed monthly rent has been paid.
ARTICLE 19
Covenant of Outlet
------------------
Employment
----------
19.01 - Covenant of Quiet Enjoyment
- -----------------------------------
Tenant, subject to the terms and provisions of this Lease, on payment of
the rent and observing, keeping and performing all the terms and provisions of
this Lease on its part to be observed, kept and performed shall lawfully,
peaceably and quietly have, hold and enjoy the Premises during the term hereof
on and after the Term Commencement Date without hindrance or ejection, by
Landlord and any persons lawfully claiming under Landlord, subject nevertheless
to terms and conditions of this Lease and to any ground or underlying lease
and/or mortgage(s): but it is understood and agreed that this covenant, and
any and all covenants of Landlord contained in this Lease shall be binding
upon Landlord and its successors only with respect to breaches occurring during
its and their respective ownership of Landlord's interest hereunder.
ARTICLE 20
Services
--------
20.01 - Services
- ----------------
During the term of this Lease, while Tenant is not in default hereunder
beyond the applicable notice and cure period hereunder, w Landlord shall furnish
to the Premises electricity, lighting, heating, ventilating, air conditioning,
elevator service, and water to the plumbing fixtures, if any, on Monday through
Friday from 8:00 A.M. to 6:00 P.M. and on Saturday from 9:00 AM. to 1:00 P.M.,
principal legal holidays excepted. The following temperature ranges shall be
maintained during the term of this lease: from 73 degrees to 75 degrees when
outside temperatures are 80 degrees or higher, and settings shall range from
70 degrees to 73 degrees when outside temperatures are 32 degrees or lower. Use
of these services by Tenant outside these days and hours could result in an
additional charge to Tenant which shall be paid by Tenant to Landlord, as
additional rent, within fifteen (15) days following the receipt of an invoice.
Landlord shall also furnish janitorial service consisting of cleaning floors and
removing waste paper each business day. Tenant shall have twenty-four (24) hour
per day, seven (7) day per week access to the building and tenant premises.
20.02 - Interruption of Service
- -------------------------------
No diminution or abatement of rent or other compensation shall be claimed
or allowed for inconvenience or discomfort arising from the making of repairs or
improvements to the Building or its appurtenances. There shall be no diminution
or abatement of rent or any other compensation for interruption or curtailment
of any service or utility herein expressly or impliedly agreed to be furnished
by Landlord when such interruption or curtailment shall be due to accident,
alterations, repairs desirable or necessary, or to inability or difficulty in
securing supplies or labor, or to some other cause not gross negligence on the
part of Landlord. No such interruption or curtailment shall be deemed a
constructive eviction. Tenant
<PAGE>
agrees that Landlord shall not be responsible for interruption of utility
service caused by any utility company or governmental regulatory agency.
ARTICLE 21
Certain Rights
--------------
Reserved to Landlord
----------------------
21.01 - Certain Rights Reserved to Landlord
- -------------------------------------------
Landlord reserves the following rights:
(a) To name the Building and to change the name or street address of the
Building;
(b) To install and maintain a sign or signs on the exterior or interior or
the Building:
(c) To designate all sources furnishing sign painting, and lettering, ice,
drinking water, towels, toilet supplies, shoe shining, vending machines, mobile
vending service, catering, and like services used on the Premises;
(d) During the last ninety (90) days of the term, if during or prior to
that time Tenant vacates the Premises, to decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy, including the placing of a
notice of reasonable size on or in the Premises offering said Premises "For
Rent" or "For Lease", all without affecting Tenant's obligation to pay rental
for the Premises;
(e) To constantly have pass keys to the Premises;
(f) At any time in the event of an emergency, or otherwise at reasonable
times, to take any and all measures, including inspections, repairs,
alterations, additions and improvements to the Premises or to the Building, as
may be necessary or desirable for the safety, protection or preservation of the
Premises or the Building or the Landlord's interests, or as may be necessary or
desirable in the operations or improvement of the Building or in order to comply
with all laws, orders and requirements of governmental or other authority: and
(g) At any reasonable time and from time to time throughout the term of the
Lease show the Premises to persons wishing to purchase the Building.
Nothing in this Lease shall imply any duty on the part of the Landlord to do
work which, under any of the provisions of this Lease Tenant may be required to
perform, and the performance thereof by Landlord shall not constitute a
constructive eviction nor a waiver of Tenant's default in failing to so perform.
In the event Landlord performs or causes any such work to be performed, Tenant
shall pay the cost thereof to Landlord forthwith as additional rent upon receipt
of Landlord's invoice therefor. No exercise by Landlord of any rights provided
in this paragraph 21.01 or elsewhere in this Lease shall entitle Tenant to any
damages for inconvenience, disturbance, loss of business or other damage to
Tenant occasioned thereby nor to any abatement of rent or additional rent.
ARTICLE 22
Miscellaneous
-------------
Provisions
----------
22.01 - Holdover
- ----------------
Should Tenant continue to occupy the Premises after the expiration of the
term hereof or after a forfeiture incurred, whether with or against the consent
of Landlord, such tenancy shall be from month-to-month,
<PAGE>
and such month-to-month tenancy shall be under all the terms, covenants and
conditions of this Lease, and at double the rent reserved herein. However, if
Tenant notifies Landlord in writing upon three months prior notice, Tenant may
holdover for three months at the Tenant's then escalated rent. Tenant shall pay
125% of their then escalated rent thereafter.
22.02 - Limitation on Personal Liability
- ----------------------------------------
(a) It is understood and agreed that Tenant shall look solely to the estate
and property of Landlord in the Building for the satisfaction of Tenant's
remedies for the collection or a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default or breach by
Landlord with respect to any of the terms, covenant, and conditions of this
Lease to be observed and/or performed by Landlord and any other obligation of
Landlord created by or under this Lease and no other property or assets of
Landlord or of its partners, beneficiaries, co-tenants, shareholders, or
principals (as the case may be) shall be subject to levy, execution or other
enforcement procedures.
(b) The term "Landlord," as used in subparagraph 22.02(a) above and
throughout this Lease, so far as covenants and agreements on the part or the
Landlord are concerned, shall be limited to mean and include only the owner or
owners at the time in question of the Building and Lease. Further, in the event
of any transfer or transfers of the title to the said Lease and/or the Building,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor), including each of its partners, beneficiaries, co-tenants,
shareholders, or principals (as the case may be), shall, be automatically freed
and relieved from and after the date of such transfer and conveyance of all
liability as respects the performance of any covenants and agreements on the
part of Landlord. Landlord or the grantor shall turn over to the grantee all
monies and security, if any, then held by Landlord or such grantor on behalf of
Tenant and shall assign to such grantee all right, title and interest of
Landlord or such grantor thereto, it being intended that the covenants and
agreements contained in this Lease on the part of Landlord to be performed
shall, subject as aforesaid, be binding on Landlord, its successors and assigns.
22.03 - No Representations by Landlord
- --------------------------------------
Landlord or Landlord's agents have made no representations or promises
with respect to the Building, the land upon which the Building is erected or
the Premises except as herein expressly set forth in the provisions of this
Lease.
22.04 - Lease Binding
- ---------------------
All covenants in this Lease which are binding upon Tenant shall be
construed to be equally applicable to and binding upon Tenant's agents,
employees and others claiming the right to be in the Premises or in the Building
through or under Tenant.
If more than one individual, firm or corporation shall join as Tenant,
the singular context shall be construed to be plural wherever necessary and the
covenants of Tenant shall be the joint and several obligations of each party
signing as Tenant, and, when the parties signing as Tenant are partners, shall
be the joint and several obligations of the firm and of the individual members
thereof..
22.05 - Vaults, Vault Space, Etc.
- --------------------------------
No vaults, vault space or space not within the property line of the
Building is leased hereunder, anything contained in or indicated on any sketch,
blueprint or plan, or anything contained elsewhere in this Lease to the contrary
notwithstanding. Landlord makes no representations as to the location of the
property line of the Building. All vaults and vault space and all
<PAGE>
space not within the property line of the Building, which Tenant may be
permitted to use and/or occupy, is to be used and/or occupied under a revocable
license, and if any such license be revoked, or if the amount of such space be
diminished or required by any Federal, State, Municipal Authority or public
utility, Landlord shall not be subject to any liability nor shall Tenant be
entitled to any compensation or diminution or abatement of rent, nor shall such
revocation, diminution or requisition be deemed constructive or actual
eviction. Any fee or charge of municipal authorities for such vault shall be
paid by Tenant.
22.06 - Failure to Give Possession
- ----------------------------------
If Landlord shall not be able to turn space over substantially completed
to Tenant by July 15, 1999, then for each day of delay at substantial completion
Tenant shall receive three (3) additional days of rent abatement.
22.07 - Force Majeure
- ---------------------
The period of time during which either party is prevented or delayed, in
the performance or the making of any improvements or repairs or fulfilling any
obligation other than the payment of fixed monthly rent or additional rent
required under this Lease due to unavoidable delays caused by fire, catastrophe,
strikes or labor trouble, civil commotion, Acts of God or the public enemy,
governmental prohibitions or regulation or inability to obtain materials by
reason thereof, or other causes beyond such party's reasonable control, shall be
added to such party's time for performance thereof, and such party shall have no
liability by reason thereof.
22.08 - Attornment by Tenant
- ------------------------------
If at any time during the term of this Lease Landlord hereunder shall be
the holder of a leasehold estate covering premises which include the Premises
and if such leasehold estate shall be cancelled or otherwise terminated prior to
the expiration date thereof and prior to the expiration of the term of this
Lease or in the event of the surrender thereof whether voluntary, involuntary or
by operation of law, Tenant shall make full and complete attornment to the
lessor of such leasehold estate for the balance of the term of this Lease upon
the same covenants and conditions as are contained herein so as to establish
direct privity between such lessor and Tenant and with the same force and effect
as though this Lease was made directly from such lessor to the Tenant. Tenant
shall make all rent payments thereafter directly to such, lessor. In the event
any proceedings are brought for the foreclosure of, or in the event of
conveyance by deed in lieu of foreclosure of, or in the event of exercises of
the power of sale under any mortgage or deed or trust made by Landlord covering
the leases Premises, or in the event Landlord sells, conveys or otherwise
transfers its interest in the Building or any portion thereof containing the
leased Premises, Tenant shall attorn to and hereby covenants and agrees to
execute an instrument in writing reasonably satisfactory to the new owner
whereby Tenant attorns to such successor in interest and recognizes such
successor as the Landlord under this Lease.
22.09 - Landlord May Pay Tenant's Obligations
- ---------------------------------------------
All costs and expenses which Tenant assumes or agrees to pay under the
provisions of this Lease shall at Landlord's election be treated as additional
rent, and in the event of nonpayment, Landlord shall have all the rights and
remedies herein provided for in case of nonpayment of rent or of a breach of
covenant. If Tenant shall default, beyond the applicable notice and cure period,
in making any payment required to be made by Tenant (other than the payment of
rent as provided by Article 3 above) or shall default in performing any term,
covenant or condition of this Lease on the part of Tenant to be performed which
shall involve the expenditure of money by Tenant, Landlord at Landlord's option
may, but shall not be obligated to,
<PAGE>
make such payment or, on behalf of Tenant, expend such sum as may be necessary
to perform and fulfill such term, covenant or condition, and any and all sums so
expended by Landlord, with interest thereon at the rate of one and one-half
percent (1-1/2%) per month from the date of such expenditure, shall be and be
deemed to be additional rent, in addition to the rent provided in Article 3 and
shall be repaid by Tenant to Landlord on demand, but no such payment or
expenditures by Landlord shall be deemed a waiver of Tenant's default nor shall
it affect any other remedy of Landlord by reason of such default.
22.10 - Effect of Captions
- --------------------------
The captions or legends on this Lease are inserted only for convenient
reference or identification of the particular paragraphs. They are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Lease, or any paragraph or provision thereof.
22.11 - Tenant Authorized to Do Business in New York
- ----------------------------------------------------
Tenant represents and covenants that it is and throughout the term of this
Lease shall be authorized to do business in the State of New York.
22.12 - Execution in Counterparts
- ---------------------------------
This Lease may be executed in one or more counterparts, any one or all of
which shall constitute but one agreement.
22.13 - Memorandum of Lease
- ---------------------------
Tenant agrees, if requested by Landlord, to execute a Memorandum of Lease
in recordable form pursuant to Section 291-c of the Real Property Law. of the
State of New York.
22.14 - Law Governing, Effect and Gender
- ----------------------------------------
This Lease shall be construed in accordance with the laws of the State of
New York and shall be binding upon the parties hereto and their respective legal
representatives, successors and assigns except as expressly provided otherwise.
Use of the neuter gender shall be deemed to include the masculine or feminine,
as the sense requires. Any reference to successors and assigns of Tenant is not
intended to constitute a consent to any assignment by Tenant but has reference
only to those Instances in which Landlord may later give consent to a particular
assignment as required by the provisions of Article 15 hereof.
22.15 - Amendments
- ------------------
The parties hereto mutually agree that so long as a mortgage or any
extension thereof shall be a lien upon the Premises, they will not reduce the
rents from that provided for in this Lease, provide for payments of rents prior
to the time herein provided for, nor terminate said Lease, except as set forth
herein, prior to the end of the term, except as otherwise provided in this
Lease, without first obtaining the consent of the mortgagee in writing, and that
any such proposed modification or termination without said mortgagee's consent
shall be void as against said mortgagee.
22.16 - Complete Agreement
- --------------------------
This Lease contains and embraces the entire Agreement between the parties
hereto and it or any part of it may not be changed, altered, modified,
limited, terminated, or extended orally or by any agreement between the parties
unless such agreement be expressed in writing, signed and acknowledged by the
parties hereto, their legal representative, successors or assigns, except as may
be expressly otherwise provided herein.
<PAGE>
22.17 - Invalidity of Particular Provisions
- -------------------------------------------
If any term or provision of this Lease or the application thereof to any
person or circumstances shall to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
22.18 - Execution of Lease by Landlord
- --------------------------------------
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of, or option for, the Premises
and this document becomes effective and binding only upon the execution and
delivery hereof by Landlord and by Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are incorporated
herein and may be modified or altered only by agreement in writing between
Landlord and Tenant, and no act or omission of any employee or other agent of
Landlord shall alter, change or modify any of the provisions hereof.
22.19 - Relationship of the Parties
- -----------------------------------
Nothing contained herein shall be deemed or construed by the parties hereto
nor by any third party as creating the relationship of principal and agent or
of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent nor any
other provision herein contained, nor any acts of the parties hereto, shall be
deemed to create any relationship between the parties hereto other than Landlord
and Tenant.
22.20 - Renewal Option
- ----------------------
Tenant shall have two (2) consecutive five (5) year lease renewal options
for up to 100% of Tenant's space then under lease at the lesser of 90% of fair
market or the then escalated rate. At the exercise of each option, the space
will be repainted and recarpeted at Landlord's expense. Replacement costs
including Landlord concessions and marketing time will be utilized to determine
fair market rent in each renewal period.
22.21 - Existing Tenant Obligation
- ----------------------------------
Landlord shall assume Community Network's, Inc. current lease obligations
at 205 South Salina Street, Syracuse, NY from the time of rent commencement at
224 Harrison Street, Community Networks current lease at 205 S.Salina Street
expires 12/31/00. In the event Community Networks, Inc. is released from any or
all of it's rent obligation at 205 S.Salina Street prior to lease expiration,
then Landlord will cover only whatever obligation is left, if any.
22.22 - Exterior Building Signage
- ---------------------------------
Landlord will agree to work with Tenant, and Tenant at Tenant's sole cost
and expense, will be allowed to install a sign on the building. Location, size
style, and design must all be approved by Landlord, which approval shall not be
unreasonably withheld or delayed.
22.23 - Right of First Refusal
- ------------------------------
Tenant shall have an ongoing Right of First Refusal on adjacent vacant
space in the building. Should Tenant exercise a
<PAGE>
refusal right, the rental rate shall be at the same terms and conditions of the
other offer.
22.24 - Additional Tenant Improvements
- --------------------------------------
Tenant, at Tenant's option, shall have the right to amortize up to an
additional $10.00 per rentable square feet over the entire lease term at an
interest rate of nine percent (9%). This allowance may be applied towards any
hard or soft, construction or moving-related costs, included but not limited to
construction, furniture, telecommunications, professional fees or moving
expenses.
22.25 - Brokerage
- -----------------
Landlord and Tenant represent that Equis of N.Y. is the sole brokerage
company related to this lease agreement and Landlord will pay Equis of N.Y. a
real estate commission per a separate agreement between Equis or N.Y. and
Landlord.
22.26 - Other Provisions
- ------------------------
Landlord will use its best efforts to provide Tenant with a nondisturbance
agreement from the lendor of the building.
Landlord shall provide a pad space outside the building approximately 10
feet by 10 feet for tenant's gas emergency generator and day tank.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
LANDLORD:
--------
244 Harrison Associates, LLC.
Date: 6/25/99 By: John Finiciello
---------------------------------------- ----------------------------
Date: 6/25/99 By: [SIGNATURE ILLEGIBLE]
---------------------------------------- ----------------------------
TENANT
------
Community Networks, Inc.
Date: 6/16/99 By: Scott Matukas
---------------------------------------- ----------------------------
Date: 6/16/99 By: [SIGNATURE ILLEGIBLE]
---------------------------------------- ----------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF ONONDAGA )SS.:
On this 25th day of June, 1999, before me personally came Anthony
[ILLEGIBLE], to me personally known, who, being by me duly sworn, did depose and
say that he resides in Liverpool, New York; that he is a Partner of 224 Harrison
Associates, LLC, that he is known to me to be one of the partners of the
Partnership that executed the within instrument; and he is acknowledged to me
that he executed the same on behalf of and in the name of such Partnership as
Landlord.
/s/ Kristen Exner
-----------------------------
Notary Public
KRISTEN EXNER
NOTARY PUBLIC, State of New York
Qualified in Onondaga County
Reg. No. 01F1505053373
My Commission Expires 12/13/99
STATE OF NEW YORK )
COUNTY OF QUEENS )SS.:
On this 16th day of June, 1999, before me personally came Scott M.
Matukas, to me personally known, who, being by me duly sworn, did depose and say
that he resides at 17 Laurelton Rd. Mt. Kisco, NY 10543 and who acknowledges
that he executed the within instrument as Tenant.
/s/ Raquel A. Brown
-----------------------------
Notary Public
Notary Public
State of New York
Raquel A. Brown
ID #01BR6019598
Exp. Feb, 08, 2001
STATE OF NEW YORK )
COUNTY OF )SS.:
On this __ day of __________, 199_, before me personally came________
________,to me personally known, who, being by me duly sworn, did depose and say
that he resides in ___________________________; that he is the________________
___________________ of ____________________________, the corporation described
in, and which executed the within instrument; that he signed his name thereto by
order of the Board of Directors of said corporation.
-----------------------------
Notary Public
<PAGE>
EXHIBIT "A"
FLOOR PLAN(S)
--------------
OUTLINING PREMISES
- ------------------
<PAGE>
EXHIBIT "C"
LANDLORD'S WORK
---------------
Landlord will provide Tenant with a twenty-five dollar ($25.00/sq.ft.) per
square foot buildout allowance for the demised space.
In addition, to the $25.00/sq.ft. allowance, Landlord shall do the following
work as Base Building Work:
. Deliver the premises demised and secure in
broom clean condition and ready for new
tenant construction.
. Comply with ADA and local building life
safety codes throughout the lease term.
. Provide pad space (10 x 10) for tenant's gas
emergency generator and access to same from
designated platform, size of pad space may
vary.
. Provide access way for an electrical conduit
from generator to Tenant's ATC switch
located at the Tenants service breaker as
designated by the Landlord.
. Provide the right and access to install
horizontal and vertical conduit for fiber
optics and for MCM Ground, subject to
Landlord's approval, which shall not be
unreasonably withheld.
. Provide freight elevator access capable of
handeling Tenant's switch and battery items.
If freight elevator and area is not capable
of this requirement than Landlord will be
responsible for renting a crane and booming
the equipment into the demised premises.
Tenant and Landlord shall agree on rating
certification of crane.
. Provide a minimum of 125 lbs. per square
foot floor loading to the demised premises.
. From existing building electric service
Landlord will provide Tenant with 800 amp
service.
Tenant and Landlord agree that Landlord will upgrade electric capacity by 1200
amps. This coat shall be divided accordingly, 2/3 of the cost to Tenant and 1/3
of the cost to Landlord. Landlord's cost is not part of the Base Building Work.
In conjunction with Landlord's work to be done by July 15, 1999, Landlord
will upgrade the forth floor loading, beyond the 125 lbs. per square foot, in
designated areas. This cost shall not be part of Landlord's Base Building Work.
A floor plan is to be provided by Tenant as to the layout of the switch room.
<PAGE>
EXHIBIT "D"
TENANT'S WORK and
-----------------
TENANT'S INSURANCE REQUIREMENTS
-------------------------------
TENANT'S WORK
-------------
Tenant to take the space in as is condition accept for the Base Building items
listed in Landlord's work in Exhibit "C". Tenant will be responsible for all
construction on the demised premises and will use the landlord's buildout
allowance to do the same. Any cost above and beyond the landlord's buildout
allowance will be at the cost of the tenant.
In fulfillment of its obligations pursuant to Paragraph 4.03 of this
Lease, Tenant shall carry, at its own expense, and shall name Landlord as
additional insured upon the following insurance coverages in the following
amounts:
(a) Comprehensive General Liability including completed operations,
explosions, collapse and underground operations, if any; broad form property
damage including completed operations, protective liability, contractual
liability and indemnity:
$1,000,000 - Each Occurrence
(b) Personal Injury (with employment exclusion deleted and
contractual exclusion deleted):
$1,000,000 - Occurrence and Aggregate
(c) Auto Liability (including non-owned and hired vehicles):
$250,000/$500,000 - Bodily Injury
$250,000 - Property Damage
(d) Statutory Worker's Compensation, Employers' Liability an
Disability Benefits:
Unlimited
(e) Excess Liability, Umbrella Form: $1,000,000 and any other special
insurance as required by Landlord so as to fully protect Landlord against loss
or damage throughout the period during the Tenant's Work is being performed.
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
(a) Tenant shall not exhibit, sell or offer for sale on the Premise or in
the Building any article or thing except those articles and things essentially
connected with the stated use of the Promises by the Tenant without the advance
consent of Landlord, nor shall Tenant install or permit to be installed any
vending machines in the Premises, other than those vending machines used soley
by employees, customers, or visitors.
(b) Tenant will not make or permit to be made any use of the Premises or
any part thereof which would violate any of the covenants, agreements, terms,
provisions and conditions of this Lease or which directly or Indirectly may be
dangerous to life, limb, or property, or which may invalidate or increase the
premium cost of any policy of insurance carried on the Building or covering its
operation, or which will suffer or permit the Premises or any part thereof to
be used in any manner including storage therein which, in the judgement of
Landlord, shall in any way impair the character, reputation or appearance of the
Building as a high quality office building, or which will impair or interfere
with or tend to impair or interfere with any of the services performed by
Landlord for the Building.
(c) Tenant shall not display, inscribe, print, paint, maintain or affix on
any place in or about the Building any sign, notice, legend, direction, figure
or advertisement, without consent of Landlord, which consent shall not be
unreasonably withheld. The listing of any name other than that of Tenant,
whether at the doors of the Premises, on the Building directory, or otherwise,
shall not operate to vest any right or interest in this Lease or in the
Premises or be deemed to be the written consent of Landlord mentioned in Article
12, it being expressly understood that any such listing is a privilege extended
by Landlord revocable at will by written notice to Tenant. Tenant will be
allowed to place a sign on the outside sign directly below Eve's Cafe sign.
Landlord must approve of the size and color. Approval by Landlord not to be
unreasonably withheld.
(d) Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities, and shall
not use the name of the Building for any purpose other than that of the
business address of Tenant, and shall never use any picture or likeness of the
Building in any circulars, notices, advertisements or correspondence without the
Landlord's consent.
(e) No additional locks or similar devices shall be attached to any door
or window other than those provided in Exhibit A, attached hereto, without
Landlord's written consent. No keys for any door other than those provided by
the Landlord shall be made. If more than one key per employee for one lock is
desired, Landlord will provide the same upon payment by Tenant. All keys must be
returned to Landlord at the expiration or termination of this Lease.
(f) All persons entering or leaving the Building between the hours of 6
p.m. and 8 a.m. Monday through Friday, or any time on Saturdays, Sundays or
holidays, may be required to do so under such regulations as Landlord may
impose. Landlord may exclude or expel any peddler, unless specifically otherwise
provided in the lease.
(g) Tenant shall not overload any floor. Landlord may direct the time and
manner of delivery, routing and removal of all items that are delivered to the
Building for the Tenant's use and may specify the location of safes and other
heavy articles. Fire proof files are located on Exhibit A, attached hereto.
(h) Unless Landlord gives advance written notice, Tenant shall not install
or operate any steam or internal combustion engine, machinery, refrigerating or
heating device or air-conditioning apparatus in or about the Premises, or carry
on any mechanical business herein, or use the Premises for housing
accommodations or lodging or sleeping purposes, or do any cooking therein or use
any illumination other than electric light, or use or permit to be brought into
the building any flammable fluids such as gasoline, kerosene, naphta, bonzing
and solvents, or any explosives, radioactive materials or other articles deemed
extra-hazardous to life, limb or property except in a manner which would violate
any ordinance or regulation or any condition imposed by the standard fire
insurance policy issued for office buildings in the municipality where the
Building is located, or do or permit anything to be done, or keep or permit
anything to be kept, in the Premises, which would increase the fire or other
casualty insurance rate on the Building or the
<PAGE>
property therein, or which would result in insurance companies of good standing
refusing to insure the Building or any such property in amounts reasonably
satisfactory to Landlord, Tenant shall not use the Premises for any illegal or
immortal purpose. Tenant is allowed to have a microwave, soda machine,
refrigerator, dishwasher and coffee pot in office space for it's sole use.
(i) Tenant shall cooperate fully with Landlord to assure the effective
operation of the Building's air-conditioning system, including the closing of
blinds and drapes, and if windows are operable to keep them closed when the air-
conditioning system is in use. Landlord shall provide, heating and air
conditioning according to the standard Ashrac conditions, except in the two
designated areas as noted on Exhibit D which need additional cooling.
(j) Tenant shall not contract for any work or service which might involve
the employment of labor unreasonably incompatible with the Building employees or
employees of contractor doing work or performing services by and on behalf of
Landlord, during the times when the Landlord is doing work.
(k) The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used for any purpose other than
for ingress to and egress from its Premises. The halls, passages, exits,
entrances, elevators, stairways and roof are not for the 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 judgement of Landlord,
shall be prejudicial to the safety, character, reputation and interests of the
Building and Its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals, in
the ordinary course of Tenant's business unless such persons arc engaged in
illegal activities. No tenant and no employees or invites or any tenant shall go
upon the roof or into the mechanical rooms of the Building.
(l) Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason or noise, odors and/or vibrations, or
interfere in any way with other tenants or those, having business herein, nor
shall any animals or birds be brought in or kept in or about the Premises of
the Building.
(m) With respect to the Premises Tenant shall see that the doors and
windows, if operable, are closed and securely locked before leaving the Building
and must observe strict care and caution that all water faucets or water
apparatus are entirely shut off before Tenant or Tenant's employees leave the
Building, and that all electricity shall likewise be carefully shut off so as to
prevent waste or damage, exception being that certain computers be loft on 24
hours per day 7 days per week due to the nature of Tenant's business. The
building hours are from 7 a.m. no 6 p.m. Monday thru Friday. After these hours
Tenant will have access Into the building with a "card-key" system.
(n) There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards. All removals, or, the, carrying in or out of any safes,
freight, furniture or bulky matter of any description must take place during the
hours which the Landlord or its Manager may reasonably determine from time to
time, The Landlord reserves the right to exclude from the Building all freight
which violates any or the Rules and Regulations or the Lease of which these
Rules and Regulations are a part.
(o) Tenant shall have the non-exclusive right in common with others to
whom Landlord has or may hereafter grant rights, to use the Building Common
Areas and the Outside Common Areas as designated from time to time by
Landlord, subject to such reasonable regulations as Landlord may impose. All
parking areas in or about (per Exhibit C) the Building provided by Landlord
shall be subject to the exclusive control and management of the Landlord, unless
specifically otherwise provided in the lease. Landlord shall have the right
to reasonably designate from time to time, specific areas in which cars owned or
used by Tenant. Its permitted officers, partners, employees, clients, visitors
and agents must be parked. If Landlord shall designate such specific parking
areas and if any car of Tenant or its permitted officers, partners, employees or
agents of Tenant is parked In any other portion of the parking area, then Tenant
shall pay to Landlord after being warned by Landlord in writing one prior time,
upon demand, the sum of Ten Dollars ($10.00) for each such car for each day, or
part thereof, such car is so parked, and Tenant hereby authorizes Landlord to
tow or cause any such car to be towed to the then designated parking area and
agrees to reimburse Landlord for the cost thereof, upon demand.
<PAGE>
EXHIBIT 10.10
AGREEMENT OF LEASE
TRI-STATE CONSUMER INSURANCE COMPANY
AND
STARBUCKS CORPORATION
<PAGE>
SUBLEASE AND CONSENT
This SUBLEASE (the "Sublease") is entered into as of the 25th day of
November 1998, by and between STARBUCKS CORPORATION, a Washington corporation
("Sublandlord") and COMMUNITY NETWORKS, a___________ (d/b/a __________________)
("Subtenant").
RECITALS
A. Sublandlord is a party to that certain lease (the "Master Lease") dated
as of January __, 1996 with TRI-STATE CONSUMER INSURANCE COMPANY ("Master
Landlord") for certain premises commonly known as Suite 202 (comprising 2215
gross rentable square feet resulting in 1883 usable square feet) at 2 Robbins
Lane, Jericho, NY 11753 (the "Premises") and legally described on Exhibit A
attached to the Master Lease. A copy of the Master Lease is attached hereto.
B. Subtenant wishes to sublease from Sublandlord all of the Premises (the
"Subleased Premises").
C. Master Landlord is willing to approve this Sublease, all on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Sublease. On the terms and conditions stated herein, Sublandlord hereby
--------
subleases the Subleased Premises to Subtenant and Subtenant hereby subleases the
Subleased Premises from Sublandlord. Except only as otherwise stated herein,
Subtenant accepts the Subleased Premises subject to all the terms and conditions
of the Master Lease. Unless otherwise defined herein, all capitalized terms used
in this Sublease shall have the meanings given such terms in the Master Lease.
2. Term. The term (the "Sublease Term") of this Sublease shall commence on
----
the date Sublandlord tenders possession of the Subleased Premises to Subtenant
(the "Commencement Date"). If Subtenant shall not receive possession of the
Premises by January 1, 1999, Subtenant shall have the right to terminate this
Sublease. The Commencement Date is currently estimated to be December 1, 1998.
Sublandlord shall deliver written notice to Subtenant of its tender of
possession and such notice conclusively shall establish the Commencement Date.
The Sublease Term shall expire May 31, 2001, to coincide exactly with the
expiration of the initial Term of the Master Lease or upon such earlier date as
this Sublease may be canceled or terminated pursuant to any of the provisions of
this Sublease, the Master Lease or pursuant to law (the "Expiration Date").
Notwithstanding anything to the contrary contained in this Sublease, Subtenant
shall not have the right to exercise the option to extend in the Master Lease.
<PAGE>
3. Base Rent.
---------
3.1 Rent shall begin to accrue thirty (30) days after possession of
the Premises is tendered to Subtenant, subject to an extension of one (1) day
for each day of delay, if any, that the Commencement Date is later than December
1, 1998 (the "Rent Commencement Date"); provided however, that Subtenant shall
-------- -------
deliver to Sublandlord a check in an amount equal to the payment of the first
full month's installment of rent upon its execution of this Sublease which
amount shall be applied to the Base Rent first due. Commencing on the Rent
Commencement Date and throughout the Term, Subtenant shall pay Sublandlord in
advance on the first day of each and every month, at its address set forth in
Section 17 below, without demand, notice, abatement, deduction or offset, annual
rent ("Base Rent") at the rates set forth below in equal monthly installments on
or before the first day of each calendar month of the Term:
Lease Year Base Rent Monthly
---------- --------- -------
Installment
-----------
all $44,300.00 $3,691.67
3.2 Partial Months. If the Sublease Term includes any partial
--------------
calendar months, the monthly installment of Base Rent for such months shall be
prorated based on a thirty (30) day month.
3.3 Late Charges and Interest. If any monthly installment of Base
-------------------------
Rent and/or any other payments to be made by Subtenant to Sublandlord hereunder
is not paid by the fifth (5th) day following the due date thereof, a service
charge equal to the greater of $100.00 or five percent (5%) of the past due
amount shall become immediately due and payable. Sublandlord and Subtenant agree
that the late charges provided for herein represent a fair and reasonable
estimate as to the additional administrative, processing and accounting costs
that will be incurred by Sublandlord as a result of any late payments by
Subtenant hereunder. In addition to the foregoing late charges, any amounts owed
by Subtenant to Sublandlord shall bear interest from the date due until paid at
the lesser of (a) twelve percent (12%) per annum, or (b) the maximum rate of
commercial interest allowed by applicable law.
4. Additional Charges. Notwithstanding any provision to the contrary
------------------
contained herein, in the event Subtenant's default, acts, omissions or occupancy
result in a charge against Sublandlord or the Premises, Subtenant shall pay the
entire amount of such charge to Sublandlord.
5. Condition of Subleased Premises.
-------------------------------
5.1 Subtenant acknowledges that it has had an opportunity to
thoroughly inspect the Subleased Premises and Subtenant agrees to accept the
Subleased Premises "as is, where is," with all faults.
2
<PAGE>
5.2 SUBTENANT ACKNOWLEDGES THAT SUBLANDLORD HAS NOT MADE AND WILL
NOT MAKE ANY WARRANTIES TO SUBTENANT WITH RESPECT TO THE QUALITY OF CONSTRUCTION
OF ANY LEASEHOLD IMPROVEMENTS OR TENANT FINISHES WITHIN THE SUBLEASED PREMISES
OR AS TO THE CONDITION OF THE SUBLEASED PREMISES OR THE PREMISES, WHETHER
EXPRESS, STATUTORY, IMPLIED OR OTHERWISE, AND THAT SUBLANDLORD EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTY THAT THE SUBLEASED PREMISES ARE OR WILL BE
SUITABLE FOR SUBTENANT'S USE OR INTENDED COMMERCIAL PURPOSES.
6. Use and Operations.
------------------
6.1 Use. Subtenant shall use the Subleased Premises solely for
---
offices.
6.2 Operating Requirements. In addition to complying with all
----------------------
operational requirements imposed on Subtenant by the terms of the Master Lease
(as incorporated herein in Section 8), Subtenant agrees as follows:
(a) Subtenant's operations shall at all times be first class
and in keeping with the highest commercial standards.
(b) Subtenant shall not create or permit a nuisance or
otherwise interfere with or disturb Sublandlord, Master Landlord, any
neighboring tenants or any of their employees, contractors, agents or invitees.
(c) Subtenant shall not operate in any manner that increases
the rate for or invalidates any policy of insurance carried by Sublandlord or
Master Landlord.
6.3 Rules. Subtenant shall comply with any reasonable rules and
-----
regulations established by Sublandlord or Master Landlord for the Subleased
Premises and communicated to Subtenant in writing.
6.4 Compliance with Law. Subtenant, at its expense, shall comply
-------------------
promptly with all laws, rules, and regulations made by any governmental
authority having jurisdiction over the Subleased Premises. Subtenant shall not
be responsible for any structural repairs to the Premises pursuant to Article 9
(a) of the Master Lease.
7. Subordination: Incorporation of Master Lease.
--------------------------------------------
7.1 Incorporation of Master Lease. Except to the extent hereinafter
-----------------------------
provided, this Sublease is subject and subordinate to all of the covenants,
agreements, terms, provisions, conditions and obligations of the Master Lease.
Subtenant agrees that all rights and privileges granted hereunder are subject to
the limitations imposed on Sublandlord by the Master Lease and that, except as
expressly provided herein, Sublandlord is not granting any rights or privileges
to Subtenant that are not expressly
3
<PAGE>
Premises or any alteration, addition or change to the Demised Premises costing
less than $20,000 that does not affect the structural, mechanical or electrical
integrity of the Demised Premises or Building.
7. ACTIVITIES INCREASING FIRE INSURANCE RATES. Lessee shall not do
or suffer anything to be done on the Premises which will increase the rate of
fire insurance on the Building.
8. ASSIGNMENT AND SUBLETTING.
(a) Lessee will not by operation of law or otherwise, assign,
mortgage or encumber this Lease, nor sublet or permit the Demised Premises to be
used by others (except to RIPCO Real Estate Company at any time after the twenty
four (24) month anniversary of the Commencement Date hereof with respect to a
sublet of the whole Premises), in whole or in part, without Lessor's prior
express written consent in each instance. The consent by Lessor to any
assignment or subletting (including a sublease to RIPCO Real Estate Company)
shall not in any manner be construed to relieve Lessee from obtaining Lessor's
express written consent to any other or further assignment or subletting nor
shall any such consent by Lessor serve to, relieve or release Lessee from its
obligations to fully and faithfully observe and perform all of the terms,
covenants and conditions of this Lease on Lessee's part to be observed and
performed.
(b) If Lessee shall desire to assign or to sublet all or any
portion of the Demised Premises, Lessee shall give notice thereof to Lessor and
in said notice shall set forth the name and address of the proposed assignee or
sublessee, information as to financial condition of such assignee or sublessee
and proposed use which assignee or sublessee desires to make of the Demised
Premises. Said notice shall bear the signature of the proposed sublessee or
assignee or an officer or managing partner, as the case may be, attesting to its
accuracy. Lessee shall in addition, at Lessor's request, furnish such other
further information as Lessor may reasonably request concerning such proposed
assignment or subletting. If Lessor does not respond to Lessee's request within
fifteen (15) days thereof, Lessor shall be deemed to have consented to such
request.
(c) As a condition of Lessor's consent to any assignment or
subletting:
(i) Lessee at the time of requesting Lessor's consent
shall not be in default of any of the terms, covenants and conditions which are
the obligations of the Lessee hereunder;
(ii) Each assignee of this Lease shall assume in writing
all of the terms, covenants and conditions of this Lease on the part of Lessee
hereunder to be performed and observed, to the extent they accrue after the date
of the assignment;
(iii) An original or duplicate original of the instrument
of assignment and assumption shall be delivered to Lessor within ten (10) days
following the execution thereof;
(iv) Any instrument of sublease shall specifically state
that each sublease is subject to all of the terms, covenants and conditions of
this Lease; and
4
<PAGE>
both Master Landlord and Sublandlord. Any permitted alterations, additions or
improvements shall be completed in a first-class manner using all-new equipment,
furnishings and fixtures. Subtenant shall submit its plans and specifications
for its initial improvements to Master Landlord and to Sublandlord as soon as
practicable after the execution of this Sublease. Subtenant shall use only
first-class, reputable contractors approved by Sublandlord to perform any work
in the Subleased Premises and shall coordinate with Sublandlord's work.
Subtenant shall not commence any work upon the Subleased Premises until it has
provided Master Landlord and Sublandlord with a copy of an executed construction
contract and a building permit for such work. Subtenant shall perform all work
in accordance with the requirements of the Master Lease, at Subtenant's sole
expense.
8.2 Upon Master Landlord or Sublandlord's request, Subtenant shall
remove any and all alterations, additions, improvements and signage from the
Subleased Premises which were installed by Subtenant upon the expiration or
termination of the Sublease and shall repair any damage caused by such removal.
8.3 Before commencing any alterations, additions or improvements using
outside contractors, Subtenant shall notify Master Landlord and Sublandlord of
the expected commencement and completion dates of the work and shall permit
Master Landlord and Sublandlord to post a notice of non-responsibility on the
Subleased Premises. Subtenant shall not permit any mechanics' or materialmen's
liens to be levied against the Premises or the property on which it is located
for any labor or material furnished to Subtenant or to its agents or contractors
and shall indemnify and hold Sublandlord and Master Landlord harmless from and
against any such claims. If Subtenant has not removed any lien within ten (10)
days after the lien is filed, then Sublandlord may pay the lienholder and
Subtenant shall reimburse Sublandlord for such costs as additional rent.
9. Repair and Maintenance: Surrender.
---------------------------------
9.1 Repair and Maintenance. Subtenant, at Subtenant's expense, shall
----------------------
keep the Subleased Premises in good order, condition and repair in accord with
the provisions of the Master Lease
9.2 Surrender. Upon the expiration or termination of this Sublease,
---------
Subtenant shall surrender the Subleased Premises to Sublandlord in broom clean
condition, in comparable or better than the condition in which the Subleased
Premises were delivered at the beginning of the Initial Term, ordinary wear and
tear excepted, and in accordance with all applicable terms and standards of the
Master Lease.
10. Compliance with Master Lease. Notwithstanding anything to the contrary
----------------------------
contained in this Sublease, neither Sublandlord nor Subtenant shall not do or
permit anything to be done by its employees, agents, contractors or invitees
which would constitute a violation or breach of any of the terms, conditions or
provisions of the Master
5
<PAGE>
Lease or which would cause the Master Lease to be terminated or forfeited by
virtue of any rights of termination or forfeiture reserved by or vested in
Master Landlord. Sublandlord and Subtenant shall each indemnify, defend and hold
the other harmless from and against any and all losses, claims, liabilities,
damages, costs or expenses (including, without limitation, reasonable attorneys'
fees and disbursements) arising from Sublandlord's or Subtenant's respective
actions, omissions or failure to perform or observe any of the terms and
conditions of the Master Lease (as and to the extent incorporated herein) or
this Sublease, as they relate to the Subleased Premises or the Premises.
Sublandlord's and Subtenant's obligations and indemnity in this Section shall
survive the expiration or sooner termination of this Sublease.
11. Default.
-------
11.1 The occurrence of any one or more of the following events shall
constitute a default and breach of this Sublease by Subtenant:
(a) The failure by Subtenant to make any payment of Base Rent,
additional rent, or any other payment required to be made by Subtenant
hereunder, as and when due.
(b) The failure by Subtenant to observe or perform any of the
covenants, conditions, or provisions of this Sublease to be observed or
performed by Subtenant (including the terms of the Master Lease which have been
incorporated herein by reference), other than the payment of sums due hereunder,
where such failure shall continue for a period of fifteen (15) days after
written notice thereof from Sublandlord to Subtenant; provided, however, that if
the nature of Subtenant's default is such that more than fifteen (15) days are
reasonably required for its cure, then Subtenant shall not be deemed to be in
default if Subtenant commences such cure within such fifteen (15) day period and
thereafter diligently pursues such cure to completion.
(c) The occurrence of any act or omission that is, or with the
giving of notice or passage of time would be, a default under the Master Lease.
11.2 In the event of any breach hereunder by Subtenant, Sublandlord
shall have all of the rights and remedies available at law or in equity or
available to Master Landlord against Sublandlord under the Master Lease, as if
such breach occurred under such document.
11.3 If Subtenant defaults in the performance of any of its
obligations under this Sublease, other than its obligation to pay Base Rent to
Sublandlord, Sublandlord, without being under any obligation to do so and
without thereby waiving such default, may remedy such default for the account
and at the expense of Subtenant.
12. Insurance: Indemnity.
--------------------
6
<PAGE>
12.1 Subtenant's Insurance. Throughout the Term of this Sublease,
---------------------
Subtenant shall, for the benefit of Sublandlord and Master Landlord, obtain
and keep in full force and effect insurance as required by the Master
Lease.
12.2 Waiver of Subrogation. Neither Sublandlord nor Subtenant shall
---------------------
be liable to the other or to any insurance company (by way of subrogation
or otherwise) insuring the other party for any loss or damage to any
building, structure or other tangible property, or any resulting loss of
income and benefits, even though such loss or damage might have been
occasioned by the negligence of such party, its agents or employees if any
such loss or damage is covered by insurance benefiting the party suffering
such loss or damage or was required to be covered by insurance pursuant to
this Sublease. Sublandlord and Subtenant shall require their respective
insurance companies to include a standard waiver of subrogation provision
in their respective policies.
12.3 Indemnification by Subtenant. Subtenant shall defend,
----------------------------
indemnify, and hold Sublandlord and Sublandlord's agents, officers,
directors, employees, and contractors harmless against and from any and all
injuries, costs, expenses, liabilities, losses, damages, injunctions,
suits, actions, fines, penalties, and demands of any kind or nature
(including reasonable attorneys' fees) arising in connection with any and
all third party claims arising out of (a) injuries occurring within the
Subleased Premises; (b)any intentional acts or negligence of Subtenant or
Subtenant's agents, employees, or contractors; (c) any breach or default in
the performance of any obligation on Subtenant's part to be performed under
this Sublease; or (d) the failure of any representation or warranty made by
Subtenant herein to be true when made. This indemnity does not include the
intentional or negligent acts or omissions of Sublandlord or its agents,
officers, contractors or employees. This indemnity shall survive
termination of this Sublease only as to claims arising out of events that
occur prior to termination of the Sublease.
13. Assignment: Subletting. Subtenant shall not assign, mortgage, pledge,
----------------------
encumber or otherwise transfer this Sublease or any interest in the
Subleased Premises, nor shall Subtenant further sublet all or any part of
the Subleased Premises, nor allow the Subleased Premises or any part
thereof to be used or occupied by anyone other than Subtenant. Any transfer
of a partnership interest, if Subtenant is a partnership, or shares of
stock, if Subtenant is a corporation, shall be deemed an assignment. Should
Subtenant desire to assign, sublet or otherwise transfer any rights under
this Sublease or all or a portion of the Premises, to (i) a parent,
subsidiary, affiliate, division or corporation controlling, controlled by
or under common control with Subtenant; (ii) a successor corporation
related to Subtenant by merger, consolidation, non-bankruptcy
reorganization or government action; or (iii) a purchaser of substantially
all of the Subtenant's assets, then Subtenant may proceed with such
transfer upon its delivery to Sublandlord of(a) a written notice of same;
(b) copies of documents evidencing and describing the transaction, redacted
to delete any proprietary or confidential information; (c) a written
statement giving contact information for the transferee; and (d) a written,
executed
7
<PAGE>
covenant running from Subtenant to Sublandlord that such transferee has the
financial ability to pay sums due hereunder and has a net worth not less than
that of Subtenant.
14. Brokers. Other than Jeff Pacy of Equis of New York, Inc., Sublandlord
-------
and Subtenant hereby warrant and represent to each other that they have dealt
with no brokers or agents in connection with the Subleased Premises or this
Sublease or Subtenant's leasing of the Subleased Premises, and that no other
broker(s) or agent(s) brought the Subleased Premises and/or the other party to
the attention of the indemnifying party. Sublandlord and Subtenant hereby agree
to indemnify, defend and hold each other harmless from and against any and all
claims, losses, liabilities, damages, costs or expenses (including, without
limitation, reasonable attorneys' fees and disbursements) arising or resulting
from the indemnifying party's breach or alleged breach of its warranty and
representation contained in this Section. The provisions of this Section shall
survive the expiration or sooner termination of this Sublease.
15. Notices. Whenever a provision is made under this Lease for any demand,
-------
notice or declaration of any kind, or where it is deemed desirable or necessary
by either party to give or serve any such notice, demand or declaration to the
other party, it shall be in writing and served either personally or sent by
United States mail, certified, postage prepaid. Notices to Subtenant shall be
given at the Premises. Notices to Sublandlord shall be given to the address set
forth below:
By Mail: P.O. Box 34067
Seattle, WA 98124-1067
By Overnight Delivery: 2401 Utah Avenue South, 8th Floor
Seattle, WA 98134
Attn: Property Management Department
With a duplicate copy to the attention of the Law and Corporate Affairs
Department at the same address.
Notices given hereunder shall be deemed to have been given on the date of
personal delivery (or the first business day thereafter if delivered on a
non-business day) or two (2) days after the date of mailing. Each party shall
have the right to change its notice addresses from time to time by written
notice given in accordance with this Section; provided, however, that legal
service of process may always be served on Subtenant by service on the employee
in charge of the Subleased Premises.
16. Parking. Sublandlord makes no representations with respect to parking
-------
at the Subleased Premises. Subtenant agrees that it has the sole responsibility
for investigating parking and ensuring that adequate parking exists for its
intended use.
17. Security Deposit. Upon execution of this Sublease by Subtenant,
----------------
Subtenant shall deposit with Sublandlord the sum of Three Thousand Six Hundred
Ninety
8
<PAGE>
One and 67/100 Thousand Dollars ($3,691.67), which sum shall be held by
Sublandlord as security for the full and faithful performance of all terms,
conditions and agreements contained in this Lease by Subtenant. In the event of
any default by Subtenant hereunder, or in the event Sublandlord advances sums on
Subtenant's behalf, Sublandlord shall have the right to use the security deposit
to recover its expenditures, and Subtenant shall, within ten (10) days request
of Sublandlord, restore the deposit to its original amount. Sublandlord may
commingle the deposit with Sublandlord's other funds and shall not be required
to pay interest on the deposit.
18. Governing Law: Sectional Headings. This Sublease shall be governed,
--------------------------------
enforced and regulated by the laws of the state where the Subleased Premises are
located. The sectional headings herein are inserted for convenience only and
shall not be used in any way to limit or modify the terms and provisions of this
Sublease.
19. Partial Invalidity. If any term or provision of this Sublease, or any
------------------
application thereof, shall be found invalid or unenforceable by a court of
competent jurisdiction, the remainder of this Sublease and any other
application thereof shall not be affected thereby, but shall remain in full
force and effect.
20. Entire Agreement. This Sublease, together with: (a) all schedules
----------------
attached to and referenced in this Sublease and (b) all of the terms and
provisions of the Master Lease wholly or partially incorporated herein,
constitutes the entire agreement between the parties hereto concerning the
matters set forth herein, and any prior or contemporaneous agreement or
understanding (whether oral or written) between such parties with respect to the
subject matter herein shall have no force or effect.
21. Changes. This Sublease shall not be modified or amended except by a
-------
writing signed by the party against whom enforcement of the modification or
amendment is sought.
22. Unexecuted/Undelivered Drafts. Unless and until executed and delivered
-----------------------------
by all parties to this Sublease, this Sublease is, and shall remain, a draft
only, and delivery or discussion of the draft shall not be construed as an offer
or commitment with respect to the proposed transaction to which the draft
pertains. No party to the proposed transaction (and no person or entity related
to any such party) will be under any legal obligation with respect to the
proposed transaction or any similar transaction, and no offer, commitment,
undertaking, estoppel or obligation of any nature whatsoever shall be implied in
fact, in law or in equity, unless and until the formal Sublease providing for
the transaction has been executed and delivered by all parties hereto.
23. Binding Effect. The terms and provisions of this Sublease shall bind
--------------
and inure to the benefit of Sublandlord and Subtenant and their respective
successors and assigns, but this Section shall not give Subtenant any rights to
assign this Sublease or to sub-sublet the Subleased Premises except as and if
allowed by some other Section(s) of this Sublease.
9
<PAGE>
24. Conflict in Terms. If any provision of this Sublease (express or
-----------------
implied) shall be in unintentional conflict with the terms of the Master Lease,
the terms of the Master Lease shall be controlling. Any capitalized terms used
but not defined in this Sublease shall have the meanings ascribed to them in the
Master Lease.
25. Holding Over. In the event of any holding over by Subtenant after the
------------
expiration or any termination of this Sublease without the prior written consent
of Sublandlord, Subtenant shall pay as liquidated damages one hundred fifty
percent (150%) of the amount of all rental which was payable by Subtenant
immediately prior to such expiration or termination, pro rated on a daily basis
for the entire holdover period. In the event of any unauthorized holding over,
Subtenant shall also indemnify Sublandlord against all claims for damages by any
other tenant to whom Sublandlord or Master Landlord may have subleased all or
any part of the Subleased Premises effective upon the expiration or termination
of this Sublease. Any such holding over, without the prior written consent of
Sublandlord, shall create only a tenancy at sufferance relationship with
Subtenant and shall not operate to renew or extend this Sublease for any period
of time.
26. Utilities. Subtenant shall pay directly to the utility provider or
---------
reimburse Sublandlord for any and all utilities consumed at or for the Subleased
Premises. To the extent practicable, Subtenant, at its sole cost and expense,
shall cause each utility providing service to the Subleased Premises to be
separately metered or submetered. In addition, Subtenant shall reimburse
Sublandlord for its Pro Rata Share of any utilities for which submetering is not
practical, unless Subtenant's use of such utilities is disproportionate to the
size of its space, in which event the cost of such utilities shall be equitably
divided. For the purposes of this Sublease, refuse and recycling services are
utilities.
27. No Waiver. No oral waiver, delay in enforcing, or failure to enforce,
---------
any right(s) (including but not limited to the right to collect late charges and
interest) of either party under this Sublease shall prevent, hinder or delay
such party's future enforcing of any such right(s), with respect to the same or
any other matter.
28. Joint and Several Liability. Each person executing this Sublease shall
---------------------------
be jointly and severally liable for the full performance of all obligations
imposed hereunder, including without limitation the payments of all amounts
required hereby.
29. Attorneys' Fees. If either party to this Sublease brings an action to
---------------
enforce the terms hereof or to declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to its reasonable
attorneys' fees to be paid by the losing party as fixed by the court.
10
<PAGE>
IN WITNESS WHEREOF, Sublandlord and Subtenant have hereunto caused this Sublease
to be duly executed as of the date first set forth above.
SUBTENANT: SUBLANDLORD:
COMMUNITY NETWORKS, STARBUCKS CORPORATION,
a NY corporation a Washington corporation
---------------
By /s/ Scott M. Matukas By
----------------------------- -------------------------
Scott M. Matukas
----------------------------- ----------------------
Title: VP HR & ADMINISTRATION Title:
---------------------- ---------------
Consented to this 30th day of November, 1998.
MASTER LANDLORD
TRI-STATE CONSUMER INSURANCE COMPANY
By [SIGNATURE ILLEGIBLE]
-----------------------------
-----------------------------
Title: President
----------------------
11
<PAGE>
Sublandlord Notary Acknowledgment
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this ____ day of , l99______, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared _______________, to me known to be the ______________of
STARBUCKS CORPORATION, a Washington corporation, the corporation that executed
the foregoing instrument and acknowledged the said instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that he is authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year this
certificate above written.
_________________________________________
NOTARY PUBLIC, in and for the State
of Washington, residing at ______________
Commission expires: _____________________
Print Name: _____________________________
12
<PAGE>
Subtenant Notary Acknowledge
STATE OF New York )
) ss.
COUNTY OF Onondaga )
On this 30th day of November, 1998 before me, the undersigned, a Notary
Public in and for the State of New York duly commissioned and sworn, personally
appeared Scott Matukas, to me known as, or providing satisfactory evidence that
he is the VP HR & Admin. of Community Networks a _____________the party that
executed the foregoing instrument and acknowledged the said instrument to be the
free and voluntary act and deed of said Scott Matukas for the uses and purposes
therein mentioned and on oath stated that he is authorized to execute said
instrument.
WITNESS my hand and official seal hereto affixed the day and year in this
certificate above written.
/s/ Tracy E. Blair
-----------------------------------------
NOTARY PUBLIC, in and for the State
of New York, residing at Onondaga County
My Commission expires 9-7-99
Print Name: Tracy E. Blair
------------------------------
-----------------------------------------
TRACY E. BLAIR
Notary Public, State of New York
[SEAL] Qualified in Onondaga County
Reg. 016L5017617
My Comm. expires 9-7-99
-----------------------------------------
13
<PAGE>
Master Landlord Notary Acknowledgment
STATE OF New York )
) ss.
COUNTY OF Nassau )
On this 30th day of November, 1998 before me, the undersigned, a Notary
Public in and for the State of New York duly commissioned and sworn, personally
appeared Penny Hart, to me known as, or providing satisfactory evidence that she
is the President of Tri-State Consumer Ins. Co. a ____________the party that
executed the foregoing instrument and acknowledged the said instrument to be the
free and voluntary act and deed of said Penny Hart for the uses and purposes
therein mentioned and on oath stated that he is authorized to execute said
instrument.
WITNESS my hand and official seal hereto affixed the day and year in this
certificate above written.
/s/ Kevin P. McCabe
-----------------------------------------
NOTARY PUBLIC, in and for the County of
Suffolk, residing at 2 Robbans Lane,
[ILLEGIBLE], NY
My Commission expires 7/15/1999
Print Name: Kevin P. McCabe
------------------------------
KEVIN P. McCABE
NOTARY PUBLIC, State of New York
No. 02MC801XXXX
Qualified in Suffolk County
Commission Expires July 16, 1999
14
<PAGE>
LEASE, made this ___ day of January, 1996, between, Tri-State Consumer
Insurance Company, whose address is 2 Robbins Lane, Jericho, New York 11753,
hereinafter called ("Lessor") and STARBUCKS CORPORATION, a corporation organized
and existing under the laws of the State of Washington, having a place of
business located at 2401 Utah Avenue South (98134), P.O. Box 34067, Seattle,
WA 98124-1067 (hereinafter called "Lessee").
For and in consideration of the covenants herein, contained and upon the
terms and conditions herein set forth, Lessor and Lessee agree as follows:
1. DESCRIPTION. Lessor, as the owner of the Building (as defined below),
hereby leases to Lessee and Lessee hereby leases from Lessor, the following
space: Suite 202 consisting of 2,215 gross rentable square feet (resulting in
1,883 usable square feet) on, the Second Floor as outlined on Exhibit A
(hereinafter called "Demised Premises" or "Premises"), together with a right in
common to use the common facilities, all as shown on the plan or plans initialed
by the parties thereto, marked Exhibit A attached hereto and made part of the
Lease in the building known as 2 Robbins Lane, Jericho, New York 11753
(hereinafter called the "Building"), together with the right to use in common
with the other lessees of the Building, their invitees, customers and employees,
those public areas of the common facilities as hereinafter defined. Lessor
represents to Lessee that the loss factor for the Demised Premises is fifteen
percent (15%).
2. TERM.
(a) The Premises are leased for an initial term of five (5) years, one (1)
month (plus, if the Commencement Date is not the first day of a month, the
period from the Commencement Date to the end of the then current month)
commencing on the Commencement Date, and ending at 12:00 midnight on the day
preceding the fifth (5th) anniversary of the second full month of the Term
hereof. The Commencement Date shall be the later of (i) February 1, 1996 or (ii)
the date that Lessor notifies Lessee that Lessor has Substantially Completed (as
defined below) all of the work to be done in the Demised Premises by Lessor and
delivers the said Premises to Lessee, provided that the Commencement Date shall
always be the first day of the month following the month in which Lessor
provides Lessee 10 days prior written notice that the Premises are Substantially
Completed. For the purposes of this paragraph, "Substantially Completed" shall
mean (a) so completed as to allow the Lessee to take possession of the Demised
Premises and conduct its normal business therein, (b) Lessee has been given the
opportunity to inspect Lessor's work in the Demised Premises and (c) Lessor has
completed, to Lessee's reasonable satisfaction, any repairs to defects in
Lessor's work and any punchlist times noted during Lessee's inspection. The
Demised Premises shall not be deemed to be substantially completed if any
details of construction, decoration or mechanical adjustment or any cleanup
remains to be done to the Demised Premises, or any part thereof, that would, in
Lessee's reasonable judgment, materially impair, reduce or hinder its ability to
utilize the Demised Premises for the purpose intended hereby. In the event the
Premises are not Substantially Completed on or before April 1, 1996, Lessee may
cancel this Lease with no further obligation hereunder on the part of either
party with respect to the other. Notwithstanding the foregoing, Lessee's right
to cancel is conditional upon Lessee having final plans for the Premises within
ten (10) business days of the date hereof. Within ten (10) business days after
the Commencement Date, Lessor and Lessee shall execute a written acknowledgment
of the Commencement Date,
<PAGE>
but Lessor's and Lessee's failure to execute such acknowledgement shall not
affect the actual Commencement Date. Lessor shall promptly correct all defects
in Lessor's work in the Demised Premises and all failures of the Lessor's work
to conform to the requirements set forth in this Lease that are discovered
within sixty (60) days after the date Lessee first occupies the Demised
Premises. Lessor shall bear all costs of correcting Lessor's work. Lessor and
Lessee shall each give the other prompt written notice after discovering the
existence of any such defects or nonconformities in Lessor's work and Lessee
shall be deemed to have waived this right if notice is not given within ten (10)
days of discovery.
(b) Lessee shall have the option in its discretion, provided no Event
of Default (as defined below) has occurred under this Lease that remains uncured
at the commencement of the Extended Term, to extend the Term of this Lease for
an additional five (5) year period beyond the expiration of the Initial Term
(the "Extended Term"). Lessee shall notify Lessor, in writing, at least ninety
(90) but not more than one hundred twenty (120) days prior to the
expiration of the Initial Term of Lessee's desire to exercise said option. All
terms of this Lease shall remain in full force and effect during the Extended
Term. Failure by Lessee to timely notify Lessor in writing of its exercise of
the option shall constitute a waiver of the option.
(c) For purposes of this Lease, the Initial Term and the Extended Term
may collectively hereinafter be referred to as the "term" or the "Term";
provided if Lessee does not exercise its option, the Initial Term shall
constitute the entire term of this Lease.
(d) Notwithstanding anything to the contrary herein, Lessee may, by
written notice given at least ninety (90) days prior to the twenty four (24)
month anniversary of the Commencement Date, elect to cancel this Lease and upon
payment by Lessee to Lessor of Ten Thousand Dollars ($10,000.00) (the
"Cancellation Fee"), which may be paid at any time before such 24 month
anniversary, the Lessee's leasehold of the Premises shall be deemed cancelled as
of the twenty four (24) month anniversary of the Commencement Date. In the
event Lessee so elects to cancel, Lessee shall vacate the Premises on or before
the 24 month anniversary of the Commencement Date or Lessee shall be deemed a
holdover tenant and Section 23 hereof shall govern the rental payments due.
Lessee's failure to vacate shall not entitle Lessee to any refund or return of
the Cancellation Fee.
(e) If Lessee cancels this Lease as provided above, Lessor shall grant
RIPCO Real Estate Company a right of first refusal to assume this Lease on
the prevailing terms and conditions. Said right of first refusal must be
exercised by RIPCO within ten (10) days of receipt of notice from the Lessor of
such right.
3. BASIC RENT.
(a) The Lessee shall pay to the Lessor at the address of the Lessor
hereinabove set forth, without notice, demand, off-set or deduction, a basic
rent (hereinafter referred to as "Basic Rent") in the amount of $40,423.80
payable in advance on the first day of each and every month during the Term
hereof in equal monthly installments of $3,368.65 each. In accordance with, and
in furtherance of, Section 3(c) hereof, Lessee has paid to Lessor upon the
signing of this Lease the sum of $3,368.65 representing Basic Rent for the first
month of the term hereof for which Basic Rent is due.
2
<PAGE>
(b) Commencing on the thirteenth (13th) full month following the
Commencement Date, and annually thereafter, including any renewals or extensions
thereto, the Basic Rent shall be increased by four (4%) percent, on a compounded
basis so that each year the Basic Rent shall be increased by four (4%) percent
over the prior year.
(c) Notwithstanding the forgoing, Lessee shall not be required to
make payments of Basic Rent for the first month after the Commencement Date of
this Lease.
4. USE AND [*ILLEGIBLE] premises for a general office space and for
[*ILLEGIBLE] may lawfully be used for these purposes.
5. CARE AND [*ILLEGIBLE] no act of waste and shall take good care of
[*ILLEGIBLE] therein, and shall, in the use and occupancy of [*ILLEGIBLE] of the
federal, state and municipal government [*ILLEGIBLE] make all necessary repairs
to the Premises, [*ILLEGIBLE] if any, including, without limitation, those
[*ILLEGIBLE] [*ILLEGIBLE] of the federal, state and municipal governments
[*ILLEGIBLE] repair has been made necessary by misuse or neglect [*ILLEGIBLE] or
licensees, in which event Lessor shall [*ILLEGIBLE] to Lessor, as additional
rent, immediately [*ILLEGIBLE] made by Lessee to the Premises, which are so
attached to the premises that may [*ILLEGIBLE] removed without material injury
to the Premises, shall become the property of Lessor upon installation. Not
later than the last day of the term, Lessee shall, at Lessee's expense, remove
all Lessee's personal property and those improvements made by Lessee which have
not become the property of Lessor, including trade fixtures movable paneling,
partitions and the like; repair all injury done by or in connection with the
installation or removal of said property and improvements; and surrender the
Premises in as good condition as they were at the beginning of the term,
reasonable wear and damage by fire, the elements, casualty, or to the cause not
due to the misuse or neglect by Lessee, Lessee's agents, Servants, visitors or
licensees excepted.
Except in the event of a holdover tenancy, all property of Lessee
remaining on the Premises after the last day of the term of this Lease shall be
conclusively deemed abandoned and may be removed by Lessor, and Lessee shall
reimburse Lessor for the cost of such removal. Lessor may have any such property
stored at Lessee's risk and expense.
6. ALTERATIONS, ADDITIONS OR IMPROVEMENT. Lessee shall not, without first
obtaining the written consent of Lessor, make any alterations, additions or
improvements in, to or about the premises. Such consent shall not be
unreasonably withheld or delayed. Any alterations to the Building's HVAC's
plumbing or electrial systems may only be made by Lessor's designated
contractors or by a contractor selected by Lessee, which contractor is
appropriately licensed in the trade in which such contractor is performing work
at the Building, maintains appropriate levels of insurance and which contractor
provides Lessor with evidence of said license and insurance prior to commencing
work at the Building. Notwithstanding the foregoing, Lessor's consent shall not
be required in connection with decorations to the Demised
3
<PAGE>
Premises or any alteration, addition or change to the Demised Premises costing
less than $20,000 that does not affect the structural, mechanical or electrical
integrity of the Demised Premises or Building.
7. ACTIVITIES INCREASING FIRE INSURANCE RATES. Lessee shall not do or
suffer anything to be done on the Premises which will increase the rate of fire
insurance on the Building.
8. ASSIGNMENT AND SUBLETTING.
(a) Lessee will not by operation of law or otherwise, assign,
mortgage or encumber this Lease, nor sublet or permit the Demised Premises to be
used by others (except to RIPCO Real Estate Company at any time after the twenty
four (24) month anniversary of the Commencement Date hereof with respect to a
sublet of the whole Premises), in whole or in part, without Lessor's prior
express written consent in each instance. The consent by Lessor to any
assignment or subletting (including a sublease to RIPCO Real Estate Company)
shall not in any manner be construed to relieve Lessee from obtaining Lessor's
express written consent to any other or further assignment or subletting nor
shall any such consent by Lessor serve to, relieve or release Lessee from its
obligations to fully and faithfully observe and perform all of the terms,
covenants and conditions of this Lease on Lessee's part to be observed and
performed.
(b) If Lessee shall desire to assign or to sublet all or any
portion of the Demised Premises, Lessee shall give notice thereof to Lessor and
in said notice shall set forth the name and address of the proposed assignee or
sublessee, information as to financial condition of such assignee or sublessee
and proposed use which assignee or sublessee desires to make of the Demised
Premises. Said notice shall bear the signature of the proposed sublessee or
assignee or an officer or managing partner, as the case may be, attesting to its
accuracy. Lessee shall in addition, at Lessor's request, furnish such other
further information as Lessor may reasonably request concerning such proposed
assignment or subletting. If Lessor does not respond to Lessee's request within
fifteen (15) days thereof, Lessor shall be deemed to have consented to such
request.
(c) As a condition of Lessor's consent to any assignment or
subletting:
(i) Lessee at the time of requesting Lessor's consent shall
not be in default of any of the terms, covenants and conditions which are the
obligations of the Lessee hereunder;
(ii) Each assignee of this Lease shall assume in writing all
of the terms, covenants and conditions of this Lease on the part of Lessee
hereunder to be performed and observed, to the extent they accrue after the date
of the assignment;
(iii) An original or duplicate original of the instrument of
assignment and assumption shall be delivered to Lessor within ten (10) days
following the execution thereof;
(iv) Any instrument of sublease shall specifically state that
each sublease is subject to all of the terms, covenants and conditions of this
Lease; and
<PAGE>
received by Lessee from a sublease or assignment of the
attorneys' fees, brokerage commissions and costs [*ILLEGIBLE] the Demised
Premises for the new tenant) (exclusive of rent [*ILLEGIBLE] Demised Premises)
which is in excess of [*ILLEGIBLE] pursuant to this Lease shall constitute
Additional Rent hereunder [*ILLEGIBLE] Lessee to Lessor.
Lessor's consent to any proposed assignment or subletting shall not
be unreasonably withheld or unduly delayed. In determining reasonableness,
however, Lessor may take into consideration the financial conditions or business
history of the proposed assignee or subleasee, the specific use to which the
Demised Premises will be put and the impact of all of the foregoing on other
tenants of Lessor and the Building as a whole.
If this Lease shall be assigned, or if the Demised Premises or any
part thereof be sublet or occupied by any person or persons other han Lessee in
breach of this Section 8, Lessor may, after default by Lessee, collect rent from
the assignee, subtenant or occupant and apply the net amount collected (which
may be treated by Lessor as rent or as use and occupany) to the rent herein
reserved but no such assignment, subletting, occupancy or collection of rent
shall be deemed a waiver of the covenants in this paragraph, nor shall it be
deemed acceptance of the assignee, subtenant or occupant as a tenant, or a
release of Lessee from the full performance by Lessee of all the terms,
conditions and covenants of this Lease.
Each permitted assignee or transferee shall assume and be deemed to
have assumed this Lease and shall be and remain liable jointly and severally
with Lessee for the payment of rent, additional rent and adjustment of rent, and
for the due performance of all the terms, covenants, conditions and agreements
herein contained on Lessee's part shall be performed for the term of this Lease
and any renewals and modifications hereof. No assignment shall be binding on
Lessor unless, as hereinbefore provided such assignee or Lessee shall deliver to
Lessor a duplicate original of the instrument of assignment which contains a
covenant of assumption by the assignee of all the obligations aforesaid and
shall obtain from Lessor the aforesaid written consent prior thereto. Any
assignment, sublease or agreement permitting the use and occupancy of the
Premises to which Lessor shall not have expressly consented in writing shall be
deemed null and void and of no force and effect and Lessee shall bear all costs
and expenses (including attorney's fees) of Lessor resulting from any wrongful
assigning of this Lease.
Notwithstanding the foregoing, Lessee may, without Lessor's prior
written consent, sublet all or any portions of the Demised Premises or assign
the Lease to (i) a parent, subsidiary, affiliate division or corporation
controlling, controlled by or under common control with Lessee; (ii) a successor
corporation related to lessee by merger, consolidation, non-bankruptcy
reorganization or government action; (iii) a purchaser of substantially all of
the Lessee's assets located in the Demised Premises, provided that as of the
date of such transfer, the purchaser has the reasonable financial ability to
perform its obligations with respect to this Lease and/or the Demised Premises
and provided further that Lessee shall remain liable for payments due hereunder
subsequent to any such transfer. For the purpose of this Lease, any sale or
transfer or Lessee's capital stock though any public exchange, or redemption or
issuance of additional stock of any
5
<PAGE>
class shall not be deemed an assignment, subletting or any other transfer of the
Lease or the Demised Premises.
9. COMPLIANCE WITH RULES AND REGULATIONS.
(a) Lessee shall observe and comply with the rules and regulations as
lessor may reasonably prescribe, from time to time, on a uniform basis to all
the Building's tenants, on written notice to the Lessee, for the safety, care
and cleanliness of the Building and the comfort, quiet and convenience of other
occupants of the Building. Lessee shall not place load upon any floor of the
Demised Premises exceeding the floor load per square foot area for which it was
designed to carry and which is allowed by law. Lessor reserves the right, but
shall not have the obligation, to prescribe acting reasonably, the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Lessee, at Lessee's expense, in
settings sufficient to absorb and prevent unreasonable vibration, noise and
annoyance. Notwithstanding anything contained herein to the contrary, Lessee's
obligations to comply with laws relating to the physical condition of the
Demised Premises is strictly limited to those that pertain to the physized
conditions of improvements constructed or requested by Lessee and those that
pertain to repairs and maintenance required as a result of Lessee's operation
upon the Demised Premises. Lessee shall not be required to make structural
changes to the Demised Premises or to install any sprinkler system in the
Demised Premises that may be required under applicable laws. Lessor shall be
responsible for all such repairs.
(b) The lessor reserves the following rights:
(i) To change the name of the building;
(ii) To install, change and maintain a building sign or signs on the
exterior or interior of the Building;
(iii) To approve all sources furnishing sign painting and lettering,
ice, shoe shining, vending machines, mobile and vending service, catering, and
the like services used at the Premises.
(iv) To have pass keys to the Demised Premises, which shall be
retained by Lessor for use in the operation and maintenance of the Building;
(v) Subject to Section 17, at any time in the event of an emergency,
and otherwise at reasonable times, upon 24 hours' prior notice, to take any and
all measures, including inspections, repairs, alterations, additions and
improvements to the Premises or to the Building, as may be necessary or
desirable for the safety, protection and preservation of the Premises or the
building or Lessor's interests therein, or as may be necessary or desirable in
the operation or improvement of the Building or in order to comply with all the
laws, orders and requirements of governmental or other authority provided,
however, that Lessor shall not unreasonably interfere with Lessee's operations.
(c) Violation of reasonably promulgated rules and regulations shall
constitute a material breach hereunder and after the expiration of the
applicable notice and cure periods
<PAGE>
may be the basis for an action of eviction notwithstanding Lessee's timely
payment of all moneys due hereunder.
10. DAMAGES TO BUILDING/WAIVER OF SUBROGATION.
(a) If the Demised Premises or any part thereof be damaged by fire or
other casualty, Lessee shall give immediate notice thereof to Lessor and shall
continue in force and effect except as hereinafter set forth.
(b) If the Demised Premises are partially damaged or rendered
partially unusable by fire or other casualty, the damages thereto shall be
repaired by and at the expense of the Lessor.
(c) If the Demised Premises are totally damaged and rendered wholly
unusable by fire or other casualty, then the Lessor shall have the right to
elect not to restore the same as hereinafter provided.
(d) If the Demised Premises are rendered wholly unusable (whether or
not the Demised Premises are damaged in whole or in part) or if the Building
shall be so damaged that Lessor shall decide to demolish it or not to restore
it, then in any of such events, Lessor may elect to terminate this Lease by
written notice to Lessee given within ninety days after such fire or casualty
specifying the date of the casualty as the date of termination, and upon such
notice the term of this lease shall expire as fully and completely as if such
date were the date set forth above for the termination of this lease, and Lessee
shall forthwith quit, surrender and vacate the premises without prejudice to
Lessor's right and remedies against Lessee under the Lease provisions in effect
prior to such termination, and any Basic Annual Rent or Additional Rent owing
for the period prior to the date of termination shall be paid up to such date
and any payments of Basic Annual Rent or Additional Rent made by Lessee which
were on account of any period subsequent to such date shall be returned to
Lessee. Unless Lessor shall serve a termination notice as provided for herein,
Lessor shall make the repairs and restorations with all reasonable dispatch
subject to delays due to adjustment of insurance claims, labor troubles and
causes beyond Lessor's control.
(e) Lessor and Lessee each hereby releases and waives the right of
recovery against the other or any other claiming through or under each of them
by way of subrogation or otherwise, for damage as a result of fire or other
insured against casualty. Lessor's and Lessee's insurance policies shall contain
a clause providing that such a release or waiver shall not invalidate the
insurance if such clause is available. If such clause is not available then the
foregoing waiver shall be void. In the event that there are additional premiums
for such inclusion the party in whose favor such waiver is intended shall have
the option to either pay the additional premiums or waive the condition that the
other's policy contain the same. Lessee acknowledges that Lessor will not carry
insurance on Lessee's furniture and/or furnishings including decorating or any
fixtures or equipment, records, improvements or appurtenances removable by
Lessee and agrees that Lessor will not be obligated to repair any damage thereto
or replace the same nor will Lessor carry flood or water damage insurance.
<PAGE>
(f) Lessee hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this Article shall govern and
control in lieu thereof.
(g) Notwithstanding anything to the contrary contained in this Lease
during any period after a damage or destruction and until the restoration of the
Demised Premises have been Substantially Completed, the Lessee shall be entitled
to an abatement of Basic Annual Rent for the unusable portion of the Demised
Premises on a per square foot basis.
(h) Notwithstanding anything to the contrary contained in this Lease,
in the event of damage or destruction to the Demised Premises or the Building,
Lessee shall have the right to terminate this Lease under the following
conditions: (a) the damage renders the Demised Premises insufficient for
Lessee's normal use for sixty (60) consecutive days in Lessee's reasonable
business judgment; (b) the damage is such that the Demised Premises cannot be
(or are not) restored within one hundred eighty (180) days from the date of
damage; or (c) the damage or destruction occurs during the last six (6) months
of the Term (or any Extended Term) and Lessee has not previously exercised any
option rights it may have for succeeding extension or renewal terms.
11. EMINENT DOMAIN. If Lessee's use of the Premises is materially affected
due to the taking by eminent domain of (a) the Premises or any part thereof or
any estate therein; or (b) any other part of the Building, the appurtenances
thereto or the real property upon which the Building is located; then in either
event, at the Lessee's option, which option must be exercised within twenty (20)
days of receipt of notice of such proposed taking, this Lease shall terminate on
the date when title vests pursuant to such taking. The rent, and any additional
rent, shall be apportioned as of said termination date any basic or additional
rent paid for any period beyond said date shall be repaid to Lessee. Lessee
shall not be entitled to any part of the award for such taking or any payment in
lieu thereof, but Lessee may file a separate claim for Lessee's fixtures and for
moving expenses, provided the same shall in no way affect or diminish Lessor's
award. In the event of a partial taking which does not effect a termination of
this Lease, but does deprive Lessee of the used more than twenty-five (25%)
percent of the Demised Premises, Lessee shall have option to be exercised within
twenty (20) days of receipt of notice of the proposed taking to cancel this
Lease when title vests pursuant to such taking and if Lessee does not cancel
this Lease, then there shall be an adjustment of the basic rent, additional rent
and Proportionate Share, as hereinafter defined depending upon the extent to
which the Demised Premises and Building may be taken.
12. BANKRUPTCY OF LESSEE AND OTHER DEFAULTS.
12.1
(a) Events of Bankruptcy. The following shall be Events of Bankruptcy
--------------------
under this lease.
(1) Lessee's becoming insolvent, as that term is defined in
Title 11 of the United States Code, entitled Bankruptcy, 11 U.S.C. Section 101,
et. seq. (the "Bankruptcy Code") or under the insolvency laws of New York State;
<PAGE>
(2) The appointment of a receiver or custodian for any or all of
Lessee's property or assets;
(3) The filing of a volutary petition under the provisions of the
Bankruptcy Code or other insolvency laws;
(4) The filing of an involuntary petition against Lessee as the
subject debtor under the Bankruptcy Code or other insolvency laws, which is
either not dismissed within sixty (60) days of filing, or results in the
issuance of an order for relief against the debtor, whichever is later; or,
(5) Lessee's making or consenting to an assignment for the benefit of
creditors of a common law composition of creditors.
(b) Lessor's Remedies.
(i) Termination of Lease. Upon the occurrence of an Event of
--------------------
Bankruptcy, Lessor shall have the right to terminate this lease by giving ninety
(90) days prior written notice to Lessee, provided, however, that this Section
12.1(b)(i) shall have no effect while a case in which Lessee is the subject
debtor under the Bankruptcy Code is pending, unless Lessee or its Trustee in
Bankruptcy is unable to comply with the provisions of Sections 12.1(b)(v),
12.1(b)(vi) and (vii) below. If Lessee or its Trustee is unable to comply with
Sections 12.1(b)(v), 12.1(b)(vi) and (vii) below, this lease shall automatically
cease and terminate, and Lessee shall be immediately obligated to quit the
premises upon the giving of notice pursuant to this Section 12.1(b)(i). Any
other notice to quit, or notice of Lessor's intention to reenter is hereby
expressly waived. If lessor elects to terminate this lease, everything contained
in this lease on the part of the Lessor to be done and performed shall cease
without prejudice, subject however, to the right of Lessor to recover from
Lessee all rent and any other sums accrued up to the time of termination or
recovery of possession by Lessor, whichever is later, and any other monetary
damages or loss or reserved rent sustained by Lessor.
(ii) Suit for Possession. Upon termination of this lease pursuant to
-------------------
Section 12.1(b)(i), Lessor may proceed to recover possession under and by virtue
of the provisions of the laws of the State of New York, or by such other
proceedings, including reentry and possession, as may be applicable.
(iii) Reletting of Premises. Upon termination of this lease pursuant
---------------------
to Section 12.1(b)(i), the Lessor may, but is not obligated to relet the
premises (though Lessor shall be obligated to use reasonable efforts to mitigate
its damages provided lessor shall be deemed to have acted reasonably by listing
the premises with a reputable commercial real estate brokerage firm) for such
rent and upon such terms as are not unreasonable under the circumstances and, if
the full rental reserved under the lease (and any of the costs, expenses or
damages indicated below) shall not be realized by Lessor, Lessee shall be liable
for all damages sustained by Lessor, including, without limitation, deficiency
in rent, reasonable attorneys' fees, brokerage fees, and expenses of placing the
premises in good order and repair (excluding the cost of any alterations
required by the new tenant). Lessor, in putting the premises in good order may,
at Lessor's option, make such alterations, repairs, or replacements in the
premises as Lessor, in Lessor's sole
<PAGE>
judgment and acting reasonably, considers advisable and necessary for the
purpose of reletting the premises, and the making of such alterations, repairs,
or replacements shall not operate or be construed to release Lessee from
liability hereunder as aforesaid. Lessor shall in no event be liable in any way
whatsoever for failure to relet the premises (provided Lessor uses reasonable
efforts to do so), or in the event that the premises are relet, for failure to
collect the rent thereof under such reletting, and in no event shall Lessee be
entitled to receive any excees, if any, or such net rent collected over the sums
payable by Lessee to Lessor hereunder.
(iv) Monetary Damages. Any damage or loss of rent sustained by Lessor
----------------
Any damage or loss of rent sustaned by Lessor as a result of an Event of
Bankruptcy may be recovered by Lessor, at Lessor's option, at the time of the
reletting, or in separate actions, from time to time, as said damage shall have
been made more easily ascertainable by successive relettings, or, in a single
proceeding deferred until the expiration of the term of this lease or any
renewal term or in a single proceeding prior to either the time of reletting or
the expiration of the term of this lease or any renewal term, in which event
Lessee agrees to pay Lessor the difference between the present value of the rent
reserved under this lease on the date of breach, discounted at eight (8%)
percent per annum, and the fair market value of the lease on the date of breach.
In the event Lessee becomes the subject debtor in a case under the Bankruptcy
Code, the provisions of this Section 12.1(b)(iv) may be limited by the
limitations of damage provisions of the Bankruptcy Code.
(v) Assumption or Assignment by Trustee. In the event Lessee becomes
-----------------------------------
the subject debtor in a case pending under the Bankruptcy Code, Lessor's right
to terminate this lease pursuant to this Section 12.1 shall be subject to the
rights of the Trustee in Bankruptcy to assume or assign this lease. The Trustee
shall not have the right to assume or assign this lease unless the Trustee;
(1) promptly cures all defaults under this lease;
(2) promptly compensates Lessor for monetary damages incurred as
a result of such default; and,
(3) provides adequate assurance of future performance all of
which shall be subject to the laws of the United States of America and the
orders of direction of the Bankruptcy Court.
(vi) Adequate Assurance of Future Performance. Lessor and Lessee
----------------------------------------
hereby agree in advance that adequate assurance of future performance, as used
in Section 12.1(b)(v) above, shall mean that all of the following minimum
criteria must be met:
(1) The Trustee must pay to Lessor, at the time the next payment
of rent is then due under this lease, in addition to such payment of rent, an
amount equal to the next three (3) months' rent due under this lease, said
amount to be held by Lessor in escrow until either the Trustee or Lessee
defaults in its payment of rent or other obligations under this lease (whereupon
Lessor shall have the right to draw upon such escrowed funds) or until the
expiration of this lease or renewal term (whereupon the funds shall be returned
to the Trustee or Lessee);
<PAGE>
(2) The Lessee or Trustee must agree to pay to the Lessor, at
any time the Lessor is authorized to and does draw on the funds escrowed
pursuant to Section 12.1(b)(vi)(1) above, the amount necessary to restore such
escrow account to the original level required by such provision;
(3) Lessee must pay its estimate pro rata share of the cost of
all services provided by Lessor (whether directly or through agents or
contractors, and whether or not the cost of such services is to be passed
through to Lessee) in advance of the performance or provision of such services;
(4) The Trustee must agree that Lessee's business shall be
conducted in a first class manner, and that no liquidating sales, auctions, or
other non-first class business operations shall be conducted on the premises;
(5) The Trustee must agree that the use of the premises as
stated in this lease will remain unchanged;
(6) The Trustee must agree that the assumption or assignment of
this lease will not violate or affect the rights of other tenants in the
Building. All of the foregoing shall be subject to the laws of the United States
of America and the orders of direction of the Bankruptcy Court.
(vii) Failure to Provide Adequate Assurance. In the event Lessee is
unable to;
(1) cure its defaults;
(2) reimburse Lessor for its monetary damages;
(3) pay the rent due under this lease, or any other payments
required of Lessee under this lease, on time (or within ten (10) days of written
notice that it is overdue); or,
(4) meet the criteria and obligations imposed by Section
12.1(b)(vi) above, then Lessee agrees in advance that it has not met its burden
to provide adequate assurance of future performance, and this lease may be
terminated by Lessor in accordance with Section 12.1(b)(i) above.
12.2 Default of Lessee.
-----------------
(a) Events of Default. The following shall be Events of Default under
-----------------
this Lease:
(i) Lessee's failure to pay any monthly installments of Basic
Rent or Additional Rent, the amount of which has been ascertained, (as required
in this lease) within ten (10) days after notice from Lessor that same is
overdue.
<PAGE>
(ii) Lessee's failure to make any other payment required under
this Lease if such failure shall continue beyond the time period specified by
the making of such payment, after notice of the amount of such payment is given
to Lessee by Lessor. If no time period is specifically set forth within which
Lessee must make such payments, Lessee shall be required to make such payment
within thirty (30) days of Lessor's notice to Lessee of the amount of such
payment.
(iii) Lessee's violation or failure to perform any of the other
terms, conditions, covenants or agreements herein made by Lessee, if such
violation or failure continues for a period of thirty (30) days after Lessor's
written notice thereof to Lessee; provided, however, that if the violation or
failure cannot be cured within thirty (30) days Lessee shall not be considered
to be in default hereunder if it commences the cure within such thirty (30) day
period and continue to diligently prosecute same.
(b) If an event of default as hereinabove specified in Section
12.2(a)(i), (ii) or (iii) shall occur, and shall not be cured within the time
period specified in Lessor's notice, or if Lessee shall commence a cure as
provided in Section 12.2(a)(iii) and shall fail to diligently proceed with such
cure, then:
(i) Lessor may give Lessee a fifteen (15) day notice of its
intention to end the term of this lease, and thereupon, at the expiration of
said fifteen day period, this lease shall expire as fully and completely as if
that day were the date herein originally fixed for the expiration of the term,
and Lessee shall then quit and surrender the premises to Lessor but Lessee shall
continue to remain liable as hereinafter provided.
(ii) Lessor, without prejudice to any other right or remedy of
Lessor, held hereunder or by operation of law, and notwithstanding any waiver of
any breach of a condition or event of default hereunder, may at its option and
without further notice, dispossess Lessee and any legal representative or
successor of Lessee or other occupant of the premises by summary proceedings or
other appropriate suit, action or proceeding and remove his, her or its effects
and hold the Demised Premises as if this lease had not been made.
12.3 Notwithstanding any such default, reentry, expiration and/or
dispossession by summary proceeding or other action or proceeding, as provided
in Paragraph 12.2(b) above, Lessee shall continue to be liable during the full
period which would otherwise have constituted the balance of the term hereof,
and shall pay as liquidated damages at the same times as the Basic Rent and
Additional Rent and other charges that become payable under the terms hereof,
together with reasonable attorneys' fees, a sum equivalent to the Basic Rent and
Additional Rent and other charges reserved herein (less only the net proceeds of
reletting as hereinafter provided), and Lessor may rent the Demised Premises for
a term or terms which may be less than or exceed the period which would
otherwise have been the balance of the term of this lease without releasing the
original Lessee from any liability, applying any monies collected, first to the
expense of resuming or obtaining possession, next to restoring the premises to a
rentable condition, then to the payment of any brokerage commissions and legal
fees in connection with the reletting of the Demised Premises and then to the
payment of the Basic Rent, Additional Rent and other charges
<PAGE>
due and to become due to Lessor hereunder, together with reasonable legal fees
of Lessor therefor.
Lessor's failure to do, observe, keep and perform any of the terms,
covenants, conditions, agreements or provisions of this Lease required to be
done, observed, kept or performed by Lessor, for a period greater than thirty
(30) days after written notice by Lessee to Lessor of said failure (except if
the nature of Lessor's obligation is such that more than thirty (30) days are
required for its performance, then Lessor shall not be deemed in default if it
commences performance within the thirty (30) day period and thereafter
diligently pursues the cure to completion), shall be deemed a default by Lessor
and a material breach of the Lease; then, Lessee may, at its option, with or
without notice or demand of any kind to Lessor or any other person, have any one
or more of the following described remedies in addition to all other rights and
remedies provided at law or in equity or elsewhere herein: (i) remedy such
default or breach and deduct the costs including but not limited to, attorney
fees thereof from the installments of rent next falling due; (ii) pursue the
remedy of specific performance; (iii) terminate this Lease; and/or (iv) seek
money damages for loss arising from Lessor's failure to discharge its
obligations under the Lease. Nothing contained in this Lease shall relieve
Lessor of its duty to effect the repair, replacements, correction or maintenance
required of it pursuant to this Lease, nor shall lessor be relieved of its
obligation to restore the affected services or utilities, and this Section shall
not be construed to obligate Lessee to undertake any such work.
12.4 WAIVER OF TRIAL BY JURY AND COUNTERCLAIM:
-----------------------------------------
VENUE; AND REDEMPTION
---------------------
(a) Lessor and Lessee do hereby mutually agree to waive trial by jury
in any action, proceeding or counterclaim brought by either Lessor or Lessee
against the other with regard to any matters whatsoever arising out of or in any
way connected with this lease, the relationship of Lessor and Lessee and
Lessee's use or occupancy of the Demised Premises, provided such waiver is not
prohibited by any laws of the State of New York. Any action or proceeding
brought by either party hereto against the other, directly or indirectly,
arising out of this agreement, shall be brought in a court in Nassau County and
all motions in any such action shall be made in Nassau County, Lessee hereby
expressly waives all rights of redemption as provided in (S)761 et seq. of the
Real Property Actions and Proceedings Law of the State of New York.
(b) Lessee hereby agrees that in any action or summary proceeding
brought by Lessor for the recovery of Basic Rent or Additional Rent, it will
not interpose noncompulsory any counterclaim or any setoff not will Lessee seek
to consolidate any such action or proceeding with any other action or
proceeding.
13. SUBORDINATION OF LEASE. Lessee agrees that this Lease and the Lessee's
interest herein shall be subordinate to any mortgage, deed of trust, ground or
underlying lease, or any method of financing or refinancing now or hereafter
placed against the land and building of which the Demised Premises form a part,
and to renewals, modifications, replacements, refinancings, consolidations and
extensions thereof. Upon request of Lessor, Lessee agrees to execute and deliver
any and all documents, subordinating its rights under this Lease as aforesaid
provided the same are drawn by Lessor or Mortgagee or their attorneys at no cost
to the Lessee. No financing or refinancing hereunder shall affect the Lessee's
right to use the Premises so long
13
<PAGE>
as Lessee is not in default hereunder. Notwithstanding anything to the contrary
herein, this Article 13 shall be self-operative with no further instrument of
subordination required to give effect hereto. Notwithstanding the foregoing,
Lessee shall not be obligated to subordinate this Lease or attorn to any
transferee of Lessor's interest under this Lease unless such transferee agrees
in writing that Lessee shall not be disturbed under this Lease as long as Lessee
is not in default under this Lease beyond any applicable notice and cure period.
Lessee shall give to any mortgagee, by registered mail, a copy of any
notice of default served upon the Lessor, provided that prior to such notice,
Lessee has been notified, in writing, (by way of Notice of Assignment of Rents
and Leases) of the address of such mortgagees. In addition, if Lessor shall have
failed to cure such default within the time provided for in this lease, then the
mortgagees shall have an additional thirty (30) days within which to cure such
default or if such default cannot be cured within that time, then such
additional time as may be necessary if within such thirty (30) days, any
Mortgagee has commenced and is diligently pursuing the remedies necessary to
cure such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this lease shall
not be terminated while such remedies are being so diligently pursued.
Notwithstanding anything to the contrary herein, Lessee shall cooperate with
Lessor and any mortgagee with respect to any financing, refinancing and any
matter relating thereto including notices in case of default by Lessor.
Lessee shall promptly execute a modification of this lease incorporating
therein any changes required by such mortgagee or prospective mortgagee
provided, however, that Lessee shall not be required to make any changes or
amendments to the Term, Basic Annual Rent or Additional Rent, nor shall any
modification affect the operation of Lessee's business change the size or
location of the Demised Premises or change any other Basic Business Terms or
increase any charge or expense to be incurred by Lessee pursuant to the terms of
this Lease.
14. SECURITY. Lessee has deposited with Lessor the sum of Three Thousand
Three Hundred Sixty Eight Dollars and 65/100 Cents ($3,368.65) as security for
the faithful performance and observance by Lessee of the terms, provisions and
conditions of this Lease; it is agreed that in the event Lessee defaults in
respect of any of the terms, provisions and conditions of this Lease, including,
but not limited to, the payment of Basic Rent and Additional Rent, Lessor may
use, apply or retain the whole or any part of the security so deposited to the
extent required for the payment of any Basic Rent and Additional Rent or any
other sum as to which Lessee is in default beyond the expiration of the
applicable cure period or for any sum which Lessor may expend or may be required
to expend by reason of Lessee's default beyond the expiration of the applicable
cure period in respect of any of the terms, covenants and conditions of this
Lease, including but not limited to, any damages or deficiency in the re-letting
of the premises, whether such damages or deficiencies accrued before or after
summary proceedings or other re-entry by Lessor. In no event may security be
used by the Lessee as a credit or right of offset to its obligation to pay rent.
Within fifteen (15) days after written notice to Lessee that any portion of the
security deposit has been used or applied as provided herein, Lessee shall
replace the same with Lessor. Lessor shall have the same remedies for failure to
replace the security deposit as Lessor has for failure to pay Basic rent. In the
event that Lessee shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this lease, the security shall be
returned to Lessee, within thirty (30) days, after the date fixed as the end of
the Lease and after delivery of entire possession of the Demised Premises to
Lessor. In the event of
<PAGE>
a sale of the land and building or leasing of the building, of which the Demised
Premises form a part, Lessor shall transfer the security to the vendee or lessee
and the Lessor shall upon acknowledgment of receipt of the security deposit by
such transferee be deemed released by Lessee from all liability for the return
of such security, and Lessee agrees to look solely to the new Lessor 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 Lessor. Lessee
further covenants that it will not assign or encumber or attempt to assign or
encumber the monies deposited herein as security and that neither Lessor nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
Lessor's security shall be held in a short-term interest bearing
account, the interest earned thereon shall be accrued and shall be held by the
Lessor as additional security hereunder. At the end of the Term, interest on the
security deposit shall be earned for the benefit of the Lessee. Lessor shall,
however, be entitled to deduct on an annual basis that portion of the interest
permitted by law to be retained by Lessor provided that the amount so deducted
does not exceed one (1%) percent of the security.
15. RIGHT TO CURE LESSEE'S BREACH. If Lessee breaches any covenant or
condition of this Lease, Lessor may, on reasonable notice to Lessee (except that
no notice need be given, in case of an emergency), cure such breach at the
expense of the Lessee and the reasonable amount of all expenses, including
attorneys' fees, expended by Lessor in so doing shall be deemed additional rent
payable on demand. If such amounts are not paid within fifteen (15) days of
demand therefor, such amounts shall bear interest at the then prevailing "Prime
Rate" plus two percent (2%) per annum until payment is made. "Prime Rate" shall
mean the "Prime Rate" of leading money center banks as published in the New York
--------
Times, or if no longer published therein, another national newspaper, from time
- -----
to time.
16. MECHANIC'S LIENS. Lessee shall, within sixty (60) days after notice
from Lessor, discharge or satisfy by bonding or otherwise any mechanic's liens
for materials or labor claimed to have been furnished to the Premises on
Lessee's behalf.
17. RIGHT TO INSPECT AND REPAIR. Lessor may enter the Demised Premises but
shall not be obligated to do so (except as required by any specific provision of
this Lease) at any reasonable time so as not to unreasonably interfere with
Lessee's operations and on 24 hours prior notice to Lessee (except that no
notice need be given in case of emergency) for the purpose of inspection or the
making of such repairs, replacement or additions, to, on and about the Premises
or the Building, as Lessor deems necessary or desirable. Lessee shall have no
claims or cause of action against Lessor by reason thereof.
18. SERVICES TO BE PROVIDED BY LESSOR; LESSOR'S EXCULPATION.
(a) Subject to intervening laws, ordinances, regulation and executive
orders, while Lessee is not in default under any of the provisions of this
Lease, Lessor agrees to furnish;
(b) Heating, ventilating and air conditioning (herein "HVAC"), as
appropriate for the reason, together with lighting and electric energy for the
common facilities shall be from
<PAGE>
8:00 a.m. to 6:00 p.m. on Monday through Friday and 9:00 a.m. to 2:00 p.m. on
Saturday except for the holidays set forth on Exhibit B attached hereto and made
a part hereof. All other HVAC ("Overtime HVAC") shall be billed at $18 per hour
for each additional hour for which the Lessee utilizes the HVAC system. Overtime
HVAC shall be paid as Additional Rent hereunder. The Lessor, at its expense,
shall have a 3-hour spring timer installed in the Premises, which timer shall be
the basis for the determation of Overtime HVAC.
(c) Cold and hot water for drinking and lavatory purposes available
twenty-four hours every day.
(d) Elevator service available twenty-four (24) hours every day.
(e) Restroom supplies and exterior window cleaning when reasonably
required, including:
(f) Maintenance and cleaning of the common areas except for the
holidays set forth on Exhibit B attached hereto and made a part hereof; and
(g) Cleaning of the Demised Premises each day Monday through Friday
except for the holidays set forth on Exhibit B attached hereto and made a part
hereof.
(h) Lessor shall have no liability to Lessee for any loss, damage or
expense which Lessee may sustain or incur by reason of any change, failure,
inadequacy or defect in the supply or character of HVAC to the common area or
common area lighting furnished to the Building or if the quantity or character
of the HVAC or common area lighting is no longer available or satisfactory for
Lessee's requirements so long as the foregoing does not arise from any
conditions or acts within the control and dominion of Lessor, its agents or
employees. Notwithstanding the foregoing, Lessor may make such changes to the
common area lighting and HVAC as it deems necessary in its sole discretion
acting reasonably.
19. INTERRUPTION OF SERVICES OR USE. Lessor shall not be responsible for
any interruption of any utilities servicing the Building which arise from
conditions or acts not within the control and dominion of Lessor or Lessor's
agents and employees. Notwithstanding anything to the contrary in this Lease, if
any failure or interruption of service occurs by reason of the negligence or
willful act of Lessor or Lessor's employees, agents or contractors, or
conditions within the reasonable control of Lessor or Lessor's employees, agents
or contractors, and such failure or interruption of service continues unabated
for five (5) consecutive days, Basic Rent and Additional Rent shall be abated
from the date of such interruption or failure in the same proportion as the
rentable area that Lessee reasonably determines is unfit for its normal uses
bears to the rentable area of the entire Demised Premises. If any such failure
or interruption of service continues for 30 consecutive days, Lessee shall have
the right to terminate this Lease upon written notice to Lessor; provided,
however, Lessee may not cancel if such failure or interruption cannot be cured,
using reasonable efforts, within such thirty day period.
20. ELECTRICITY, HEATING, VENTILATING AND AIR CONDITIONING; GAS.
<PAGE>
(a) Lessee may, at its expense, have a separate electric service and
meter from LILCO for electrical service. If so installed, Lessee will pay
directly to LILCO the bills for electric service to the Demised Premises. Lessee
shall pay to LILCO any deposits required for the provision of electric service
to the Demised Premises. In the event Lessor is unable to arrange a separate
electric service, in whole or in part, to the Demised Premises, Lessor may, at
Lessor's expense, install a separate electric submeter for the Demised Premises,
in which event Lessee shall pay to Lessor for the electricity consumed in the
Demised Premises at the same rates as Lessor shall pay to LILCO plus the
appropriate allocable portion of the taxes billed to Lessor by LILCO (based upon
the square footage of the Demised Premises).
(b) Until such time as Lessee has a separate meter installed, Lessee
shall intentionally pay $2.25 per square foot for electric service as Additional
Rent. This amount shall change by such amount (on a percentage basis) and at
such time as Long Island Lighting Company shall change rates to the Building,
provided Landlord documents such changes to Tenant's reasonable satisfaction.
(c) Lessee shall pay its "Proportionate Share" (as defined below) of
all gas charges levied by LILCO on the Building at the rate per cubic foot that
the Building is billed by LILCO.
(d) Lessor shall have no liability to Lessee for any loss, damage or
expense which Lessee may sustain or incur by reason of any change, failure,
inadequacy or defect in the supply or character of the electrical energy or HVAC
furnished to the Demised Premises or if the quantity or character of the
electrical energy or HVAC is no longer available or satisfactory for Lessee's
requirements so long as such loss, damage or expense results from any conditions
or acts within the control and dominion of Lessee, its agents or employees.
Notwithstanding anything to the contrary in this Lease, if any failure or
interruption of service occurs by reason of the negligence or willful act of
Lessor or Lessor's employees, agents or contractors, or conditions within the
reasonable control of Lessor or Lessor's employees, agents or contractors, and
such failure or interruption of service continues unabated for five (5)
consecutive days, Basic Rent and Additional Rent shall be abated from the date
of such interruption or failure in the same proportion as the rentable area that
Lessee reasonably determines is unfit for its normal uses bears to the rentable
area of the entire Demised Premises. If any such failure or interruption of
service continues for 30 consecutive days, Lessee shall have the right to
terminate this Lease upon written notice to Lessor; provided, however; Lessee
may not cancel if such failure or interruption cannot be cured, using reasonable
efforts, within such thirty day period.
21. ADDITIONAL RENT. It is expressly agreed that Lessee will pay in
addition to the Basic Rent provided in Article 3 above, an additional rental to
cover the Lessee's "Proportionate Share" (as hereinafter defined) of the
increased cost to Lessor, for each of the categories enumerated herein, over the
"Base Period Costs" (as hereinafter defined) for said categories.
(a) TAX ESCALATION. If the Real Estate Taxes for the Building at which
the Demised Premises are located for any Lease Year or proportionate part
thereof, during the Lease Term, shall be greater than the Base Real Estate Taxes
(adjusted proportionately for periods less than a Lease Year) then Lessee shall
pay to Lessor as additional rent, its proportionate share, as hereinafter
defined, of all such excess Real Estate Taxes.
<PAGE>
(b) As assumed in this Article, the words and terms which follow mean
and include the following:
(i) "Base Real Estate Taxes" shall mean those real estate taxes
for the 1996 Town Tax year (January 1-December 31) and the 1995/1996 School Tax
year (July 1-June 30) for the Building, as said amounts shall finally be
determined.
(ii) "Real Estate Taxes" shall mean the property taxes and
assessments imposed upon the Building. If due to a future change in the method
of taxation, any franchise, income or profit tax shall be levied against Lessor
in substitution for, or in lieu of, any tax which would other constitute a Real
Estate Tax, such franchise, income or profit tax shall be deemed to be a Real
Estate Tax for the purposes hereof. Notwithstanding anything in this Lease to
the contrary, Real Estate Taxes shall not include any assessments upon the
Building (including, but not limited to, any assessments covering the initial
costs of development of the Building that Lessor elects to be placed against the
Building in the form of an assessment or tax payable over a term of years; i.e.,
sewers initially installed, connection of utilities or fees for connecting
utilities, installation of required traffic control devices, off-site street
work, etc.), or any franchise corporate, estate, inheritance, succession, income
or transfer tax of Lessor except as stated above.
(c) Lease Year. As used in this Lease, Lease Year shall mean the
twelve (12) month period commencing with the Commencement Date, and each twelve
(12) month period thereafter. Once the base costs are established, in the event
any lease period is less than twelve (12) months, then the costs for the
categories listed above shall be adjusted (on an actual per diem basis) to equal
the proportion that said period bears to twelve (12) months, and Lessee shall
pay to Lessor as additional rent for such period, an amount equal to Lessee's
proportionate share, as hereinafter defined, of the excess for said period over
the adjusted base with respect to each of the aforesaid categories.
(d) Payment. At any time, and from time to time, after the
establishment of the costs for each of the referred to above, Lessor shall
advise the Lessee in writing of Lessee's proportionate share with respect to
each of the categories as estimated for the next twelve (12) month period (and
for each succeeding twelve (12) month period or proportionate part thereof if
the last period prior to the Lease's termination is less than twelve (12)
months) as then known to the Lessor, and thereafter, the Lessee shall pay as
additional rent, its Proportionate Share, as hereinafter defined, of these costs
for the periods affected by such advice in equal monthly installments, such new
rates being applied to any months for which the rental shall have already been
paid which are affected by the Tax escalation costs above referred to, as well
as the expired months of the current period, the adjustment for the then expired
months to be made at the payment of the next succeeding monthly rental, all
subject to final adjustment at the expiration of each Lease Year as defined in
Subparagraph (c) hereof (or proportionate part hereof, if the last period prior
to the Lease's termination is less than twelve (12) months).
Notwithstanding anything herein, contained to the contrary, in the
event the last period prior to the Lease's termination is less than twelve (12)
months, the costs during said period
<PAGE>
shall be proportionately reduced on an actual per diem basis to correspond to
the duration of said final period.
(e) Books and Records. Lessor shall maintain books of account in
regard to all of its operating expenses and taxes. On request of Lessee no more
frequently than once each year, Lessor shall exhibit copies of all such books
and records, together with back-up bills and statements to Lessee during
Lessor's normal business hours. Any disagreement with respect to any one or more
of said charges if not satisfactorily settled between Lessor and Lessee shall be
referred by either party to an independent certified public accountant to be
mutually agreed upon and if such an accountant cannot be agreed upon, the
American Arbitration Association may be asked by either party to select an
arbitrator, whose decision on the dispute will be final and binding upon both
parties, who shall jointly share any cost of such arbitration. Pending
resolution of said dispute the Lessee shall pay to Lessor the sum so billed by
Lessor subject to its ultimate resolution as aforesaid.
If, after Lessee shall have made a payment of Additional Rent for Real
Estate Taxes, Lessor shall receive a refund of any portion of the Real Estate
Taxes payable during any Lease year upon which such payment of Additional Rent
shall have been based, as a result of a reduction of such Real Estate Taxes by
final determination of legal proceedings, settlement or otherwise, Lessor shall,
within 20 days after receiving the refund, pay to Lessee, Lessee's proportionate
share of the refund.
22. LESSEE'S ESTOPPEL. Lessee shall, from time to time, on not less than
ten (10) days' prior written request by Lessor, execute, acknowledge and deliver
to Lessor a written statement certifying that the Lease is unmodified and in
full force and effect, or that the Lease is in full force and effect as modified
and listing the instruments of modification; the dates to which the rents and
charges have been paid; and, to the best of Lessee's knowledge, whether or not
Lessor is in default hereunder, and if so, specifying the nature of the default.
It is intended that any such statement delivered pursuant to this Article 22 may
be relied on by a prospective purchaser of Lessor's interest or mortgagee of
Lessor's interest or assignee of any mortgage of Lessor's interest.
23. HOLDOVER TENANCY. If Lessee holds possession of the Premises after the
term of this Lease, Lessee shall become a tenant from month to month under the
provisions herein. For the first thirty (30) days of a holdover tenancy, the
basic rent shall be the then prevailing basic rent during the last month of the
term set forth in Article 3 hereof, for days thirty-one (31) through ninety (90)
at a monthly basic rent equal to one and one half (1-1/2) times the basic rent
paid during the last month of the term set forth in Article 3 hereof and for all
days after ninety (90), at a basic monthly rent equal to two (2) times the basic
rent during the last month of the term set forth in Article 3 hereof, plus, in
all cases, the additional rent provided for in Article 21 for the period of the
hold over.
24. RIGHT TO SHOW PREMISES. Lessor may show the Premises to prospective
purchasers and mortgagees; and, during the three (3) months prior to termination
of either the Initial Term or the Extended Term of this Lease, to prospective
tenants, during regular business hours (i.e., between 8:30 a.m and 5:30 p.m.) on
reasonable notice to Lessee.
19
<PAGE>
25. LATE CHARGE. Anything in this Lease to the contrary notwithstanding, at
Lessor's option, Lessee shall pay a "Late Charge" of two percent (2%) on the
first late payment made during any Lease year and five percent (5%) on each late
payment thereafter during such Lease year, each late payment being any
installment of rent or additional rent paid more than ten (10) days after the
due date thereof, to cover the extra expense involved in handling delinquent
payments.
26. INSURANCE. Lessee covenants to provide on or before the Commencement
Date (i) a comprehensive policy of general liability insurance and (ii) a policy
insuring against damage to property each naming the Lessor as an additional
named insured, insuring Lessee and Lessor against any liability commonly insured
against and occasioned by accident resulting from any act or omission on or
about the Premises and any appurtenances thereto or any property damage
occurring on, in or adjacent to the Demised Premises. Such policy is to be
written by an insurance company qualified to do business in the State of New
York reasonably satisfactory to Lessor. The liability policy shall be with
limits in the aggregate of not less than One Million Dollars ($1,000,000.00)
coverage and the property damage insurance shall be in an amount of not less
than Five Hundred of Thousand Dollars ($500,000). Said limits shall be subject
to periodic review and Lessor reserves the right to increase said coverage
limits no more frequently than twice during the Lease Term, if in the reasonable
opinion of Lessor, said coverage becomes inadequate and is less than that
commonly maintained by tenants in similar buildings in the area by tenants
making similar uses. At least fifteen (15) days prior to the expiration or
termination date of any policy, the Lessee shall deliver a renewal or
replacement policy with proof of the payment of the premium therefor. Each said
policy shall contain an endorsement providing that the policy may not be
cancelled or terminated without at least fifteen (15) days notice to Lessor and
an endorsement that no act or failure to act of Lessee shall invalidate the
coverage afforded Lessor under the policy.
27. NO OTHER REPRESENTATIONS. No representations or promises shall be
binding on the parties hereto except those representations and promises
contained herein or in some future writing signed by the party making such
representation(s) or promise(s).
28. QUIET ENJOYMENT. Lessor covenants that if, and so long as, Lessee pays
the rent, and any additional rent as herein provided, and performs the covenants
hereof, Lessor shall do nothing to affect Lessee's right to peaceably and
quietly have, hold and enjoy the Premises for the term herein mentioned, subject
to the provisions of this Lease.
29. INDEMNITY. If insurance required to be maintained by Lessee does not
cover claims against Lessor, Lessee shall indemnify and save harmless Lessor and
its agents against and from (a) any and all claims (i) arising from (x) the
conduct or management by Lessee, its subtenants, licensees, its or their
employees, agents, contractors or invitees on the Demised Premises or of any
business therein, or (y) any work or thing whatsoever done, or any condition
created (other than by Lessor for Lessor's account) in or about the Demised
Premises during the term of this Lease or during the period of time, if any,
prior to the Commencement Date that Lessee may have been given access to the
Demised Premises, or (ii) arising from any negligent or otherwise wrongful act
or omission of Lessee or any of its subtenants or licensees or its or their
employees, agents, contractors, or invitees, and (b) all costs, expenses and
liabilities incurred in or in connection with each such claim or action or
proceeding brought thereon.
<PAGE>
case any action or proceeding be brought against Lessor by reason of any such
claim, Lessee, upon notice from Lessor, shall resist and defend such action or
proceeding.
Lessor shall defend, indemnify, and hold Lessee and Lessee's agents,
officers, directors, employees, and contractors harmless against and from any
and all injuries, costs, expenses, liabilities, losses, damages, injunctions,
suits, actions, fines, penalties, and demands of any kind or nature (including
reasonable attorneys' fees) by or on behalf of any person, entity, or
governmental authority occasioned by or arising out of (a) any acts, negligence,
or default performed solely by Lessor or Lessor's agents, employees, or
contractors, (b) Lessor's failure to comply with any laws, ordinances,
requirements, orders, directions, rules or regulations of any federal, state, or
municipal governmental authority or agent of record affecting the Demised
Premises or the Building, (c) any failure by Lessor to perform any of the
agreements, terms, covenants, conditions of this Lease on Lessor's part to be
performed or any environmental pollution, damage, condition or problem,
including without limitation, the presence of any hazardous substances, asbestos
or other toxic waste as defined in any federal, state, or municipal governmental
or quasi-governmental laws, rules, regulations, or ordinances in or about the
Demised Premises or the Building that are (i) existing in the Demised Premises
or the Building prior to Lessee's occupancy of the Demised Premises, or (ii)
caused by the acts, omissions or negligence of Lessor, its agents, servants,
independent contractors, or invitees or (iii) caused by another tenant's
negligence or intentional acts, and not caused by Lessee's use of the Demised
Premises. This indemnity shall expire at the end of the applicable statutes of
limitation for the matters indemnified for herein. Nothing herein shall waive or
release Lessor's right to seek indemnity and/or contribution from Lessee.
30. PARAGRAPH HEADINGS. The paragraph headings in this Lease and position
of its provisions are intended for convenience only and shall not be taken into
consideration in any construction or interpretation of this Lease or any of
its provisions.
31. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions of this Lease shall
apply to, bind and inure to the benefit of Lessor and Lessee and their
respective heirs, successors, legal representations and assigns. It is
understood that the term "Lessor" as used in this Lease means only the owner, a
mortgagee in possession or a term lessee of the Building, so that in the event
of any sale of the Building or any lease thereof, or if a mortgagee shall take
possession of the Premises, the Lessor named herein shall be and hereby is
entirely freed and relieved of all covenants and obligations of Lessor hereunder
accruing thereafter, and it shall be deemed without further agreement that the
purchaser, the term lessee of the Building, or the mortgagee in possession has
assumed and agreed to carry out any and all covenants and obligations of Lessor
hereunder.
32. PARKING SPACES. Lessee's occupancy of the Demised Premises shall not
include the use of any reserved parking spaces. Lessee shall have the right to
use the parking areas located around the Building in common with the other
tenants of the Building. Lessee shall, upon request, promptly furnish to Lessor
the license numbers of the cars operated by Lessee and its subtenants,
licensees, invitees, concessionaires, officers and employees. If required by
Lessor, Lessee agrees that the parking of Lessee, its employees and invitees'
automobiles shall be in spaces designated for Lessee. Lessor reserves the right
to designate a portion of the parking around the building as visitor parking.
<PAGE>
33. LESSOR'S LIABILITY FOR LOSS OF PROPERTY. Lessor shall not be
liable for any loss or property from any cause whatsoever, including, but not
limited to (i) theft or burglary from the Demised Premises, and any such loss
arising there from, other than if such loss results from the negligence or
willful misconduct of Lessor, its agents, servants or invitees, or (ii) defects,
errors or omissions in the construction or design of the Demised Premises and/or
the Building including the structural and non-structural portions thereof, and
Lessee covenants and agrees to make no claim for any such loss at any time
except as specifically provided to the contrary herein.
34. PARTIAL INVALIDITY. If any of the provisions of this Lease, or
the application thereof to any person or circumstances, shall to any extent, be
invalid or unenforceable, the reminder of this Lease, or the application of
such provisions or provisions to persons or circumstances other than those to
whom or which it is held to be invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law, except if tenant's use of the Demised Premises
is not permitted by the operation of the foregoing, except illegal acts by the
principles or employees of the tenant.
35. BROKER. Lessor and Lessee warrant and represent that they dealt
with no broker other than Real Estate Strategies, Inc. in connection with this
transaction and each hereby indemnifies the other against any claims of any
broker other than Real Estate Strategies, Inc. (collectively, the "Brokers") by
reason of such broker having had any conversations or dealings with such party
in connection with this transaction. If either party has breached the foregoing
provisions, such party agrees to reimburse the other party for any damages it
might sustain by reason of such claims including the cost of defending any
action in connection therewith and any reasonable legal fees in connection
therewith. Lessor shall pay any commission or fee owing to Broker in connection
with the Lease.
36. PERSONAL LIABILITY. Notwithstanding anything to the contrary
provided in this Lease, it is specifically understood and agreed, such agreement
being a primary consideration for the execution of this Lease by Lessor, that
there shall be absolutely no personal liability on the part of the Lessor, or
its successors, assigns or any mortgagee in possession (for the purposes of this
paragraph, collectively referred to as "Lessor"), with respect to any of the
terms, covenants and conditions of this Lease, and that Lessee shall look solely
to the equity of Lessor in the Building for the satisfaction of each and every
remedy of Lessee in the event of any breach by Lessor of any of the terms,
covenants and conditions of this Lease to be performed by Lessor. Such
exculpation of liability shall be absolute and without exception whatsoever.
37. NO OPTIONS. The submission of this Lease Agreement for
examination does not constitute a reservation of, or option for, the Premises
and this Lease Agreement shall become effective only upon execution and delivery
thereof by Lessor and Lessee.
38. DEFINITIONS. A Proportionate Share. Lessee's Proportionate
Share, wherever that phrase is used, shall be 7.38 percent, which the parties
agree reflects the ratio of the rentable square footage of the Demised Premises
to the gross square footage of the Building measured from outside of outside
wall to outside of outside wall (as determined by Lessor's architect or
engineer).
<PAGE>
(a) Common Facilities. Common facilities shall mean the non-assigned
parking areas; lobby; elevator(s); fire stairs; public hallways; public
lavatories, all other general Building facilities that service all Building
tenants; air conditioning; fan rooms; janitors' closets; electrical closets;
telephone closets; elevator shafts and machine rooms; flues; stacks; pipe shafts
and vertical ducts with their enclosing walls. Lessor may at any time close
temporarily any Common Facility to make repairs or changes therein or to effect
construction, repairs or changes within the Building, or to discourage
non-tenant parking, and may do other such acts in and to the Common Facility as
in its judgment may be desirable to improve the convenience thereof.
(b) Force Majeure. Force Majeure shall mean and include those
situations beyond Lessor's or Lessee's control, including by way of example and
not by limitation, acts of God; accidents; repairs; strikes; shortages of labor,
supplies or materials; inclement weather; or where applicable, the passage of
time while waiting for any adjustment of insurance proceeds.
39. NOTICES. All notices, demands and requests under this Lease shall be in
writing and shall be sent by United States registered or certified mail, postage
prepaid, return receipt requested or by Federal Express or other similar
overnight carrier or by hand delivery or by facsimile followed by telephonic
confirmation of receipt with a signature accepting delivery and addressed as
follows:
(a) If to Lessor:
Tri-State Consumer Insurance Company
2 Robbins Lane
Jericho, New York 11753
Attn: Penny F. Hart
with a copy to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556-0111
Attn: Gary C. Hisiger, Esq.
Tel: 516-357-3128
Fax: 516-357-3333
(b) If to Lessee:
Starbucks Corporation
P.O. Box 34067
Seattle, WA 98124-1067
Attention: Property Management Department
Tel: 447-1575
Fax: (206) 625-9068
by overnight mail to:
<PAGE>
2401 Utah Ave., South
Seattle, WA 98134
With a duplicate copy to the attention of the Legal Department
at the same address.
Either party may, by notice given to the other party, designate
a new address to which notices, demands and requests shall be sent and,
thereafter, any of the foregoing shall be sent to the address most recently
designated by such party. Notices, demands and requests which shall be served
upon Lessor or Lessee in the manner aforesaid shall be deemed to have been
served or given for all purposes under this Lease at the time such notice,
demand or request shall be received or returned as having been "refused" or
"undeliverable". Notices given by an attorney for a party shall be deemed given
by such party.
40. ACCORD AND SATISFACTION. No payment by Lessee or receipt by
Lessor of a lesser amount than the rent and additional charges payable hereunder
shall be deemed to be other than a payment on account of the earliest stipulated
basic rent and additional rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment for rent or additional
rent be deemed an accord and satisfaction, and Lessor may accept such check or
payment without prejudice to Lessor's right to recover the balance of such rent
and additional rent or pursue any other remedy provided herein or by law.
41. EFFECT OF WAIVERS. No failure by Lessor or Lessee to insist upon
the strict performance of any covenant, agreement, term or condition of this
Lease or to exercise any right or remedy consequent upon a breach thereof, and
no acceptance of full or partial rent during the continuance of any such breach
thereof, shall constitute a waiver by Lessor of any such breach or of such
covenant, agreement, term or condition. No consent or waiver, express or implied
by either party to or of any breach of any covenant, condition or duty of the
other party shall be construed as a consent or waiver to or of any other breach
of the same or any other covenant, condition, or duty, unless in writing signed
by the waiving party.
42. INITIAL LEASEHOLD IMPROVEMENTS. Lessor agrees that prior to the
commencement of the term hereof, Lessor will do any and all work shown on the
plans and specifications attached hereto as Exhibit C irrespective of the party
responsible for payment thereof. Lessor will pay the first $31,010 (the "Work
Allowance") of the cost of such work. Any amounts due which relate to work at
the Demised Premises in excess of the Work Allowance shall be paid by Lessee
within ten (10) days of demand therefor, provided that Lessor shall have
received Lessee's written consent to incur the additional expense prior to
commencing Lessor's work.
At such time that Lessee's space is Substantially Completed,
same shall be measured by Lessor's and Lessee's architect from inside of glass
to inside of glass, or mid-point of demising walls. In the event that the usable
square footage increases or decreases by 66 square feet plus or minus, the basic
rent and Lessee's Proportionate Share shall be appropriately adjusted and this
Lease shall be deemed amended by the writing, which shall be signed by both
Lessor and Lessee, reflecting such adjustment provided in no event shall Lessee
be responsible for more than one hundred (100) square feet of increased space as
a result of such measurements.
<PAGE>
43. DIRECTORY LISTINGS. Lessor shall provide Lessee with directory
listings on the main floor of the Building identifying the Lessee and its suite
within the Demised Premises, at no additional cost to Lessee.
44. CONSENTS. Whenever Lessor is requested by Lessee to issue its
consent, Lessor's consent shall be timely delivered and shall not be
unreasonably withheld.
45. NO SMOKING. Lessee agrees and acknowledges that smoking is
prohibited within the Building and outside the main entrances (front and rear)
of the Building and will cause its guests, employees and agents to comply with
this provision.
46. WINDOW TREATMENTS. Lessee recognizes and agrees that, as of the
date of this Lease, window coverings, vertical blinds, shades and other types of
window treatments shall not be provided by Lessor but may be installed by
Lessee, at its cost and expense. In the event Lessee elects to install window
coverings or window treatments, Lessee shall request Lessor's permission to
install such window treatments, which permission may be withheld by Lessor in
its sole discretion.
47. KEYPAD SECURITY. Lessor, at its cost and expense, shall have a
keypad security system installed on the exterior main entrance doors to the
Building. Lessor shall provide Lessee with the necessary codes to afford access
to Lessee. Nothing herein shall limit Lessor's rights to change the exterior
security system at any time, in Lessor's sole discretion.
48. ACCESS. Notwithstanding anything to the contrary herein, Lessee
agrees that RIPCO and any assignee, sublessee or successor hereunder thereto
shall have a right of access through a common interior doorway, which Lessee
shall leave unlocked at all times.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals the day and year first above written.
TRI-STATE CONSUMER INSURANCE COMPANY
By: /s/ Penny Hart
--------------------------
Penny Hart
President
STARBUCKS CORPORATION
By: /s/ Howard Schultz
---------------------------
Howard Schultz
CEO/Chairman
<PAGE>
Accepted as to Section 2(e):
RIPCO II Real Estate Corp.
By:[*ILLEGIBLE]
--------------------------
<PAGE>
EXHIBIT B
HOLIDAYS
1. New Year's Day 6. Thanksgiving Day
2. Washington's Birthday 7. Day After Thanksgiving
3. Memorial Day 8. Christmas Day
4. Independence Day
5. Labor Day
<PAGE>
EXHIBIT C
TRISTATE CONSUMER INSURANCE
OFFICE INTERIOR SPECIFICATION
Note: Any reference to "Landlord" or "TriState" refers to TriState Consumer
Insurance Company. TriState has designated STRUCTURE TECH, INC. to act as their
Construction Managers, and MoJo Stumer Architects, for the work. All
correspondence regarding the following should be directed accordingly.
1. PARTITIONS
----------
A. Demising partitions shall be constructed of 3-5/8" 25 gauge steel
studs with two layers of 5/8" fire code drywall from floor to
underside of steel roof deck. These will be provided as per Town Code.
LANDLORD will erect lineal interior office partitions in accordance
with approved plan. Studs shall be 3-5/8" 25 gauge steel, 24" on
center, with a single layer of 5/8" drywall on both sides. Joints
shall be taped and spackled, three coats. Exterior corners shall be
furnished with metal corner beads. Studs shall be erected from
finished floor to 6" above ceiling. Drywall installation in accordance
with U.S. Gypsum specifications. All toilet walls shall receive water
resistant drywall and 2 1/2" sound batts. Batt insulation for
conference rooms and executive offices.
B. Sound Baffles and Filler Panels
-------------------------------
Where any type of partition intersects a window mullion, a filler
panel shall be provided. Sound baffles and filler panels shall have
the same sound transfer coefficient as the material of which the
partition is constructed.
2. DOOR BUCKS AND HARDWARE
-----------------------
A. Ordinary Doors
--------------
Interior doors will be 3'-0" x 7'-0" hollow core paint grade in office
areas. Such doors will be set in one piece steel buck equipped with
one and one-half pair 4 1/2" door butts and cylindrical latchset of
standard building finish. Master keying will be provided by TRISTATE.
Doors will have removable lock cores for keying system. All doors
shall be undercut as required.
B. Corridor Entry Doors
--------------------
<PAGE>
Entry doors shall be 3'-0" x 7'-0" solid core wood white oak veneer.
Such doors will be set in one piece steel buck equipped with one and
one-half pair 4 1/2" door butts and cylindrical lockset of standard
building finish. Master keying will be provided by TRISTATE. Doors will
have removable lock cores for keying system. All doors shall be undercut
as required.
C. Hardware
--------
1. Door closures shall be provided for all doors opening on public
corridors and at other locations where closures are required by building
codes.
2. A heavy duty floor stop shall be provided for every door.
3. All hardware shall be Schlage, Taco, Arrow, or equal.
D. Door Saddles and Reducing Strips
--------------------------------
Door saddles or reducing strips shall be furnished between carpeted and
non-carpeted areas.
3. CEILINGS
--------
Throughout the general offices, a mechanically attached acoustic ceiling
system will be provided. Existing shall be reused wherever possible. In
the General Office areas, a 2x4 lay-in ceiling Armstrong Minaboard shall
be provided. In the Reception Area, and (1) office, the tile shall be
Armstrong Second Look 2' x 2' upgraded material.
4. FLOORING
--------
TRISTATE will provide commercial grade carpeting in the OFFICE AREAS,
or VCT in general office areas, accounting/support function offices;
storage areas, lounge and file room. A 4" vinyl wall base in either
straight or cove shape will be provided throughout.
<PAGE>
5. WALL TREATMENT
--------------
A. Painting
--------
1. Initial painting of all walls, vertical furring, non-acoustically
treated ceiling, doors, door bucks, and all masonry, gypsum board or
metal surfaces not having a factory finish to consist of one prime
coat, and one finish coat of paint, flat finish (doors and trim may
be in matching semi-gloss finish) in not more than a total of three
selected colors, two of which may be used in a private office or
other enclosed space, and one of which may be used in general office
area. Patch samples shall be submitted by TRISTATE for approval by
TENANT prior to application of the final coat.
2. Painting shall be done in ALL areas not receiving Vinyl
Wallcovering.
B. Wall Covering
-------------
1. Vinyl wall covering may be specified at additional cost to Tenant.
6. LIGHTING
--------
A. Fixtures
--------
1. 2x4 recessed lighting fixtures with rapid start ballasts and an
acrylic prismatic plastic diffuser will be standard.
2. Where required by design conditions, a 2' x 2' fixture will be
installed. Where air conditioning ducts or other obstructions will not
permit the use of standard depth fluorescent fixtures, a shallow type
fixture will be substituted so as to maintain adjacent ceiling levels.
The number of fixtures furnished and installed will be adequate to
furnish a lighting level of 75 foot candles in office and work areas,
and 55 foot candles in hallways and technician's areas.
<PAGE>
B. Switches
--------
All single pole switches, or 3-way switches, and associated wiring
facilities required to service the lighting fixtures shall be provided
in locations and quantities shown. Breaker control shall be provided to
lighting fixtures except when otherwise mutually agreed with Tenant.
7. ELECTRICAL AND TELEPHONE
------------------------
A. Metering
--------
Since contracting for LILCO provided service is the responsibility of
TENANT, TRISTATE shall furnish, install, and connect all wiring,
cabinets, and switches in order to perform the metering function by the
utility. All deposits shall be paid by TENANT, when applicable. Meters
are located in building meter room.
B. Distribution System
-------------------
1. Distribution panels for lighting and electrical equipment shall be
of the circuit breaker type including counter-pulsation equipment.
2. Electrical power and distribution panels shall be installed with
circuit breakers, safety switches, conduit, and required wiring
facilities to such panel for Tenant. The Tenant's special business
machines, pantry, employee lunch room, and other special electrical
requirements are an additional expense to Tenant and will be determined
during the planning stage of the installation, but prior to lease
signing.
3. All circuit wiring from the lighting and power panels to the various
outlets shall be as selected by TRISTATE as Building Standard and in
accordance with local electrical codes.
4. Electrical receptacles shall be circuited separately from lighting
fixtures and in accordance with local codes but no more than eight
duplex receptacles shall be included on one circuit.
5. Low voltage wiring without conduit may be run in peripheral
enclosures and/or hung ceiling to the extent practicable and permitted
by local codes.
C. Convenience and Telephone Outlets
---------------------------------
1. TRISTATE will install 120 volt convenience duplex receptacles
in the walls in general accordance with Tenant layout,
<PAGE>
such location being adjusted to follow good practice, but with a maximum
of 3 per 100 square feet.
2. Kitchen and copying rooms will have an additional wall mounted
dedicated outlet for their respective equipment.
3. The telephone and computer distribution system is to be provided by
Tenant. TRISTATE shall furnish electrical outlets and coordinate the
incoming main telephone line. All New York Telephone fees shall be paid
by Tenant. No isolated grounding or power conditioning has been
included.
8. PLUMBING
--------
A. Tenant shall utilize the existing toilets.
9. HEATING, VENTILATION AND AIR CONDITIONING
----------------------------------------
A. Office Area Air Conditioning/Heating
------------------------------------
1. Galvanized steel ductwork for air distribution including:
a. Supply ductwork, ceiling return plenum.
b. Fresh air intake.
c. Registers, grilles, diffusers, balancing dampers.
d. Insulation of ductwork in hung ceilings not used as return
plenums.
e. All ductwork design and construction as per ASHRAE.
2. Zoning of air conditioning as possible utilizing existing
equipment wherever possible.
B. Office Area Ventilation:
-----------------------
1. Air exhaust in accordance with local/state codes, standard of
ASHRAE.
2. Exhausts to be of the roof or ceiling mounted centrifugal type
with curbs, backdraft damper, birdscreens, and disconnect
switches. Light switch control fans.
C. Equipment
---------
1. Existing equipment will be utilized.
<PAGE>
10. MILLWORK
--------
None included in base rent.
11. ADDITIONAL WORK
---------------
A. Items Included in Specification
-------------------------------
1. Tenant may at any time request additional work of the TRISTATE.
Additional quantities of fixtures or materials such as are provided
for in this specification. These shall be provided by TRISTATE as
extras at unit prices to be provided upon request.
B. Approval of Costs
-----------------
1. Unless expressly so authorized in writing by Tenant, TRISTATE
shall not proceed with any item of work or material at Tenant
expense until Tenant has received and approved an estimate of the
cost thereof.
<PAGE>
EXCLUSIONS AND CLARIFICATIONS
-----------------------------
1. Telephone equipment or cabling.
2. Utility Deposit Fees.
3. Installation of Tenant supplied equipment other than as specified in
previous section.
4. Security required at the time of delivery of Tenant supplied equipment and
furnishings.
5. Signage of any type.
6. Any special lighting fixtures, equipment power, or those electrical
requirements not referenced herein.
7. Security locking systems, grand master keying, card access systems, etc.
8. Furnishings, desks, chairs, landscape partitions, file cabinets, tables,
etc.
9. Pneumatic tube system.
10. Burglar Alarms.
11. Satellites equipment, or connection.
12. Computer equipment, or connection.
13. Internal music system.
14. Permit fees.
15. Bullet proof glass, closed circuit cameras, shielded or reinforced vault
areas.
16. Environmental or hazardous material handling.
17. Window treatments or decorations.
<PAGE>
EXHIBIT 10.11
LEASE AGREEMENT
between
ALBANY VENTURES, INC.
and
COMMUNITY NETWORKS
------------------------------------------------------------------------
For 100 State Street, Albany New York 12207, Leased Premises: Suite 140
----
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
NO. PARAGRAPH TITLE.................................................... PAGE
- --- --------------- ----
<S> <C>
1 TERM............................................................... 3
2 RENTAL SCHEDULE.................................................... 3
3 USE OF PREMISES.................................................... 4
4 UTILITY CHARGES AND OPERATING SERVICES............................. 4
5 ELECTRICAL SYSTEM AND SERVICE...................................... 4
6 HEATING, VENTILATING & AIR CONDITIONING SYSTEM & SERVICE........... 5
7 INSURANCE; INDEMNITY............................................... 6
8 PREPARATION OF THE LEASED PREMISES................................. 7
9 OTHER LEASEHOLD IMPROVEMENTS BY LESSEE............................. 8
10 OCCUPANCY/COMMENCEMENT DATE........................................ 9
11 MAINTENANCE AND REPAIRS............................................ 10
12 CLEANING/JANITORIAL SERVICES....................................... 11
13 DAMAGE TO OR DESTRUCTION OF LEASED PREMISES........................ 11
14 ACTION OF PUBLIC AUTHORITIES....................................... 11
15 DEFAULT............................................................ 12
16 ACCELERATION OF RENT UPON DEFAULT.................................. 12
17 SUBORDINATION...................................................... 13
18 SUBLETTING AND ASSIGNMENT.......................................... 13
19 RECORDATION........................................................ 14
20 SURRENDER AND WAIVERS.............................................. 14
21 NOTICE............................................................. 15
22 BROKERAGE.......................................................... 15
23 ENTIRE AGREEMENT................................................... 15
24 CHANGES, MODIFICATIONS OR AMENDMENTS............................... 15
25 SEVERABILITY....................................................... 16
26 COVENANTS TO BIND RESPECTIVE PARTIES............................... 16
27 BUILDING NAME...................................................... 16
28 CERTIFICATE........................................................ 16
29 LESSEE'S REPRESENTATIONS........................................... 16
30 LESSEE'S REMEDIES.................................................. 16
31 SECURITY........................................................... 16
32 GOVERNING LAW...................................................... 17
33 RELOCATION CLAUSE.................................................. 17
33A EXPANSION OF LEASED PREMISES....................................... 17
34 SIGNATURE PAGE..................................................... 18
35 ACKNOWLEDGMENTS.................................................... 19
EXHIBIT A - RENTAL SCHEDULE........................................ 20
EXHIBIT C - WORK LETTER............................................ 21
EXHIBIT D - RULES AND REGULATIONS.................................. 22
EXHIBIT E - GUARANTY OF LEASE...................................... 24
</TABLE>
-2-
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT, (the "Lease") made as of the day of September, 1998,
between Albany Ventures, Inc., a New York corporation, having its principal
office at 100 State Street, Albany, New York 12207 (Lessor) and Community
---------
Networks, a corporation [authorized to do business in New York
- --------------------------------------------------------------------------------
State], having its principal office at 100 State Street, Suite ________________
- ------
Albany, New York (Lessee).
WITNESSETH
----------
WHEREAS, Lessor is the owner of that certain tract of land with building
and improvements thereon erected commonly known as 100 State Street Albany, New
York (hereinafter referred to as the "Building"); and
WHEREAS, Lessee desires to rent a portion of the Building for the conduct
of its business;
NOW THEREFORE, in consideration of the payment by Lessee of the Fixed Rent
and Additional Rent (as hereinafter defined) reserved and the mutual performance
of the covenants and conditions hereinafter set forth, Lessor does hereby let
and demise unto Lessee and Lessee does hereby take and hire from Lessor, a
certain portion of the Building (hereinafter referred to as the "Leased
Premises"), located on the 1ST floor of the Building, comprising approximately
---
1,976 rentable square feet of space, as more particularly described on Exhibit A
annexed hereto and made a part hereof.
1. TERM: This Lease is for a term of twenty five months (25) commencing
----
October 1, 1998, assuming the Leased Premises are ready for occupancy (as
defined in paragraph 10 hereof) or the day Lessee or anyone claiming under or
through Lessee first occupies the Leased Premises or any part thereof for
business, whichever occurs earlier (the earlier of such date being hereinafter
referred to as the "Commencement Date"), and expiring on October 31, 2000, or
shall end on such earlier date upon which the term of this Lease shall expire or
be canceled or terminated pursuant to the provisions of this Lease or pursuant
to law.
2. RENTAL SCHEDULE:
----------------
(A) The fixed rental (the "Fixed Rent") for the Leased Premises is
$31,616.00 per annum, for the term of this Lease payable in monthly increments
- ----------
of $2,634.66; all based on there being 1976 rentable square feet in the Leased
--------- ----
Premises and subject to correction if there are fewer or greater. Lessee shall
be given one (1) month free rent.
(B) The rentable area set forth above has been determined from the plans of
the Leased Premises. Should there be any variance between said plans and the
actual rentable area occupied by Lessee, then promptly upon notice by Lessor to
Lessee of such variance, the parties shall enter into a recordable agreement to
reflect such change and the Fixed Rent shall be adjusted in accordance
therewith.
(C) The Fixed Rent payments shall be paid in advance, without notice, on or
before the first day of each calendar month following the Commencement Date and
each month thereafter during the term of this Lease or any renewal thereof,
except that Lessee shall pay, upon the execution and delivery of this
-3-
<PAGE>
Lease by Lessee, the sum of $2,634.66 to be applied against the last installment
of Fixed Rent becoming due under this Lease. Lessee covenants that the Fixed
Rent shall be paid promptly to Lessor, at the offices of Galesi Management
Corporation, 100 State Street, Albany, NY 12207, or to such other person and/or
at such other place as Lessor may designate, in lawful money of the United
States, without notice, demand, or abatement (except an abatement expressly
provided for in this Lease) and without any setoff or deduction whatsoever.
Lessee further covenants that any Additional Rent (as hereinafter defined) shall
be paid to Lessor in the same manner and subject to the same conditions,
covenants and requirements as provided for the payment of the Fixed Rent, on or
before the first day of the first calendar month following demand therefor
(unless otherwise specifically provided in this Lease).
(D) In addition to Fixed Rent, Lessee shall pay Additional Rent which shall
mean all sums of money payable by Lessee under this Lease other than Fixed Rent.
(E) The Lessee shall pay a "Late Charge" of two (2%) per month from the due
date of any installment of rental (Fixed Rent or Additional Rent) if said rental
payment is made after the tenth of the month. Nothing herein contained shall be
deemed to limit any right or remedy which the Lessor may have under this Lease,
at law or in equity.
3. USE OF PREMISES: Lessee will use and occupy the Leased Premises as
---------------
executive and general office activities for its lawful business purposes. Lessee
will comply with any and all laws, ordinances, rules, orders and regulations of
any governmental authority which are applicable to the conduct of Lessee's
business on the Leased Premises. The parties agree not to hinder the operational
activities of either party within such common areas as the Building entrance and
lobby, elevators, fire access lanes, driveways, turn-around areas, parking,
loading, unloading and shall mutually observe the restricted areas of either
party or other tenants of the Building.
4. UTILITY CHARGES AND OPERATING SERVICE: (A) Lessor shall cause hot and
-------------------------------------
cold water for ordinary lavatory, cleaning, drinking and toilet facility
purposes to be furnished at no expense to Lessee. Such facilities are provided
for common sharing and not for individual offices. (B) During the term of this
Lease or any renewal or extension thereof, Lessee shall pay for the following
utilities required for its operations: All telephone equipment, installation and
usage which shall be billed directly to the account of the Lessee by the
utility.
5. ELECTRICAL SYSTEM & SERVICE:
---------------------------
(A) The Lessor shall provide to the Lessee the installed or connected
electrical system and related equipment for the Leased Premises. Any
relocation, addition or alteration of the system beyond the building standard
shall be at the Lessee's expense.
(B) The Lessee agrees that the Lessor may periodically survey the Leased
Premises to verify that electrical energy demand and consumption do not exceed
the building standard. Usage in excess of the standard will result in necessary
corrections or alterations. The Lessor and Lessee agree that such corrective
action shall be at the expense of the Lessee and shall be billed and payable to
the Lessor with the next month's rent.
(C) Lessor shall not be liable to Lessee at any time for any loss, damage,
or expense resulting from any change in the quantity or character of the
electrical service furnished to the Building by the
-4-
<PAGE>
electric utility; by the cessation or interruption of the supply of current; nor
shall any such loss, damage or expense, or non-suitability, non-availability,
cessation or interruption in the supply of electric service or current in any
way affect the tenancy or in any way relieve Lessee of any obligation arising
under the terms of this Lease.
(D) In order that the personal safety and property of the occupants and
owner of the Building may not be imperiled by the over-taxing of the capacity of
the existing electrical distribution system, Lessee agrees not to make any
alterations or additions to the electrical equipment, appliances, fixtures or
other machinery utilizing electric power (other than lamps, typewriters, and
other small office machines) without obtaining the prior written consent of
Lessor in each instance. Lessee covenants and agrees that at all times its use
of electric current shall never exceed the capacity of existing feeders or any
wiring installation in the Leased Premises.
(E) Replacement lamps/starters for all lighting fixtures shall be Lessor's
responsibility.
6. HEATING, VENTILATING AND AIR CONDITIONING SYSTEM & SERVICE:
-----------------------------------------------------------
(A) Lessor shall provide heating, air conditioning, and year round
ventilating system into the interior areas, capable of maintaining temperature
conditions of 68 degrees F. dry bulb when the outside temperature is 0 degrees
F., and 75 degrees F. dry bulb when the outside temperature is 95 degrees F.,
assuming a population of not more than ten (10) people, and no reconfiguration
of the existing office space. Any change in location of diffusers or peripheral
system units, control valves, thermostats shall be for the account of the
Lessee.
(B) Lessor shall provide the above levels of HVAC throughout the year, in
accordance with the regular business hours of the Building designated as 7:00
a.m. to 6:00 p.m. Monday - Friday, excluding holidays ("Building Hours").
(C) Lessee agrees to keep and cause to be kept closed all windows in the
Leased Premises and to close the drapes or blinds when necessary to help
maintain comfortable temperatures and to conserve energy, and Lessee agrees at
all times to cooperate fully with the Lessor's energy conservation measures and
to abide by all regulations and requirements which Lessor may prescribe for the
proper functioning and protection of the HVAC system.
(D) Lessee agrees that in the event its occupancy level or electrical load
or both shall exceed the design capacity, the cost to Lessor of providing the
necessary additional HVAC capacity, including but not limited to any necessary
equipment, duct work or the like together with the cost of operation thereof,
shall be for the account of Lessee and shall be payable by Lessee to Lessor,
based upon the capacity of such additional equipment or the cost of otherwise
providing such additional capacity as Additional Rent. Lessor shall finish
Lessee in writing with an estimate of the cost of any such additional HVAC
equipment together with the additional monthly amount for operating any
additional capacity, and shall receive Lessee's written approval thereof prior
to providing such additional HVAC capacity.
(E) Lessor, through the term of this Lease, shall have free and
unrestricted access to any and all HVAC equipment in the Leased Premises upon
reasonable notice. Lessor reserves the fight to interrupt, curtail, stop or
suspend such HVAC equipment when necessary by reason of accident, or
-5-
<PAGE>
repairs, alteration or improvements that are in the judgment of Lessor to be
desirable or necessary to be made. No diminution or abatement of rent or other
compensation shall or will be claimed by Lessee, nor shall the Lease or any of
the obligations of Lessee be affected or reduced by reason of interruption or
curtailment of such HVAC, when such interruption or curtailment or stoppage or
suspension shall be due to failure of electric power or accident, or to repairs,
alterations or improvements that are in the reasonable judgment of Lessor
desirable or necessary to be made, or to difficulty or inability in securing
supplies or labor, or to strikes, or to any other cause beyond the reasonable
control of Lessor, whether such other cause be similar or dissimilar to those
hereinbefore specifically mentioned.
Lessor shall not be required to furnish, and Lessee shall not be entitled
to receive, any HVAC service during any period wherein Lessee shall be in
default beyond the applicable notice period in the payment of Fixed Rent or
Additional Rent as specified in the Lease.
7. INSURANCE; INDEMNITY:
--------------------
(A) Lessor shall procure and maintain all insurance which it deems
necessary for its protection against loss or damage to the Leased Premises or
any other property of Lessor situated thereon.
(B) Nothing contained in this Lease shall be construed to require either
party to repair, replace, reconstruct, or pay for any property of the other
party which may be damaged or destroyed by fire, flood, windstorm, earthquake,
strikes, riots, civil commotions, acts of public enemy, act of God, or other
casualty, and each party hereby waives all claims against the other for all loss
or damage arising out of perils normally insured against by standard fire and
extended coverage insurance.
(C) (1) Except as hereinafter provided, neither party nor any agent or
employee of either party shall be liable for:
(a) Loss of or damage to any property of the other party, or of
any entity within the other party's control, or injury to any entity (if a
person) within the other party's control, from any cause whatsoever, unless
caused by or due to such party's gross negligence;
(b) Any damage referred to in (a) above caused by other
occupants or persons in the Building or by construction of any private, public,
or quasi-public work;
(c) Any latent defect in the Leased Premises or the Building and
Lessee shall not be entitled to any compensation therefor or for abatement of
Fixed Rent or Additional Rent or to any release of any of Lessee's obligations
under this Lease so long as such defect remains latent; nor shall the same
constitute an eviction.
Lessee shall indemnify, defend and hold the Lessor harmless against and
from all liability referred to in (a) above arising out of any action brought by
any entity within the Lessee's control, which, for purposes of this paragraph,
shall include the Lessee's agents, employees, contractors and invitees.
(2) Lessee shall reimburse and compensate Lessor as Additional Rent
within five (5) days after rendition of a statement for all expenditures
(including attorney's fees) made by, or damages or fines sustained or incurred
due to non-performance of or non-compliance with or breach by or failure to
observe any term, covenant or condition of this Lease on Lessee's part to be
kept, observed, performed
-6-
<PAGE>
or complied with.
(D) Lessee shall save Lessor harmless and indemnify it from and against
all injury, loss, claims or damage (including attorney's fees) to any person or
property while at the Building arising out of use or occupancy of the Leased
Premises by the Lessee or its employees, suppliers, contractors or agents and
from and against all injury, loss, claim, or damage to any person or property
anywhere occasioned by any act, neglect or default of the Lessee or its
employees, suppliers, contractors or agents. Lessee covenants and agrees that
during the term of this Lease it will provide and keep in force general public
liability insurance protecting and indemnifying persons and property in or about
the Leased Premises and in the Building throughout and the connecting corridors
thereof to the limit of not less than one million ($1,000,000.00) dollars in
respect of any one occurrence and three million ($3,000,000.00) dollars for
bodily injury or death to any number of persons in any one occurrence and to the
limit of not less than one hundred thousand ($100,000.00) dollars for property
damage. Lessee shall provide, or cause to be provided, Worker's Compensation
Insurance covering all persons employed in connection with the performance of
work upon, in or about the Leased Premises and throughout the Building and the
connecting corridors thereof (exclusive of work, if any, being done by Lessor as
provided by this Lease). All such insurance shall be effected in standard form
under valid, enforceable policies issued by insurers of recognized
responsibility and licensed to do business in the State of New York and shall,
except in the case of Worker's Compensation Insurance, name Lessor and Lessee as
the insureds as their respective interest may appear. A Certificate of such
insurance shall be delivered to Lessor prior to the Commencement Date and
thereafter from time to time (but no less than annually) during the term of this
Lease and at least ten (10) days prior to the expiration date of the previous
policy together with certificates evidencing the renewal of such policy, with
satisfactory evidence of payment of the premium on such policy. To the extent
obtainable, all such policies shall contain agreements by the insurers that (i)
such policies shall not be canceled except upon ten (10) days prior written
notice to each named insured and (ii) the coverage afforded thereby shall not be
affected by the performance of any work upon, in or about the Leased Premises.
(E) If by reason of any improper act of Lessee there shall be an increase
in the insurance premiums applicable to the Building, or the Lessor shall incur
any other expense by reason thereof, Lessee shall pay such increase or expense
to Lessor on the first day of the month immediately following the submission of
a bill or statement by Lessor to the Lessee for the same.
8. PREPARATION OF THE LEASED PREMISES:
----------------------------------
(A) The Lessor shall provide and install in the Leased Premises, those
items, if any, as shall be specified in Exhibit C ("Work Letter") attached
hereto and made a part hereof.
(B) The Lessee may require and specify additional leasehold improvements
for the Leased Premises in addition to or in excess of the "building standard."
Any such improvement so designated shall be done by and for the specific account
of the Lessee unless otherwise provided for in the "Work Letter." The
authorization by the Lessee to do the work shall be specified by the attached
"Work Letter" or by additional supplement to the Work Letter to describe the
complete scope of improvements.
(C) The Lessor's agreement to do the work in the Leased Premises as set
forth in the "Work Letter" shall not require it to incur overtime costs and
expenses and shall be subject to unavoidable delays due to acts of God,
governmental restrictions, strikes, labor disturbances, shortages of materials
and
-7-
<PAGE>
supplies and for any other causes or events beyond Lessor's reasonable control.
Lessor has made, and makes, no representation as to the date when the Leased
Premises will be ready for Lessee's occupancy. In the event that Lessor is
unable to substantially complete the work specified in Exhibit C so as to allow
Lessee to have commercially reasonable use of the Leased Premises on or before
October 1, 1998, Lessor shall at no cost to Lessee, make available space in
Suite 130 in its "as is" condition until the Leased Premises are substantially
completed.
9. OTHER LEASEHOLD IMPROVEMENTS BY LESSEE:
---------------------------------------
(A) Lessee shall have the right, with the prior written consent of Lessor
(except that decorative improvements including painting, wall coverings,
carpeting and non-structural work shall require only prior notice to Lessor),
and at Lessee's sole expense, to make alterations or improvements in or to the
Leased Premises as it shall consider necessary or desirable for the conduct of
its business, provided that all such work shall be done in good and workmanlike
manner, that the structural integrity of the Building shall not be impaired, and
no liens shall attach to the Leased Premises or Building by reason thereof, and
provided also that all requirements of governmental authorities shall be
complied with.
(B) With respect to other improvements by the Lessor's requiring Lessees
written consent, Lessee shall prepare at its expense the outline drawings and
specifications indicating the alterations, modifications or any other
improvements to be made to the Leased Premises by the Lessee. All such plans
shall conform to the conditions outlined herein and as may be reasonably
established by Lessor.
(C) The Lessee shall submit the plans and specifications to the Lessor for
review and approval prior to the start of any work. The Lessor shall make
commercially reasonable good faith efforts to provide Lessor's approval,
conditioned acceptance or denial of the improvements within ten (10) days after
receipt.
(D) With respect to improvements by the Lessee requiring Lessor's written
consent, the Lessee, at the expense of the Lessee, shall file the appropriate
plan with the appropriate municipal building department and obtain approval and
all requisite, building, occupancy or other permits. No work shall commence
until the above approvals have been received.
(E) With respect to improvements by the Lessee requiring Lessor's written
consent, Lessee shall furnish a copy to Lessor of any construction contracts
with contractors who will perform the Lessee's improvements to the Leased
Premises. The Lessor shall have the right to inspect the improvements during
the construction thereof to insure:
(1) That the work will be done in accordance with the approved plans
and specifications and the consents, authorizations and licenses obtained;
(2) That the contractor or other persons performing the work and
furnishing materials will look solely to Lessee for payment and will hold Lessor
and the Leased Premises and the Building containing free from all liens and
claims of all persons furnishing labor or materials therefor, or both;
(3) That qualified and skilled tradesmen only shall be used in the
performance of Lessee's improvements;
-8-
<PAGE>
(4) Any mechanic's lien filed against the Leased Premises or the
Building for work claimed to have been done or materials finished to Lessee
shall be discharged by Lessee, at its expense, within fifteen (15) days after
notice from Lessor to such effect. For the purposes hereof, the bonding of such
lien by a reputable casualty or insurance company shall be deemed the equivalent
of a discharge of such mechanic's lien. In the event Lessee fails to so
discharge such mechanics lien, Lessor may cause same to be bonded or discharged
and charge the expense thereof (including attorney's fees) to Lessee as
Additional Rent.
(5) Contractors doing Lessee's work shall employ only such labor as
will not result in jurisdictional disputes or strikes or otherwise cause labor
discord with respect to the Building.
(F) Lessee or its employees, suppliers, contractors or agents agree to
indemnify and save Lessor harmless against any and all bills for labor performed
and equipment, fixtures and materials installed in the Building and from and
against all losses, damages, costs, expenses, suits and claims whatsoever in
connection with the access to the Building and to the Lessee's leasehold
improvements in the Leased Premises. The cost of Lessee's leasehold improvements
shall be paid for in cash or its equivalent, so that the Leased Premises and the
Building containing the same shall at all times be free of liens for labor and
materials supplied or claimed to have been supplied.
(G) Upon the termination of this Lease, the improvements and any other
alterations, additions or improvements (other than trade fixtures) shall, at the
option of the Lessor (1) become the property of Lessor, or (2) be removed by the
Lessee, provided that any part of the Leased Premises affected by such removal
shall be restored to its original condition, reasonable wear and tear excepted.
10. OCCUPANCY/COMMENCEMENT DATE:
---------------------------
(A) In the event this Lease pertains to the initial occupancy by any
Lessee of the Leased Premises, the Leased Premises shall be deemed ready for
occupancy on the earliest date on which both of the following conditions have
been met.
(1) The improvements described herein to be performed by Lessor have
been substantially completed, including the erection and painting or covering
(as required) of the walls, the installation of the doors and hardware and locks
therefor, the installation of lighting, electric outlets and switches such that
they are operational, and the issuance of such governmental approvals as may be
required for occupancy.
(2) Adequate means of access have been provided, and the use without
material interference of the facilities necessary to Lessee's occupancy of the
Leased Premises, including corridors, elevators, stairways, heating,
ventilating, air conditioning, sanitary, water and electrical lighting and power
facilities, are available to Lessee in accordance with Lessor's obligations
under the Lease.
(B) Lessor shall give written notice to Lessee designating the
Commencement Date for the term of this Lease in respect to the Leased Premises,
which shall not be fewer than two (2) business days' notice.
-9-
<PAGE>
11. MAINTENANCE AND REPAIRS:
-----------------------
(A) Lessee shall keep the Leased Premises in good condition, reasonable
wear and tear excepted, and shall, in the use and occupancy of the Leased
Premises, conform to all laws, orders and regulations of the Federal, State and
Municipal governments, or any of their departments, and regulations of the New
York Board of Fire Underwriters, applicable to the Premises. Lessee shall not be
required to perform any maintenance, repairs or replacements necessitated by the
negligence of Lessor, its servants, agents, or employees, or structural defects
or deficiencies in the Building, or by fire, or other casualty.
(B) Except for such maintenance, repairs, and replacements as are
required by (A) above to be made by Lessee, Lessor shall perform any and all
structural alterations, maintenance, repairs and equipment replacements which
may be necessary to maintain the Building in good, safe and tenantable
condition.
(C) Lessee shall permit the Lessor to erect, use and maintain pipes and
conduits in and through the Leased Premises, provided the same are installed and
concealed behind walls and ceilings of the Leased Premises and do not result in
any noticeable loss of Lessee's space. All work necessary in connection with the
foregoing shall to the extent possible, be done outside of Lessee's regular
business hours. The Lessor or its agents shall have the right to enter the
Leased Premises to make such repairs or alterations as the Lessor reasonably
deems desirable for the proper operation of the Building and shall have the
right to enter the Leased Premises at any time on reasonable advance notice to
Lessee to examine them or when necessary for the protection of the Leased
Premises or the Building. The Lessor, provided it proceeds with due diligence,
shall be allowed to take all material into and upon the Leased Premises that may
be required for such repairs or alterations without the same constituting an
eviction of Lessee in whole or in part and without any abatement or diminution
of Fixed Rent or Additional Rent. In the making of such repairs or alterations,
the Lessor, to the extent practicable and consistent with efficiency and
economy, shall exercise reasonable diligence so as to minimize the disturbance
of or interference with the business of Lessee. Nothing herein contained,
however, shall be deemed or construed to impose upon the Lessor any obligation,
responsibility or liability whatsoever for the care, supervision or repair of
the Premises or any part thereof, other than as herein provided. The Lessor
shall also have the right at any time, without the same constituting an actual
or constructive eviction and without incurring any liability to Lessee therefor,
to change the arrangement or location of entrances or passageways, doors and
doorways and corridors, stairs, toilets, or other public parts of the Building,
provided that no changes shall be made without Lessee's consent where such
changes would adversely affect Lessee's ingress and egress to and from the
Leased Premises from the street floor or from the lobby of the Building or from
the hallway or lobby of the Building.
Lessee shall at all times during the term of this Lease, and any
extension thereof, permit inspection of the Leased Premises during
business hours, by the Lessor and its agents or representatives, or by
or on behalf of prospective lessees. Except in the case of emergency,
any such inspection will be on at least twenty-four (24) hours'
notice. Such inspection will be done in a manner so as not to
unreasonably interfere with Lessee in the conduct of its business.
(D) Damages resulting from any act of the Lessee or its employees,
contractors, agents, licensees or invitees shall be repaired by the Lessee, or,
if repaired by the Lessor, all costs shall be
-10-
<PAGE>
charged to the account of the Lessee.
(E) All repairs or replacements by Lessee or Lessor shall be of first
quality and done in good and workmanlike manner. If Lessee is charged with
making such repairs, restorations and replacements, the contract or chosen by
Lessee to do such repairs, restorations or replacements shall be subject to
Lessee's approval and further, if Lessee shall fail within fifteen (15) days'
written request from Lessor to commence the making of such repairs, restorations
and replacements and complete the work with reasonable diligence, they may be
made and completed by Lessor but at the expense of Lessee.
12. CLEANING/JANITORIAL SERVICES: Lessor shall provide cleaning and janitorial
----------------------------
services. Any special Lessee requirements for cleaning shall be specified,
priced separately and billed as Additional Rent to the Lessee's account, or they
may be billed directly to the Lessee by the contractor performing the work, at
Lessor's discretion.
13. DAMAGE TO OR DESTRUCTION OF LEASED PREMISES: If during the term of the
-------------------------------------------
Lease, the Leased Premises are damaged by fire, flood, windstorm, strikes,
riots, civil commotions, acts of God, or other casualty so that the same are
rendered wholly unfit for occupancy, and if said Leased Premises cannot be
repaired within one hundred eighty (180) days from the time of such damage, then
this Lease, at the option of the Lessor, may be terminated as of the date of
such damage. In the event that the Lessor elects to terminate this Lease, the
Lessee shall pay the Fixed Rent and any Additional Rent apportioned to the time
of damage and shall immediately as practicable surrender the Leased Premises to
the Lessor who may enter upon and repossess the same and from and after the date
of surrender, Lessee shall be relieved from any further liability hereunder. If
the Lessor elects not to terminate the Lease or if any damage by any of the
above casualties, rendering the Leased Premises wholly unfit, can be repaired
within one hundred eighty (180) days thereafter, Lessor agrees to repair such
damage promptly within such period and this Lease shall not be affected in any
manner except that the Fixed Rent and Additional Rent shall be suspended and
shall not accrue from the date of such damage until such repairs have been
completed. If said Leased Premises shall be so slightly damaged by any of the
above casualties as not to be rendered wholly unfit for occupancy, Lessor shall
repair the Leased Premises promptly to Lessee's reasonable satisfaction and
during the period from the date of such damage until the repairs are completed
the Fixed Rent shall be apportioned so that the Lessee shall pay as Fixed Rent
an amount which bears the same ratio to the entire monthly Fixed Rent as the
portion of the Leased Premises which Lessee is able to occupy without
disturbance during such period bears to the entire Leased Premises. If the
damage by any of the above casualties is so slight that Lessee is not disturbed
in its possession and enjoyment of the Leased Premises, then Lessor shall repair
the same promptly and in that case the Fixed Rent and Additional Rent accrued or
accruing shall not abate.
Notwithstanding anything herein contained to the contrary, if the cost of
repair or restoration exceeds thirty (30%) percent of the replacement value,
less foundation, of the Building, then Lessor shall have the option, exercisable
on written notice to Lessee within sixty (60) days of such damage, not to repair
and restore the Building.
Lessee hereby expressly waives the provisions of Section 227 of the Real
Property Law or any other law or statute hereafter enacted of similar import and
agrees that the foregoing provisions of this paragraph shall govern and control
in lieu thereof.
14. ACTION OF PUBLIC AUTHORITIES: In the event that any exercise of the power
----------------------------
of eminent
-11-
<PAGE>
domain by any governmental authority, Federal, State, County, or Municipal, or
by any other party vested by law with such power shall at any time materially
affect Lessee's use and enjoyment of the Leased Premises for the purposes set
forth in paragraph 3, Lessor and Lessee shall each have the right thereupon to
terminate this Lease. In the event of the termination of this Lease in
accordance with the provisions of this paragraph 14, the Fixed Rent shall be
apportioned and prorated accordingly. Lessee shall not be entitled to claim or
receive any part of any award in any condemnation proceeding or as a result of
such condemnation or taking, or to any damages against Lessor whether the same
be for the value of the unexpired term of this Lease or otherwise. Nothing
herein contained, however, shall be deemed to preclude Lessee's fixtures or
improvements or for Lessee's moving expenses provided the award for such claim
or claims is not in diminution of the award made to the Lessor (who shall not
claim such items as its own).
15. DEFAULT: If Lessee shall fail to pay any Fixed Rent or Additional Rent to
-------
Lessor when the same is due and payable under the terms of this Lease and such
default shall continue for a period of ten (10) days after written notice
thereof has been given to Lessee by Lessor, or if the Lessee shall materially
fail to perform any of the covenants or conditions hereof or any other duty or
obligation imposed upon it by this Lease and such default shall continue for a
period of thirty (30) days after written notice thereof has been given to Lessee
by Lessor, or if the Lessee shall be adjudged bankrupt, either voluntarily or
involuntarily, or shall make a general assignment for the benefit of its
creditors, or a receiver of any property of any property of Lessee in or upon
the Leased Premises be appointed in any action, suit, or proceeding by or
against Lessee and such appointment shall not be vacated or annulled within
sixty (60) days, or if Lessee enters into any type of reorganization under the
United States Bankruptcy Code, as the same may from time to time be amended, or
if the interest of Lessee in the Leased Premises shall be sold under execution
or other legal process, then and in any such events Lessor, in its sole
discretion, may at any time thereafter terminate this Lease and the term thereof
upon giving to the Lessee five (5) days notice in writing of its intention to do
so and upon the giving of such notice, this Lease and the term thereof shall
terminate, and Lessor shall again have, repossess and enjoy the same as if this
Lease had not been made, and thereupon this Lease shall terminate without
prejudice, however, to the right of Lessor to recover from Lessee all Fixed Rent
and Additional Rent due and unpaid up to the time of such re-entry together with
all damages and expenses, including attorney's fees, incurred by Lessor due to
Lessee's default. In the event of any such default and re-entry, Lessor shall
have the right, but not the obligation to relet the Leased Premises for the
remainder of the then existing term whether such term be the initial term of
this Lease or any renewed or extended term, for the highest rent then
obtainable, and to recover from Lessee, as damages, the difference between the
rent reserved by this Lease and the amount obtained through such reletting less
the costs and expenses reasonably incurred by Lessor in such reletting
(including attorney's fees). In the event that the amount obtained through such
reletting, less the reasonable costs and expenses thereof, including attorney's
fees, shall exceed the Fixed Rent and Additional Rent herein reserved, Lessee
shall have no right to such excess. Any such notice shall specifically refer to
this paragraph 15 and shall specify the default claimed.
Lessor's remedies as specified in this Lease are cumulative and are not
intended to preclude any other remedies or means of redress to which Lessor may
lawfully be entitled at any time, and Lessor may invoke any remedy allowed at
law or in equity as if specified remedies were not provided for in this Lease.
16. ACCELERATION OF RENT UPON DEFAULT: It is hereby mutually agreed, that
---------------------------------
notwithstanding anything to the contrary herein contained, the Leased Premises
are demised for rental
-12-
<PAGE>
of $63,232.00 for the entire term of twenty four (24) months, payable at the
time of the making of this Lease, and that the provisions herein contained for
the payment of said Fixed Rent in installments are for the convenience of Lessee
only, and that, upon default in payment of the rent in installments, as herein
allowed, then the whole of the Fixed Rent and Additional Rent hereby reserved
for the whole of the said term and then remaining unpaid shall at once become
due and payable, without notice or demand.
17. SUBORDINATION:
-------------
(A) This Lease is subject and subordinate to any mortgages now or
hereafter affecting or covering the Leased Premises and all or any part of the
Building, and to any and all renewals, modifications, consolidations,
replacements and extensions of such leases and mortgages. This clause shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, however, Lessee agrees to execute any
instrument which may be deemed necessary or desirable by Lessor to effectuate
the subordination of this Lease to any such mortgage.
(B) Lessee shall attorn to and recognize a successor lessor, whether
through possession or foreclosure action or sale, as Lessee's landlord under
this Lease and shall promptly execute and deliver any instrument that such
successor Lessor may reasonably request to evidence such recognition and
attornment.
18. SUBLETTING AND ASSIGNMENT:
-------------------------
(A) Lessee shall not have the right to sublet or assign the Leased
Premises except on the following terms and conditions:
(1) Such subletting or assignment shall not relieve the Lessee from
its duty to perform fully all of the agreements, covenants and conditions set
forth in this Lease or any guarantor from the obligations of any guaranty
executed and delivered in connection with this Lease.
(2) The Lessee shall first obtain the Lessor's written consent to the
subletting or assignment in each instance. Tenant, however, may assign interest
or sublet premises to any entity which controls, is controlled by, or is under
common control with tenant with notice to landlord, but without landlord's
consent.
(3) The Lessee shall provide the name of the proposed sublessee or
assignee, the term and conditions of the proposed subletting or assignment, the
nature and character of the business of the proposed sublessee or assignee, and
banking, financial and other credit information relating to the proposed
sublessee reasonably sufficient to enable Lessor to determine the financial
responsibility of said proposed sublessee or assignee.
(4) Upon the receipt of such request from Lessee, Lessor shall have
an option, to be exercised in writing within forty-five (45) days thereafter, to
terminate this Lease effective on a date (the "Termination Date") set forth in
Lessors notice of termination, which shall not be less than thirty (30) days nor
more than one hundred twenty (120) days following the service upon Lessee of
Lessor's notice of termination.
(5) In the event Lessor shall exercise such option to terminate this
Lease, this Lease shall
-13-
<PAGE>
expire on the termination date as if that date has been originally fixed as the
expiration date of the term herein granted and Lessee shall surrender possession
of the entire Leased Premises on the termination date in accordance with the
provisions of this Lease.
(B) If Lessor shall not exercise its option within the period aforesaid,
then Lessor's consent to such request shall not be arbitrarily withheld but will
be given only on the following conditions, which conditions are hereby
acknowledged by Lessee to be reasonable and proper:
(1) That the subletting or assignment is for the entire Leased
Premises only;
(2) That the subletting or assignment shall be to a sublessee whose
occupancy will be in keeping with the dignity and character of the then use and
occupancy of the Building by other lessees and whose occupancy will not be more
objectionable or more hazardous than that of Lessee herein. In no event shall
any subletting or assignment be permitted to a school of any kind or an
employment or placement agency; or governmental or quasi-governmental agency;
(3) That the subletting or assignment shall not be to any lessee,
sublessee or assignee of any leased space in the Building;
(4) That the subletting or assignment shall not be at a lower rental
rate than that being charged by Lessor at the time for similar space in the
Building;
(5) That the sublease or assignment will expressly prohibit
assignment of the Lease or further subletting by the sublessee without Lessor's
written consent.
(6) If this Lease shall be assigned, or if the Leased Premises or any
part thereof, be sublet or occupied by any person or persons other than Lessee,
Lessor may, after default by Lessee, collect Fixed Rent and/or Additional Rent
from the assignee, subtenant or occupant, and apply the net amount collected to
the Fixed Rent and/or Additional Rent herein reserved, but no such assignment,
subletting, occupancy or collection of Fixed Rent and Additional Rent shall be
deemed a waiver of the covenants contained in this Lease, nor shall it be deemed
acceptance of the assignee, subtenant or occupant as a tenant or a release of
Lessee from the full performance by Lessee of all of the terms, conditions and
covenants of this Lease.
19. RECORDATION: Lessee and Lessor agree that they will not record this Lease
-----------
nor any memorandum thereof.
20. SURRENDER AND WAIVERS: When this Lease shall terminate in accordance with
---------------------
the terms hereof, Lessee shall quietly and peaceably deliver up possession to
Lessor without notice from Lessor other than as may be specifically required by
any provision of this Lease. Lessee expressly waives the benefit of all laws
now or hereafter in force requiring notice from Lessor with respect to
termination. Lessee shall deliver up on of the Leased Premises in as good order,
repair, and condition as the same were in at the beginning of the term of this
Lease, except for reasonable wear and tear. The cost of repairing any damage to
the Leased Premises arising from the removal of Lessee's property, shall be paid
by Lessee. Lessee's obligation to observe or perform this provision shall
survive the expiration or other termination of the term of this Lease. All
personal property of Lessee not removed by it shall be deemed abandoned.
-14-
<PAGE>
The Lessee, for itself and on behalf of any person claiming through or
under it, including creditors of all kinds, does hereby waive and surrender all
rights and privileges which it might have under or by reason of any present or
future law to redeem the Leased Premises or to have a continuance of this Lease
for the term thereof after being dispossessed or ejected therefrom by process of
law or under the provisions of this Lease or after any termination of this Lease
as herein provided. Lessee also waives the provisions of any law relating to
notice or delay in levy of execution in case of an eviction or dispossession of
Lessee for non-payment of Fixed Rent and/or Additional Rent or of any other law
of like import now or hereafter in effect.
Lessee shall not interpose any counterclaim or claim of set-off of any
nature or description whatsoever in any action or summary proceeding for the
non-payment of the Fixed Rent or Additional Rent.
Except for an action, proceeding or counterclaim brought by either Lessor
or Lessee against the other for personal injury or property damage, Lessor and
Lessee hereby waive trial by jury in any action or proceeding or counterclaim
brought by either against the other on any matter whatsoever arising out of or
in any way connected with this Lease, the relationship of Lessor and Lessee, or
Lessee's use or occupancy of the Leased Premises, including any emergency or
other statutory remedy with respect thereto.
21. NOTICE: Any notice or demand required by the provisions of this Lease to
------
be given to Lessor shall be deemed to have been given adequately if sent by
Certified Mail, Return Receipt Requested, to Lessor at the following address:
Albany Ventures, Inc.
c/o Galesi Management Corporation
100 State Street
Albany, NY 12207
Any notice or demand required by the provisions of this Lease to be given
to Lessee shall be deemed to have been given adequately if sent by Certified
Mail, Return Receipt Requested, to Lessee at the following address:
Community Networks
205 South Salina Street
Syracuse, NY 13202
or to such other address as Lessee may hereafter designate by notice to Lessor.
Notice shall be deemed given when the same is received by the addressee.
22. BROKERAGE: Lessee hereby warrants and represents that Equis of New York
---------
has been used in connection with this Lease. Lessor agrees that it will pay the
commission of said broker pursuant to a separate brokerage agreement.
23. ENTIRE AGREEMENT: The whole and entire agreement of the parties is set
----------------
forth in this Lease and the parties are not bound by any agreements,
understandings or conditions otherwise than as expressly
-15-
<PAGE>
set forth and stipulated hereunder.
24. CHANGES, MODIFICATIONS OR AMENDMENTS: This Lease may not be changed,
------------------------------------
modified, discharged or terminated orally or in any other manner than by an
agreement signed by the parties hereto or their respective successors and
assigns.
25. SEVERABILITY: If any provision of this Lease or its application to any
------------
situation, shall be invalid or unenforceable to any extent, the remainder of
this Lease, or the application thereof to situations other than that as to which
it is invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
26. COVENANTS TO BIND RESPECTIVE PARTIES: The covenants, agreements,
------------------------------------
conditions and provisions of this Lease shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective heirs, distributees,
executors, administrators, successors and permitted assigns, except that no
assignment or subletting in violation of the provisions of paragraph 18 shall
operate to vest any rights in any successor assignee or subtenant.
27. BUILDING NAME: The Lessor, for itself and its successors and assigns
-------------
reserves the right to change the name of the Building, now generally known as
the 100 State Street Building, or the address of the Building or to designate
additional addresses therefor, on notice to Lessee.
28. CERTIFICATE: Lessee agreed, at any time and from time to time, upon not
-----------
less than ten (10) days prior request by Lessor to execute, acknowledge and
deliver a statement in writing certifying that this Lease is unmodified and is
in full force and effect (or if there have been modifications, that the same is
in full force and effect as modified and stating the modifications), the
commencement date of this Lease, or any other existing status of the Lease, and
the dates to which the rent and other charges have been paid in advance, if any,
it being intended that any such statement delivered pursuant to this paragraph
may be relied upon by any prospective purchaser or mortgagee of the Building.
29. LESSEE'S REPRESENTATIONS: Lessee represents to Lessor that it has made a
------------------------
thorough examination and inspection of the Leased Premises and is familiar with
the condition of every part thereof. Lessee agrees that it enters into this
Lease without any representations or warranties by Lessor or any of its agents,
representatives, employees or servants or by any other person as to the
condition of the Leased Premises, and Lessee agrees to accept the Leased
Premises on the Commencement Date "as is" in its then condition, without any
alterations, improvements, repairs or decorations to be made by Lessor, except
as hereinabove otherwise provided.
30. LESSEE'S REMEDIES: Lessee shall look only to Lessor's estate and property
-----------------
in the Building (or the proceeds thereof) for the satisfaction of Lessee's
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Lessor in the event of any default by Lessor hereunder,
and no other property or assets of Lessor or its partners or principals,
disclosed or undisclosed, shall be subject to levy, execution, or other
enforcement procedure for the satisfaction of Lessee's remedies under or with
respect to this Lease, the relationship of Lessor and Lessee hereunder or
Lessee's use and occupancy of the Leased Premises.
31. SECURITY: Lessee has deposited with Lessor the sum of $______0______ as
--------
security for the full and faithful performance and observance by Lessee of
Lessee's obligations under this Lease. If
-16-
<PAGE>
Lessee defaults in the full and prompt payment and performance of any of
Lessee's obligations under this Lease including, without limitation, the payment
of Fixed Rent and Additional Rent, Lessor may use, apply or retain the whole or
any part of the security so deposited to the extent required for the payment of
any Fixed Rent and Additional Rent or any other sum as to which Lessee is in
default or for any sum which Lessor, may expend or may be required to expend by
reason of Lessee's defaults. If Lessor shall so use, apply or retain the whole
or any part of the security, Lessee shall, upon demand, immediately deposit with
Lessor a sum equal to the amount so used, applied or retained, as security as
aforesaid. If Lessee shall fully and faithfully comply with all of Lessee's
obligations under this Lease, the security or any balance thereof shall be
returned to Lessee upon the termination of the Lease and after delivery to the
Lessor of entire possession of the Leased Premises. In the event of any sale of
Lessor's interest in the Building, Lessor shall have the fight to transfer the
security to the vendee and Lessor shall thereupon be released by Lessee from all
liability for the return of such security. The security deposit shall be
deposited by Lessor in an interest bearing account and interest earned by the
security is for the account of Lessee, unless Lessor retains the entire security
deposit.
32. GOVERNING LAW: The terms and conditions of this Lease shall be construed
-------------
and interpreted under the laws of the State of New York.
33. RELOCATION CLAUSE: Lessor shall have the right upon forty-five (45) days
-----------------
written notice to relocate Lessee to similar space, in size and type, with in
the Building. Notice to relocate shall be in writing and does not require
Lessee's written approval. Relocation costs shall be borne by the Lessor and all
terms and covenants of this Lease shall remain in full effect. In the event that
Lessor shall request that Lessee relocate during the last six (6) months of the
term of this Lease, then, provided Lessee is not then in default under this
Lease at the time that the relocation notice is given, Lessee shall have the
option, exercisable notice given within five (5) days of the date that Lessee
receives Lessor's relocation notice of terminating this Lease effective as of
the date specified in Lessor's notice of relocation the date that relocation is
to occur.
33.A. EXPANSION OF LEASED PREMISES. If Lessor receives a bona fide inquiry to
----------------------------
show space at Suite 130 ("Expansion Premises"), it shall promptly notify Lessee
of such fact and Lessee shall have forty-eight (48) hours within which to inform
Lessor that Lessee desires to enter into negotiations to lease the Expansion
Premises. Lessor and Lessee agree to negotiate in good faith an acceptable
rental rate and other terms for the Expansion Space. If Lessee shall not inform
Lessor of its desire to negotiate within such forty-eight (48) hour period or if
Lessee cannot agree on terms within five (5) business days, Lessor may be free
to negotiate a lease with the bonafide third party.
- signature page to follow -
-17-
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused these presents to be
executed by their duly authorized officers as of the day and year first above
written.
ALBANY VENTURES, INC., LESSOR
By:__________________________
Name:
Title:
COMMUNITY NETWORKS, LESSEE
By:__________________________
Name:
Title:
PLEASE NOTARIZE ON PAGE 15.
-18-
<PAGE>
NOTARY FOR LESSOR:
- -----------------
STATE OF NEW YORK
COUNTY OF __________
On the__________ day of _____________ in the year __________, before
me, the undersigned, a notary public in and for said state, personally appeared
___________________; the person known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacities and that by his/her/their signature(s) on the
instrument, the individual(s) or the person upon behalf of which the
individual(s) acted, executed the instrument.
--------------------
Notary Public
NOTARY FOR LESSEE:
- -----------------
STATE OF NEW YORK
COUNTY OF __________
On the__________ day of ______________ in the year __________, before
me, the undersigned, a notary public in and for said state, personally appeared
___________________; the person known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacities and that by his/her/their signature(s) on the
instrument, the individual(s) or the person upon behalf of which the
individual(s) acted, executed the instrument.
--------------------
Notary Public
-19-
<PAGE>
EXHIBIT A
---------
RENTAL SCHEDULE
---------------
1976 rentable square feet-100 State Street, Suite 140
- ---- ---
Tenant: Community Networks
Contact: Scott Matukas
Lease Term: Twenty four (24) months
Lease Commencement Date: October 1, 1998
Lease Rate: October 1, 1998 - October 31, 1998 Free Rent
November 1, 1998 - October 31, 2000 $31,616.00/annum
$2,634.66/mo.
Special Provisions:
After 18 months of paid rent, tenant can exercise the option to leave by
paying (1) one months rent penalty and the balance of the commission to broker.
-20-
<PAGE>
EXHIBIT C
---------
WORK LETTER
-----------
1. Construct 20' 5" wall to make separate conference room.
2. Resurface all existing walls and paint.
3. Install 26 oz. carpet to the floor. Landlord to select colors.
4. Install electrical outlets.
5. Install 6 panel painted masonite door.
6. Remove dumb waiter and patch.
-21-
<PAGE>
EXHIBIT D
---------
RULES AND REGULATIONS
---------------------
1. The sidewalks, entrances, passages, courts or halls shall not be
obstructed by Lessee or used for any purpose other than ingress and egress to
and from the demised premises. Nothing shall be thrown out of windows or doors
or down passages of building.
2. Movement of goods in or out of the premises and building shall only be
effected through the rear entrance. No hand trucks, carts, etc., shall be used
in the building unless equipped with rubber tires and side guards.
3. The skylights, windows, and doors that reflect or admit light and air
into the halls, or other public places in the building shall not be covered or
obstructed by Lessee, nor shall anything be placed on the window sills.
4. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
rubbish, rags or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by the Lessee who, or
whose employees, agents, visitors or licensees, shall have caused the same.
5. No Lessee shall make, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of the Lessor, and as the Lessor may direct.
6. No Lessee shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring premises or
buildings.
7. No Lessee or any of Lessee's employees, agents or visitors or
licensees, shall bring or keep upon the demised premises any inflammable,
combustible or explosive fluid, chemical or substance, other than those used in
the normal course of business, or allow any unusual or objectionable odors to be
produced upon the demised premises, or permit animals or birds to be brought or
kept on the premises.
8. No machine may be operated on the premises without the written consent
of the Lessor, except for normal business machines. Machinery shall be placed
in approved settings to absorb or prevent any noise or annoyance.
9. No Lessee shall place a load upon any floor of the building exceeding
the floor load per square foot area which such floor was designed to carry, and
all floor loads shall be evenly distributed. All removals or deliveries of any
safes, freight, furniture or bulky matter of any description must take place
during the hours which the Lessor or Lessor's agent may determine from time to
time. The Lessor reserves the right to prescribe the weight and position of all
safes, which must be placed so as to distribute the weight. The Lessor reserves
the fight to inspect all freight to be brought into the building and to exclude
from the building all freight which violates any of the Rules and Regulations.
10. Canvassing, soliciting and peddling in the building are prohibited and
each Lessee shall
-22-
<PAGE>
cooperate to prevent the same.
11. No air conditioning unit or system, portable electric heater or
similar apparatus shall be installed or used by any Lessee without the written
consent of the Lessor.
12. Unless specifically designated within the building by the Lessor, the
building, Leased Premises and common areas have been designated by Lessor as
non-smoking areas. No smoking will be permitted in the building, unless Lessor
has designated a specific smoking area.
13. Lessee shall not permit its employees, agents, visitors or licensees
to loiter within the building or on the adjoining sidewalks.
14. Lessor reserves the right to change, amend or otherwise revise the
Building Standard rules and regulations as Lessor deems reasonable and
necessary.
-23-
<PAGE>
EXHIBIT E
---------
GUARANTY OF LEASE
-----------------
In order to induce ALBANY VENTURES, INC., a New York corporation, as
Lessor, to enter into the attached lease dated as of August __, 1998 (the
"Lease") _______________ as Lessee, the undersigned _____________________,
having an address of ____________________ ("Guarantor") hereby guarantees to
Lessor:
(a) full payment when due of all sums payable by Lessee to Lessor under the
lease and
(b) the full and prompt performance and observance of all of the terms,
covenants, conditions and agreements provided in the lease to be performed and
observed by Lessee, including the "Rules and Regulations" as therein provided,
without requiring any notice of nonpayment, nonperformance or nonobservance, or
notice or demand whereby to charge the Guarantor therefor, all of which the
Guarantor hereby expressly waives.
This guaranty constitutes the unconditional, direct and primary obligation
of the Guarantor, and shall be enforceable regardless of whether any steps shall
have been taken to enforce any rights against Lessee and regardless of any other
condition or contingency. Guarantor consents that Lessor may do or omit from
doing any or all of the following and the obligations of the Guarantor hereunder
shall not be terminated or impaired by reason thereof:
(i) the assertion by Lessor against Lessee of any of the rights or
remedies reserved by Lessor pursuant to the lease;
(ii) the extension of the time for payment or performance on the part of
Lessee of any agreement or condition under the lease;
(iii) the supplementing, modification or amendment of the lease by the
parties thereto;
(iv) any failure, omission or delay on the part of Lessor to enforce,
assert or exercise any right or remedy conferred on Lessor under the
lease; and
(v) the voluntary or involuntary liquidation, dissolution, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, or any similar proceeding
affecting Guarantor or Lessee or any of their assets. Guarantor
hereby waives notice of acceptance of this Guaranty and the right of
trial by jury and the right to interpose a counterclaim in any
litigation arising out of or in connection with this Guaranty.
Guarantor represents and warrants that he/she is fully authorized to enter
into this Guaranty and that Guarantor has a financial interest in the Lessee.
This Guaranty shall bind the legal representatives, successors and assigns
of the Guarantor and
-24-
<PAGE>
shall inure to the benefit of the Lessor, its successors and assigns and shall
be construed for all purposes in accordance with the laws of the State of New
York.
Dated: ____________________________
Year of ____________________________
_________________, _________________
City State
By: ________________________
Name: ________________________
Title: ________________________
ATTEST:
_______________________
-25-
<PAGE>
Exhibit 10.12
Existing Lease Abstract
Building: 416-426 Main Street, Buffalo, NY
Lease Date: October 22, 1998
Landlord: Main Place Liberty Group
Tenant: Coaxicom, Inc. (Community Networks)
Premises: Part of 5th Floor, Suite 500
Rentable Area: 2,029 RSF
Lease Term: 1 year
Lease Commencement: October 1, 1998
Lease Expiration: September 30, 1999
Rent Commencement: October 1,1998
Base Rent: Fixed Rental (Gross)-$26,884.25 per annum
($2,240.35 per month)
Electricity: Included in Gross Rent
Real Estate Taxes: Included in Gross Rent
Operating Expense: Included in Gross Rent
Security Deposit: $2,240.35
Use: General Office Use
Sublet/Assignment: Tenant must obtain prior written consent of
the Landlord, which shall not be unreasonably
withheld. However, Tenant may assign its
interest or sublet the Premises to any entity
which controls, is controlled by, or is under
common control with Tenant with Notice to
Landlord, but without Landlord's consent.
In instances where Landlord's consent is
needed, Landlord resewes the right to
terminate this lease as an alternative to
granting its consent to such assignment or
subletting. In either case, Landlord will
respond in writing within thirty (30) days of
receipt of Tenant's said Notice. If Landlord
elects to terminate this lease, such
termination shall be thirty (30) days after
Landlord gives Notice to Tenant thereof.
<PAGE>
Termination Option(s): N/A
Expansion Option(s): N/A
Right of First Refusal: N/A
Renewal Option(s): N/A
Holdover: If Tenant shall remain in possession of the
Premises after the Termination Date, tenancy
shall be subject to all terms and conditions
of this lease on a month to month basis. The
monthly rental shall be double the amount of
the monthly installments herein paid by
Tenant to Landlord.
<PAGE>
[LOGO] 2100 Liberty Building
Buffalo, New York 14202
(716) 855-1900
(716) 855-2487 Fax
September 13, 1998
Mr. Jeffrey R. Pacy
Equis of New York, Inc.
Park Avenue Tower
8th Floor
65 East 55th Street
New York, NY 10022
Re: Community Networks
Dear Jeff:
Enclosed is one (1) originally signed Commission Agreement and one (1) copy
of the executed Lease between Violet Realty, Inc. and Community Networks, for
your records.
If you have any questions, feel free to contact me at (716)855-1900.
Thank you.
Very truly yours,
MAIN PLACE LIBERTY GROUP
/s/ MICHAEL McAVINN
MICHAEL McAVINN, RPA, EDFP, AICP
Director of Leasing
encl.
<PAGE>
LIBERTY BUIIDING
416-426 MAIN STREET
BUFFALO, NEW YORK
THIS LEASE, dated this 8th day of October, 1998,
entered into by and between Violet Realty, Inc., hereinafter called
"Landlord", and Community Networks, hereinafter called "Tenant",
WITNESSETH:
Landlord does hereby lease to Tenant and Tenant
leases and accepts the premises consisting of Room(s) Suite 500 on
the 5th floor(s)and containing approximately 2,029 square feet of
the Building located at 416-426 Main Street, Buffalo, New York,
also known as the Liberty Building (herein called the "Building"),
the premises covered by this Lease being herein called the "Leased
Premises, as further defined crosshatched on attached Exhibit "A".
The terms of this Lease are as follows:
Term 1. Subject to the terms and conditions set forth
herein, this Lease shall continue in force for a term
of one (1) year, beginning on the 1st day of October,
1998, or on such earlier date as Tenant shall occupy
the Leased Premises or any part thereof with the
consent of Landlord (such date for the commencement
of the term hereof being herein called the
"Commencement Date") and to end on the 30th day of
September, 1999, or on such earlier date upon which
said term may expire or be terminated pursuant to any
of the terms or conditions of this Lease.
Rent 2. As rental for the Lease and use of the Leased
Premises, Tenant shall pay to the Landlord, at the
office of Landlord in Buffalo, New York, 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 such payment, an annual fixed
rental of Twenty-six Thousand, Eight Hundred Eighty-
four & 25/100 Dollars ($26,884.25), such sum (being
herein called "the annual base rent") is to be paid
in twelve equal monthly installments in the amount of
$2,240.35 each, such installments to be paid without
demand and without deduction, abatement or set-off
for any cause, the first of such monthly installments
to be due and payable on the 1st day of October,
1998, with a like installment to be due and payable
on the first day of each month thereafter during the
term of this Lease. In the event that the
Commencement Date shall be a date other than the
first day of a calendar month, then the Tenant shall
pay on the Commencement Date an amount equal to such
portion of an equal monthly installment as the number
of days from the Commencement Date bears to the total
number of days in said calendar month, and said
payment shall represent the pro-rata rent from the
Commencement Date to the end of such calendar month,
and a like adjustment shall be made at the end of the
term in this event as well. All other amounts
reguired to be paid by Tenant to Landlord under other
provisions of this Lease shall be deemed for all
purposes to be additional rent for this Lease and
upon Tenant's failure to timely pay same, Landlord
shall have the same rights and remedies as in the
event of failure to pay the annual base rent.
Rentable 3. The total rentable area for the Building shall
Area be deemed to be 309,000 square feet for purpose of
this Lease. The rentable area for a full floor of the
Building shall be the area bounded by the four
exterior Building walls (measured to the interior
-1-
<PAGE>
surface of the glass windows) excluding the area
used for Building stairs, vertical ducts, elevator
shafts, flues, stacks and pipe shafts and including
the area used for elevator lobbies, corridors,
special stairways, rest rooms, mechanical rooms,
telephone closets, and the structural columns of the
Building and all vertical penetrations for the
special use of Tenant. The rentable area for the
Leased Premises shall be the total rentable area
calculated for the floor or floors to be occupied by
Tenant or where only a portion of a floor is to be
occupied, the rentable area for the Leased Premises
shall be the area calculated within the boundaries
defined by any exterior Building walls bounding the
Leased Premises (measured to the interior surface of
the glass windows), the center line of any common
walls separating the Leased Premises from areas
leased or to be leased to other tenants and the
exterior of any walls separating the Leased Premises
from any public corridors or other public or common
areas on such floor plus a pro-rata portion of the
area on such floor used for elevator lobbies,
corridors, restrooms, mechanical rooms and telephone
closets. The rentable area for the Leased Premises
calculated pursuant to this provision shall be
deemed to be the square footage leased and accepted
as set forth above. Neither the rent payable
hereunder nor any other obligation of Tenant
hereunder shall be reduced, increased or otherwise
affected by a determination that the amount of the
rentable area for the Leased Premises as determined
by calculations made pursuant to the definitions set
forth above after construction of Tenant improvements
is more or 1ess than the amount set forth above.
Uses of 4. Tenant shall use and occupy the Leased
Premises Premises for office purposes only and shall use such
and premises for no other purpose without the prior
Compliance written consent of Landlord. Tenant shall not use or
with Law permit the use of the Leased Premises or any part
and thereof in any way which violates any of the terms
Insurance and provisions of this Lease or any certificate of
Coverage occupancy issued with respect to the Leased Premises,
or which in the judgment of Landlord, would in any
way impair the character reputation or appearance of
the Building or cause discomfort, inconvenience or
annoyance to any of the other tenants or occupants of
the Building. Tenant shall at its expense comply
with all laws, ordinances, orders, rules and
regulations of Federal, State, County and Municipal
authorities and with any direction made pursuant to
law by any public officer or officers which shall
relate to the occupancy, use or manner of use of, or
any installation in, the Leased Premises or to any
abatement of nuisance, or which impose any order or
duty upon Landlord or Tenant, whether or not such
law, order, ordinance, regulation or direction shall
be presently in effect. Tenant shall not do or permit
to be done any act or thing in or upon the Leased
Premises which will invalidate, or be in conflict
with the certificate of occupancy for the Leased
Premises or the Building. Tenant will not occupy or
use, or permit any portion of the Leased Premises to
be occupied or used for any business or purpose
which is extra hazardous on account of fire, or
permit any thing to be done which will in any way
conflict with or increase the rate of fire insurance
on the Building and/or its contents. And in the event
that, by reason of Tenant's acts, there shall be any
increase in rate for the insurance on the Building or
its contents created by Tenant's acts or conduct of
business, then Tenant hereby agrees to pay such
increase.
-2-
<PAGE>
Acceptance 5. Tenant is familiar with the Leased Premises,
and acknowledges that the same are received by Tenant in
Indemnity good state of repair, accepted by Tenant in the
condition in which they are now, and that Landlord
shall not be liable to Tenant or Tenant's agents,
employees, invitees or visitors for any damage to
persons or property due to condition, design or
defect in the Building or its mechanical systems or
elsewhere in the Leased Premises or the Building
which may now exist or hereafter occur, less due to
the diligence or willful or omissions of landlord,
its agents, contractors and employees. Tenant
accepts the Leased Premises as suitable for the
purposes for which the same are leased and assumes
all risks of damage to persons or property.
Landlord will not be responsible for any lost or
stolen personal property, equipment, money or jewelry
from Tenant's Leased Premises, area, or public rooms
regardleSs of whether such loss occurs when the area
is locked against entry or not.
Tenant agrees to indemnify and hold Landlord
harmless from all liability, claims, suits, demands,
damaqes, costs, fines, penalties and expenses
(including but not limited to, attorneys'fees and
other disbursements incurred in the defense of any
action or proceeding)to which Landlord may be subject
or suffer by reason by any injury to, or death of,
any person or persons or for damage to property
(including any loss of the use thereof), or
otherwise, arising or in any way related to Tenant's
use and occupancy of the Leased Premises during the
term of this Lease or during the period of time, if
any, prior to the Commencement Date in which Tenant
may have been given access to the Leased Premises for
the purpose of doing work or making installations
therein, or resulting from any condition of the
premises caused by any default by Tenant or resulting
from any act, omission or negligence of Tenant or any
of Tenant's agents, employees or invitees. Tenant
agrees to use and occupy the Leased Premises and all
other facilities of the Building at his own risk and
hereby releases Landlord, its agents and employees
from all claims for damage to property or injury to
persons from any cause to the full extent permitted
by law. Tenant further agrees that Landlord shall not
be responsible or liable to Tenant, his employees,
agents, or invitees for personal injuries or property
damage occasioned by the act or omission of any other
Tenant or such other Tenant's employees, agents or
invitees within the Building.
Nuisance 6. Tenant will conduct his business, and control
his agents, employees, invitees and visitors in such
a menner as not to create nuisance or interfere with,
annoy, or disturb any %er Tenant &Landlord in its
management of the Building.
Assignment 7. Tenant shall not assign this Lease, sublease,
and the Leased Premises or mortgage or pledge its
Subletting leasehold interest hereunder or grant any concession
or license within the Leased Premises without
obtaining the prior written consent of Landlord
thereto in each instance. See Page 3A. In the event
of any authorized assignment or sublease, Tenant
shall not thereby be released from any of its
obligations hereunder and Landlord shall be entitled
to enforce all of the terms of this Iaase directly
against either Tenant or his assignee or sublessee,
or both. Tenant shall continue to be bound by all of
the terms, covenants and conditions hereof
notwithstanding such assignment or sublease or the
acceptance of rent from any assignee or subtenant or
any other fact, unless Tenant is specifically
released from his obligations in writing by Landlord.
Any attempted assignment or subletting of this Lease
of the Premises without consent of Landlord shall be
void.
-3-
<PAGE>
The following is added to Paragraph 7, Assignment and Subletting,
Page 3:
which shall not be unreasonably withheld; and
Landlord and Tenant specifically agree that it
shall not be unreasonable for Landlord to withhold
its consent to an assignment or sublease to an
individual or entity with less net worth or less
operating experience than Tenant. Tenant, however,
may assign its interest or sublet the Premises to any
entity which controls, is controlled by, or is under
common control with Tenant with notice to Landlord,
but without Landlord consent.
-3A-
<PAGE>
Landlord's consent to any such assignment or sublease
shall not be deemed a waiver of the requirement for
consent to any subsequent assignment or sublease.
Tenant acknowledges and agrees that a sublease of a
part of the Leased Premises is strictly prohibited
and Landlord under no circumstances will permit such
an assignment or sublease.
In the event of any proposed assignment of this
Lease or subletting of the Leased Premises, Landlord
reserves the right, in its discretion and at its sole
option to terminate this Lease as an alternative to
granting its consent to such assignment or
subletting. Prior to the proposed assignment or
subletting, Tenant shall forward to Landlord in
writing the instrument proposing to effect such
assignment or subletting indicating the proposed
sub-tenant and the terms of the assignment or
subletting. Within thirty (30)days after receipt of
the notice of the proposed assignment or subletting,
Landlord shall notify Tenant in writing whether it
consents, withholds its consent, or elects to
terminate this Lease. If Landlord elects to terminate
this Lease, such termination shall be effective
thirty (30)days after Landlord gives notice to Tenant
thereof.
Alterations 8. Tenant shall not make any decorations,
or Improve- installations, additions or improvements in or to the
ments, Liens Leased premises without obtaining Landlord's prior
written consent thereto in each instance. All such
installations, additions or improvements shall be
done at Tenant's sole expense, by contractors or
mechanics approved in writing by Landlord under
contracts approved in writing by Landlord, and at
such time and in such manner as Landlord may from
time to time designate. The work to be performed
shall in all instances comply with laws, rules,
orders and regulations of governmental authorities
having jurisdiction thereof, shall comply in all
respects with plans and specifications approved by
Landlord and such work shall be of first quality.
Tenant shall never suffer or permit any bill for
labor or materials furnished for or used in the
repair, alteration, installation, restoration,
rebuilding or construction of any improvements upon
the Leased Premises under any provision of this Lease
or otherwise by Tenant ever to attach to said Leased
Premises as a lien or be secured by a lien upon said
premises; nor shall Tenant ever suffer to permit any
lien ever to attach to the rights or titles of the
Landlord to the fee title to said premises or the
right of Landlord to collect and receive the rentals
provided for herein or, in default of receiving such
rentals, to the right to Pursue and enforce the
remedies and options available to Landlord under such
circumstances, and in the event of the termination of
Tenant's rights hereunder, to receive back and be
entitled to have the full use, enjoyment and
occupancy of all of said Leased Premises free of
liens or encumbrances arising by virtue of any
contract or agreement made and entered into by Tenant
or any act or thing done or omitted to be done by
Tenant. All fixtures, equipment, improvements,
installations, alterations, additions attached to or
built into the Leased premises at the commencement of
or during the term of this Lease, whether or not
furnished or installed at the expense of Tenant,
shall be and remain part of the Leased Premises and
be deemed the property of Landlord and shall not be
removed by Tenant except as otherwise expressly
provided in this Lease. In the event Landlord, upon
at least thirty (30)days'notice to Tenant prior to
the expiration or termination of this Lease, shall
require Tenant to remove any of the aforesaid
fixtures, equipment, improvements, installations,
alterations, decorations, or additions
-4-
<PAGE>
which are designated by Landlord, Tenant shall
remove same from the Leased Premises and restore
Leased Premises to their original condition, all at
Tenant's cost and expense and prior to the expiration
or termination of this Lease. All movable
property, furniture, furnishings and trade fixtures
installed or placed in the Leased Premises by Tenant,
other than those so affixed that they cannot be
removed without material damage thereto, shall remain
the property of Tenant and shall be removed by Tenant
prior to the expiration or termination of this Lease,
and the premises left in a neat and clean condition.
In the case of any damage to the Leased Premises by
reason of such removal, Tenant shall restore the
Leased Premises to good order and condition. If any
property of any kind which may be or is required to
be removed from the Building by Tenant, is not
removed by Tenant within the time specified above,
then Landlord (in addition to any other rights and
remedies which Landlord may have) may, at its
election, store or warehouse Tenant's property, at
Tenant's expense, or deem that the same has been
abandoned by Tenant, in which event Landlord may
thereafter deal with such abandoned property in such
manner as it deems best and without any further right
or claim thereto on the part of Tenant, and in either
event, upon removal of Tenant's property, Landlord
may restore such premises to their original
condition, and Tenant shall reimburse Landlord for
all costs and expenses incurred by Landlord in
removing such property and restoring the Leased
Premises.
Fire or 9. If the Leased Premises or any part thereof
Damage shall be damaged by fire or other casualty, Tenant
Clause, shall give prompt notice thereof to Landlord and
Release, Landlord shall proceed with reasonable diligence to
Subrogation repair or cause such damage to be repaired. If the
Leased Premises or any part thereof shall be rendered
untenable by reason of such damage and such damage
shall not be caused by the negligence or other
wrongful conduct of Tenant, his agents, employees or
invitees, the annual base rent or a proportionate
part thereof hased on the area of the Leased Premises
so rendered untenable, shall be abated for the period
from the occurrence of such damage to the date when
the damage shall have been repaired, as aforesaid.
Otherwise Tenant's obligation to pay rent shall not
be affected by such fire or casualty. Landlord shall
not be liable for and Tenant expressly releases
Landlord from liability for inconvenience or
annoyance to Tenant or for injury to property or the
business of Tenant resulting in any way from such
damage or any action taken in connection with the
repair thereof. In case the Leased Premises or the
Building (whether or not the Leased Premises shall
have been damaged) shall be so damaged by such fire
or other casualty that substantial alterations or
reconstruction of the Building shall, in Landlord's
sole judgment, be required, then Landlord may, at its
option, terminate this Lease by so notifying Tenant
of such termination in writing within 90 days after
the date of such damage. In the event Landlord elects
to terminate this Lease, any prepaid and unearned
rent shall be refunded to Tenant. It is expressly
agreed that neither Landlord nor Tenant shall be
liable to the other, and each party hereto hereby
releases and waives all claims, rights of recovery,
and causes of action that either such party or any
party claiming by, through, or under such party or
subrogation or otherwise may now or hereafter have
against the other party or any of the other party's
directors, officers, employees, or agents for any
loss or damage that may occur to the Building, Leased
Premises Tenant's improvements, or any of the
contents of any of the foregoing by reason of fire,
Act of God, the elements, or any other cause,
including negligence
-5-
<PAGE>
of the parties hereto or their directors, officers,
employees, or agents, to the extent any loss or
damage incurred by the other shall be covered by
insurance; and both Landlord and Tenant shall cause
the carriers of any insurance covering or affecting
the Leased Premises or the Building to include
provisions in all such policies waiving any rights by
way of subrogation against either. However, if as a
result of any act or omission by Tenant, his agents,
employees or invitees, Landlord is unable to recover
the proceeds of any insurance policy maintained in
force by Landlord covering damage to the Building or
any part thereof, Tenant shall be liable to Landlord
for the cost of repair or restoration of the Building
to the condition in which it was immediately prior to
the occurrence of such damage thereto.
Landlord's 10. To secure the payment of all rent payable
Lien hereunder and the performance of all of the other
obligations of Tenant hereunder, Tenant grants to
Landlord an express contract lien on and security
interest in all property and chattels now or
hereafter placed in the Leased premises. All
exemption laws are hereby waived by Tenant, the lien
and security interest hereby granted being in
addition to and cumulative of Landlord's statutory
lien. It is expressly agreed that the lien and
security interest herein granted may be foreclosed
with or without judicial proceedings, by public or
private sale, with or without notice and with or
without the property being present, to the highest
bidder for cash, and that Landlord shall have the
right to become purchaser thereof upon its being the
highest bidder at any such sale. The proceeds of any
such sale shall be applied first to the costs
incurred in holding such sale, next to the payment of
any rent or other amounts then owing by Tenant to
Landlord, and the balance, if any, to Tenant. Tenant
agrees to deliver possession of any property so
foreclosed upon to the purchaser thereof, and to pay
Landlord any deficiency remaining after such
foreclosure sale. The Tenant agrees to execute any
Uniform Commercial Code financing statements required
by Landlord to evidence the security interest hereby
granted.
Default, 11. In the event Tenant shall fail to timely pay
Abandonment rent or any other amount required to be paid by the
Attorney's terms hereof, shall be in default of or fail to
Fees perform any other obligation or duty provided for
herein within five (5) days after receipt of written
demand from Landlord to do so, shall abandon or
vacate the Leased Premises or in the event of the
filing of a petition in bankruptcy or other
insolvency proceeding by or against Tenant, or the
filing of a petition or answer seeking relief under
any provision of the Bankruptcy Laws, or in the event
of assignment by Tenant for the benefit of creditors
or the filing of a petition or other proceeding for
the appointment of a trustee, receiver or liquidator
of Tenant, or any of Tenant's property, or the filing
of a proceeding by any governmental authority for
the dissolution or liquidation of Tenant, then in any
such event (it being expressly agreed that each of
the foregoing circumstances or events shall
constitute a default by Tenant) Landlord shall have
the right, at its option, in addition to any other
right or remedy which it may have at law or in
equity, to enter upon or take possession of the
Leased Premises and remove all persons and property
therefrom, with or without legal process, to chance
all locks to the Leased Premises and to take such
other action as may be necessary to dispossess Tenant
therefrom. Tenant agrees that such act or actions by
Landlord shall in no event be deemed unauthorized
entry or constitute a conversion of Tenant's
property, and all claims for damages by reason of any
such re-entry, repossession or
-6-
<PAGE>
changing of any locks are hereby expressly waived
by Tenant as are any and all claims for damages by
reason of any legal proceedings instituted by
Landlord to recover possession of Leased Premises. It
is hereby agreed that in the event of default, as
hereinabove specified, Landlord shall be entitled to
terminate this Lease and all of Tenant's rights
hereunder. It is further agreed that all of the
foregoing rights and remedies granted to Landlord in
the event of Tenant's default may be exercised by
Landlord with or without terminating this Lease and
that the exercise of any one or more of the rights
hereinabove provided for shall in no event be deemed
to be an acceptance or surrender of the Leased
Premises by operation of law or otherwise, and shall
in no event effect a waiver or other release of any
other rights which Landlord shall have under this
Lease or otherwise. If Landlord elects to terminate
this Lease, Tenant shall nevertheless be liable to
Landlord for the full amount of all accrued and
unpaid rent as well as any and all other amounts then
owing to Landlord at the time of such termination
plus, as damages for Tenant's default hereunder, an
amount equal to the then present value of the amount
of rent which would have otherwise been payable by
Tenant to Landlord under the terms hereof for the
balance of the term of this Lease less the then
present value of the then fair rental value of the
Leased Premises for the residue of said term. In the
event Landlord elects to take possession of the
Leased Premises, as aforesaid, without terminating
this Lease, then Landlord may, at its option and
without any obligation or duty to do so, re-let the
whole or any portion of the Leased Premises for any
period to any Tenant and for any use and purpose
whatsoever. If Landlord does re-let all or part of
the Leased Premises Tenant shall be entitled to a
credit against its rental obligations hereunder in
the amount of all rents received by Landlord as a
result of such re-letting less the total of all costs
and expenses incurred, by Landlord in connection with
such re-letting, including brokerage commission, all
costs incurred in resuming possession of the Leased
Premises and moving and storing Tenant's property,
and the cost of repairing, altering, remodeling or
otherwise rendering the Leased Premises in condition
for re-letting to one or more new tenants; and Tenant
shall pay and satisfy any deficiencies. Nothing
herein shall be construed as in any way denying
Landlord the right, in case of abandonment, vacation
of premises, or other default by Tenant, to treat the
same as an entire breach and at Landlord's option
immediately sue for the entire breach of this Lease
and any and all damages occasioned Landlord thereby.
In case Tenant defaults in the performance of any
of the terms, covenants, agreements or conditions
contained in this Lease and Landlord places the
enforcement of this Lease or any part thereof, or the
collection of any rent due, or to become due
hereunder, or recovery of the possession of the
Leased Premises in the hands of an attorney or
attorneys or files suit upon the same, Tenant agrees
to pay and shall be liable for Landlord's reasonable
attorneys' fees and payment of the same shall be
secured in like manner as is herein provided as to
security for rent.
lla Chronic Defaults
----------------
Tenant will be in "Chronic Default" under this
Lease if Tenant commits a default (either a Monetary
or Non-Monetary Default) during any 365-day period in
which any of the following combinations of default
has already occurred (even though said defaults may
have been timely cured):
-7-
<PAGE>
(1) Two Monetary Defaults: or
(2) Three Non-Monetary Defaults: or
(3) One Monetary Default and two Non-Monetary
Defaults: or
llb Remedies
--------
If Tenant is in Chronic Default, Landlord may
immediately exercise any or all remedies available
under this Lease or at law or in eguity, all without
giving Tenant any notice or an opportunity to cure
the last default causing Tenant's Chronic Default
(notwithstanding any notice and cure provision or
other lease provision to the contrary).
1lc Definitions
-----------
For the purposes of this section,
(1) a Monetary Default occurs if Tenant fails to
pay any sum of money when due (including, but
not limited to, Base Rent and Additional
Rent).
(2) a Non-Monetary Default occurs if Tenant fails
to perform any of ifs obligations under this
Lease other than the timely payment of money.
Notice to 12. Tenant shall not take any action to enforce
Landlord Lease without giving Landlord at least thirty (30)
days' notice in writing of any alleged default by
Landlord in the performance of any of its obligations
hereunder and the opportunity to commence to cure
such alleged default within thirty (30)days following
the minimum thirty (30) days' notice provided for
herein.
Sale, Lease 13. Landlord shall have the right to convey,
or Mortgage transfer, assign, mortgage or otherwise encumber, in
by Landlord whole or in part, its rights, titles and interests in
and to this Lease, the Building, the land upon which
it is situated or any ground or underlying lease
covering such Building and land, and Tenant shall, in
any such event, recognize and respect any such
conveyance, transfer and assignment and attorn to any
person or entity who shall acquire any such rights,
titles and interests, whether by voluntary transfer,
assignment or conveyance or through foreclosure of
any mortgage, lien or other security interest granted
by Landlord. In the event of the transfer by Landlord
of all its interests in the Building, following such
transfer, Landlord shall be released from all further
obligations or duties thereafter accruing hereunder.
In like manner each subsequent owner of Landlord's
interests in the Building shall be released from
liability hereunder upon the transfer of all of its
interests in the Building. Tenant agrees that this
Lease and all rights of Tenant hereunder are and
shall at all times here after be subject and
subordinate to any and all ground or underlying
leases, affecting the Building and the land upon
which it is situated and to any and all mortgages and
for any and all deeds of trust, now or hereafter
placed against or affecting the Building, the land
upon which it is situated, or any ground or
underlying lease covering such Building or land or
any part thereof, and any amendments, modifications,
consolidations, replacements, renewals or extensions
thereof. This clause shall be self-operative and no
further instrument of subordination shall be
required, but Tenant, from time to time, on request
of Landlord, shall execute an instrument in
recordable form confirming such subordination. Tenant
hereby appoints Landlord its Attorney in Fact to
execute any such
-8-
<PAGE>
instrument for, or on behalf of, Tenant. However,
Tenant agrees that the holder of any mortgage or lien
against either the Building, the land upon which it
is situated, or any ground or underlying lease shall
have the right at any time during the term of this
Lease to elect, by giving written notice to Tenant,
to make this Lease superior to such mortgage or
lien so that, upon the giving of such notice, this
Lease shall in all respects be prior and superior to
the mortgage or lien of the party giving such notice.
Landlord's 14. Landlord will furnish such heat, water,
Services air conditioning, elevator service and cleaning
service as, in its judgment, is necessary for the
comfortable use and occupancy of the Leased Premises;
however, Landlord shall be obligated to furnish heat
or air conditioning to the Leased Premises only at
such times and on such days as are necessary, in
Landlord's judgment, to meet the needs of the tenants
of the Building; and Landlord shall not be required
to furnish heat and air conditioning after 6.00 P.M.
on week days, or on weekends or holidays observed by
Landlord. It is agreed that the interruption or
failure of any such services shall not constitute an
eviction or disturbance of Tenant's use and
possession of the Leased Premises or a breach by
Landlord of any of its obligations hereunder, that
Landlord shall not by reason thereof be liable for
damages, and Tenant shall not thereby be relieved of
any of its obligations hereunder. Landlord agrees
that it shall in all instances exercise reasonable
diligence to restore any service which shall be
interrupted. If any payment of rent due hereunder
shall remain unpaid for more than ten (10) days after
it shall become due, Landlord may without notice to
Tenant discontinue furnishing heat, air conditioning,
cleaning, elevator service and lighting services or
any of them, until all arrears of rent have been paid
in full, and Landlord shall not be liable for damages
to person or property or the business of Tenant for
any such discontinuance, nor shall such
discontinuance in any way be construed as eviction of
Tenant or cause an abatement of rent, or operate to
release Tenant from any of Tenant's obligations
hereunder.
Condemnation 15. In the event that the whole of the Leased
Premises shall be condemned or taken in any manner
for any public or quasi-public use, this Lease shall
cease and terminate as of the date of vesting of
title thereto in the condemning authority. If a part
of the Building of which the Leased Premises form a
part is so taken or condemned and, if, in Landlord's
sole judgment, the continued operation of the
remaining part of the Building is not economical or
practicable, then Landlord, by written notice given
to Tenant within one hundred twenty (120) days of the
vesting of title in the taking or condemning
authority, may elect to terminate this Lease. In the
event that only a part of the Leased Premises shall
be so condemned or taken then, at the option of
Landlord, such option to be exercised within one
hundred twenty (120) days after such taking, this
Lease may be either terminated or continued in force
and effect. In the event of the termination of this
Lease pursuant to the foregoing provisions hereof,
rent shall be payable only up to the date of such
termination and Landlord will refund to Tenant any
prepaid unearned rent. However, in the event of a
partial taking of the Leased Premises and the
Landlord's election to continue this Lease, the
annual base rent hereunder shall be abated by an
amount in proportion to the area of the Leased
Premises so condemned or taken. In the event that
only a part of the Leased Premises shall be so
condemned or taken and is not terminated, Landlord
shall, with reasonable diligence and at its expense,
restore
-9-
<PAGE>
the remaining portion of the Leased Premises as
nearly as practicable to the same condition as it was
in prior to such condemnation or taking. Landlord
shall not be liable or responsible for any loss or
damage to any property or person, or inconvenience
which may arise through such repair or alteration of
any part of the Building, or failure to make any such
repairs, or from any cause whatever, unless caused
solely by Landlord's gross negligence. In the event
of condemnation or taking of all or any part of the
Leased Premises or the
[ILLEGIBLE]
Care of the 16. Except as otherwise expressly provided herein,
Leased Landlord shall not be required to make any
Premises, improvements or repairs to the Leased Premises during
Landlord's the term of this Lease. Tenant shall take good care
Access, of the Leased Premises and all fixtures and
Surrender appurtenances therein and, at his cost and expense,
of Leased make all repairs thereto as are needed to preserve
Premises such Leased Premises in good order and condition. In
the event Tenant fails to make any repairs required
to be made by him under the terms hereof, Landlord
shall have the right, without obligation to do so, to
enter upon the Leased Premises to carry out any
repairs or other work required to be performed by
Tenant hereunder. If Landlord does undertake to carry
out any repairs or other work required to be
performed by Tenant, Landlord shall not be deemed to
have waived Tenant's default, and Tenant shall be
obligated to reimburse Landlord, upon demand, for all
costs and expenses incurred by Landlord in performing
such repairs and other work. During the progress of
any repairs or work by Landlord, Landlord may store
and keep on the Leased Premises all necessary
materials, tools, supplies and equipment therefore
and Landlord shall not be liable to Tenant for any
inconvenience, disturbance, or other loss or damage
to Tenant by reason of or on account of such actions
by Landlord. No entry by Landlord or its authorized
representatives upon the Leased Premises for the
purpose of making such repairs or performing such
other work shall constitute or be deemed a trespass
or eviction of Tenant, nor a termination of this
Lease. Landlord and its duly authorized agents and
employees shall have access to and the right to enter
upon the Leased Premises at any reasonable time to
examine the condition thereof, to make any repairs
required to be made by Landlord here hereunder, to
show the Leased Premises to prospective purchasers or
Tenants of the Building or for any other legitimate
purpose, including, without limitation, to perform
the services or to make the repairs and restoration
the Landlord elects to perform or furnish under this
Lease, to make repairs to adjoining space, to cure
any defaults of Tenant hereunder that Landlord elects
to cure, and to remove from the Leased Premises any
improvements thereto or property placed therein in
violation of this Lease, and Tenant shall not be
entitled to any abatement or reduction of rent by
reason thereof. Upon expiration or other termination
of this Lease, Tenant shall surrender possession of
the Leased Premises to Landlord in good order and
broom clean condition, ordinary wear and tear
excepted and such other damage
-lO-
<PAGE>
thereto as Tenant shall not be obligated to repair.
Prior to the surrender of the Leased Premises to
Landlord, Tenant at his sole cost and expense shall
remove all liens and other encumbrances which may
have resulted from the acts or omissions of Tenant.
If Tenant fails to do any of the foregoing, Landlord,
in addition to other remedies available to it at law
or in equity, may, without notice, enter upon,
reenter, possess and repossess itself thereof, by
force, summary proceedings, ejectment, or otherwise,
and may dispossess and remove Tenant and all persons
and property from the Leased Premises: and Tenant
waives any and all damages or claims for damages as a
result thereof. Such dispossession and removal of
Tenant shall not constitute a waiver by Landlord of
any claims by Landlord against Tenant.
Non-Waive 17. Neither the acceptance of rent or other
Holding payment by Landlord with knowledge of any default by
Over, Tenant or the failure of Landlord to complain with
Quiet respect to any default by Tenant hereunder, shall
Enjoyment constitute a waiver of Landlord's rights hereunder.
Nor shall waiver by Landlord of any right resulting
from any default by Tenant waive any of Landlord's
rights with respect to a subsequent default by Tenant
with respect to the same obligation or any other
obligation here under. Tenant, upon payment of the
rental herein provided for and the performance of the
covenants and agreements set forth herein to be by
him performed, shall and may peacefully and quietly
have, hold and enjoy the Leased Premises for the term
of this Lease, subject to the terms and provisions
of this Lease. If the Tenant shall remain in
possession of the Leased Premises after the date of
termination of this Lease, Tenant shall be deemed to
be occupying the Leased Premises as a Tenant from
month to month, subject to all of the terms and
provisions of this Lease and at a monthly rental of
the amount of the installments herein provided
to be paid by Tenant to Landlord each month during
the term of this Lease, and, in addition, Tenant
shall be liable to Landlord for such other damages as
Landlord shall incur by reason of Tenant's holding
over.
Rules and 18. The "Rules and Regulations" hereinafter set
Regulations forth form a part of this Lease with the same force
and effect as though written herein and each and
every provision thereof shall be observed and
performed by Tenant. In like manner, Tenant will
comply with such additional rules and regulations
which may from time to time be promulgated by
Landlord relating to the use and occupancy of the
Building, provided that such additional rules and
regulations may not infringe upon or deny Tenant's
rights under this Lease Agreement.
Tax Insur-
ance and
Building
Operating [Intentionally Omitted]
Expenses,
Escalation
-ll-
<PAGE>
-12-
<PAGE>
Electric 20. Landlord will furnish electricity to Tenant
Service through the presently installed electrical facilities
for Tenant's reasonable use of such lighting,
electrical appliances and equipment as are either now
or to be installed in the Leased Premises by the
Commencement Date. In order to prevent Tenant from
possibly overloading the electrical distribution
facilities of the Building, Tenant shall make no
alterations or additions to the electrical equipment
and/or appliances used in the Leased Premises without
obtaining the prior written consent of Landlord in
each such instance. Landlord shall not in anywise be
liable or responsible to Tenant for any loss, damage
or expense which Tenant may sustain or incur if
either the quantity or character of the electrical
service is changed or is no longer available or
suitable for Tenant's requirements. If Tenant deems
it necessary to install any riser or associated
equipment to Supply Tenant's electrical requirements,
-13-
<PAGE>
Landlord shall, upon written request of Tenant,
install such equipment, provided however, the cost
and expense of such equipment and installation
thereof shall be borne by Tenant, and provided
further that the installation of such additional
equipment, in Landlord's sole judgment, is necessary
and will not cause or create a dangerous or hazardous
condition, entail excessive or unreasonable
alterations, repairs or expenses or interfere with or
disturb other tenants or occupants of the Building.
Tenant shall furnish and install all lighting tubes,
lamps, bulbs and ballasts required in the Leased
Premises at Tenant's expense or shall pay Landlord's
reasonable charges therefore on demand.
Notwithstanding any other term or provision
hereof, Tenant shall pay to Landlord, monthly, as
billed, such charges as may be separately metered or
as Landlord's engineer may compute for any electric
service utilized by Tenant for computers, data
processing equipment or other electrical equipment
(except typewriters, dictating equipment, adding
machines and desk-top calculators) or extra lighting
or other electrical service not standard for the
Building.
In the event that Tenant desires air conditioning
or heating at any time or times other than normal
times, and Landlord consents to the furnishing of
such services at the time or times requested by
Tenant, Tenant shall be charged for such air
conditioning or heating furnished by Landlord during
such periods at Landlord's then standard hourly rate
applicable during the periods when such services are
furnished. Such rate may be changed by Landlord at
any time and from time to time during the Lease term.
No Modifica- 21. Tenant agrees, at any time and from time to
tion, No time, upon not less than ten (10) days' prior notice
Default to notice to Landlord, to execute, acknowledge and
Notice deliver to Landlord a statement in writing addressed
to Landlord certifying that this Lease is unmodified
and in full force and effect (or, if there have been
modifications, that the Lease is in full force and
effect, as so modified), stating the date to which
the annual base rent and any additional rental have
been paid and stating whether or not there exists any
default by either party in the performance or
observance of any of the terms and provisions hereof
and, if so, specifying any such default. Tenant
acknowledges that any such statement delivered
pursuant hereto may be relied upon by Landlord and by
anY mortgagee or prospective mortgagee of any
mortgage affecting the Building, the land upon which
the Building is situated or Landlord's interest in
any ground or underlying lease or leases, and by any
lessor under any ground or underlying lease affecting
the Building or land, or both, and by any purchaser
or prospective purchaser of Landlord's interest in
the Building, the lands or any ground or underlying
lease or leases.
Broker 22. Tenant warrants and represents he has not had
any dealings with any realtor, broker, or agent, in
connection with the negotiation of this Lease except
Eguis of New York, Inc., and Tenant agrees to pay and
to hold harmless from any cost, expense (including
reasonable cost of suit and attorneys' fees) or
liability for any compensation, commission or charges
claimed by any realtor, broker or agent other than
those named above with respect to this Lease and the
negotiations thereof. In the event
-14-
<PAGE>
of default or early Lease Termination it is expressly
agreed that any leasing commission monies actually
paid by Landlord to a broker or agent pursuant to
entering into this Lease shall be included when
determining the extent of wages incurred by Landlord
by reason of Tenant's default.
Reservation 23. landlord reserves the right to change the name
of Rights or street address of the Building, to install and
and Modifi- maintain a sign or signs on the exterior of the
cations Building, to change or modify any of the public areas
of the Building, and to take any and all other
measures, including inspections, repairs,
alterations, additions and improvements to the Leased
Premises or to the Building as may be necessary or
desirable for the Safety, protection or preservation
of the leased or other premises or the Building or as
may otherwise be necessary or desirable, in
Landlord's judgment, for the proper operation of the
Building. Landlord also reserves the right of access
to and through the Leased Premises for any or all of
the above described purposes.
Notices 24. Any notice required or permitted to be given
under the terms of this Lease shall be in writing and
shall be either delivered by hand or sent by United
States Registered or Certified Mail, postage prepaid,
if for Landlord, to the Building or if for Tenant, to
the Leased Premises. Such adresses may be changed
from time to time by either party by giving notice as
provided above. Notice shall be deemed given when
delivered (if delivered by Hand)or when postmarked
(if sent by mail).
Taxes on 25. Tenant shall pay all ad valorem and similar
Personalty taxes or assessments levied upon or applicable to all
and Tenant equipments, fixtures, furnitures, and other property
Improvements placed by Tenant in the Leased Premises and all
license and other fees or charges imposed on the
business conducted by Tenant in the Leased Premises.
If the Tenant's improvements do not consist entirely
of Building Standard Improvements and Landlord shall
be required to pay higher ad valorem or other taxes
with respect to the Building that would have been
payable had the Tenant's improvements consisted
entirely of Building Standard Improvements, Tenant
shall pay to Landlord within ten days after demand,
the amount by which such taxes payable by Landlord
with respect to the Building for the tax period
exceed the amount of such taxes that otherwise would
have been payable by Landlord.
Interest 26. All amounts of money payable by Tenant to
Landlord under this Lease, if not paid when due,
shall bear interest from the date due until paid at
the rate of 12% per annum.
Heavy 27. Tenant shall not move any safe, heavy
Equipment machinery, heavy equipment, bulky freight, bulky
furniture, bulky matter, or fixtures into, or out of,
the Building except at such times and under such
reasonable conditions as Landlord shall determine or
provide from time to time in Rules and Regulations.
Landlord has the right to prescribe the weight, size,
and position of all safes and other heavy equipment
brought into the Building. Tenant shall indemnify
Landlord for, and hold Landlord harmless and free
from, damages sustained by person or property as well
as for all expenses and attorneys' fees, incurred in
connection with such moving and from all costs
incurred in repairing any to the Building or
appurtenances arising therefrom.
-15-
<PAGE>
Tenant shall not place a load upon any floor of
the Leased Premises exceeding the floor load per
square foot area which such floor was designed to
carry and which is allowed by law, and, if considered
necessary by Landlord, safes or other heavy objects
shall stand on sufficiently thick wood strips so as
to evenly distribute the weight.
Business machines and mechanical equipment
belonging to Tenant, which cause vibration or noise
that may be transmitted to the Building structure or
to any leased space to such a degree as to be
objectionable to Landlord or to any tenants in the
Building, shall be placed and maintained by Tenant,
at his expense, in settings of cork, rubber or
spring type vibration eliminators sufficient to
eliminate such vibration or noise.
Security 28. Tenant has deposited with Landlord the sum of
Deposit Two Thousand, Two Hundred Forty & 35/100 Dollars
($2,240.35) as Security for the faithful performance
and observance by Tenants of the terms, provisions,
and conditions, of this Lease; it is agreed that in
the event Tenant defaults in respect of any of the
terms, provisions and conditions of this Lease,
including, but not limited to, the payment of rent
and additional rent, Landlord may use, apply or
retain the whole or any part of the security so
deposited to the extent required for the payment of
any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which
Landlord may expend or may be required to expend by
reason of Tenant's default in respect of any of the
terms, covenants and conditions of this Lease,
including but not limited to, any damages or
deficiency in the re-letting of the Leased Premises,
whether such damages or deficiency accrued before of
after summary proceedings or other re-entry by
Landlord. In the event that Tenant shall fully and
faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the security
shall be returned to Tenant after the date, fixed as
the end of the Lease and after delivery of entire
possession of the Leased Premises to Landlord. In the
event of a sale of land and the Building or the
leasing hereof, of which the Leased Premises form a
part, Landlord shall have the right to transfer the
security to the vendee of Landlord and Landlord shall
thereupon be released by Tenant from all liability
for the return of such security: and Tenant agrees to
look to the new Landlord solely for the return of
said security: and it is agreed that the provisions
hereof shall apply to every transfer or assignment
made of the the security to a new Landlord. Tenant
further covenants that he will not assign or encumber
or attempt to assign or encumber the moneys,
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. Landlord shall
not be obligated to pay any interest to Tenant on the
amount so deposited.
Landlord's 29. Any provisions of this Lease to the contrary
Liability notwithstanding Tenant hereby agrees that no personal
or corporate liability of any kind or character
whatsoever now attaches or at any time hereafter
under any condition shall attach to Landlord for
payment of amounts payable under this Lease or for
the performance of any obligation under this Lease.
The exclusive remedies of Tenant for the failure of
Landlord to perform any of its obligations under this
Lease shall be to proceed
-16-
<PAGE>
against the interest of Landlord in and to the
Building.
Light and 30. Neither diminution nor shutting off of light
Air or air or both nor any other effect on the Leased
Premises by any structure erected or condition now or
hereafter existing on lands adjacent to the Building
shall affect this Lease, abate rent, or otherwise
impose any liability on Landlord.
Insurance 31. Landlord shall maintain during the term of
this Lease fire and extended coverage insurance
insuring the Building and Leased Premises excluding
Tenant's goods, furniture or property placed in the
Leased Premises, against damage or loss from fire or
other casualty normally insured against under the
terms of standard policies of fire and extended
coverage insurance. Tenant shall be responsible for
providing, at Tenant's own expense, all insurance
coverage necessary for the protection against loss or
damage from fire or other casualty for Tenant's
goods, furniture or other property placed in the
Leased Premises.
Force 32. Landlord shall not be in default hereunder if
Majeure Landlord is unable to fulfill or is delayed in
fulfilling any of its obligations hereunder,
including, without limitation, any obligations to
supply any service hereunder, or any obligations to
make repairs or replacements hereunder, if Landlord
is prevented from fulfilling or is delayed in
fulfilling such obligations by reason of fire or
other casualty, strikes, or labor troubles,
governmental preemption in connection with a national
emergency, shortage of supplies or materials, or by
reason of any rule, order or regulation of any
governmental authority, or by reason of the condition
of supply and demand affected by war or other
emergency, or any other cause beyond its control.
Such inability or delay by Landlord in fulfilling any
of Landlord's obligations hereunder shall not affect,
impair or excuse the Tenant from the performance of
any of the terms, covenants, conditions, limitations,
provisions or agreements hereunder on his part to be
performed, nor result in any abatement of rents or
additional rents payable hereunder.
No Waiver 33. No act or thing done by Landlord or Landlord's
agents, servants, employees, invitees, guests or
licensees, during the term hereof, shall be deemed an
acceptance of a surrender of the Leased Premises,
other than a written agreement signed by Landlord
accepting such surrender. The failure of Tenant or
Landlord to seek redress for violation of, or to
insist upon the strict performance of, any term,
covenant, condition, limitation, provision or
agreement of this Lease, or any of the Rules end
Regulations set forth or hereafter adopted by
Landlord, shall not prevent a subsequent act, which
would have originally constituted a violation, from
having all the force and effect of an original
violation. The receipt by Landlord or the payment by
Tenant of rent with knowledge of the breach of any
term, covenant, condition, limitation, provision, or
agreement of this Lease shall not be deemed a waiver
of such breach. The failure of Landlord to enforce
any of the Rules and Regulations set forth, or
hereafter adopted, against Tenant and/or against any
other Tenant in the Building of which the Leased
Premises form a part, shall not be deemed a waiver of
such Rules and Regulations. No provision of this
Lease shall be deemed to have been waived by Landlord
or Tenant, unless such waiver be in writing signed by
-17-
<PAGE>
Landlord or Tenant, as the case may be. No payment
by Tenant or receipt by Landlord of a lesser amount
than the monthly rent herein stipulated shall be
deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or
statement on any check or any letter accompanying any
check or payment of rent be deemed an accord and
satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to
recover the balance of such rental or pursue any
other remedy. No agreement hereafter made shall be
effective to change, modify, discharge, terminate or
effect an abandonment of this Lease in whole or in
part unless such agreement is in writing and signed
by the party against whom enforcement of the change,
modification, discharge, termination or abandonment
is sought.
Legal Inter- 34. This Lease and the rights and obligations of
pretation the parties hereto shall be interpreted, construed
and enforced in accordance with the laws of the State
of New York. All obligations, if any, of either party
requiring any performance after the expiration of the
term shall survive the expiration of the term and
shall be fully enforceable in accordance with those
provisions pertaining thereto. If the rights of the
Tenant hereunder are owned by two or more parties or
two or more parties are designated herein as Tenant,
then all such parties shall be jointly and severally
liable for the obligations of Tenant hereunder.
Section titles appearing in the margins are for
convenient reference only and shall not be used to
interpret or limit the meaning of any provision of
this Lease.
Tenant hereby waives all rights under Section 227
of the Real Property law of the State of New York and
agrees that the provisions of this Article shall
govern with regard to the subject matter dealt with
in said Section 227.
Captions 35. The captions set forth in this Lease are
inserted only as a matter of convenience and for
reference and in no way define, limit or describe the
scope of this Lease nor the intent of any provisions
thereof.
Taxes 36. Where used in this Lease, the term "taxes"
means all ad valorem taxes, personal property taxes,
and all other taxes, assessments, use and occupancy
taxes, transit taxes, water and sewer charge,
excises, levies, license and permit fees and all
other similar charges, if any, which are levied,
assessed, or imposed upon or become due and payable
in connection with, or a lien upon, the land, the
Building, or facilities used in connection therewith,
and rentals or receipts therefrom, and all taxes of
whatsoever nature that are imposed in substitution
for or in lieu of any of the taxes, assessments, or
other charges included in this definition of taxes;
provided, however, taxes shall not include the
portion, if any of ad valorem taxes against the
Leased Premises that is paid by Tenant as a separate
charge.
Possession 37. If, for any reason, the Leased Premises shall
not be ready for occupancy by Tenant at the time of
commencement of this Lease, this Lease shall not be
affected thereby, nor shall Tenant have any claim
against Landlord by reason there of, but no rent
shall be payable for the period during which the
Leased Premises shall not be ready for occupancy; and
all claims for damages arising out of such delay are
waived and released by Tenant.
-18-
<PAGE>
Right to 38. Notwithstanding anything herein to the
Relocate contrary, Landlord shall in all cases retain the
right and power to relocate Tenant within the
Building, in space which is comparable in size and
location and suited to the Tenant's use, such right
and power to be exercised reasonably and such
relocation to be made at Landlord's sole cost and
expense. Landlord shall not be liable or responsible
for any claims, damages or liabilities in connection
with or occasioned by such relocation. Landlord's
reasonable exercise of such right and power shall
include, but shall in no way be limited to, a
relocation to consolidate the Rentable Square Feet
occupied in order to provide Landlord's services more
efficiently or a relocation to provide contiguous
vacant space for a prospective Tenant.
Pronouns 39. When this Lease agreement is executed by more
and Gender than one person, it shall be construed as though
Tenant were written "Tenants" and the words in their
number were changed to correspond; and pronouns of
the masculine gender, whenever used herein shall
include persons of the female sex, and corporations
and associations of every kind and character.
Severability 40. If any term, covenant, condition or provision
of this Lease or the application thereof to any
person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this
Lease, or the application of such term, covenant,
condition or provision to persons or circumstances
other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and
each term, covenant, condition or provision of this
Lease shall be valid and be enforced to the fullest
extent permitted by law.
Entire 41. This Lease, together with the Rules and
Agreement Regulations and any addendum attached hereto and
initialed for identification on behalf of both
parties hereto, contains all of the agreements,
representations and arrangements between the parties
hereto as to the Leased Premises and any and all
rights which either party may have had under any
prior or contemporaneous written or oral agreement or
representation are hereby cancelled and terminated in
all respects. This Lease cannot be changed, amended
or extended except by written instrument signed by
both parties hereto. The paragraphs captioned set
forth above are for convenience only and do not limit
or modify the terms and provisions hereof.
Not Binding 42. The submission or delivery of this document
until Execution for examination and review does not constitute an
option, an offer to lease space in the Building or an
agreement to lease. This document shall no binding
affect on the parties unless and until executed by
both landlord and Tenant. Once executed by both
Landlord and Tenant, all the terms, covenants and
conditions shall be effective unless otherwise
expressly specified that they shall be effective or
commence at some future time.
The terms of this Lease shall be binding upon and
benefit of the parties hereto and their respective
representatives, successors and assigns.
EXECUTED on this the day of , 1998
-19-
<PAGE>
ATTEST: LOEB PARTNERS REALTY & DEVELOPMENT
CORP. AS AGENT FOR VIOLET REALTY, INC.
By[ILLEGIBLE] By: /s/ Alan L. Gordon
--------------------
Name: Alan L. Gordon
--------------------------------
Title: VP
-------------------------------
Date: 10/8/98
-------------------------------
ATTEST: COMMUNITY NETWORKS
By:[ILLEGIBLE] By: /s/ Scott M. Matukas
-------------------- ----------------------------------
Name: Scott M. Matukas
--------------------------------
Title: VP-Finance
-------------------------------
Date: 9/22/98
-------------------------------
OF LANDLORD:
STATE OF ) Date: 9/22/98
)ss:
COUNTY OF )
Personally Appeared
of Loeb Partners Realty & Development Corp. as agent for Violet
Realty, Inc., signer and sealer of the foregoing instrument and
acknowledged the same to be his free act and the free act and
deed of said corporation before me.
__________________________________
Notary Public
OF TENANT (IF INDIVIDUAL OR PARTNERSHIP):
STATE OF ) Date:
)ss:
COUNTY OF )
Personally Appeared
signer(s)and sealer(s)of the foregoing instrument and
acknowledged the same to be his (their)free act and deed before
me.
__________________________________
Notary Public
OF TENANT (IF CORPORATION):
STATE OF New York ) Date: 9/22/98
)ss:
COUNTY OF Onondaga )
Scott Matukas Personally appeared of Scott Matukas
signer and sealer of the foregoing instrument and acknowledged
the same to be his free act and the free act and deed of said
corporation before me.
/s/ Tracy E. Blair
-------------------------------
Notary Public
[SEAL] Tracy E. Blair
Notary Public State of New York
Qualified in Onondaga County
Reg. 01BL5017617
My Comm. Expires 9-7-97
------
-20-
<PAGE>
LIBERTY BUILDING
"RULES AND REGULATIONS"
1. The sidewalks, halls, passages, exits, entrances,
elevators, shopping malls, escalators and stairways of the
Building shall not be obstructed by any of the Tenants or used
by them for any purpose other than for ingress to and egress
from the their respective premises. The halls, passages, exits,
entrances, elevators, escalators and stairways are not for the
use of the general public, and Landlord shall in all cases
retain the right to control and prevent access thereto of all
persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation and interests
of the Building and its Tenants, provided that nothing herein
contained shall be construed to prevent such access to persons
with whom any Tenant normally deals with in the ordinary course
of his business, unless such persons are engaged in illegal
activities. No Tenant and no employee, agent or invitee of any
Tenant shall go upon the roof of the Building.
2. No sign, placard, picture, name, advertisement or
notice, visible from the exterior of any Tenant's premises shall
be inscribed, painted, affixed or otherwise displayed by any
Tenant on any part of the Building without the prior written
consent of Landlord, and Landlord shall have the right to remove
any such sign, placard, picture, name, advertisement or notice
at Tenant's expense and without notice to Tenant. If Landlord
shall have given such consent at any tima, such consent shall be
deemed to relate only to the particular sign, placard, picture,
name, advertisement or notice so consented to by Landlord and
shall not be construed as dispensing with the necessity of
obtaining the specific written ten consent of Landlord with
respect to each and every other sign, placard, picture, name,
advertisement or notice. Landlord wi11 adopt and furnish to
Tenant, uniform rules and regulations relating to signs on the
office floors which shall be applicable to all Tenants occupying
space on the office floors of the Building, and Tenant agrees to
conform to such rules and regulations. All approved signs or
lettering on doors shall be printed, painted, affixed or
inscribed at the expense of Tenant by a person approved by
Landlord.
3. Landlord will furnish each Tenant with two keys
free of charge. Landlord may make a reasonable charge for any
additional keys. No Tenant shall have any keys made. No Tenant
shall alter any lock or install a new or additional lock or any
bolt on any door of his premises without prior written consent
of Landlord. If Landlord shall give its consent, the Tenant
shall in each case furnish Landlord with a key for any such
lock. Each Tenant upon termination of his tenancy, shall deliver
to Landlord all keys to doors in the Building which shall have
been furnished to Tenant.
4. No Tenant shall use or keep in, on, or about the
premises of the Building any kerosene, gasoline or inflammable
or combustible fluid or material, or use any method of heating
or air conditioning other than that supplied by Landlord. No
Tenant shall use, keep or permit to be used or kept any foul or
noxious gas or substance in, or about the premises, or permit or
suffer the premises to be occupied or used in a manner offensive
or objectionable to Landlord or other occupants of the Building
by reason of noise, odors and/or vibrations, or interfere in any
way with other Tenants or those having business therein.
5. The premises shall not be used for the storage of
merchandise or for lodging, and no cooking shall be done or
permitted by any Tenant on the premises,except that the
preparation of coffee, tea, hot chocolate and similar items for
Tenant and his employees shall be permitted.
6. No animals, or birds, or bicycles shall be allowed
in the offices halls, corridors, elevators or elsewhere in the
Building.
7. No Tenant shall employ any person or persons other
than the janitor of Landlord for the purpose of cleaning the
premises, unless otherwise agreed to by Landlord in writing.
Except with the
-21-
<PAGE>
written consent of Landlord, no person or persons other than
those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the same. No Tenant shall
cause any unnecessary labor by reason of such Tenant's
carelessness or indifference in the preservation of good order
and cleanliness. Landlord shall in no way be responsible to any
Tenant for any loss of property on the premises, however
occurring, of for any damage done to the furniture or other
effects of any Tenant by the janitor or any other employee or
any other person. Janitor service shall include ordinary dusting
and cleaning by the janitor assigned to such work and shall not
include shampooing of carpets or rugs or moving of furniture or
other special services. Janitor services will not be furnished
on nights when rooms are occupied after 6:30 P.M.
8. Landlord reserves the right to exclude from the
Building between the hours of 6:00 P.M. and 7:00 A.M. and at all
hours on Sunday, legal holidays and after 1:00 P.M. on Saturdays
all persons who do not present a pass to the Building signed by
Landlord. Landlord will furnish passes to persons for whom any
Tenant requests the same in writing. Each Tenant shall be
responsible for all persons for whom he requests passes and
shall be liable to Landlord for all acts of such persons.
Landlord shall in no case be liable for damages for any error
with regard to the admission to or exclusion from the Building
of any person. In the case of invasion, mob, riot, public
excitement, or other circumstances rendering such action
advisable in Landlord's opinion, Landlord reserves the right to
prevent access to the Building during the continuance of the
same by such actions as Landlord may deem appropriate, including
closing and locking doors.
9. No Tenant shall obtain for use in the premises ice,
drinking water, food, beverage, towel or other similar services,
or accepting barbering or bootblacking services in the premises,
except from persons authorized by Landlord, and at hours and
under regulations fixed by Landlord.
10. Each Tenant shall see that doors of his premises
are closed and securely locked and must observe strict care and
caution that all water faucets, water apparatus and utilities
are shut off before Tenant or Tenant's employees leave the
premises, so as to prevent waste or damage, and for any default
or carelessness Tenant shall make good all injuries sustained by
other Tenants or occupants of the Building or Landlord. On
multiple-tenancy floors, all Tenants shall keep the door or
doors to the Building corridors closed at all times except for
ingress and egress.
11. No curtains, draperies, blinds, shutters, shades,
screens or other coverings, hanging or decorations shall
attached to, hung or placed in, or used in connection with any
window of the Building without the prior written consent of
Landlord. In any event, with the prior written consent of
Landlord, said above items shall be installed inboard of
Landlord's standard window covering and shall in no way be
visible from the exterior of the Building.
12. The toilet rooms, toilets, urinals, wash bowls and
other apparatus shall not be used for any purpose other than
that for which they were constructed, no foreign substance of
any kind whatsoever shall be thrown therein, and the expense of
any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by the Tenant who, or whose employees,
agents or invitees, shall have caused it.
13. Except with the prior written consent of Landlord,
no Tenant shall sell, or permit the sale of newspapers,
magazines, periodicals, theatre tickets or any other goods or
merchandise in or on the premises, nor shall any Tenant carry
on, or permit or allow any employee or other person to carry on,
the business of stenography, typewriting or any similar business
in or from the premises for the services or accommodation of
occupants of any other portion of the Building.
14. No Tenant shall install any radio or television
antenna, loudspeaker or other device on the roof or exterior
walls of the Building.
-22-
<PAGE>
15. There shall not be used in any space, or in the
public halls of the Building, either by any Tenant or others,
any hand trucks except those equipped with rubber tires and side
guards. No other vehicles of any kind shall be brought by any
Tenant, his employees, agents or invitees into the Building or
kept in or about his premises.
16. Each Tenant shall store all his trash and garbage
within his premises. No material shall be placed in the trash
boxes or receptacles if such material is of such nature that it
may be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage in the City of
Buffalo, without being in violation of any law or ordinance
governing such disposal. All garbage and refuse disposal shall
be made only through entryways and elevators provided for such
purposes and at such times as Landlord shall designate.
17. Canvassing, soliciting, and peddling in the
Building are prohibited, and each Tenant shall cooperate to
prevent the same.
18. The requirements of Tenant vi11 be attended to
only upon application at the office of the Building. Employees
of Landlord shall not perform any work or do anything outside of
their regular duties unless under special instructions from
Landlord.
19. A Building bulletin board wi11 be provided for the
display of the name and location of Tenant only, and Landlord
reserves the right to exclude any other names therefrom. Any
additional name which Tenant shall desire to place upon said
bulletin board must first be approved by Landlord, and, if so
approved, a charge will be made therefor.
20. Landlord may waive any one or more of these Rules
and Regulations for the benefit of any particular Tenant or
Tenants, but no such waiver by Landlord shall be construed as a
waiver of such Rules and Regulations in favor of any other
Tenant or Tenants, nor prevent Landlord from hereafter enforcing
any such Rules and Regulations against any or all of the Tenants
of the Building.
21. These Rules and Regulations are in addition to and
shall not be construed to in any way modify, alter or amend, in
whole or in part, the terms, covenants, agreements and
conditions of any lease of premises in the Building.
22. Landlord reserves the right to make such other and
reasonable rules and regulations and to modify these Rules and
Regulations as in its judgment may from time to time be needed
for the safety, care and cleanliness of the Building, and
for the preservation of good order therein.
-23-
<PAGE>
[MAP OF LIBERTY BUILDING APPEARS HERE]
THE LIBERTY BUILDING
5TH FLOOR
NOT TO SCALE
DWN BY: RYAN R. O'BRIEN
DATE: 9/10/98
EXHIBIT "A"
<PAGE>
RIDER
RIDER attached to and made part of the Lease dated
day of September, 1998 between violet Realty, Inc.,
as Landlord, and Community Networks, as Tenant, as follows:
Premises Condition: Tenant agrees to take the space in "as is"
condition.
Building Conference Landlord grants Tenant permission to use
Room(s): the Building Conference Room in the Main
Place Tower, located at 350 Main Street,
commencing October 1, 1998 to December 31,
1998 for a period of one (1)hour per day
between 8:00 a.m. and 5:00 p.m., based upon
first come, first serve. After December 31,
1998, Tenant shall be permitted use of the
Main Place Tower Conference Room and/or the
Liberty Building conference Room for a
combined total of three (3)days a month,
based upon first come, first serve, at no
charge. Tenant shall be charge $100.00 for
each day of use of the Main Place Tower
Conference Room and/or the Liberty Building
Conference Room through the end of the
month, for the duration of the Lease.
<PAGE>
FIRST LEASE AMENDMENT
---------------------
AGREEMENT made this 29th day of July, 1999, between Violet Realty, Inc.
(hereinafter called "Landlord")and Community Networks (hereinafter called
"Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant entered into that certain Lease dated
October 8, 1998 (the "Lease"), demising space in the Liberty Building located at
416-426 Main Street, Buffalo, New York (the "Building"); and
WHEREAS, Landlord and Tenant desire to modify, amend and extend the terms
of said Lease.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. This Lease shall be extended for a term of one (1) year beginning
on the 1st day of October, 1999 (hereinafter referred to as
"Commencement Date") and to end on the 30th day of September,
2000 ("Extended Term"). Leased Premises for the Extended Term
shall consist of 2,029 rentable square feet as shown crosshatched
on attached Exhibit "A".
2. In addition to all other rents and charges due, commencing on
October 1, 1999, Tenant shall pay Landlord an annual base rent of
Twenty-six Thousand, Eight-Hundred Eighty-four and 25/l00
Dollars ($26,884.25). Such sum is to be paid in twelve (12) equal
monthly installments without demand and without deduction,
abatement or set-off for any cause, the first of such monthly
installments to be due and payable on the first day of October,
1999, with a like installment to be due and payable each month
during the term of the Lease.
3. Tenant agrees to take the Leased Premises in an "as is"
condition.
4. Tenant warrants and represents that he has not had any dealing
with any Realtor, broker or agent, except Equis of New York,
Inc., in connection with the negotiation of this Amendment and
Tenant agrees to pay and to hold harmless from any cost, expense
(including
<PAGE>
reasonable cost of suit and attorney's fees) or liability for any
compensation, commission or charges claimed by any Realtor,
broker or agent with respect to this Amendment and the
negotiations thereof.
5. Except as hereby specifically modified, all of the terms,
covenants and conditions of the Lease shall remain in full force
and effect and are hereby ratified and affirmed by the parties
hereto.
6. Should there be any conflicts between this Amendment and the
Lease, then the terms and conditions this Amendment shall govern
and control.
7. Not Binding Until Execution. The submission or delivery of
this document for examination and review does not constitute an
option, an offer to lease space in the Building or an agreement
to lease. This document shall have no binding affect on the
parties unless and until executed by both Tenant and Landlord.
Once executed by both Tenant and Landlord, all the terms,
covenants and conditions shall be effective or commence at some
future time.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Amendment as of the day and year first above written.
WITNESS: LOEB PARTNERS REALTY & DEVELOPMENT
CORP., AS AGENT FOR VIOLET REALTY,
INC.
_______________________ By: /s/ Alan L. Gordon
----------------------------
Name: Alan L. Gordon
Title: Vice President
Date: 9/2/99
--------------------------
WITNESS: COMMUNITY NETWORKS
Diane Kahn
_______________________ By: /s/ Scott M. Matuks
----------------------------
Name: Scott M. Matuks
Title: Vice President
Date: 7/29/99
--------------------------
2
<PAGE>
[MAP OF LIBERTY BUILDING APPEARS HERE]
THE LIBERTY BUILDING
5TH FLOOR
NOT TO SCALE
DWN BY: RYAN R. O'BRIEN
DATE: 9/10/98
EXHIBIT "A"
<PAGE>
SECOND LEASE AMENDMENT
THIS SECOND LEASE AMENDMENT ("Amendment") is entered into this 26th day of
January, 2000, by and between VIOLET REALTY, INC., having an address at 2100
Liberty Building, Buffalo, New York ("Landlord") and BROADVIEW NETWORKS, f/k/a
Community Networks, having an address at 500 Liberty Building, Buffalo, New York
("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant previously entered into that certain Lease
dated October 8, 1998, as amended by First Lease Amendment dated July 29, 1999
(executed by Landlord on September 2, 1999)(the "Lease"), pursuant to which
Tenant agreed to lease from Landlord 2,029 rentable square feet of office space
designated as Room Suite 500 on the 5th floor in that certain office building
known as the Liberty Building, located at 416-426 Main Street, Buffalo, New York
(the "Building"); and
WHEREAS, Landlord and Tenant desire to modify, extend and amend the terms
of the Lease.
NOW, THEREFORE, in consideration of mutual promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be bound hereby, the parties hereto
agree as follows:
1. The Lease is hereby amended as follows:
a. The Leased Premises are hereby modified to contain
2,303 rentable square feet of office space which is an
expansion of 274 rentable square feet ("Expansion
Area") from the original 2,029 rentable square feet
("Original Leased Premises"). The Original Leased
Premises together with the Expansion Area (as further
defined on attached Exhibit "A")are hereafter referred
to as the "Modified Leased Premises".
b. As the term of the Lease currently expires on September
30, 2000, the parties wish to extend the existing term
for four (4) months to January 31, 2001 ("Extended
Term"). All terms, covenants and conditions of the
Lease, including, but not limited to, the terms of this
Amendment, shall commence relative to the Expansion
Area on February 1, 2000 ("Commencement Date").
c. In addition to all other rents and charges due under
the Lease, Tenant shall pay Landlord an annual base
rent of Three Thousand Six Hundred Thirty and 50/100
Dollars ($3,630.50)for the Expansion Area to be paid in
twelve (12) equal monthly installments of $302.54
payable without demand and without deduction, abatement
or set-off for any cause, the first of such monthly
installments to be due and payable on the Commencement
Date, with a like installment to be due and payable on
the first day of each month thereafter through and
including the final month of the Extended Term of the
Lease.
d. In addition to all other rents and charges due under
the Lease, the annual base rent of Twenty-Six Thousand
Eight Hundred Eighty-Four and 25/100 Dollars
($26,884.25) payable by Tenant under the Lease for the
Original Leased Premises shall remain unchanged as to
the amount and shall continue to be paid in twelve
(12) equal monthly installments of $2,240.35 due and
payable on the first day of each month hereafter
through and including the final month of the Extended
Term of the Lease.
e. Tenant agrees to take the Expansion Area in an "as is"
condition.
f. Pursuant to Section 28 of the Lease, Tenant shall
deposit an additional $302.54 as security for Tenant's
performance and observance of all terms, covenants and
conditions of the Lease. Such sum shall be governed by
the terms of the Lease.
1
<PAGE>
2. Tenant warrants and represents that Tenant has not had any
dealinga with any realtor, broker, or agent in connection
with the negotiation of this Amendment, except Equis of New
York, Inc., and Tenant agrees to pay and to hold Landlord
harmless from any cost, expense (including reasonable cost of
suit and attorneys' fees) or liabiity for any compensation,
commission or charges claimed by any realtor, broker, or
agent other than those named above with respect to this
Amendment and the negotiations thereof In the event of
default or early Lease termination, it is expressly agreed
that any leasing commission monies actually paid by Landlord
to a broker or agent pursuant to entering into this Amendment
shall be included when determining the extent of damages
incurred by Landlord by reason of Tenant's default.
3. Every reference in the Lease to the Leased Premises (which in
this Amendment is referred to as the Original Leased
Premises) shall now mean the Modified Leased Premises as
defined herein.
4. Except as speci&ally modified by this Amendment, all of the
terms, covenants and conditions of the Lease shall remain in
full force and effect and are hereby ratified and affirmed
by the parties hereto. All defined terms contained in this
Agreement shall have the meanings given to them in the Lease
unless otherwise defined herein.
5. In the event of a conflict between any provision of this
Amendment and the Lease, the terms and conditions of this
Amendment shall govern and control.
6. The submission or delivery of this document for examination
and review does not constitute an option, an offer to lease
space in the Building or an agreement to lease. This
Amendment shall have no binding effect on the parties unless
and until executed by both Landlord and Tenant. Once executed
by both Landlord and Tenant, all the terms, covenants and
conditions of this Amendment shall be effective unless
otherwise expressly specified that they shall be effective or
commence at some future time.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the day and year first above written.
WITNESS: LANDLORD:
LOEB PARTNERS REALTY & DEVELOPMENT
CORP., AS AGENT FOR VIOLET REALTY,
INC.
___________________________ By:_____________________________
Name: Alan L. Gordon
Title: Vice President
Date:
WITNESS: TENANT:
BROADVIEW NETWORKS
___________________________ By: /s/ Scott M. Matukas
----------------------------
Name: Scott M. Matukas
Title: VP-Admin
Date: 1/26/00
---------------------------
2
<PAGE>
[MAP OF LIBERTY BUILDING APPEARS HERE]
THE LIBERTY BUILDING
5TH FLOOR
NOT TO SCALE
DWN BY TIM BURKE
DATE 1/14/00
EXHIBIT "A"
<PAGE>
Exhibit 10.13
[LOGO]
Broadview
Networks
- -------------------------------------------------------------------------------
Existing Lease Abstract
Building: Hood Business Park, 500 Rutherford Avenue, Boston
Lease Data: TBD
Landlord: Hood Business Park, LLC
Tenant: Community Networks
Premises: Portion of the 2nd floor
Rentable Area: Approximately 11,000 RSF - 3,000 office and 9,490 switch
Lease Term: Ten (10) years
Lease Commencement: Upon full execution and unconditional delivery of
lease documents.
Lease Expiration: Ten (10) years from Lease Commencement
Rent Commencement: Office: Upon Possession
Switch: Three (3) months from Possession
Base Rent: Years l-5: Office: $20.00 pRSF NNN
Switch: $17.75 pRSF NNN
Years 6-l0: Office: $23.00 pRSF NNN
Switch: $20.40 pRSF NNN
Electricity: $1.75 pRSF
Real Estate Taxes: included in Operating Expenses figure.
Operating Expenses: $4.15 pRSF, which should grow at approximately
2% per year
Use: General Office use and the installation and maintenance
of equipment and facilities in connection with Community
Networks' telecommunications business. Tenant may also
use Premises as a switch, assuming Tenant acquires
proper permits.
Sublet/Assignment: Tenant may sublet all or a portion of the premises or
assign the lease to an affiliate, parent company or
company under it's control without consent or to a non-
affiliate company with prior written consent of owner,
which may not be unreasonably withheld or delayed.
Parking: Twenty (20) spaces at no charge.
Termination Option(s): N/A
Expansion Option(s): Landlord will work with Tenant to accommodate
expansion needs.
EQUIS
- -------------------------------------------------------------------------------
11/17/99
<PAGE>
[LOGO]
Broadview
Networks
- -------------------------------------------------------------------------------
Security Deposit: TBD
Right of First Refusal: N/A
Renewal Option(s): Tenant shall have one five (5) year renewal option.
EQUIS
- -------------------------------------------------------------------------------
11/17/99
<PAGE>
N NORDIC
October 22, 1999
Mr. Brendan Callahan
Equis of New York
65 East 55th Street
15th Floor
New York, NY 10022
Dear Brendan:
As you requested, enclosed is a copy of the lease for Community Networks. Thanks
for all your help.
I look forward to doing more transactions with you in the future.
Sincerely,
/s/ G. Kent Gonzales
G. Kent Gonzales
Project Manager
GKGLML
Enclosure
-----------------
31 Third Avenue
Burlington, MA
01803-4470
(781)272-4000
Fax (781)270-0359
<PAGE>
[LOGO]community
networks
Solutions that work for your business.
September 23,1999
Mr. Gary Buchman
Rachstein, Norman L Buchman, LLP
134O Centre Street-Suite 212
Newton Centre, MA 02459
Re: Community Networks, Inc. - Lease
Hood Business Park, Charlestown, MA
Dear Mr. Buchman:
Enclosed please find four (4) copies of the above referenced lease agreement.
Please return a fully executed copy to my attention as soon as possible.
We will deliver a $209,000 letter of credit within a week. If we are unable to
provide a letter of credit by l0/4/99 we will provide a $209,000 cash deposit
and subsequently "swap it out" for a letter of credit.
Sincerely,
/s/ Scott M. Matukas
Scott M. Matukas
VP - Administration
Cc: Joy Phanumas, Esquire
Brendan Callahan
Kent Gonzales
4518 Court Square, Suite 403, Long Island City, New York 11101 /718-707-8800
/Fax: 718-706-9575
<PAGE>
LEASE
-----
LANDLORD: Hood Business Park LLC, a Massachusetts
Limited Liability Company
TENANT: Community Networks, Inc., a New York
Corporation
PREMISES: Hood Business Park, Charlestown, Massachusetts
DATED: September 23, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE CAPTION PAGE
I REFERENCE DATA 1
(A) Subjects Referred To 1
(B) Exhibits 3
II PREMISES 3
III TERM AND CONSTRUCTION 4
(A) Term 4
(B) Landlord's Required Work 4
(C) Tenant's Work 4
(D) General Construction Provisions. 5
(E) Floor Area Measurement 5
IV LANDLORD'S COVENANTS 5
(A) Landlord's Covenants During The Term 5
(B) Interruptions 5
V RENT 6
(A) Fixed Rent 6
(B) Additional Rent - Taxes 6
(C) Additional Rent - Operating Costs 8
(D) Monthly Payments 10
(E) Additional Rent -Electricity, Gas, Water & Sewer 10
VI TENANT'S COVENANTS 11
VII DEFAULT 16
(A) Events of Default 16
(B) Obligations Thereafter 17
VIII CASUALTY AND TAKING 17
(A) Casualty And Taking 17
(B) Reservation Of Award 18
IX MORTGAGEE 18
(A) Subordination To Mortgages 18
(B) Limitation On Mortgagee's Liability 19
(C) No Release Or Termination 19
X GENERAL PROVISIONS. 20
(A) Captions 20
(B) Short Form Lease 20
(C) Relocation 20
(D) Notices 20
(E) Successors And Assigns 21
(F) No Surrender 21
(G) Waivers And Remedies 21
(H) Self-Help 21
(I) Estoppel Certificate 21
(J) Waiver Of Subrogation 23
(K) Brokers 24
(L) Landlord's Defaults 24
(M) Effectiveness Of Lease. 24
(N) Hazardous Materials 24
(0) Delays 25
XI SECURITY DEPOSIT 25
XII MODIFICATION 26
XIII OPTION 26
(A) Option Term 26
(B) Option Rent 26
<PAGE>
Exhibit A Plan Showing Location Of The Building
Exhibit A-l Condition of Building
Exhibit A-2 Roof Space
Exhibit B Landlord's Required Work
Exhibit C Intentionally Omitted
Exhibit D Landlord's Services
Exhibit E Rules And Regulations
Exhibit F Legal Description Of Lot
<PAGE>
Lease dated as of the ____day of September, 1999, by and between Hood Business
Park LLC, a Massachusetts Limited Liability Company, as landlord ("Landlord"),
and Community Networks, Inc., a New York corporation, as tenant ("Tenant").
ARTICLE I
REFERENCE DATA
1. (A) SUBJECTS REFERRED TO:
Each reference in this lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1 (A):
LANDLORD'S ADDRESS: 90 Everett Avenue
Chelsea, MA 02150-2301
LANDLORD'S MANAGING AGENT: Nordblom Company
31 Third Avenue
Burlington, MA 01803-4470
TENANTS ADDRESS: 500 Rutherford Avenue
Charlestown. MA
BUILDING: That certain building designated as "500 Rutherford Avenue" upon
Exhibit A.
RENTABLE FLOOR AREA OF TENANT'S SPACE:
SWITCH: APPROXIMATELY 9490 SQUARE FEET
OFFICE: APPROXIMATELY 3OOO SQUARE FEET
TOTAL RENTABLE FLOOR AREA OF THE BUILDING:
WAREHOUSE: 109,148 SQUARE FEET
OFFICE: 191,716 SQUARE FEET
APPROXIMATE DELIVERYDATE:
WITHIN THIRTY (30) DAYS OF LEASE EXECUTION. IF LANDLORD IS UNABLE TO
DELIVER THE SWITCH SPACE TO TENANT WITHIN SAID THIRTY (30) DAYS,
LANDLORD SHALL PROVIDE A SECURE AREA FOR STORAGE OF TENANT'S SWITCH
EQUIPMENT UNTIL SUCH TIME AS LANDLORD DELIVERS THE SWITCH SPACE TO
TENANT.
COMMENCEMENT DATE: UPON DELIVERY OF EITHER THE OFFICE SPACE OR THE SWITCH SPACE
TO TENANT WITH LANDLORD'S WORK SUBSTANTIALLY COMPLETE.
ORIGINAL TERM: TEN (10) YEARS AND THREE (3) MONTHS FROM THE COMMENCEMENT DATE
1
<PAGE>
OPTION TERM: ONE (1) OPTION FOR FIVE (5) YEARS
FIXED RENT:
OFFICE SPACE
COMMENCING UPON THE COMMENCEMENT DATE AND THEREAFTER:
DURING THE FIRST (5) YEARS OF THE ORIGINAL TERM --
$60,00.00 PER ANNUM; AND
DURING EACH YEAR OF THE BALANCE OF THE ORIGINAL TERM --
$69,000.00 PER ANNUM.
SWlTCH SPACE:
DURING THE FIRST THREE (3) MONTHS FOLLOWING THE COMMENCEMENT DATE NO
FIXED RENT SHALL BE PAYABLE; THEREAFTER DURING THE BALANCE OF THE
FIRST FIVE (5) YEARS OF THE ORIGINAL TERM -- $168,447.50 PER ANNUM; AND
DURING EACH YEAR OF THE BALANCE OF THE ORIGINAL TERM -- $193,596.00 PER
ANNUM.
ADDITIONAL RENT FOR TAXES AND OPERATING COSTS:
PRO RATA.
SECURITY DEPOSIT: LETTER OF CREDIT FOR AN AMOUNT NOT TO EXCEED
$209,000.00. PROVIDED TENANT IS NOT IN DEFAULT BEYOND
ANY APPLICABLE CURE PERIOD, SAID LETTER OF CREDIT SHALL
BE REDUCED TO $139.333.00 FOLLOWING THE FIFTH (5TH)
YEAR OF THE TERM.
GUARANTOR: TBD
PERMITTED USE: GENERAL OFFICE USE AND THE INSTALLATION AND MAINTENANCE
OF EQUIPMENT AND FACILITIES IN CONNECTION WITH TENANT'S
TELECOMMUNICATIONS BUSINESS. WHILE TENANT'S INTENDED USE
OF THE DEMISED PREMISES AS A TELECOMMUNICATION SWITCH IS
PERMITTED UNDER CURRENT ZONING, ANY SPECIAL PERMITS,
REQUIREMENTS OF LAW OR LOCAL AUTHORITIES, CHANGES IN
CERTIFICATE OF OCCUPANCY, ETC. AS NECESSARY DUE TO
TENANT'S USE WILL BE AT TENANT'S SOLE COST AND EXPENSE.
2
<PAGE>
PUBLIC LIABILITY INSURANCE LIMITS: BODILY INJURY:
$2,000,000
PROPERTY DAMAGE:$ 500,000
(B)EXHIBITS
The exhibits listed below in this Section are incorporated in this lease
by reference and are to be construed as part of this lease:
Exhibit A Plan Showing Location Of the Building
Exhibit A-l Condition of Building
Exhibit A-2 Roof Space
Exhibit B Landlord's Required Work
Exhibit C Intentionally Omitted
Exhibit D Landlord's Services
Exhibit E Rules And Regulations
Exhibit F Legal Description Of Lot
ARTICLE II
PREMISES
2. PREMISES
Subject to and with the benefit of the provisions of this lease,
Landlord hereby leases to Tenant, and Tenant leases from Landlord, Tenant's
space on the second floor of the Building, excluding exterior faces of exterior
walls, all common facilities of the Building and all building service fixtures
and equipment serving (exclusively or in common) other parts of the Building.
Tenant's space includes approximately nine thousand four hundred ninety
(9,490)square feet of switch space and three thousand (3,000) square feet of
office space on the second floor of the Building. The Building is outlined in
red upon the plan attached as Exhibit A. Tenant's space, with such exclusions,
is hereinafter referred to as "the demised premises". In addition, Tenant shall
have the exclusive right to use that portion of the roof outlined on Exhibit A-2
to install and maintain certain equipment (other than antennae and other
transmitting devices) approved by Landlord and at no additional charge. Tenant
shall have, as appurtenant to the demised premises, the right to use in common
with others entitled thereto, subject to reasonable rules from time to time made
by Landlord of which Tenant is given notice: (i) the common facilities,
including cafeteria and exercise room (without monthly or annual fees, except as
provided for as part of Operating Expenses) from time to time included in the
Building or on the parcel of land on which the Building is located (said parcel
being more particularly described in Exhibit F and being hereafter referred to
as "the Lot"), to the extent from time to time designated by Landlord; and
(ii) the building service fixtures and equipment serving the demised premises.
The Lot is represented by the area outlined by a bold line upon said Exhibit A.
It is understood and agreed that said plan is intended only to show the
approximate size of the Lot as presently constituted and the approximate size
and location of the Building and for no other purpose. Landlord reserves the
right from time to time (a) to install, repair, replace, use, maintain and
relocate for service to the demised premises and to other parts of the,
Building or either, building service fixtures and equipment wherever located in
the Building; (b) to alter, relocate or eliminate any other common facility; (c)
to designate specific parking areas upon the Lot to be for the exclusive use of
one or more users thereof; (d) to designate specific traffic routes for trucks
and other delivery vehicles; (e) to alter the size of the Building, including,
without
3
<PAGE>
limitation, converting warehouse space to office space or office space to
warehouse space; and (f) to increase and/or decrease the size of the Lot by the
acquisition of adjacent land and/or the disposition of any portions thereof. No
such increase or decrease shall be deemed to have occurred until Landlord shall
give Tenant notice thereof. Landlord shall designate parking for at least twenty
(20) cars as "Reserved for Customers" reasonably proximate to the Building
entrance. Notwithstanding the foregoing, Landlord agrees that it shall not
unreasonably adversely impair access to or egress from the demised premises.
ARTICLE III
TERM AND CONSTRUCTION
3. (A) TERM
To have and to hold for a period of ten (10) years ("the original Term"
or "the Term") commencing when the office space or switch space, whichever
occurs first, are deemed ready for occupancy as provided hereinbelow (being
hereafter referred to as "the Commencement Date") and, unless sooner terminated
as provided herein, ending at the end of the Term; provided that if the Term
(calculated as aforesaid) would expire prior to the last day of a calendar
month, the Term shall be extended so as to expire on the last day of such
calendar month.
(B) LANDLORD'S REQUIRED WORK
Landlord agrees to use reasonable efforts to complete Landlord's
Required Work (described in Exhibit B) on or before the Approximate Delivery
Date, which shall, however, be extended for a period equal to that of any delays
due to governmental regulations, scarcity of or inability to obtain labor or
materials, labor difficulties, casualty or other causes reasonably beyond
Landlord's control. The demised premises shall be deemed ready for occupancy on
the substantial completion of Landlord's Required Work in the office space
and/or switch space and the delivery of either the office space or the switch
space to Tenant.
Landlord shall permit Tenant access (at Tenant's sole risk) for installing
equipment and furnishings in the demised premises prior to the Term if it can be
done without material interference with, or delay of, Landlord's work in the
demised premises and/or in other portions of the Building.
Notwithstanding, the foregoing provisions of this Section (B), if the
demised premises are not deemed ready for occupancy on or before the first
anniversary of the Approximate Delivery Date for whatever reason, other than
Tenant's default, Tenant may elect to cancel this lease at any time within ten
days thereafter (but only if the demised premises are still not deemed ready for
occupancy) by giving notice to Landlord of such cancellation, which cancellation
shall be effective when given, it being understood that said election shall be
Tenant's sole remedy at law or in equity for Landlord's failure to make the
demised premises ready for occupancy. Furthermore, if the term of this lease
shall not have commenced on or before the third anniversary of the Approximate
Delivery Date, this lease shall thereupon automatically terminate.
(C) TENANT'S WORK
Intentionally Omitted.
4
<PAGE>
(D) GENERAL C0NSTRUCTION PROVISIONS
All construction work required or permitted by this lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authorities and insurance rating or inspection bureaus
having jurisdiction over the Building. Either party may inspect the work of the
other at reasonable times and shall promptly give notice of observed defects.
Landlord's Required Work shall be deemed to have been performed upon the
Commencement Date except for items which are incomplete or do not conform with
the requirements of Exhibit B and as to which Tenant shall, in either case, have
given written notice to Landlord prior to the Commencement Date.
(E) FLOOR AREA MEASUREMENT
Within sixty (60) days following the Commencement Date, Tenant may
engage an independent certified architectural surveyor to measure the actual
floor area of the demised premises. Tenant's architect or surveyor shall
determine the floor area by measuring same from the outside of any exterior
walls to the center of any interior demising walls. If the architect's, or
surveyor's measurements of the floor area of the demised premises is less than
the rentable floor area of Tenant's space as set forth in Article 1 above by
three percent (3%) or more, Fixed Rent and Tenant's proportionate share of taxes
and Operating Costs shall be proportionately reduced. If the variance is less
than three percent (3%) of the floor area of the demised premises, or if the
demised premises shall contain more square foot of floor area than as set forth
in Article 1 above, no adjustment shall be made.
ARTICLE IV
LANDLORD'S COVENANTS
4. (A) LANDLORD'S COVENANTS DURING THE TERM:
Landlord covenants during the Term:
(1) To furnish, through Landlord's employees or independent
contractors, the services listed in Exhibit D; and
(2) Except as otherwise provided in this lease, to make such structural
repairs to the roof, exterior walls, and common facilities of the Building, the
Lot and the demised premises as may be necessary to keep them in serviceable
condition.
(B) INTERRUPTIONS
Except as otherwise expressly provided herein, Landlord shall not be
liable to Tenant for any compensation or reduction of rent by reason of
inconvenience or annoyance or for loss of business arising from (a) power losses
or shortages, or (b) the necessity of Landlord's entering the demised premises
for any of the purposes in this lease authorized, including without limitation,
for repairing or altering the demised premises or any portion of the Building or
for bringing materials into and/or through the demised premises in connection
with the making of repairs or alterations.
5
<PAGE>
In case Landlord is prevented or delayed from making any repairs,
alterations or improvements or furnishing any service or performing any other
covenant or duty to be performed on Landlord's part, by reason of any cause
reasonably beyond Landlord's control, Landlord shall not be liable to Tenant
therefor, nor, except as expressly otherwise provided in Article VIII, shall
Tenant be entitled to any abatement or reduction of rent by reason thereof, nor
shall the same give rise to a claim in Tenant's favor that such failure
constitutes actual or constructive, total or partial, eviction from the demised
premises. Landlord reserves the right to stop any service or utility system when
necessary, in Landlord's reasonable opinion by reason of accident or emergency
or until necessary repairs have been completed. Except in case of emergency
repairs (in which case Landlord shall give such notice as is reasonably
practicable under the circumstances), Landlord will give Tenant reasonable
advance notice of any contemplated stoppage and, in any event, Landlord will use
reasonable efforts to avoid unnecessary inconvenience to Tenant by reason
thereof. Landlord agrees that if there is such a stoppage of such service or
utility system for more than ten (10) business days, and if Tenant cannot
reasonably conduct its business in the demised premises as a result thereof,
Fixed Rent shall thereafter abate until such service or utility system is
restored or Tenant is again able reasonably to conduct its business in the
demised premises.
ARTICLE V
RENT
5. (A) FIXED RENT
Tenant agrees to pay, without any offset or reduction whatever {except
as made in accordance with the express provisions of this lease), fixed monthly
rent equal to 1/12th of the Fixed Rent, such rent to be paid in equal
installments in advance on the first day of each calendar month included in the
Term, except as otherwise set forth in Section (A) of Article 1 above; and for
any portion of a calendar month at the beginning or end of the Term, a portion
of such fixed monthly rent, prorated on a per diem basis. All payments of
Fixed and additional rent shall be made in lawful money of the United States and
shall be made to Hood Business Park LLC and sent to Landlord's Managing Agent at
Managing Agent's Address set forth in Section (A) of Article I above, or to such
other person and/or at such other address as Landlord may from time to time
designate.
If any payment of rent or any other payment payable hereunder by Tenant
to Landlord shall not be paid within ten (10) days of when due, the same shall
bear interest from the date when the same was payable until the date paid at the
lesser of (a) fifteen percent (15%) per annum, or (b) the highest lawful rate of
interest which Landlord may charge to Tenant without violating any applicable
law. Such interest shall constitute additional rent payable hereunder.
(B) ADDITIONAL RENT -TAXES
(1) For the purposes of this Section, "Tax Year" shall mean the
twelve month period in use in the City of Boston for the purpose of imposing ad
valorem taxes upon real property. In the event that said City changes the period
of its tax year, "Tax Year" shall mean a twelve-month period commencing on the
first day of such new tax year, and each twelve-month period commencing on an
anniversary of such date during the Term of this lease. For purposes of this
Section "the Property" shall mean the Lot and all improvements thereon from time
to time, including the Building; and "the Factor" shall mean a fraction the
6
<PAGE>
(7) As of the Commencement Date, Landlord represents and warrants
that Landlord has paid in full all currently due taxes; and Landlord shall pay
when due all future taxes provided Tenant makes timely payment of same.
(C) ADDITIONAL RENT - OPERATING COSTS
(1) For the purposes of this Section, the following terms shall have
the following respective meanings:
Operating Year: Each successive fiscal year (as adopted by Landlord) in
which any part of the Term of this lease shall fall.
"Operating Expenses" shall mean all costs or expenses incurred for the
operation, cleaning, maintenance, repair and upkeep of the Property, including,
without limitation, all costs of maintaining and repairing the Property
(including snow removal, landscaping and grounds maintenance parking lot
operation and maintenance, security, operation and repair of ventilating and
airconditioning equipment, elevators, lighting and any other Building equipment
or systems) and of all repairs and replacements (other than repairs or
replacements for which Landlord has received full reimbursement from
contractors, other tenants of the Building or from others) necessary to keep the
Property in good working order, repair, appearance and condition; all costs,
including material and equipment costs for cleaning and janitorial services to
the Building (including window cleaning of the Building); all costs of any
reasonable insurance carried by Landlord relating to the Property; all costs
related to provision of heat (including oil, electric, steam and/or gas), air-
conditioning, and water (including sewer charges) and other utilities to the
Building, (but excluding the reheat units in Tenant's VAV units); payments under
all service contracts relating to the foregoing; all compensation, fringe
benefits, payroll taxes and workmen's compensation insurance premiums related
thereto with respect to any employees of Landlord or its affiliates engaged in
security and maintenance of the Property; attorneys'fees and disbursements
(exclusive of any such fees and disbursements incurred in tax abatement
proceedings or the preparation of leases) and auditing and other professional
fees and expenses; and a management fee at market rates customarily paid with
respect to buildings similar to the Building.
There shall not be included in such Operating Expenses brokerage fees (including
rental fees) related to the operation of the Building; interest and depreciation
charges incurred on the Property; or expenditures made by Tenant with respect to
(i) cleaning, maintenance and upkeep of the demised premises; and (ii) the
provision of electricity to the demised premises. Operating Expenses shall not
include (1) the initial costs of equipment properly chargeable to the capital
account consisting of items of real estate in nature and the original costs of
constructing the Common Areas; (2) expenses for which the Landlord is or will be
reimbursed by another source (excluding tenant reimbursement for Operating
Expenses) including repair or replacement of any item covered by warranty; (3)
costs incurred to benefit (or as a result of) a specific tenant or items and
services selectively supplied to any specific tenant; (4) expenses for the
defense of the Landlord's title to the demised premises or the Building;
(5) depreciation and amortization of the Building, financing costs, including
interest and principal debts; (6) charitable or political contributions; (7)
costs of improving or renovating space for a tenant or space vacated by a
tenant; (8) expenses paid directly by Tenant for any reason (such as excessive
utility use); (9) any repair, rebuilding or other work necessitated by
condemnation, fire, windstorm or other
8
<PAGE>
insured casualty or hazard, but only to the extent of the insurance proceeds
received by Landlord therefor; (10) any other amounts as a result of Landlord's
violation or failure to comply with any governmental regulations and rules or
any court order, decree or judgment; (11) leasing commissions, advertising
expenses and other costs incurred in leasing or procuring new tenants;
(12) rental on ground leases or other underlying leases; and (13) attorneys'
fees, accounting fees and expenditures incurred in connection with negotiations,
disputes and claims of other tenants or occupants of the Building or with other
third parties except as specifically provided in the lease. Landlord agrees that
it shall not charge Tenant twice for any Operating Expenses, and to the extent
any personnel of Landlord shall perform services for other properties of
Landlord or its affiliates, the cost of such personnel shall be appropriately
prorated.
If, during the Term of this lease, Landlord shall replace any capital items or
make any capital expenditures reasonably necessary to maintain the structural
integrity of the demised premises or the Building or of the utility systems
servicing the demised premises, or which result in reducing Operating Expenses
(collectively called "capital expenditures") the total amount of which is not
properly included in Operating Expenses for the calendar year in which they were
made, there shall nevertheless be included in Operating Expenses for each
calendar year in which and after such capital expenditure is made the annual
charge-off of such capital expenditure. (Annual charge-off shall be determined
by (i) dividing the original cost of the capital expenditure by the number of
years of useful life thereof [the useful life shall be reasonably determined by
Landlord in accordance with generally accepted accounting principles and
practices in effect at the time of acquisition of the capital item]; and
(ii) adding to such quotient an interest factor computed on the unamortized
balance of such capital expenditure based upon an interest rate reasonably
determined by Landlord as being the interest rate then being charged for long
term mortgages by institutional lenders on like properties within the locality
in which the Building is located.) Provided, further, that if Landlord
reasonably concludes on the basis of engineering estimates that a particular
capital expenditure will effect savings in Operating Expenses and that such
annual projected savings will exceed the annual charge-off of capital
expenditure computed as aforesaid, then and in such events, the annual charge-
off shall be determined by dividing the amount of such capital expenditure by
the number of years over which the projected amount of such savings shall fully
amortize the cost of such capital item or the amount of such capital
expenditure; and by adding the interest factor, as aforesaid.
The foregoing are intended to describe only the extent of potential cost
and expenses and impose no obligation on Landlord to incur same.
The Factor: As defined in Section (B) above.
Building's Share of Operating Expenses: One hundred percent (100%)of the
Operating Expenses with respect to the Building plus the product of the
Operating Expenses with respect to the Lot and a fraction the numerator of
which is the rentable floor area contained within the Building and the
denominator of which is the rentable floor area contained within all of the
buildings located upon the Lot and not separately maintained by the tenants
thereof.
(2) During the Term commencing on the Commencement Date Tenant shall pay
to Landlord, as additional rent, an amount equal to the Building's Share of
Operating Expenses for each Operating Year multiplied by the Factor, such
9
<PAGE>
amount to be apportioned on a per diem basis for any fraction of an Operating
Year contained within the Term.
(3) In the event of any taking by eminent domain under circumstances
whereby this lease shall not terminate, each of the Building's Share of
Operating Expenses and the Factor shall be appropriately adjusted to reflect any
change in rentable floor area.
(D) MONTHLY PAYMENTS
Payment on account of the additional rent described in Sections (B) and
(C) above shall be paid, as part of Tenant's total rent, monthly, and at the
times and in the fashion herein provided for the payment of Fixed Rent. For an
initial period from the Commencement Date until the end of the Tax Year during
which the term of this lease shall commence, the monthly amount so to be paid
shall be that amount equal to one twelfth (1/12th) the product of $4.15 and the
square foot floor area of the demised premises, being that amount reasonably
estimated by Landlord for such purpose at the commencement of the Term. Promptly
after the end of said Tax Year, and promptly after the end of each Tax Year
thereafter, Landlord shall make a determination of Tenant's share of real estate
taxes and Operating Expenses; and if the aforesaid payments theretofore made for
such period by Tenant exceed Tenant's share, such overpayment shall be credited
against the payments thereafter to be made by Tenant pursuant to this Section
(D); and if Tenant's share is greater than such payments theretofore made on
account for such period, Tenant shall make a suitable payment to Landlord. The
initial monthly payment on account of said additional rent shall be replaced
after Landlord's determination of Tenant's share for the preceding Tax Year by a
payment which is one-twelfth (l/l2th)of Tenant's actual share thereof for the
immediately preceding Tax Year, with adjustments as appropriate where such
period is less than a full twelve-month period. Appropriate adjustments shall be
made in said monthly payment if the real estate taxes upon the Property for the
current Tax Year shall be known prior to the end of said Tax Year and/or if real
estate taxes shall be payable to the taxing authority in installments, all to
the end that as each payment of real estate taxes shall become payable Landlord
shall have received from Tenant payments sufficient in amount to pay Tenant's
share of the Building's Share of Real Estate Taxes then payable by Landlord. At
Landlord's election, Landlord may use its fiscal year rather than Tax Years for
purposes of the adjustments described in this Section. Landlord shall provide
Tenant with copies of invoices upon request but in any event not more often than
once per year.
(E) ADDITIONAL RENT - ELECTRICITY, GAS, WATER & SEWER
(1) The demised premises shall have utility meters measuring only
the amount of the utilities consumed in the demised premises, and commencing
upon Tenant's entry into the demised premises to perform Tenant's work, Tenant
shall pay to the utility companies furnishing such utilities, promptly upon the
receipt of bills therefor, the cost of such utilities consumed in the demised
premises.
(2) Tenant's use of electricity in the demised premises shall not
at any time exceed the capacity of any of the electrical conductors or equipment
in or otherwise serving the demised premises. Landlord represents that the
existing feeders, risers, and wiring installations in the Building are capable
of supplying without any adverse impact on other occupants or the need for
upgrading electrical service, and there shall be available to the perimeter of
the demised
10
<PAGE>
premises on the Commencement Date, at least 1200 Amperes of electric service.
The cost of bringing said electric service from the main utility source in the
Building to the demised premises shall be Tenant's obligation and at Tenant's
cost and expense.
ARTICLE VI
TENANT'S COVENANTS
6. TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such other time as Tenant occupies
any part of the demised premises:
(1) To pay when due (a) all Fixed Rent and additional rent, (b) all
taxes which may be imposed on Tenant's personal property in the demised premises
(including, without limitation, Tenant's fixtures and equipment)regardless to
whomever assessed, and (c) all charges by any public utility for telephone and
other utility services rendered to the demised premises;
(2) Except as otherwise provided in Article VIII and Section
4(A)(2), to keep the demised premises in good order, repair and condition,
reasonable wear only excepted; to replace all light bulbs as necessary; maintain
and replace all interior glass; keep all utilities, pipes, conduits, drains and
other installations exclusively used in connection with the demised premises
(other than the tie-ins to the Building's life, safety and fire systems which
shall be Landlord's obligation to repair and maintain), including, without
limitation, the heating, ventilating and air conditioning systems which serve
only the demised premises in good order, condition and repair; and at the
expiration or termination of this lease peaceably to yield up the demised
premises and all changes and additions therein in such order, repair and
condition, first removing all goods and effects of Tenant and those claiming
under Tenant and any items the removal of which is required by any agreement
between Landlord and Tenant (or specified therein to be removed at Tenant's
election and which Tenant elects to remove), and repairing all damage caused by
such removal and restoring the demised premises and leaving them clean and neat.
Notwithstanding anything to the contrary contained herein, Tenant shall
forthwith remove from the demised premises (repairing any damage caused by such
removal) any installations, alterations, additions or improvements made by
Tenant without Landlord's consent or which Landlord, at the time of granting
consent thereto, requests Tenant to remove. Tenant shall remove same within
thirty (30) days after the expiration or termination of the term of this lease,
such removal to include returning the previously modified portions of the
demised premises to their condition prior to the making of such installations,
alterations, additions or improvements. Tenant's obligations hereunder shall
survive the expiration or termination of the term of this lease. For purposes of
this Section (2)the word "repairs" includes the making of non structural
replacements when necessary. Upon the expiration or sooner termination of this
lease, whether or not6t such termination is a result of default, Tenant shall
have the right, at its expense, to remove from the demised premises all items
and nonstructural characteristics that are indicative of Tenant's business, and
otherwise to "deidentify" the demised premises, as Tenant reasonably believes
necessary or appropriate for the protection of Tenant's interest in Tenant's
trademarks, tradenames, copyrights and other proprietary interests, provided
Tenant shall repair any damage to the demised premises caused by the removal
thereof, which repair shall include the patching and filling of holes. In no
event shall Tenant remove any restrooms, flooring, ceilings or electrical
systems. All
11
<PAGE>
other utility systems will be capped and returned to a condition compatible with
code requirements. Any removal of furnishings, machinery, fixtures, equipment,
improvements, or personal property by Tenant shall be conducted in a good and
workmanlike manner, and Tenant shall diligently and promptly repair or restore
any injury or damage done to the demised premises in connection with such
removal;
(3) Continuously from the Commencement Date, to use and occupy the
demised premises only for the Permitted Use; and not to injure or deface the
demised premises, Building, or Lot; and not to permit in the demised premises
any auction sale, nuisance, or the emission from the demised premises of any
objectionable noise or odor; nor any use thereof which is improper, offensive,
contrary to law or ordinances, or liable to invalidate or increase the premiums
for any insurance on the Building (or any portion thereof)or its contents, or
liable to render necessary any alteration or addition to the Building. Tenant
shall obtain Landlord's consent prior to the installation of antennae or other
transmitting devices on the roof of the Building, and Tenant shall pay the fair
market rent (determined in the same manner as set forth in Section (B)of Article
13 below) for locating said antennae and/or equipment on the roof of the
Building. Landlord represents and warrants to Tenant that (i) Tenant's permitted
use of the demised premises shall not in and of itself violate any of the
provisions of this lease or the provisions of any grant, lease, or mortgage to
which this lease is subordinate; (ii) the certificate of occupancy for the
Building permits the use of the demised premises by Tenant for the purpose set
forth in Article 1 above; (iii) Tenant's use of the demised premises for the
purposes specified herein will not in and of itself violate Landlord's insurance
policies which shall be in effect immediately prior to the beginning of the Term
of this lease, nor increase the premiums therefor;
(4) To comply with the rules and regulations set forth in Exhibit E
and all other reasonable rules and regulations hereafter made by Landlord (but
only after copies thereof have been delivered to Tenant) for the care and use of
the Building and Lot and their facilities and approaches, it being expressly
understood, however, that Landlord shall not be liable to Tenant for the failure
of other tenants of the Building to conform to such rules and regulations. The
lease provisions shall control and supersede any contradictory or inconsistent
provisions contained in the rules and regulations or in any Exhibit to this
lease;
(5) To keep the demised premises equipped with all safety appliances
required by law or ordinance or any other regulation of any public authority
and/or any insurance inspection or rating bureau having jurisdiction, and to
procure all licenses and permits required because of any use made by Tenant and,
if requested by Landlord, to do any work required because of such use, it being
understood that the foregoing provisions shall not be construed to broaden in
any way the Permitted Use;
(6) Not without the prior written consent of Landlord (which consent
Landlord agrees that it shall not unreasonably withhold), to assign,
hypothecate, pledge or otherwise encumber this lease, to make any sublease or to
permit occupancy of the demised premises or any part thereof by anyone other
than Tenant, voluntarily or by operation of law, and as additional rent, to
reimburse Landlord promptly upon demand for reasonable legal and other expenses
incurred by Landlord in connection with any request by Tenant for consent to
assignment or subletting. If Landlord shall consent to any assignment of this
lease by Tenant or a subletting of the whole of the demised premises by Tenant
at
12
<PAGE>
a rent which exceeds the rent payable hereunder by Tenant, or if Landlord shall
consent to a subletting of a portion of the demised premises by Tenant at a rent
in excess of the subleased portion's prorata share of the rent payable hereunder
by Tenant, then Tenant shall pay to Landlord, as additional rent forthwith upon
Tenant's receipt of each installment of any such excess rent, fifty percent
(50%) of any such excess rent. Each request by Tenant for permission to assign
this lease or to sublet the whole or any part of the demised premises shall be
accompanied by a warranty by Tenant as to the amount of rent to be paid to
Tenant by the proposed assignee or sublessee. For purposes of this Section (6),
the term "rent" shall mean all fixed rent, additional rent or other payments
and/or consideration payable by one party to another for the use and occupancy
of premises. Tenant agrees, however, that neither it nor anyone claiming under
it shall enter into any sublease, license, concession or other agreement for
use, occupancy or utilization of space in the demised premises which provides
for rental or other payment for such use, occupancy or utilization based, in
whole or in part, on the net income or profits derived by any person or entity
from the space leased, used, occupied or utilized (other than an amount based on
a fixed percentage or percentages of receipts or sales), and Tenant agrees that
any such purported sublease, license, concession or other agreement shall be
absolutely void and ineffective as a conveyance of any right or interest in the
possession, use, occupancy, or utilization of any part of the demised premises.
Tenant further agrees that any sublease, license, concession or agreement, for
use, occupancy or utilization of space in the demised premises entered into by
it or by anyone claiming under it shall contain the provisions set forth in the
immediately preceding sentence. Tenant further agrees that if a sublease is
entered into, neither the rent payable thereunder nor the amount thereof passed
oh LO any person or entity shall have deducted therefrom any expenses or costs
related in any way to the subleasing of such space. If and whenever Tenant shall
not be a so-called "publicly held" company, it is understood and agreed that the
transfer of fifty percent (50%)or more of the stock in Tenant of any class
(whether at one time or at intervals)shall constitute an "assignment" of
Tenant's interest in this lease. Notwithstanding The foregoing, during such time
as Tenant shall not be a publicly held corporation, transfers of stock (i)by and
among existing shareholders; (ii) pursuant to an initial public offering; and
(iii) transfers of stock for estate planning to immediate family members of
existing shareholders, or trusts created therefore, shall not be deemed an
assignment of this lease. If there shall be any assignment or subletting by
Tenant pursuant to the provisions of this paragraph, Tenant shall remain
primarily liable for the performance and observance of the covenants and
agreements herein contained on the part of Tenant to be performed and observed,
such liability to be (in the case of any assignment) joint and several with that
of such assignee. It is expressly understood and agreed that no assignment of
Tenant's interest in this lease shall be effective until such time as Tenant
shall deliver to Landlord an agreement from the assignee, which agreement shall
be reasonably satisfactory to Landlord in form and substance and shall provide
that the assignee agrees with Landlord to be primarily liable for the
performance and observance of the covenants and agreements herein contained on
the part of Tenant to be performed and observed, such liability to be joint and
several with that of Tenant. Landlord hereby agrees, however, that Tenant may
assign its interest in this lease or sublet the whole of the demised premises to
a)a corporation which owns all of the outstanding stock of Tenant (" Tenant's
Parent"); (b)a corporation wholly owned by Tenant or by Tenant's Parent (" a
Subsidiary"); or (c)a corporation resulting from the consolidation or merger of
Tenant with any other corporation. Landlord agrees, further, that it shall not
unreasonably withhold, delay or condition its consent to an assignment of this
lease to an entity which shall acquire all or substantially all
13
<PAGE>
of the assets or stock of Tenant. Notwithstanding the foregoing provisions, if
the assignment or subletting is to a Subsidiary, said assignment or subletting
shall be valid only for such period of time as said Subsidiary is wholly owned
by Tenant or Tenant's Parent. In the event that Tenant or Tenant's Parent shall
ever sell or otherwise transfer any interest in said Subsidiary to another
person or entity, unless Landlord shall have specifically assented thereto, the
same shall be deemed to be a material breach of this lease;
(7) To defend Landlord, with counsel acceptable to Landlord, save
Landlord harmless from, and indemnify Landlord against any liability for injury,
loss, accident or damage to any person or property and from any claims, actions,
proceedings and expenses and costs in connection therewith (including, without
implied limitation, reasonable counsel's fee): (i) arising from the omission,
fault, willful act, negligence or other misconduct of Tenant or anyone claiming
under Tenant, or from any use made or thing done or occurring upon or about the
demised premises but not due to the omission, fault, willful act, negligence or
other misconduct of Landlord, or (ii)resulting from the failure of Tenant to
perform and discharge its covenants and obligations under this lease beyond any
applicable cure period;
(8) To maintain public liability insurance upon the demised premises
in amounts which shall, at the beginning of the Term, be at least equal to
$2,000,000.00 for bodily injury or death to one or more individuals and
$500,000.00 for damage to property, and from time to time during the Term, shall
be for such higher limits, if any, as are customarily carried in the area in
which the demised premises are located upon property similar in type and use to
the demised premises. Such insurance shall name Landlord, Landlord's Managing
Agent, and Landlord's Mortgagee as additional insureds. Tenant shall deliver to
Landlord certificates thereof, at least fifteen (15) days prior to the
Commencement Date, and each renewal policy or certificate thereof, at least
fifteen (15)days prior to the expiration of the policy it renews. Each such
policy shall be written by a responsible insurance company authorized to do
business in the Commonwealth of Massachusetts and shall provide that the same
shall not be modified or terminated wit! lout at least twenty (20) days' prior
written notice to each named insured;
(9) To keep all employees working in the demised premises covered by
workmen's compensation insurance in amounts required by law, and to furnish
Landlord with certificates thereof;
(10) To permit Landlord and its agents entry: to examine the demised
premises at reasonable times upon prior reasonable notice (except in an
emergency when Landlord may enter at any time)and, if Landlord shall so elect,
to make repairs, alterations and replacements; to remove, at Tenant's expense,
any changes, additions, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in writing; and to show the demised
premises to prospective tenants during the nine (9) months preceding the
expiration of the Term and to prospective purchasers and mortgagees at all
reasonable times. Landlord agrees that in exercising its rights pursuant to this
subsection (l0). it shall not unreasonably interfere with Tenant's conduct of
business in the demised premises;
or
(11) Not to place a load upon any part of the tloor of the demised
premises exceeding that for which said floor was designed or in violation of
what is allowed by law; and not to move any safe, vault or other heavy equipment
in,
14
<PAGE>
about or out of the demised premises except in such manner and at such times as
Landlord shall approve in writing in each instance. Tenant's business machines
and mechanical equipment which cause vibration or noise that may be transmitted
to the Building structure or to any other space in the Building shall be placed
and maintained by Tenant in settings of cork, rubber, spring, or other types of
vibration eliminators sufficient to confine such vibration or noise to the
demised premises. Tenant shall have the right to place a reasonable amount of
heating, ventilating and air conditioning equipment approved by Landlord on the
roof of the Building in locations and in a manner reasonably acceptable to
Landlord at no additional charge. Landlord warrants that the floor load capacity
of the demised premises is 150 lbs. per square foot;
(12) All 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 demised premises by Tenant or anyone claiming under Tenant, may
be on the demised premises or elsewhere in the Building or on the Lot 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. Unless caused by the gross negligence or willful act of Landlord,
its agents, servants, employees or contractors;
(13) To pay promptly when due the entire cost of any work done on the
demised premises by Tenant and those claiming under Tenant; not to cause or
permit any liens for labor or materials performed or furnished in connection
therewith to attach to the demised premises; and immediately to discharge any
such liens which may so attach after notice;
(14) Not to make any alterations, improvements, changes or additions
to the demised premises without Landlord's prior written consent. Tenant shall
have the right to tie the switch space into and or connect same with the vents,
pipes, ducts and conduits of the Building in connection with Tenant's initial
work to prepare the switch space for Tenant's occupancy and the providing of
utility services thereto, all in accordance with plans and specifications
approved by Landlord;
(15) To pay to Landlord one hundred seventy five percent (175%)of the
total of the Fixed Rent and additional rent then applicable for each month or
portion thereof that Tenant shall retain possession of the demised premises or
any part thereof after the termination of this lease, whether by lapse of time
or otherwise, and also to pay all damages sustained by Landlord on account
thereof; however, the provisions of this subsection shall not operate as a
waiver by Landlord of any right of re-entry provided in this lease or as a
matter of law;
(16) To insure the contents, equipment, and improvements of Tenant
and those claiming under Tenant, under policies covering at least fire and the
standard extended coverage risks, in amounts equal to eighty percent (80%)of the
replacement cost thereof, the terms of which policies shall provide that such
insurance shall not be canceled without at least twenty (20) days' prior written
notice to Landlord. Copies of such insurance policy or policies, or certificates
there of, shall be delivered to Landlord at least fifteen (IS)days prior to the
Commencement Date and each renewal policy or certificate thereof, at least
fifteen (15)days prior to the expiration of the policy it renews.
Notwithstanding
15
<PAGE>
anything contained to the contrary contained in this lease, Landlord shall have
no interest in any insurance proceeds Tenant receives for Tenant's property and
Landlord shall sign waivers of lien reasonably acceptable to Landlord in
connection with Tenant's personal property. Tenant may carry the aforesaid
policies under blanket policies provided the demised premises is separately
identified thereon; and
(17)* To pay Landlord's expenses, including reasonable attorney's
fees, incurred in enforcing any obligation of Tenant in this lease.
ARTICLE VII
DEFAULT
7. (A) EVENTS OF DEFAULT
(1) If Tenant shall default in the payment of Fixed Rent, additional
rent or other payments required of Tenant, and if Tenant shall fail to cure said
default within ten (10)days after receipt of notice of said default from
Landlord, or (2) if Tenant shall default in the performance or observance of any
other agreement or condition on its part to be performed or observed and if
Tenant shall fail to cure said default within fifteen days after receipt of
notice of said default from Landlord (but if longer than fifteen days shall be
reasonably required to cure said default, then if Tenant shall fail to commence
the curing of such default within fifteen days after receipt of said notice and
diligently prosecute the curing thereof to completion), or (3) if any person
shall levy upon, or take this leasehold interest or any part thereof upon
execution, attachment or other process of law, or (4) if Tenant or Guarantor
shall make an assignment of its property for the benefit of creditors, or (5)
if Tenant or Guarantor shall be declared bankrupt or insolvent according to law,
or (6) if any bankruptcy or insolvency proceedings shall be commenced by or
against Tenant or Guarantor and, if against, if not dismissed within ninety
(90)days, or (7) if a receiver, trustee or assignee shall be appointed for the
whole or any part of Tenant's or Guarantor's property, and such appointment is
not stayed after seven (7) business days, then in any of said cases, Landlord
lawfully may immediately, or at any time thereafter, and upon five (5) days
notice or demand, enter into and upon the demised premises or any part thereof
in the name of the whole, and hold the demised premises as if this lease had not
been made, and expel by judicial proceeding Tenant and those claiming under it
and remove its or their property without being taken or deemed to be guilty of
any manner of trespass (or Landlord may send written notice to Tenant of the
termination of this lease), and upon entry as aforesaid (or in the event that
Landlord shall send Tenant notice of termination as above provided, on the fifth
day next following the date of the sending of the notice), the term of this
lease shall terminate. Notwithstanding the provisions of clause (1) of the
immediately preceding sentence, if Landlord shall have rightfully given Tenant
notice of default pursuant to either or both of said clauses twice during any
twelve-month period, and if Tenant shall hereafter default in the payment of
Fixed Rent, additional rent or other payments required of Tenant, then Landlord
may exercise the right of termination provided for it in said immediately
preceding sentence without first giving Tenant notice of such default and the
opportunity to cure the same within the time provided in said clause (1). Tenant
hereby expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed for
any cause, or in the event Landlord terminates this lease as provided in this
Article.
16
<PAGE>
(B) OBLIGATIONS THEREAFTER
In case of any such termination, Tenant will indemnify Landlord each
month against all loss of Fixed Rent and additional rent and against all
obligations which Landlord may incur by reason of any such termination between
the time of termination and the expiration of the Term; or at the election of
Landlord, exercised at the time of termination or at any time thereafter, Tenant
will indemnify Landlord each month until the exercise of the election against
all loss of Fixed Rent and additional rent and against all obligations which
Landlord may incur by reason of such termination during the period between the
time of the termination and the exercise of the election, and upon the exercise
of the election Tenant will pay to Landlord as damages such amount as at the
time of the exercise of the election represents the amount by which the rental
value of the demised premises for the period from the exercise of the election
until the expiration of the Term shall be less than the amount of rent and
other payments provided herein to be paid by Tenant to Landlord during said
period. It is understood and agreed that at the time of the termination or at
any time thereafter Landlord may rent the demised premises, and for a term which
may expire before or after the expiration of the Term, without releasing Tenant
from any liability whatsoever, that Tenant shall be liable for any reasonable
expenses incurred by Landlord in connection with obtaining possession of the
demised premises, with removing from the demised premises property of Tenant and
persons claiming under it (including warehouse charges), with putting the
demised premises into good condition for reletting, and with any reletting,
including, but without limitation, reasonable attornes' fees and brokers fees,
and that any monies collected from any reletting shall be applied first to the
foregoing expenses and then to the payment of Fixed Rent, additional rent and
all other payments due from Tenant to Landlord.
ARTICLE VIII
CASUALTY AND TAKING
8. (A) CASUALTY AND TAKING
In case during the Term all or any substantial part of the demised
premises, the Building, or Lot or any one or more of them, are damaged by fire
or any other casualty or by action of public or other authority or are taken by
eminent domain, this lease shall terminate at Landlord's election, which may be
made notwithstanding Landlord's entire interest may have been divested, by
notice given to Tenant within thirty days after the occurrence of the event
giving rise to the election to terminate. Said notice shall, in the case of
damage as aforesaid, specify the effective date of termination which shall be
not less than thirty nor more than sixty days after the date of notice of such
termination. In the case of any such taking by eminent domain, the effective
date of the termination shall be the day on which the taking authority shall
take possession of the taken property. Fixed Rent and additional rent shall be
apportioned and adjusted as of the effective date of any such termination. If in
any such case the demised premises are rendered unfit for use and occupation and
this lease is not so terminated, Landlord shall use due diligence to put the
demised premises, or, in the case of a taking, what may remain thereof
(excluding any items which Tenant may be required or permitted to remove from
the demised premises at the expiration of the Term) into proper condition for
use and occupation, but Landlord shall not be required to spend more than the
net proceeds of insurance or award of damages it receives therefor, and a just
proportion of the Fixed Rent and additional rent according to the nature and
extent of the injury to the demised
17
<PAGE>
premises shall be abated until the demised premises or such remainder shall have
been put by Landlord in such condition; and in case of a taking which
permanently reduces the area of the demised premises, a just proportion of the
Fixed Rent shall be abated for the remainder of the Term. Notwithstanding the
foregoing, if there shall be damage or destruction to the demised premises by
fire or other casualty which shall not be repaired or restored by Landlord
within a period of twelve (12) months after the date of such damage or
destruction, then Tenant, as Tenant's sole remedy, may terminate the Term of
this lease by notice to Landlord within sixty (60) days after the expiration of
such twelve (12) month period; provided that said repair or restoration shall
not have been completed prior to the receipt by Landlord of said notice. If any
damage or destruction occurs to the demised premises during the last year of the
Term and the cost to repair the damage exceeds Twenty Five Thousand Dollars
($25,000.00), either Landlord or Tenant may terminate this lease upon giving the
other party thirty (30) days written notice; provided, however, that if Landlord
notifies Tenant that it wishes to terminate this lease pursuant to the foregoing
sentence, then Tenant may, if it has not already done so, exercise its right to
extend the Term of the lease, whereupon Landlord's election to terminate shall
be null and void.
(B) RESERVATION OF AWARD
Landlord reserves to itself any and all rights to receive awards made
for damage to the demised premises, Building or Lot and the leasehold hereby
created, or any one or more of them, accruing by reason of any exercise of the
right of eminent domain or by reason of anything done in pursuance of public or
other authority. Tenant hereby releases and assigns to Landlord all of Tenant's
rights to such awards, and covenants to deliver such further assignments and
assurances thereof as Landlord may from time to time request. It is agreed and
understood, however, that Landlord does not reserve to itself, and Tenant does
not assign to Landlord, any damages payable for (i) movable equipment installed
by Tenant or anybody claiming under Tenant at its own expense or (ii) relocation
expenses, but in each case only if and to the extent that such damages are
recoverable by Tenant from such authority in a separate action and without
reducing Landlord's award of damages.
ARTICLE IX
MORTGAGEE
9. (A) SUBORDINATION TO MORTGAGES
It is agreed that the rights and interest of Tenant under this lease
shall be: (i) subject and subordinate to the lien of any present or future first
mortgage and to any and all advances to be made thereunder, and to the interest
thereon, upon the demised premises or any property of which the demised
premises are a part, if the holder of such mortgage shall elect, by notice to
Tenant, to subject and subordinate the rights and interest of Tenant under this
lease to the lien of its mortgage; or (ii) prior to the lien of any present or
future first mortgage, if the holder of such mortgage shall elect, by notice to
Tenant, to give the rights and interest of Tenant under this lease priority to
the lien of its mortgage. It is understood and agreed that the holder of such
mortgage may also elect, by notice to Tenant, to make some provisions hereof
subject and subordinate to the lien of its mortgage while granting other
provisions hereof priority to the lien of its mortgage. In the event of any of
such elections, and upon notification by the holder of such mortgage to that
effect, the rights and interest of Tenant under this lease shall be deemed to be
subordinate to, or to have priority over, as the case
18
<PAGE>
may be, the lien of said mortgage, irrespective of the time of execution or time
of recording of any such mortgage. Tenant agrees that it will, upon request of
Landlord, execute, acknowledge and deliver any and all instruments deemed by
Landlord necessary or desirable to evidence or to give notice of such
subordination or priority. Tenant also agrees that if it shall fail at any time
after twenty (20) days notice to execute, acknowledge and deliver any such
instrument reasonably requested by Landlord, Landlord may, in addition to any
other remedies available to it, execute, acknowledge and deliver such instrument
as the attorney-in-fact of Tenant and in Tenant's name; and Tenant does hereby
make, constitute and irrevocably appoint Landlord as its attorney-in-fact and in
its name, place and stead so to do. The word "mortgage" as used herein includes
mortgages, deeds of trust or other similar instruments and modifications,
consolidations, extensions, renewals, replacements and substitutes thereof.
Whether the lien of any mortgage upon the demised premises or any property of
which the demised premises are a part shall be superior or subordinate to this
lease and the lien hereof, Tenant agrees that it will, upon request, attorn to
the holder of such mortgage or anyone claiming under such holder and their
respective successors and assigns in the event of foreclosure of or similar
action taken under such mortgage. Tenant further agrees that it shall not
subordinate its interest in this lease, to the lien of any junior mortgage,
security agreement or lease affecting the demised premises, unless the holder of
the first mortgage upon the demised premises or property which includes the
demised premises shall consent thereto. Notwithstanding anything to the contrary
contained in this Article 9, Landlord shall use its best efforts to cause the
holder of such mortgage to enter into an agreement with Tenant, recordable in
form, to the effect that in the event of foreclosure of, or similar action taken
under, such mortgage, Tenant's possession of the demised premises shall not be
terminated or disturbed by such mortgage holder or anyone claiming under such
mortgage holder so long as Tenant shall not be in default under this lease
beyond any applicable cure period.
(B) LIMITATION ON MORTGAGEE'S LIABILITY
Upon entry and taking possession of the mortgaged premises for any
purpose, the holder of a mortgage shall have all rights of Landlord, and during
the period of such possession Landlord, not such mortgage holder, shall have the
duty to perform all of Landlord's obligations hereunder. No such holder shall be
liable, either as a mortgagee or as holder of a collateral assignment of this
lease, to perform, or be liable in damages for failure to perform, any of the
obligations of Landlord unless and until such holder shall succeed to Landlord's
interest herein through foreclosure of its mortgage or the taking of a deed in
lieu of foreclosure, and thereafter such mortgage holder shall not be liable for
the performance of any of Landlord's obligations hereunder, except for the
performance of those obligations which arise during the period of time that such
mortgage holder holds Landlord's right, title and interest in this lease, such
liability to be limited to the same extent as Landlord's liability is limited
pursuant to Section 10(E)hereof.
(C) NO RELEASE OR TERMINATION
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this lease, or by law, to be relieved of any of
Tenant's obligations hereunder or to terminate this lease, shall result in a
release or termination of such obligations or a termination of this lease unless
(i) Tenant shall have first given written notice of Landlord's act or failure to
act to
19
<PAGE>
Landlord's mortgagees of record, if any, specifying the act or failure to act on
the part of Landlord which could or would be the basis of Tenant's rights and
(ii) such mortgagees, after receipt of such notice, have failed or refused to
correct or cure the condition complained of within a reasonable time thereafter,
but nothing contained in this Section (C) shall be deemed to impose any
obligation on any such mortgagee to correct or cure any such condition.
"Reasonable time" as used above means and includes a reasonable time to obtain
possession of the mortgaged premises, if the mortgagee elects to do so, and a
reasonable time to correct or cure the condition. Finally, Tenant agrees that so
long as any present or future mortgage shall remain in effect Tenant shall not
alter, modify, amend, change, surrender or cancel this lease nor pay the rent
due hereunder in advance for more than thirty (30) days, except as may be
required herein, without the prior written consent of the holder thereof, and
Tenant will not seek to be made an adverse or defendant party in any action or
proceeding brought to enforce or foreclose such mortgage.
ARTICLE X
GENERAL PROVISIONS
10. (A) CAPTIONS
The captions of the Articles are for convenience and are not to be
considered in construing this lease.
(B) SHORT FORM LEASE
Upon request of either party both parties shall execute and deliver a
short form of this lease in form appropriate for recording, and if this lease is
terminated before the Term expires, an instrument in such form acknowledging the
date of termination. No such short form lease shall contain any indication of
the amount of the rentals payable hereunder by Tenant.
(C) RELOCATION
Intentionally Omitted.
(D) NOTICES
All notices and other communications authorized or required hereunder
shall be in writing and shall be given by mailing the same by certified or
registered mail, return receipt requested, postage prepaid, by mailing the same
by Express Mail or by having the same delivered by a commercial delivery service
such as Federal Express, UPS, Purolator Courier and the like. If given to Tenant
the same shall be directed to Tenant at Tenant's Address, with a copy to Littman
Krooks Roth and Ball P.C., 655 Third Avenue, 20th Floor, New York, New York
10012, with a further copy to Scott Matukas, Community Networks, 45-18 Court
Square, Suite 403, Long Island City, New York 11101, or to such other person or
at such other address as Tenant may hereafter designate by notice to Landlord;
and if given to Landlord the same shall be directed to Landlord at Landlord's
Address, or to such other person or at such other address as Landlord may
hereafter designate by notice to Tenant. In the event the notice directed as
above provided shall not be received upon attempted delivery thereof to the
proper address and shall be returned by the Postal Service or delivery service
to the sender because of a refusal of receipt, the absence of a person to
receive, or
20
<PAGE>
otherwise, the time of the giving of such notice shall be the first business day
on which delivery was so attempted.
After receiving notice from Landlord or from any person, firm or other
entity holds a mortgage which includes the demised premises as part of the
mortgaged premises, no notice from Tenant to Landlord shall be effective unless
and until a copy of the same is given by certified or registered mail to such
holder, and the curing of any of Landlord's defaults by such holder shall be
treated as performance by Landlord, it being understood and agreed that such
holder shall be afforded a reasonable period of time after the receipt of such
notice in which to effect such cure.
(E) SUCCESSORS AND ASSIGNS
The obligations of this lease shall run with the land, and this lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns, except that the
Landlord named herein and each successive owner of Landlord's interest in this
lease shall be liable only for the obligations of Landlord accruing during the
period of its ownership. Whenever Landlord's interest in this lease is owned by
a trustee or trustees, the obligations of Landlord shall be binding upon
Landlord's trust estate, but not upon any trustee, beneficiary or shareholder of
the trust individually. Without limiting the generality of the foregoing, and
whether or not Landlord's interest in this lease is owned by a trustee or
trustees, Tenant specifically agrees to look solely to Landlord's interest in
the Building and Lot for recovery of any judgment from Landlord, it being
specifically agreed that neither Landlord, any trustee, beneficiary or
shareholder of any trust estate for which Landlord acts nor any person or entity
claiming by, through or under Landlord shall ever otherwise be personally liable
for any such judgment.
(F) NO SURRENDER
The delivery of keys to any employee of Landlord or to Landlord's agent
or any employee thereof shall not operate as a termination of this lease or a
surrender of the demised premises.
(G) WAIVERS AND REMEDIES
The failure of Landlord or of Tenant to seek redress for violation of,
or to insist upon the strict performance of any covenant or condition of this
lease, or, with respect to such failure of Landlord, any of the rules and
regulations referred to in Section 6(4), whether heretofore or hereafter adopted
by Landlord, shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said rules and regulations against any other tenant
in the Building be deemed a waiver of any such rules or regulations as far as
Tenant is concerned. The receipt by Landlord of Fixed Rent or additional rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach by Landlord unless such waiver be in writing signed by
Landlord. No consent or waiver express or implied, by Landlord or Tenant to or
of any breach of any agreement or duty shall be construed as a waiver or consent
to or of any other breach of the same or any other agreement or duty. No
acceptance by Landlord of a lesser sum than the Fixed Rent and additional rent
then due shall be deemed to be other than on account of the earliest installment
of such rent due, nor shall any
21
<PAGE>
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed as accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy available to it. 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 it may be lawfully entitled in case of any breach or
threatened breach by Tenant of any provisions of this lease. In addition to the
other remedies provided in this lease, Landlord shall be entitled to the
restraint by injunction of tie violation or attempted or threatened violation of
any of the covenants, conditions or provisions of this lease or to a decree
compelling specific performance of any such covenants, conditions or provisions.
If any term1 of this lease, or the application thereof to any person or
circumstances shall be held, to any extent, to be invalid or unenforceable, the
remainder of this lease, or the application of such term to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby, and each term of this lease shall
be valid and enforceable to the fullest extent permitted by law. If any interest
to be paid by Tenant hereunder shall exceed the highest lawful rate which
Landlord may recover from Tenant, such interest shall be reduced to such highest
lawful rate of interest.
(H) SELF-HELP
If Tenant shall at any time default in the performance of any obligation
under this lease, Landlord shall have the right, but shall not be obligated, to
enter upon the demised premises and to perform such obligation, notwithstanding
the fact that no specific provision for such 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. All sums so paid by
Landlord (together with interest, from the time paid by Landlord until the time
Tenant repays the same to Landlord, at the rate of interest per annum as set
forth in Section (A)of Article V above, shall be deemed to be additional rent
and shall be payable to Landlord immediately on demand. Landlord may exercise
the foregoing right without waiving any other of its rights or releasing Tenant
from any of its obligations under this lease. If Landlord shall at any time
default in the performance of any obligation under this lease, Tenant shall have
the right, but shall not be obligated, to enter upon the demised premises and to
perform such obligation, notwithstanding the fact that no specific provision
for such performance by Tenant 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. All sums so paid by Tenant (together with interest,
from the time paid by Tenant until the time Landlord repays the same to Tenant,
at the rate of interest per annum as set forth in Section (A)of Article V above,
shall be payable to Tenant immediately on demand. Tenant may exercise the
foregoing right without waiving any other of its rights or releasing Landlord
from any of its obligations under this lease.
(I) ESTOPPEL CERTIFICATE
Tenant agrees from time to time after the Commencement Date, upon not
less than five 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; that Landlord has completed Landlord's
Required Work; that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Fixed Rent and additional rent and to perform its other
22
<PAGE>
covenants under this lease; that there are no uncured defaults of Landlord or
Tenant under this lease (or, if there have been any modifications, that this
lease is in full force and effect as modified and stating the modifications,
and, if there are any defenses, offsets, counterclaims, or defaults, setting
them forth in reasonable detail); and the dates to which the Fixed Rent,
additional rent and other charges have been paid. Any such statement delivered
pursuant to this Section (I) may be relied upon by any prospective purchaser or
mortgagee of premises which include the demised premises or any prospective
assignee of any such mortgagee. Landlord agrees from time to time after the
Commencement Date, upon not less than five days' prior written request by
Tenant, to execute, acknowledge and deliver to Tenant a statement in writing
certifying that this lease is unmodified and in full force and effect; that
Landlord has completed Landlord's Required Work; that Tenant has no defenses,
offsets or counterclaims against its obligations to pay the Fixed Rent and
additional rent and to perform its other covenants under this lease; that there
are no uncured defaults of Landlord or Tenant under this lease (or, if there
have been any modifications, that this lease is in full force and effect as
modified and stating the modifications, and, if there are any defenses, offsets,
counterclaims, or defaults, setting them forth in reasonable detail); and the
dates to which the Fixed Rent, additional rent and other charges have been paid.
(J) WAIVER OF SUBROGATION
(1) Tenant hereby releases Landlord to the extent of Tenant's
insurance coverage, from any and all liability for any loss or damage caused by
fire or any of the extended coverage casualties or any other casualty insured
against, even if such fire or other casualty shall be brought about by the fault
or negligence of Landlord or its agents, provided, however this release shall be
in force and effect only with respect to loss or damage occurring during such
time as Tenant's policies covering such loss or damage shall contain a clause to
the effect that this release shall not affect said policies or the right of
Tenant to recover thereunder. Tenant agrees that its fire and other casualty
insurance policies will include such a clause so long as the same is includable
without extra cost, or if extra cost is chargeable therefor, so long as Landlord
pays such extra cost. If extra cost is chargeable therefor, Tenant will advise
Landlord thereof and of the amount thereof. Landlord at its election, may pay
the same, but shall not be obligated to do so.
(2) Landlord hereby releases Tenant, to the extent of the Landlord's
insurance coverage, from any and all liability for any loss or damage caused by
fire or any of the extended coverage casualties or any other casualty insured
against, even if such fire or other casualty shall be brought about by the fault
or negligence of Tenant or its agents, provided, however, this release shall be
in force and effect only with respect to loss or damage occurring during such
time as Landlord's policies covering such loss or damage shall contain a clause
to the effect that this release shall not affect said policies or the right of
Landlord to recover thereunder. Landlord agrees that its fire and other casualty
insurance policies will include such a clause so long as the same is includable
without extra cost, or if extra cost is chargeable therefor, so long as Tenant
pays such extra cost. If extra cost is chargeable therefor, Landlord will advise
Tenant thereof and of the amount thereof. Tenant at its election may pay the
same, but shall not be obligated to do so.
23
<PAGE>
(K) BROKERS
Tenant hereby represents and warrants to Landlord that it has dealt with
no broker in connection with this lease other than Equis and CB Richard Ellis
Whittier Partners ("the Listed Broker/s"), and there are no other brokerage
commissions or other finders' fees payable in connection herewith. Tenant hereby
agrees to hold Landlord harmless from, and indemnified against, all loss or
damage (including without limitation, the cost of defending the same)arising
from any claim by any broker other than ("the Listed Broker/s"), claiming to
have dealt with Tenant. Landlord shall pay the commission due the Listed
Broker/s by separate agreement. Landlord hereby represents and warrants to
Tenant that it has dealt with no broker in connection with this lease other than
Equis and CB Richard Ellis Whittier Partners ("the Listed Broker/s"), and there
are no other brokerage commissions or other finders' fees payable in connection
herewith. Landlord hereby agrees to hold Tenant harmless from, and indemnified
against, all loss or damage (including without limitation, the cost of defending
the same) arising from any claim by any broker other than "the Listed
Broker/s", claiming to have dealt with Landlord.
(L) LANDLORD'S DEFAULTS
Landlord shall not be deemed to have committed a breach of any
obligation to make repairs or alterations or perform any other act unless: (1)
it shall have made such repairs or alterations or performed such other act
negligently; or (2) it shall have received notice from Tenant designating the
particular repairs or alterations needed or the other act of which there has
been failure of performance and shall have failed to make such repairs or
alterations or performed such other act within a reasonable time after the
receipt of such notice; and in the latter event Landlord's liability shall be
limited to the cost of making such repairs or alterations or performing such
other act.
(M) EFFECTIVENESS OF LEASE
The submission of this lease for examination does not constitute a reservation
of, or option for, the demised premises, and this lease becomes effective as a
lease only upon execution and unconditional delivery thereof by both Landlord
and Tenant.
(N) HAZARDOUS MATERIALS
Tenant shall not (either with or without negligence)cause or permit the
escape, disposal or release of any biologically or chemically active or other
hazardous substances, or materials. Tenant shall not allow the storage or use of
such substances or materials in any manner not sanctioned by the applicable
permits, or by law or by the highest standards prevailing in the industry for
the storage and use of such substances or materials, nor allow to be brought
into the Lot any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Tenant shall obtain
and maintain all proper permits required by applicable law or ordinance for the
storage and use of hazardous materials, and Tenant shall furnish evidence of
same upon request. Without limitation, hazardous substances and materials shall
include those described in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq., any
24
<PAGE>
applicable state or local laws and the regulations adopted under these acts. If
any lender or governmental agency shall ever require testing to ascertain
whether or not there has been any release of hazardous materials, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand
as additional rent if such requirement applies to the demised premises. In
addition, Tenant shall execute affidavits, representations and the like from
time to time at Landlord's request concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the demised
premises. In all events, Tenant shall indemnify Landlord in the manner elsewhere
provided in this least from any release of hazardous materials on the demised
premises occurring while Tenant is in possession, or elsewhere if caused by
Tenant or persons acting under Tenant. Landlord shall indemnify Tenant from any
release of hazardous materials on the Lot caused by Landlord or persons acting
under Landlord. The within covenants shall survive the expiration or earlier
termination of the term of this lease.
(0) DELAYS
In any case where either party hereto is required to do any act (other
than make a payment of money), delays caused by or resulting from Act of God,
war, civil commotion, fire or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations or other causes beyond
such party's reasonable control (other than such party's financial
condition) shall not be counted in determining the time during which such act
shall be completed, whether such time be designated by a fixed date, a fixed
time or "a reasonable time". In any case where work is to be paid for out of
insurance proceeds or condemnation awards, due allowance shall be made, both to
the party required to perform such work and to the party required to make such
payment, for delays in the collection of such proceeds and awards.
ARTICLE XI
SECURITY DEPOSIT
11. Landlord acknowledges that it has received from Tenant the
Security Deposit, as security for the payment of rents and the performance and
observance of the agreements and conditions in this lease contained on the part
of Tenant to be performed and observed. In the event of any default or defaults
in such payment, performance or observance Landlord may apply said sum or any
part thereof toward the curing of any such default or defaults and/or toward
compensating Landlord for any loss or damage arising from any such default or
defaults. Upon the yielding up of the demised premises at the expiration or
other termination of the Term, if Tenant shall not then be in default or
otherwise liable to Landlord, said sum or the unapplied balance thereof shall
be returned to Tenant. It is understood and agreed that Landlord shall always
have the right to apply said sum, or any part thereof, as aforesaid in the event
of any such default or defaults, without prejudice to any other remedy or
remedies which Landlord may have, or Landlord may pursue any other such remedy
or remedies in lieu of applying said sum or any part thereof. No interest shall
be payable on said sum or any part thereof. If Landlord shall apply said sum or
any part thereof as aforesaid, Tenant shall upon demand pay to Landlord the
amount so applied by Landlord, to restore the security to its original amount.
Whenever the holder of Landlord's interest in this lease, whether it be the
Landlord named in this lease or any transferee of said Landlord, immediate or
remote, shall transfer its interest in this lease, said holder shall turn over
to its transferee said sum or the unapplied balance thereof, and thereafter such
holder shall be released from any and all
25
<PAGE>
liability to Tenant with respect to said sum or its application or return, it
being understood that Tenant shall thereafter look only to such transferee with
respect to said sum, its application and return. The holder of any mortgage upon
property which includes the demised premises shall never be responsible to
Tenant for said sum or its application or return unless said sum shall actually
have been received in hand by such holder.
ARTICLE XII
MODIFICATION
12. In the event that any holder or prospective holder of any
mortgage which includes the demised premises as part of the mortgaged premises,
shall request any modification of any of the provisions of this lease, other
than a provision directly related to the rents payable hereunder, the duration
of the term hereof, or the size, use or location of the demised premises,
Tenant agrees that Tenant will enter into an amendment of this lease containing
each such modification so requested provided same does not enlarge Tenant's
obligations hereunder.
ARTICLE XIII
OPTION
13. (A) OPTION TERM
Tenant shall have the right, at its election, to extend the
original Term of this lease for an additional period of five (5) years
commencing upon the expiration of the original Term, provided that Landlord
shall receive written notice from Tenant of the exercise of its election at
least nine (9) months prior to the expiration of the original Term and provided
further that Tenant shall not be in default beyond any applicable cure period at
the time of Landlord's receipt of such notice in the performance or observance
of any of the terms and agreements in this lease contained on the part of Tenant
to be performed or observed. The expression "the original Term" means the period
of ten (10) years referred to in Section (A) of Article 1 above. Prior to the
exercise by Tenant of said election to extend the original Term, the expression
"the Term of this lease" or any equivalent expression shall mean the original
Term; after the exercise by Tenant of the aforesaid election, the expression
"the Term of this lease" or any equivalent expression shall mean the original
Term as extended. Except as expressly otherwise provided in this lease, all the
agreements and conditions in this lease contained shall apply to the additional
period to which the original Term shall be extended as aforesaid. If Landlord
shall receive notice of the exercise of the election in the manner and within
the time provided aforesaid, the Term shall be extended upon the receipt of the
notice without the requirement of any action on the part of Landlord.
B. OPTION RENT
During the additional period for which the original Term of this
lease may be extended as set forth in Section (A) of this Article $13 above, the
Fixed Rent payable hereunder shall be adjusted so as to equal the greater of
(a) the Fixed Rent payable immediately prior thereto, or (b) the "fair market
rent", as mutually determined by Landlord and Tenant through the process of
negotiation. Notwithstanding anything to the contrary contained herein, however,
if for any reason whatsoever Landlord and Tenant shall not agree in writing upon
the "fair market rent" for said additional period at least six (6) months prior
to the
26
<PAGE>
expiration of the original Term, then the fair market rent for premises of the
size and nature of the demised premises shall be determined by licensed real
estate appraisers having at least five (5) years' experience in the appraisal of
commercial real estate in the Greater Boston area, one such appraiser to be
designated by each of Landlord and Tenant. If either party shall fail to
designate its appraiser by giving notice of the name of such appraiser to the
other party within fifteen (15)days after receiving notice of the name of the
other party's appraiser, then the appraiser chosen by the other party shall
determine the fair market rent and his determination shall be final and
conclusive. If the appraisers designated by Landlord and Tenant shall disagree
as to the fair market rent, but if the difference between their estimates of
fair market rent shall be five percent (5%)or less of the greater of the
estimates, then the average of their estimates shall be the fair market rent for
purposes hereof. If the appraisers designated by Landlord and Tenant shall
disagree as to the amount of fair market rent, and if their estimates of fair
market rent shall vary by more than five percent (5%)of the greater of said
estimates, then they shall jointly select a third appraiser meeting the
qualifications set forth above, and his estimate of fair market rent shall be
the fair market rent for purposes hereof if it is not greater than the greater
of the other two estimates and not less than the lesser of the other two
estimates. If said third appraiser's estimate is greater than the greater of the
other two estimates, then the greater of the other two estimates shall be the
fair market rent for purposes hereof; and if the estimate of the third appraiser
shall be less than the lesser of the other two estimates, then the lesser of the
other two estimates shall be the fair market rent for purposes hereof. Each of
Landlord and Tenant shall pay for the services of its appraiser, and if a third
appraiser shall be chosen, then each of Landlord and Tenant shall pay for one-
half of the services of the third appraiser. After determination has been made
of the Fixed Rent payable for the additional period, Landlord and Tenant shall
execute and deliver to each other an instrument setting forth the annual Fixed
Rent as so determined.
EXECUTED as a sealed instrument in two or more counterparts as of the
day and year first above written.
LANDLORD:
HOOD BUSINESS PARK LLC
BY: CATAMOUNT RUTHERFORD LLC
ITS MANAGER
/s/ Stephen J. Kaneb, Manager
------------------------------
Stephen J. Kaneb, Manager
TENANT:
COMMUNITY NETWORKS, INC.
/s/ Vern Kennedy
------------------------------
Vern Kennedy, President
ATTEST:
/s/ Terrence Anderson
------------------------------
Terrence Anderson ,President
27
<PAGE>
EXHIBIT A-1
CONDITION OF BUILDING
BASE BUILDING
- -------------
Extensive interior and exterior renovations have been completed
[** ILLEGIBLE**] and virtual image. The improvements provided as part of the
base building are summarized below.
Lobby Core
- ----------
A new central lobby core serving all three floors of the office includes:
. a first floor lobby with quality finishes and lobbies on the
second and third floors to complement the first floor
. new restrooms at the core
. two new passenger elevators
. new ???? tower with "?????" ????? from first to second floor
. an existing freight elevator with outside access so that
deliveries are not made through the first floor lobby.
Facade Improvements
- -------------------
Restoration of the Art Deco facade that includes:
. new window frames and tinted glazing on all office windows
. additional windows to provide more light and views
. a new "Grand" entry leading into a first class lobby
Site Improvements
- -----------------
. improved lighting
. upgraded parking lot including visitor parking, islands,
improved circulation and re-striping for parking and
circulation.
. a comprehensive site signage and graphics program
. enhanced landscaping especially in the area of new "Grand" entry.
. pedestrian and vehicular access to Spice Street
Building Systems
- ----------------
. new base building HVAC
. new base building electrical
. new restrooms at core
. new fire protection system
. new roofing
. existing stairs towers to be cleaned, painted and revamped
<PAGE>
EXHIBIT B
---------
LANDLORD'S REQUIRED WORK
Landlord shall furnish and install, in accordance with approved Tenant's plans,
the following materials and work in the initial preparation of the Premises for
Tenant's occupancy. Landlord at Landlord's expense shall provide a "Turn-Key"
design-built tenant installation based on mutually acceptable design,
construction, mechanical and electrical plans to be prepared utilizing the
Building standard specifications (see Exhibit A). Landlord will provide three
(3)offices and conference rooms, a pantry, a reception area and the balance of
space as open plan.
Ceilings
- -------
Ceiling will be suspended grid type with recessed 2'x 4'(reveal-edge) lay-
in-panels.
Electrical
- ----------
The base building electrical design and components layout is detailed on the
electrical constraction drawings. This includes the design and location of the
electric room on each floor. The following summary reviews the quality of major
electrical components in the tenant areas.
Lights
------
Electrical supplies for normal requirements will include: 2'x
4' fluorescent light fixtures with paracube lenses. Allowance is one
fixture for each 80 square feet of usable area. One of every twelve of
these fixtures will be provided with emergency battery backup.
Switches
--------
One single-pole wall-mounted light switch per 4,000 square feet of open
area and one per office.
Outlets
-------
One duplex wall receptacle per 500 square feet of open area and per code
in office area.
Exit Signs
----------
Per code.
Fire Alarm
----------
Adequate devices for typical open office layout.
<PAGE>
Exterior Wall
-------------
The exterior and common walls in the tenant office spaces will be
insulated and finished with l/4" gypsum board over 2 l/2" metal studs.
Partitions
----------
Tenant Partitions -Partitions within premises will be 2 l/2" metal
studs with one layer of l/2" gypsum board on each side. Partitions will
extend from floor to the acoustic tile ceiling.
Painting
--------
All wall surfaces shall receive two coats of latex paint with an
eggshell finish using not more than three (3) readily available colors.
Any doors shall receive two coats of clear polyurethane. All frames
shall receive two coats of semi-gloss enamel to match room color.
Doors
-----
Tenant entrance door will consist of a 3'6" x 7'10 1/2" x 1 3/4" thick
solid oak and glass door with oak frame and 3" '6" wide sidelight with
oak rail and tenant signage. Hardware will include 2 pair of butts and a
standard duty lever handle locker and closer.
Interior Doors
--------------
Doors within premises will be 3'0" x 7'0" x 1 3/4" solid core with plain
slice oak veneer. Door frames will be pressed metal. Hardware will
include 1 l/2" pair of butts, one standard duty brushed brass knob set
and one door stop.
Heating, Ventilating and Air Conditioning
------------------------------------------
Heating and air conditioning will be accomplished through the use of a
variable air volume (VAV)system. Air will return through the ceiling
plenum. Each floor will be provided with the number of separately
controlled zones shown on the HVAC construction drawings.
Floor Covering
--------------
Landlord agrees to prepare the floor and provide base building carpeting
at an allowance of $14.00 per square yard.
Automatic Sprinkler System
--------------------------
A wet sprinkler system will be installed with one head per 150 square
feet of usable area per code.
Sun Control Blinds
------------------
All windows will have 3" perforated vertical blinds similar to Louver-
Drape in type and color selected by Landlord.
<PAGE>
Fiber Optics
------------
There are three (3) fiber optic carriers to the Building; MCI, WorldCom,
New England Optic Network (NEON); and Bell Atlantic. At Tenant's
expense, Landlord will work with Tenant to provide two (2) diversified
entrances for their fiber optic needs, preferably from different
carriers. Subject to Landlord's approval, which approval shall not be
unreasonably withheld or delayed, Tenant will be allowed to trench or
otherwise install from the street a primary or secondary fiber optic
service to the Building's telephone or equipment room, at Tenant's
expense outside the Building to tie into local fiber optic network.
SWITCH SPACE
Landlord shall install a separate means of ingress and egress for the
office space and the switch space. Within thirty (30) days of Lease
Execution, Landlord at Landlord's expense shall:
. Deliver the premises demised and secure in broom clean
condition and ready for Tenant construction.
. Remove skylights and replace with waterproof sections of
roof.
. Provide/certify a minimum of 150 lbs. per square foot
floor loading to the demised premises provided,
however, that Tenant at Tenant's expense and subject to
Landlord's approval, shall be allowed td upgrade an area
(approximately 750 RSF) to a floor loading capacity of
300 lbs. per square foot.
. Landlord shall cause the structural components of the
Building and-the demised premises to comply with ADA and
local building life safety codes throughout the lease
Term.
. Provide main sprinkler loop to the demised premises.
Tenant at Tenant's expense will provide per-action valve
system.
. Provide tie-ins to Building life and safety systems.
. Provide 1200 amp service to Tenant. Tenant, at Tenant's
expense and subject to Landlord's approval, which
approval shall not be unreasonably withheld or delayed,
shall be responsible for providing all services and
equipment necessary to bring the services to the demised
premises.
. Tenant shall, at Tenant's expense, provide any
electrical and utility metering equipment.
. Provide pad space (10'x 10') for Tenant's gas emergency
generator and day tank and access to same from
designated platform.
. Provide access way for an electrical conduit from
generator to Tenant's service breaker as designated by
Landlord.
3
<PAGE>
. Provide the right and access to install horizontal and
vertical conduit for fiber optics, subject to Landlord's
approval, which shall not be unreasonably withheld.
4
<PAGE>
EXHIBIT C
--------
INTENTIONALLY OMITTED
5
<PAGE>
EXHIBIT D
---------
LANDLORD'S SERVICES
Landlord shall cause the parking areas and driveways of the Lot to be
kept reasonably free and clear of snow, ice and refuse and shall cause the
landscaped areas (if any) of the Lot to be maintained in a reasonably attractive
appearance. Landlord shall also cause the parking areas of the Lot to be kept
lighted during hours of darkness to the extent reasonably required for the
business operations conducted upon the Lot.
Landlord shall provide to the Building hot water for lavatory purposes
and cold water for drinking, lavatory and toilet purposes. Landlord shall also
provide to the Building elevators for the use of all tenants and the general
public. Programming of elevators (including, but not limited to, service
elevators) shall be as Landlord from time to time determines. Landlord shall
cause the common lobbies, corridors, stairways and lavatories within the
Building to be kept reasonably neat and clean and lighted to the extent required
by the business operations conducted within the Building. Landlord shall also
cause the common areas of the Building to be heated and air conditioned during
the heating and air conditioning seasons in a manner consistent with applicable
law and customary practice in Boston, Massachusetts. Landlord shall also provide
central heating, ventilating and air conditioning ("HVAC") service to the
office portion of the demised premises which shall include air conditioning in
the cooling season, and tempered air during the heating season, all during
normal business hours which are 7:00 am - 6:00 pm Monday through Friday and
8:00 am - 1:00 pm on Saturdays. Tenant agrees to pay an hourly surcharge for
HVAC service requested outside normal business hours. Finally, Landlord shall
provide janitorial service for the office space comprising part of the demised
premises. Subject to the provisions of Section (O) of Article X, Landlord agrees
that throughout the Term, Tenant shall have access to the demised premises,
twenty four (24) hours a day, seven (7) days a week and fifty two (52) weeks a
year.
Landlord shall provide on-site uniformed security guard service to the parking
lot, grounds and building entrances 24 hours per day, 365 days per year.
Landlord provides a cafeteria and exercise room.
Tenant may use the freight elevator without charge during Tenant's construction
of Initial Alterations and move-in period.
1
<PAGE>
EXHIBIT E
---------
RULES AND REGULATIONS
1. The sidewalks, paved and/or landscaped areas shall not be obstructed
or encumbered by Tenant or used for any purpose other than ingress and egress to
and from the demised premises. No merchandise, boxes or pallets may be stored by
Tenant outside of the demised premises and no cars, trucks or trailers may be
parked on the Lot overnight without the prior written consent of Landlord.
2. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by Tenant on any part of the demised
premises or Building so as to be visible from outside the demised premises
without the prior written consent of Landlord. In the event of the violation of
this paragraph, Landlord may remove same without any liability, and may charge
the expense incurred in such removal to Tenant, as additional rent.
3. No awnings, curtains, blinds, shades, screens or other projections
shall be attached to or hung in, or used in connection with, any window of the
demised premises or any outside wall of the Building without the prior written
consent of Landlord. Such awnings, curtains, blinds, shades, screens or other
projections must be of a quality, type, design and color, and attached in the
manner, approved by Landlord.
4. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed and
constructed, and no sweepings, rubbish, rags, acids, chemicals, process water,
cooling water or like substances shall be deposited therein. Said plumbing
fixtures and the plumbing system of the Building shall be used only for the
discharge of so-called sanitary waste. All damage resulting from any misuse of
said fixtures and/or plumbing system by Tenant or anyone claiming under Tenant
shall be borne by Tenant.
5. Tenant must, upon the Termination of its tenancy, return to Landlord
all locks, cylinders and keys to the demised premises and any offices therein.
6. Tenant shall, at Tenant's expense, provide artificial light and
electric current for the employees of Landlord and/or Landlord's contractors
while making repairs or alterations in the demised premises.
7. Tenant shall not make, or permit to be made, any unseemly or
disturbing odors or noises or disturb or interfere with occupants of the
Building or those having business with them, whether by use of any musical
instrument, radio, machine, or in any other way.
8. Canvassing, soliciting, and peddling in the Building are prohibited
and Tenant shall cooperate to prevent the same.
9. Tenant shall keep the demised premises free at all times of pests,
rodents and other vermin, and at the end of each business day Tenant shall place
for collection in the place or places provided therefor all trash and rubbish
then in the demised premises.
1
<PAGE>
10. Landlord reserves the right to rescind, alter, waive and/or
establish any rules and regulations, which, in its judgment, are necessary,
desirable or proper for its best interests and the best interests of the
occupants of the Building.
1l. All of the work done by Tenant shall be done by such contractors,
labor and means so that, as far as may be possible, all work on the Property,
whether by Landlord or Tenant, shall be done without interruption on account of
strikes, work stoppages or similar causes of delay.
12. The buildings of Hood Business Park are smoke free buildings, and
Tenant shall cause its employees and invitees who smoke to restrict such smoking
to areas designated as "smoking areas" by Landlord from time to time.
2
<PAGE>
EXHIBIT F
LEGAL DESCRIPTION OF LOT
PARCEL II
Being shown as Lot B on a plan entitled "Plan of Land in Boston, MASS.", dated
June 7, 1982 by Dana F. Perkins and Assoc., Inc., Civil Engineers and surveyors,
recorded with Suffolk County Registry of Deeds, Book 9971, Page 454.
Included within the bounds of said Lot B is registered land shown on Land Court
Plan No. 12912A, dated April 20, 1928, a copy of which is filed with the Suffolk
County Registry District of the Land Court with Certificate of Title No. 24288.
There is appurtenant to said Lot B all rights and easements as may exist of
record, insofar as the same are now in force and applicable to be exercised in
common with all others lawfully entitled thereto, including, without limitation,
those rights and easements set forth or referred to in the following deeds:
Deed from Boston and Maine Railroad to H.P. Hood & Sons, Inc., dated July 21,
1960, recorded with Suffolk County Registry of Deeds, Book 7493, Page 233; Deed
from David Massif, et al, Trustees of Massif Realty Trust to H.P. Hood & Sons,
Inc. dated December 19, 1963, recorded with Suffolk County Registry of Deeds,
Book 7810, Page 107; Deed from Boston and Maine Corporation to H.P. Hood &
Sons, Inc., dated September 9, 1969, recorded with Suffolk County Registry of
Deeds, Book 8310, Page 483; Deed from Whiting Milk Company, Inc. to H.P. Hood,
Inc., dated May 31, 1973, recorded with Suffolk County Registry of Deeds, Book
8631, Page 705; Deed from Boston and Maine Railroad to H.P. Hood & Sons, Inc.,
dated June 16, 1943, recorded with Suffolk County Registry of Deeds, Book 6040,
Page 584; Deed from Boston and Maine Railroad to H.P. Hood & Sons, Inc., dated
December 20, 1949, recorded with Suffolk County Registry of Deeds, Book 6572,
Page 369 and Deed from Boston and Maine Railroad to H.P. Hood & Sons, Inc. dated
May 26, 1953, recorded with Suffolk County Registry of Deeds, Book 6873, Page 2,
bounded and described as follows:
S 23 degrees 50'38" E by said Rutherford Avenue, 1143.99 feet to a point at land
of David Massif; thence turning and running
S 47 degrees 49'22" W by said land of Massif and by land of W.W.F. Paper
Corp., 716.04 feet to a point at land of B & M; thence turning and running
N 26 degrees 16'38" W by said land of B & M, 84.52 feet to a point; thence
turning and running
N 35 degrees 33'36" W still by said land of B & M, 134.90 feet to a point;
thence turning and running
N 30 degrees 10'18" W still by said land of B & M, 519.55 feet to a point;
thence turning and running
N 26 degrees 23'18" W still by said land of B & M, 51.62 feet to a point; thence
turning and running
N 30 degrees 32'31" W by said land of B & M, 344.11 feet to a point; thence
turning and running
N 49 degrees 53'49" E still by said land of B & M, 94.19 feet to a point; thence
turning and running
N 45 degrees 39'59" E still by said land of B & M, 170.84 feet to a point;
thence turning and running
N 49 degrees 55'29" E still by said land of B & M, 322.29 feet to a point;
thence turning and running
N 51 degrees 14'19" E still by said land of B & M, 259.17 feet to a point of
beginning.
<PAGE>
EXHIBIT A
PLAN SHOWING LOCATION OF THE BUILDING
[GRAPHIC]
<PAGE>
Exhibit 10.14
OFFICE SPACE LEASE
for
400 HORSHAM ROAD, HORSHAM PENNSYLVANIA
by and between
400 HORSHAM ROAD ASSOCIATES, L.P.
(as Landlord)
and
BROADVIEW NETWORKS, INC.
(as Tenant)
Date: 1/31/2000
<PAGE>
THIS LEASE (the "Lease") is made the 31st day of January, 2000
between 400 HORSHAM ROAD ASSOCIATES, L.P. (herein referred to as "Landlord")
whose address is 1101 West DeKalb Pike, Suite 200, Wayne, Pennsylvania 19087 and
BROADVIEW NETWORKS, INC. (herein referred to as "Tenant"), a New York
corporation, whose address is 45-18 Court Square, Long Island City, NY 11101.
PREAMBLE
BASIC LEASE PROVISIONS AND DEFINITIONS
In addition to other terms elsewhere defined in this Lease, the
following terms whenever used in this Lease shall have only the meanings set
forth in this section, unless such meanings are expressly modified, limited or
expanded elsewhere herein.
1. ADDITIONAL RENT shall mean all sums in addition to Fixed Basic Rent payable
---------------
by Tenant to Landlord or to third parties pursuant to the provisions of the
Lease.
2. BROKER(S) shall mean Kelley & Associates, Inc. and Equis of New York.
---------
3. BUILDING shall mean 400 Horsham Road, Horsham, Pennsylvania as described on
--------
Exhibit A hereto.
- ---------
4. BUILDING HOLIDAYS shall be those shown on Exhibit D.
-----------------
5. COMMENCEMENT DATE shall mean, with respect to Phase One of the Premises, the
-----------------
date this Lease is fully executed by the Landlord and Tenant and, with respect
to Phase Two of the Premises, the date the Landlord's Work, as defined in
Section 3(b) of the Lease, is substantially complete.
6. DEMISED PREMISES OR PREMISES shall be approximately twenty six thousand
----------------------------
(26,000) gross rentable square feet on the first floor of the Building as
designated on Exhibit A-l which includes an allocable share of the Common
-----------
Facilities as defined in Section 2 which measurement shall be subject to final
measurement and agreement by the parties in accordance with 1996 BOMA standards
for multi-tenant office buildings. The Demised Premises shall be let to Tenant
in two (2) phases: Phase One shall consist of approximately 6,000 rentable
square feet of space and Phase Two shall consist of approximately 20,000
rentable square feet.
7. EXHIBITS shall be the following, attached to this Lease and incorporated
--------
herein and made a part hereof:
Exhibit A Location of Building
Exhibit A-l Demised Premises
Exhibit B Rules and Regulations
Exhibit C Fiber Optic Work
Exhibit D Building Holidays
<PAGE>
Exhibit E Tenant Estoppel Certificate
Exhibit F Janitorial Specifications
8. EXPENSE STOP shall mean Four Dollars ($4.00) per rentable square foot of the
------------
Premises.
9. FIXED BASIC RENT shall be calculated and payable as follows:
----------------
With respect to Phase One of the Premises:
Rate Per
Rentable Rentable Yearly Monthly
Months Sq. Ft. Sq. Foot Rate Installment
l-6 6,000 $ 0.00 $0.00 $0.00
7-12 6,000 $17.50 $105,000.00 $ 8,750.00
13-24 6,000 $18.00 $108,000.00 $ 9,000.00
25-36 6,000 $18.50 $111,000.00 $ 9,250.00
37-48 6,000 $19.00 $114,000.00 $ 9,500.00
49-60 6,000 $19.50 $117,000.00 $ 9,750.00
61-66 6,000 $20.00 $120,000.00 $10,000.00
With respect to Phase Two of the Premises:
Rate Per
Rentable Rentable Yearly Monthly
Months Sq. Ft. Sq. Foot Rate Installment
l-3 20,000 $ 0.00 $0.00 $0.00
4-12 20,000 $17.50 $350,000.00 $29,166.67
13-24 20,000 $18.00 $360,000.00 $30,000.00
25-36 20,000 $18.50 $370,000.00 $30,833.33
37-48 20,000 $19.00 $380,000.00 $31,666.67
49-60 20,000 $19.50 $390,000.00 $32,500.00
61-66 20,000 $20.00 $400,000.00 $33,333.33
10. OFFICE BUILDING AREA is as set forth on Exhibit A-l
--------------------
11. PERMITTED USE shall be general office use and the installation and
-------------
maintenance of equipment and facilities in connection with Tenant's
telecommunications business.
12. PROPORTIONATE SHARE shall mean a fraction, the numerator of which shall be
-------------------
the total rentable square feet of the Premises, which figure is the gross
rentable square feet contained within the Premise and the denominator of which
shall be the total rentable square feet of the Building, which figure is 150,000
square feet.
<PAGE>
13. SECURITY DEPOSIT shall be none.
----------------
14. TARGET DATE with respect to Phase One of the Premises shall be immediately
-----------
upon full execution of this Lease by the parties and with respect to Phase Two
of the Premises shall be sixty (60) days from the date Tenant delivers to
Landlord final approved plans for Landlord's Work.
15. TERM shall mean five (5) years and six (6) months from the date this Lease
----
is fully executed by the Landlord and Tenant plus the number of days which
remain in the calendar month in which such term expires (the "Term") unless
terminated or extended pursuant to any option or provision contained herein.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
1. Definitions ............................................................. 1
2. Premises ................................................................ 1
3. Completion of Premises .................................................. 1
4. Term .................................................................... 2
5. Use of Premises ......................................................... 2
6. Rent .................................................................... 3
7. Insurance ............................................................... 6
8. Repairs and Maintenance ................................................. 7
9. Utilities and Services .................................................. 8
10. Governmental Regulations ................................................ 9
11. Signs ................................................................... 10
12. Alterations, Additions and Fixtures ..................................... 10
13. Mechanic's Liens ........................................................ 11
14. Landlord's Right of Entry ............................................... 12
15. Damage by Fire or Other Casualty ........................................ 12
16. Non-Abatement of Rent ................................................... 14
17. Indemnification ......................................................... 14
18. Condemnation ............................................................ 15
19. Quiet Enjoyment ......................................................... 16
20. Rules and Regulations ................................................... 16
21. Assignment and Subletting ............................................... 16
22. Tenant's Expansion/Relocation ........................................... 19
23. Subordination ........................................................... 19
24. Curing Tenant's Defaults ................................................ 20
25. Surrender ............................................................... 20
26. Defaults-Remedies ....................................................... 21
27. Conditions of Premises .................................................. 24
28. Hazardous Substances .................................................... 24
29. Recording ............................................................... 25
30. Broker's Commission ..................................................... 25
31. Notices ................................................................. 25
32. Irrevocable Offer, No Option ............................................ 26
33. Landlord Inability to Perform ........................................... 26
34. Survival ................................................................ 26
35. Corporate Tenants ....................................................... 27
36. Tenant Representations and Warranties ................................... 27
37. Waiver of Invalidity of Lease ........................................... 27
38. Security Deposit ........................................................ 27
39. Estoppel Certificate .................................................... 27
40. Rights Reserved by Landlord ............................................. 28
41. Miscellaneous ........................................................... 30
42. Additional Definitions .................................................. 31
43. Tenant's Right of First Refusal ......................................... 32
</TABLE>
<PAGE>
For and in consideration of the covenants herein contained, and upon
the terms and conditions herein set forth, Landlord and Tenant, intending to be
legally bound, agree as follows:
1. Definitions. The definitions set forth in the preceding Preamble
shall apply to the same capitalized terms appearing in this Lease Agreement.
Additional definitions are contained in Section 42 and throughout this Lease.
2. Premises. Landlord hereby demises and leases the Premises to
Tenant and Tenant hereby leases and takes the Premises from Landlord for the
Term (as defined in Section 4) and upon the terms, covenants, conditions, and
provisions set forth in this Lease Agreement, including the Preamble (this
"Lease"). The Tenant's interest in the Premises as tenant shall include the
right, in common with Landlord and other occupants of the Building, to use
driveways, sidewalks, loading and parking areas, lobbies, hallways and other
facilities which are located within the Property (defined in Section 6) and
which are designated by Landlord from time to time for the use of all of the
tenants of the Building (the "Common Facilities"). Landlord shall provide Tenant
with four and one-half (4.5) unreserved parking spaces per one thousand rentable
square feet contained within the Premises at no additional cost or rental to
Tenant.
3. Completion of Premises.
a) Phase One of the Premises shall be delivered to Tenant on the
Target Date for Phase One in its "As-Is, Where-Is" condition as of the date of
this Lease and Landlord shall not be required to provide any tenant or other
improvements thereto except as otherwise provided herein. Commencing on the
Target Date for Phase One of the Premises, Tenant shall promptly construct and
install tenant improvements to the Premises in accordance with plans (the
"Plans") prepared by Tenant at Tenant's sole cost and expense and approved by
Landlord in Landlord's reasonable discretion. Landlord shall pay to Tenant a
tenant improvement allowance (the "Allowance") in the amount Twenty Dollars
($20.00) per rentable square foot of Phase One of the Premises for use by Tenant
in constructing and installing its tenant improvements therein. Tenant shall
complete the improvements set forth in the Plans and Landlord shall pay the
Allowance to Tenant in two (2) equal installments the first of which shall be
made on or before thirty (30) days after the Target Date for Phase One and the
second of which shall be made on or before sixty (60) days after the Target Date
for Phase One provided Tenant is not in default of its obligations hereunder
beyond any applicable notice and cure period and has constructed and installed
tenant improvements with a cost in an amount greater than or equal to the amount
of the Allowance being paid to Tenant at such time, as reasonably determined by
Landlord. All improvements and alterations for Phase One of the Premises, as
specified by the Plans or otherwise, shall be performed by Tenant in accordance
with the terms of this Lease.
b) Phase Two of the Premises shall be completed in accordance
with the plans and specifications to be prepared by Tenant's architect, and
approved by Landlord and Tenant, Landlord shall complete the improvements set
forth in the plans
<PAGE>
and specifications ("Landlord's Work") at its sole cost and expense in an
amount not to exceed the sum of Twenty Dollars ($20.00) per rentable square foot
of Phase Two of the Premises. All necessary construction shall be commenced
promptly following Landlord's execution and acceptance of this Lease and shall
be substantially completed ready for use and occupancy by Tenant on the Target
Date for Phase Two as set forth in the Preamble; provided, however, that the
time for substantial completion of the Premises shall be extended for additional
periods of time equal to the time lost by Landlord or Landlord's contractors,
subcontractors or suppliers due to strikes or other labor troubles; delays in
Tenant's selection of materials, plans or specifications; governmental
restrictions and limitations; unavailability or delays in obtaining fuel, labor
or materials; war or other national emergency; accidents; floods; defective
materials; fire damage or other casualties; adverse weather conditions; the
inability to obtain building or use and occupancy permits; or any cause similar
or dissimilar to the foregoing which is beyond the reasonable control of
Landlord or Landlord's contractors, subcontractors or suppliers. As soon as
practicable after final approval of the plans for the Landlord's Work, Landlord
shall obtain and deliver to Tenant complete final and binding bids from at least
three (3) reputable contractors acceptable setting forth breakouts for all
components of the bid with all pertinent sub-contractor cost information.
Landlord shall request proposals from such contractors for lump sum contracts.
Landlord shall choose the contractor submitting the lowest bid unless Landlord
reasonably believes such contractor is unable to complete Landlord's Work in a
timely manner. Landlord's Work and Phase Two of the Premises shall be deemed
substantially completed when Tenant is in receipt of a Certificate of Occupancy
or Temporary Certificate of Occupancy (punchlist items excepted). In the event
Landlord's Work is not substantially complete on or prior to the Target Date for
Phase Two, then upon substantial completion of same, Tenant shall be entitled to
two (2) additional days of Rent abatement for each one (1) day of delay beyond
such Target Date until such work is substantially completed.
c) All construction shall be done in a good and workmanlike
manner and shall comply at the time of completion with all applicable and lawful
laws, ordinances, regulations and orders of the federal, state, county or other
governmental authorities having jurisdiction thereof. In addition to the
Landlord's Work defined above, Landlord shall cooperate with Tenant in
connection with its installation and completion of the Fiber Optic Work set
forth on Exhibit C attached hereto and made a part hereof. Landlord shall be
obligated for the direct and actual costs of completion of the Fiber Optic Work
up to Fifty Thousand Dollars ($50,000.00) and Tenant shall be obligated for any
excess costs. The failure to complete Fiber Optic Work shall not delay the
Commencement Date for either Phase One or Phase Two of the Premises or in any
respect affect the validity or continuance of this Lease or any obligation of
Tenant hereunder or extend the Term of the Lease, whether or not within
Landlord's control, and Landlord shall not be subject to any liability to
Tenant.
4. Term. [Intentionally Deleted].
5. Use of Premises. Tenant shall occupy the Premises throughout the
Term and shall use the same for, and only for, the Permitted Use specified in
the Preamble. The
<PAGE>
Building is designed to normal building standards for floor-loading capacity.
Tenant shall not use the Premises in such ways which, in Landlord's reasonable
judgment, exceed such load limits.
6. Rent. Unless otherwise specifically requested by Landlord in
writing at any time, Fixed Basic Rent, Additional Rent and any other rent or
other sums due under this Lease (hereunder collectively referred to as
Rent) shall be paid and delivered to Landlord's property manager, if any, as
agent for Landlord, in the amounts, time and manner more particularly provided
in this Lease.
a. Fixed Basic Rent. Commencing on the Commencement Date with
respect to Phase One and Phase Two of the Premises as set forth in the Preamble,
Tenant shall pay, throughout the Term, Fixed Basic Rent with respect to Phase
One and Phase Two of the Premises, as applicable, in the amount specified in the
Preamble, without notice or demand and without setoff or deduction, except as
otherwise provided herein in equal monthly installments equal to one-twelfth of
the Fixed Basic Rent (specified as Monthly Installments in the Preamble), in
advance, on the first day of each calendar month during the Term. If the
Commencement Date falls on a day other than the first day of a calendar month,
the Fixed Basic Rent shall be apportioned on a per diem basis for the period
between the applicable Commencement Date and the first day of the first full
calendar month in the Term and such apportioned sum shall be paid on the
applicable Commencement Date.
b. Additional Rent. Commencing on January 1, 200l Tenant shall
pay to Landlord, as Additional Rent, in the manner more particularly set forth
below, Tenant's Proportionate Share of Annual Operating Costs (as defined below)
for the Property to the extent same exceeds the Expense Stop per rentable square
foot of the Premises:
i) Annual Operating Costs. The term "Annual Operating Costs"
shall mean all costs Landlord incurs from owning, operating and maintaining the
Building and the lot or tract of land on which it is situated (the "Property").
Annual Operating Costs shall include, by way of example rather than limitation:
insurance costs, including premiums; fees; Impositions (defined below); costs
for repairs, maintenance and service contracts; management fees; landscaping;
snow removal; governmental permits fees; costs of compliance with governmental
orders and regulations; administrative and overhead expenses; costs of
furnishing water, sewer, electricity, gas, fuel, and other utility services, for
use in Common Facilities of the Building and Property; and the cost of
janitorial service and trash removal; EXCLUDING, however, from Annual Operating
Costs the following: costs which are treated as capital under generally accepted
accounting principles; mortgage debt or ground rents incurred by Landlord as
owner of the Property; income, excess profits, corporate capital stock or
franchise tax imposed or assessed upon Landlord, unless such tax or any similar
tax is levied or assessed, in lieu of all or any part of any currently existing
Imposition or an increase in any currently existing Imposition; but only to the
extent of such substitution and calculated as if the Property was the sole asset
of Landlord, leasing commissions, accountants', consultants' or attorneys' fees,
costs and disbursement and other expenses
<PAGE>
incurred in connection with negotiations or disputes with tenants or prospective
tenants or associated with the enforcement of any leases or the defense of
Landlord's title to or interest in the Building in connection with any
proceedings involving real property taxes other than disputes regarding tax
assessment and reduction of real property taxes; costs of construction of the
Building and related facilities and correction of defects in construction of the
Building (including permit, license and inspection fees); costs of any items or
services sold or provided to tenants (including Tenant) for which Landlord is
entitled to be reimbursed by such tenants or which are not generally provided to
all tenants of the Building; fees and higher interest charges caused by
Landlord's refinancing the Building; all repairs to the interior of the Building
of a structural nature (not made necessary by unusual use by Tenant); costs
incurred due to violation by Landlord or any tenant of the terms and conditions
of any lease; overhead and profit increment paid to subsidiaries or affiliates
of Landlord, or to any party as a result of a noncompetitive selection process,
for management or other services on or to the Building or for supplies or other
materials, to the extent that the costs of such services, supplies or materials
exceed the costs that would have been paid had the services, supplies or
materials been provided by unaffiliated parties on a competitive basis; general
overhead and administrative expenses except salaries of on-site property
manager, management secretary and maintenance man; any compensation paid to
clerks, attendants or other persons in commercial concessions operated by
Landlord, rentals and other related expenses incurred in leasing air
conditioning systems, elevators or other equipment ordinarily considered to be
for a capital nature, except equipment which is used in providing janitorial
services and which is not affixed to the Building; all items and services for
which Tenant reimburses Landlord or pays third persons or which Landlord
provides selectively to one or more tenants or occupants of the Building (other
than Tenant) without reimbursement; commissions, advertising, and promotional
expenditures. "Impositions" shall mean all levies, taxes, assessments, charges,
imposts, and burdens, of whatever kind and nature, ordinary and extraordinary,
which are assessed or imposed during the Term by any federal, state or municipal
government or public authority or under any law, ordinance or regulation thereof
or pursuant to any recorded covenants or agreements upon or with respect to the
Property or any part thereof, any improvements thereto, any personal property
necessary to the operation thereof and owned by Landlord or this Lease.
ii) Estimated Payments - Expense Statement and
Reconciliation.
(1) Landlord shall submit to Tenant as soon as reasonably
possible after the beginning of each calendar year of the Term, the following:
(a) a statement setting forth (i) the Annual Operating Costs
for the previous calendar year of the Term and (ii) a calculation of Tenant's
Proportionate Share of the increase in the Annual Operating Costs over the
Expense Stop for the previous calendar year (the "Expense Statement"); and
(b) a statement of Landlord's good faith estimate of the
Annual Operating Costs for the current calendar year and a calculation of
Tenant's Proportionate Share of the increase in the Annual Operating Costs over
the Expense Stop
<PAGE>
for the current calendar year ("Tenant's Estimated Share").
(2) Beginning with the next installment of Fixed Basic Rent
due after the delivery of the aforesaid statements to Tenant, Tenant shall pay
to Landlord, on account of its Proportionate Share of the increase in the Annual
Operating Costs over the Expense Stop, the following:
(a) a sum equal to the product of one-twelfth (l/12) of
Tenant's Estimated Share and the number of calendar months elapsed during the
current calendar year up to and including the month payment is made, plus any
amounts due from Tenant to Landlord on account of Annual Operating Costs for any
prior period(s) of time, less
(b) a sum equal to the amount, if any, by which the sum
of all payments made by Tenant to Landlord on account of Annual Operating Costs
for the previous calendar year exceed those actually specified in the Expense
Statement.
(3) On the first day of each succeeding calendar month until
such time as Tenant receives a new Expense Statement and statement of Tenant's
Estimated Share, Tenant shall pay to Landlord, on account of its Proportionate
Share of Annual Operating Costs, one-twelfth (l/12) of the then current Tenant's
Estimated Share. Any payment due from Tenant to Landlord, or any refund due from
Landlord to Tenant, on account of Annual Operating Costs not yet determined as
of the expiration of the Term shall be made within thirty (30) days after
submission to Tenant of the next Expense Statement.
c) Disputes. Unless Tenant, within ninety (90) days after any
statement of Additional Rent is furnished, shall give notice to Landlord that
Tenant disputes said statement, specifying in detail the basis for such dispute,
each statement furnished to Tenant by Landlord under any provision of this
Section shall be conclusively binding upon Tenant as to the particular
Additional Rent due from Tenant for the period represented thereby; provided,
however, that additional amounts due may be required to be paid by any
supplemental statement furnished by Landlord. Tenant shall have the right at
reasonable times to examine the records used in making the aforestated
determinations, upon written notice in advance; provided, however, such disputed
amount shall have been paid by Tenant to Landlord. In the event any such
examination shall reveal an adverse variance in excess of 10% of the total
operating expenses of which Tenant is required to pay their Proportionate Share,
Landlord shall reimburse Tenant for the reasonable cost of such examination
together with the amount of Tenant's overpayment within thirty (30) days after
demand. Tenant shall make all payments of Additional Rent without delay and
regardless of any pending dispute over the amount of Additional Rent that is due
in accordance with the statements furnished by Landlord.
d) Independent Covenant; Survival. Tenant's covenant to pay Rent
is independent of any other covenant, agreement, term or condition of this
Lease. Without limitation of any obligation of Tenant under this Lease which
shall survive the expiration
<PAGE>
of the Term, the obligation of Tenant to pay Rent shall survive the expiration
of the Term.
7. Insurance.
a) Liability. Tenant, at Tenant's sole cost and expense, shall
maintain and keep insurance in effect throughout the Term against liability for
bodily injury (including death) and property damage in or about the Premises or
the Property under a policy of Commercial general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than $1,000,000 for each person and $2,000,000 in the
aggregate for bodily injury (including death) to more than one (1) person and
$1,000,000 for property damage. The policies of commercial general public
liability insurance shall name Landlord (and if requested, any mortgagee of
Landlord) as an additional party. Each such policy shall provide that it shall
not be cancelable without at least thirty (30) days prior written notice to
Landlord and to any mortgagee named in an endorsement thereto and shall be
issued by an insurer and in a form reasonably satisfactory to Landlord. At least
ten (10) days prior to the Commencement Date, and thereafter upon Landlord's
request, a certificate of insurance shall be delivered to Landlord proving
compliance with the foregoing requirements. If Tenant shall fail, refuse or
neglect to obtain or to maintain any insurance that it is required to provide or
to furnish Landlord with satisfactory evidence of coverage on any such policy
within 5 days after demand, Landlord shall have the right to purchase such
insurance. All payments made by Landlord for such insurance shall be recoverable
by Landlord from Tenant, together with interest thereon, as Additional Rent
promptly within 10 days after demand. Notwithstanding anything contained herein
to the contrary, Tenant may self-insure all of its personal property situated
within the Premises against property damage and destruction. Tenant's insurance
may be provided under blanket insurance policies.
b) Waiver of Subrogation. The parties to this Lease each release
the other, to the extent of the releasing party's insurance coverage, from any
and all liability for any loss or damage covered by such insurance which may be
inflicted upon the property of such party even if such loss or damage shall be
brought about by the fault or negligence of the other party, its agents or
employees. If any policy does not permit such a release of liability and a
waiver of subrogation, and if the party to benefit therefrom requests that such
a waiver be obtained, the other party agrees to obtain an endorsement to its
insurance policies permitting such waiver of subrogation if it is available. If
an additional premium is charged for such waiver, the party benefiting therefrom
agrees to pay the amount of such additional premium promptly upon demand. In the
event a party is unable to obtain such a waiver, it shall immediately notify the
other party of its inability. In the absence of such notifications, each party
shall be deemed to have obtained such waiver of subrogation. Notwithstanding
anything to the contrary contained in this Lease, Landlord shall have no
interest in any insurance proceeds Tenant receives for Tenant's property (not
purchased, installed or otherwise paid for using the Allowance) and Landlord
shall sign all documents which are necessary or appropriate in connection with
the settlement of any claim or loss by Tenant. Tenant's policies shall not be
<PAGE>
contributing with or in excess of any coverage which Landlord shall carry on the
Building.
c) Increase of Premiums. Tenant will not do anything or fail to
do anything or permit anything to be done which will cause the cost of
Landlord's insurance to increase or which will prevent Landlord from procuring
insurance (including but not limited to public liability insurance) from
companies, and in a form, satisfactory to Landlord. If any breach of this
subsection (c) by Tenant shall cause the rate of fire or other insurance to be
increased, Tenant shall pay the amount of such increase as Additional Rent
promptly upon demand. Notwithstanding anything to the contrary contained in this
Lease, Landlord represents and warrants to Tenant that Tenant's use of the
Premises for the purposes specified herein will not in and of itself violate
Landlord's insurance policies which shall be in effect immediately prior to the
beginning of the Term of this Lease nor increase the premiums therefor.
8. Repairs and Maintenance.
a) Tenant shall, throughout the Term and at Tenant's sole cost
and expense, keep and maintain the Premises in a neat and orderly condition;
and, upon expiration of the Term, Tenant shall leave the Premises in good order
and condition, ordinary wear and tear, damage by fire or other casualty alone
excepted, and for that purpose and except as stated, Tenant will make all
necessary non-structural repairs and replacements. Tenant shall not permit any
waste, damage or injury to the Premises. Tenant shall not use or permit the use
of any portion of the Common Facilities for other than their intended use as
specified by the Landlord from time to time.
b) Landlord shall, promptly throughout the Term, make all
necessary repairs to the structural elements of the Premises, the building, and
other improvements located on the Property; provided, however, that Landlord
shall have no responsibility to make any repairs unless and until Landlord
receives written notice of the need for such repair. Landlord shall keep and
maintain all Common Facilities of the Property and any sidewalks, parking areas,
curbs and access ways adjoining the Property in a clean and orderly condition,
free of accumulation of dirt and rubbish and shall keep and maintain all
landscaped areas within the Property in a neat and orderly condition.
Notwithstanding anything to the contrary contained herein, Landlord shall be
responsible for maintaining and repairing the life, fire, and safety systems and
the points of connection thereto to the Premises, and the costs of same shall be
included in Annual Operating Costs.
c) Notwithstanding the foregoing, repairs and replacement to the
Premises and the Property arising out of or caused by Tenant's specific use,
specific manner of use or occupancy of the Premises, by Tenant's installation of
alterations, additions, improvements, trade fixtures or equipment in or upon the
Premises or by any act or omission of Tenant or any employee, agent, contractor
or invitee (while on the Premises) of Tenant shall be made at Tenant's sole cost
and expense and Tenant shall pay Landlord the reasonable cost of any such repair
or replacement, as Additional Rent, within 15 days after demand.
<PAGE>
9. Utilities and Services.
a) Landlord shall furnish the Premises with electricity, heating
and air conditioning for the normal use and occupancy of the Premises as general
offices between 8:00 a.m. and 6:00 p.m., Monday through Friday, of each week
during the Term (Building Holidays excepted). Tenant agrees to pay as Additional
Rent all charges for electricity, light, heat or other utility used by Tenant at
the Premises. A separate submeter has been installed and Tenant shall pay for
the consumption of such utilities based upon its metered usage. If no meter is
installed, Tenant shall pay its Proportionate Share of any utility charges
covering the Demised Premises and the remainder of the Building. Tenant shall
pay all bills for separately metered utility usage within ten (10) days after
receipt thereof, and any non-payment or late payment of such utility bills shall
be deemed a default under the terms of this Lease. All charges for repairs of
any meters servicing the Premises shall be payable by Tenant as Additional Rent
and shall be paid when the same shall become due. Notwithstanding anything to
the contrary contained in this Lease, if necessary, Landlord shall upgrade the
electric service to the Building in order to provide the Premises with 400 amps,
which upgrade shall be done at Landlord's sole cost and expense.
b) Within the Common Facilities of the Building, Landlord shall
furnish reasonably: (i) adequate electricity, (ii) hot and cold water, (iii)
lavatory supplies, (iv) automatically operated elevator service, (v) normal and
customary cleaning services (on a five-day a week basis) after business hours,
(vi) heat and air conditioning in season, (vii) landscaping, (viii) parking lot
maintenance, (ix) common area maintenance and (x) snow and ice removal. Tenant
shall be responsible for its Proportionate Share of the cost of such services in
accordance with Section 6(b) hereof. Landlord shall provide janitorial service
to the Premises, five days per week, after regular business hours, in accordance
with the janitorial specifications attached hereto as Exhibits F, and the costs
of such service will be passed through to Tenant as set forth in Section 6.
c) Except as otherwise expressly provided herein, Landlord shall
not be liable for any damages to Tenant resulting from the quality, quantity,
failure, unavailability or disruption of any services beyond the reasonable
control of Landlord and the same shall not constitute a termination of this
Lease or an actual or constructive eviction or entitle Tenant to an abatement of
rent. Landlord shall not be responsible for providing any services not
specifically provided for in this Lease. Notwithstanding anything to the
contrary contained herein, in the event there is any failure or defect in
service furnished to the Premises by Landlord's direct control (as opposed to a
public service utility company) or Landlord determines to make any repairs,
additions, alterations, replacements, decorations or improvements in the
Building or the Demised Premises, and Tenant shall be unable for at least
seventy-two (72) hours to operate its business in the Premises in substantially
the same manner as such business was operated prior to such interruption, the
Fixed Basic Rent and Additional Rent shall be reduced on a per diem basis in
their proportion in which the area of the untenantable portion of the Premises
(i.e., the portion of the Premises in which Tenant is unable to operate its
<PAGE>
business in substantially the same manner as such business was operated prior to
such interruption) bears to the total area of the Premises, for each day
subsequent to the aforesaid seventy-two (72) hour period that such portion of
the Premises remains unusable. If any such interruption continues for a period
in excess of thirty (30) days, Tenant shall have the right to terminate this
Lease upon notice to Landlord. Tenant, its agents, employees and licensees shall
have access to the premises 24 hours per day, 7 days per week.
10. Governmental Regulations.
a) Landlord and Tenant shall comply with all laws, ordinances,
notices, orders, rules, regulations and requirements of all federal, state and
municipal government or any department, commission, board of officer thereof, or
of the National Board of Fire Underwriters or any other body exercising similar
functions, relating to the Premises or to the use or manner of use of the
Property. Tenant shall not knowingly do or commit, or suffer to be done or
committed anywhere in the Building, any act or thing contrary to any of the
laws, ordinances, regulations and requirements referred to in this Section.
Tenant shall give Landlord prompt written notice of any accident in the Premises
and of any breakage, defect or failure in any of the systems or equipment
servicing the Premises or any portion of the Premises.
b) Tenant shall pay its Proportionate Share of the cost of
capital improvements which Landlord shall install or construct in compliance
with governmental requirements which take effect after the commencement of the
Term hereof. Tenant's Proportionate Share shall be determined based upon the
estimated life of the capital investment item, determined by Landlord in
accordance with generally accepted accounting principles, and shall include a
cost of capital funds adjustment equal to the rate of Interest on the
unamortized portion of all such costs. Tenant shall only have to pay for the
portion of the useful life of the capital improvement which falls within the
Term. Tenant shall thus make payments in equal annual installments for such
capital improvements until the Term expires or until the cost of the improvement
has been fully paid for, whichever first occurs; such payments shall be computed
by Landlord at the time of installation of the capital improvement in the same
manner as Landlord makes computations of Tenant's share of the Annual Operating
Costs pursuant to Section 6(b)(ii). Landlord represents and warrants that, as of
the Commencement Date, the Premises and all structural parts thereof, including,
without limitation, the foundation, roof, exterior walls, plumbing, electrical
and other mechanical systems (a) will meet and comply with all federal, state
and local laws, ordinances and regulations and all handicapped accessibility
standards, including, without limitation, those promulgated under the Americans
With Disabilities Act ("ADA"), and (b) will be in good, workable and sanitary
order, condition, and repair. Landlord shall correct any latent defects promptly
after Tenant notifies Landlord of any such defect. Notwithstanding anything to
the contrary contained in this Lease, Landlord represents and warrants to the
Tenant that (i) Tenant's Permitted Use shall not in and of itself violate any of
the provisions of this Lease or the provisions of any grant, lease, or mortgage
to which this Lease is subordinate and (ii) Tenant's use of the Premises for the
Permitted Use will not in and of
<PAGE>
itself violate Landlord's insurance policies which shall be in effect
immediately prior to the commencement of the Term of this Lease nor increase the
premiums therefor.
c) Tenant shall pay all taxes imposed upon Tenant's furnishings,
trade fixtures, equipment or other personal property.
11. Signs. Except for signs which are located wholly within the
interior of the Premises and which are not visible from the exterior of the
Premises, Tenant shall not place, erect, maintain or paint any signs upon the
Premises or the Property unless the design of such signs are approved by
Landlord in writing which approval may be withheld in Landlord's sole
discretion. Tenant shall be entitled to Building standard signage and to have
its name and logo placed on the monument sign located at the Property. Tenant
shall be solely responsible for all costs and expenses associated with the
erection of any signs upon the Premises and shall be obligated to obtain and
provide to Landlord any and all necessary permits prior to the placement or
erection of such signs.
12. Alterations, Additions and Fixtures.
a) Tenant shall have the right to install in the Premises any
trade fixtures; provided, however, that no such installation and no removal
thereof shall be permitted which affects any structural component of the
Building or Premises and that Tenant shall repair and restore any damage or
injury to the Premises or the Property caused by installation or removal.
b) Subsequent to Tenant's initial alterations, Tenant shall not
make or permit to be made any alterations, improvements or additions to the
Premises or Property without on each occasion first presenting plans and
specifications to Landlord and obtaining Landlord's prior written consent, which
shall not be unreasonably withheld or delayed, but may be conditioned upon
compliance with reasonable requirements of Landlord including, without
limitation, the filing of mechanics' lien waivers by Tenant's contractors and
the submission of written evidence of adequate insurance coverage naming
Landlord as an additional insured thereunder. If Landlord consents to any
proposed alterations, improvements or additions or Tenant's contractor performs
any of the work identified in Section 3 of this Lease Agreement, then Tenant
shall make the proposed alterations, improvements and additions at Tenant's sole
cost and expense provided that: (i) Tenant supplies any necessary permits; (ii)
such alterations and improvements do not, in Landlord's judgment, impair the
structural strength of the Building or any other improvements or reduce the
value of the Property; (iii) Tenant takes or causes to be taken all steps that
are otherwise required by Section 13 of this Lease and that are required or
permitted by law in order to avoid the imposition of any mechanic's, laborer's
or materialman's lien upon the Premises or the Property; (iv) Tenant uses a
contractor reasonably approved by Landlord; (v) the occupants of the Building
and of any adjoining real estate owned by Landlord are not annoyed or disturbed
by such work; (vi) the alterations, improvements or additions shall be installed
in accordance with the approved plans and specifications and completed according
to a construction schedule reasonably approved by Landlord; and (vii) Tenant
provides insurance of the types and
<PAGE>
coverage amounts required by Landlord. Any and all alterations, improvements and
additions to the Premises which are constructed, installed or otherwise made by
Tenant shall be the property of Tenant until the expiration or sooner
termination of this Lease; at that time all such alterations and additions shall
remain on the Premises and become the property of Landlord without payment by
Landlord unless, upon the termination of this Lease, Landlord instructs Tenant
in writing to remove the same in which event Tenant will remove such
alterations, improvements and additions, and repair and restore any damage to
the Property caused by the installation or removal. Notwithstanding anything to
the contrary contained in this Lease, Landlord may withhold its approval to any
proposed alterations, additions or improvements to the Premises (subsequent to
Tenant's initial alterations) in its absolute and sole discretion with respect
to any such alteration, addition or improvement which Landlord determines
involves any modification to the Building's exterior or its structural,
electrical, mechanical or plumbing systems, or any components thereof.
Notwithstanding anything to the contrary contained in this Lease, upon the
expiration or sooner termination of the Term of this Lease, Tenant shall not be
required to restore the Premises to its condition prior to the making of any
alteration permitted under this Section 12(b), except if and to the extent that
subsequent to Tenant's initial alterations to prepare the Premises for Tenant's
initial occupancy, such restoration is made an express condition of Landlord's
consent to such alteration. Notwithstanding anything to the contrary contained
in this Lease, Tenant shall have the right, and is hereby granted a license for
such purpose, to use such portions of the common areas of the Building which are
necessary or desirable to supports its intended use of the Premises, including,
without limitation, the right to tie into and/or connect with the vents, pipes,
ducts and conduits of the Building in connection with Tenant's initial
alterations to prepare the Premises for Tenant's opening for business and the
providing of utility service to the Premises provided Tenant gives Landlord
notice of same and does not interfere with any other tenant's use of the
Building or their respective premises.
13. Mechanic's Liens. Tenant shall promptly pay any contractors and
materialmen who supply labor, work or materials to Tenant at the Premises or the
Property so as to minimize the possibility of a lien attaching to the Premises
or the Property. Tenant shall take all steps permitted by law in order to avoid
the imposition of any mechanic's, laborer's or materialman's lien upon the
Premises or the Property. Should any such lien or notice of lien be filed for
work performed for Tenant other than by Landlord, Tenant shall cause such lien
or notice of lien to be discharged of record by payment, deposit, bond or
otherwise within thirty (30) days after the filing thereof or after Tenant's
receipt of notice thereof, whichever is earlier, regardless of the validity of
such lien or claim. If Tenant shall fail to cause such lien or claim to be
discharged and removed from record within such thirty (30) day period, then,
without obligation to investigate the validity thereof and in addition to any
other right or remedy Landlord may have, Landlord may, but shall not be
obligated to, contest the lien or claim or discharge it by payment, deposit,
bond or otherwise; and Landlord shall be entitled to compel the prosecution of
an action for the foreclosure of such lien by the lienor and to pay the amount
of the judgment in favor of the lienor with interest and costs. Any amounts so
paid by Landlord and all costs and expenses including, without limitation,
reasonable attorneys' fees incurred by Landlord in connection therewith,
together with Interest from
<PAGE>
the respective dates of Landlord's making such payment or incurring such cost or
expense, which shall constitute Additional Rent payable hereunder promptly upon
demand therefor. Nothing in this Lease is intended to authorize Tenant to do or
cause any work or labor to be done or any materials to be supplied for the
account of Landlord, all of the same to be solely for Tenant's account and at
Tenant's risk and expense. Further, notwithstanding anything to the contrary
contained in this Lease, nothing contained in or contemplated by this Lease
shall be deemed or construed in any way to constitute the consent or request by
Landlord for the performance of any work or services or the furnishing of any
materials for which any lien could be filed against the Premises or the Building
or the Property or any part of any thereof, nor as giving Tenant any right,
power or authority to contract or permit the performance of any work or services
or the furnishing of any materials for which any lien could be filed against the
Premises, the Building, the Property or any part of any thereof. Throughout this
Lease the term "mechanic's lien" is used to include any lien, encumbrance or
charge levied or imposed upon the Premises or the Property or any interest
therein or income therefrom on account of any mechanic's, laborer's or
materialman's lien or arising out of any debt or liability to or any claim or
demand of any contractor, mechanic, supplier, materialman or laborer due to work
done for or materials supplied to Tenant (other than Landlord's Work) and shall
include without limitation any mechanic's notice of intention given to Landlord
or Tenant, any stop order given to Landlord or Tenant, any notice of refusal to
pay naming Landlord or Tenant and any injunctive or equitable action brought by
any person entitled to any mechanic's lien.
14. Landlord's Right of Entry.
a) Tenant shall permit Landlord and the authorized
representatives of Landlord and of any mortgagee or any prospective mortgagee to
enter the Premises at all reasonable times, upon at least 24 hours prior notice
(which may be oral) to Tenant, for the purpose of (i) inspecting the Premises or
(ii) making any necessary repairs to the Premises or to the Building and
performing any work therein. During the progress of any work on the Premises or
the Building, Landlord will attempt not to inconvenience Tenant, but shall not
be liable for inconvenience, annoyance, disturbance, loss of business or other
damage to Tenant by reason of making any repair or by bringing or storing
materials, supplies, tools and equipment in the Premises during the performance
of any work, except as otherwise expressly provided herein and the obligations
of Tenant under this Lease shall not be thereby affected in any manner
whatsoever.
b) Landlord shall have the right at all reasonable times to, with
prior notice to Tenant, enter and to exhibit the Premises for the purpose of
inspection or showing the Premises in connection with a sale or mortgage and,
during the last six (6) months of the Term, to enter upon and to exhibit the
Premises to any prospective tenant.
15. Damage by Fire or Other Casualty.
a) If the Premises or Building is damaged or destroyed by fire or
other casualty, Tenant shall promptly notify Landlord whereupon Landlord shall,
subject to the
<PAGE>
consent of Landlord's present or future mortgagee and to the conditions set
forth in this Section 15, repair, rebuild or replace such damage and restore the
Premises to substantially the same condition as the Premises were in immediately
prior to such damage or destruction; provided, however, that Landlord shall only
be obligated to restore such damage or destruction to the extent of the proceeds
of fire and other extended coverage insurance policies. Notwithstanding anything
to the contrary contained in this Lease, if the Premises is damaged or destroyed
by fire or any casualty which cannot, despite diligent, good faith efforts be
repaired or restored within one hundred eighty (180) days following the date on
which such damage occurs, then Tenant or Landlord may elect to terminate this
Lease effective as of the date of such damage or destruction. Within thirty (30)
days after the date of such damage, the parties shall determine how long the
repair and restoration will take. After that determination has been made, if the
determination is that the restoration will take more than one hundred eighty
(180) days to complete, Tenant and Landlord shall have a period of thirty (30)
days to terminate this Lease by giving written notice to the other. If neither
party elects to terminate this Lease as provided herein, then Landlord shall,
subject to the provisions of this Section, promptly commence and diligently
pursue to completion the repair of such damage so that the Premises are restored
to a condition of similar quality, character and utility for Tenant's purposes.
If the Premises are not substantially repaired and restored within two hundred
and forty (240) days of the date of the damage, Tenant may cancel this Lease at
any time before Landlord substantially completes the repairs and delivers the
restored Premises to Tenant. If Tenant does not so terminate, Landlord shall
continue to restore the Premises. In the event of termination, Landlord shall
return any prepaid Fixed Basic Rent, Additional Rent and any other prepaid
amounts to Tenant within thirty (30) days from the date of termination of this
Lease. If any damage or destruction occurs to the Premises during the last year
of the Term and the cost to repair the damage exceeds Five Hundred Thousand
Dollars ($500,000.00) either Landlord or Tenant may terminate this Lease upon
giving the other party thirty (30) days written notice; provided, however, that
if Landlord notifies Tenant that it wishes to terminate this Lease, then Tenant
may, if it has not already done so, exercise its right to extend the term of the
Lease under Rider A, whereupon Landlord's election to terminate shall be null
and void. If Landlord is required to repair or restore the Premises under any
provision of this Article and Tenant's use of the Premises is affected, then
until Landlord completes such repair or restoration, Fixed Basic Rent,
Additional Rent and all other charges payable by Tenant hereunder shall abate in
their entirety, unless Tenant remains in possession of the Premises, in which
event such rent and other charges shall abate based on the portion of the
Premises which is not being used by Tenant.
b) The repair, rebuilding or replacement work shall be commenced
promptly and completed with due diligence, taking into account the time required
by Landlord to effect a settlement with, and procure insurance proceeds from,
the insurer, and for delays beyond Landlord's reasonable control.
c) The net amount of any insurance proceeds recovered by reason
of the damage or destruction of the Building (meaning the gross insurance
proceeds excluding proceeds received pursuant to a rental coverage endorsement
and the cost of adjusting the
<PAGE>
insurance claim and collecting the insurance proceeds) shall be applied towards
the cost of restoration. Notwithstanding anything to the contrary in this Lease
Agreement, if in Landlord's reasonable opinion the net insurance proceeds will
not be adequate to complete such restoration, Landlord shall have the right to
terminate this Lease and all the unaccrued obligations of the parties hereto by
sending a written notice of such termination to Tenant specifying a termination
date no less than ten (10) days after its transmission; provided, that Landlord
terminates all other office Leases in the Building affected by such casualty. If
the net insurance proceeds are more than adequate, the amount by which the net
insurance proceeds exceed the cost of restoration will be retained by Landlord
or applied to repayment of any mortgage secured by the Premises.
d) Landlord's obligation or election to restore the Premises
under this Section shall be subject to the terms of any present or future
mortgage affecting the Premises and to the mortgagee's consent if required in
the mortgage and shall not, in any event, include the repair, restoration or
replacement of the fixtures, improvements, alterations, furniture or any other
property owned, installed, made by, or in the possession of Tenant.
e) Landlord shall maintain insurance against loss or damage to
the Building by fire and such other casualties as may be included within fire
and extended coverage insurance or all-risk insurance, together with a rental
coverage endorsement or other comparable form of coverage. If Tenant is
dispossessed of the Premises due to fire or other casualty, Tenant will receive
an abatement of its Fixed Basic Rent during the period Tenant is dispossessed to
the extent of payments received by Landlord from the carrier providing the
rental coverage endorsement.
16. Non-Abatement of Rent. Except as otherwise expressly provided in
this Lease there shall be no abatement or reduction of the Fixed Basic Rent,
Additional Rent or other sums payable hereunder for any cause whatsoever and
this Lease shall not terminate, nor shall Tenant be entitled to surrender the
Premises, in the event of fire, casualty or condemnation or any default by
Landlord under this Lease.
17. Indemnification
a) Unless such loss, costs or damages were caused by negligence
of Landlord, its employees, agents or contractors, Tenant hereby agrees to
indemnify, defend and hold the Landlord and its employees, agents and
contractors harmless from any loss, costs and damages (including reasonable
attorney's fees and costs) suffered by Landlord, its agents, employees or
contractors, as a result of any claim by a third party, its agents, employees or
contractors arising from Tenant's occupancy of the Premises. Tenant shall have
the right to designate counsel acceptable to Landlord, such approval not be
unreasonably withheld, to assume the defense of any such third party claim on
behalf of itself and Landlord. Landlord shall not have the right to settle any
claim without the consent of Tenant. This indemnity shall survive the expiration
or termination of this Lease.
<PAGE>
b) Unless such loss, costs or damages were caused by negligence
of Tenant, its employees, agents or contractors, Landlord hereby agrees to
indemnify, defend and hold the Tenant and its employees, agents and contractors
harmless from any loss, costs and damages (including reasonable attorney's fees
and costs) suffered by Tenant, its agents, employees or contractors, as a result
of any claim by a third party, its agents, employees or contractors arising from
Landlord's ownership and operation of the Property. Landlord shall have the
right to designate counsel acceptable to Tenant, such approval not be
unreasonably withheld, to assume the defense of any such third party claim on
behalf of itself and Tenant. Tenant shall not have the right to settle any claim
without the consent of Landlord. This indemnity shall survive the expiration or
termination of this Lease.
c) If Landlord brings any action under this Lease Agreement,
Tenant agrees in each case to pay Landlord's reasonable attorney's fees and
other costs and expenses incurred by Landlord in connection therewith; provided,
however, the Landlord prevails in such action.
18. Condemnation.
a) Condemnation of Premises. If any portion of the Premises is
taken under the power of eminent domain, or sold by Landlord under the threat of
the exercise of said power (the act of which is herein referred to as
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes possession of the condemned portion of the
Premises (the "Condemnation Date"). If the entire Premises is condemned, then
the Lease shall automatically terminate as of the Condemnation Date. The party
who receives the condemnor's notice of intention to take (the "Condemnation
Notice") shall immediately give a copy of such notice to the other party.
b) Condemnation of the Property. If as a result of any
condemnation of the Property or any portion thereof (even though the Premises is
not physically affected) or (a) the number of parking spaces on the Property is
reduced by more than fifty (50) spaces and Landlord does not provide alternative
parking which is reasonably accessible, then Tenant may terminate this Lease at
any time after Tenant receives the Condemnation Notice by giving Landlord thirty
(30) days written notice.
c) Condemnation of the Building. If a condemnation of any portion
of the Building (even though the Premises is not physically affected) renders
the Building unsuitable for use as an office Building in the Landlord's
reasonable business judgment, then Landlord may terminate this Lease by giving
the Tenant at least thirty (30) days written notice. Notwithstanding the
foregoing, Landlord may only exercise its right to terminate under this Section
if Landlord terminates the Leases of all other tenants in the Building.
d) Restoration. If this Lease is not terminated as to the whole
Premises, (a) it shall remain in full force and effect as to the portion of the
Premises remaining,
<PAGE>
provided the Fixed Basic Rent and all other charges payable hereunder shall be
reduced in the same proportion that the area taken bears to the total area of
the Premises prior to the taking, and (b) Landlord shall use the condemnation
award to restore the Premises and the Building as soon as reasonably possible to
a complete unit of the same quality, character and utility for Tenant's purposes
existing prior to the condemnation. If the Lease is not terminated but the
Premises cannot be restored (as reasonably determined by Landlord and Tenant) to
substantially the same condition as existed prior to the date of the
condemnation within one hundred and eighty (180) days, then this Lease shall
terminate upon written notice from either party to the other.
e) Award. In the event of a condemnation affecting Tenant, Tenant
shall have the right to make a claim against the condemnor for removal expenses
and moving expenses, loss of business and any other claims Tenant may have;
provided and to the extent, however, that such claims or payments do not reduce
the sums otherwise payable by the condemnor to Landlord. Except as aforesaid,
Tenant hereby waives all claims against Landlord and against the condemnor, and
Tenant hereby assigns to Landlord all claims against the condemnor including,
without limitation, all claims for leasehold damages and diminution in value of
Tenant's leasehold interest.
19. Quiet Enjoyment. Tenant, upon paying the Fixed Basic Rent,
Additional Rent and other charges herein required and observing and keeping all
covenants, agreements and conditions of this Lease, shall quietly have and enjoy
the Premises during the Term without hindrance or molestation by anyone claiming
by or through Landlord, subject, however, to the exceptions, reservations and
conditions of this Lease.
20. Rules and Regulations. The Landlord hereby reserves the right to
prescribe, from time to time, at its sole discretion, reasonable rules and
regulations (herein called the "Rules and Regulations") attached hereto as
Exhibit B governing the use and enjoyment of the Premises and the remainder of
the Property. The Rules and Regulations shall not materially interfere with the
Tenant's use and enjoyment of the Premises in accordance with the provisions of
this Lease for the Permitted Use and shall not increase or modify Tenant's
obligations under this Lease. In the event of a conflict between the Lease
Agreement and such rules and regulations, the Lease Agreement shall control. The
Tenant shall comply at all times with the Rules and Regulations and shall cause
its agents, employees, invitees, visitors, and guests to do so.
21. Assignment and Sublease.
a) Tenant may assign this Lease or sublet the whole orany portion
of the Premises, subject to the Landlord's prior written consent, which consent
shall not be unreasonably withheld or delayed on the basis of the following
terms and conditions:
i) The Tenant shall provide to the Landlord the name and
address of the assignee or subtenant.
<PAGE>
ii) The assignee or subtenant shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such assumption
agreement shall be furnished to the Landlord within ten (10) days of its
execution. Any sublease shall expressly acknowledge that said subtenant's rights
against Landlord shall be no greater than those of Tenant.
iii) The Tenant and each assignee shall be and remain liable
for the observance of all the covenants and provisions of this Lease, including,
but not limited to, the payment of Fixed Basic Rent and Additional Rent reserved
herein, through the entire Term of this Lease, as the same may be renewed,
extended or otherwise modified.
iv) The Tenant and any assignee shall promptly pay to Landlord
one-half of the net profit received from such subleasing or assignment. Net
profit will be calculated after deducting the Tenant's Transfer Expenses (as
hereinafter defined). "Transfer Expenses" shall mean (i) the reasonable
out-of-pocket costs and expenses of Tenant in making such sublease or
assignment, as the case may be, such as market rate brokers' fees, reasonable
attorneys' fees and advertising fees, (ii) any fees paid to Landlord pursuant to
the terms of this Lease, (iii) the cost of improvements or alterations made by
Tenant expressly for the purpose of preparing the Premises for such subtenant or
assignee, and (iv) the unamortized cost of any Tenant's property leased to and
used by such subtenant or assignee. In determining Transfer Expenses, the costs
set forth in clauses (i), (ii) and (iii) shall be amortized on a straight-line
basis over the term of the sublease, or the remainder of the term of this Lease,
if an assignment, and the costs set forth in clause (iv) shall be amortized on a
straight-line basis over the greater of (x) the longest useful life of such
improvements, alterations or property (as permitted pursuant to the Internal
Revenue Code of 1986, as amended), or (y) the term of the sublease, or the
remainder of the Term of this Lease, if an assignment.
v) In any event, the acceptance by the Landlord of any rent
from the assignee or from any of the subtenants or the failure of the Landlord
to insist upon a strict performance of any of the terms, conditions and
covenants herein shall not release the Tenant herein, nor any assignee assuming
this Lease, from any and all of the obligations herein during and for the entire
Term of this Lease.
vi) Landlord shall require a Five Hundred Dollars ($500.00)
payment to cover its handling charges for each request for consent to any sublet
or assignment prior to its consideration of the same. Tenant acknowledges that
its sole remedy with respect to any assertion that Landlord's failure to consent
to any sublet or assignment is unreasonable shall be the remedy of specific
performance and Tenant shall have no other claim or cause of action against
Landlord as a result of Landlord's actions in refusing to consent thereto.
b) Notwithstanding anything to the contrary in this Lease, Tenant
may, upon ten (10) days written notice to Landlord but without Landlord's prior
written consent, and without Landlord having any right to terminate this Lease
or share in any consideration or profit therefor, assign or transfer its entire
interest in this Lease and the leasehold estate
<PAGE>
hereby created, or sublease the entire demised premises, to a successor
corporation of Tenant, which for the purposes of this Lease shall mean either
(a) any corporation or other business entity which controls, is controlled by,
or under common control with, Tenant (a "related corporation"), or (b) a
corporation or other business entity into which or with which Tenant, its
corporate successors or assigns, is merged or consolidated, in accordance with
applicable statutory provisions for the merger or consolidation of corporations,
provided that by operation of law or by effective provisions contained in the
instruments of merger or consolidation the liabilities of the corporations or
other business entities participating in such merger or consolidation are
assumed by the corporation or other business entity surviving such merger or
consolidation, or (c) a corporation or other business entity acquiring
substantially all of Tenant's assets, or (d) any successor to a successor
corporation becoming such by any of the methods described in subdivisions (a),
(b) and (c) above; provided, however, that Tenant shall have no such right to
assign or transfer to a successor corporation unless Tenant shall not be in
default in the performance of any of its obligations under this Lease beyond the
applicable notice and cure period and provided that in the event of such merger,
consolidation or transfer of (i) the successor to Tenant has a net worth
computed in accordance with generally accepted accounting principles at least
equal to the greater of (1) the net worth of Tenant immediately prior to such
merger, consolidation or transfer, or (2) the net worth of Tenant herein named
on the date of this Lease, and (ii) proof satisfactory to Landlord of such net
worth shall have been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction. For the purposes hereof "control" shall
be deemed to mean ownership of not less than fifty percent (50%) of all of the
voting stock of such corporation, or not less than fifty percent (50%) of all of
the legal and equitable interest in any other business entity, or the possession
of the power, directly or indirectly, to direct or cause the direction of
management and policy of a corporation or other business entity, whether through
the ownership of voting securities, common directors or officers, the
contractual right to manage the business affairs of such business entity, or
otherwise. Notwithstanding anything to the contrary contained in this Lease and
(x) any sale or transfer of Tenant's capital stock through any public exchange,
or redemption or issuance of additional stock of any class, shall not be deemed
an assignment, subletting or any other transfer of this Lease or the Premises
d) In the event that any or all of Tenant's interest in the
Premises and/or this Lease is transferred by operation of law to any trustee,
receiver, or other representative or agent of Tenant, or to Tenant as a debtor
in possession, and subsequently any or all of Tenant's interest in the Premises
and/or this Lease is offered or to be offered by Tenant or any trustee,
receiver, or other representative or agent of Tenant as to its estate or
property (such person, firm or entity being hereinafter referred to as the
"Grantor", for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than Landlord (each such transaction being hereinafter
referred to as a "Disposition"), it is agreed that Landlord has and shall have a
right of first refusal to purchase, take, or otherwise acquire, the same upon
the same terms and conditions as the Grantor thereof shall accept upon such
Disposition to such other person, firm, or entity; and as to each such
Disposition the Grantor shall give written notice to Landlord in reasonable
detail of all of the terms and conditions of such Disposition within twenty
(20) days next following its determination to accept the same but prior to
accepting the same, and Grantor shall not make the Disposition until and
<PAGE>
unless Landlord has failed or refused to accept such right of first refusal as
to the Disposition, as set forth herein. Landlord shall have sixty (60)days next
following its receipt of the written notice as to such Disposition in which to
exercise the option to acquire Tenant's interest by such Disposition, and the
exercise of the option by Landlord shall be effected by notice to that effect
sent to the Grantor; but nothing herein shall require Landlord to accept a
particular Disposition or any Disposition, nor does the rejection of any one
such offer of first refusal constitute a waiver or release of the obligation of
the Grantor to submit other offers hereunder to Landlord. In the event Landlord
accept such offer of first refusal, the transaction shall be consummated
pursuant to the terms and conditions of the Disposition described in the notice
to Landlord. In the event Landlord rejects such offer of first refusal, Grantor
may consummate the Disposition with such other person, firm, or entity; but any
decrease in price of more than two percent (2%)of the price sought from Landlord
or any change in the terms of payment for such Disposition shall constitute a
new transaction requiring a further option of first refusal to be given to
Landlord hereunder.
e) Without limiting any of the provisions of this Section 21, if
pursuant to the Federal Bankruptcy Code (herein referred to as the "Code"), or
any similar law hereafter enacted having the same general purpose, Tenant is
permitted to assign this Lease notwithstanding the restrictions contained in
this Lease, adequate assurance of future performance by an assignee expressly
permitted under such Code shall be deemed to mean the deposit of cash security
in an amount equal to the sum of one year's Fixed Basic Rent plus an amount
equal to the Additional Rent for the calendar year preceding the year in which
such assignment is intended to become effective, which deposit shall be held by
Landlord for the balance of the Term, without interest, as security for the full
performance of all of Tenant's obligations under this Lease, to be held and
applied in the manner specified for any security deposit required hereunder.
f) Except as specifically set forth above, no portion of the
Premises or of Tenant's interest in this Lease may be acquired by any other
person or entity, whether by assignment, mortgage, sublease, transfer, operation
of law or act of the Tenant, nor shall Tenant pledge its interest in this Lease
or in any security deposit required hereunder.
22. Tenant's Relocation. [Intentionally Deleted].
23. Subordination. The estate of this Lease and Tenant's rights
hereunder shall be subject and subordinate at all times in lien and priority to
any first mortgage or other primary encumbrance now or hereafter placed upon or
affecting the Property or the Premises, and to any second mortgage or
encumbrance with the consent of the first mortgagee, and to all renewals,
modifications, consolidations and extensions thereof, without the necessity of
any further instrument or act on the part of Tenant. Tenant shall execute and
deliver upon demand any further instrument or instruments confirming the
subordination of this Lease to the lien of any such first mortgage or to the
lien of any other mortgage, if requested to do so by Landlord with the consent
of the first mortgagee, and any further instrument or instruments of attornment
that may be desired by any such mortgagee or Landlord, provided, however, that
any holder of such lien or mortgage agrees not to disturb the use and occupancy
of the Premises in accordance with the terms
<PAGE>
of this Lease Agreement upon any foreclosure. Notwithstanding the foregoing, any
mortgagee may at any time subordinate its mortgage to this Lease, without
Tenant's consent, by giving notice in writing to Tenant and thereupon this Lease
shall be deemed prior to such mortgage without regard to their respective dates
of execution and delivery. In that event such mortgagee shall have the same
rights with respect to this Lease as though this Lease had been executed prior
to the execution and delivery of the mortgage and had been assigned to such
mortgagee. Landlord agrees that it will use best efforts to obtain and deliver
to Tenant a subordination, non-disturbance and attornment agreement from the
holder(s) of any mortgage or other security interest affecting the Premises of
Building.
24. Curing Tenant's Defaults. If Tenant defaults in the performance
of any of its obligations hereunder, beyond any applicable notice and cure
period Landlord may, without any obligation to do so and in addition to any
other rights it may have in law or equity, elect to cure such default on behalf
of Tenant after written notice (except in the case of emergency) to Tenant.
Tenant shall reimburse Landlord upon demand for any reasonable sums paid or
costs incurred by Landlord in curing such default, including interest thereon
from the respective dates of Landlord's making the payments and incurring such
costs, which sums and costs together with interest thereon shall be deemed
Additional Rent payable within ten (10) days of demand.
25. Surrender.
a) At the expiration or earlier termination of the Term Tenant
shall promptly yield up the Premises and all improvements, alterations and
additions thereto, and all fixtures and equipment servicing the Premises in a
condition which is clean of garbage and debris and broom clean and in the same
condition, order and repair in which they are required to be kept throughout the
Term, ordinary wear and tear excepted.
b) Tenant, upon three (3) months prior written notice to
Landlord, Tenant may extend the Term, or if applicable, any renewal term, of the
Lease for one (1) additional three (3) month period and during such period, all
the terms and conditions of this Lease shall apply and Tenant shall pay Fixed
Basic Rent at the rate then being paid by Tenant. If Tenant, or any person
claiming through Tenant, continues to occupy the Premises after the expiration
or earlier termination of the Term or any renewal thereof without prior written
consent of Landlord, the tenancy under this Lease shall become, at the option of
Landlord, expressed in a written notice to Tenant and not otherwise, either from
month-to-month, terminable by Landlord on thirty (30) days prior notice, under
the same terms and conditions set forth in this Lease; except, however, that the
Fixed Basic Rent during such continued occupancy shall be 150% of the amount set
forth in subsection 6(a) and Tenant shall indemnify Landlord for any loss or
damage incurred by reason of Tenant's failure to surrender the Premises.
Anything to the contrary notwithstanding, any holding over by Tenant without
Landlord's prior written consent shall constitute a default hereunder and shall
be subject to all the remedies set forth in subsection 26(b) hereof.
<PAGE>
26. Defaults-Remedies.
a) Defaults. It shall be an event of default under this Lease if
any one or more of the following events occurs:
i) Tenant fails to pay in full, within five (5) days after
when due and without demand, any and all installments of Fixed Basic Rent or
Additional Rent or any other charges or payments due and payable under this
Lease whether or not herein included as rent.
ii) Tenant violates or fails to perform or otherwise breaches
any agreement, term, covenant or condition contained in this Lease and fails to
cure same within 20 days after notice.
iii) Tenant abandons or vacates the Premises without notice
without having first paid to Landlord in full all Fixed Basic Rent, Additional
Rent and other charges that have become due as well as all which will become due
thereafter through the end of the Term.
iv) Tenant becomes insolvent or bankrupt in any sense or makes
an assignment for the benefit of creditors or if a petition in bankruptcy or for
reorganization or for an arrangement with creditors under any federal or state
law is filed by or against Tenant, or a bill in equity or other proceeding for
the appointment of a receiver or similar official for any of Tenant's assets is
commenced, or if any of the real or personal property of Tenant shall be levied
upon by any sheriff, marshal or constable; provided, however, that any
proceeding brought by anyone other than the parties to this Lease under any
bankruptcy, reorganization arrangement, insolvency, readjustment, receivership
or similar law shall not constitute an event of default until such proceeding,
decree, judgment or order has continued unstayed for more than sixty
(60) consecutive days.
b) Remedies. Upon the occurrence of an event of default under
this Lease, Landlord shall have all of the following rights:
i) Landlord may charge a late payment charge of five (5%)
percent of any amount owed to Landlord pursuant to this Lease which is not paid
within five (5) days of the due date which is set forth in the Lease or, if a
due date is not specified in this Lease, within thirty (30) days of the mailing
of a bill therefor by Landlord. If Landlord incurs a late charge in connection
with any payment which Tenant has failed to make within the times required in
this Lease, Tenant shall pay Landlord, in addition to such payment due, the full
amount of such late charge incurred by Landlord. Nothing in this Lease shall be
construed as waiving any rights of Landlord arising out of any default of
Tenant, by reason of Landlord's imposing or accepting any such late charge(s)
and/or interest; the right to collect such late charge(s) and/or interest is
separate and apart from any rights relating to remedies of Landlord after
default by Tenant including, without limitation, the rights and remedies of
Landlord provided herein. For the first time in any
<PAGE>
calendar year that Tenant has failed to pay any such monthly installment of
Fixed Basic Rent or Additional Rent, such interest and late charge shall not
apply unless Tenant has failed to make such payments within five (5) days of
receipt of Landlord's written notice of such delinquency. Landlord shall not be
required to give Tenant such notice more than once in any calendar year prior to
assessing such interest and late charge.
ii) Landlord may accelerate the whole or any part of the Fixed
Basic Rent and all Additional Rent for the entire unexpired balance of the Term
of this Lease, as well as all other charges, payments, costs and expenses herein
agreed to be paid by Tenant, and any Fixed Basic Rent or other charges,
payments, costs and expenses so accelerated shall, in addition to any and all
installments of rent already due and payable and in arrears and any other charge
or payment herein reserved, included or agreed to be treated or collected as
rent and any other charge, expense or cost herein agreed to be paid by Tenant
which may be due and payable and in arrears, be deemed due and payable as if, by
the terms and provisions of this Lease, such accelerated rent and other charges,
payments, costs and expenses were on that date payable in advance but in the
event that the Premises are relet, Tenant shall be entitled to a credit in an
amount equal to the net sum of rents actually received by Landlord in reletting
after deduction of all reasonable expenses.
iii) Landlord may re-enter the Premises and, at the option of
Landlord, remove all persons and all or any property therefrom, either by
summary dispossess proceedings or by any suitable action or proceeding at law
without being liable for prosecution or damages therefor, and Landlord may
repossess and enjoy the Premises. Upon recovering possession of the Premises by
reason of or based upon or arising out of a default on the part of Tenant,
Landlord may, at Landlord's option, either terminate this Lease or make such
alterations and repairs as may be necessary in order to relet the Premises and
may relet the Premises or any part or parts thereof, either in Landlord's name
or otherwise, for a term or terms which may, at Landlord's option, be less than
or exceed the period which would otherwise have constituted the balance of the
Term of this Lease and at such rent or rents and upon such other terms and
conditions as in Landlord's reasonable discretion may seem advisable and to such
person or persons as may in Landlord's discretion seem best; upon each such
reletting all rents received by Landlord from such reletting shall be applied as
follows: first, to the payment of any reasonable costs and expenses of such
reletting, including all costs of alterations and repairs; second, to the
payment of any indebtedness other than Fixed Basic Rent, Additional Rent or
other charges due hereunder from Tenant to Landlord; third, to the payment of
Fixed Basic Rent, Additional Rent and other charges due and unpaid hereunder;
and the residue, if any, shall be held by Landlord and applied in payment of
future rent as it may become due and payable hereunder. If rentals received from
reletting during any month are less than that to be paid during that month by
Tenant, Tenant shall pay any such deficiency to Landlord. Such deficiency shall
be calculated and paid monthly. No such re-entry or taking possession of the
Premises or the making of alterations or improvements thereto or the reletting
thereof shall be construed as an election on the part of Landlord to terminate
this Lease unless written notice of termination is given to Tenant. Landlord
shall in no event be liable in any way
<PAGE>
whatsoever for failure to relet the Premises or, in the event that the Premises
or any part or parts thereof are relet, for failure to collect the rent thereof
under such reletting. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for such
previous breach.
iv) Landlord may terminate this Lease and the Term without any
right on the part of Tenant to waive the forfeiture by payment of any sum due or
by other performance of any condition, term or covenant broken. Upon such
termination, Landlord shall be entitled to recover, in addition to any and all
sums and damages for violation of Tenant's obligations hereunder in existence at
the time of such termination, damages for Tenant's default in an amount equal to
the amount of the Fixed Basic Rent and Additional Rent reserved for the balance
of the Term, as well as all other charges, payments, costs and expenses herein
agreed to be paid by Tenant all of which amount shall be immediately due and
payable from Tenant to Landlord upon demand therefor.
v) WHEN THIS LEASE AND THE TERM OR ANY EXTENSION OR RENEWAL
THEREOF SHALL HAVE BEEN TERMINATED ON ACCOUNT OF ANY DEFAULT BY TENANT, OR WHEN
THE TERM HAS EXPIRED, IT SHALL BE LAWFUL FOR ANY ATTORNEY OF ANY COURT OF RECORD
TO APPEAR AS ATTORNEY FOR TENANT AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH
OR UNDER TENANT, AND TO FILE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN
ACTION FOR JUDGMENT IN EJECTMENT AGAINST TENANT AND ALL PERSONS CLAIMING BY,
THROUGH OR UNDER TENANT FOR THE RECOVERY BY LANDLORD OF POSSESSION OF THE
PREMISES, FOR WHICH THIS LEASE SHALL BE A SUFFICIENT WARRANT; WHEREUPON, IF
LANDLORD SO DESIRES, AN APPROPRIATE WRIT OF POSSESSION MAY ISSUE FORTHWITH,
WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER, AND PROVIDED THAT IS FOR ANY
REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED IT SHALL BE DETERMINED AND
POSSESSION OF THE PREMISES REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL
HAVE THE RIGHT FOR THE SAME DEFAULT AND UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS,
OR UPON THE TERMINATION OF THIS LEASE OR TENANT'S RIGHT OF POSSESSION AS
HEREINBEFORE SET FORTH, TO BRING ONE OR MORE FURTHER ACTIONS IN EJECTMENT AS
HEREINBEFORE SET FORTH TO CONFESS JUDGMENT FOR THE RECOVERY OF POSSESSION OF THE
PREMISES.
c) Waiver of Jury Trial. IT IS MUTUALLY AGREED BY AND BETWEEN
LANDLORD AND TENANT THAT (A) THEY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTER-CLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OCCUPANCY OF THE
PREMISES OR CLAIM OF INJURY OR DAMAGE, AND (B) IN ANY ACTION BY LANDLORD AGAINST
TENANT, THE LEGAL FEES OF THE
<PAGE>
PREVAILING PARTY WILL BE PAID BY THE OTHER PARTY TO THE ACTION.
d) Non-Waiver. No waiver by Landlord of any breach by Tenant of
any of Tenant's obligations, agreements or covenants herein shall be a waiver of
any subsequent breach or of any other obligation, agreement or covenant, nor
shall any forbearance by Landlord to seek a remedy for any event of default by
Tenant be a waiver by Landlord of any rights and remedies with respect to such
or any subsequent event of default.
e) Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy provided herein or by law, but each shall be cumulative and in
addition to every other right or remedy given herein or now or hereafter
existing at law or in equity or by statute.
f) Duty to Mitigate. Notwithstanding any other provisions of this
Lease, Landlord shall use all commercially reasonable efforts to mitigate its
damages and relet the Premises. Landlord's duty to mitigate damages shall be
deemed satisfied if Landlord lists the Premises for lease with a reputable
commercial real estate broker who reasonably markets the Premises and Landlord
subsequently deals with any tenant prospects, in a commercially reasonable
manner.
27. Condition of Premises. Tenant represents that the Property and
the Premises, the have been examined by Tenant and Tenant accepts them in the
condition or state in which they now are, or any of them now is, without relying
on any representation, covenant or warranty, express or implied, in fact or in
law, by Landlord and without recourse to Landlord, the nature, condition or
usability thereof or the use or uses to which the Premises and the Property or
any part thereof may be put under present zoning ordinances or otherwise, except
as to work to be performed by Landlord pursuant to Section 3 and except as to
latent defects in such work.
28. Hazardous Substances.
a) Landlord and Tenant shall not cause or allow the generation,
treatment, storage or disposal of Hazardous Substances on or near the Premises
or Property. "Hazardous Substances" shall mean (i) any hazardous substance as
that term is defined in the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended, (ii) any
------
hazardous waste or hazardous substance as those terms are defined in any local,
state or Federal law, regulation or ordinance not inapplicable to the Premises
and Property, or (iii) petroleum including crude oil or any fraction thereof. In
the event Landlord or Tenant uses any Hazardous Substances, Landlord or Tenant
shall dispose of such substances in accordance with all applicable Federal,
state and local laws, regulations and ordinances.
b) Landlord and Tenant agree to indemnify, defend and hold
harmless the other, its employees, agents, successors, and assigns, from and
against any and all
<PAGE>
damage, claim, liability, or loss, including reasonable attorneys' and other
fees, arising out of or in any way connected to the generation, treatment,
storage or disposal of Hazardous Substances by Landlord or Tenant, its
employees, agents, contractors, or invitees, on or near the Premises or
Property. Such duty of indemnification shall include, but not be limited to
damage, liability, or loss pursuant to all Federal, state and local
environmental laws, rules and ordinances, strict liability and common law.
c) Landlord and Tenant agree to notify each other immediately of
any disposal of Hazardous Substances in the Premises or Property, of any
discovery of Hazardous Substances in the Premises, or of any notice by a
governmental authority or private party alleging or suggesting that a disposal
of Hazardous Substances on or near the Premises or Property may have occurred.
Furthermore, Landlord and Tenant agree to provide the other with full and
complete access to any documents or information in its possession or control
relevant to the question of the generation, treatment, storage, or disposal of
Hazardous Substances on or near the Premises.
d) Landlord represents and warrants that, to the best of its
knowledge, there are no Hazardous Substances in, under or about the Building.
Landlord shall be responsible, at its sole cost and expense, for compliance with
any governmental law, order, regulation, or requirement relating to the removal,
encapsulation, or other treatment of any asbestos containing materials or other
Hazardous Substances located within or about the Premises as of the date of this
Lease, and for the removal of any asbestos or asbestos containing materials or
other Hazardous Substances within or about the Premises, unless the presence of
any such asbestos or other Hazardous Substances was caused by Tenant, or its
employees, agents or invitees.
29. Recording. Neither this Lease nor a memorandum of this Lease
shall be recorded in any public records without the written consent of Landlord.
30. Brokers' Commission. Tenant and Landlord represent and warrant to
each other that the Brokers (as defined in the Preamble) are the sole brokers
with whom each has negotiated in bringing about this Lease and Tenant and
Landlord agree to indemnify and hold each other and Landlord's mortgagee(s)
harmless from any and all claims of other brokers and expenses in connection
therewith arising out of a representations made herein. In no event shall
Landlords mortgagee(s) have any obligation to any broker involved in this
transaction. Landlord shall pay the Brokers' commissions pursuant to a separate
agreement.
31. Notices. All notices, demands, requests, consents, certificates,
and waivers required or permitted hereunder from either party to the other shall
be in writing and sent by United States certified mail, return receipt
requested, postage prepaid, or by recognized overnight courier, addressed as
follows:
If to Tenant:
Broadview Networks, Inc.
45-l8 Court Square, Suite 403
<PAGE>
Long Island City, NY 11101
Atten: Scott Matukas, Vice President
with a copy to:
Littman Krooks Roth and Ball P.C.
655 Third Avenue, 20th Floor
New York, New York 10017
Attention: Stuart S. Ball, Esq.
If to Landlord:
400 Horsham Road Associates, L.P.
c/o O'Neill Properties Group, L.P.
1101 West DeKalb Pike, Suite 200
Wayne, PA 19087
Attn: President
with a copy to:
Kevin W. Walsh, Esquire
Adelman Lavine Gold and Levin
1101 West DeKalb Pike, Suite 201
Wayne, PA 19087
Either party may at any time, in the manner set forth for giving notices to the
other, specify a different address to which notices to it shall thereafter be
sent.
32. Irrevocable Offer: No Option. Although Tenant's execution of this
Lease shall be deemed an offer irrevocable by Tenant, the submission of this
Lease by Landlord to Tenant for examination shall not constitute a reservation
of or option for the Premises. This Lease shall become effective only upon
execution thereof by an authorized officer of the general partner of the
Landlord and by an authorized officer of Tenant.
33. Inability to Perform. In the event either party shall be delayed
or hindered in or prevented from the performance of any covenant, agreement,
work, service, or other act required under this Lease to performed by such party
(other than Tenant's obligation to pay Rent) and such delay or hindrance is due
to strikes, lockouts, failure of power or other utilities, injunction or other
court or administrative order, governmental law or regulations which prevent or
substantially interfere with the required performance, condemnations, riots,
insurrections, martial law, civil commotion, war, fire, flood, earthquake, or
other casualty, acts of God, or other causes not within the reasonable control
of such party, the performance of any covenant, agreement, work, service, or
other act shall be excused for the period of delay and the period for the
performance of the same extended by the period.
34. Survival. Notwithstanding anything to the contrary contained in
this Lease,
<PAGE>
the expiration of the Term of this Lease, whether by lapse of time or otherwise,
shall not relieve Tenant from its obligations accruing prior to the expiration
of the Term.
35. Corporate Tenants. If Tenant is a corporation, the
person(s) executing this Lease on behalf of Tenant hereby covenant(s) and
warrant(s) that: Tenant is a duly formed corporation qualified to do business in
the state in which the Property is located; Tenant will remain qualified to do
business in said state throughout the Term and any renewals thereof; and such
persons are duly authorized by such corporation to execute and deliver this
Lease on behalf of the corporation.
36. Tenant Representations and Warranties. Tenant hereby represents
and warrants to Landlord (i) that Tenant's most recent financial statements
delivered to Landlord in connection with the execution of this Lease are true in
all material respects and no material adverse changes have occurred with respect
thereto, (ii) that upon Landlord's request in connection with Landlord's efforts
to refinance the Property or to sell the Property, or at the request of
Landlord's mortgagee, Tenant will deliver to Landlord current financial
statements which shall be prepared in accordance with generally accepted
accounting principles consistently applied, and (iii) during the Term of the
Lease, no material adverse change shall occur with respect to Tenant's financial
condition.
37. Waiver of Invalidity of Lease. Each party agrees that it will not
raise or assert as a defense to any obligation under the Lease or make any claim
that the Lease is invalid or unenforceable due to any failure of this document
to comply with ministerial requirements including, without limitation,
requirements for corporate seals, attestations, witnesses, notarizations or
other similar requirements and each party hereby waives the right to assert any
such defenses or make any claim of invalidity or unenforceability due to any of
the foregoing.
38. Security Deposit. [Intentionally Deleted].
39. Estoppel Certificate.
a) Tenant shall from time to time, within five (5) days after
Landlord's request or that of any mortgagee of Landlord, execute, acknowledge
and deliver to Landlord a written instrument in recordable form, substantially
in the form attached hereto as Exhibit E (a "Tenant Estoppel Certificate"),
---------
certifying (i) that this Lease is in full force and effect and has not been
modified, supplemented or amended (or, if there have been modifications,
supplements or amendments, that it is in full force and effect as modified,
supplemented or amended, and stating such modifications, supplements and
amendments); (ii) the dates to which Fixed Basic Rent and Additional Rent and
any other charges arising hereunder have been paid; (iii) the amount of any
prepaid rents or credits due Tenant, if any; (iv) if applicable, that Tenant has
accepted possession and has entered into occupancy of the Premises, and
certifying the Commencement Date and the Termination Date; (v) whether or not,
to the best of the Tenant's knowledge, all conditions under the Lease to be
performed by Landlord prior thereto have been satisfied
<PAGE>
and whether or not Landlord is then in default in the performance of any
covenant, agreement or condition contained in this Lease and specifying each, if
any, unsatisfied condition and each, if any, default of which Tenant may have
knowledge; and (vi) any other fact or condition related to the Lease or the
Tenant reasonably requested. Any certification delivered pursuant to the
provisions of this Article shall be intended to be relied upon by Landlord and
any mortgagee or prospective mortgagee or purchaser of the Property or of any
interest therein.
b) The failure of Tenant to execute, acknowledge and deliver to
Landlord a written Tenant Estoppel Certificate in accordance with the provisions
of this Section 39 within said five (5) day period shall constitute an
acknowledgment by Tenant, which may be relied upon by any mortgagee or
prospective mortgagee or any purchaser of the Property or of any interest
therein, that this Lease has not been modified, supplemented or amended except
as set forth in landlord's request, and is in full force and effect (or in full
force and effect as so modified, supplemented or amended), that the Base Rent,
Additional Rent and any other charges arising hereunder have not been paid
beyond the respective due dates immediately preceding the date of such request,
that Tenant has no right of set-off or other defense to this Lease and of the
truth of such other facts and conditions as shall have been requested to be
certified, and shall constitute, as to any person entitled to rely as aforesaid,
a waiver of any defaults which may exist prior to the date of such request.
Notwithstanding the foregoing, Tenant's failure to furnish a Tenant Estoppel
Certificate within said five (5) day period shall constitute a default under
this Lease.
c) Landlord, at any time, and from time to time, on the written
request of Tenant, will execute, acknowledge and delivery to Tenant a
certificate certifying the then current status of the Lease and providing any
other information reasonably requested by Tenant, all substantially in
accordance with Tenant's similar obligations as set forth in this Section 39.
40. Rights Reserved by Landlord. Landlord waives no rights, except
those that may be specifically waived herein, and explicitly retains all other
rights including, without limitation, the following rights, each of which
Landlord may exercise without notice to Tenant and without liability to Tenant
for damage or injury to property, person or business on account of the exercise
thereof, and the exercise of any such rights shall not be deemed to constitute
an eviction or disturbance of Tenant's use or possession of the Premises and
shall not give rise to any claim for set-off or abatement of Rent or any other
claim except as otherwise expressly provided herein: Notwithstanding anything to
the contrary contained in this Lease, any changes, additions or alterations by
Landlord shall not (i) impair access to, visibility of, or frontage of, the
Demised Premises or (ii) materially affect the conduct of Tenant's customary
business therein.
a) Upon sixty (60) days prior notice to change the name or street
address of the Building.
b) To install, affix and maintain any and all signs on the
exterior and on
<PAGE>
the interior of the Building.
c) Upon prior reasonable notice to decorate or to make repairs,
alterations, additions, or improvements, whether structural or otherwise, in and
about the Building, or any part thereof, and for such purposes to enter upon the
Premises and during the continuance of any of such work, to temporarily close
doors, entry ways, public space and corridors in the Building and to interrupt
or temporarily suspend services or use of facilities, all without affecting any
of Tenant's obligations hereunder except as otherwise expressly provided herein,
so long as the Premises are reasonably accessible and usable.
d) To furnish door keys for the entry door(s) in the Premises on
the Commencement Date and to retain at all times, and to use in appropriate
instances, keys to all doors within and into the Premises. Tenant agrees to
purchase only from Landlord additional duplicate keys as required, to change no
locks, and not to affix locks on doors without the prior written consent of the
Landlord which consent shall not be unreasonably withheld or delayed Upon the
expiration of the Term or Tenant's right to possession, Tenant shall return all
keys to Landlord and shall disclose to Landlord the combination of any safes,
cabinets or vaults left in the Premises.
e) To designate and approve all window coverings used in the
Building.
f) To approve the weight, size and location of heavy equipment
and articles in and about the Premises and the Building so as not to exceed the
legal load per square foot designated by the structural engineers for the
Building, and to require all such items and furniture and similar items to be
moved into or out of the Building and Premises only at such reasonable times and
in such reasonable manner as Landlord shall direct in writing. Tenant shall not
install or operate machinery or any mechanical devices of a nature not directly
related to the Permitted Use, of the Premises without the prior written consent
of Landlord which consent shall not be unreasonably withheld or delayed. The
movement of Tenant's property into or out of the Building or the Premises and
within the Building are entirely at the risk and responsibility of Tenant, and
Landlord reserves the right to require written authorization from Tenant, in
form and content reasonably satisfactory to Landlord, before allowing any
property to be moved into or out of the Building or Premises.
g) To regulate delivery of supplies and the usage of the loading
docks, receiving areas and freight elevators.
h) To enter the Premises in accordance with Section 14, and, if
vacated or abandoned, to show the Premises at any time and to prepare the
Premises for re-occupancy.
i) To erect, use and maintain pipes, ducts, wiring and conduits,
and appurtenances thereto, in and through the Premises.
j) To grant to any person or to reserve unto itself the exclusive
right to
<PAGE>
conduct any business or render any service in the Building other than a
competitor of Tenant. If Landlord elects to make available to tenants in the
Building any services or supplies, or arranges a master contract therefor,
Tenant agrees to obtain its requirements, if any, therefor from Landlord or
under any such contract, provided that the charges therefor are reasonably
consistent with market rates.
k) To alter the layout, design and/or use of the Building in such
manner as Landlord, in its sole discretion, deems appropriate, so long as the
character of the Building as a first class office building is maintained.
41. Miscellaneous.
a) Entire Agreement. This Lease represents the entire agreement
between the parties hereto and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the Premises or the
Property. No rights, easements or licenses are acquired in the Property or any
land adjacent to the Property by Tenant by implication or otherwise except as
expressly set forth in the provisions of this Lease.
b) Modification. This Lease shall not be modified in any manner
except by an instrument in writing executed by the parties. In addition, Tenant
agrees to make such changes to this Lease as are required by any mortgagee,
provided such changes do not substantially affect Tenant's rights and obligation
hereunder.
c) Interpretation. The masculine (or neuter) pronoun, singular
number, shall include the masculine, feminine and neuter genders and the
singular and plural number.
d) Exhibits. Each writing or plan referred to herein as being
attached as an Exhibit or otherwise designated herein as an Exhibit hereto is
hereby made a part hereof.
e) Captions and Headings. The captions and headings of sections,
subsections and the table of contents herein are for convenience only and are
not intended to indicate all of the subject matter in the text and they shall
not be deemed to limit, construe, affect or alter the meaning of any provisions
of this Lease and are not to be used in interpreting this Lease or for any other
purpose in the event of any controversy.
f) Interest. Wherever interest is required to be paid hereunder,
such interest shall be at the highest rate permitted under law but not in excess
of the prime rate (as set forth in the Wall Street Journal plus two percentage
points per annum).
g) Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be
<PAGE>
affected thereby, and each term and provision of this Lease shall be valid and
be enforced to the fullest extent permitted by law.
h) Joint and Several Liability. If two or more individuals,
corporations, partnerships or other persons (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other persons to pay the Rent and perform all other
obligations hereunder shall be deemed to be joint and several, and all notices,
payments and agreements given or made by, with or to any one of such
individuals, corporations, partnerships or other persons shall be deemed to have
been given or made by, with or to all of them. In like manner, if Tenant shall
be a partnership or other legal entity, the members of which are, by virtue of
any applicable law or regulation, subject to personal liability, the liability
of each such member shall be joint and several.
i) No Representations by Landlord. Landlord and Landlord's agents
have made no representations, agreements, conditions, warranties, understandings
or promises, either oral or written, other than as expressly set forth herein,
with respect to this Lease, the Premises and/or the Building.
j) Relationship of Parties. This Lease shall not create any
relationship between the parties other than that of Landlord and Tenant.
k) Choice of Law. The terms of this Lease shall be construed
under the laws of the Commonwealth of Pennsylvania, and that exclusive
jurisdiction and venue shall be in the Court of Common Pleas of the County in
which the Property is located.
42. Additional Definitions.
a) "Date of this Lease" or "date of this Lease" shall mean the
date of acceptance of this Lease by the Landlord, following execution and
delivery thereof to Landlord by Tenant and that date shall be inserted in the
space provided in the Preamble.
b) "Landlord" as used herein includes the Landlord named above as
well as its successors and assigns, each of whom shall have the same rights,
remedies, powers, authorities and privileges as it would have had it originally
signed this lease as Landlord. Any such person, whether or not named herein,
shall have no liability hereunder after ceasing to hold title to the Premises.
Neither Landlord nor any principal of Landlord nor any owner of the Building or
the Lot, whether disclosed or undisclosed, shall have any personal liability
with respect to any of the provisions of this Lease or the Premises, and if
Landlord is in breach or default with respect to Landlord's obligations under
this Lease or otherwise, Tenant shall look solely to the equity of Landlord in
the Premises for the satisfaction of Tenant's remedies.
c) "Tenant" as used herein includes the Tenant named above as
well as its heirs, successors and assigns, each of which shall be under the same
obligations, liabilities and disabilities and each of which shall have the same
rights, privileges and
<PAGE>
powers as it would have possessed had it originally signed this Lease as Tenant.
Each and every person named above as Tenant shall be bound formally and
severally by the terms, covenants and agreements contained herein. However, no
such rights, privileges or powers shall inure to the benefit of any assignee of
Tenant, immediate or remote, unless the assignment to such assignee is permitted
or has been approved in writing by Landlord. Any notice required or permitted by
the terms of this Lease may be given by or to any one of the persons named above
as Tenant, and shall have the same force and effect as if given by or to all of
them.
d) "Mortgage" and "Mortgagee" as used herein includes any lien or
encumbrance on the Premises or the Property or on any part of or interest in or
appurtenance to any of the foregoing, including without limitation any ground
rent or ground lease if Landlord's interest is or becomes a leasehold estate.
The word "mortgagee" is used herein to include the holder of any mortgage,
including any ground Landlord if Landlord's interest is or becomes a leasehold
estate. Wherever any right is given to a mortgagee, that right may be exercised
on behalf of such mortgagee by any representative or servicing agent of such
mortgagee.
e) "Person" as used herein includes a natural person, a
partnership, a corporation, an association, and any other form of business
association or entity.
f) "Property" as used herein shall mean the Building and the lot,
tract or parcel of land on which the Building is situated.
g) "Rent" or "rent" as used herein shall mean all Fixed Basic
Rent and Additional Rent reserved under this Lease.
43. Tenant's Right of First Refusal.
a) Subject to the rights of tenants of the Building as of the
date of this Lease, Tenant shall have a right of first refusal ("Right of
Refusal") to lease any additional space which becomes available in the Building
contiguous to the Premises during the Term ("Additional Space"). If Landlord
has Additional Space available and receives a bona fide offer (the "Offer") to
lease the Additional Space from a third party ("Offeror") which Landlord is
willing to accept, Landlord shall send written notice to Tenant, which notice
shall set forth the terms of the third party offer. Within ten (10) days after
receipt of Landlord's notice, Tenant shall reply by written notice either
accepting the Additional Space on the same terms and conditions of the third
party offer, or rejecting the same. Failure to respond within the ten (10) day
period shall constitute a rejection of the Additional Space. If Tenant accepts
the Additional Space, the Additional Space shall be added to the Premises by
amendment to this Lease, which shall include an adjustment of Tenant's
Proportionate Share and such other changes as may be appropriate. In the event
Tenant rejects the Offer, then Landlord may proceed to enter into a lease for
such Additional Space with the Offeror provided such lease is executed by the
Landlord and the Offeror within six (6) months from the date of the Offer. In
the
<PAGE>
event a new offer is tendered or received by Landlord, Landlord must again
submit such new offer to Tenant in accordance with this Section 43.
b) All of the terms and conditions of this Lease will apply to
any Offer Space leased by Tenant, except as otherwise provided in Landlord's
Notification. The term of this Lease with respect to the Offer Space shall be
coterminous with the Term of this Lease with respect to the original Premises.
Landlord will have no liability to Tenant if any tenant of the Offer Space
wrongfully holds over. In the event such tenant wrongfully holds over, Landlord
will attempt in good faith to cause such tenant to vacate the Offer Space.
<PAGE>
RIDER A
RENEWAL OPTION: Tenant is hereby granted two (2) options to renew this Lease
upon the following terms and conditions:
At the time of the exercise of each option to renew and at the time of the said
renewals, the Tenant shall not be in default in accordance with the terms and
provisions of this Lease beyond any applicable notice and surge period, and
shall be in possession of the Premises pursuant to this Lease.
Notice of the exercise of each option shall be sent to the Landlord in writing
at least six (6) months but not more than twelve (12) months before the
expiration of the term of this Lease in the case of the first renewal term, or
before the expiration of the first renewal term in the case of the second
renewal term.
Each renewal term shall be for a period of five (5) years, to commence at the
expiration of the Term of this Lease in the case of the first renewal term or
the first renewal term in the case of the second renewal term and all of the
terms and conditions of this Lease, other than the Fixed Basic Rent, shall apply
during any such renewal term.
The annual fixed basic rent to be paid during each renewal term shall not be
less than that paid for the Premises during the last year of the original term
of the Lease, or the first renewal term in the case of the second renewal term.
However, if ninety five percent (95%) of the fair rental value per square foot
at the commencement of the renewal term shall exceed the rent as established in
the preceding sentence, the Tenant shall pay such ninety five percent (95%) of
the fair rental value. In determining the fair rental value, the Landlord shall
notify Tenant of the fair rental value as established by the respective parties
if Landlord and Tenant cannot reach a mutual agreement with respect to such fair
market value, Landlord and Tenant shall jointly employ the services of an
independent appraiser familiar with office buildings located within the
metropolitan Philadelphia, Pennsylvania area comparable to the Building, who
shall be a member of MA1 and who shall render an appraisal. The fee of such
appraiser shall be borne equally by Landlord and Tenant. If the Landlord and the
Tenant cannot agree on the fair rental value, or in such case, on an independent
appraiser acceptable to both, either party may request the American Arbitration
Association to appoint such independent appraiser who shall be a member of MA1
familiar with office buildings in the area of the Building who shall render an
appraisal, and in such event the judgment of the appraiser shall be final and
binding upon the parties. Pending resolution of the issue of fair rental value,
the Tenant shall pay the Landlord as of commencement of the renewal term, the
Fixed Basic Rent as established by Landlord, subject to retroactive adjustment
upon final determination of this issue. Each party shall pay its own counsel
fees and expenses, if any, in connection with any arbitration under this
Article. It is expressly understood that in connection with any determination of
the fair and reasonable annual market rental value of the demised premises
pursuant to this Article, the following criteria shall be considered, among
other things, in the determination:
<PAGE>
(A) the fact that the Expense Stop provided herein shall not change for the
purpose of calculating the Additional Rent payable pursuant to this Lease;
(B) the fact that Tenant shall have no further right to renew this Lease
except as set forth herein;
(C) the fact that Landlord shall not be obligated to perform any work in
the Demised Premises to prepare the same for Tenant's occupancy;
(D) the fact that Tenant shall not be entitled to any free rent or other
similar credit against the Fixed Basic Rent; and
(E) whether or not Landlord is or is not obligated to pay a brokerage
commission with respect to the applicable Renewal Term.
<PAGE>
SECTION 26(b) HEREOF SETS FORTH A WARRANT OR AUTHORITY FOR AS ATTORNEY TO
CONFESS JUDGMENT AGAINST TENANT. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS
JUDGMENT AGAINST TENANT, TENANT HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY,
AND (ON THE ADVICE OF THE SEPARATE COUNSEL OF TENANT, IF TENANT HAS USED COUNSEL
IN REGARD TO ENTERING INTO THIS LEASE) UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS
TENANT HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE
CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
Lease and for other good and valuable consideration, and intending to be legally
bound, each party hereto has caused this agreement to be duly executed under
seal.
Landlord:
1/31/00
Date Signed: ------------------------ 400 HORSHAM ROAD
ASSOCIATES, L.P.
By: 400 HORSHAM ROAD
ASSOCIATES ACQUISITION
CORP.
By: ---------------------------
Name: ---------------------
Title: --------------------
Attest: -----------------------
Tenant:
1/31/00
Date Signed: ------------------------ BROADVIEW NETWORKS, INC.
By: /s/
---------------------------
Name: Scott M. Matukas
---------------------
Title: VP Admin
---------------------
Attest: /s/
-----------------------
Joy Phanumas
<PAGE>
SECTION 26(b) HEREOF SETS FORTH A WARRANT OR AUTHORITY FOR AS ATTORNEY TO
CONFESS JUDGMENT AGAINST TENANT. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS
JUDGMENT AGAINST TENANT, TENANT HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY,
AND (ON THE ADVICE OF THE SEPARATE COUNSEL OF TENANT, IF TENANT HAS USED COUNSEL
IN REGARD TO ENTERING INTO THIS LEASE) UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS
TENANT HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE
CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
Lease and for other good and valuable consideration, and intending to be legally
bound, each party hereto has caused this agreement to be duly executed under
seal.
Landlord:
Date Signed: 1/31/00 400 HORSHAM ROAD
------------------------ ASSOCIATES, L.P.
By: 400 HORSHAM ROAD
ASSOCIATES ACQUISITION
CORP.
By:/s/
----------------------------
Name:/s/
----------------------
Title:/s/
---------------------
Attest: /s/
------------------------
Tenant:
Date Signed: 1/31/00 BROADVIEW NETWORKS, INC.
------------------------
By: /s/
----------------------------
Name:/s/
----------------------
Title:/s/
---------------------
Attest:/s/
--------------------
<PAGE>
EXHIBIT A
---------
LOCATION OF BUILDING
<PAGE>
ALL THOSE TWO CERTAIN tracts or parcels of land with the buildings and
improvements thereon erected, Situate in the Township of Horsham, County of
Montgomery and Commonwealth of Pennsylvania, bounded and described according to
subdivision plan of Forge Industrial Tract, made by, Hopkins 6 Scott, Inc.,
dated 11/6/1983 as follows, to wit:
TEE FIRST THEREOF:
BEGINNING at the point of intersection of the centerlines of Horsham Road, Rte.
#463 and Norristown Road, as shown on said plan; thence from said point of
beginning extending along the said centerline of Horsham Road North 47 degrees
06 minutes West, 653.53 feet to a point, a corner; in the same; thence extending
North 42 degrees 54 minutes East, crossing the Northeasterly side of said.
Horsham Road and along Parcel A-l on said Plan, 497.00 feet to a point, a corner
thence continuing along siad Parcel A-l, South 47 degrees 06 minutes East 165.00
feet to a point, an angle: thence continuing along the same and along Parcel B-3
North 68 degrees 25 minutes East, 532.43 feet to a point, a corner in line of
Parcel B-l on said plan; thence extending along the same and Parcel B-2 and
crossing a 60 feet wide easement for ingress, egress, regress for Parcels A-l
and A-2, South 21 degrees 35 minutes East, 596.16 feet to a point, an angle;
thence continuing along said said Parcel B-2, South 47 degrees 06 minutes East,
94.64 feet to a point in line of lands of Willow Grove Construction Co.; thence
extending along the same South 42 degrees 29 minutes West, 342.50 feet to a
point in the centerline of Norristown Road, aforesaid; thence extending along
the same North 89 degrees 35 minutes West 510.12 feet to the first mentioned
point and place of beginning.
BEING PARCELS A-2 and B-4 on said plan, Containing 15.5 acres clear of
right-of-way.
BEING Parcel Numbers 36-00-04015-00-8 and 36-00-05334-12-9.
AS TO PART BEING the same premises which Mainard, Incorporated (Pa. Corp.) by
Deed dated 10/14/1981 and recorded in Montgomery County in Deed Book 4663 page
800 conveyed unto Montgomery County Industrial Development Authority, in fee.
AS TO THE REMAINING PART BEING the same premises which Mainard, Incorporated
(Pa. Corp.) by Deed dated 12/21/1983 and recorded in Montgomery County in Deed
Book 4728 page 816 conveyed unto Montgomery Industrial Development Authority, in
fee.
<PAGE>
EXHIBIT A-l
DEMISED PREMISES
<PAGE>
400 Horsham Road
Horsham, Pennsylvania
EXHIBIT A-1 - APPROX. -27,000 RSF CROSS-HATCHED
Existing
Tenant
Available
92,926 RSF
Existing
Tenant
Existing
Tenant
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
1. OBSTRUCTION OF PASSAGEWAYS: The sidewalks, entrance, passages, courts,
--------------------------
elevators, vestibules, stairways, corridors and public parts of the Building
shall not be obstructed or encumbered by Tenant or used by Tenant for any
purpose other than ingress and egress. If the Premises are situated on the
ground floor with direct access to the street, then Landlord shall, at
Landlord's expense, keep the sidewalks and curbs directly in front of the
Premises clean and free from ice, snow and refuse.
2. WINDOWS: Windows in the Premises shall not be covered or obstructed by
-------
Tenant. No bottles, parcels or other articles shall be placed on the window
sills, in the halls, or in any other part of the Building other than the
Premises. No article shall be thrown out of the doors or windows of the
Premises.
3. PROJECTIONS FROM BUILDING: No awnings, air-conditioning units, or other
-------------------------
fixtures shall be attached to the outside walls or the window sills of the
Building or otherwise affixed so as to project from the Building, without prior
written consent of Landlord.
4. SIGNS: No sign or lettering shall be affixed by Tenant to any part of the
-----
outside of the Premises, or any part of the inside of the Premises so as to be
clearly visible from the outside of the Premises, without the prior written
consent of Landlord. However, Tenant shall have the right to place its name on
any door leading into the Premises the size, color and style thereof to be
subject to the Landlord's approval. Tenant shall not have the right to have
additional names placed on the Building directory without Landlord's prior
written consent.
5. FLOOR COVERING: Tenant shall not lay linoleum or other similar floor covering
--------------
so that the same shall come in direct contact with the floor of the Premises. If
linoleum or other similar floor covering is desired to be used, an interlining
of builder's deadening felt shall first be fixed to the floor by a paste or
other material that may easily be removed with water, the use of cement or other
similar adhesive material being expressly prohibited.
6. INTERFERENCE WITH OCCUPANTS OF BUILDING: Tenant shall not make, or permit to
---------------------------------------
be made, any unseemly or disturbing noises or odors and shall not interfere with
other tenants or those having business with them. Tenant will keep all
mechanical apparatus in the Premises free of vibration and noise which may be
transmitted beyond the limits of the Premises.
7. LOCK KEYS: No additional locks or bolts of any kind shall be placed on any of
---------
the doors or windows by Tenant. Tenant shall, on the termination of Tenant's
tenancy, deliver to Landlord all keys to any space within the Building either
furnished to or otherwise procured by Tenant, and in the event of the loss of
any keys furnished, Tenant shall pay to
<PAGE>
Landlord the cost thereof. Tenant, before closing and leaving the Premises,
shall ensure that all windows are closed and entrance doors locked. Nothing in
this Paragraph 7 shall be deemed to prohibit Tenant from installing a burglar
alarm within the Premises, provided: (1) Tenant obtains Landlord's consent which
will not be unreasonably withheld delayed; (2) Tenant supplies Landlord with
copies of the plans and specifications of the system; (3) such installation
shall not damage the Building; and (4) all costs of installation shall be borne
solely by Tenant.
8. CONTRACTORS: No contract of any kind with any supplier of towels, water,
-----------
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish, garbage, or other like service shall be entered into by Tenant,
nor shall any machine of any kind be installed in the Building or the Office
Building Area without the prior written consent of the Landlord. Tenant shall
not employ any persons other than Landlord's janitors for the purpose of
cleaning the Premises without prior written consent of Landlord. Landlord shall
not be responsible to Tenant for any loss of property from the Premises however
occurring, or for any damage to the effects of Tenant by such janitors or any of
its employees, or by any other person or any other cause.
9. PROHIBITED ON PREMISES: Tenant shall not conduct, or permit any other person
----------------------
to conduct, any auction upon the Premises, manufacture or store goods, wares or
merchandise upon the Premises without the prior written approval of Landlord,
except the storage of usual supplies and inventory to be used by Tenant in the
conduct of its business, permit the Premises to be used for gambling, make any
unusual noises in the Building, permit to be played musical instrument on the
Premises, permit any radio to be played, or television, recorded or wired music
in such loud manner as to disturb or annoy other tenants, or permit any unusual
odors to be produced on the Premises. Tenant shall not permit any portion of the
Premises to be occupied as an office for a public stenographer or typewriter, or
for the storage, manufacture, or sale of intoxicating beverages, narcotics,
tobacco in any form or as a barber or manicure shop. Canvassing, soliciting and
peddling in the Building and the Office Building Area are prohibited and Tenant
shall cooperate to prevent the same. No bicycles, vehicles or animals of any
kind shall be brought into or kept in or about the Premises.
10. PLUMBING, ELECTRIC AND TELEPHONE WORK: Plumbing facilities shall not be used
-------------------------------------
for any purpose other than those for which they were constructed; and no
sweepings, rubbish, ashes, newspaper or other substances of any kind shall be
thrown into them. Waste and excessive or unusual amounts of electricity or water
is prohibited. When electric wiring of any kind is introduced, it must be
connected as directed by Landlord, and no stringing or cutting of wires will be
allowed, except by prior written consent of Landlord, and shall be done by
contractors approved by Landlord. The number and locations of telephones,
telegraph instruments, electrical appliances, call boxes, etc. shall be subject
to Landlord's approval.
11. MOVEMENT OF FURNITURE, FREIGHT OR BULKY MATTER: The carrying in or out of
----------------------------------------------
freight, furniture or bulky matter of any description must take place
<PAGE>
during such hours as Landlord may from time to time reasonably determine and
only after advance notice to the superintendent of the Building. The persons
employed by Tenant for such work must be reasonably acceptable to the Landlord.
Tenant may, subject to these provisions, move freight, furniture, bulky matter,
and other material into or out of the Premises on Saturdays between the hours of
9:00 a.m. and 1:00 p.m., provided Tenant pays additional costs, if any,
incurred by Landlord for elevator operators or security guards, and for any
other expenses occasioned by such activity of Tenant. If, at least three (3)
days prior to such activity, Landlord requests that Tenant deposit with
Landlord, as security of Tenant's obligations to pay such additional costs, a
sum of which Landlord reasonably estimates to be the amount of such additional
cost, the Tenant shall deposit such sum with Landlord as security of such cost.
There shall not be used in the Building or Premises, either by Tenant or by
others in the delivery or receipt of merchandise, any hand trucks except those
equipped with rubber tires and side guards, and no hand trucks will be allowed
in the elevators without the consent of the superintendent of the Building.
12. SAFES AND OTHER HEAVY EQUIPMENT: Landlord reserves the right to prescribe
-------------------------------
the weight and position of all safes and other heavy equipment so as to
distribute properly the weight thereof and to prevent any unsafe condition from
arising.
13. ADVERTISING: Landlord shall have the right to prohibit any advertising by
-----------
Tenant which in Landlord's reasonable opinion tends to impair the reputation of
the Building or its desirability as a building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinue such advertising.
14. NON-OBSERVANCE OR VIOLATION OF RULES BY OTHER TENANTS: Landlord shall not be
-----------------------------------------------------
responsible to Tenant for non-observance or violation of any of these rules and
regulations by any other tenant.
15. AFTER HOURS USE: Landlord reserves the right to exclude from the Building
---------------
between the hours of 6:00 p.m. and 8:00 a.m. and at all hours on Saturdays,
Sundays and Building Holidays, all persons who do not present a pass to the
Building signed by the Tenant. Each Tenant shall be responsible for all persons
for whom such a pass is issued and shall be liable to the Landlord for the acts
of such persons.
16. PARKING: Tenant and its employees shall park their cars only in those
-------
portions of the parking area designated by Landlord.
17. RESERVATION OF RIGHTS: Landlord hereby reserves to itself any and all rights
---------------------
not granted to Tenant hereunder, including, but not limited to, the following
rights which are reserved to Landlord for its purposes in operating the
Building:
a. the exclusive right to the use of the name of the Building for all
purposes, except that Tenant may use the name as its business address and for no
other purposes; and
b. the right to change the name or address of the Building, without
incurring any liability to Tenant for doing so; and
<PAGE>
c. the right to install and maintain a sign on the exterior of the
Building; and
d. the exclusive right to use or dispose of the use of the roof of the
Building; and
e. the right to limit the space on the directory of the Building to be
allotted to Tenant; and
f. the right to grant to anyone the right to conduct any particular
business or undertaking in the Building.
18. HEALTH AND SAFETY: The Tenant shall be responsible for initiating,
-----------------
maintaining and supervising all health and safety precautions and/or programs
required by Law in connection with the Tenant's use and occupancy of the
Premises.
19. HAZARDOUS MATERIALS: The Tenant shall not store, introduce or otherwise
-------------------
permit any material known to be hazardous within the Premises. Any material
within the Premises which is determined to be hazardous shall be removed and
properly disposed of by the Tenant at the Tenant's sole expense.
--END--
<PAGE>
EXHIBIT C
---------
Fiber Optic Work
Landlord and Tenant shall install dual fiber optic entrances to the
Building, together with any and all necessary installations to the Building in
order to ensure such fiber optic services via a path diverse fiber ring system.
<PAGE>
EXHIBIT D
---------
BUILDING HOLIDAYS
BUILDING CLOSED ON:
*NEW YEAR'S DAY*
*MEMORIAL DAY*
*INDEPENDENCE DAY*
*LABOR DAY*
*THANKSGIVING DAY*
*CHRISTMAS DAY*
<PAGE>
EXHIBIT E
---------
TENANT ESTOPPEL CERTIFICATE
TO: __________________________("_________") pursuant to that certain __________
Agreement (the "Agreement") dated ________, 199_, by and between____________ and
____________________________________ ("Lessor").
1. The undersigned ("Lessee") is the lessee under that certain Lease dated
___________, 19_, by and between ____________________________________, as
lessor, and __________________________________________, as lessee (the "Lease"),
covering a portion of those certain premises commonly known and designated as
_______________________________________, Pennsylvania, consisting of
approximately _____________ square feet (the "Premises"). A true, complete and
correct copy of the Lease is attached hereto as Exhibit "A".
2. The Lease has not been modified, changed, altered or amended in any
respect (except as indicated following this sentence) and is the only lease or
agreement between the undersigned and the Lessor affecting the Premises. If
none, state "none".
________________________________________________________________________________
________________________________________________________________________________
3. The undersigned has made no agreements with Lessor or its agents or
employees, which are not described in the Lease concerning free rent, partial
rent, rebate of rental payments or any other type of rental concession with
respect to the Lease (except as indicated following this sentence). If none,
state "none".
________________________________________________________________________________
________________________________________________________________________________
4. The undersigned accepted possession of the Premises on __________, 19__,
currently occupies the Premises and has been open for business since __________,
19__. The current term of the Lease began on ____________, 19__. The current
term of the Lease will expire on __________, 19__, and Lessee has no present
right to cancel or terminate the Lease under the terms thereof, or otherwise. No
rent payable pursuant to the Lease has been prepaid for more than two (2)
months, and no monies otherwise payable to Lessor under the Lease have been paid
in advance of the due date therefor as set forth in the Lease. The fixed minimum
rent currently being paid under the Lease is $__________ per month. Future
changes to the fixed minimum rental are as set forth in the Lease. The
undersigned also pays amounts for percentage rent, insurance and property tax
escalations based upon the square footage of the Premises subject to the Lease,
as set forth in the Lease, which amounts have been paid to and including
_____________, 199_.
5. The Lease is fully valid and enforceable and is currently in full force
and effect. Neither Lessor or Lessee is in default thereunder, and all
conditions and obligations on the part of Lessor to be fulfilled under the terms
of the Lease have been
<PAGE>
satisfied or fully performed including, without limitation, all required tenant
improvements, allowances, alterations, installations and construction, and
payment therefor has been made in full. Lessee has no offset, claim, defense or
counterclaim against any rent or other sum payable by Lessee under the Lease or
against any other obligation of Lessee under the Lease. No condition exists
which with the giving of notice or the passage of time, or both, would
constitute a default under the Lease.
6. Lessee has not suffered any assignment of the Lease or sublet the
Premises or any portion thereof, and no person or entity, other than Lessee, has
any possessory interest in the Premises or right to occupy the Premises or any
portion thereof, except as permitted under the Lease.
7. Lessee claims no right, title or interest in or to the Premises or right
to possession of the Premises, except as lessee under the terms of the Lease.
The Lease does not contain and the undersigned does not have any outstanding
options or rights of first refusal to purchase the Premises or any portion
thereof or the real property of which the Premises are a part, except as
otherwise set forth below. If none, state "none".
________________________________________________________________________________
________________________________________________________________________________
8. No actions, whether voluntary or otherwise, are pending against the
undersigned under the bankruptcy laws of the United States or any state thereof,
and Lessee knows of no fact or pending or threatened claim or litigation that
might result in the insolvency or bankruptcy of Lessee.
9. Lessee is a [corporation][limited partnership][general partnership] duly
organized and validly existing and in good standing under the laws of the State
of __________ [and qualified to do business in the State where the Premises is
located]. [__________, a __________, owns and holds all of the issued and
outstanding stock in and of Lessee, and is a separate and distinct entity from
Lessee].
10. Lessee's occupancy of the Premises complies fully with all local, state
and federal laws, ordinances, codes, rules, regulations and orders including,
without limitation, those concerning hazardous wastes, hazardous materials,
asbestos, oil and underground storage tanks. In addition, no such hazardous
wastes, hazardous materials, asbestos, oil or underground storage tanks have
been or are incorporated in, stored on or under, released from, treated on,
transported to or from or disposed of, on or from the Premises or any portion
thereof.
11. All inspections, licenses, permits, consents, permissions, approvals
and certificates required, whether by law, regulation or insurance standards, to
be made or issued with respect to the conduct of Lessee's business, the Premises
and the use and occupancy of the Premises by Lessee have been made by or issued
by all necessary private parties, the appropriate governmental or
quasi-governmental authorities or other authorities having jurisdiction over the
Premises and/or Lessee's business, are in full force and effect, and Lessee has
not received notification from any such authority that
2
<PAGE>
Lessee or the Premises is in material noncompliance with such laws, regulations
or standards, that the Premises is being used, operated or occupied unlawfully
or that Lessee has failed to obtain such inspections, permits, consents,
permissions, approvals, licenses or certificates, as the case may be. Lessee has
not received notice of any violation or failure to conform with any such law,
ordinance, regulation, standard, license, permit, consent, permission, approval
or certificate.
12. All insurance policies required to be maintained by Lessee under the
Lease have been maintained, are in full force and effect and all premiums with
respect thereto have been paid in full.
13. Upon receipt of notice of the closing of the purchase and sale of the
Premises as set forth in the Agreement, Lessee shall recognize ______ as lessor
under the Lease, and all payments of rent and other sums due to Lessor under the
Lease and all communications permitted or required under the Lease shall be
directed to ______ c/o ________________________________________________________,
and all communications permitted or required under the Lease shall be directed
to Lessee at the address for Lessee set forth in the Lease (except as otherwise
indicated following this sentence), unless and until otherwise specified in
written notice by the party to whom notice is to be given at such address. If
none, state "none".
________________________________________________________________________________
________________________________________________________________________________
14. This certification is made to induce __________ [to enter into the
Agreement][to provide financing to Lessor] knowing that
_________________________ is relying upon the truth of this Tenant Estoppel
Certificate in [entering into the Agreement,][providing such financing] and that
[the acquisition of the Premises by __________ pursuant to the Agreement][the
financing provided to Lessor] shall be deemed good and valuable consideration to
Lessee for the foregoing representations made by Lessee.
Dated this ____ day of __________, 199_.
LESSEE:
_____________________________,
a____________________________
BY:__________________________
Name:_____________________
Title:____________________
3
<PAGE>
EXHIBIT F
CLEANING SPECIFICATIONS
-----------------------
LOBBY AND ENTRANCE AREAS
- ------------------------
Daily Cleaning Services
-----------------------
1. Dust and damp mop all lobby and entrance foyers to insure dust free
floors with specific attention to hard-to-reach areas.
2. All ashtrays will be emptied, washed and dried.
3. All waste and trash cans will be empties. All waste and trash cans
will be washed as needed.
4. All telephones will be sanitized.
5. Vacuum all carpeted areas.
6. Dust and wipe clean all desks and chairs.
7. Wipe, clean and polish all stainless steel and other metal work.
8. Clean all entrance doors.
9. All floors to be swept with chemically treated cloths, spot mopped and
spray buffed.
10. Dust and/or wash clean all directory boards and display glass.
11. All lights will be turned off, and specified doors locked at the
completion of cleaning.
Weekly Cleaning Services
------------------------
1. Dust and clean all paneling, door trim and other architectural
louvres, ornamental work, grills, picture frames, thermostats, boards,
entire doors and woodwork.
2. Vacuum all upholstered furniture and wall surfaces.
3. Complete high dusting of pictures, frames, etc.
<PAGE>
4. Spot clean all carpeted areas.
5. Spot clean wall surfaces.
Quarterly Cleaning Service
--------------------------
1. Scrub and refinish floor areas.
Yearly Cleaning Services
------------------------
1. Strip and refinish all floor areas.
GENERAL OFFICE AREAS
- --------------------
Daily Cleaning Services
-----------------------
1. All ashtrays will be empties, washed and dried.
2. All waste and trash cans will be emptied. All waste and trash cans
will be washed as needed.
3. All telephones will be cleaned and sanitized.
4. All water fountains to be sanitized and polished.
5. Dust desk tops.
6. Spot clean all wall surfaces and columns.
7. Vacuum all carpeted areas; moving light furniture other than desks,
file cabinets, etc.
8. Dust and spot mop all resilient tile floor areas. All floor edges will
be damp mopped.
9. All glass partitions will be spot cleaned.
Weekly Cleaning Services
------------------------
1. Dust and clean all paneling, door time, ornamental work, grills,
picture frames, ventilating louvres, baseboards and entire doors.
2. Dust and wipe clean all furniture, fixtures, shelving, cabinets,
window sills, picture frames, bases of all chairs and desk tops with
clean cloths.
2
<PAGE>
3. Wipe clean metal door knobs, light switch plates, mirrors, kick
plates, door saddles and directional signs.
Monthly Cleaning Services
-------------------------
1. Complete all high dusting.
2. Dust and wipe clean all diffusers and ventilators.
3. Damp mop and spray buff all resilient floor areas.
Bi-Yearly Cleaning Services
---------------------------
1. Dust blinds.
Yearly Cleaning Services
------------------------
1. Snip and refinish all resilient tile floor areas.
RESTROOMS
- ---------
Daily Cleaning Services
-----------------------
1. All toilets and urinals will be sanitized and wiped clean.
2. All sinks and fixtures will be cleaned with a non-abrasive cleaner,
sanitized and polished.
3. All paper towel and toilet tissue dispensers will be wiped clean.
4. All waste baskets and sanitary disposal units will be emptied.
5. Clean all mirrors with glass cleaner and chrome with chrome cleaner.
6. All hand soap dispensers will be refilled.
7. All restroom floors will be damp mopped nightly using disinfectant.
Weekly Cleaning Services
------------------------
1. All partitions, tiled walls and vertical surfaces will be wiped clean.
Monthly Cleaning Services
-------------------------
1. All walls, vertical and horizontal surfaces will be wiped clean and
sanitized.
3
<PAGE>
Quarterly Cleaning Services
---------------------------
1. All restroom floors will be machine scrubbed.
CORRIDORS AND COMMON AREAS
- --------------------------
Daily Cleaning Services
-----------------------
1. All ashtrays will be empties, washed and dried.
2. All drinking fountains will be sanitized and polished.
3. All waste trash cans will be emptied.
4. Wipe clean all metal door knobs, light switch plats, kick plates,
mirrors, door saddles and directional signs.
5. Sweep with chemically treated mops; damp mop to remove spill off.
Weekly Cleaning Services
------------------------
1. Spray buff all resilient tile floor areas.
2. All fire extinguishers will be dusted.
3. Spot clean all wall surfaces and columns; including stainless steel
work.
4. Dust and wipe clean all furniture, fixtures, shelving, cabinets,
window sills and picture frames with clean clothes.
Monthly Cleaning Services
-------------------------
1. Complete all high dusting.
2. Dust and wipe clean all paneling, door trim, ornamental work, grills,
picture frames, ventilating louvres, baseboards and entire doors.
Quarterly Cleaning Services
---------------------------
1. Scrub and refinish all resilient tile floor areas.
2. Dust and wipe clean all air diffusers and ventilators.
Yearly Cleaning Services
------------------------
4
<PAGE>
1. Strip and refinish all resilient tile floor areas.
ELEVATORS
- ---------
Daily Cleaning Services
-----------------------
1. All elevators will be cleaned maintaining all metal work throughout.
2. All resilient tile floor areas will be swept with a chemically treated
dust mop and spot mopped.
Weekly Cleaning Services
------------------------
1. All resilient tile floors will be mopped and spray buffed.
2. All walls will be wiped clean.
3. Vacuum elevator door tracks and saddles.
STAIRWELLS AND MISCELLANEOUS
- ----------------------------
Weekly Cleaning Services
------------------------
1. All stairs will be swept and mopped.
2. All metal and framework will be dusted and wiped clean.
3. All janitorial closets will be kept clean and orderly.
5
<PAGE>
Exhibit 10.15
OFFICE SPACE LEASE
for
400 HORSHAM ROAD, HORSHAM PENNSYLVANIA
by and between
400 HORSHAM ROAD ASSOCIATES, L.P.
(as Landlord)
and
BROADVIEW NETWORKS, INC.
(as Tenant)
Date: January 31, 2000
<PAGE>
THIS LEASE (the "Lease") is made the 31st day of January, 2000
between 400 HORSHAM ROAD ASSOCIATES, L.P. (herein referred to as "Landlord")
whose address is 1101 West DeKalb Pike, Suite 200, Wayne, Pennsylvania 19087 and
BROADVIEW NETWORKS, INC. (herein referred to as "Tenant"), a New York
corporation, whose address is 45-18 Court Square, Long Island City, NY 11101.
PREAMBLE
--------
BASIC LEASE PROVISIONS AND DEFINITIONS
In addition to other terms elsewhere defined in this Lease, the
following terms whenever used in this Lease shall have only the meanings set
forth in this section, unless such meanings are expressly modified, limited or
expanded elsewhere herein.
1. ADDITIONAL RENT shall mean all sums in addition to Fixed Basic Rent payable
---------------
by Tenant to Landlord or to third parties pursuant to the provisions of the
Lease.
2. BROKER(S) shall mean Kelley & Associates, Inc. and Equis of New York.
--------
3. BUILDING shall mean 400 Horsham Road, Horsham, Pennsylvania as described on
--------
Exhibit A hereto.
4. BUILDING HOLIDAYS shall be those shown on Exhibit D.
----------------- ---------
5. COMMENCEMENT DATE shall mean the date this Lease is fully executed by the
-----------------
Landlord and Tenant.
6. DEMISED PREMISES OR PREMISES shall be approximately ten thousand
----------------------------
(10,000) gross rentable square feet on the first floor of the Building as
designated on Exhibit A-l which includes an allocable share of the Common
-----------
Facilities as defined in Section 2 which measurement shall be subject to final
measurement and agreement by the parties in accordance with 1996 BOMA standards
for multi-tenant office buildings.
7. EXHIBITS shall be the following, attached to this Lease and incorporated
--------
herein and made a part hereof:
Exhibit A Location of Building
Exhibit A-l Demised Premises
Exhibit B Rules and Regulations
Exhibit C Landlord's Work
Exhibit D Building Holidays
Exhibit E Tenant Estoppel Certificate
Exhibit F Janitorial Specifications
8. EXPENSE STOP shall mean Four Dollars ($4.00)per rentable square foot of the
------------
Premises.
i
<PAGE>
9. FIXED BASIC RENT shall be calculated and payable as follows:
----------------
Rate Per
Rentable Rentable Yearly Monthly
Months Sq. Ft. Sq. Foot Rate Installment
l-10 10,000 $ - $ - $ -
11-24 10,000 $17.50 $175,000.00 $14,583.33
25-36 10,000 $18.00 $180,000.00 $15,000.00
37-48 10,000 $18.50 $185,OOO.OO $15,416.67
49-60 10,000 $19.00 $190,000.00 $15,833.33
61-72 10,000 $19.50 $195,000.00 $16,250.OO
73-84 10,000 $20.00 $200,000.00 $16,666.67
85-96 10,000 $20.50 $205,OOO.OO $17,083.33
97-10 10,000 $21.00 $210,000.00 $17,500.00
109-120 10,000 $21.50 $215,OOO.OO $17,916.67
121-130 10,000 $22.00 $220,000.00 $18,333.33
10. OFFICE BUILDING AREA is as set forth on Exhibit A-l
-------------------- -----------
11. PERMITTED USE shall be general office use and the installation and
-------------
maintenance of equipment and facilities in connection with Tenant's
telecommunications business.
12. PROPORTIONATE SHARE shall mean a fraction, the numerator of which shall be
-------------------
the total rentable square feet of the Premises, which figure is the gross
rentable square feet contained within the Premise and the denominator of which
shall be the total rentable square feet of the Building, which figure is 150,000
square feet.
13. SECURITY DEPOSIT shall be none.
----------------
14. TARGET DATE shall be immediately upon full execution of this Lease by the
-----------
parties.
15. TERM shall and mean ten (10)years ten (10)months from the date this Lease
----
is fully executed by the Landlord and Tenant plus the number of days which
remain in the calendar month in which such term expires (the "Term")unless
terminated or extended pursuant to any option or provision contained herein.
ii
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
------- ----
<S> <C> <C>
1. Definitions ............................................................ 1
2. Premises ............................................................... 1
3. Completion of Premises ................................................. 1
4. Term ................................................................... 2
5. Use of Premises ........................................................ 2
6. Rent ................................................................... 2
7. Insurance .............................................................. 5
8. Repairs and Maintenance ................................................ 6
9. Utilities and Services ................................................. 7
10. Governmental Regulations ............................................... 8
11. Signs................................................................... 9
12. Alterations, Additions and Fixtures..................................... 9
13. Mechanic's Liens........................................................11
14. Landlord's Right of Entry...............................................12
15. Damage by Fire or Other Casualty........................................12
16. Non-Abatement of Rent...................................................14
17. Indemnification.........................................................14
18. Condemnation............................................................14
19. Quiet Enjoyment.........................................................15
20. Rules and Regulations...................................................16
21. Assignment and Subletting...............................................16
22. Tenant's Expansion/Relocation...........................................19
23. Subordination...........................................................19
24. Curing Tenant's Defaults................................................19
25. Surrender...............................................................20
26. Defaults--Remedies......................................................20
27. Condition of Premises...................................................24
28. Hazardous Substances....................................................24
29. Recording...............................................................25
30. Broker's Commission.....................................................25
31. Notices.................................................................25
32. Irrevocable Offer, No Option............................................26
33. Landlord Inability to Perform...........................................26
34. Survival................................................................26
35. Corporate Tenants............................... ......................26
36. Tenant Representations and Warranties...................................26
37. Waiver of Invalidity of Lease...........................................27
38. Security Deposit........................................................27
39. Estoppel Certificate....................................................27
40. Rights Reserved by Landlord.............................................28
41. Miscellaneous...........................................................29
42. Additional Definitions..................................................31
43. Tenant's Right of First Refusal.........................................32
44. Tenant's Use of the Roof................................................32
</TABLE>
<PAGE>
For and in consideration of the covenants herein contained, and upon
the terms and conditions herein set forth, Landlord and Tenant, intending to be
legally bound, agree as follows:
1. Definitions. The definitions set forth in the preceding Preamble
shall apply to the same capitalized terms appearing in this Lease Agreement.
Additional definitions are contained in Section 42 and throughout this Lease.
2. Premises. Landlord hereby demises and leases the Premises to
Tenant and Tenant hereby leases and takes the Premises from Landlord for the
Term (as defined in Section 4) and upon the terms, covenants, conditions, and
provisions set forth in this Lease Agreement, including the Preamble (this
"Lease"). The Tenant's interest in the Premises as tenant shall include the
right, in common with Landlord and other occupants of the Building, to use
driveways, sidewalks, loading and parking areas, lobbies, hallways and other
facilities which are located within the Property (defined in Section 6)and which
are designated by Landlord from time to time for the use of all of the tenants
of the Building (the "Common Facilities"). Landlord shall provide Tenant with
four and one-half (4.5) unreserved parking spaces per one thousand rentable
square feet contained within the Premises at no additional cost or rental to
Tenant. In addition to the foregoing, in the event the roof of the Building
cannot support the weight of Tenant's supplemental HVAC units, Tenant shall be
permitted to place such units outside of the Building adjacent to the Premises
in a manner which is reasonably satisfactory to Landlord.
3. Completion of Premises.
a) The Premises shall be delivered to Tenant on the Target Date in
its "As-Is, Where-Is" condition as of the date of this Lease and Landlord shall
not be required to provide any tenant or other improvements thereto except as
otherwise provided herein. Commencing on the Target Date, Tenant shall promptly
construct and install tenant improvements to the Premises in accordance with
plans (the "Plans") prepared by Tenant at Tenant's sole cost and expense and
approved by Landlord in Landlord's reasonable discretion. Landlord shall pay to
Tenant a tenant improvement allowance (the "Allowance") in the amount Twenty
Dollars ($20.00) per rentable square foot of the Premises for use by Tenant in
constructing and installing its tenant improvements therein. Tenant shall
complete the improvements set forth in the Plans and Landlord shall pay the
Allowance to Tenant in two (2) equal installments the first of which shall be
made on or before thirty (30) days after the Target Date and the second of which
shall be made on or before sixty (60) days after the Target Date provided Tenant
is not in default of its obligations hereunder beyond any applicable notice and
cure period and has constructed and installed tenant improvements with a cost in
an amount greater than or equal to the amount of the Allowance being paid to
Tenant at such time, as reasonably determined by Landlord. All improvements and
alterations for the Premises, as specified by the Plans or otherwise, shall be
performed by Tenant in accordance with the terms of this Lease.
b) Landlord shall undertake the work for the Premises as set forth
on
<PAGE>
Exhibit C attached hereto ("Landlord's Work") at its sole cost and expense. All
necessary construction shall be commenced promptly following Landlord's
execution and acceptance of this Lease and shall be substantially completed
ready for use and occupancy by Tenant within thirty (30) days of the Target
Date; provided, however, that the time for substantial completion of the
Premises shall be extended for additional periods of time equal to the time lost
by Landlord or Landlord's contractors, subcontractors or suppliers due to
strikes or other labor troubles; delays in Tenant's selection of materials,
plans or specifications; governmental restrictions and limitations;
unavailability or delays in obtaining fuel, labor or materials; war or other
national emergency; accidents; floods; defective materials; fire damage or other
casualties; adverse weather conditions; the inability to obtain building or use
and occupancy permits; or any cause similar or dissimilar to the foregoing which
is beyond the reasonable control of Landlord or Landlord's contractors,
subcontractors or suppliers. In the event Landlord fails to substantially
complete the work necessary to demise the Premises on or before sixty (60) days
from the date this Lease is fully executed, then upon substantial completion of
same, Tenant shall be entitled to two (2) additional days of Rent abatement for
each one (1) day of delay beyond such date until such work is substantially
completed.
c) All construction shall be done in a good and workmanlike manner
and shall comply at the time of completion with all applicable and lawful laws,
ordinances, regulations and orders of the federal, state, county or other
governmental authorities having jurisdiction thereof.
4. Term. [Intentionally Deleted].
5. Use of Premises. Tenant shall occupy the Premises throughout the
Term and shall use the same for, and only for, the Permitted Use specified in
the Preamble. The Building is designed to normal building standards for
floor-loading capacity. Tenant shall not use the Premises in such ways which, in
Landlord's reasonable judgment, exceed such load limits.
6. Rent. Unless otherwise specifically requested by Landlord in
writing at any time, Fixed Basic Rent, Additional Rent and any other rent or
other sums due under this Lease (hereunder collectively referred to as
Rent) shall be paid and delivered to Landlord's property manager, if any, as
agent for Landlord, in the amounts, time and manner more particularly provided
in this Lease.
a. Fixed Basic Rent. Commencing on the Commencement Dates as set
forth in the Preamble, Tenant shall pay, throughout the Term, Fixed Basic Rent
in the amount specified in the Preamble, without notice or demand and without
setoff or deduction, except as otherwise provided herein in equal monthly
installments equal to one-twelfth of the Fixed Basic Rent (specified as Monthly
Installments in the Preamble), in advance, on the first day of each calendar
month during the Term. If the Commencement Date falls on a day other than the
first day of a calendar month, the Fixed Basic Rent shall be apportioned on a
per diem basis for the period between the
2
<PAGE>
Commencement Date and the first day of the first full calendar month in the Term
and such apportioned sum shall be paid on the applicable Commencement Date.
b. Additional Rent. Commencing on January 1, 200l Tenant shall pay
to Landlord, as Additional Rent, in the manner more particularly set forth
below, Tenant's Proportionate Share of Annual Operating Costs (as defined
below) for the Property to the extent same exceeds the Expense Stop per rentable
square foot of the Premises:
i) Annual Operating Costs. The term "Annual Operating Costs"
shall mean all costs Landlord incurs from owning, operating and maintaining the
Building and the lot or tract of land on which it is situated (the Annual
"Property"). Annual Operating Costs shall include, by way of example rather than
limitation: insurance costs, including premiums; fees; Impositions (defined
below); costs for repairs, maintenance and service contracts; management fees;
landscaping; snow removal; governmental permits fees; costs of compliance with
governmental orders and regulations; administrative and overhead expenses; costs
of furnishing water, sewer, electricity, gas, fuel, and other utility services,
for use in Common Facilities of the Building and Property; and the cost of
janitorial service and trash removal; excluding, however, from Annual Operating
Costs the following: costs which are treated as capital under generally accepted
accounting principles; mortgage debt or ground rents incurred by Landlord as
owner of the Property; income, excess profits, corporate capital stock or
franchise tax imposed or assessed upon Landlord, unless such tax or any similar
tax is levied or assessed, in lieu of all or any part of any currently existing
Imposition or an increase in any currently existing Imposition; but only to the
extent of such substitution and calculated as if the Property was the sole asset
of Landlord, leasing commissions, accountants' consultants or attorneys' fees,
costs and disbursement and other expenses incurred in connection with
negotiations or disputes with tenants or prospective tenants or associated with
the enforcement of any leases or the defense of Landlord's title to or interest
in the Building in connection with any proceedings involving real property taxes
other than disputes regarding tax assessment and reduction of real property
taxes; costs of construction of the Building and related facilities and
correction of defects in construction of the Building (including permit, license
and inspection fees); costs of any items or services sold or provided to tenants
(including Tenant) for which Landlord is entitled to be reimbursed by such
tenants or which are not generally provided to all tenants of the Building; fees
and higher interest charges caused by Landlord's refinancing the Building; all
repairs to the interior of the Building of a structural nature (not made
necessary by unusual use by Tenant); costs incurred due to violation by Landlord
or any tenant of the terms and conditions of any lease; overhead and profit
increment paid to subsidiaries or affiliates of Landlord, or to any party as a
result of a noncompetitive selection process, for management or other services
on or to the Building or for supplies or other materials, to the extent that the
costs of such services, supplies or materials exceed the costs that would have
been paid had the services, supplies or materials been provided by unaffiliated
parties on a competitive basis; general overhead and administrative expenses
except salaries of on-site property manager, management secretary and
maintenance man; any compensation paid to clerks, attendants or other persons in
commercial concessions operated by Landlord, rentals and other related expenses
incurred in leasing air
3
<PAGE>
conditioning systems, elevators or other equipment ordinarily considered to be
for a capital nature, except equipment which is used in providing janitorial
services and which is not affixed to the Building; all items and services for
which Tenant reimburses Landlord or pays third persons or which Landlord
provides selectively to one or more tenants or occupants of the Building (other
than Tenant) without reimbursement; commissions, advertising, and promotional
expenditures. "Impositions" shall mean all levies, taxes, assessments, charges,
imposts, and burdens, of whatever kind and nature, ordinary and extraordinary,
which are assessed or imposed during the Term by any federal, state or municipal
government or public authority or under any law, ordinance or regulation thereof
or pursuant to any recorded covenants or agreements upon or with respect to the
Property or any part thereof, any improvements thereto, any personal property
necessary to the operation thereof and owned by Landlord or this Lease.
ii) Estimated Payments - Expense Statement and Reconciliation.
(1) Landlord shall submit to Tenant as soon as reasonably
possible after the beginning of each calendar year of the Term, the following:
(a) a statement setting forth (i) the Annual Operating
Costs for the previous calendar year of the Term and (ii) a calculation of
Tenant's Proportionate Share of the increase in the Annual Operating Costs over
the Expense Stop for the previous calendar year (the "Expense Statement"); and
(b) a statement of Landlord's good faith estimate of the
Annual Operating Costs for the current calendar year and a calculation of
Tenant's Proportionate Share of the increase in the Annual Operating Costs over
the Expense Stop for the current calendar year ("Tenant's Estimated Share").
(2) Beginning with the next installment of Fixed Basic Rent due
after the delivery of the aforesaid statements to Tenant, Tenant shall pay to
Landlord, on account of its Proportionate Share of the increase in the Annual
Operating Costs over the Expense Stop, the following:
(a) a sum equal to the product of one-twelfth (l/12)of
Tenant's Estimated Share and the number of calendar months elapsed during the
current calendar year up to and including the month payment is made, plus any
amounts due from Tenant to Landlord on account of Annual Operating Costs for any
prior period(s) of time, less
(b) a sum equal to the amount, if any, by which the sum of
all payments made by Tenant to Landlord on account of Annual Operating Costs for
the previous calendar year exceed those actually specified in the Expense
Statement.
(3) On the first day of each succeeding calendar month until
such time as Tenant receives a new Expense Statement and statement of Tenant's
Estimated Share, Tenant shall pay to Landlord, on account of its Proportionate
Share of Annual
4
<PAGE>
Operating Costs, one-twelfth (l/12) of the then current Tenant's Estimated
Share. Any payment due from Tenant to Landlord, or any refund due from Landlord
to Tenant, on account of Annual Operating Costs not yet determined as of the
expiration of the Term shall be made within thirty (30) days after submission to
Tenant of the next Expense Statement.
c) Disputes. Unless Tenant, within ninety (90) days after any
statement of Additional Rent is furnished, shall give notice to Landlord that
Tenant disputes said statement, specifying in detail the basis for such dispute,
each statement furnished to Tenant by Landlord under any provision of this
Section shall be conclusively binding upon Tenant as to the particular
Additional Rent due from Tenant for the period represented thereby; provided,
however, that additional amounts due may be required to be paid by any
supplemental statement furnished by Landlord. Tenant shall have the right at
reasonable times to examine the records used in making the aforestated
determinations, upon written notice in advance; provided, however, such disputed
amount shall have been paid by Tenant to Landlord. In the event any such
examination shall reveal an adverse variance in excess of 10% of the total
operating expenses of which Tenant is required to pay their Proportionate Share,
Landlord shall reimburse Tenant for the reasonable cost of such examination
together with the amount of Tenant's overpayment within thirty (30) days after
demand. Tenant shall make all payments of Additional Rent without delay and
regardless of any pending dispute over the amount of Additional Rent that is due
in accordance with the statements furnished by Landlord.
d) Independent Covenant; Survival. Tenant's covenant to pay
Rent is independent of any other covenant, agreement, term or condition of this
Lease. Without limitation of any obligation of Tenant under this Lease which
shall survive the expiration of the Term, the obligation of Tenant to pay Rent
shall survive the expiration of the Term.
7. Insurance.
a) Liability. Tenant, at Tenant's sole cost and expense, shall
maintain and keep insurance in effect throughout the Term against liability for
bodily injury (including death) and property damage in or about the Premises or
the Property under a policy of Commercial general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than $1,000,000 for each person and $2,000,000 in the
aggregate for bodily injury (including death) to more than one (1)person and
$1,000,000 for property damage. The policies of commercial general public
liability insurance shall name Landlord (and if requested, any mortgagee of
Landlord) as an additional party. Each such policy shall provide that it shall
not be cancelable without at least thirty (30) days prior written notice to
Landlord and to any mortgagee named in an endorsement thereto and shall be
issued by an insurer and in a form reasonably satisfactory to Landlord. At least
ten (10) days prior to the Commencement Date, and thereafter upon Landlord's
request, a certificate of insurance shall be delivered to Landlord proving
compliance with the foregoing requirements. If Tenant shall fail, refuse or
neglect to obtain or to maintain any insurance that it is
5
<PAGE>
required to provide or to furnish Landlord with satisfactory evidence of
coverage on any such policy within 5 days after demand, Landlord shall have the
right to purchase such insurance. All payments made by Landlord for such
insurance shall be recoverable by Landlord from Tenant, together with interest
thereon, as Additional Rent promptly within 10 days after demand.
Notwithstanding anything contained herein to the contrary, Tenant may
self-insure all of its personal property situated within the Premises against
property damage and destruction. Tenant's insurance may be provided under
blanket insurance policies.
b) Waiver of Subrogation. The parties to this Lease each
release the other, to the extent of the releasing party's insurance coverage,
from any and all liability for any loss or damage covered by such insurance
which may be inflicted upon the property of such party even if such loss or
damage shall be brought about by the fault or negligence of the other party, its
agents or employees. If any policy does not permit such a release of liability
and a waiver of subrogation, and if the party to benefit therefrom requests that
such a waiver be obtained, the other party agrees to obtain an endorsement to
its insurance policies permitting such waiver of subrogation if it is available.
If an additional premium is charged for such waiver, the party benefiting
therefrom agrees to pay the amount of such additional premium promptly upon
demand. In the event a party is unable to obtain such a waiver, it shall
immediately notify the other party of its inability. In the absence of such
notifications, each party shall be deemed to have obtained such waiver of
subrogation. Notwithstanding anything to the contrary contained in this Lease,
Landlord shall have no interest in any insurance proceeds Tenant receives for
Tenant's property (not purchased, installed or otherwise paid for using the
Allowance) and Landlord shall sign all documents which are necessary or
appropriate in connection with the settlement of any claim or loss by Tenant.
Tenant's policies shall not be contributing with or in excess of any coverage
which Landlord shall carry on the Building.
c) Increase of Premiums. Tenant will not do anything or fail to
do anything or permit anything to be done which will cause the cost of
Landlord's insurance to increase or which will prevent Landlord from procuring
insurance (including but not limited to public liability insurance) from
companies, and in a form, satisfactory to Landlord. If any breach of this
subsection (c) by Tenant shall cause the rate of fire or other insurance to be
increased, Tenant shall pay the amount of such increase as Additional Rent
promptly upon demand. Notwithstanding anything to the contrary contained in this
Lease, Landlord represents and warrants to Tenant that Tenant's use of the
Premises for the purposes specified herein will not in and of itself violate
Landlord's insurance policies which shall be in effect immediately prior to the
beginning of the Term of this Lease nor increase the premiums therefor.
8. Repairs and Maintenance.
a) Tenant shall, throughout the Term and at Tenant's sole cost
and expense, keep and maintain the Premises in a neat and orderly condition;
and, upon expiration of the Term, Tenant shall leave the Premises in good order
and condition,
6
<PAGE>
ordinary wear and tear, damage by fire or other casualty alone excepted, and for
that purpose and except as stated, Tenant will make all necessary non-structural
repairs and replacements. Tenant shall not permit any waste, damage or injury to
the Premises. Tenant shall not use or permit the use of any portion of the
Common Facilities for other than their intended use as specified by the Landlord
from time to time.
b) Landlord shall, promptly throughout the Term, make all
necessary repairs to the structural elements of the Premises, the building, and
other improvements located on the Property; provided, however, that Landlord
shall have no responsibility to make any repairs unless and until Landlord
receives written notice of the need for such repair. Landlord shall keep and
maintain all Common Facilities of the Property and any sidewalks, parking areas,
curbs and access ways adjoining the Property in a clean and orderly condition,
free of accumulation of dirt and rubbish and shall keep and maintain all
landscaped areas within the Property in a neat and orderly condition.
Notwithstanding anything to the contrary contained herein, Landlord shall be
responsible for maintaining and repairing the life, fire, and safety systems and
the points of connection thereto to the Premises, and the costs of same shall be
included in Annual Operating Costs.
c) Notwithstanding the foregoing, repairs and replacement to
the Premises and the Property arising out of or caused by Tenant's specific use,
specific manner of use or occupancy of the Premises, by Tenant's installation of
alterations, additions, improvements, trade fixtures or equipment in or upon the
Premises or by any act or omission of Tenant or any employee, agent, contractor
or invitee (while on the Premises) of Tenant shall be made at Tenant's sole cost
and expense and Tenant shall pay Landlord the reasonable cost of any such repair
or replacement, as Additional Rent, within 15 days after demand.
9. Utilities and Services.
a) Landlord shall furnish the Premises with electricity,
heating and air conditioning for the normal use and occupancy of the Premises as
general offices between 8:00 a.m. and 6:00 p.m., Monday through Friday, of
each week during the Term (Building Holidays excepted). Tenant agrees to pay as
Additional Rent all charges for electricity, light, heat or other utility used
by Tenant at the Premises. A separate submeter has been installed and Tenant
shall pay for the consumption of such utilities based upon its metered usage. If
no meter is installed, Tenant shall pay its Proportionate Share of any utility
charges covering the Demised Premises and the remainder of the Building. Tenant
shall pay all bills for separately metered utility usage within ten (10) days
after receipt thereof, and any non-payment or late payment of such utility bills
shall be deemed a default under the terms of this Lease. All charges for repairs
of any meters servicing the Premises shall be payable by Tenant as Additional
Rent and shall be paid when the same shall become due. Notwithstanding anything
to the contrary contained in this Lease, Landlord shall upgrade the electric
service to the Building in order to provide the Premises with 1200 amps which
upgrade shall be done at Landlord's sole cost and expense.
7
<PAGE>
b) Within the Common Facilities of the Building, Landlord shall
furnish reasonably: (i) adequate electricity, (ii) hot and cold water, (iii)
lavatory supplies, (iv) automatically operated elevator service, (v) normal and
customary cleaning services (on a five-day a week basis) after business hours,
(vi) heat and air conditioning in season, (vii) landscaping, (viii) parking lot
maintenance, (ix) common area maintenance and (x) snow and ice removal. Tenant
shall be responsible for its Proportionate Share of the cost of such services in
accordance with Section 6(b) hereof. Landlord shall provide janitorial service
to the Premises, five days per week, after regular business hours, in accordance
with the janitorial specifications attached hereto as Exhibits F, and the costs
of such service will be passed through to Tenant as set forth in Section 6.
c) Except as otherwise expressly provided herein, Landlord
shall not be liable for any damages to Tenant resulting from the quality,
quantity, failure, unavailability or disruption of any services beyond the
reasonable control of Landlord and the same shall not constitute a termination
of this Lease or an actual or constructive eviction or entitle Tenant to an
abatement of rent. Landlord shall not be responsible for providing any services
not specifically provided for in this Lease. Notwithstanding anything to the
contrary contained herein, in the event there is any failure or defect in
service furnished to the Premises by Landlord's direct control (as opposed to a
public service utility company) or Landlord determines to make any repairs,
additions, alterations, replacements, decorations or improvements in the
Building or the Demised Premises, and Tenant shall be unable for at least
seventy-two (72) hours to operate its business in the Premises in substantially
the same manner as such business was operated prior to such interruption, the
Fixed Basic Rent and Additional Rent shall be reduced on a per diem basis in
their proportion in which the area of the untenantable portion of the Premises
(i.e., the portion of the Premises in which Tenant is unable to operate its
business in substantially the same manner as such business was operated prior to
such interruption) bears to the total area of the Premises, for each day
subsequent to the aforesaid seventy-two (72) hour period that such portion of
the Premises remains unusable. If any such interruption continues for a period
in excess of thirty (30) days, Tenant shall have the right to terminate this
Lease upon notice to Landlord. Tenant, its agents, employees and licensees shall
have access to the premises 24 hours per day, 7 days per week.
10. Governmental Regulations.
a) Landlord and Tenant shall comply with all laws, ordinances,
notices, orders, rules, regulations and requirements of all federal, state and
municipal government or any department, commission, board of officer thereof, or
of the National Board of Fire Underwriters or any other body exercising similar
functions, relating to the Premises or to the use or manner of use of the
Property. Tenant shall not knowingly do or commit, or suffer to be done or
committed anywhere in the Building, any act or thing contrary to any of the
laws, ordinances, regulations and requirements referred to in this Section.
Tenant shall give Landlord prompt written notice of any accident in the Premises
and of any breakage, defect or failure in any of the systems or equipment
servicing the Premises or any portion of the Premises.
8
<PAGE>
b) Tenant shall pay its Proportionate Share of the cost of
capital improvements which Landlord shall install or construct in compliance
with governmental requirements which take effect after the commencement of the
Term hereof. Tenant's Proportionate Share shall be determined based upon the
estimated life of the capital investment item, determined by Landlord in
accordance with generally accepted accounting principles, and shall include a
cost of capital funds adjustment equal to the rate of Interest on the
unamortized portion of all such costs. Tenant shall only have to pay for the
portion of the useful life of the capital improvement which falls within the
Term. Tenant shall thus make payments in equal annual installments for such
capital improvements until the Term expires or until the cost of the improvement
has been fully paid for, whichever first occurs; such payments shall be computed
by Landlord at the time of installation of the capital improvement in the same
manner as Landlord makes computations of Tenant's share of the Annual Operating
Costs pursuant to Section 6(b)(ii). Landlord represents and warrants that, as of
the Commencement Date, the Premises and all structural parts thereof, including,
without limitation, the foundation, roof, exterior walls, plumbing, electrical
and other mechanical systems (a) will meet and comply with all federal, state
and local laws, ordinances and regulations and all handicapped accessibility
standards, including, without limitation, those promulgated under the Americans
With Disabilities Act ("ADA"), and (b) will be in good, workable and sanitary
order, condition, and repair. Landlord shall correct any latent defects promptly
after Tenant notifies Landlord of any such defect. Notwithstanding anything to
the contrary contained in this Lease, Landlord represents and warrants to the
Tenant that (i) Tenant's Permitted Use shall not in and of itself violate any of
the provisions of this Lease or the provisions of any grant, lease, or mortgage
to which this Lease is subordinate and (ii) Tenant's use of the Premises for the
Permitted Use will not in and of itself violate Landlord's insurance policies
which shall be in effect immediately prior to the commencement of the Term of
this Lease nor increase the premiums therefor.
c) Tenant shall pay all taxes imposed upon Tenant's
furnishings, trade fixtures, equipment or other personal property.
11. Signs. Except for signs which are located wholly within the
interior of the Premises and which are not visible from the exterior of the
Premises, Tenant shall not place, erect, maintain or paint any signs upon the
Premises or the Property unless the design of such signs are approved by
Landlord in writing which approval may be withheld in Landlord's sole
discretion. Tenant shall be entitled to Building standard signage and to have
its name and logo placed on the monument sign located at the Property. Tenant
shall be solely responsible for all costs and expenses associated with the
erection of any signs upon the Premises and shall be obligated to obtain and
provide to Landlord any and all necessary permits prior to the placement or
erection of such signs.
12. Alterations, Additions and Fixtures.
a) Tenant shall have the right to install in the Premises any
trade fixtures; provided, however, that no such installation and no removal
thereof shall be permitted
9
<PAGE>
which affects any structural component of the Building or Premises and that
Tenant shall repair and restore any damage or injury to the Premises or the
Property caused by installation or removal.
b) Subsequent to Tenant's initial alterations, Tenant shall not
make or permit to be made any alterations, improvements or additions to the
Premises or Property without on each occasion first presenting plans and
specifications to Landlord and obtaining Landlord's prior written consent, which
shall not be unreasonably withheld or delayed, but may be conditioned upon
compliance with reasonable requirements of Landlord including, without
limitation, the filing of mechanics' lien waivers by Tenant's contractors and
the submission of written evidence of adequate insurance coverage naming
Landlord as an additional insured thereunder. If Landlord consents to any
proposed alterations, improvements or additions or Tenant's contractor performs
any of the work identified in Section 3 of this Lease Agreement, then Tenant
shall make the proposed alterations, improvements and additions at Tenant's sole
cost and expense provided that: (i) Tenant supplies any necessary permits; (ii)
such alterations and improvements do not, in Landlord's judgment, impair the
structural strength of the Building or any other improvements or reduce the
value of the Property; (iii) Tenant takes or causes to be taken all steps that
are otherwise required by Section 13 of this Lease and that are required or
permitted by law in order to avoid the imposition of any mechanic's, laborer's
or materialman's lien upon the Premises or the Property; (iv) Tenant uses a
contractor reasonably approved by Landlord; (v) the occupants of the Building
and of any adjoining real estate owned by Landlord are not annoyed or disturbed
by such work; (vi) the alterations, improvements or additions shall be installed
in accordance with the approved plans and specifications and completed according
to a construction schedule reasonably approved by Landlord; and (vii) Tenant
provides insurance of the types and coverage amounts required by Landlord. Any
and all alterations, improvements and additions to the Premises which are
constructed, installed or otherwise made by Tenant shall be the property of
Tenant until the expiration or sooner termination of this Lease; at that time
all such alterations and additions shall remain on the Premises and become the
property of Landlord without payment by Landlord unless, upon the termination of
this Lease, Landlord instructs Tenant in writing to remove the same in which
event Tenant will remove such alterations, improvements and additions, and
repair and restore any damage to the Property caused by the installation or
removal. Notwithstanding anything to the contrary contained in this Lease,
Landlord may withhold its approval to any proposed alterations, additions or
improvements to the Premises (subsequent to Tenant's initial alterations)in its
absolute and sole discretion with respect to any such alteration, addition or
improvement which Landlord determines involves any modification to the
Building's exterior or its structural, electrical, mechanical or plumbing
systems, or any components thereof. Notwithstanding anything to the contrary
contained in this Lease, upon the expiration or sooner termination of the Term
of this Lease, Tenant shall not be required to restore the Premises to its
condition prior to the making of any alteration permitted under this Section
12(b), except if and to the extent that subsequent to Tenant's initial
alterations to prepare the Premises for Tenant's initial occupancy, such
restoration is made an express condition of Landlord's consent to such
alteration. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall have the right, and is hereby
10
<PAGE>
granted a license for such purpose, to use such portions of the common areas of
the Building which are necessary or desirable to support its intended use of the
Premises, including, without limitation, the right to tie into and/or connect
with the vents, pipes, ducts and conduits of the Building in connection with
Tenant's initial alterations to prepare the Premises for Tenant's opening for
business and the providing of utility service to the Premises provided Tenant
gives Landlord notice of same and does not interfere with any other tenant's use
of the Building or their respective premises.
13. Mechanic's Liens. Tenant shall promptly pay any contractors and
materialmen who supply labor, work or materials to Tenant at the Premises or the
Property so as to minimize the possibility of a lien attaching to the Premises
or the Property. Tenant shall take all steps permitted by law in order to avoid
the imposition of any mechanic's, laborer's or materialman's lien upon the
Premises or the Property. Should any such lien or notice of lien be filed for
work performed for Tenant other than by Landlord, Tenant shall cause such lien
or notice of lien to be discharged of record by payment, deposit, bond or
otherwise within thirty (30) days after the filing thereof or after Tenant's
receipt of notice thereof, whichever is earlier, regardless of the validity of
such lien or claim. If Tenant shall fail to cause such lien or claim to be
discharged and removed from record within such thirty (30) day period, then,
without obligation to investigate the validity thereof and in addition to any
other right or remedy Landlord may have, Landlord may, but shall not be
obligated to, contest the lien or claim or discharge it by payment, deposit,
bond or otherwise; and Landlord shall be entitled to compel the prosecution of
an action for the foreclosure of such lien by the lienor and to pay the amount
of the judgment in favor of the lienor with interest and costs. Any amounts so
paid by Landlord and all costs and expenses including, without limitation,
reasonable attorney's fees incurred by Landlord in connection therewith,
together with Interest from the respective dates of Landlord's making such
payment or incurring such cost or expense, which shall constitute Additional
Rent payable hereunder promptly upon demand therefor. Nothing in this Lease is
intended to authorize Tenant to do or cause any work or labor to be done or any
materials to be supplied for the account of Landlord, all of the same to be
solely for Tenant's account and at Tenant's risk and expense. Further,
notwithstanding anything to the contrary contained in this Lease, nothing
contained in or contemplated by this Lease shall be deemed or construed in any
way to constitute the consent or request by Landlord for the performance of any
work or services or the furnishing of any materials for which any lien could be
filed against the Premises or the Building or the Property or any part of any
thereof, nor as giving Tenant any right, power or authority to contract or
permit the performance of any work or services or the furnishing of any
materials for which any lien could be filed against the Premises, the Building,
the Property or any part of any thereof. Throughout this Lease the term
"mechanic's lien" is used to include any lien, encumbrance or charge levied or
imposed upon the Premises or the Property or any interest therein or income
therefrom on account of any mechanic's, laborer's or materialman's lien or
arising out of any debt or liability to or any claim or demand of any
contractor, mechanic, supplier, materialman or laborer due to work done for or
materials supplied to Tenant (other than Landlord's Work)and shall include
without limitation any mechanic's notice of intention given to Landlord or
Tenant, any stop order given to Landlord or Tenant, any notice of refusal to pay
naming
11
<PAGE>
Landlord or Tenant and any injunctive or equitable action brought by any person
entitled to any mechanic's lien.
14. Landlord's Right of Entry.
a) Tenant shall permit Landlord and the authorized
representatives of Landlord and of any mortgagee or any prospective mortgagee to
enter the Premises at all reasonable times, upon at least 24 hours prior notice
(which may be oral) to Tenant, for the purpose of (i) inspecting the Premises or
(ii) making any necessary repairs to the Premises or to the Building and
performing any work therein. During the progress of any work on the Premises or
the Building, Landlord will attempt not to inconvenience Tenant, but shall not
be liable for inconvenience, annoyance, disturbance, loss of business or other
damage to Tenant by reason of making any repair or by bringing or storing
materials, supplies, tools and equipment in the Premises during the performance
of any work, except as otherwise expressly provided herein and the obligations
of Tenant under this Lease shall not be thereby affected in any manner
whatsoever.
b) Landlord shall have the right at all reasonable times to,
with prior notice to Tenant, enter and to exhibit the Premises for the purpose
of inspection or showing the Premises in connection with a sale or mortgage and,
during the last six (6) months of the Term, to enter upon and to exhibit the
Premises to any prospective tenant.
15. Damage by Fire or Other Casualty.
a) If the Premises or Building is damaged or destroyed by fire
or other casualty, Tenant shall promptly notify Landlord whereupon Landlord
shall, subject to the consent of Landlord's present or future mortgagee and to
the conditions set forth in this Section 15, repair, rebuild or replace such
damage and restore the Premises to substantially the same condition as the
Premises were in immediately prior to such damage or destruction; provided,
however, that Landlord shall only be obligated to restore such damage or
destruction to the extent of the proceeds of fire and other extended coverage
insurance policies. Notwithstanding anything to the contrary contained in this
Lease, if the Premises is damaged or destroyed by fire or any casualty which
cannot, despite diligent, good faith efforts be repaired or restored within one
hundred eighty (180) days following the date on which such damage occurs, then
Tenant or Landlord may elect to terminate this Lease effective as of the date of
such damage or destruction. Within thirty (30) days after the date of such
damage, the parties shall determine how long the repair and restoration will
take. After that determination has been made, if the determination is that the
restoration will take more than one hundred eighty (180) days to complete,
Tenant and Landlord shall have a period of thirty (30) days to terminate this
Lease by giving written notice to the other. If neither party elects to
terminate this Lease as provided herein, then Landlord shall, subject to the
provisions of this Section, promptly commence and diligently pursue to
completion the repair of such damage so that the Premises are restored to a
condition of similar quality, character and utility for Tenant's purposes. If
the Premises are not substantially repaired and restored within two hundred and
forty (240) days of the date of the damage, Tenant may cancel this Lease at
12
<PAGE>
any time before Landlord substantially completes the repairs and delivers the
restored Premises to Tenant. If Tenant does not so terminate, Landlord shall
continue to restore the Premises. In the event of termination, Landlord shall
return any prepaid Fixed Basic Rent, Additional Rent and any other prepaid
amounts to Tenant within thirty (30) days from the date of termination of this
Lease. If any damage or destruction occurs to the Premises during the last year
of the Term and the cost to repair the damage exceeds Five Hundred Thousand
Dollars ($500,000.00) either Landlord or Tenant may terminate this Lease upon
giving the other party thirty (30) days written notice; provided, however, that
if Landlord notifies Tenant that it wishes to terminate this Lease, then Tenant
may, if it has not already done so, exercise its right to extend the term of the
Lease under Rider A, whereupon Landlord's election to terminate shall be null
and void. If Landlord is required to repair or restore the Premises under any
provision of this Article and Tenant's use of the Premises is affected, then
until Landlord completes such repair or restoration, Fixed Basic Rent,
Additional Rent and all other charges payable by Tenant hereunder shall abate in
their entirety, unless Tenant remains in possession of the Premises, in which
event such rent and other charges shall abate based on the portion of the
Premises which is not being used by Tenant.
b) The repair, rebuilding or replacement work shall be
commenced promptly and completed with due diligence, taking into account the
time required by Landlord to effect a settlement with, and procure insurance
proceeds from, the insurer, and for delays beyond Landlord's reasonable control.
c) The net amount of any insurance proceeds recovered by reason
of the damage or destruction of the Building (meaning the gross insurance
proceeds excluding proceeds received pursuant to a rental coverage endorsement
and the cost of adjusting the insurance claim and collecting the insurance
proceeds) shall be applied towards the cost of restoration. Notwithstanding
anything to the contrary in this Lease Agreement, if in Landlord's reasonable
opinion the net insurance proceeds will not be adequate to complete such
restoration, Landlord shall have the right to terminate this Lease and all the
unaccrued obligations of the parties hereto by sending a written notice of such
termination to Tenant specifying a termination date no less than ten (10) days
after its transmission; provided, that Landlord terminates all other office
Leases in the Building affected by such casualty If the net insurance proceeds
are more than adequate, the amount by which the net insurance proceeds exceed
the cost of restoration will be retained by Landlord or applied to repayment of
any mortgage secured by the Premises.
d) Landlord's obligation or election to restore the Premises
under this Section shall be subject to the terms of any present or future
mortgage affecting the Premises and to the mortgagee's consent if required in
the mortgage and shall not, in any event, include the repair, restoration or
replacement of the fixtures, improvements, alterations, furniture or any other
property owned, installed, made by, or in the possession of Tenant.
e) Landlord shall maintain insurance against loss or damage to
the Building by fire and such other casualties as may be included within fire
and extended
13
<PAGE>
coverage insurance or all-risk insurance, together with a rental coverage
endorsement or other comparable form of coverage. If Tenant is dispossessed of
the Premises due to fire or other casualty, Tenant will receive an abatement of
its Fixed Basic Rent during the period Tenant is dispossessed to the extent of
payments received by Landlord from the carrier providing the rental coverage
endorsement.
16. Non-Abatement of Rent. Except as otherwise expressly provided in
this Lease there shall be no abatement or reduction of the Fixed Basic Rent,
Additional Rent or other sums payable hereunder for any cause whatsoever and
this Lease shall not terminate, nor shall Tenant be entitled to surrender the
Premises, in the event of fire, casualty or condemnation or any default by
Landlord under this Lease.
17. Indemnification
a) Unless such loss, costs or damages were caused by negligence
of Landlord, its employees, agents or contractors, Tenant hereby agrees to
indemnify, defend and hold the Landlord and its employees, agents and
contractors harmless from any loss, costs and damages (including reasonable
attorney's fees and costs) suffered by Landlord, its agents, employees or
contractors, as a result of any claim by a third party, its agents, employees or
contractors arising from Tenant's occupancy of the Premises. Tenant shall have
the right to designate counsel acceptable to Landlord, such approval not be
unreasonably withheld, to assume the defense of any such third party claim on
behalf of itself and Landlord. Landlord shall not have the right to settle any
claim without the consent of Tenant. This indemnity shall survive the expiration
or termination of this Lease.
b) Unless such loss, costs or damages were caused by negligence
of Tenant, its employees, agents or contractors, Landlord hereby agrees to
indemnify, defend and hold the Tenant and its employees, agents and contractors
harmless from any loss, costs and damages (including reasonable attorney's fees
and costs) suffered by Tenant, its agents, employees or contractors, as a result
of any claim by a third party, its agents, employees or contractors arising from
Landlord's ownership and operation of the Property. Landlord shall have the
right to designate counsel acceptable to Tenant, such approval not be
unreasonably withheld, to assume the defense of any such third party claim on
behalf of itself and Tenant. Tenant shall not have the right to settle any claim
without the consent of Landlord. This indemnity shall survive the expiration or
termination of this Lease.
c) If Landlord brings any action under this Lease Agreement,
Tenant agrees in each case to pay Landlord's reasonable attorney's fees and
other costs and expenses incurred by Landlord in connection therewith; provided,
however, the Landlord prevails in such action.
18. Condemnation.
a) Condemnation of Premises. If any portion of the Premises is
taken
14
<PAGE>
under the power of eminent domain, or sold by Landlord under the threat of the
exercise of said power (the act of which is herein referred to as
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes possession of the condemned portion of the
Premises (the "Condemnation Date"). If the entire Premises is condemned, then
the Lease shall automatically terminate as of the Condemnation Date. The party
who receives the condemnor's notice of intention to take (the "Condemnation
Notice") shall immediately give a copy of such notice to the other Party
b) Condemnation of the Property. If as a result of any
condemnation of the Property or any portion thereof (even though the Premises is
not physically affected) or (a) the number of parking spaces on the Property is
reduced by more than fifty (50) spaces and Landlord does not provide alternative
parking which is reasonably accessible, then Tenant may terminate this Lease at
any time after Tenant receives the Condemnation Notice by giving Landlord thirty
(30) days written notice.
c) Condemnation of the Building. If a condemnation of any
portion of the Building (even though the Premises is not physically
affected) renders the Building unsuitable for use as an office Building in the
Landlord's reasonable business judgment, then Landlord may terminate this Lease
by giving the Tenant at least thirty (30) days written notice. Notwithstanding
the foregoing, Landlord may only exercise its right to terminate under this
Section if Landlord terminates the Leases of all other tenants in the Building.
d) Restoration. If this Lease is not terminated as to the whole
Premises, (a) it shall remain in full force and effect as to the portion of the
Premises remaining, provided the Fixed Basic Rent and all other charges payable
hereunder shall be reduced in the same proportion that the area taken bears to
the total area of the Premises prior to the taking, and (b) Landlord shall use
the condemnation award to restore the Premises and the Building as soon as
reasonably possible to a complete unit of the same quality, character and
utility for Tenant's purposes existing prior to the condemnation. If the Lease
is not terminated but the Premises cannot be restored (as reasonably determined
by Landlord and Tenant) to substantially the same condition as existed prior to
the date of the condemnation within one hundred and eighty (180) days, then this
Lease shall terminate upon written notice from either party to the other.
e) Award. In the event of a condemnation affecting Tenant,
Tenant shall have the right to make a claim against the condemnor for removal
expenses and moving expenses, loss of business and any other claims Tenant may
have; provided and to the extent, however, that such claims or payments do not
reduce the sums otherwise payable by the condemnor to Landlord. Except as
aforesaid, Tenant hereby waives all claims against Landlord and against the
condemnor, and Tenant hereby assigns to Landlord all claims against the
condemnor including, without limitation, all claims for leasehold damages and
diminution in value of Tenant's leasehold interest.
19. Quiet Enjoyment. Tenant, upon paying the Fixed Basic Rent,
Additional
15
<PAGE>
Rent and other charges herein required and observing and keeping all covenants,
agreements and conditions of this Lease, shall quietly have and enjoy the
Premises during the Term without hindrance or molestation by anyone claiming by
or through Landlord, subject, however, to the exceptions, reservations and
conditions of this Lease.
20. Rules and Regulations. The Landlord hereby reserves the right to
prescribe, from time to time, at its sole discretion, reasonable rules and
regulations (herein called the "Rules and Regulations") attached hereto as
Exhibit B governing the use and enjoyment of the Premises and the remainder of
=========
the Property. The Rules and Regulations shall not materially interfere with the
Tenant's use and enjoyment of the Premises in accordance with the provisions of
this Lease for the Permitted Use and shall not increase or modify Tenant's
obligations under this Lease. In the event of a conflict between the Lease
Agreement and such rules and regulations, the Lease Agreement shall control. The
Tenant shall comply at all times with the Rules and Regulations and shall cause
its agents, employees, invitees, visitors, and guests to do so.
21. Assignment and Sublease.
a) Tenant may assign this Lease or sublet the whole or any
portion of the Premises, subject to the Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed on the basis of the
following terms and conditions:
i) The Tenant shall provide to the Landlord the name and
address of the assignee or subtenant.
ii) The assignee or subtenant shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such assumption
agreement shall be furnished to the Landlord within ten (10) days of its
execution. Any sublease shall expressly acknowledge that said subtenant's rights
against Landlord shall be no greater than those of Tenant.
iii) The Tenant and each assignee shall be and remain
liable for the observance of all the covenants and provisions of this Lease,
including, but not limited to, the payment of Fixed Basic Rent and Additional
Rent reserved herein, through the entire Term of this Lease, as the same may be
renewed, extended or otherwise modified.
iv) The Tenant and any assignee shall promptly pay to
Landlord one-half of the net profit received from such subleasing or assignment.
Net profit will be calculated after deducting the Tenant's Transfer Expenses (as
hereinafter defined). "Transfer Expenses" shall mean (i) the reasonable out-of-
pocket costs and expenses of Tenant in making such sublease or assignment, as
the case may be, such as market rate brokers' fees, reasonable attorneys' fees
and advertising fees, (ii) any fees paid to Landlord pursuant to the terms of
this Lease, (iii) the cost of improvements or alterations made by Tenant
expressly for the purpose of preparing the Premises for such subtenant or
assignee, and (iv) the unamortized cost of any Tenant's property leased to and
used by such subtenant
16
<PAGE>
or assignee. In determining Transfer Expenses, the costs set forth in clauses
(i), (ii) and (iii) shall be amortized on a straight-line basis over the term of
the sublease, or the remainder of the term of this Lease, if an assignment, and
the costs set forth in clause (iv) shall be amortized on a straight-line basis
over the greater of (x) the longest useful life of such improvements,
alterations or property (as permitted pursuant to the Internal Revenue Code of
1986, as amended), or (y) the term of the sublease, or the remainder of the Term
of this Lease, if an assignment.
v) In any event, the acceptance by the Landlord of any
rent from the assignee or from any of the subtenants or the failure of the
Landlord to insist upon a strict performance of any of the terms, conditions and
covenants herein shall not release the Tenant herein, nor any assignee assuming
this Lease, from any and all of the obligations herein during and for the entire
Term of this Lease.
vi) Landlord shall require a Five Hundred Dollars
($500.00) payment to cover its handling charges for each request for consent to
any sublet or assignment prior to its consideration of the same. Tenant
acknowledges that its sole remedy with respect to any assertion that Landlord's
failure to consent to any sublet or assignment is unreasonable shall be the
remedy of specific performance and Tenant shall have no other claim or cause of
action against Landlord as a result of Landlord's actions in refusing to consent
thereto.
b) Notwithstanding anything to the contrary in this Lease,
Tenant may, upon ten (10) days written notice to Landlord but without Landlord's
prior written consent, and without Landlord having any right to terminate this
Lease or share in any consideration or profit therefor, assign or transfer its
entire interest in this Lease and the leasehold estate hereby created, or
sublease the entire demised premises, to a successor corporation of Tenant,
which for the purposes of this Lease shall mean either (a) any corporation or
other business entity which controls, is controlled by, or under common control
with, Tenant (a "related corporation"), or (b) a corporation or other business
entity into which or with which Tenant, its corporate successors or assigns, is
merged or consolidated, in accordance with applicable statutory provisions for
the merger or consolidation of corporations, provided that by operation of law
or by effective provisions contained in the instruments of merger or
consolidation the liabilities of the corporations or other business entities
participating in such merger or consolidation are assumed by the corporation or
other business entity surviving such merger or consolidation, or (c) a
corporation or other business entity acquiring substantially all of Tenant's
assets, or (d) any successor to a successor corporation becoming such by any of
the methods described in subdivisions (a), (b) and (c) above; provided, however,
that Tenant shall have no such right to assign or transfer to a successor
corporation unless Tenant shall not be in default in the performance of any of
its obligations under this Lease beyond the applicable notice and cure period
and provided that in the event of such merger, consolidation or transfer of (i)
the successor to Tenant has a net worth computed in accordance with generally
accepted accounting principles at least equal to the greater of (1) the net
worth of Tenant immediately prior to such merger, consolidation or transfer, or
(2) the net worth of Tenant herein named on the date of this Lease, and (ii)
proof satisfactory to Landlord of such net worth shall have been delivered to
Landlord at least ten
17
<PAGE>
(10) days prior to the effective date of any such transaction. For the purposes
hereof "control" shall be deemed to mean ownership of not less than fifty
percent (50%) of all of the voting stock of such corporation, or not less than
fifty percent (50%) of all of the legal and equitable interest in any other
business entity, or he possession of the power, directly or indirectly, to
direct or cause the direction of management and policy of a corporation or other
business entity, whether through the ownership of voting securities, common
directors or officers, the contractual right to manage the business affairs of
such business entity, or otherwise. Notwithstanding anything to the contrary
contained in this Lease and (x) any sale or transfer of Tenant's capital stock
through any public exchange, or redemption or issuance of additional stock of
any class, shall not be deemed an assignment, subletting or any other transfer
of this Lease or the Premises
d) In the event that any or all of Tenant's interest in the
Premises and/or this Lease is transferred by operation of law to any trustee,
receiver, or other representative or agent of Tenant, or to Tenant as a debtor
in possession, and subsequently any or all of Tenant's interest in the Premises
and/or this Lease is offered or to be offered by Tenant or any trustee,
receiver, or other representative or agent of Tenant as to its estate or
property (such person, firm or entity being hereinafter referred to as the
"Grantor", for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than Landlord (each such transaction being hereinafter
referred to as a "Disposition"), it is agreed that Landlord has and shall have a
right of first refusal to purchase, take, or otherwise acquire, the same upon
the same terms and conditions as the Grantor thereof shall accept upon such
Disposition to such other person, firm, or entity; and as to each such
Disposition the Grantor shall give written notice to Landlord in reasonable
detail of all of the terms and conditions of such Disposition within twenty (20)
days next following its determination to accept the same but prior to accepting
the same, and Grantor shall not make the Disposition until and unless Landlord
has failed or refused to accept such right of first refusal as to the
Disposition, as set forth herein. Landlord shall have sixty (60) days next
following its receipt of the written notice as to such Disposition in which to
exercise the option to acquire Tenant's interest by such Disposition, and the
exercise of the option by Landlord shall be effected by notice to that effect
sent to the Grantor; but nothing herein shall require Landlord to accept a
particular Disposition or any Disposition, nor does the rejection of any one
such offer of first refusal constitute a waiver or release of the obligation of
the Grantor to submit other offers hereunder to Landlord. In the event Landlord
accept such offer of first refusal, the transaction shall be consummated
pursuant to the terms and conditions of the Disposition described in the notice
to Landlord. In the event Landlord rejects such offer of first refusal, Grantor
may consummate the Disposition with such other person, firm, or entity; but any
decrease in price of more than two percent (2%) of the price sought from
Landlord or any change in the terms of payment for such Disposition shall
constitute a new transaction requiring a further option of first refusal to be
given to Landlord hereunder.
e) Without limiting any of the provisions of this Section 21,
if pursuant to the Federal Bankruptcy Code (herein referred to as the "Code"),
or any similar law hereafter enacted having the same general purpose, Tenant is
permitted to assign this Lease notwithstanding the restrictions contained in
this Lease, adequate assurance of future performance by an assignee expressly
permitted under such Code shall be deemed to mean
18
<PAGE>
the deposit of cash security in an amount equal to the sum of one year's Fixed
Basic Rent plus an amount equal to the Additional Rent for the calendar year
preceding the year in which such assignment is intended to become effective,
which deposit shall be held by Landlord for the balance of the Term, without
interest, as security for the full performance of all of Tenant's obligations
under this Lease, to be held and applied in the manner specified for any
security deposit required hereunder.
f) Except as specifically set forth above, no portion of the
Premises or of Tenant's interest in this Lease may be acquired by any other
person or entity, whether by assignment, mortgage, sublease, transfer, operation
of law or act of the Tenant, nor shall Tenant pledge its interest in this Lease
or in any security deposit required hereunder.
22. Tenant's Relocation. [Intentionally Deleted].
23. Subordination. The estate of this Lease and Tenant's rights
hereunder shall be subject and subordinate at all times in lien and priority to
any first mortgage or other primary encumbrance now or hereafter placed upon or
affecting the Property or the Premises, and to any second mortgage or
encumbrance with the consent of the first mortgagee, and to all renewals,
modifications, consolidations and extensions thereof, without the necessity of
any further instrument or act on the part of the Tenant. Tenant shall execute
and deliver upon demand any further instrument or instruments confirming the
subordination of this Lease to the lien of any such first mortgage or to the
lien of any other mortgage, if requested to do so by Landlord with the consent
of the first mortgagee, and any further instrument or instruments of attorment
that may be desired by any such mortgagee or Landlord, provided, however, that
any holder of such lien or mortgage agrees not to disturb the use and occupancy
of the Premises in accordance with the terms of this Lease Agreement upon any
foreclosure. Notwithstanding the foregoing, any mortgagee may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by giving
notice in writing to Tenant and thereupon this Lease shall be deemed prior to
such mortgage without regard to their respective dates of execution and
delivery. In that event such mortgagee shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution and
delivery of the mortgage and had been assigned to such mortgagee. Landlord
agrees that it will use best efforts to obtain and deliver to Tenant a
subordination, non-disturbance and attornment agreement from the holder(s)of any
mortgage or other security interest affecting the Premises of Building.
24. Curing Tenant's Defaults. If Tenant defaults in the performance
of any of its obligations hereunder, beyond any applicable notice and cure
period Landlord may, without any obligation to do so and in addition to any
other rights it may have in law or equity, elect to cure such default on behalf
of Tenant after written notice (except in the case of emergency) to Tenant.
Tenant shall reimburse Landlord upon demand for any reasonable sums paid or
costs incurred by Landlord in curing such default, including interest thereon
from the respective dates of Landlord's making the payments and incurring such
costs, which sums and costs together with interest thereon shall be deemed
Additional Rent payable within ten (10) days of demand.
19
<PAGE>
25. Surrender.
a) At the expiration or earlier termination of the Term Tenant
shall promptly yield up the Premises and all improvements, alterations and
additions thereto, and all fixtures and equipment servicing the Premises in a
condition which is clean of garbage and debris and broom clean and in the same
condition, order and repair in which they are required to be kept throughout the
Term, ordinary wear and tear excepted.
b) Tenant, upon three (3) months prior written notice to
Landlord, Tenant may extend the Term, or if applicable, any renewal term, of the
Lease for one (1) additional three (3) month period and during such period, all
the terms and conditions of this Lease shall apply and Tenant shall pay Fixed
Basic Rent at the rate then being paid by Tenant. If Tenant, or any person
claiming through Tenant, continues to occupy the Premises after the expiration
or earlier termination of the Term or any renewal thereof without prior written
consent of Landlord, the tenancy under this Lease shall become, at the option of
Landlord, expressed in a written notice to Tenant and not otherwise, either from
month-to-month, terminable by Landlord on thirty (30) days prior notice, under
the same terms and conditions set forth in this Lease; except, however, that the
Fixed Basic Rent during such continued occupancy shall be 150% of the amount set
forth in subsection 6(a) and Tenant shall indemnify Landlord for any loss or
damage incurred by reason of Tenant's failure to surrender the Premises.
Anything to the contrary notwithstanding, any holding over by Tenant without
Landlord's prior written consent shall constitute a default hereunder and shall
be subject to all the remedies set forth in subsection 26(b) hereof.
26. Defaults-Remedies.
a) Defaults. It shall be an event of default under this Lease
if any one or more of the following events occur:
i) Tenant fails to pay in full, within five (5) days
after when due and without demand, any and all installments of Fixed Basic Rent
or Additional Rent or any other charges or payments due and payable under this
Lease whether or not herein included as rent.
ii) Tenant violates or fails to perform or otherwise
breaches any agreement, term, covenant or condition contained in this Lease and
fails to cure same within 20 days after notice.
iii) Tenant abandons or vacates the Premises without
notice without having first paid to Landlord in full all Fixed Basic Rent,
Additional Rent and other charges that have become due as well as all which will
become due thereafter through the end of the Term.
iv) Tenant becomes insolvent or bankrupt in any sense or
makes
20
<PAGE>
an assignment for the benefit of creditors or if a petition in bankruptcy or for
reorganization or for an arrangement with creditors under any federal or state
law is filed by or against Tenant, or a bill in equity or other proceeding for
the appointment of a receiver or similar official for any of Tenant's assets is
commenced, or if any of the real or personal property of Tenant shall be levied
upon by any sheriff, marshal or constable; provided, however, that any
proceeding brought by anyone other than the parties to this Lease under any
bankruptcy, reorganization arrangement, insolvency, readjustment, receivership
or similar law shall not constitute an event of default until such proceeding,
decree, judgment or order has continued unstayed for more than sixty
(60) consecutive days.
b) Remedies. Upon the occurrence of an event of default under
this Lease, Landlord shall have all of the following rights:
i) Landlord may charge a late payment charge of five
(5%) percent of any amount owed to Landlord pursuant to this Lease which is not
paid within five (5) days of the due date which is set forth in the Lease or, if
a due date is not specified in this Lease, within thirty (30) days of the
mailing of a bill therefor by Landlord. If Landlord incurs a late charge in
connection with any payment which Tenant has failed to make within the times
required in this Lease, Tenant shall pay Landlord, in addition to such payment
due, the full amount of such late charge incurred by Landlord. Nothing in this
Lease shall be construed as waiving any rights of Landlord arising out of any
default of Tenant, by reason of Landlord's imposing or accepting any such late
charge(s) and/or interest; the right to collect such late charge(s) and/or
interest is separate and apart from any rights relating to remedies of Landlord
after default by Tenant including, without limitation, the rights and remedies
of Landlord provided herein. For the first time in any calendar year that Tenant
has failed to pay any such monthly installment of Fixed Basic Rent or Additional
Rent, such interest and late charge shall not apply unless Tenant has failed to
make such payments within five (5) days of receipt of Landlord's written notice
of such delinquency. Landlord shall not be required to give Tenant such notice
more than once in any calendar year prior to assessing such interest and late
charge.
ii) Landlord may accelerate the whole or any part of the
Fixed Basic Rent and all Additional Rent for the entire unexpired balance of the
Term of this Lease, as well as all other charges, payments, costs and expenses
herein agreed to be paid by Tenant, and any Fixed Basic Rent or other charges,
payments, costs and expenses so accelerated shall, in addition to any and all
installments of rent already due and payable and in arrears and any other charge
or payment herein reserved, included or agreed to be treated or collected as
rent and any other charge, expense or cost herein agreed to be paid by Tenant
which may be due and payable and in arrears, be deemed due and payable as if, by
the terms and provisions of this Lease, such accelerated rent and other charges,
payments, costs and expenses were on that date payable in advance but in the
event that the Premises are relet, Tenant shall be entitled to a credit in an
amount equal to the net sum of rents actually received by Landlord in reletting
after deduction of all reasonable expenses.
21
<PAGE>
iii) Landlord may re-enter the Premises and, at the
option of Landlord, remove all persons and all or any property therefrom, either
by summary dispossess proceedings or by any suitable action or proceeding at law
without being liable for prosecution or damages therefor, and Landlord may
repossess and enjoy the Premises. Upon recovering possession of the Premises by
reason of or based upon or arising out of a default on the part of Tenant,
Landlord may, at Landlord's option, either terminate this Lease or make such
alterations and repairs as may be necessary in order to relet the Premises and
may relet the Premises or any part or parts thereof, either in Landlord's name
or otherwise, for a term or terms which may, at Landlord's option, be less than
or exceed the period which would otherwise have constituted the balance of the
Term of this Lease and at such rent or rents and upon such other terms and
conditions as in Landlord's reasonable discretion may seem advisable and to such
person or persons as may in Landlord's discretion seem best; upon each such
reletting all rents received by Landlord from such reletting shall be applied as
follows: first, to the payment of any reasonable costs and expenses of such
reletting, including all costs of alterations and repairs; second, to the
payment of any indebtedness other than Fixed Basic Rent, Additional Rent or
other charges due hereunder from Tenant to Landlord; third, to the payment of
Fixed Basic Rent, Additional Rent and other charges due and unpaid hereunder;
and the residue, if any, shall be held by Landlord and applied in payment of
future rent as it may become due and payable hereunder. If rentals received from
reletting during any month are less than that to be paid during that month by
Tenant, Tenant shall pay any such deficiency to Landlord. Such deficiency shall
be calculated and paid monthly. No such re-entry or taking possession of the
Premises or the making of alterations or improvements thereto or the reletting
thereof shall be construed as an election on the part of Landlord to terminate
this Lease unless written notice of termination is given to Tenant. Landlord
shall in no event be liable in any way whatsoever for failure to relet the
Premises or, in the event that the Premises or any part or parts thereof are
relet, for failure to collect the rent thereof under such reletting.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
iv) Landlord may terminate this Lease and the Term
without any right on the part of Tenant to waive the forfeiture by payment of
any sum due or by other performance of any condition, term or covenant broken.
Upon such termination, Landlord shall be entitled to recover, in addition to any
and all sums and damages for violation of Tenant's obligations hereunder in
existence at the time of such termination, damages for Tenant's default in an
amount equal to the amount of the Fixed Basic Rent and Additional Rent reserved
for the balance of the Term, as well as all other charges, payments, costs and
expenses herein agreed to be paid by Tenant all of which amount shall be
immediately due and payable from Tenant to Landlord upon demand therefor.
v) WHEN THIS LEASE AND THE TERM OR ANY EXTENSION OR
RENEWAL THEREOF SHALL HAVE BEEN TERMINATED ON ACCOUNT OF ANY DEFAULT BY TENANT,
OR WHEN THE TERM HAS EXPIRED, IT SHALL BE LAWFUL FOR ANY ATTORNEY OF ANY COURT
OF RECORD TO APPEAR AS ATTORNEY FOR TENANT AS WELL AS FOR ALL
22
<PAGE>
PERSONS CLAIMING BY, THROUGH OR UNDER TENANT, AND TO FILE AN AGREEMENT FOR
ENTERING IN ANY COMPETENT COURT AN ACTION FOR JUDGMENT IN EJECTMENT AGAINST
TENANT AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER TENANT FOR THE RECOVERY BY
LANDLORD OF POSSESSION OF THE PREMISES, FOR WHICH THIS LEASE SHALL BE A
SUFFICIENT WARRANT; WHEREUPON, IF LANDLORD SO DESIRES, AN APPROPRIATE WRIT OF
POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER,
AND PROVIDED THAT IS FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED
IT SHALL BE DETERMINED AND POSSESSION OF THE PREMISES REMAIN IN OR BE RESTORED
TO TENANT, LANDLORD SHALL HAVE THE RIGHT FOR THE SAME DEFAULT AND UPON ANY
SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE TERMINATION OF THIS LEASE OR
TENANT'S RIGHT OF POSSESSION AS HEREINBEFORE SET FORTH, TO BRING ONE OR MORE
FURTHER ACTIONS IN EJECTMENT AS HEREINBEFORE SET FORTH TO CONFESS JUDGMENT FOR
THE RECOVERY OF POSSESSION OF THE PREMISES.
c) Waiver of Jury Trial. IT IS MUTUALLY AGREED BY AND BETWEEN
LANDLORD AND TENANT THAT (A)THEY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTER-CLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OCCUPANCY OF THE
PREMISES OR CLAIM OF INJURY OR DAMAGE, AND (B) IN ANY ACTION BY LANDLORD AGAINST
TENANT, THE LEGAL FEES OF THE PREVAILING PARTY WILL BE PAID BY THE OTHER PARTY
TO THE ACTION.
d) Non-Waiver. No waiver by Landlord of any breach by Tenant of
any of Tenant's obligations, agreements or covenants herein shall be a waiver of
any subsequent breach or of any other obligation, agreement or covenant, nor
shall any forbearance by Landlord to seek a remedy for any event of default by
Tenant be a waiver by Landlord of any rights and remedies with respect to such
or any subsequent event of default.
e) Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy provided herein or by law, but each shall be cumulative and in
addition to every other right or remedy given herein or now or hereafter
existing at law or in equity or by statute.
f) Duty to Mitigate. Notwithstanding any other provisions of
this Lease, Landlord shall use all commercially reasonable efforts to mitigate
its damages and relet the Premises. Landlord's duty to mitigate damages shall be
deemed satisfied if Landlord lists the Premises for lease with a reputable
commercial real estate broker who reasonably markets the Premises and Landlord
subsequently deals with any tenant prospects, in a
23
<PAGE>
commercially reasonable manner.
27. Condition of Premises. Tenant represents that the Property and
the Premises, the have been examined by Tenant and Tenant accepts them in the
condition or state in which they now are, or any of them now is, without relying
on any representation, covenant or warranty, express or implied, in fact or in
law, by Landlord and without recourse to Landlord, the nature, condition or
usability thereof or the use or uses to which the Premises and the Property or
any part thereof may be put under present zoning ordinances or otherwise, except
as to work to be performed by Landlord pursuant to Section 3 and except as to
latent defects in such work.
28. Hazardous Substances.
a) Landlord and Tenant shall not cause or allow the generation,
treatment, storage or disposal of Hazardous Substances on or near the Premises
or Property. "Hazardous Substances" shall mean (i) any hazardous substance as
that term is defined in the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended, (ii) any
------
hazardous waste or hazardous substance as those terms are defined in any local,
state or Federal law, regulation or ordinance not inapplicable to the Premises
and Property, or (iii) petroleum including crude oil or any fraction thereof. In
the event Landlord or Tenant uses any Hazardous Substances, Landlord or Tenant
shall dispose of such substances in accordance with all applicable Federal,
state and local laws, regulations and ordinances.
b) Landlord and Tenant agree to indemnify, defend and hold
harmless the other, its employees, agents, successors, and assigns, from and
against any and all damage, claim, liability, or loss, including reasonable
attorneys' and other fees, arising out of or in any way connected to the
generation, treatment, storage or disposal of Hazardous Substances by Landlord
or Tenant, its employees, agents, contractors, or invitees, on or near the
Premises or Property. Such duty of indemnification shall include, but not be
limited to damage, liability, or loss pursuant to all Federal, state and local
environmental laws, rules and ordinances, strict liability and common law.
c) Landlord and Tenant agree to notify each other immediately
of any disposal of Hazardous Substances in the Premises or Property, of any
discovery of Hazardous Substances in the Premises, or of any notice by a
governmental authority or private party alleging or suggesting that a disposal
of Hazardous Substances on or near the Premises or Property may have occurred.
Furthermore, Landlord and Tenant agree to provide the other with full and
complete access to any documents or information in its possession or control
relevant to the question of the generation, treatment, storage, or disposal of
Hazardous Substances on or near the Premises.
d) Landlord represents and warrants that, to the best of its
knowledge, there are no Hazardous Substances in, under or about the Building.
Landlord shall be responsible, at its sole cost and expense, for compliance with
any governmental law, order, regulation, or requirement relating to the removal,
encapsulation, or other
24
<PAGE>
treatment of any asbestos containing materials or other Hazardous Substances
located within or about the Premises as of the date of this Lease, and for the
removal of any asbestos or asbestos containing materials or other Hazardous
Substances within or about the Premises, unless the presence of any such
asbestos or other Hazardous Substances was caused by Tenant, or its employees,
agents or invitees.
29. Recording. Neither this Lease nor a memorandum of this Lease
shall be recorded in any public records without the written consent of Landlord.
30. Brokers' Commission. Tenant and Landlord represent and warrant to
each other that the Brokers (as defined in the Preamble) are the sole brokers
with whom each has negotiated in bringing about this Lease and Tenant and
Landlord agree to indemnify and hold each other and Landlord's mortgagee(s)
harmless from any and all claims of other brokers and expenses in connection
therewith arising out of a representations made herein. In no event shall
Landlord's mortgagee(s) have any obligation to any broker involved in this
transaction. Landlord shall pay the Brokers' commissions pursuant to a separate
agreement.
31. Notices. All notices, demands, requests, consents, certificates,
and waivers required or permitted hereunder from either party to the other shall
be in writing and sent by United States certified mail, return receipt
requested, postage prepaid, or by recognized overnight courier, addressed as
follows:
If to Tenant:
Broadview Networks, Inc.
45-l8 Court Square, Suite 403
Long Island City, NY 11101
Atten: Scott Matukas, Vice President
with a copy to:
Littman Krooks Roth and Ball P.C.
655 Third Avenue, 20th Floor
New York, New York 10017
Attention: Stuart S. Ball, Esq.
If to Landlord:
400 Horsham Road Associates, L.P.
c/o O'Neill Properties Group, L.P.
1101 West DeKalb Pike, Suite 200
Wayne, PA 19087
Attn: President
25
<PAGE>
with a copy to:
Kevin W. Walsh, Esquire
Adelman Lavine Gold and Levin
1101 West DeKalb Pike, Suite 201
Wayne, PA 19087
Either party may at any time, in the manner set forth for giving notices to the
other, specify a different address to which notices to it shall thereafter be
sent.
32. Irrevocable Offer: No Option. Although Tenant's execution of this
Lease shall be deemed an offer irrevocable by Tenant, the submission of this
Lease by Landlord to Tenant for examination shall not constitute a reservation
of or option for the Premises. This Lease shall become effective only upon
execution thereof by an authorized officer of the general partner of the
Landlord and by an authorized officer of Tenant.
33. Inability to Perform. In the event either party shall be delayed
or hindered in or prevented from the performance of any covenant, agreement,
work, service, or other act required under this Lease to performed by such party
(other than Tenant's obligation to pay Rent) and such delay or hindrance is due
to strikes, lockouts, failure of power or other utilities, injunction or other
court or administrative order, governmental law or regulations which prevent or
substantially interfere with the required performance, condemnations, riots,
insurrections, martial law, civil commotion, war, fire, flood, earthquake, or
other casualty, acts of God, or other causes not within the reasonable control
of such party, the performance of any covenant, agreement, work, service, or
other act shall be excused for the period of delay and the period for the
performance of the same extended by the period.
34. Survival. Notwithstanding anything to the contrary contained in
this Lease, the expiration of the Term of this Lease, whether by lapse of time
or otherwise, shall not relieve Tenant from its obligations accruing prior to
the expiration of the Term.
35. Corporate Tenants. If Tenant is a corporation, the person(s)
executing this Lease on behalf of Tenant hereby covenant(s) and warrant(s) that:
Tenant is a duly formed corporation qualified to do business in the state in
which the Property is located; Tenant will remain qualified to do business in
said state throughout the Term and any renewals thereof; and such persons are
duly authorized by such corporation to execute and deliver this Lease on behalf
of the corporation.
36. Tenant Representations and Warranties. Tenant hereby represents
and warrants to Landlord (i) that Tenant's most recent financial statements
delivered to Landlord in connection with the execution of this Lease are true in
all material respects and no material adverse changes have occurred with respect
thereto, (ii) that upon Landlord's request in connection with Landlord's efforts
to refinance the Property or to sell the Property, or at the request of
Landlord's mortgagee, Tenant will deliver to Landlord current financial
statements which shall be prepared in accordance with
26
<PAGE>
generally accepted accounting principles consistently applied, and (iii) during
the Term of the Lease, no material adverse change shall occur with respect to
Tenant's financial condition.
37. Waiver of Invalidity of Lease. Each party agrees that it will not
raise or assert as a defense to any obligation under the Lease or make any claim
that the Lease is invalid or unenforceable due to any failure of this document
to comply with ministerial requirements including, without limitation,
requirements for corporate seals, attestations, witnesses, notarizations or
other similar requirements and each party hereby waives the right to assert any
such defenses or make any claim of invalidity or unenforceability due to any of
the foregoing.
38. Security Deposit. [Intentionally Deleted].
39. Estoppel Certificate.
a) Tenant shall from time to time, within five (5) days after
Landlord's request or that of any mortgagee of Landlord, execute, acknowledge
and deliver to Landlord a written instrument in recordable form, substantially
in the form attached hereto as Exhibit E (a "Tenant Estoppel Certificate"),
certifying (i) that this Lease is in full force and effect and has not been
modified, supplemented or amended (or, if there have been modifications,
supplements or amendments, that it is in full force and effect as modified,
supplemented or amended, and stating such modifications, supplements and
amendments); (ii) the dates to which Fixed Basic Rent and Additional Rent and
any other charges arising hereunder have been paid; (iii) the amount of any
prepaid rents or credits due Tenant, if any; (iv) if applicable, that Tenant has
accepted possession and has entered into occupancy of the Premises, and
certifying the Commencement Date and the Termination Date; (v) whether or not,
to the best of the Tenant's knowledge, all conditions under the Lease to be
performed by Landlord prior thereto have been satisfied and whether or not
Landlord is then in default in the performance of any covenant, agreement or
condition contained in this Lease and specifying each, if any, unsatisfied
condition and each, if any, default of which Tenant may have knowledge; and
(vi) any other fact or condition related to the Lease or the Tenant reasonably
requested. Any certification delivered pursuant to the provisions of this
Article shall be intended to be relied upon by Landlord and any mortgagee or
prospective mortgagee or purchaser of the Property or of any interest therein.
b) The failure of Tenant to execute, acknowledge and deliver to
Landlord a written Tenant Estoppel Certificate in accordance with the provisions
of this Section 39 within said five (5) day period shall constitute an
acknowledgment by Tenant, which may be relied upon by any mortgagee or
prospective mortgagee or any purchaser of the Property or of any interest
therein, that this Lease has not been modified, supplemented or amended except
as set forth in landlord's request, and is in full force and effect (or in full
force and effect as so modified, supplemented or amended), that the Base Rent,
Additional Rent and any other charges arising hereunder have not been paid
beyond the respective due dates immediately preceding the date of such request,
that Tenant has no
27
<PAGE>
right of set-off or other defense to this Lease and of the truth of such other
facts and conditions as shall have been requested to be certified, and shall
constitute, as to any person entitled to rely as aforesaid, a waiver of any
defaults which may exist prior to the date of such request. Notwithstanding the
foregoing, Tenant's failure to furnish a Tenant Estoppel Certificate within said
five (5)day period shall constitute a default under this Lease.
c) Landlord, at any time, and from time to time, on the written
request of Tenant, will execute, acknowledge and delivery to Tenant a
certificate certifying the then current status of the Lease and providing any
other information reasonably requested by Tenant, all substantially in
accordance with Tenant's similar obligations as set forth in this Section 39.
40. Rights Reserved by Landlord. Landlord waives no rights, except
those that may be specifically waived herein, and explicitly retains all other
rights including, without limitation, the following rights, each of which
Landlord may exercise without notice to Tenant and without liability to Tenant
for damage or injury to property, person or business on account of the exercise
thereof, and the exercise of any such rights shall not be deemed to constitute
an eviction or disturbance of Tenant's use or possession of the Premises and
shall not give rise to any claim for set-off or abatement of Rent or any other
claim except as otherwise expressly provided herein: Notwithstanding anything to
the contrary contained in this Lease, any changes, additions or alterations by
Landlord shall not (i) impair access to, visibility of, or frontage of, the
Demised Premises or (ii) materially affect the conduct of Tenant's customary
business therein.
a) Upon sixty (60) days prior notice to change the name or
street address of the Building.
b) To install, affix and maintain any and all signs on the
exterior and on the interior of the Building.
c) Upon prior reasonable notice to decorate or to make repairs,
alterations, additions, or improvements, whether structural or otherwise, in and
about the Building, or any part thereof, and for such purposes to enter upon the
Premises and during the continuance of any of such work, to temporarily close
doors, entry ways, public space and corridors in the Building and to interrupt
or temporarily suspend services or use of facilities, all without affecting any
of Tenant's obligations hereunder except as otherwise expressly provided herein,
so long as the Premises are reasonably accessible and usable.
d) To furnish door keys for the entry door(s)in the Premises on
the Commencement Date and to retain at all times, and to use in appropriate
instances, keys to all doors within and into the Premises. Tenant agrees to
purchase only from Landlord additional duplicate keys as required, to change no
locks, and not to affix locks on doors without the prior written consent of the
Landlord which consent shall not be unreasonably withheld or delayed Upon the
expiration of the Term or Tenant's right to possession, Tenant shall return all
keys to Landlord and shall disclose to Landlord the combination of
28
<PAGE>
any safes, cabinets or vaults left in the Premises.
e) To designate and approve all window coverings used in the
Building.
f) To approve the weight, size and location of heavy equipment
and articles in and about the Premises and the Building so as not to exceed the
legal load per square foot designated by the structural engineers for the
Building, and to require all such items and furniture and similar items to be
moved into or out of the Building and Premises only at such reasonable times and
in such reasonable manner as Landlord shall direct in writing. Tenant shall not
install or operate machinery or any mechanical devices of a nature not directly
related to the Permitted Use, of the Premises without the prior written consent
of Landlord which consent shall not be unreasonably withheld or delayed. The
movement of Tenant's property into or out of the Building or the Premises and
within the Building are entirely at the risk and responsibility of Tenant, and
Landlord reserves the right to require written authorization from Tenant, in
form and content reasonably satisfactory to Landlord, before allowing any
property to be moved into or out of the Building or Premises.
g) To regulate delivery of supplies and the usage of the
loading docks, receiving areas and freight elevators.
h) To enter the Premises in accordance with Section 14, and, if
vacated or abandoned, to show the Premises at any time and to prepare the
Premises for reoccupancy.
i) To erect, use and maintain pipes, ducts, wiring and
conduits, and appurtenances thereto, in and through the Premises.
j) To grant to any person or to reserve unto itself the
exclusive right to conduct any business or render any service in the Building
other than a competitor of Tenant. If Landlord elects to make available to
tenants in the Building any services or supplies, or arranges a master contract
therefor, Tenant agrees to obtain its requirements, if any, therefor from
Landlord or under any such contract, provided that the charges therefor are
reasonably consistent with market rates.
k) To alter the layout, design and/or use of the Building in
such manner as Landlord, in its sole discretion, deems appropriate, so long as
the character of the Building as a first class office building is maintained.
41. Miscellaneous.
a) Entire Agreement. This Lease represents the entire agreement
between the parties hereto and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the Premises or the
Property. No rights, easements or licenses are acquired in the Property or any
land adjacent to the Property by Tenant by implication or otherwise except as
expressly set
29
<PAGE>
forth in the provisions of this Lease.
b) Modification. This Lease shall not be modified in any manner
except by an instrument in writing executed by the parties. In addition, Tenant
agrees to make such changes to this Lease as are required by any mortgagee,
provided such changes do not substantially affect Tenant's rights and obligation
hereunder.
c) Interpretation. The masculine (or neuter) pronoun, singular
number, shall include the masculine, feminine and neuter genders and the
singular and plural number.
d) Exhibits. Each writing or plan referred to herein as being
attached as an Exhibit or otherwise designated herein as an Exhibit hereto is
hereby made a part hereof.
e) Captions and Headings. The captions and headings of
sections, subsections and the table of contents herein are for convenience only
and are not intended to indicate all of the subject matter in the text and they
shall not be deemed to limit, construe, affect or alter the meaning of any
provisions of this Lease and are not to be used in interpreting this Lease or
for any other purpose in the event of any controversy.
f) Interest. Wherever interest is required to be paid
hereunder, such interest shall be at the highest rate permitted under law but
not in excess of the prime rate (as set forth in the Wall Street Journal plus
two percentage points per annum).
g) Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
h) Joint and Several Liability. If two or more individuals,
corporations, partnerships or other persons (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other persons to pay the Rent and perform all other
obligations hereunder shall be deemed to be joint and several, and all notices,
payments and agreements given or made by, with or to any one of such
individuals, corporations, partnerships or other persons shall be deemed to have
been given or made by, with or to all of them. In like manner, if Tenant shall
be a partnership or other legal entity, the members of which are, by virtue of
any applicable law or regulation, subject to personal liability, the liability
of each such member shall be joint and several.
i) No Representations by Landlord. Landlord and Landlord's
agents have made no representations, agreements, conditions, warranties,
understandings or promises, either oral or written, other than as expressly set
forth herein, with respect to
30
<PAGE>
this Lease, the Premises and/or the Building.
j) Relationship of Parties. This Lease shall not create any
relationship between the parties other than that of Landlord and Tenant.
k) Choice of Law. The terms of this Lease shall be construed
under the laws of the Commonwealth of Pennsylvania, and that exclusive
jurisdiction and venue shall be in the Court of Common Pleas of the County in
which the Property is located.
42. Additional Definitions.
a) "Date of this Lease" or "date of this Lease" shall mean the
date of acceptance of this Lease by the Landlord, following execution and
delivery thereof to Landlord by Tenant and that date shall be inserted in the
space provided in the Preamble.
b) "Landlord" as used herein includes the Landlord named above
as well as its successors and assigns, each of whom shall have the same rights,
remedies, powers, authorities and privileges as it would have had it originally
signed this lease as Landlord. Any such person, whether or not named herein,
shall have no liability hereunder after ceasing to hold title to the Premises.
Neither Landlord nor any principal of Landlord nor any owner of the Building or
the Lot, whether disclosed or undisclosed, shall have any personal liability
with respect to any of the provisions of this Lease or the Premises, and if
Landlord is in breach or default with respect to Landlord's obligations under
this Lease or otherwise, Tenant shall look solely to the equity of Landlord in
the Premises for the satisfaction of Tenant's remedies.
c) "Tenant" as used herein includes the Tenant named above as
well as its heirs, successors and assigns, each of which shall be under the same
obligations, liabilities and disabilities and each of which shall have the same
rights, privileges and powers as it would have possessed had it originally
signed this Lease as Tenant. Each and every person named above as Tenant shall
be bound formally and severally by the terms, covenants and agreements contained
herein. However, no such rights, privileges or powers shall inure to the benefit
of any assignee of Tenant, immediate or remote, unless the assignment to such
assignee is permitted or has been approved in writing by Landlord. Any notice
required or permitted by the terms of this Lease may be given by or to any one
of the persons named above as Tenant, and shall have the same force and effect
as if given by or to all of them.
d) "Mortgage" and "Mortgagee" as used herein includes any lien
or encumbrance on the Premises or the Property or on any part of or interest in
or appurtenance to any of the foregoing, including without limitation any ground
rent or ground lease if Landlord's interest is or becomes a leasehold estate.
The word "mortgagee" is used herein to include the holder of any mortgage,
including any ground Landlord if Landlord's interest is or becomes a leasehold
estate. Wherever any right is given to a mortgagee, that right may be exercised
on behalf of such mortgagee by any representative or servicing agent of such
mortgagee.
31
<PAGE>
e) "Person" as used herein includes a natural person, a
partnership, a corporation, an association, and any other form of business
association or entity.
f) "Property" as used herein shall mean the Building and the
lot, tract or parcel of land on which the Building is situated.
g) "Rent" or "rent" as used herein shall mean all Fixed Basic
Rent and Additional Rent reserved under this Lease.
43. Tenant's Right of First Refusal.
a) Subject to the rights of tenants of the Building as of the
date of this Lease, Tenant shall have a right of first refusal ("Right of
Refusal") to lease any additional space which becomes available in the Building
contiguous to the Premises during the Term ("Additional Space"). If Landlord
has Additional Space available and receives a bona fide offer (the "Offer")to
lease the Additional Space from a third party ("Offeror") which Landlord is
willing to accept, Landlord shall send written notice to Tenant, which notice
shall set forth the terms of the third party offer. Within ten (10) days after
receipt of Landlord's notice, Tenant shall reply by written notice either
accepting the Additional Space on the same terms and conditions of the third
party offer, or rejecting the same. Failure to respond within the ten (10) day
period shall constitute a rejection of the Additional Space. If Tenant accepts
the Additional Space, the Additional Space shall be added to the Premises by
amendment to this Lease, which shall include an adjustment of Tenant's
Proportionate Share and such other changes as may be appropriate. In the event
Tenant rejects the Offer, then Landlord may proceed to enter into a lease for
such Additional Space with the Offeror provided such lease is executed by the
Landlord and the Offeror within six (6) months from the date of the Offer. In
the event a new offer is tendered or received by Landlord, Landlord must again
submit such new offer to Tenant in accordance with this Section 43.
b) All of the terms and conditions of this Lease will apply to
any Offer Space leased by Tenant, except as otherwise provided in Landlord's
Notification. The term of this Lease with respect to the Offer Space shall be
coterminous with the Term of this Lease with respect to the original Premises.
Landlord will have no liability to Tenant if any tenant of the Offer Space
wrongfully holds over. In the event such tenant wrongfully holds over, Landlord
will attempt in good faith to cause such tenant to vacate the Offer Space.
44. Tenant's Use of the Roof. Tenant shall also have the right
without charge to install and use and operate satellite and/or antennae and
communications equipment necessary or reasonably desirable to Tenant
(collectively, the "Equipment"), including the right to interconnect the
Equipment with Tenant's other equipment located in the Premises, in a mutually
agreeable location on the roof of the Premises which installation may penetrate
the roof membrane provided Tenant complies with the terms of Landlord's roof
warranty, a copy of which will be delivered to Tenant upon request.
32
<PAGE>
Tenant shall be solely responsible for the costs of installation, operation, and
maintenance of the Equipment. Tenant will install and operate the Equipment in
accordance with all federal, state and local regulations. If Tenant decides to
install a microwave satellite dish and/or antennae, Landlord hereby permits
Tenant to install wires, conduits and appurtenant facilities upon the Premises
or Common Facilities, at Tenant's sole cost and expense. In addition, Tenant
shall be responsible for obtaining any permits and licenses required to install
and operate the Equipment, and Landlord agrees to cooperate with Tenant to
accomplish the same.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
33
<PAGE>
SECTION 26(b) HEREOF SETS FORTH A WARRANT OR AUTHORITY FOR AS
ATTORNEY TO CONFESS JUDGMENT AGAINST TENANT. IN GRANTING THIS WARRANT OF
ATTORNEY TO CONFESS JUDGMENT AGAINST TENANT, TENANT HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, AND (ON THE ADVICE OF THE SEPARATE COUNSEL OF
TENANT, IF TENANT HAS USED COUNSEL IN REGARD TO ENTERING INTO THIS
LEASE) UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TENANT HAS OR MAY HAVE TO PRIOR
NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE CONSTITUTIONS AND LAWS OF THE
UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA.
IN WITNESS WHEREOF, and in consideration of the mutual entry
into this Lease and for other good and valuable consideration, and intending to
be legally bound, each party hereto has caused this agreement to be duly
executed under seal.
Landlord:
- --------
Date Signed: 400 HORSHAM ROAD
----------- ASSOCIATES, L.P.
By: 400 HORSHAM ROAD
ASSOCIATES ACQUISITION
CORP.
By: /s/
------------------------
Name:
-------------------
Title:
------------------
Attest:
--------------------
Tenant:
- ------
Date Signed: 1/31/00 BROADVIEW NETWORKS, INC.
-----------
By: /s/ Scott Matukas
------------------------
Name: Scott Matukas
-------------------
Title: VP-ADMIN
------------------
Attest: /s/ [*ILLEGIBLE]
--------------------
[*ILLEGIBLE]
34
<PAGE>
RIDER A
RENEWAL OPTION: Tenant is hereby granted two (2) options to renew this Lease
- --------------
upon the following terms and conditions:
At the time of the exercise of each option to renew and at the time of the said
renewals, the Tenant shall not be in default in accordance with the terms and
provisions of this Lease beyond any applicable notice and surge period, and
shall be in possession of the Premises pursuant to this Lease.
Notice of the exercise of each option shall be sent to the Landlord in writing
at least six (6) months but not more than twelve (12) months before the
expiration of the term of this Lease in the case of the first renewal term, or
before the expiration of the first renewal term in the case of the second
renewal term.
Each renewal term shall be for a period of five (5) years, to commence at the
expiration of the Term of this Lease in the case of the first renewal term or
the first renewal term in the case of the second renewal term and all of the
terms and conditions of this Lease, other than the Fixed Basic Rent, shall apply
during any such renewal term.
The annual fixed basic rent to be paid during each renewal term shall not be
less than that paid for the Premises during the last year of the original term
of the Lease, or the first renewal term in the case of the second renewal term.
However, if ninety five percent (95%) of the fair rental value per square foot
at the commencement of the renewal term shall exceed the rent as established in
the preceding sentence, the Tenant shall pay ninety five percent (95%) of the
fair rental value. In determining the fair rental value, the Landlord shall
notify Tenant of the fair rental value as established by the respective parties
if Landlord and Tenant cannot reach a mutual agreement with respect to such fair
market value, Landlord and Tenant shall jointly employ the services of an
independent appraiser familiar with office buildings located within the
metropolitan Philadelphia, Pennsylvania area comparable to the Building, who
shall be a member of MAI and who shall render an appraisal. The fee of such
appraiser shall be borne equally by Landlord and Tenant. If the Landlord and the
Tenant cannot agree on the fair rental value, or in such case, on an independent
appraiser acceptable to both, either party may request the American Arbitration
Association to appoint such independent appraiser who shall be a member of MAI
familiar with office buildings in the area of the Building who shall render an
appraisal, and in such event the judgment of the appraiser shall be final and
binding upon the parties. Pending resolution of the issue of fair rental value,
the Tenant shall pay the Landlord as of commencement of the renewal term, the
Fixed Basic Rent as established by Landlord, subject to retroactive adjustment
upon final determination of this issue. Each party shall pay its own counsel
fees and expenses, if any, in connection with any arbitration under this
Article. It is expressly understood that in connection with any determination of
the fair and reasonable annual market rental value of the demised premises
pursuant to this Article, the following criteria shall be considered, among
other things, in the determination:
<PAGE>
(A) the fact that the Expense Stop provided herein shall not change
for the purpose of calculating the Additional Rent payable pursuant to this
Lease;
(B) the fact that Tenant shall have no further right to renew this
Lease except as set forth herein;
(c) the fact that Landlord shall not be obligated to perform any work
in the Demised Premises to prepare the same for Tenant's occupancy;
(D) the fact that Tenant shall not be entitled to any free rent or
other similar credit against the Fixed Basic Rent; and
(E) whether or not Landlord is or is not obligated to pay a brokerage
commission with respect to the applicable Renewal Term.
36
<PAGE>
EXHIBIT A
---------
LOCATION OF BUILDING
<PAGE>
ALL THOSE TWO CERTAIN tracts or parcels of land with the buildings and
improvements thereon erected, Situate in the Township of Horsham, County of
Montgomery and Commonwealth of Pennsylvania, bounded and described according to
subdivision plan of Forge Industrial Tract, made by, Hopkins & Scott, Inc.,
dated 11/6/1983 as follows, to wit:
THE FIRST THEREOF:
BEGINNING at the point of intersection of the centerlines of Horsham Road, Rte.
463 and Norristown Road, as shown on said plan; thence from said point of
beginning extending along the said centerline of Horsham Road North 47 degrees
06 minutes West, 653.53 feet to a point, a corner; in the same; thence extending
North 42 degrees 54 minutes East, crossing the Northeasterly side of said
Horsham Road and along Parcel A-l on said Plan, 497.00 feet to a point, a corner
thence continuing along said Parcel A-l, South 47 degrees 06 minutes East 165.00
feet to a point, an angle; thence continuing along the same and along Parcel B-3
North 68 degrees 25 minutes East, 532.43 feet to a point, a corner in line of
Parcel B-l on said plan; thence extending along the same and Parcel B-2 and
crossing a 60 feet wide easement for ingress, egress, regress for Parcels A-l
and A-2, South 21 degrees 35 minutes East, 596.16 feet to a point, an angle;
thence continuing along said Parcel B-2, South 47 degrees 06 minutes East,
94.64 feet to a point in line of lands of Willow Grove Construction Co.; thence
extending along the same South 42 degrees 29 minutes West, 342.50 feet to a
point in the centerline of Norristown Road, aforesaid; thence extending along
the same North 89 degrees 35 minutes West 510.12 feet to the first mentioned
point and place of beginning.
BEING PARCELS A-2 and B-4 on said plan, Containing 15.5 acres clear of
right-of-way.
BEING Parcel Numbers 36-00-04015-00-8 and 36-00-05334-12-9.
AS TO PART BEING the same premises which Mainard, Incorporated (Pa. Corp.)by
Deed dated 10/14/1981 and recorded in Montgomery County in Deed Book 4663 page
800 conveyed unto Montgomery County Industrial Development Authority, in fee.
AS TO TEE REMAINING PART BEING the same premises which Mainard, Incorporated
(Pa. Corp.) by Deed dated 12/21/1983 and recorded in Montgomery County in Deed
Book 4728 page 816 conveyed unto Montgomery Industrial Development Authority, in
fee.
<PAGE>
EXHIBIT A-l
-----------
DEMISED PREMISES
<PAGE>
400 Horsham Road
Horsham, Pennsylvania
[GRAPHIC OF FLOOR PLAN]
EXHIBIT A-1 - APPROX - 10,000 RSF
CROSS HATCHED
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
1. OBSTRUCTION OF PASSAGEWAYS: The sidewalks, entrance, passages, courts,
--------------------------
elevators, vestibules, stairways, corridors and public parts of the Building
shall not be obstructed or encumbered by Tenant or used by Tenant for any
purpose other than ingress and egress. If the Premises are situated on the
ground floor with direct access to the street, then Landlord shall, at
Landlord's expense, keep the sidewalks and curbs directly in front of the
Premises clean and free from ice, snow and refuse.
2. WINDOWS: Windows in the Premises shall not be covered or obstructed by
-------
Tenant. No bottles, parcels or other articles shall be placed on the window
sills, in the halls, or in any other part of the Building other than the
Premises. No article shall be thrown out of the doors or windows of the
Premises.
3. PROJECTIONS FROM BUILDING: No awnings, air-conditioning units, or other
-------------------------
fixtures shall be attached to the outside walls or the window sills of the
Building or otherwise affixed so as to project from the Building, without prior
written consent of Landlord.
4. SIGNS: No sign or lettering shall be affixed by Tenant to any part of the
-----
outside of the Premises, or any part of the inside of the Premises so as to be
clearly visible from the outside of the Premises, without the prior written
consent of Landlord. However, Tenant shall have the right to place its name on
any door leading into the Premises the size, color and style thereof to be
subject to the Landlord's approval. Tenant shall not have the right to have
additional names placed on the Building directory without Landlord's prior
written consent.
5. FLOOR COVERING: Tenant shall not lay linoleum or other similar floor covering
--------------
so that the same shall come in direct contact with the floor of the Premises. If
linoleum or other similar floor covering is desired to be used, an interlining
of builder's deadening felt shall first be fixed to the floor by a paste or
other material that may easily be removed with water, the use of cement or other
similar adhesive material being expressly prohibited.
6. INTERFERENCE WITH OCCUPANTS OF BUILDING: Tenant shall not make, or permit to
---------------------------------------
be made, any unseemly or disturbing noises or odors and shall not interfere with
other tenants or those having business with them. Tenant will keep all
mechanical apparatus in the Premises free of vibration and noise which may be
transmitted beyond the limits of the Premises.
7. LOCK KEYS: No additional locks or bolts of any kind shall be placed on any of
---------
the doors or windows by Tenant. Tenant shall, on the termination of Tenant's
tenancy, deliver to Landlord all keys to any space within the Building either
furnished to or otherwise procured by Tenant, and in the event of the loss of
any keys furnished, Tenant shall pay to
<PAGE>
Landlord the cost thereof. Tenant, before closing and leaving the Premises,
shall ensure that all windows are closed and entrance doors locked. Nothing in
this Paragraph 7 shall be deemed to prohibit Tenant from installing a burglar
alarm within the Premises, provided: (1) Tenant obtains Landlord's consent which
will not be unreasonably delayed; withheld or
8. CONTRACTORS: No contract of any kind with any supplier of towels, water,
-----------
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish, garbage, or other like service shall be entered into by Tenant,
nor shall any machine of any kind be installed in the Building or the Office
Building Area without the prior written consent of the Landlord. Tenant shall
not employ any persons other than Landlord's janitors for the purpose of
cleaning the Premises without prior written consent of Landlord. Landlord shall
not be responsible to Tenant for any loss of property from the Premises however
occurring, or for any damage to the effects of Tenant by such janitors or any of
its employees, or by any other person or any other cause.
9. PROHIBITED ON PREMISES: Tenant shall not conduct, or permit any other person
----------------------
to conduct, any auction upon the Premises, manufacture or store goods, wares or
merchandise upon the Premises without the prior written approval of Landlord,
except the storage of usual supplies and inventory to be used by Tenant in the
conduct of its business, permit the Premises to be used for gambling, make any
unusual noises in the Building, permit to be played musical instrument on the
Premises, permit any radio to be played, or television, recorded or wired music
in such loud manner as to disturb or annoy other tenants, or permit any unusual
odors to be produced on the Premises. Tenant shall not permit any portion of the
Premises to be occupied as an office for a public stenographer or typewriter, or
for the storage, manufacture, or sale of intoxicating beverages, narcotics,
tobacco in any form or as a barber or manicure shop. Canvassing, soliciting and
peddling in the Building and the Office Building Area are prohibited and Tenant
shall cooperate to prevent the same. No bicycles, vehicles or animals of any
kind shall be brought into or kept in or about the Premises.
10. PLUMBING, ELECTRIC AND TELEPHONE WORK: Plumbing facilities shall not be used
-------------------------------------
for any purpose other than those for which they were constructed; and no
sweepings, rubbish, ashes, newspaper or other substances of any kind shall be
thrown into them. Waste and excessive or unusual amounts of electricity or water
is prohibited. When electric wiring of any kind is introduced, it must be
connected as directed by Landlord, and no stringing or cutting of wires will be
allowed, except by prior written consent of Landlord, and shall be done by
contractors approved by Landlord. The number and locations of telephones,
telegraph instruments, electrical appliances, call boxes, etc. shall be subject
to Landlord's approval.
11. MOVEMENT OF FURNITURE, FREIGHT OR BULKY MATTER: The carrying in or out of
----------------------------------------------
freight, furniture or bulky matter of any description must take place
2
<PAGE>
during such hours as Landlord may from time to time reasonably determine and
only after advance notice to the superintendent of the Building. The persons
employed by Tenant for such work must be reasonably acceptable to the Landlord.
Tenant may, subject to these provisions, move freight, furniture, bulky matter,
and other material into or out of the Premises on Saturdays between the hours of
9: 00 a. m. and 1: OO p. m., provided Tenant pays additional costs, if any,
incurred by Landlord for elevator operators or security guards, and for any
other expenses occasioned by such activity of Tenant. If, at least three (3)days
prior to such activity, Landlord requests that Tenant deposit with Landlord, as
security of Tenant's obligations to pay such additional costs, a sum of which
Landlord reasonably estimates to be the amount of such additional cost, the
Tenant shall deposit such sum with Landlord as security of such cost. There
shall not be used in the Building or Premises, either by Tenant or by others in
the delivery or receipt of merchandise, any hand trucks except those equipped
with rubber tires and side guards, and no hand trucks will be allowed in the
elevators without the consent of the superintendent of the Building.
12. SAFES AND OTHER HEAVY EQUIPMENT: Landlord reserves the right to prescribe
-------------------------------
the weight and position of all safes and other heavy equipment so as to
distribute properly the weight thereof and to prevent any unsafe condition from
arising.
13. ADVERTISING: Landlord shall have the right to prohibit any advertising by
-----------
Tenant which in Landlord's reasonable opinion tends to impair the reputation of
the Building or its desirability as a building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinue such advertising.
14. NON-OBSERVANCE OR VIOLATION OF RULES BY OTHER TENANTS: Landlord shall not be
-----------------------------------------------------
responsible to Tenant for non-observance or violation of any of these rules and
regulations by any other tenant.
15. AFTER HOURS USE: Landlord reserves the right to exclude from the Building
---------------
between the hours of 6: 00 p. m. and 8: 00 a. m. and at all hours on Saturdays,
Sundays and Building Holidays, all persons who do not present a pass to the
Building signed by the Tenant. Each Tenant shall be responsible for all persons
for whom such a pass is issued and shall be liable to the Landlord for the acts
of such persons.
16. PARKING: Tenant and its employees shall park their cars only in those
-------
portions of the parking area designated by Landlord.
17. RESERVATION OF RIGHTS: Landlord hereby reserves to itself any and all rights
---------------------
not granted to Tenant hereunder, including, but not limited to, the following
rights which are reserved to Landlord for its purposes in operating the
Building:
a. the exclusive right to the use of the name of the Building
for all purposes, except that Tenant may use the name as its business address
and for no other purposes; and
b. the right to change the name or address of the Building,
without incurring any liability to Tenant for doing so; and
3
<PAGE>
c. the right to install and maintain a sign on the exterior of
the Building; and
d. the exclusive right to use or dispose of the use of the roof
of the Building; and
e. the right to limit the space on the directory of the
Building to be allotted to Tenant; and
f. the right to grant to anyone the right to conduct any
particular business or undertaking in the Building.
18. HEALTH AND SAFETY: The Tenant shall be responsible for initiating,
maintaining and supervising all health and safety precautions and/or programs
required by Law in connection with the Tenant's use and occupancy of the
Premises.
19. HAZARDOUS MATERIALS: The Tenant shall not store, introduce or otherwise
permit any material known to be hazardous within the Premises. Any material
within the Premises which is determined to be hazardous shall be removed and
properly disposed of by the Tenant at the Tenant's sole expense.
-- END --
4
<PAGE>
EXHIBIT C
Landlord's Work
---------------
Landlord at Landlord's expense shall:
. Deliver the Premises demised and secure in broom clean condition and ready
for tenant construction.
. Remove HVAC vents and replace and waterproof .sections of roof, if necessary
. Provide/Certify a minimum of 125 lbs. per square foot floor loading to the
demised
. Comply with ADA and local building life safety codes throughout the Lease
term
. Provide main sprinkler loop to the premises. Tenant, at Tenant's expense,
will provide a pre-action valve system.
. Scrape, patch and level the floor (if necessary)
. Provide tie-ins to Building life and fire safety system(s)
. Provide 1200 amp service to Tenant Premises.
. Provide any electrical and utility metering equipment
. Provide right for either an interior or exterior pad space (10 X 10)for
tenant's gas emergency generator and day tank and access to same from
designated platform.
. Provide access way for an electrical conduit from generator to Tenant's ATS
switch located at the Tenants service breaker as designated by the Landlord.
. Provide the right and access to install horizontal & vertical conduit for
fiber optics, subject to Landlord's approval, which shall not be unreasonably
withheld.
. Black pipe gas lines running through Premises to be removed, and if needed,
rerouted.
<PAGE>
EXHIBIT D
---------
BUILDING HOLIDAYS
BUILDING CLOSED ON:
*NEW YEAR'S DAY*
*MEMORIAL DAY*
*INDEPENDENCE DAY*
*LABOR DAY*
*THANKSGIVING DAY*
*CHRISTMAS DAY*
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
TO: ___________________________("___________") pursuant to that certain________
Agreement (the "Agreement") dated ___________, 199_, by and between _________and
________________________________ (" Lessor").
1. The undersigned (" Lessee") is the lessee under that certain Lease dated
_________, 19_, by and between __________________________________________, as
lessor, and _______________________________________, as lessee (the "Lease"),
covering a portion of those certain premises commonly known and designated as
_______________________________________________, Pennsylvania, consisting of
approximately _______________ square feet (the "Premises"). A true, complete
and correct copy of the Lease is attached hereto as Exhibit "A".
2. The Lease has not been modified, changed, altered or amended in any
respect (except as indicated following this sentence) and is the only lease or
agreement between the undersigned and the Lessor affecting the Premises. If
none, state "none".
_______________________________________________________________________________
_______________________________________________________________________________
3. The undersigned has made no agreements with Lessor or its agents or
employees, which are not described in the Lease concerning free rent, partial
rent, rebate of rental payments or any other type of rental concession with
respect to the Lease (except as indicated following this sentence). If none,
state "none".
_______________________________________________________________________________
_______________________________________________________________________________
4. The undersigned accepted possession of the Premises on _________,19__,
currently occupies the Premises and has been open for business since _________,
19__. The current term of the Lease began on _________,19__. The current term
of the Lease will expire on _________, 19__, and Lessee has no present right to
cancel or terminate the Lease under the terms thereof, or otherwise. No rent
payable pursuant to the Lease has been prepaid for more than two (2) months, and
no monies otherwise payable to Lessor under the Lease have been paid in advance
of the due date therefor as set forth in the Lease. The fixed minimum rent
currently being paid under the Lease is $__________ per month. Future changes
to the fixed minimum rental are as set forth in the Lease. The undersigned also
pays amounts for percentage rent, insurance and property tax escalations based
upon the square footage of the Premises subject to the Lease, as set forth in
the Lease, which amounts have been paid to and including _______________,
199__.
5. The Lease is fully valid and enforceable and is currently in full force
and effect. Neither Lessor or Lessee is in default thereunder, and all
conditions and obligations on the part of Lessor to be fulfilled under the terms
of the Lease have been
<PAGE>
satisfied or fully performed including, without limitation, all required tenant
improvements, allowances, alterations, installations and construction, and
payment therefor has been made in full. Lessee has no offset, claim, defense or
counterclaim against any rent or other sum payable by Lessee under the Lease or
against any other obligation of Lessee under the Lease. No condition exists
which with the giving of notice or the passage of time, or both, would
constitute a default under the Lease.
6. Lessee has not suffered any assignment of the Lease or sublet the
Premises or any portion thereof, and no person or entity, other than Lessee, has
any possessory interest in the Premises or right to occupy the Premises or any
portion thereof, except as permitted under the Lease.
7. Lessee claims no right, title or interest in or to the Premises or right
to possession of the Premises, except as lessee under the terms of the Lease.
The Lease does not contain and the undersigned does not have any outstanding
options or rights of first refusal to purchase the Premises or any portion
thereof or the real property of which the Premises are a part, except as
otherwise set forth below. If none, state "none".
_______________________________________________________________________________
_______________________________________________________________________________
8. No actions, whether voluntary or otherwise, are pending against the
undersigned under the bankruptcy laws of the United States or any state thereof,
and Lessee knows of no fact or pending or threatened claim or litigation that
might result in the insolvency or bankruptcy of Lessee.
9. Lessee is a [corporation][limited partnership][general partnership]duly
organized and validly existing and in good standing under the laws of the State
of _____________ [and qualified to do business in the State where the Premises
is located]. [________, a ________, owns and holds all of the issued and
outstanding stock in and of Lessee, and is a separate and distinct entity from
Lessee].
10. Lessee's occupancy of the Premises complies fully with all local, state
and federal laws, ordinances, codes, rules, regulations and orders including,
without limitation, those concerning hazardous wastes, hazardous materials,
asbestos, oil and underground storage tanks. In addition, no such hazardous
wastes, hazardous materials, asbestos, oil or underground storage tanks have
been or are incorporated in, stored on or under, released from, treated on,
transported to or from or disposed of, on or from the Premises or any portion
thereof.
11. All inspections, licenses, permits, consents, permissions, approvals
and certificates required, whether by law, regulation or insurance standards, to
be made or issued with respect to the conduct of Lessee's business, the Premises
and the use and occupancy of the Premises by Lessee have been made by or issued
by all necessary private parties, the appropriate governmental or
quasi-governmental authorities or other authorities having jurisdiction over the
Premises and/or Lessee's business, are in full force and effect, and Lessee has
not received notification from any such authority that
2
<PAGE>
Lessee or the Premises is in material noncompliance with such laws, regulations
or standards, that the Premises is being used, operated or occupied unlawfully
or that Lessee has failed to obtain such inspections, permits, consents,
permissions, approvals, licenses or certificates, as the case may be. Lessee has
not received notice of any violation or failure to conform with any such law,
ordinance, regulation, standard, license, permit, consent, permission, approval
or certificate.
12. All insurance' policies required to be maintained by Lessee under the
Lease have been maintained, are in full force and effect and all premiums with
respect thereto have been paid in full.
13. Upon receipt of notice of the closing of the purchase and sale of the
Premises as set forth in the Agreement, Lessee shall _____ recognize as lessor
under the Lease, and all payments of rent and other sums due to Lessor under the
Lease and all communications permitted or required under the Lease shall be
directed to _____ c/o_______________________________________, and all
communications permitted or required under the Lease shall be directed to Lessee
at the address for Lessee set forth in the Lease (except as otherwise indicated
following this sentence), unless and until otherwise specified in written notice
by the party to whom notice is to be given at such address. If none, state
"none".
14. This certification is made to induce __________ [to enter into the
Agreement][to provide financing to Lessor]knowing that ____________ is relying
upon the truth of this Tenant Estoppel Certificate in [entering into the
Agreement,]providing such financing]and that [the acquisition of the Premises by
____________ pursuant to the Agreement][the financing provided to Lessor]shall
be deemed good and valuable consideration to Lessee for the foregoing
representations made by Lessee.
Dated this _____ day of __________, 199_.
LESSEE:
_________________________________,
a________________________________
BY:______________________________
Name:_________________________
Title:________________________
3
<PAGE>
EXHIBIT F
CLEANING SPECIFICATIONS
LOBBY AND ENTRANCE AREAS
- ------------------------
Daily Cleaning Services
----------------------
1. Dust and damp mop all lobby and entrance foyers to insure dust
free floors with specific attention to hard-to-reach areas.
2. All ashtrays will be emptied, washed and dried.
3. All waste and trash cans will be empties. All waste and trash
cans will be washed as needed.
4. All telephones will be sanitized.
5. Vacuum all carpeted areas.
6. Dust and wipe clean all desks and chairs.
7. Wipe, clean and polish all stainless steel and other metal work.
8. Clean all entrance doors.
9. All floors to be swept with chemically treated cloths, spot
mopped and spray buffed.
10. Dust and/or wash clean all directory boards and display glass.
11. All lights will be turned off, and specified doors locked at the
completion of cleaning.
Weekly Cleaning Services
-----------------------
1. Dust and clean all paneling, door trim and other architectural
louvres, ornamental work, grills, picture frames, thermostats,
boards, entire doors and woodwork.
2. Vacuum all upholstered furniture and wall surfaces.
3. Complete high dusting of pictures, frames, etc.
<PAGE>
4. Spot clean all carpeted areas.
5. Spot clean wall surfaces.
Quarterly Cleaning Service
--------------------------
1. Scrub and refinish floor areas.
Yearly Cleaning Services
------------------------
1. Strip and refinish all floor areas.
GENERAL OFFICE AREAS
- --------------------
Daily Cleaning Services
-----------------------
1. All ashtrays will be empties, washed and dried.
2. All waste and trash cans will be emptied. All waste and trash
cans will be washed as needed.
3. All telephones will be cleaned and sanitized.
4. All water fountains to be sanitized and polished.
5. Dust desk tops.
6. Spot clean all wall surfaces and columns.
7. Vacuum all carpeted areas; moving light furniture other than
desks, file cabinets, etc.
8. Dust and spot mop all resilient tile floor areas. All floor edges
will be damp mopped.
9. All glass partitions will be spot cleaned.
Weekly Cleaning Services
------------------------
1. Dust and clean all paneling, door time, ornamental work, grills,
picture frames, ventilating louvres, baseboards and entire doors.
2. Dust and wipe clean all furniture, fixtures, shelving, cabinets,
window sills, picture frames, bases of all chairs and desk tops
with clean cloths.
<PAGE>
3. Wipe clean metal door knobs, light switch plates, mirrors, kick
plates, door saddles and directional signs.
Monthly Cleaning Services
-------------------------
1. Complete all high dusting.
2. Dust and wipe clean all diffusers and ventilators.
3. Damp mop and spray buff all resilient floor areas.
Bi-Yearly Cleaning Services
---------------------------
1. Dust blinds.
Yearly Cleaning Services
------------------------
1. Strip and refinish all resilient tile floor areas.
RESTROOMS
- ---------
Daily Cleaning Services
-----------------------
1. All toilets and urinals will be sanitized and wiped clean.
2. All sinks and fixtures will be cleaned with a non-abrasive
cleaner, sanitized and polished.
3. All paper towel and toilet tissue dispensers will be wiped clean.
4. All waste baskets and sanitary disposal units will be emptied.
5. Clean all mirrors with glass cleaner and chrome with chrome
cleaner.
6. All hand soap dispensers will be refilled.
7. All restroom floors will be damp mopped nightly using
disinfectant.
Weekly Cleaning Services
------------------------
1. All partitions, tiled walls and vertical surfaces will be wiped
clean.
Monthly Cleaning Services
-------------------------
1. All walls, vertical and horizontal surfaces will be wiped clean
and sanitized.3
3
<PAGE>
Quarterly Cleaning Services
---------------------------
1. All restroom floors will be machine scrubbed.
CORRIDORS AND COMMON AREAS
- --------------------------
Daily Cleaning Services
-----------------------
1. All ashtrays will be empties, washed and dried.
2. All drinking fountains will be sanitized and polished.
3. All waste trash cans will be emptied.
4. Wipe clean all metal door knobs, light switch plats, kick plates,
mirrors, door saddles and directional signs.
5. Sweep with chemically treated mops; damp mop to remove spill off.
Weekly Cleaning Services
------------------------
1. Spray buff all resilient tile floor areas.
2. All fire extinguishers will be dusted.
3. Spot clean all wall surfaces and columns; including stainless
steel work.
4. Dust and wipe clean all furniture, fixtures, shelving, cabinets,
window sills and picture frames with clean clothes.
Monthly Cleaning Services
-------------------------
1. Complete all high dusting.
2. Dust and wipe clean all paneling, door trim, ornamental work,
grills, picture frames, ventilating louvres, baseboards and
entire doors.
Quarterly Cleaning Services
---------------------------
1. Scrub and refinish all resilient tile floor areas.
2. Dust and wipe clean all air diffusers and ventilators.
Yearly Cleaning Services
------------------------
4
<PAGE>
1. Strip and refinish all resilient tile floor areas.
ELEVATORS
- ---------
Daily Cleaning Services
-----------------------
1. All elevators will be cleaned maintaining all metal work
throughout.
2. All resilient tile floor areas will be swept with a chemically
treated dust mop and spot mopped.
Weekly Cleaning Services
------------------------
1. All resilient tile floors will be mopped and spray buffed.
2. All walls will be wiped clean.
3. Vacuum elevator door tracks and saddles.
STAIRWELLS AND MISCELLANEOUS
- ----------------------------
Weekly Cleaning Services
------------------------
1. All stairs will be swept and mopped.
2. All metal and framework will be dusted and wiped clean.
3. All janitorial closets will be kept clean and orderly.
5
<PAGE>
Exhibit 10.16
COMMERCIAL LEASE
THIS LEASE is made on the 15 day of July, 1998.
The landlord hereby agrees to the Tenant, and the Tenant hereby agrees to hire
and take from the Landlord, the Leased Premises described below pursuant to the
terms and conditions specified herein:
LANDLORD: Robert S. Sloat TENANT(S): OSS, LLC
(Wholly Owned Subsidiary of
Coaxicom)
Address: 21 Charles Street Address: 29 Bank Street
Westport, CT 06880 Stamford, CT
1. Leased Premises. The Leased Premises are those premises described as 21
Charles Street, East Wing-4th Floor, Westport, CT 06880, including 4 covered
parking spaces, the use of up to 15 available space(s) at rear of the Franklyn
Ave RR Parking Lot and access to gym facilities.
2. Term. The term of the Lease shall be for a period of 2 years commencing on
the 15th day of August, 1998, ending on the 14th day of August, 2000 unless
sooner terminated as hereinafter provided. If Tenant remains in possession of
the Leased Premises with written consent of the Landlord after the lease
expiration date stated above, this Lease will be converted to a month-to-month
Lease and each party shall have the right to terminate the Lease by giving at
least one months' prior written notice to the other party except as noted in
Section 21.
3. Rent. The Tenant agrees to pay the ANNUAL RENT of Sixty-Three Thousand and
00/l00 dollars ($63,000.00) payable in equal installments of $5,250.00 in
advance on the first day of each and every calendar month during the full term
of this Lease.
4. Security Deposit. The sum of $5,250.00 is deposited by the Tenant with the
Landlord as security for faithful performance of all the covenants and
conditions of the lease by the said Tenant. If the Tenant faithfully performs
all the covenants and conditions on his part to be performed, then the sum
deposited shall be returned to the Tenant.
5. Delivery of Possession. If for any reason the Landlord cannot deliver
possession of the leased property to the Tenant when the lease term commences,
this Lease shall not be void or voidable, nor shall the Landlord be liable to
the Tenant for any loss or damage resulting therefrom. However, there shall be
an abatement of rent for the period between the commencement of the lease term
and the time when the Landlord delivers possession.
6. Use of Leased Premises. The Leased Premises may be used only for the
following purpose:
Computer Software Development
7. Utilities. Except as specified below, the Tenant shall be responsible for all
utilities and services that are furnished to the Leased Premises. The
application for and connecting of utilities, as well as all services, shall be
made by and only in the name of the Tenant: (List exceptions if any)
Air Conditioning, Heat, Water, Electricity.
Page 1
<PAGE>
8. Condition of Leased Premise; Maintenance and Repair. The Tenant acknowledges
that the Leased Premises are in good order and repair. The Tenant agrees to take
good care of and maintain the Leased Premises in good condition throughout the
term of the Lease.
9. Compliance with Laws and Regulations. Tenant, at its expenses, shall promptly
comply with all federal, state, and municipal laws, orders, and regulations, and
with all lawful directives of public officers, which impose any duty upon it or
Landlord with respect to the Leased Premises. The Tenant at its expense, shall
obtain all required licenses or permits for the conduct of its business within
the terms of this lease, or for the making of repairs, alterations,
improvements, or additions. Landlord, when necessary, will join the Tenant in
applying for all such permits or licenses.
10. Alterations and Improvements. Tenant shall not make any alterations, or
improvements to, or install any fixtures on, the Leased Premises without the
Landlord's prior written consent. If such consent is given, all alterations,
additions, and improvements made, and fixtures installed, by the Tenant shall
become Landlord's property upon the expiration or sooner termination of this
Lease. Landlord may, however, require Tenant to remove such fixtures, at
Tenant's cost, upon the termination hereof.
11. Assignment/Subletting Restriction. Tenant may not assign or sublet the
Leased Premises without prior written consent of the Landlord. Any assignment,
sublease or other purported license to use the Leased Premises by Tenant without
the Landlord's consent shall be void and shall (at Landlord's option) terminate
the lease.
12. Insurance.
(i) By Landlord. Landlord shall at all times during the term of this Lease,
at its expense, insure and keep in effect on the building in which the Leased
Premises is located fire insurance with extended coverage whereby the insurer
waives the right of subrogation. The Tenant shall not permit any use of the
Leased Premises which will make voidable any insurance on the property of which
the Leased Premises are a part, or on the contents of said property or which
shall be contrary to any law or regulation from time to time established by the
applicable fire insurance rating association. Tenant shall on demand reimburse
the Landlord, and all other tenants, all extra insurance premiums caused by the
Tenant's use of the premises.
(ii) By Tenant. Tenant shall, at its expense, during the term hereof,
maintain and deliver to Landlord public liability, and property damage and plate
glass insurance policies with respect to the Leased Premises. The certificate
should be prepared and signed by a reputable insurer rated by BEST'S or
equivalent with a rating of "A" or better. The certificate should state that
Robert S. Sloat is an additional name insured, that Mr. Sloat will receive ten
(10) days advance notice of any change in or cancellation of the policy, that
the insurer waives the right of subrogation, and that the policy carries the
following all-risk extended liability limits:
Personal Property: $1,000,000 per occurrence
Property Damage: $l,000,000 per occurrence
A copy of an up-to-date certificate must be submitted to the Landlord annually.
13. Indemnification of Landlord. Tenant shall defend, indemnify, and hold
Landlord harmless from and against any claim, loss, expense or damage to any
person or property in or upon the Leased Premises, arising out of Tenants use or
occupancy of the Leased Premises, or arising out of any act or neglect of Tenant
or its servants, employees, agents, or invitees.
Page 2
<PAGE>
14. Condemnation. If all or any part of the Leased Premises is taken by eminent
domain, this lease shall expire on the date of such taking, and the rent shall
be apportioned as of that date. No part of any award shall belong to Tenant.
15. Destruction of premises. If the building in which the Leased Premises is
located is damaged by fire or other casualty, without Tenant's fault, and the
damage is so extensive as to effectively constitute a total destruction of the
property or building, this Lease shall terminate and the rent shall be
apportioned to the time of the damage. In all other cases of damage without
Tenant's fault, Landlord shall repair the damage with reasonable dispatch, and
if the damage has rendered the Leased Premises wholly or partially untenable,
the rent shall be apportioned until the damage is repaired. In determining what
constitutes reasonable dispatch, consideration shall be given to delays caused
by strikes, adjustment of insurance, and other causes beyond Landlord's control.
16. Landlord's Rights upon Default. In event of any breach of this lease by the
Tenant, which shall not have been cured within TEN (10) DAYS, then the Landlord,
Besides other rights or remedies it may have, shall have the immediate right of
reentry and may remove all persons and property from the Leased Premises; such
property may be removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of, the Tenant. If the Landlord elects to reenter
as herein provided, or should it take possession pursuant to any notice provided
by law, it may either terminate this Lease or may, from time to time, without
terminating this lease, relet the Leased Premises or any part thereof, for such
term or terms and at such rental or rentals and upon such other terms and
conditions as the Landlord in Landlord's own discretion may deem advisable.
Should rental received from such relating during any month be less than that
agreed to be paid during the month by the Tenant thereunder, the Tenant shall
pay such deficiency to the Landlord monthly. The Tenant shall also pay to the
Landlord, as soon as ascertained, the cost and expenses incurred by the Landlord
in such reletting.
17. Quiet Enjoyment. The Landlord agrees that if the Tenant shall pay the rent
as aforesaid and perform the covenants and agreements herein contained on its
part to be performed, the Tenant shall peaceably hold and enjoy the said rented
premises without hindrance or interruption by the Landlord or by any other
person or persons acting under or through the Landlord.
18. Landlord's Right to Enter. Landlord may, at reasonable times, enter the
leased Premises to inspect it, to make repairs or alterations, and to show it to
potential buyers, lenders or tenants.
19. Surrender upon Termination. At the expiration of the lease term the Tenant
shall surrender the leased property in as good condition as it was at the
beginning of the term, reasonable use and wear excepted.
20. Subordination. This lease, and the Tenant's leasehold interest, is and shall
be subordinate, subject and inferior to any and all liens and encumbrances now
and thereafter placed on the Leased Premises by Landlord, any and all extensions
of such liens and encumbrances and all advances paid under such liens and
encumbrances.
21. Additional Provisions:
Tenant will have one (1) option to renew Lease, the renewal to be for a term of
two (2) years, exercisable by Tenant giving Landlord written notice of Tenant's
intention to exercise no later than sixty days prior to the end of the then
current term. A renewal option may be exercised only if the Tenant is not then
in default under the Lease. The terms of the Lease during the renewal term will
be the same as during the original term, except that the rent will be increased
pursuant to the following schedule.
First year of renewal: $66,150.00 per year
Second year of renewal: $69,457.50 per year
Page 3
<PAGE>
Tenant may design and construct renovations to the Leased Premises, at its own
expense, subject to Landlord's prior approval of Tenant's plans for the same.
Tenant will be responsible for complying with all building codes, procuring all
permits and satisfying all other legal requirements associated with the
construction, all at Tenant's expense.
22. Miscellaneous Terms.
(I) Notices. Any notice, statement, demand or other communication by one
party to the other, shall be given by personal delivery or by mailing same,
postage prepaid, addressed to the Tenant at the premises, or to the Landlord at
the address set forth above.
(ii) Severability. If any clause or provision herein shall be adjudged
invalid or unenforceable by a court of competent jurisdiction or by operation of
any applicable law, it shall not affect the validity of any other clause or
provision, which shall remain in full force and effect.
(iii) Waiver. The failure of either party to enforce any of the provisions
of this lease shall not be considered a waiver of that provision or the right of
the party to thereafter enforce the provision.
(iv) Complete Agreement. This lease constitutes the entire understanding
of the parties with respect to the subject matter hereof and may not be modified
except by an instrument in writing and signed by the parties.
(v) Successors. This lease is binding on all parties who lawfully
succeed to the rights or take the place of the Landlord or Tenant.
IN WITNESS WHEREOF the parties have set their hands and seals this ____ day of
___________1998________
/s/ Robert S. Sloat /s/ Eric Neikrug
_______________________________________ ___________________
Landlord or Landlord's Authorized Agent Tenant
___________________________________
Tenant
Page 4
<PAGE>
EXHIBIT 10.17
- --------------------------------------------------------------------------------
COAXICOM, INC.
8% SERIES C CONVERTIBLE REDEEMABLE
PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
Dated as of April 23, 1999
- --------------------------------------------------------------------------------
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of April 23, 1999 (this
"Agreement"), among Coaxicom, Inc., a Delaware corporation (the "Company"),
Baker Communications Fund, L.P. ("Baker") and the holders of Series A Preferred
Stock of the Company and Series B Preferred Stock of the Company listed on
Schedule A to this Agreement (the "Holders"; the Holders and Baker being
collectively referred to herein as, the "Purchasers").
WITNESSETH:
WHEREAS, the Company desires to issue to the Purchasers, and the Purchasers
desire to purchase from the Company, the Preferred Shares (as such term is
defined below) as set forth below; and
WHEREAS, certain terms used in this Agreement are defined in Section 9.1
hereof;
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter contained, the parties hereto hereby agree as follows:
1. Sale and Purchase of Securities.
1.1. Sale and Purchase of Initial Preferred Shares.
---------------------------------------------
(a) Subject to the terms and conditions of this Agreement, on the date
hereof (sometimes referred to herein as, the "Closing Date"), the Company is
issuing, selling and delivering to Baker, and Baker is purchasing from the
Company, for the Baker Purchase Price (as defined in Section 2.1(a) hereof)
4,478,481 shares of 8% Series C Convertible Redeemable Preferred Stock of the
Company (the "Baker Preferred Shares").
(b) Subject to the terms and conditions of this Agreement, on the date
hereof, the Company is issuing, selling and delivering to the Holders in the
denominations set forth on Schedule A, and the Holders are purchasing from the
Company, for the Holders' Purchase Price (as defined in Section 2.1(b) hereof)
1,791,394 shares of 8% Series C Convertible Redeemable Preferred Stock of the
Company (the "Holders' Preferred Shares"; the Holders' Preferred Shares and the
Baker Preferred Shares are collectively referred to herein as, the "Initial
Preferred Shares"). The Initial Preferred Shares shall have the rights,
preferences and designations set forth in the Amended and Restated Certificate
of Incorporation of the Company in the form attached hereto as Exhibit A (the
"Amended and Restated Certificate of Incorporation").
1.2. Sale and Purchase of Additional Preferred Shares. Subject to the
------------------------------------------------
terms and conditions of this Agreement, the Purchasers shall have the option to
purchase an aggregate of 5,300,892 shares of 8% Series D Convertible Redeemable
Preferred Stock of the Company
<PAGE>
(the "Series D Preferred Shares" and together with the Initial Preferred Shares,
the "Preferred Shares"), on a pro-rata basis based on their ownership of the
Initial Preferred Shares, at any time after the Closing Date. The option to
purchase the Series D Preferred Shares shall be exercisable independently by
Baker and each of the Holders in the denominations set forth on Schedule B, and
Baker and each of the Holders, in each such case, shall be entitled to exercise
their respective portion of such option in whole but not in part. The Series D
Preferred Shares shall have the rights, preferences and designations set forth
in the Amended and Restated Certificate of Incorporation. The initial conversion
price applicable to the conversion of the Series D Preferred Shares into Common
Stock of the Company shall be set forth in the Amended and Restated Certificate
of Incorporation, except that the initial conversion price shall be subject to
adjustment for anti-dilutive events occurring prior to the purchase of the
Series D Preferred Shares, in accordance with the anti-dilution provisions
contained in paragraph 5 of Section (E) of the Amended and Restated Certificate
of Incorporation which shall apply as if the Series D Preferred Shares were
outstanding as of the date of such anti-dilutive events. After December 31,
1999, the Company may send a written notice to the Purchasers requesting the
Purchasers to exercise their option to purchase the Series D Preferred Shares
provided for in this Section 1.2. If no such notice is sent by the Company by
February 15, 2000, the option provided for in this Section 1.2 shall
automatically expire. If such notice is sent by the Company, the Purchasers
shall have thirty-five (35) days from the date of such notice to notify the
Company of its intention to exercise the option and forty-five (45) days from
the date of such notice to consummate its purchase of the Series D Preferred
Shares. If the Purchasers do not notify the Company of its election to exercise
the option within such thirty-five (35) day period and purchase the Series D
Preferred Shares within such forty-five (45) day period, the option provided for
in this Section 1.2 shall expire. Notwithstanding anything contained in this
Section 1.2 to the contrary, the option shall not be deemed to expire until such
time as the Company has delivered to the Purchasers the certificate and, if
applicable, the notice of adjustment to the conversion price referred to in
paragraph 5.14.3 of Section (D) of the Amended and Restated Certificate of
Incorporation with respect to the Performance Benchmark (as defined therein),
and thirty (30) days have elapsed from receipt of such certificate and, if
applicable, the notice of adjustment to the conversion price. The Purchasers
shall have the right to transfer all or a portion of their option to purchase
Series D Preferred Shares to one or more of their respective Affiliates.
2. Purchase Price.
2.1. Amount of Purchase Price.
------------------------
(a) The purchase price for the Baker Preferred Shares being purchased
pursuant to Section 1.1(a) shall be an aggregate amount equal to Twenty Million
Dollars ($20,000,000) (the "Baker Purchase Price"). The Baker Purchase Price
shall be payable as provided in Section 2.2(a) hereof.
-2-
<PAGE>
(b) The purchase price for the Holders' Preferred Shares being
purchased pursuant to Section 1.1(b) shall be an aggregate amount equal to Eight
Million Dollars ($8,000,000) (the "Holders' Purchase Price"; the Holders'
Purchase Price and the Baker Purchase Price are collectively referred to herein
as, the "Purchase Price"). The portion of the Holders' Purchase Price payable
by each of the Holders shall be in the amount specified in Schedule A and is
being paid as provided in Section 2.2(b) hereof.
2.2. Payment of the Purchase Price.
-----------------------------
(a) Baker is paying the Baker Purchase Price by wire transfer of
immediately available funds or by such other method as may be reasonably
acceptable to the Company and Baker, to the account of the Company as shall have
been designated in advance to Baker by the Company.
(b) At the Closing, the Holders are paying the Holders' Purchase
Price as follows: (i) Four Million Dollars ($4,000,000) plus interest accrued
thereon through the Closing Date through the conversion of a Four Million Dollar
($4,000,000) bridge loan evidenced by promissory notes dated February 26, 1999
(the "Notes") from the Holders to the Company, and (ii) the remainder of the
Holders' Purchase Price by wire transfer of clearing house funds or by such
other method as may be reasonably acceptable to the Company and the Holders, to
the account of the Company as shall have been designated in advance to the
Holders by the Company. The issuance of the Holders' Preferred Shares shall be
in complete satisfaction of the Company's obligations under the Notes.
2.3. Purchase Price for Additional Preferred Shares. If the
----------------------------------------------
Purchasers exercise their respective options to purchase the Series D Preferred
Shares provided for in Section 1.2, the purchase price for such Series D
Preferred Shares shall be $5.28213 per Series D Preferred Share or an aggregate
of Twenty Eight Million Dollars ($28,000,000) (the "Series D Purchase Price").
The Series D Purchase Price shall be paid at a closing as described in Section
3.2 hereof by wire transfer of clearing house funds or by such other method as
may be reasonably acceptable to the Company and the Purchasers, to the account
of the Company as shall have been designated in advance to the Purchasers by the
Company.
3. Closing.
3.1. Closing Date. The closing of this Agreement (the "Closing") is
------------
taking place on April 23, 1999 at the offices of Swidler Berlin Shereff
Friedman, LLP in New York, New York, or at such other time, date or place as the
parties hereto may mutually agree. The date on which the Closing is held is
referred to in this Agreement as the "Closing Date." At the Closing, the parties
shall execute and deliver or cause to be delivered the documents referred to in
Section 8 hereof.
-3-
<PAGE>
3.2. Closing Date for Additional Preferred Shares. The closing for
--------------------------------------------
the purchase of the Series D Preferred Shares (the "Series D Preferred Shares
Closing Date") shall be at a mutually acceptable time and place. At the Series
D Preferred Shares Closing, the Company shall execute and deliver or cause to be
delivered such documents referred to in Section 8.1(f) and (i) hereof, dated as
of the Series D Preferred Shares Closing Date, as are requested by the
Purchasers, and stock certificates representing the Series D Preferred Shares
being purchased at such closing against delivery of the Series D Purchase Price
in respect of such shares paid in accordance with Section 2.3 hereof, provided,
however, the inability of counsel to the Company to render an unqualified
opinion on matters requested by the Purchasers shall not give rise to any
recourse on the part of the Purchasers other than to decline to exercise the
option specified in Section 1.2.
4. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchasers that:
4.1. Organization and Good Standing, Capitalization.
----------------------------------------------
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as now conducted. The Company is duly qualified or authorized
to do business as a foreign corporation and, except as specifically stated
therein, is in good standing under the laws of each jurisdiction specified on
Schedule 4.1(a), which includes each jurisdiction in which the conduct of its
business or the ownership of its properties or assets requires such
qualification or authorization except where the failure to so qualify would not
individually, or in the aggregate, result in a Material Adverse Effect.
(b) The authorized and issued capital stock of the Company
immediately prior to and immediately after the Closing is as set forth on
Schedule 4.1(b). Except as disclosed on Schedule 4.1(b), (i) there is no option,
warrant, call, right, commitment or other agreement of any character to which
the Company is a party requiring, (ii) there are no securities of the Company
outstanding which upon conversion or exchange would require, and (iii) there are
no stock appreciation rights, or other similar rights based on securities of the
Company, which would require the issuance, sale or transfer of any additional
shares of capital stock or other equity securities of the Company or other
securities convertible into, exchangeable for or evidencing the right to
subscribe for or purchase shares of capital stock or other equity securities of
the Company. Except as disclosed on Schedule 4.1(b) and other than this
Agreement, the Company is not a party to, nor is it aware of, any voting trust
or other voting agreement or with respect to any of the securities of the
Company or to any agreement relating to the issuance, sale, redemption, transfer
or other disposition of the capital stock of the Company. Except as disclosed on
Schedule 4.1(b) and other than this Agreement, there are no securities of the
-4-
<PAGE>
Company that are entitled to registration rights and the Company is not a party
to, nor is it aware of, any registration rights agreement or other agreement
with respect to the registration of any of the securities of the Company.
4.2. Authorization of Agreement; Enforceability. The Company has all
------------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, instrument and certificate to be executed by
the Company in connection with the consummation of the transactions contemplated
by this Agreement (the "Transaction Documents") and to perform fully its
obligations hereunder and thereunder. The execution, delivery and performance
by the Company of this Agreement and the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company and its
stockholders. This Agreement and each of the Transaction Documents have been
duly and validly executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof by the Purchasers), this Agreement
and each of the Transaction Documents constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
4.3. Subsidiaries, Joint Ventures, Partnerships, Etc. Except as set
------------------------------------------------
forth on Schedule 4.3, the Company has no subsidiaries. The securities of each
subsidiary owned, directly or indirectly, by the Company are held free and clear
of all Liens, and all such securities have been duly authorized and validly
issued and are fully paid and non-assessable. Except as set forth on Schedule
4.3, the Company is not a participant in any joint venture, partnership or
similar arrangement.
4.4. Consents of Third Parties. Except as set forth on Schedule 4.4,
-------------------------
none of the execution and delivery by the Company of this Agreement and the
Transaction Documents, the consummation of the transactions contemplated hereby
or thereby, or compliance by the Company with any of the provisions hereof or
thereof will (a) conflict with, or result in the breach of, any provision of the
certificate of incorporation or by-laws of the Company or any of its
subsidiaries, (b) conflict with, violate, result in the breach or termination
of, or constitute a default or give rise to any right of termination or
acceleration or right to increase the obligations or otherwise modify the terms
thereof under any Contract, Permit or Order to which the Company or its
subsidiaries is a party or by which the Company or its subsidiaries or any of
their properties or assets is bound, (c) constitute a violation of any Law
applicable to the Company or its subsidiaries; or (d) result in the creation of
any Lien upon the properties or assets of the Company or its subsidiaries.
Other than those which have been obtained or made, no consent, waiver, approval,
Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of the
Company or its subsidiaries in connection with the execution and delivery of
this Agreement or the Transaction Documents,
-5-
<PAGE>
or the compliance by the Company with any of the provisions hereof or thereof.
4.5. Authorization of Preferred Shares and Common Stock.
--------------------------------------------------
(a) The issuance, sale, and delivery of the Preferred Shares to be
purchased pursuant to this Agreement have been duly authorized by all requisite
action of the Company, and, when issued and delivered to the Purchasers in
accordance with this Agreement, such Preferred Shares will be validly issued and
outstanding, fully paid, and non-assessable, with no personal liability
attaching to the ownership thereof, and, except as specifically provided for
herein with respect to the Purchasers, not subject to preemptive or any other
similar rights of the stockholders of the Company or others.
(b) The issuance, sale, and delivery of the Common Stock to be
delivered upon conversion of the Preferred Shares in accordance with the terms
of the Preferred Shares have been duly authorized by all requisite action of the
Company, and, when issued, sold, and delivered in accordance with this
Agreement, the Common Stock will be validly issued and outstanding, fully paid,
and non-assessable, with no personal liability attaching to the ownership
thereof, and, except as specifically provided for herein with respect to the
Purchasers, and those which have been waived as set forth on Schedule 4.5, not
subject to preemptive or any other similar rights of the stockholders of the
Company or others.
4.6. Financial Statements. Attached hereto as Schedule 4.6 are (a)
--------------------
copies of (i) the unaudited consolidated balance sheet of the Company and its
subsidiaries as of December 31, 1998, the unaudited consolidated statement of
income and retained earnings of the Company and its subsidiaries for the fiscal
year ended December 31, 1998, and the unaudited consolidated statement of cash
flows of the Company and its subsidiaries for the fiscal year ended December 31,
1998 and (ii) the unaudited consolidated balance sheet of the Company and its
subsidiaries as of December 31, 1997 and the unaudited consolidated statement of
income and retained earnings and the unaudited consolidated statement of cash
flows of the Company and its subsidiaries, each for the fiscal year ended
December 31, 1997 (the "Unaudited Year End Financial Statements") and (b) the
unaudited consolidated balance sheet of the Company and its subsidiaries as of
March 31, 1999, the unaudited consolidated statement of income and retained
earnings of the Company and its subsidiaries for the three month period ended
March 31, 1999, and the unaudited consolidated statement of cash flows of the
Company and its subsidiaries for the three-month period ended March 31, 1999
(the "Unaudited Quarterly Financial Statements," and together with the Unaudited
Year End Financial Statements, the "Financial Statements"). Each of the
Financial Statements was prepared in good faith, is complete and correct in all
material respects, has been prepared in accordance with GAAP, except that they
omit footnotes and other presentation items and, in the case of the Unaudited
Quarterly Financial Statements are subject to normal year end adjustments, and
in conformity with the practices consistently applied by the Company and its
subsidiaries and presents fairly the financial position, results of operations
and cash flows of the Company and its subsidiaries as of the dates and for the
periods
-6-
<PAGE>
indicated.
4.7. No Undisclosed Liabilities. Except as set forth on Schedule 4.7,
--------------------------
the Company and its subsidiaries have no liabilities (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), except (a) obligations under Contracts described in Schedule 4.13
or under Contracts that are not required to be disclosed thereon as a result of
dollar thresholds therein; (b) liabilities provided for in the Financial
Statements (other than liabilities which, in accordance with GAAP, need not be
disclosed); (c) liabilities (other than accounts payable) incurred since the
Unaudited Quarterly Financial Statements, in the ordinary course of business
consistent with past practice; and (d) accounts payable in excess of those shown
on the Financial Statements, incurred in the ordinary course of business
consistent with past practice, the sum of which (other than in respect of
accrued compensation and related benefits) is, in the aggregate, not greater
than $250,000.
4.8. Absence of Certain Developments.
-------------------------------
(a) Except as set forth on Schedule 4.8(a), the general nature of the
business of the Company and its subsidiaries is described in the business plan
of the Company (the "Business Plan"), which previously has been delivered to the
Purchasers. The financial projections contained in the Business Plan are based
on and reflect facts that the Company believes still exist and assumptions that
the Company believes are still reasonable, as of the date of this Agreement.
(b) Except as set forth on Schedule 4.8(b) and since the date of the
Unaudited Year End Financial Statements:
(i) there has not been any Material Adverse Change nor has any
event occurred which could reasonably be expected to result in any Material
Adverse Change;
(ii) there has not been any declaration, setting a record date,
setting aside or authorizing the payment of, any dividend or other distribution
in respect of any shares of capital stock of the Company or any repurchase,
redemption or other acquisition by the Company, of any of the outstanding shares
of capital stock or other securities of, or other ownership interest in, the
Company;
(iii) there has not been any transfer, issue, sale or other
disposition by the Company of any shares of capital stock or other securities of
the Company or any grant of options, warrants, calls or other rights to purchase
or otherwise acquire shares of such capital stock or such other securities;
(iv) except as accrued on the Unaudited Quarterly Financial
Statements, the Company and its subsidiaries have not awarded or paid any
bonuses to
-7-
<PAGE>
Employees or Representatives of the Company and its subsidiaries nor has the
Company and its subsidiaries entered into any employment, deferred compensation,
severance or similar agreements (nor amended any such agreement) or agreed to
increase the compensation payable or to become payable by the Company and its
subsidiaries to any of their Employees or Representatives or agreed to increase
the coverage or benefits available under any severance pay, deferred
compensation, bonus or other incentive compensation, pension or other employee
benefit plan, payment or arrangement made to, for or with such Employees or
Representatives, other than in the ordinary course of business consistent with
past practice and with the operating expense budget of the Company and its
subsidiaries reflected in the projections contained in the Business Plan, and
other than as may have been required by law or insurers;
(v) the Company and its subsidiaries have not made any loans,
advances (other than compensation advances to employees that in the aggregate do
not exceed $30,000) or capital contributions to, or investments in, any Person
or paid any fees or expenses to any Affiliate of the Company and its
subsidiaries (other than payments between the Company and a subsidiary);
(vi) the Company and its subsidiaries have not transferred or
granted any rights under any Contracts, leases, licenses, agreements or
intangible property (as set forth in Section 4.12 hereof) used by the Company or
its subsidiaries in their business which could result in a Material Adverse
Change;
(vii) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property or assets of the Company
and its subsidiaries having a replacement cost of more than $100,000 for any
single loss or $100,000 for all such losses;
(viii) the Company and its subsidiaries have not mortgaged, pledged or
subjected to any Lien any of its assets, or acquired any assets or sold,
assigned, transferred, conveyed, leased or otherwise disposed of any assets of
the Company or its subsidiaries, except for assets acquired or sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the ordinary course of
business consistent with past practice;
(ix) the Company and its subsidiaries have not canceled or
compromised any debt or claim or amended, canceled, terminated, relinquished,
waived or released any Contract or right except in the ordinary course of
business consistent with past practice and which would not have a Material
Adverse Effect;
(x) the Company and its subsidiaries have not entered into any
contract or made any binding commitment to make any capital expenditures or
capital additions or betterments in any such case obligating the Company or its
subsidiaries to pay an amount in any twelve-month period in excess of $25,000
individually or $100,000 in the aggregate;
-8-
<PAGE>
(xi) there has not been any default under any material
agreement or the occurrence of any event, which with notice or lapse of time or
both would result in a default under any such agreement;
(xii) the Company and its subsidiaries have not incurred any
debts, obligations or liabilities, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business which did not
result in a Material Adverse Change;
(xiii) the Company and its subsidiaries have not entered into any
material transaction other than in the usual and ordinary course of business
except for this Agreement;
(xiv) the Company and its subsidiaries have not encountered any
labor difficulties or labor union organizing activities which could reasonably
be expected to result in a Material Adverse Effect;
(xv) the Company and its subsidiaries have not made any change
in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted;
(xvi) the Company and its subsidiaries have not disclosed to any
Person any material trade secrets except for disclosures made to Persons subject
to valid and enforceable confidentiality agreements; or
(xvii) to the Company's knowledge, suffered or experienced any
change in the relationship or course of dealings between the Company or its
subsidiaries and any of their suppliers or customers which supply goods or
services to the Company and its subsidiaries or purchase goods or services from
the Company and its subsidiaries, which resulted or is likely to result in a
Material Adverse Effect.
4.9 Taxes. Except as disclosed on Schedule 4.9, the Company and its
-----
subsidiaries have filed all Tax returns (including statements of estimated Taxes
owed) required to be filed within the applicable periods (subject to extensions)
for such filings and have paid all Taxes required to be paid, and have
established adequate reserves (net of estimated Tax payments already made) for
the payment of all Taxes payable in respect of the period subsequent to the last
periods covered by such returns. All information provided in such returns is
complete and accurate in all material respects. No deficiencies for any Tax are
currently assessed against the Company and/or its subsidiaries, and, except as
set forth on Schedule 4.9, no Tax returns of the Company and/or its subsidiaries
have ever been audited, and, to the knowledge of the Company, there is no such
audit pending or contemplated. There is no Tax lien, whether imposed by any
federal, state or local taxing authority, outstanding against the assets,
properties or business of the Company or any of its subsidiaries. Except as
disclosed on Schedule 4.9, the
-9-
<PAGE>
Company and its subsidiaries have withheld from its employees and timely paid to
the appropriate taxing authority proper and accurate amounts in all material
respects through all periods in compliance in all material respects with all
employee Tax withholding provisions of all applicable Laws.
4.10. Real Property.
-------------
(a) The Company and its subsidiaries do not own any real property.
(b) Schedule 4.10(b) sets forth a complete list of all real
property and interests in real property leased by the Company and its
subsidiaries (each a "Real Property Lease", and collectively, the "Real Property
Leases") as lessee or lessor. To the knowledge of the Company, the Company and
its subsidiaries have good and marketable title to the leasehold estates in all
Real Property Leases in each case free and clear of all Liens. The Company and
its subsidiaries have no reason to believe that such title would not be
insurable subject to customary exceptions.
(c) To the knowledge of the Company, each of the Real Property
Leases is valid and enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Real Property Lease by the Company or its subsidiaries or, to
the knowledge of the Company, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder. The Company has delivered or otherwise made
available to the Purchasers true, correct and complete copies of the Real
Property Leases, together with all amendments, modifications, supplements or
side letters affecting the obligations of any party thereunder.
(d) No previous or current party to any Real Property Lease has
given notice of or made a claim with respect to any breach or default
thereunder. To the knowledge of the Company, with respect to those Real Property
Leases that were assigned or subleased to the Company or its subsidiaries by a
third party, all necessary consents to such assignments or subleases have been
obtained.
4.11. Tangible Personal Property. Except for property sold or
--------------------------
otherwise disposed of in the ordinary course of business since December 31, 1998
and except as set forth on Schedule 4.11, the Company and its subsidiaries own
free and clear of any Liens, all of the personal property reflected as owned by
the Company and its subsidiaries in the balance sheet contained in the Unaudited
Quarterly Financial Statements, and all other material items of personal
property acquired by the Company through the date hereof All material items of
such personal property are in good operating condition, normal wear and tear
excepted.
-10-
<PAGE>
4.12. Intangible Property. Except where failure could not reasonably
-------------------
be foreseen to have a Material Adverse Effect, the Company and its subsidiaries
own or possess adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes, formulae, trade
secrets and know-how (collectively, "Intellectual Property") necessary or
desirable to the conduct of its business, and no claim is pending or, to the
knowledge of the Company, threatened to the effect that the operations of the
Company or its subsidiaries infringe upon or conflict with the asserted rights
of any other Person under any Intellectual Property, and the Company does not
know of any basis for any such claim (whether or not pending or threatened). No
claim is pending or, to the knowledge of the Company, threatened to the effect
that any such Intellectual Property owned or licensed by the Company or its
subsidiaries, or which the Company or its subsidiaries otherwise has the right
to use, is invalid or unenforceable by the Company or its subsidiaries, and the
Company does not know of any basis for any such claim (whether or not pending or
threatened). No Employee of the Company or its subsidiaries has any rights to
own or license the Intellectual Property owned or licensed by the Company or its
subsidiaries in connection with the operation of its business. No Employee of
the Company or its subsidiaries has infringed on the Intellectual Property
rights of another entity. The Company and its subsidiaries have not granted or
assigned to any other person or entity any right to assemble or sell the
products or proposed products or to provide the services or proposed services of
the Company and its subsidiaries.
4.13. Material Contracts.
------------------
(a) Except as set forth on Schedule 4.13(a), neither the Company,
its subsidiaries nor any of their properties or assets is a party to or bound by
any (i) Contract not made in the ordinary course of business, or involving a
commitment or payment by the Company or its subsidiaries in excess of $100,000
in any twelve-month period (whether or not in the ordinary course) or, in the
Company's belief, otherwise material to the business of the Company or its
subsidiaries; (ii) Contract among stockholders or granting a right of first
refusal or for a partnership or a joint venture or for the acquisition, sale or
lease of any assets or capital stock of the Company, its subsidiaries or any
other Person or involving a sharing of profits; (iii) mortgage, pledge,
conditional sales contract, security agreement, factoring agreement or other
similar Contract with respect to any real or tangible personal property of the
Company or its subsidiaries; (iv) loan agreement, credit agreement, promissory
note, guarantee, subordination agreement, letter of credit or any other similar
type of Contract; (v) Contract with any Governmental Body other than in the
ordinary course of business; (vi) Contract with respect to the discharge,
storage or removal of hazardous materials; or (vii) binding commitment or
agreement to enter into any of the foregoing. The Company has delivered or
otherwise made available to the Purchasers true, correct and complete copies of
the Contracts listed on Schedule 4.13(a) (except as noted thereon), together
with all amendments, modifications, supplements or side letters to such
Contracts.
-11-
<PAGE>
(b) (i) Each of the Contracts listed on Schedule 4.13(a) is
valid and enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no default under any Contract
listed on Schedule 4.13(a) by the Company, its subsidiaries or, to the knowledge
of the Company, by any other party thereto, and no event has occurred that with
the lapse of time or the giving of notice or both would constitute a default
thereunder that could have a Material Adverse Effect.
(ii) No previous or current party to any Contract has given
written notice to the Company or any of its subsidiaries of or made a claim with
respect to any breach or default thereunder and the Company has no knowledge of
any notice of or claim with respect to any such breach or default.
(c) With respect to the Contracts listed on Schedule 4.13(a) that
were assigned to the Company or its subsidiaries by a third party, all necessary
consents to such assignment have been obtained.
4.14. Employee Benefit Plans, ERISA.
-----------------------------
(a) Schedule 4.14. sets forth an accurate and complete list of
-------------
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and all other
employee benefit plans, arrangements or policies, which are currently maintained
and/or sponsored by the Company and its subsidiaries, or to which the Company
and its subsidiaries currently contribute, or have an obligation to contribute
(collectively the "Plans").
(b) The Company has made available to the Purchasers, for each
Plan, a true and complete copy of (i) the plan document currently in effect, and
any amendments thereto, (ii) any trust agreement, insurance contract or other
agreement or arrangement for the funding of benefits under the Plan, (iii) a
copy of the most recent summary plan description ("SPD"), and all summaries of
material modifications to such SPD, (iv) if the Plan is intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), the most recent determination letter issued by the Internal Revenue
Service (the "IRS") for the Plan, and the request filed with the IRS for such
determination, (v) the most recent annual report (Form 5500) for the Plan, if
such form is required by law to be filed for the Plan and (vi) the most recently
issued financial statement, if any, for the Plan.
(c) All of the Plans are in substantial compliance with all
applicable provisions of ERISA and the Code, and the regulations issued
thereunder, as well as with all other applicable laws, and have been
administered, operated and managed in substantial
-12-
<PAGE>
accordance with the governing documents. All Plans that are intended to qualify
(the "Qualified Plans") under Section 401(a) of the Code are so qualified and
have been determined by the IRS to be so qualified (or applications for
determination letters have been timely submitted to the IRS). All reports and
other documents required to be filed with the IRS, the Department of Labor or
any other Governmental Body or distributed to plan participants or beneficiaries
(including, but not limited to, annual reports, summary annual reports, or tax
returns) have been timely filed or distributed. Neither any Plan, the Company or
any of its subsidiaries has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan is
subject to Title IV of ERISA or the funding requirements of Section 412 of the
Code or Section 302 of ERISA. For the six-year period ending on the date of this
Agreement, the Company and its subsidiaries have not contributed to, or been
obligated to contribute to, any multiemployer plan (within the meaning of
Section 3(37) of ERISA), a multiple employer plan (as described in Section
413(c) of the Code), any multiple employer welfare arrangement (within the
meaning of Section 3(40) of ERISA) or any plan which is subject to Title IV of
ERISA.
(d) The Company and its subsidiaries are not, or at any time during
the six-year period ending on the date of this Agreement have been, aggregated,
and treated as a single employer, with any other entity under Section 414(b),
(c), (m) or (o) of the Code.
(e) All contributions to each Plan, including both employee and
employer contributions, which are required to have been made, whether by virtue
of the terms of the particular Plan or by operation of law, have been made by
the due date thereof (including all applicable extensions), and all
contributions to each Plan which are not yet due but which relate to periods
which began prior to the date hereof have been paid or have been appropriately
reflected on the financial statements.
(f) No Governmental Body has initiated any examination or audit or,
to the Company's knowledge, any investigation of any Plan which has not been
completed.
(g) There is no litigation, arbitration, disputed claim, settlement
or adjudication proceeding pending or, to the Company's knowledge, threatened
with respect to any Plan.
(h) Except as disclosed in Schedule 4.14, the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) cause any payment (whether of severance pay or otherwise) not
otherwise due from becoming due from any of the Plans, or from the Company and
its subsidiaries with respect to any of the Plans, to any individual, or (ii)
cause the vesting, acceleration of payment, or increase in the amount of any
benefit payable under any of the Plans to any individual.
-13-
<PAGE>
(i) Except as disclosed in Schedule 4.14, any hospital, medical,
dental, vision, sickness or accident, survivor or death benefit, disability or
similar benefit coverage provided under any Plan is provided solely through
insurance policies. Except as disclosed in Schedule 4.14, no Plan provides for
hospital, medical, death, survivor or any other welfare benefit for retired or
former employees, officers or directors, except as required by the Section 4980B
of the Code or Sections 601 to 608 of ERISA.
(j) Except as disclosed in Schedule 4.14, the Company and its
subsidiaries are not under any obligation (express or implied) to modify any
Plan or to establish any additional employee benefit plan.
(k) The Financial Statements of the Company and its subsidiaries
reflect the approximate total pension, medical and other benefit expense for all
Plans, and no material funding changes or irregularities are reflected thereon
which would cause such financial statements to be not representative of prior
periods.
4.15. Employees.
---------
(a) To the knowledge of the Company, no key executive Employee and
no group of Employees or independent contractors of the Company or any of its
subsidiaries has any plans to terminate his, her or its employment or
relationship as an Employee or independent contractor with the Company or any of
its subsidiaries.
(b) Schedule 4.15 sets forth a true and complete list of the name
and amount of annual cash compensation of each Employee of the Company and its
subsidiaries whose current annual cash compensation is $75,000 or more, together
with such person's job title and amounts and forms of compensation and fringe
and severance benefits.
(c) To the knowledge of the Company, no key executive Employee or
any other Employee of the Company and its subsidiaries is a party to or is
otherwise bound by any agreement or arrangement (including, without limitation,
confidentiality agreements, noncompetition agreements, licenses, covenants, or
commitments of any nature), or subject to any judgment, decree, or order of any
court or administrative agency, (i) that would conflict with such Employee's
obligations to the Company and its subsidiaries or (ii) that would conflict with
the business of the Company and its subsidiaries as now conducted or proposed to
be conducted.
4.16. Labor Laws. The Company and its subsidiaries are in
----------
compliance in all material respects with all applicable Laws relating to labor,
employment, fair employment practices, terms and conditions of employment, and
wages and hours.
-14-
<PAGE>
4.17. Litigation. There are no Legal Proceedings pending or, to the
----------
knowledge of the Company, threatened that question the validity of this
Agreement or the Transaction Documents or any action taken or to be taken by the
Company and its subsidiaries in connection with the consummation of the
transactions contemplated hereby or thereby. There are no Legal Proceedings
pending or, to the knowledge of the Company, threatened against or involving the
Company and its subsidiaries or any of their properties or assets, at law or in
equity, and, to the knowledge of the Company, there exists no reasonable basis
therefor. There is no outstanding or, to the knowledge of the Company,
threatened Order of any Governmental Body against the Company and its
subsidiaries or any of their properties or assets.
4.18. Compliance with Laws; Permits.
-----------------------------
(a) The Company and its subsidiaries are and, to the knowledge of
the Company, at all times have been in compliance with all material Laws and
material Orders promulgated by any Governmental Body applicable to the Company
and its subsidiaries or to the conduct of the business or operations of the
Company and its subsidiaries or the use of their properties (including any
leased properties) and assets. The Company and its subsidiaries have not
received any notices of violation or alleged violation of any such Law or Order
by any Governmental Body.
(b) Except as set forth on Schedule 4.18(b), and to the knowledge of
the Company, the Company and its subsidiaries have all Permits necessary for the
conduct of its business where the failure to have such Permits could have a
Material Adverse Effect; such Permits have been validly issued, and the Company
and its subsidiaries have complied in all material respects with all conditions
of such Permits applicable to it; no default or violation, or event that with
the lapse of time or giving of notice or both would become a default or
violation, has occurred in the due observance of any such Permit; all such
Permits are in full force and effect without further consent or approval of any
Person; and the Company and its subsidiaries have not received any notice from
any source to the effect that there is lacking any such material Permit required
in connection with the current operations of the Company and its subsidiaries.
4.19. Investment Company Act. The Company and its subsidiaries are
----------------------
not, nor are they directly or indirectly controlled by or acting on behalf of,
any Person that is an investment company within the meaning of the Investment
Company Act of 1940, as amended.
4.20. Transactions with Affiliates. Except for expenses in the
----------------------------
ordinary course of business and except as set forth on Schedule 4.20, neither
the Company nor its subsidiaries has made any payment to, or received any
payment from, or made or received any investment in, or entered into any
transaction with, any Affiliate, including without limitation, the purchase,
sale or exchange of property or the rendering of any service, where the amount
involved is material to the business of the Company.
-15-
<PAGE>
4.21. Disclosures; Survival. This Agreement, the Financial Statements,
---------------------
the schedules provided in connection with this Agreement and the Business Plan
do not contain any untrue statement of material fact and do not fail to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive for a period of
twenty-four (24) months following the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, except that the
representations and warranties set forth in Sections 4.1, 4.2, and 4.5 shall
survive in perpetuity and the representations and warranties set forth in
Sections 4.9 and 4.14 shall survive for the applicable period of the statute of
limitations. No representations and warranties of the Company in this Agreement
shall be affected by any examination made for or on behalf of the Purchasers,
the knowledge of the Purchasers, or the acceptance by the Purchasers of any
certificate or opinion.
4.22. Insurance. There is in full force and effect certain policies of
---------
insurance issued by insurers of recognized responsibility, including, without
limitation, directors and officers insurance, business interruption insurance
and key man insurance in the minimum amounts set forth on Schedule 4.22,
insuring the Company and its subsidiaries and their properties, business and
projects against such losses and risks, and in such amounts, as are customary in
the case of corporations of established reputation engaged in the same or
similar business and similarly situated. The Company has no reason to believe
that the Company or its subsidiaries will be unable to renew its existing
insurance coverage as and when the same shall expire upon terms at least as
favorable as those presently in effect, other than possible increases in
premiums that do not result from any act or omission of the Company or its
subsidiaries. Schedule 4.22 sets forth a list of each insurance policy
(specifying the insurer, the amount of coverage, the type of insurance, the
policy number, the expiration date, the annual premium (current and for each of
the last three years) and any pending claims thereunder) maintained by the
Company and its subsidiaries relating to their properties, assets, business or
personnel. Except as disclosed on Schedule 4.22 and to the knowledge of the
Company, neither the Company nor its subsidiaries are in default with respect to
any provision contained in any insurance policy, and the Company and its
subsidiaries have not failed to give any notice or present any presently
existing claims under any insurance policy in due and timely fashion.
4.23. Customers and Suppliers. Schedule 4.23 sets forth a list of the
-----------------------
ten (10) largest customers and all suppliers paid more than $25,000 per month of
the Company and its subsidiaries and the dollar amount of purchases or sales
which each such customer or supplier represents. There exists no actual or, to
the knowledge of the Company, threatened termination or cancellation of the
business conducted by the Company or its subsidiaries with any customer,
supplier or group of customers or group of suppliers set forth on Schedule 4.23.
-16-
<PAGE>
4.24. Year 2000 Problem. The Company has developed and is in the
-----------------
process of implementing a plan which the Company believes in good faith is
sufficient to ensure that in all material respects all hardware, software,
firmware, systems, files, applications, interfaces, databases and other
computer-related materials ("Software") that the Company and its subsidiaries
own, possess and/or control is or will be designed to be used prior to, during,
and after the calendar year 2000 A.D., and will operate in all material respects
during each such time period, either on a stand-alone basis, or by interacting
or interoperating with third-party Software, without material error relating to
the processing, calculating, comparing, sequencing or other use of date data,
including: (i) any material error relating to or resulting from date data which
represents or references more than one century ("Century-Based Data"), (ii) any
abnormal ending or provision of materially invalid or incorrect results as a
result of any Century-Based Data; or (iii) any material error relating to
century recognition or calculations accommodating Century-Based Data, values or
formulae, and the implementation of such plan is expected in good faith to be
completed in a timely manner. The Company has performed all necessary due
diligence and is in the process of performing tests and implementing
modifications to all Software that the Company and its subsidiaries own, possess
and/or control to design an appropriate plan and to ensure the accuracy of this
representation and warranty. The cost of becoming Year 2000 compliant will not
exceed $200,000.
4.25. Financial Advisors. No agent broker, investment banker, finder,
------------------
financial advisor or other person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from the Company, directly
or indirectly, in connection with the transactions contemplated by this
Agreement or any Transaction Document.
4.26. Condition of Properties. All facilities, machinery, equipment,
-----------------------
fixtures, vehicles and other properties owned, leased or used by the Company and
its subsidiaries are in good operating condition and repair, are reasonably fit
and usable for the purposes for which they are being used, are adequate and
sufficient for the business of the Company and its subsidiaries and conform in
all material respects with all applicable Laws.
4.27. Illegal or Unauthorized Payments; Political Contributions.
---------------------------------------------------------
Neither the Company and its subsidiaries nor, to the Company's knowledge, any of
their respective officers, directors, Employees, agents or other Representatives
of the Company and its subsidiaries have, directly or indirectly, made or
authorized any payment, contribution or gift of money, property, or services,
whether or not in contravention of applicable law, (a) as a kickback or bribe to
any person or (b) to any political organization, or the holder of or any
aspirant to any elective or appointive public office except for personal
political contributions not in excess of $5,000 in any single instance and not
involving the direct or indirect use of funds of the Company and its
subsidiaries.
-17-
<PAGE>
4.28. Pending Changes. To the knowledge of the Company, there is no
---------------
pending or imminent change in any Law which is likely to result in a Material
Adverse Effect. To the knowledge of the Company, there has been no discovery,
change or development in the development, design or marketing of any product or
service of the Company and its subsidiaries or of any product or service that is
or may be competitive with any such product or service which is likely to result
in a Material Adverse Effect.
4.29. Governmental Inquiries. To the knowledge of the Company, the
----------------------
Company has provided to the Representatives of the Purchasers each material
inspection report, questionnaire, inquiry, demand or request for information
received by the Company and its subsidiaries from (and the response of the
Company thereto), and each material statement, report or other document filed by
the Company and its subsidiaries with, the federal government or a federal
administrative agency (including but not limited to, the Securities and Exchange
Commission, Department of Justice, Internal Revenue Service, Department of
Labor, Occupational Safety and Health Administration, Federal Trade Commission,
National Labor Relations Board, Interstate Commerce Commission, Nuclear
Regulatory Commission, Federal Communications Commission), any state securities
administrator or any local or state taxing authority.
4.30. No Public Solicitation. Neither the Company nor any Person
----------------------
acting on its behalf has offered the Preferred Shares to any Person by means of
general or public solicitation or general or public advertising, such as by
newspaper or magazine advertisements, by broadcast media, or at any seminar or
meeting whose attendees were solicited by such means.
4.31. Access Lines. As of April 21, 1999, the Company had 52,513
------------
access lines in total resale service, none of which qualify for the Performance
Benchmark.
4.32. General Telecommunications Matters.
----------------------------------
(a) Neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation, modification or non-renewal of
any authorizations necessary to provide telecommunications services currently
provided to customers.
(b) There are no proceedings or investigations pending or
threatened, to the Company's knowledge, before the Federal Communications
Commission ("FCC") or any of the various state regulatory agencies with primary
regulatory jurisdiction over telecommunications matters ("State Regulatory
Agencies") directed specifically at the Company or, in the case of matters of
general applicability to the telecommunications industry, in which the Company
is identified for possible disparate treatment or whose outcome may have a
disparate impact on the Company, in which any of the following matters are being
considered which are reasonably likely to have a material adverse effect on the
Company, nor has the Company or any of its subsidiaries received written notice
or inquiry from the FCC or any State Regulatory Agency,
-18-
<PAGE>
indicating that any of such matters should be considered or may become the
object of consideration or investigation specifically regarding the Company
which are reasonably likely to have a material adverse effect on the Company or,
in the case of matters of general applicability to the telecommunications
industry, in which the Company is identified for possible disparate treatment or
whose outcome may have a disparate impact on the Company; (a) increases in
access charges, universal service contributions or the like; (b) traffic routing
restrictions or restrictions on use of facilities; (c) reduction or restriction
of rates charged to customers; (d) reduction of earnings; (e) refunds or other
forfeitures of amounts previously charged to customers; (f) use of NXX codes; or
(g) failure to meet any expense, infrastructure, service quality or other
commitments previously made to or imposed by the FCC or any State Regulatory
Agency.
(c) Neither the Company nor any of its subsidiaries has any
outstanding commitments made in the context of a matter or proceeding related
specifically to the Company or, in the case of matters of general applicability
to the telecommunications industry, in which the Company is identified for
possible disparate treatment or whose outcome may have a disparate impact on the
Company (and no such obligations have been imposed upon the Company and remain
outstanding), regarding; (a) increases in access charges, universal service
contributions or the like; (b) traffic routing restrictions or restrictions on
use of facilities; (c) reduction or restriction of rates charged to customers;
(d) reduction of earnings; (e) refunds or other forfeitures of amounts
previously charged to customers; (f) use of NXX codes; or (g) expenses,
infrastructure expenditures, service quality or other regulatory requirements,
to or by the FCC or any State Regulatory Agency, in each case which are
reasonably likely to have a material adverse effect on the Company.
(d) The Company has not transferred, sold any interest in or
otherwise taken action to reduce its control over any federal or state
regulatory licenses, certificates, approvals or other authorizations under which
it operates, and the transfer of such authorizations, subject to regulatory
approval, would not violate the terms of any agreement to which the Company is a
party or by which the Company is bound, or impinge the rights of any third
party.
(e) The Company has obtained Section 214 authorization from the FCC,
an application for which was filed with the FCC on August 18, 1996.
(f) The Company has an interstate tariff on file with the FCC,
effective as of January 31, 1998.
(g) No notice of termination has been provided by either Frontier
Communications of the West, Inc. or Community Networks, Inc. in connection with
that certain Wholesale Service Agreement between Frontier Communications of the
West, Inc. and Briar Joy Development Corp., d/b/a/ SCC Telecommunications, Inc.
(presently known as Community Networks, Inc.).
-19-
<PAGE>
(h) The Company (i) does not own any international facilities or
provide services over leased international capacity and (ii) does not have any
affiliations with foreign carriers.
(i) As of the Closing Date, the Company does not have any
interlocking directorates within the meaning of 47 C.F.R. 62.2 and 47 C.F.R.
68.18(h)(2).
(j) The Company has retained for a period of eighteen (18) months
the following billing information about each toll telephone call: the name,
address, and telephone number of the caller, the telephone number of the party
called, and the date, time and length of the call. The Company maintains a
master index of records which identifies records, their location and the
Company's record destruction policies. The master index contains a certified
statement regarding any lost or destroyed documents prior to the expiration of
the eighteen (18) month period. The Company has included in its master index,
and in the future will include in its master index, any documents which are
relevant to a complaint proceeding, and the Company will include such documents
in its master index until the final disposition of the complaint proceeding.
(k) To the Company's knowledge, no complaint has been filed, and no
action or investigation is pending, against the Company or any of its
subsidiaries with the FCC's Enforcement Division of the Common Carrier Bureau as
of the Closing Date.
(l) The Company and Community Networks, Inc. have obtained
certifications to resell telephone service in New York.
(m) As of the Closing Date, all resold intrastate telecommunications
services have been provided by Community Networks, Inc.
(n) The Company has a New York P.S.C. Tariff No. 1 on file with the
New York Public Service Commission for the provision of communications services
in New York.
5. Representations and Warranties of the Purchasers.
Each Purchaser hereby represents and warrants to the Company, only as to
itself, that:
5.1. Capacity; Authorization. Such Purchaser has all legal capacity
-----------------------
to enter into this Agreement and to carry out its obligations hereunder.
Assuming due execution and delivery by the Company of this Agreement, this
Agreement will constitute a legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in
-20-
<PAGE>
equity).
5.2. Investment Purposes. (a) Such Purchaser is acquiring the
-------------------
Preferred Shares it has agreed to purchase for investment purposes only, for its
own account, and not as nominee or agent for any other Person, and not with a
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) such Purchaser has knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, (c) such Purchaser is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act, (d) in the
case of Baker, it is a resident of the State of New York and the Holders are
residents of Maryland and California and (e) the Company has made available to
it the opportunity to ask questions and to receive answers, and to obtain the
information it has deemed material and necessary to evaluate the merits and
risks of this investment.
5.3. Consents of Third Parties. None of the execution and delivery by
-------------------------
such Purchaser of this Agreement and the Transaction Documents, the consummation
of the transactions contemplated hereby or thereby, or compliance by such
Purchaser with any of the provisions hereof or thereof will (a) conflict with,
or result in the breach of, any provision of the governing documents of such
Purchaser or (b) constitute a violation of any Law applicable to such Purchaser.
Other than those which have been obtained or made, no consent, waiver, approval,
Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of such
Purchaser in connection with the execution and delivery of this Agreement or the
Transaction Documents, or the compliance by such Purchaser with any of the
provisions hereof or thereof.
5.4. Litigation. Except as set forth on Schedule 5.4, there are no
----------
Legal Proceedings pending or, to the knowledge of such Purchaser, threatened
that question the validity of this Agreement or the Transaction Documents or any
action taken or to be taken by such Purchaser in connection with the
consummation of the transactions contemplated hereby or thereby.
6. Further Agreements of the Parties.
6.1. Covenants. For so long as the Preferred Shares are convertible,
---------
the Company shall reserve that number of shares of Common Stock issuable upon
conversion of the Preferred Shares, which shares shall not be subject to any
preemptive or other similar rights.
6.2. Use of Proceeds.
---------------
The Company shall use the cash proceeds from the sale of the Preferred
Shares under this Agreement for the following purposes:
-21-
<PAGE>
(a) approximately $100,000 in payment of (i) reasonable fees and
expenses of the Purchasers to be reimbursed on the Closing Date as contemplated
by Section 9.2 hereof and (ii) fees and expenses incurred by the Company in
connection with the transactions contemplated hereby; and
(b) the remainder for other working capital purposes.
6.3. Confidentiality. Except as may be required by applicable law or
---------------
as otherwise agreed among the parties hereto, neither the Company, the
Purchasers nor any of their respective Affiliates shall at any time publicly
divulge, disclose, disseminate, announce or release any information to any
Person concerning this Agreement, the Transaction Documents, the transactions
contemplated hereby or thereby, any trade secrets or other confidential
information of the Company or the Purchasers, without first obtaining the prior
written consent of the other parties hereto; provided, however, that (i) the
Purchasers shall be entitled to disclose information with respect to their
investment in the Company on any reports that the Purchasers furnish to their
investors or as otherwise required by Law and (ii) the Company shall be entitled
to disclose its trade secrets or other confidential information not related to
this Agreement, the Transaction Documents or the transactions contemplated
hereby or thereby in any manner consistent with good business practice.
6.4. Other Actions. The Company and the Purchasers agree to execute
-------------
and deliver such other documents and take such other actions as the other
parties may reasonably request for the purpose of carrying out the intent of
this Agreement and the Transaction Documents. The Purchasers shall use their
reasonable efforts, at no cost to themselves, to cooperate in the Company's
efforts to undertake a public offering of its stock.
6.5. Indemnity.
---------
(a) The Company agrees to indemnify, defend and hold harmless the
Purchasers (and their partners (and each officer and director thereof),
directors, officers, members, stockholders, Employees, Affiliates, agents and
permitted assigns) from and against any and all losses, claims, liabilities,
damages, deficiencies, costs or expenses (including interest, penalties and
reasonable attorneys' fees, disbursements and related charges) (collectively,
"Losses") based upon, arising out of or otherwise in respect of any inaccuracy
in or breach of any representations, warranties, covenants or agreements of the
Company contained in this Agreement or the Transaction Documents; provided,
--------
however, that any claim in respect of an inaccuracy or breach of a
- -------
representation or warranty shall be made prior to the end of the survival period
set forth in Section 4.21 hereof.
(b) The Purchasers agree to indemnify, defend and hold harmless the
Company (and its directors, officers, members, stockholders, Employees,
Affiliates, agents and permitted assigns) from and against any and all Losses
based upon, arising out of or otherwise in
-22-
<PAGE>
respect of any inaccuracy in or breach of any representations, warranties,
covenants or agreements of the Purchasers contained in this Agreement.
7. Transfer Restrictions.
7.1. Transfer Restrictions: Private Placement.
----------------------------------------
(a) The Purchasers understand and agree that the Preferred Shares
have not been registered under the Securities Act, and that accordingly they
will not be fully transferable except as permitted under various exemptions
contained in the Securities Act, or upon satisfaction of the registration and
prospectus delivery requirements of the Securities Act. The Purchasers
acknowledge that they must bear the economic risk of the Preferred Shares for an
indefinite period of time (subject, however, to the Company's obligation to
redeem the Preferred Shares at the election of the Purchasers in accordance with
the terms thereof, and to the Company's obligation to effect the registration of
the Preferred Shares under the Securities Act in accordance with the terms of
the Shareholders' Agreement (as defined in Section 8.1(k)) since they have not
been registered under the Securities Act and therefore cannot be sold unless
they are subsequently registered or an exemption from registration is available.
(b) The Purchasers agree with the Company that the certificates
evidencing the Preferred Shares will bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT COVERING SUCH SECURITIES OR THE SECURITIES ARE SOLD AND
TRANSFERRED IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(c) The legend endorsed on the certificates pursuant to Section
8.1(b) hereof shall be removed and the Company shall issue a certificate without
such legend to the holder thereof at such time as the securities evidenced
thereby cease to be restricted securities upon the earliest to occur of (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) the securities
shall have been sold to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, or (iii) such securities may be sold by the
holder without restriction or registration under Rule 144(k) under the
Securities Act (or any successor provision).
-23-
<PAGE>
8. Conditions to Closing.
8.1. Conditions of Obligations of the Purchase. The obligation of the
-----------------------------------------
Purchasers to purchase and pay for the Initial Preferred Shares which it has
agreed to purchase on the Closing Date is subject to the fulfillment prior to or
on the Closing Date of the following conditions, any of which may be waived in
whole or in part by the Purchasers:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company under this Agreement shall be deemed to have been made
again on the Closing Date and shall then be true and correct.
(b) Compliance with Agreement. The Company shall have performed and
-------------------------
complied with all agreements and conditions required by this Agreement to be
performed or complied with by the Company on or before the Closing Date.
(c) Approvals. The Company shall have obtained any and all consents,
---------
waivers, approvals or authorizations, with or by any Governmental Body or any
other Person required for the valid execution of this Agreement and the
Transaction Documents.
(d) No Material Adverse Change. Since December 31, 1998, there shall
--------------------------
not have been a Material Adverse Change.
(e) Certificate of Officer. The Company shall have delivered to the
----------------------
Purchasers a certificate dated the Closing Date, executed by its Chief Executive
Officer, certifying the satisfaction of the conditions specified in paragraphs
(a), (b), (c) and (d) of this Section 8.1.
(f) Opinion of the Company's Counsel. The Purchasers shall have
--------------------------------
received from Mayer, Brown & Platt, counsel for the Company, a favorable opinion
dated the Closing Date, in form and substance satisfactory to the Purchasers and
their counsel.
(g) Amendment to Certificate of Incorporation. The Amended and
-----------------------------------------
Restated Certificate of Incorporation required as a result of the rights granted
under this Agreement and the Transaction Documents shall have been duly adopted
and executed and filed with the Secretary of State of the State of Delaware.
The Company shall not have adopted or filed any other document designating the
terms, relative rights or preferences of the Preferred Shares. The Amended and
Restated Certificate of Incorporation shall be in full force and effect as of
the Closing under the laws of Delaware and shall not have been amended or
modified, and a copy of the Amended and Restated Certificate of Incorporation
certified by the Secretary of State of the State of Delaware shall have been
delivered to counsel for the Purchasers.
-24-
<PAGE>
(h) Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws shall have been obtained for the lawful execution, delivery and performance
of this Agreement and the transactions contemplated hereby, including without
limitation, the offer, sale, issuance and delivery of the Preferred Shares.
(i) Supporting Documents. The Purchasers shall have received the
--------------------
following:
(i) Copies of resolutions of the Board and the stockholders
of the Company, certified by the Secretary of the Company, authorizing and
approving the Amended and Restated Certificate of Incorporation and, as to the
Board, the execution, delivery and performance of this Agreement and the
Transaction Documents and the issuance of the Preferred Shares, the form of By-
laws of the Company, the forms of stock certificates, and all other documents
and instruments to be delivered pursuant hereto and thereto;
(ii) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in subparagraph (i) above and
further certifying that the Certificate of Incorporation and By-laws of the
Company delivered to the Purchasers at the time of the execution of this
Agreement have been validly adopted and have not been amended or modified; and
(iii) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as the
Purchasers or their counsel may reasonably request.
(j) Proceedings and Documents. All corporate and other proceedings
-------------------------
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transactions, shall be reasonably satisfactory in
form and substance to the Purchasers and to their counsel.
(k) Shareholders' Agreement. The Purchasers shall have entered into
-----------------------
a certain Shareholders' Agreement (the "Shareholders' Agreement") with the
Company and each of the following individuals: Vern M. Kennedy, Terrence J.
Anderson, Philip B. Smith and Tracy W. Korman.
8.2. Conditions of Company's Obligations. The Company's obligation to
-----------------------------------
issue and sell the Preferred Shares to the Purchasers on the Closing Date is
subject to the fulfillment prior to or on the Closing Date of the following
conditions, any of which may be waived in whole or in part by the Company:
-25-
<PAGE>
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser under this Agreement shall be deemed to have been
made again on the Closing Date and shall then be true and correct in all
material respects.
(b) Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws shall have been obtained for the lawful execution, delivery and performance
of this Agreement and the performance of the transactions contemplated hereby,
including without limitation, the offer, sale, issuance and delivery of the
Preferred Shares.
(c) Payment of Purchase Price. The Purchasers shall have delivered
-------------------------
the Purchase Price specified in Section 2.1 hereof.
(d) Approvals. The Purchasers shall have obtained any and all
---------
consents, waivers, approvals or authorizations, with or by any Governmental Body
or any other Person required for the valid execution of this Agreement and the
Transaction Documents.
(e) Amendment to Certificate of Incorporation. The Amended and
-----------------------------------------
Restated Certificate of Incorporation shall have been duly adopted and executed
and filed with the Secretary of State of the State of Delaware.
(f) Shareholders' Agreement. The Company shall have entered into the
-----------------------
Shareholders' Agreement.
9. Miscellaneous.
9.1. Certain Definitions.
-------------------
"Affiliate" of any Person means any Person that directly or indirectly
controls, or is under common control with, or is controlled by, such Person. As
used in this definition, "control" (including with its correlative meanings,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Contract" means any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
insurance policy, commitment or other
-26-
<PAGE>
arrangement or agreement, whether written or oral.
"Employee" means any current, former, or retired Employee, office
consultant, independent contractor, agent, officer or director of the Company.
"GAAP" means generally accepted accounting principles, as in effect in the
United States.
"Governmental Body" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Legal Proceeding" means any judicial, administrative or arbitral actions,
suits, proceedings (public or private), claims or governmental proceedings.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including, without limitation, any conditional sale or other
title retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction and including any lien or charge arising by statute or other
law.
"Material Adverse Change" means any material adverse change in the
business, assets, liabilities, prospects, properties, results of operations or
condition (financial or otherwise) of the Company and its subsidiaries, in the
aggregate.
"Material Adverse Effect" means any material adverse effect on the
business, assets, liabilities, prospects, properties, results of operations or
condition (financial or otherwise) of the Company and its subsidiaries, in the
aggregate.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Permits" means any approvals, authorizations, consents, licenses, permits
or certificates by or of any Governmental Body.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Representatives" of a Person means its officers, Employees, agents, legal
advisors and accountants.
-27-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
9.2. Expenses.
--------
(a) At the Closing, the Company shall reimburse the Purchasers for
all reasonable out-of-pocket fees and expenses of the Purchasers incurred in
connection with the transactions contemplated hereby (including, without
limitation, reasonable attorneys' and accountants' fees), up to a maximum of
$100,000 in the aggregate. The Company agrees that such fees and expenses
incurred through the Closing Date may be deducted by the Purchasers from the
Purchase Price payable at the Closing.
(b) The Company shall pay its own out-of-pocket expenses and all
stamp and other Taxes which may be payable in respect of the execution and
delivery of this Agreement, the Transaction Documents, or the issuance, delivery
or acquisition of the Preferred Shares.
(c) The Company further agrees to reimburse the Purchasers on demand
for the Purchasers' reasonable out-of-pocket fees and expenses incurred in
connection with any amendment to or waiver or enforcement of this Agreement.
9.3. Specific Performance. Each of the parties hereto acknowledges
--------------------
and agrees that the breach of this Agreement would cause irreparable damage to
the other parties hereto and that the other parties hereto will not have an
adequate remedy at law. Therefore, the obligations of each of the parties
hereto under this Agreement shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement or
otherwise.
9.4. Further Assurances. The Company and the Purchasers each agree
------------------
to execute and deliver such other documents or agreements as may be necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
-28-
<PAGE>
9.5. Submission to Jurisdiction, Consent to Service of Process.
---------------------------------------------------------
(a) The parties hereto hereby irrevocably submit to the non-
exclusive jurisdiction of any federal or state court located within the Borough
of Manhattan, State of New York over any dispute arising out of or relating to
this Agreement or any of the transactions contemplated hereby and each party
hereby irrevocably agrees that all claims in respect of such dispute or any
suit, action or proceeding related thereto may be heard and determined in such
courts. The parties hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 9.9
hereof.
9.6. Entire Agreement, Amendments and Waiver. This Agreement
---------------------------------------
(including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof and can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference to
this Agreement signed by the parties hereto. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
9.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
9.8. Table of Contents; Headings; Interpretive Matters. The table of
-------------------------------------------------
contents and section headings of this Agreement are for reference purposes only
and are to be given no effect in the construction or interpretation of this
Agreement. No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to
-29-
<PAGE>
which any such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
9.9 Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be deemed given when delivered
personally, by telecopy or mailed by certified mail, return receipt requested,
to the parties at the following addresses (or to such other address as a party
may have specified by notice given to the other party pursuant to this
provision):
If to the Company, to:
Coaxicom, Inc.
45-18 Court Square
Suite 403
Long Island City, NY 11101
Attention: Vern Kennedy
Facsimile: (718) 706-9575
With a copy (which shall by itself not constitute notice) to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: Thomas M. Vitale, Esq.
Facsimile: (212) 262-1910
If to the Purchasers, to:
Baker Communications Fund, L.P.
c/o Baker Capital Partners, LLC
540 Madison Avenue
New York, NY 10022
Attention: Edward W. Scott
Facsimile: (212.) 486-0410
and to the other Purchasers as set forth on Schedule A to this
Agreement
-30-
<PAGE>
With a copy (which shall by itself not constitute notice) to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
Attention: Richard A. Goldberg, Esq.
Facsimile: (212) 758-9526
and:
Wise & Shepard, LLP
3030 Hansen Way, Suite 100
Palo Alto, CA 94304-1006
Attention: Jerrold F. Petruzzelli
Facsimile: (650) 856-1200
All notices are effective upon receipt or upon refusal if properly
delivered.
9.10. Severability. If any provision of this Agreement is invalid or
------------
unenforceable, the balance of this Agreement shall remain in effect.
9.11. Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third-party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by the Company or the Purchasers (by
operation of law or otherwise) without the prior written consent of the other
parties hereto and any attempted assignment without the required consents shall
be void; provided, however, that the Purchasers may assign this Agreement and
any or all rights and obligations hereunder, in whole or in part, to any
Affiliate of the Purchasers, but any such assignment shall not relieve the
Purchasers of its obligations hereunder. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which are for
the benefit of the Purchasers as a purchaser or holder of Preferred Shares (or
any securities pursuant to which such Preferred Shares may be converted or
exercised into) are also for the benefit of and enforceable by, any subsequent
holder of such Preferred Shares who acquires at least $100,000 in original
purchase price value of the Preferred Shares other than pursuant to open-market
purchases. Upon any permitted assignment, the references in this Agreement to
the Purchasers shall also apply to any such assignee unless the context
otherwise requires.
9.12. Counterparts. 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.
-31-
<PAGE>
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
By:______________________
Name:
Title:
505 Hamilton Avenue, Suite 305
Palp Alto, California 94310
Fax: 650-325-9608
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or have caused this
Agreement to be executed, by their respective officers thereunto duly
authorized, as of the date first written above.
COAXICOM, INC.
By: /s/ Vern Kennedy
-----------------------------
Name:
Title: President and CEO
BAKER COMMUNICATIONS FUND, L.P.,
By: Baker Capital Partners, LLC
Its General Partner
By: /s/ Edward Scott
-----------------------------
Name:
Title: Manager
COMMUNICATIONS VENTURES II, L.P.
By:/s/: Roland A. VanderMeer
-------------------------------
Name: Roland A. VanderMeer
Title: Managing Member
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
By:/s/: Roland A. VanderMeer
_______________________________
Name: Roland A. VanderMeer
Title: Managing Member
Securities Purchase Agreement Signature Page
<PAGE>
NEW ENTERPRISE ASSOCIATES VII, L.P.
By:______________________________
Name:
Title:
Securities Purchase Agreement Signature Page
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or have caused this
Agreement to be executed, by their respective officers thereunto duly
authorized, as of the date first written above.
COAXICOM, INC.
By:______________________________
Name:
Title:
BAKER COMMUNICATIONS FUND, L.P.,
By: Baker Capital Partners, LLC
Its General Partner
By:______________________________
Name:
Title:
COMMUNICATIONS VENTURES II, L.P.
By:______________________________
Name:
Title:
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
By:______________________________
Name:
Title:
Securities Purchase Agreement Signature Page
<PAGE>
NEW ENTERPRISE ASSOCIATES VII, L.P.
By:/s/ Peter Bains
------------------------------
Name:
Title:
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, L.L.C
Fund Investment Advisory Member
By: /s/: Barry Eggers
------------------------------
Name: Barry Eggers
Title: Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, LLC
General Partner
By: ______________________________
Name: Barry Eggers
Title: Managing Member
Securities Purchase Agreement Signature Page
<PAGE>
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG Venture Advisers, Ltd.
Administrative General Partner
By:__________________________________
Name: Robin Smith or Scott Dakers
Title: Director
WPG ENTERPRISE FUND III,L.L.C.
By: WPG VC Fund Adviser, LLC,
Fund Investment Advisory Member
By: /s/ Barry Eggers
----------------------------------
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Barry Eggers
---------------------------------
Name: Barry Eggers
Title: Managing Member
Securities Purchase Agreement Signature Page
<PAGE>
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
General Partner
By:______________________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG Venture Advisers, Ltd.
Administrative General Partner
By:/s/: Scott Dakers
--------------------------------------
Name: Scott Dakers
Title: Director
Securities Purchase Agreement Signature Page
<PAGE>
SCHEDULE A
The Holders Purchase Price Holders' Preferred
- ----------- -------------- ------------------
Shares
------
Communications Ventures II, L.P. $2,573,015.33 576,160
505 Hamilton Avenue, Suite 305
Palo Alto, California 94310
Fax: 415-325-9608
Communications Ventures II $ 109,176.78 47,245
Affiliates
Fund, L.P.
505 Hamilton Avenue, Suite 305
Palo Alto, California 94310
Fax: 415-325-9608
New Enterprise Associates VII, L.P. $2,784,002.05 623,405
11911 Freedom Drive
One Fountain Square, Suite 580
Reston, Virginia 20190
Fax: 703-834-7579
WPG Enterprise Fund III, LLC $1,042,844.68 233,518
2882 Sand Hill Road, Suite 106
Menlo Park, California 94025
Fax: 650-234-8333
Weiss, Peck & Greer Venture $1,192,408.79 267,009
Associates IV, LLC
2882 Sand Hill Road, Suite 106
Menlo Park, California 94025
Fax: 650-234-8333
Weiss, Peck & Greer Venture $ 150,542.12 33,710
Associates IV Cayman, L.P.
2882 Sand Hill Road, Suite 106
Menlo Park, California 94025
Fax: 650-234-8333
<PAGE>
The Holders Purchase Price Holders' Preferred
- ----------- -------------- ------------------
Shares
------
WPG Information Sciences $ 46,207.63 10,347
Entrepreneur Fund, L.P.
2882 Sand Hill Road, Suite 106
Menlo Park, California 94025
Fax: 650-234-8333
<PAGE>
SCHEDULE B
Breakdown of Option to Purchase Series D Preferred Shares
Baker Communications Fund, L.P. - 3,786,351 shares
The Holders - 1,514,541 shares
<PAGE>
EXHIBIT A
The Amended and Restated Certificate of Incorporation of Coaxicom, Inc., is
located behind Tab 4 of this volume.
<PAGE>
EXHIBIT 10.18
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT, dated as of February
2, 200O (this "Amendment") to that certain Securities Purchase Agreement dated
as of April 23, 1999 between BROADVIEW NETWORKS HOLDINGS, INC. (f/k/a Coaxicom,
Inc.), a Delaware corporation (the "Company"), Baker Communications Fund, L.P.
("Baker") and the holders of Series A Preferred Stock of the Company and Series
B Preferred Stock of the Company as listed on Schedule A of the Securities
Purchase Agreement (the "Purchasers"), is made by and between the Company and
the Purchasers.
WHEREAS, Baker desires to assign portions of its option (the "Baker
Option") to purchase 4,290,685 shares of 8% Series D Convertible Redeemable
Preferred Stock of the Company ("Series D Preferred Stock") to Joel Gross and
to certain other parties, (together with Joel Gross the "Assignees") and the
Company and the Purchasers desire to approve and consent to such assignment; and
WHEREAS, the Company and the Purchasers desire to delete the provisions
in Section 1.2 of the Securities Purchase Agreement providing for an adjustment
to the price of the Company's 8% Series C Convertible Redeemable Preferred Stock
in the event the Company fails to meet a certain "Performance Benchmark";
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the Company and the Purchasers hereby
agree as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise
defined herein shall have the meaning given to them in the Securities Purchase
Agreement or, if not defined therein, in the Company's Certificate of
Incorporation, as amended.
SECTION 2. Amendments to Securities Purchase Agreement. The Securities
Purchase Agreement is hereby amended as of the date hereof as follows:
(a) The first sentence is amended and restated in its entirety as
follows:
"SECURITIES PURCHASE AGREEMENT, dated as of April 23,
1999 (this "Agreement"), among Broadview Networks Holdings,
Inc., a Delaware corporation (the "Company"), Baker
Communications Fund, L. P. ("Baker"), Baker's Permitted
Transferees who appear as signatories to this Agreement, Joel
Gross and the holders of Series A Preferred Stock of the
Company and Series B Preferred Stock of the Company listed on
Schedule A to this Agreement (the "Holders"; the Holders,
Baker, Baker's Permitted Transferees and Joel Gross being
collectively referred to herein as, the "Purchasers").
<PAGE>
(b)Section 1.2 is amended and restated in its entirety as follows:
-----------
"Subject to the terms and conditions of this
Agreement, the Series D Preferred Shares shall have the
rights, preferences and designations set forth in the Amended
and Restated Certificate of Incorporation. The initial
conversion price applicable to the conversion of the Series D
Preferred Shares into Common Stock of the Company shall be set
forth in the Amended and Restated Certificate of
Incorporation, except that the initial conversion price shall
be subject to adjustment for anti-dilutive events occurring
prior to the purchase of the Series D Preferred Shares, in
accordance with the anti-dilution provisions contained in
paragraph 5 of Section (E) of the Amended and Restated
Certificate of Incorporation which shall apply as if the
Series D Preferred Shares were outstanding as of the date of
such anti-dilutive events. The Purchasers shall have the right
to transfer all or a portion of their option to purchase
Series D Preferred Shares to one or more of their respective
Affiliates."
(c)Section 2.3 is amended and restated in its entirety as follows:
-----------
"The purchase price for Series D Preferred Shares
shall be $4.66126 per Series D Preferred Share or an aggregate
of Twenty Eight Million Dollars ($28,000,000) (the "Series D
Purchase Price"). The Series D Purchase Price shall be paid at
a closing as described in Section 3.2 hereof by wire transfer
of clearing house funds or by such other method as may be
reasonably acceptable to the Company and the Purchasers, to
the account of the Company as shall have been designated in
advance to the Purchasers by the Company."
(d)SCHEDULE B is amended and restated in its entirety as follows:
"Breakdown of Option to Purchase Series D Preferred Shares
Baker Communications Fund, L.P. - 2,038,075
Joel Gross - 214,534
Baker Permitted Transferees - 2,038,075
The Holders - 1,716,275
2
<PAGE>
SECTION 3. Unexercised Portion of Baker Option. The Company and the
-----------------------------------
Purchasers hereby approve and consent to Baker's assignment of its option to
purchase 2,038,075 shares of Series D Preferred Stock of the Company to the
State Treasurer of the State of Michigan, Custodian of the Michigan Public
School Employees' Retirement System, State Employees' Retirement System and
Michigan State Police Retirement System (the "State of Michigan") on or before
February 4, 2000, conditional upon the State of Michigan exercising its assigned
option on or before such date. Baker agrees that any portion of such option that
remains unexercised after such date will be exercised within two business days
by Baker.
SECTION 4. Agreement to be Bound by Securities Purchase Agreement.
------------------------------------------------------
Upon the Assignees' execution of this Amendment, the Securities Purchase
Agreement shall be binding upon and inure to the benefit of each of them and
their permitted assigns.
SECTION 5. No Implied Amendments. Except as herein amended, the
---------------------
Securities Purchase Agreement shall remain in full force and effect and is
ratified in all respects. On and after the effectiveness of this Amendment, each
reference in the Securities Purchase Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import, and each reference to the Securities
Purchase Agreement in any other agreements, documents or instruments executed
and delivered pursuant to the Securities Purchase Agreement, shall mean and be a
reference to the Securities Purchase Agreement, as amended by this Amendment.
SECTION 6. Effective Date. This Amendment shall be effective as of the
--------------
date hereof.
SECTION 7. Counterparts. This Amendment may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
* * * *
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or have caused
this Agreement to be executed, by their respective officers thereunto duly
authorized, as of the date first written above.
BROADVIEW NETWORKS HOLDING, INC.
By: /s/ Vern Kennedy
----------------------------
Name:
Title:
Amendment No. 1 to Securities Purchase Agreement
4
<PAGE>
JOEL GROSS
/s/ JOEL GROSS
-----------------------------
Amendment No. 1 to Securities Purchase Agreement
5
<PAGE>
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Barry Eggers
-----------------------------
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.
Fund Investment Advisory
Member
By: /s/ Barry Eggers
----------------------------
Name: Barry Eggers
Title: Managing Member
WPG INFORMATION SCIENCES
ENTREPENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
General Partner
By: /s/ Barry Eggers
-----------------------------
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory
Partner
By: /s/ Barry Eggers
----------------------------
Name: Barry Eggers
Title: Managing Member
Amendment No. 1 to Securities Purchase Agreement
6
<PAGE>
NEW ENTERPRISE ASSOCIATES VII, L.P.
By: /s/ Nancy Dorman
------------------------------
Name: Nancy Dorman
Title: General Partner
Amendment No. 1 to Securities Purchase Agreement
7
<PAGE>
COMMUNICATIONS VENTURES II, L.P.
By its General Partner ComVen II, LLC
By: /s/ Roland A. Van der Meer
--------------------------
Name: Roland A. Van der Meer
Title: Member
COMMUNICATIONS VENTURE II
AFFILIATES FUND, L.P.
By its General Partner ComVen II, LLC
By: /s/ Roland A. Van der Meer
--------------------------
Name: Roland A. Van der Meer
Title: Member
Amendment No. 1 to Securities Purchase Agreement
8
<PAGE>
BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
Its General Partner
By: /s/
----------------------------
Name:
Title:
Amendment No. 1 to Securities Purchase Agreement
9
<PAGE>
Exhibit 10.19
AMENDMENT NO. 2 TO SECURITIES PURCHASE AGREEMENT
AMENDMENT NO. 2 TO SECURITIES PURCHASE AGREEMENT, dated as of February 4,
2000 (this "Amendment") to that certain Securities Purchase Agreement dated as
---------
of April 23, 1999 between BROADVIEW NETWORKS HOLDINGS, INC. (f/k/a Coaxicom,
Inc.), a Delaware corporation (the "Company"), Baker Communications Fund, L.P.
-------
("Baker") and the holders of Series A Preferred Stock of the Company and Series
B Preferred Stock of the Company as listed on Schedule A of the Securities
Purchase Agreement, as amended by Amendment No. 1 ("Amendment No. 1") dated
---------------
February 2, 2000 (the "Securities Purchase Agreement"), is made by and between
-----------------------------
the Company and the other parties who appear as signatories to this Amendment
(the "Purchasers").
----------
WHEREAS, Section 3 of Amendment No. 1 contemplated Baker assigning the
remainder of its option (the "Baker Option") to purchase shares of 8% Series D
------------
Convertible Redeemable Preferred Stock of the Company ("Series D Preferred
------------------
Stock") to the State Treasurer of the State of Michigan, Custodian of the
Michigan Public School Employees' Retirement System, State Employees' Retirement
System and Michigan State Police Retirement System (the "State of Michigan
-----------------
Retirement Systems") on or before February 4, 2000, conditional upon the State
- ------------------
of Michigan Retirement Systems exercising their assigned option on or before
such date.
WHEREAS, Baker now desires to assign the remainder of its option to the
State of Michigan Retirement Systems, and the State of Michigan Retirement
Systems desire to exercise their assigned option as of the date hereof, subject
to the terms of this Amendment, and the Company and the Purchasers desire to
approve and consent to such exercise; and
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the Company and the Purchasers hereby agree
as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise defined
-----------
herein shall have the meaning given to them in the Securities Purchase Agreement
or, if not defined therein, in the Company's Certificate of Incorporation, as
amended.
SECTION 2. Amendments to Securities Purchase Agreement. The Securities
-------------------------------------------
Purchase Agreement is hereby amended as of the date hereof as follows:
(a) The first sentence is amended and restated in its entirety as follows:
"SECURITIES PURCHASE AGREEMENT, dated as of April 23, 1999 (this
"Agreement"), among Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), Baker Communications Fund, L.P.
("Baker"), the State Treasurer of the State of Michigan, as Custodian
of the Michigan Public School Employees' Retirement System, State
Employees' Retirement System and
<PAGE>
Michigan State Police Retirement System (the "State of Michigan
Retirement Systems"), Joel Gross and the holders of Series A Preferred
Stock of the Company and Series B Preferred Stock of the Company
listed on Schedule A to this Agreement (the "Holders"; the Holders,
Baker, the State of Michigan Retirement Systems and Joel Gross being
collectively referred to herein as the "Purchasers").
(b) Section 2.3 is amended and restated in its entirety as follows:
-----------
"The purchase price for Series D Preferred Shares shall be
$4.66126 per Series D Preferred Share or an aggregate of Twenty Eight
Million Dollars ($28,000,000) (the "Series D Purchase Price"). The
Series D Purchase Price shall be paid at a closing or closings as
described in Section 3.2 hereof by wire transfer of clearing house
funds or by such other method as may be reasonably acceptable to the
Company and the Purchasers, to the account of the Company as shall
have been designated in advance to the Purchasers by the Company."
(c) Section 6.5(b) is amended and restated in its entirety as follows:
--------------
(b) The Purchasers (other than the State of Michigan Retirement
Systems) agree to indemnify, defend and hold harmless the Company (and
its directors, officers, members, stockholders, Employees, Affiliates,
agents and permitted assigns) from and against any and all Losses
based upon, arising out of or otherwise in respect of any inaccuracy
in or breach of any representations, warranties, covenants or
agreements of the Purchasers contained in this Agreement.
(d) Section 6.5 is amended to add the following as Section 6.5(c):
-----------
(c) The Company is advised that as a result of an interpretation
of the constitution of the State of Michigan by the Attorney General
of the State of Michigan, the State of Michigan Retirement Systems are
prohibited from agreeing to the indemnification obligations set forth
in Section 6.5(b) of the Securities Purchase Agreement. The Company
--------------
and the Purchasers agree that the State of Michigan Retirement Systems
will have no indemnification obligations under such Section 6.5(b);
--------------
provided that the State of Michigan Retirement Systems acknowledge and
agree that, notwithstanding the release from the indemnification
obligation from such Section 6.5(b), the Company and its directors,
--------------
officers, members, stockholders, Employees, Affiliates, agents and
permitted assigns shall be entitled to make a claim against the State
of Michigan Retirement Systems for any and all losses, claims,
liabilities, damages, deficiencies, costs or expenses (including
interest, penalties and reasonable attorneys' fees, disbursements and
related charges) based upon, arising out of or otherwise in respect of
any
2
<PAGE>
inaccuracy in or breach of any representations, warranties, covenants
or agreements of the State of Michigan Retirement Systems contained in
the Securities Purchase Agreement.
(e) Section 9.5(a) is amended and restated in its entirety as follows:
--------------
(a) To the fullest extent permitted by applicable law and public
policy, the parties hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the Borough
of Manhattan, State of New York over any dispute arising or relating
to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of
such dispute or any suit, action or proceeding related thereto may be
heard and determined in such courts. The parties hereby irrevocably
waive, to the fullest extent permitted by applicable law and public
policy, any objection which they may now or hereafter have to the
laying of venue of any such dispute brought in such court or any
defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(f) SCHEDULE B is amended and restated in its entirety as follows:
"Breakdown of Option to Purchase Series D Preferred Shares
Baker Communications Fund, L.P. - 2,038,075
Joel Gross - 214,534
The State of Michigan Retirement Systems - 2,038,075
The Holders - 1,716,275"
SECTION 3. Agreement to be Bound by Securities Purchase Agreement. Upon
------------------------------------------------------
the State of Michigan Retirement Systems' execution of this Amendment, the
Securities Purchase Agreement shall be binding upon and inure to the benefit of
the State of Michigan Retirement Systems and their permitted assigns.
SECTION 4. No Implied Amendments. Except as herein amended, the
---------------------
Securities Purchase Agreement shall remain in full force and effect and is
ratified in all respects. On and after the effectiveness of this Amendment,
each reference in the Securities Purchase Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import, and each reference to
the Securities Purchase Agreement in any other agreements, documents or
instruments
3
<PAGE>
executed and delivered pursuant to the Securities Purchase Agreement, shall mean
and be a reference to the Securities Purchase Agreement, as amended by this
Amendment.
SECTION 5. Effective Date. This Amendment shall be effective as of the
--------------
date hereof.
SECTION 6. Counterparts. This Amendment may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
* * * *
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or have caused this
Amendment to be executed, by their respective officers thereunto duly
authorized, as of the date first written above.
BROADVIEW NETWORKS HOLDINGS, INC.
/s/ Vern Kennedy
By:______________________________
Name:
Title:
BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
Its General Partner
/s/ Edward Scott
By:______________________________
Name:
Title:
The State Treasurer of the State of Michigan,
as Custodian of the Michigan Public School
Employees' Retirement System, State Employees'
Retirement System and Michigan State Police
Retirement System
By:______________________________
Name:
Title:
JOEL GROSS
______________________________
<PAGE>
COMMUNICATIONS VENTURES II, L.P.
/s/ Roland Van der Meer
By:______________________________
Name:
Title:
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
/s/ Roland Van der Meer
By:______________________________
Name:
Title:
NEW ENTERPRISE ASSOCIATES VII, L.P.
/s/ Nancy Dorman
By:______________________________
Name:
Title:
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, LLC.,
Fund Investment Advisory Member
By:______________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
<PAGE>
By:________________________________
Name: Barry Eggers
Title: Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
General Partner
By:________________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Partner
By:________________________________
Name: Barry Eggers
Title: Managing Member
<PAGE>
EXHIBIT 10.20
SHAREHOLDER'S AGREEMENT
THIS SHAREHOLDER'S AGREEMENT (this "Agreement") is made and entered into
effective as of April 23, 1999 among Coaxicom, Inc., a Delaware corporation (the
"Company"), Baker Communications Fund, L.P. ("Baker"), those parties listed on
Schedule I to the (i) Series A Preferred Stock Purchase Agreement (the "Series A
Holders"), dated as of January 29, 1998, by and among the Company and the Series
A Holders, and (ii) the Series B Preferred Stock Purchase Agreement (the "Series
B Holders"), dated as of September 9, 1998, by and among the Company and the
Series B Holders (the Series A Holders and the Series B Holders are collectively
referred to herein as, the "Holders"), and each of the individuals listed on the
signature pages hereto under the heading "Founders" (collectively, the
"Founders"; the Founders, the Holders and Baker and their respective Permitted
Transferees (as defined herein) are collectively referred to herein as, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, Baker, the Holders and the Company have entered into a certain
Securities Purchase Agreement (the "Securities Purchase Agreement") which
provides for, among other things, (i) the purchase by Baker of 4,478,481 shares
(the "Baker Series C Preferred Shares") of 8% Series C Convertible Redeemable
Preferred Stock ("Series C Stock") of the Company for an aggregate purchase
price of Twenty Million Dollars ($20,000,000), (ii) the purchase by the Holders
of 1,791,392 shares of the Series C Stock (the "Holders' Series C Preferred
Shares"; the Holders' Series C Preferred Shares and the Baker Series C Preferred
Shares are collectively referred to herein as, the "Series C Preferred Shares")
for an aggregate purchase price of Eight Million Dollars ($8,000,000) and (iii)
an option for Baker (the "Baker Option") and the Holders to purchase up to an
aggregate of 5,300,892 shares of 8% Series D Convertible Redeemable Preferred
Stock of the Company (the "Series D Preferred Shares"; the Series C Preferred
Shares and the Series D Preferred Shares are collectively referred to herein as,
the "Priority Preferred Shares), based on their pro rata ownership of the Series
C Preferred Shares, for an aggregate additional purchase price of Twenty Eight
Million Dollars ($28,000,000); and
WHEREAS, it is a condition precedent to the Closing of the Securities
Purchase Agreement that the parties enter into this Agreement which provides
for, among other things, certain voting rights and certain agreements with
respect to the transfer of the securities of the Company held by the parties to
this Agreement.
NOW THEREFORE, in order to induce Baker to enter into the transactions
contemplated by the Securities Purchase Agreement, the parties hereto hereby
agree as follows:
1. Voting Rights. For so long as this Agreement is in effect, the
-------------
Stockholders shall each vote all of their securities of the Company,
including any securities of the Company
<PAGE>
acquired after the date of this Agreement, in favor of the size of the
Board of Directors of the Company (the "Board") and the election of each of
the other Stockholders' designees to the Board, or any committee thereof,
as provided below:
(a) Two designees to the Board who are selected by holders of at least a
majority in interest of the then outstanding Priority Preferred Shares
("Majority Priority Preferred Holders"), which shall be reconstituted
to provide for seven (7) members to accommodate such designation
initially consisting of the following persons: Peter Barris, Vern
Kennedy, Ashley Leeds, Edward Scott, Philip B. Smith, Roland Van der
Meer and Joseph M. Walsh; provided, however, that the Board shall be
-------- -------
reconstituted to provide for five (5) members no later than December
31, 1999, at which time, the members of the Board shall continue to
include at least two (2) designees selected by the Majority Priority
Preferred Holders, one of whom shall have relevant industry experience
and shall be approved by the Founders which approval shall not be
unreasonably withheld. The two designees selected by the Majority
Priority Preferred Holders shall have the right to serve on all of the
Board's committees;
(b) Two designees to the Board who are jointly selected by the Series A
Holders and the Series B Holders (initially Roland Van der Meer and
Peter Barris), one of whom, following December 31, 1999, shall have
relevant industry experience and shall be approved by the Founders
which approval shall not be unreasonably withheld.
(c) Three (3) designees to the Board who are jointly selected by the
Founders (initially Vern Kennedy, Philip B. Smith and Joseph N. Walsh)
until the Board is reconstituted at five (5) as set forth in
subsection 1 (a) above, at which time the Founders shall only be
entitled to designate one (1) director to the Board.
2. Restrictions.
------------
(a) The Company shall not take any of the following actions without the
prior written approval of at least seventy-five percent (75%) in
interest of the then outstanding shares held by the Series A Holders
and Series B Holders and the holders of the Priority Preferred Shares
(collectively, "All Preferred Holders"), voting together as a single
class:
(i) amend or modify the certificate of incorporation or by-laws of
the Company; or
(ii make any material purchase or acquisition of any stock,
obligations or securities of, or any interest in, or make a
material capital contribution to,
2
<PAGE>
any other Person, or make any material purchase or acquisition
of any property or assets not used in the usual and ordinary
course of business.
(b) The Company shall not take any of the following actions without the
prior written approval of at least a majority of the then outstanding
shares held by All Preferred Holders:
(i) enter into or permit to exist any transaction or series of
related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services)
with any Affiliate (each, an "Affiliate Transaction") or
extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction, unless such transaction, series of
related transactions, extension, renewal, waiver or other
modification (i) is disclosed to all members of the Board, (ii)
either is approved by a majority of disinterested Directors or
has an aggregate value not exceeding $5,000 and (iii) is on an
arm's-length basis and on terms no less favorable to the
Company than could be obtained from non-related parties;
provided, however, that the foregoing shall not apply to the
-------- -------
payment of any salary or or any increase or change in salary,
other compensation or fringe benefit approved by the Board in
the manner set forth in this Section 2(b)(i) or the
reimbursement of expenses in the ordinary course of business;
(ii) incur any debt or enter into any commitments to incur debt
(whether by issuance, guarantee or otherwise) including vendor
financing and capital leases, with the exception of debt
incurred by the Company under the current Nortel credit
facilities in an amount to be approved by the majority in
interest of All Preferred Holders as part of its approval of
the quarterly budget pursuant to Section 2(b)(vii) at or prior
to the beginning of each calendar quarter;
(iii) agree to the issuance or issue any capital stock or other
securities convertible into or exercisable for capital stock
other than stock or option issuances to Employees of the
Company that are Excluded Events within the meaning of
paragraph 5.3.10(iii) of Section (C) of Article Four of the
Company's Amended and Restated Certificate of Incorporation;
(iv) purchase, redeem or otherwise acquire or retire for value any
capital stock or other securities convertible into or
exercisable for capital stock of the Company;
3
<PAGE>
(v) enter into any agreement, indenture or other instrument which
contains any provisions restricting the Company's obligation to
pay dividends on or make redemptions of the Priority Preferred
Shares;
(vi) declare or pay any dividend or distribution on any securities
ranking junior to the Priority Preferred Shares;
(vii) approve the quarterly budget of the Company or make any
expenditures not provided for in such budget; or
(viii) sell or transfer assets in any transaction or series of related
transactions having a value in excess of or for a purchase
price in excess of Five Million Dollars ($5,000,000).
3. Right of First Offer. If any Stockholder who is or becomes a party to this
--------------------
Agreement proposes to sell (the "Selling Stockholder") any Common Stock of
the Company or any stock or security convertible into or exchangeable for
Common Stock of the Company, other than a sale to a Permitted Transferee,
the Selling Stockholder shall have the obligation to first offer such
securities to the other Stockholders (the "Non-Selling Stockholders") and
to the Company upon the following terms:
(a) The Selling Stockholder shall give the Non-Selling Stockholders and
the Company prompt written notice (the "Notice of Intent") of its
intent to sell such securities of the Company. The Company and the
Non-Selling Stockholders shall have the exclusive right for a period
of fifteen (15) business days from the date on which the Notice of
Intent was given (the "Exclusivity Period") to make a firm offer to
purchase such securities on terms satisfactory to the Selling
Stockholder. The Company shall have the first priority in respect of
any such purchase and if the Company does not make an offer acceptable
to the Selling Stockholder, each Non-Selling Stockholder who is
willing to purchase the securities on terms acceptable to the Selling
Stockholder shall have the right to participate in such purchase,
based upon their respective pro rata ownership of the Fully Diluted
Common Stock. If, upon the expiration of the Exclusivity Period, the
Selling Stockholder, the Company and the Non-Selling Stockholders are
unable to come to terms with respect to the purchase and sale of such
securities, the Selling Stockholder shall have the right to sell such
securities to a third party. The Selling Stockholder shall not enter
into discussions with any third party regarding the sale of such
securities during the Exclusivity Period; and
(b) If, after following the procedures set forth in Section 2(a), the
Selling Stockholder receives an offer from a third party for such
securities on terms and conditions that it deems acceptable (but on
terms no less favorable to the Selling Stockholder
4
<PAGE>
than the Company or the Non-Selling Stockholders shall have offered
pursuant to Section 3(a)), the Selling Stockholder may sell such
securities to such third party, provided that such sale takes place
--------
within ninety (90) days after the expiration of the Exclusivity
Period. If no such sale occurs during such ninety (90) day period, any
attempted sale of such securities shall be subject to the right of
first offer by the Non-Selling Stockholders set forth in this Section
3.
4. Tag Along Rights. After complying with the terms of Section 3 of this
----------------
Agreement, if any Selling Stockholder proposes to sell or transfer, in one
transaction or in a series of related transactions (a "Tag Along Sale"),
any securities of the Company owned by such Selling Stockholder to any
third party, other than a sale or transfer to a Permitted Transferee or to
the Company or to Non-Selling Stockholders pursuant to Section 3 of this
Agreement, the Non-Selling Stockholders shall have the right to participate
in such Tag Along Sale on the following terms:
(a) The Selling Stockholder shall give the Non-Selling Stockholders not
less than thirty (30) days' written notice (a "Sale Notice") of its
intention, describing the price offered, all other material terms and
conditions of the Tag Along Sale and, if the consideration payable
pursuant to the Tag Along Sale consists in whole or in part of
consideration other than cash, such information relating to such other
consideration as investors may reasonably request and which is
available to the Selling Stockholder.
(b) In connection with any Tag Along Sale, the Non-Selling Stockholders
shall have the right, in their sole discretion, to sell, for the same
price per share being paid to, and otherwise on the same terms and
conditions as, the Selling Stockholder, its pro rata portion of the
aggregate amount of Fully Diluted Common Stock being sold in the Tag
Along Sale, determined by multiplying the number of securities being
sold in the Tag Along Sale by a fraction, the numerator of which is
the number of shares of Fully Diluted Common Stock held by such Non-
Selling Stockholder and the denominator of which is the number of
shares of Fully Diluted Common Stock.
(c) The Non-Selling Stockholders must exercise their "tag along" rights by
giving written notice to the Selling Stockholder within thirty (30)
days of the delivery of a Sale Notice, specifying the number of
securities that such Non-Selling Stockholder desires to include in the
Tag Along Sale. At the closing of the Tag Along Sale, against payment
of the purchase price for the securities to be sold by each Non-
Selling Stockholder, each Non-Selling Stockholder will deliver to the
third party the certificate or certificates representing such number
of securities, duly endorsed, together with all other documents which
are necessary in order to effect such Tag Along Sale. The Selling
Stockholder shall use its best efforts to
5
<PAGE>
obtain the agreement of the prospective transferee(s) to the
participation of the Non-Selling Stockholders in any contemplated Tag
Along Sale. No party to this Agreement shall transfer any of its
securities to any prospective transferee if such prospective
transferee declines to allow a Non-Selling Stockholder to participate
in a Tag Along Sale.
5. Source of Financing. If the Company determines to raise capital through
-------------------
the issuance of any Common Stock or any stock or security convertible into
or exchangeable for Common Stock (an "Equity Financing") in a transaction
or transactions not involving an issuance referred to in Section 6(a)(1),
(ii) or (iii), then All Preferred Holders shall have the right to first
offer to provide the Equity Financing to the Company on the following
terms:
(a) The Company shall give All Preferred Holders prompt written notice (a
"Financing Notice") of its determination, describing the material
terms and conditions of the Equity Financing. All Preferred Holders
shall have the exclusive right for a period of fifteen (15) business
days from the date on which the Financing Notice was given (the
"Financing Exclusivity Period") to make a firm offer to provide the
Equity Financing on terms satisfactory to the Company. If, upon the
expiration of the Financing Exclusivity Period, the best offer (the
"Best Offer") of either the Series A and Series B Holders, on the one
hand, or the holders of the Priority Preferred Shares, on the other
hand, is unacceptable to the Company with respect to the Equity
Financing, the Company shall have the right to approach other sources
to provide the Equity Financing. If the Company accepts the Best
Offer, all Stockholders shall have preemptive rights to participate in
such financing in the manner set forth in Section 6. The Company shall
not enter into discussions with any financing source other than All
Preferred Holders during the Financing Exclusivity Period.
(b) If, after following the procedures set forth in Section 5(a), the
Company receives a financing proposal from an alternative financing
source on terms and conditions that it deems acceptable (but on terms
more favorable to the Company than the Best Offer), the Company shall
be entitled to accept such alternative proposal and close within 120
days of the expiration of the Financing Exclusivity Period. Subject to
any confidentiality obligations to which the Company is then subject,
the Company shall notify All Preferred Holders and keep such holders
fully apprised of such alternative proposal, including the status of
negotiations with respect thereto. After such 120-day period, the
Company must comply with the right of first offer to All Preferred
Holders pursuant to the terms of this Section 5.
6. Preemptive Rights. In addition to the rights of All Preferred Holders
-----------------
provided in Section 5 hereof, all Stockholders shall be entitled to certain
preemptive rights as follows:
6
<PAGE>
(a) Except for the issuance of the Company's capital stock or other
securities (i) pertaining to options or rights to acquire shares of
capital stock existing on the date hereof, (ii) pursuant to a public
offering if the managing underwriter of such public offering advises
the Company in writing that in its opinion it is necessary for the
Stockholders to waive its preemptive rights granted hereunder in order
for the public offering to achieve its maximum benefit, or (iii)
comprising additional stock or option issuances to Employees of the
Company that are Excluded Events within the meaning of paragraph
5.3.10(iii) of Section (C) of Article Four of the Company's Amended
and Restated Certificate of Incorporation, if the Company at any time
after the date hereof authorizes the issuance or sale of any capital
stock of the Company or any securities of the Company containing
options or rights to acquire any shares of capital stock (other than
as a dividend on the outstanding capital stock), the Company shall
first offer to sell to the Stockholders a portion of such capital
stock or other securities equal to the percentage of Fully Diluted
Common Stock held by each Stockholder at the time of such issuance. In
the event any of the Stockholders elect not to exercise their
preemptive rights with respect to any issuance of capital stock or
other securities by the Company, the remaining Stockholders shall have
the right to purchase such unsubscribed portion on a pro rata basis,
based on the percentage of Fully Diluted Common Stock held by each
remaining Stockholder at the time of such issuance.
(b) In order to exercise their purchase rights hereunder, the Stockholders
must, within 10 business days after receipt of written notice from the
Company describing in reasonable detail the capital stock or
securities being offered, the purchase price thereof and the payment
terms, deliver a written notice to the Company describing its election
hereunder. The Company shall give the Stockholders no less than 15
business days notice of the closing of the sale and purchase of such
shares.
(c) Upon the expiration of the 10-day period described above, the Company
shall be entitled to sell such capital stock or securities which the
Stockholders have elected not to purchase during the 120 days
following such expiration on terms and conditions no more favorable to
the purchasers thereof than those offered to the Stockholders. Any
capital stock or securities offered or sold by the Company to any
Person after such 120-day period must be reoffered to the Stockholders
pursuant to the terms of this Section 6.
7. Year 2000 Covenant. The Company undertakes to promptly inform the Series A
------------------
and Series B Holders and the holders of the Priority Preferred Shares of
any material deficiency or expected cost in complying with the Year 2000
Problem.
7
<PAGE>
8. Maintenance of Insurance. The Company shall maintain in full force and
------------------------
effect the present levels of insurance set forth on Schedule A to this
Agreement to the extent such insurance remains available on commercially
reasonable terms.
9. Registration Rights.
-------------------
9.1. Demand Registrations.
---------------------
(a) Requests for Registration. Subject to Section 9.1(b) below, the
-------------------------
Majority Priority Preferred Holders may at any time after the first
to occur of (x) a Qualified Public Offering or (y) the fifth
anniversary of the issuance of the Series C Preferred Shares, and
the Series A and Series B Holders owning a majority in interest of
the Series A Preferred Stock and the Series B Preferred Stock of the
Company (the "Majority Series A/B Holders") may at any time after
the first to occur of (x) a Qualified Public Offering or (y) the
sixth anniversary of issuance of the Series C Preferred Shares,
request registration under the Securities Act of all or part of
their Registrable Securities on Form S-1, or any similar long-form
of registration, or, if available on Form S-2 or S-3 or any similar
short-form of registration. Each request for a Demand Registration
shall specify the number of Registrable Securities requested to be
registered and the proposed underwriter. Within 10 days after
receipt of any such request, the Company will give written notice of
such requested registration to all other holders (if any) of
Registrable Securities and, subject to Section 9.1(d) below, will
include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
All registrations requested pursuant to this Section 9.1(a) are
referred to herein as "Demand Registrations."
(b) Registrations. The Majority Priority Preferred Holders and the
-------------
Majority Series A/B Holders are each entitled to request (i) one (1)
Demand Registration to compel the Company to effect an initial
public offering and (ii) two (2) Demand Registrations after a
Qualifying EPO. In each such case, the Company will pay all
Registration Expenses (as defined in Section 9.5 hereto). A
registration will not count as one of such Demand Registrations
until it has become effective and, if such offering is an
underwritten offering, the holders of Registrable Securities have
sold all securities requested to be included thereunder (exclusive
of securities registered to cover underwriters' over-allotment
options).
(c) Priority in Demand Registration. If a Demand Registration is an
-------------------------------
underwritten offering and the managing underwriters advise the
Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested
to be included in such offering exceeds the number of
8
<PAGE>
Registrable Securities and other securities, if any, which can be
sold therein without adversely affecting the marketability of the
offering (the "Offering Quantity"), the Company will include in such
registration securities in the following priority:
(i) For a demand made by the Majority Priority Preferred Holders
prior to a Qualified Public Offering and the sixth
anniversary of issuance of the Series C Preferred Shares (a
"Priority Registration"), all Registrable Securities owned
by the Priority Preferred holders.
(ii) For any demand which is not a Priority Registration, first,
all Registrable Securities requested to be included by any
holders thereof, and if the number of such holders'
securities requested to be included exceeds the Offering
Quantity, then the Company shall include an equal number of
shares from (a) the Holders of the Series A Preferred Stock
and the Series B Preferred Stock of the Company and (b) the
holders of the Priority Preferred Shares, with such shares
to be allocated among the holders within each series of
preferred stock based on the amount of Registrable
Securities held by the particular holders in each class on
an as converted basis; and
(ii) second, to the extent (and only to the extent) that the
Offering Quantity exceeds the aggregate amount of securities
to be sold for the account of the holders of Registrable
Securities which are requested to be included in such
registration, the Company will include in such registration
any other securities requested to be included in such
offering, and if the number of such other holders'
securities requested to be included exceeds the Offering
Quantity, then the Company shall include only each such
requesting holder's pro rata share of the Offering Quantity,
based on the amount of securities held by such holder, on an
as converted basis.
(d) Restrictions on Demand Registrations. The Company will not be
------------------------------------
obligated to effect any Demand Registration within 120 days after
the effective date of a previous Demand Registration or other
registration of securities of the Company that is an underwritten
offering.
(e) Selection of Underwriters. In connection with a Demand Registration
-------------------------
and any other registration of securities of the Company that is an
underwritten offering, the Board shall have the right to select the
lead book-running manager to administer the offering, such selection
to be subject to the approval of the Majority Priority Preferred
Holders and the Majority Series A/B Holders which approval shall not
be unreasonably withheld.
9
<PAGE>
(f) Other Registration Rights. Except as provided in this Agreement, the
-------------------------
Company will not grant to any Persons the right to demand that the
Company register any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, without the prior written consent of the Majority Series
A/B Holders and the Majority Priority Preferred Holders.
(g) Demand Registrations Expenses. The Registration Expenses of the
-----------------------------
holders of Registrable Securities will be paid by the Company in all
Demand Registrations.
9.2. Piggyback Registrations.
------------------------
(a) Right to Piggyback. Whenever the Company proposes to register any of
------------------
its securities under the Securities Act (other than pursuant to a
Demand Registration or a registration on Form S-4 or S-8 or any
successor or similar forms) and the registration form to be used may
be used for the registration of Registrable Securities, whether or
not for sale for its own account, the Company will give prompt
written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such
registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within
30 days after the receipt of the Company's notice (a "Piggyback
Registration").
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
---------------------------------
underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing (with a copy to
each party hereto requesting registration of Registrable Securities)
that in their opinion the number of securities requested to be
included on a secondary basis in such registration exceeds the
number which can be sold in such offering without adversely
affecting the marketability of such primary or secondary offering
(the "Company Offering Quantity"), the Company will include in such
registration securities in the following priority:
(i) first, the Company will include the securities the Company
proposes to sell; and
(ii) second, the Company will include all Registrable Securities
and all other securities of the Company requested to be
included by any holders thereof, and if the number of such
holders' securities requested to be included exceeds the
Company Offering Quantity, then the Company shall include
10
<PAGE>
an equal number of shares of (a) the Holders of the Series A
Preferred Stock and the Series B Preferred Stock of the
Company and (b) the holders of the Priority Preferred
Shares, with such shares to be allocated among the holders
within each series of preferred stock on a pro rata basis,
based on the amount of securities held by the particular
holders in each class on an as converted basis.
(d) Other Registrations. If the Company has previously filed a
-------------------
registration statement with respect to Registrable Securities
pursuant to Section 9.1 or pursuant to this Section 9.2, and if such
previous registration has not been withdrawn or abandoned, the
Company will not file or cause to be effected any other registration
of any of its equity securities or securities convertible into or
exchangeable or exercisable for its equity securities under the
Securities Act (except on Form S-4 or S-8 or any successor or
similar form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least 120
days has elapsed from the date on which such previous registration
statement was declared effective by the Securities Exchange
Commission.
9.3. Holdback Agreements.
-------------------
(a) To the extent not inconsistent with applicable law, the holders of
Registrable Securities agree not to effect any public sale or
distribution (including sales pursuant to Rule 144 of the Securities
Act) of any securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such
securities that the holders of Registrable Securities own prior to
the effective date of any registration statement and during the
seven days prior to and the 120-day period beginning on such
effective date, unless (in the case of an underwritten public
offering) the managing underwriters otherwise agree; provided that
--------
such restrictions shall not be more restrictive in duration or scope
than restrictions imposed on (i) any Person which has been granted
registration rights by the Company, (ii) any officer or director of
the Company or (iii) any 5% or greater holder of equity securities
of the Company; and provided further, that such restriction shall
-------- -------
not apply to equity securities purchased in or after such
underwritten registration.
(b) The Company agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven
days prior to and during the 120-day period beginning on the
effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4
or S-8 or any successor or similar form), unless the underwriters
managing the public offering otherwise
11
<PAGE>
agree, and (ii) to cause each holder of its Common Stock, or any
securities convertible into or exchangeable or exercisable for
Common Stock, purchased from the Company at any time after the date
of this Agreement (other than in a public offering) to agree not to
effect any public sale or distribution (including sales pursuant to
Rule 144 of the Securities Act) of any such securities during such
period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the public
offering otherwise agree.
9.4. Registration Procedures. Whenever any Registrable Securities are
-----------------------
required to be registered pursuant to this Agreement, the Company will use its
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) prepare and within 60 days (or 45 days with respect to any short-
form Registration) after the end of the period within which requests
for registration may be given to the Company file with the
Securities and Exchange Commission a registration statement with
respect to such Registrable Securities and thereafter use its best
efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus
--------
or any amendments or supplements thereto, the Company will furnish
to the counsel selected by the holders of a majority of the
Registrable Securities initiating such registration statement copies
of all such documents proposed to be filed, which documents will be
subject to review of such counsel); provided, however, that the
-------- -------
Company may postpone for not more than 90 calendar days the filing
or effectiveness of a registration statement requested under Section
9.1 hereof if the Company determines that such registration could
reasonably be expected to have a material adverse effect on any
proposal or plan by the Company to engage in any acquisition of
assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction then
under consideration; but in such event, the Majority Series A/B
Holders or the Majority Priority Preferred Holders, whichever has
made a demand for such registration, shall be entitled to withdraw
such request, and if such request is withdrawn such registration
will not count as a Demand Registration under Section 9.1 hereof;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period of either (i) not
less than 270 days (subject to extension pursuant to Section 9.7(b))
or, if such registration statement relates to an underwritten
offering, such longer period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or
dealer or (ii) such shorter
12
<PAGE>
period as will terminate when all of the securities covered by such
registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement (but in any event not before
the expiration of any longer period required under the Securities
Act), and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement until such time as all of such securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller
(provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event (a "Changing Event")
as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, and, at
the request of any such seller, the Company will as soon as possible
prepare and furnish to such seller (a "Correction Event") a
reasonable number of copies of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
13
<PAGE>
(f) use best efforts to cause all such Registrable Securities to be
listed on each securities exchange on which similar securities
issued by the Company are then listed and, if not so listed, to be
listed on the NASD automated quotation system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities
(including, without limitation, effecting a stock split or a
combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers,
directors, Employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any securities included in such
registration statement for sale in any jurisdiction, the Company
will use its reasonable best efforts promptly to obtain the
withdrawal of such order;
(l) use its best efforts to obtain one or more comfort letters, dated
the effective date of such registration statement (and, if such
registration includes a public offering, dated the date of the
closing under the underwriting agreement), signed by the Company's
independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the
holders of a majority of the Registrable Securities being sold
reasonably request; and
14
<PAGE>
(m) use its best efforts to provide a legal opinion of the Company's
outside counsel, dated the effective date of such registration
statement (and, if such registration includes a public offering,
dated the date of the closing under the underwriting agreement),
with respect to the registration statement, each amendment and
supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in
customary form and covering such matters of the type customarily
covered by legal opinions of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing. No filing under subparagraph 9.4(a) or
9.4(b) shall be deemed late, in default of the Company's obligations thereunder,
or otherwise defective, if it occurs after the times indicated in such
subparagraphs solely as a result of any delay by any seller of Registrable
Securities in furnishing the information called for pursuant to the preceding
sentence.
9.5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding
discounts and commissions, which will be paid by the sellers of
Registrable Securities) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"),
will be borne as provided in this Agreement, and the Company will,
in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its Employees performing
legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on
each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration (including registration
pursuant to Section 9.10) and Piggyback Registration, the Company
will reimburse the holders of Registrable Securities for the
reasonable fees and disbursements of one counsel chosen by the
holders of a majority of the Registrable Securities who request
inclusion in such registration.
15
<PAGE>
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of Registrable Securities and any other
holder of securities included in any registration hereunder will pay
those Registration Expenses allocable to the registration of such
holder's Registrable Securities or other securities, as the case may
be, so included, and any Registration Expenses not so allocable will
be borne by all sellers of Registrable Securities and any other
holders of securities included in such registration in proportion to
the aggregate selling price of the securities to be so registered.
9.6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless, to the extent
permitted by law, each holder of Registrable Securities and its
Representatives against any Losses, joint or several, to which such
holder of Registrable Securities or its Representatives may become
subject under the Securities Act or otherwise, insofar as such
Losses (or actions or proceedings, whether commenced or threatened,
in respect thereto arise out of or are based upon (i) any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment or supplement thereto or (ii) any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse such holder of Registrable Securities and its
Representatives for any legal or any other expenses incurred by them
in connection with investigating or defending any such Loss, action
or proceeding, provided, however, that the Company shall not be
-------- -------
liable to any such holder in any such case to the extent that any
such Loss (or action or proceeding, whether commenced or threatened,
in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged
omission, made in such registration statement, any such prospectus
or preliminary prospectus or any amendment or supplement thereto, in
reliance upon, and in conformity with, written information prepared
and furnished to the Company by such holder of Registrable
Securities or its Representatives expressly for use therein or by
failure of such holder of Registrable Securities to deliver a copy
of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder of
Registrable Securities with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to
the indemnification of the holders of Registrable Securities.
16
<PAGE>
(b) In connection with any registration statement in which the holders of
Registrable Securities are participating, the holders of Registrable
Securities will furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection
with any such registration statement or prospectus and, to the extent
permitted by law, each such holder of Registrable Securities will
indemnify and hold harmless the Company, its directors and officers and
each other Person who controls the Company (within the meaning of the
Securities Act) against any Losses, joint or several, to which the
Company, its directors and officers and each other controlling Person
may become subject under the Securities Act or otherwise, insofar as
such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (i) the
purchase or sale of Registrable Securities during any period beginning
upon a Changing Event (as defined in Section 9.4(e)) and ending on a
Correction Event (as defined in Section 9.4(e)), provided such
--------
holder of Registrable Securities received proper written notice of such
Changing Event pursuant to Section 9.4(e), (ii) any untrue or alleged
untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment or
supplement thereto, or (iii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but, with respect to clauses (ii)
and (iii) above, only to the extent that such untrue statement or
omission is made in such registration statement any such prospectus or
preliminary prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information prepared and
furnished to the Company by such holder of Registrable Securities
expressly for use therein, and such holder of Registrable Securities
will reimburse the Company and each such director, officer and
controlling Person for any legal or any other expenses incurred by them
in connection with investigating or defending any such Loss, action or
proceeding; provided, however, that the obligation to indemnify will be
-------- -------
individual to each such holder of Registrable Securities and will be
limited to the net amount of proceeds received by such holder of
Registrable Securities from the sale of Registrable Securities pursuant
to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give
--------
prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not materially prejudiced the
indemnifying party) and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Such indemnifying
party shall not,
17
<PAGE>
however, enter into any settlement with a party without obtaining an
unconditional release of each indemnified party by such party with
respect to any and all claims against each indemnified party. If such
defense is assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the
transfer of securities. The Company also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification
is unavailable for any reason.
9.7 Participation in Underwritten Registrations.
-------------------------------------------
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements (including, without limitation, pursuant to the terms of
any over-allotment or "green shoe" option requested by the managing
underwriter(s), provided that each holder of Registrable Securities
--------
shall not be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in
any registration) and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements.
(b) Each Person that is participating in any registration hereunder agrees
that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 9.4(e) above, such Person
will forthwith discontinue the disposition of its Registrable
Securities pursuant to the registration statement until such Person's
receipt of the copies of a supplemented or amended prospectus as
contemplated by such Section 9.4(e). In the event the Company shall
give any such notice, the applicable time period mentioned in Section
9.4(b) during which a Registration Statement is to remain effective
shall be extended by the number of
18
<PAGE>
days during the period from and including the date of the giving of
such notice pursuant to this paragraph to and including the date when
each seller of a Registrable Security covered by such registration
statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 9.4(e).
9.8 Current Public Information. At all times after the Company has filed
--------------------------
a registration statement with the Securities and Exchange Commission pursuant
to the requirements of either the Securities Act or the Securities Exchange Act,
the Company will file all reports required to be filed by it under the
Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will use
commercially reasonable best efforts to take such further action as the
Purchasers may reasonably request, all to the extent required to enable the
holders of Registrable Securities to sell Registrable Securities pursuant to
Rule 144 adopted by the Securities and Exchange Commission under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission.
9.9 Adjustment Affecting Registrable Securities. Except as otherwise
-------------------------------------------
provided herein, the Company will not effect a stock split or dividend or a
combination of shares or take any similar action, or permit any similar change
to occur, with respect to its securities which would materially and adversely
affect the ability of the holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or which would adversely affect the marketability of such Registrable Securities
in any such registration (including, without limitation, effecting a stock split
or a combination of shares) in any material respect.
9.10 Form S-3 Registration. In case the Company shall receive from the
---------------------
Majority Series A/B Holders or the Majority Priority Preferred Holders, a
written request or requests that the Company effect a registration on Form S-3
under the Securities Act (or any similar successor form) and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned such holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other holders of
securities of the Company; and
(b) as soon as practicable, use its best efforts to effect such
registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution
of all or such portion of the Registrable Securities as are specified
in such request, together with all or such portion of the securities
of any other holder in the group of All Preferred Holders of
securities joining in such request as is specified in a written
request given within fifteen (15) days after receipt of such written
notice from the Company; provided, however,
-------- -------
19
<PAGE>
that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section
9.10: (i) if the Company is not qualified as a registrant entitled to
use Form S-3 (or the applicable successor form); (ii) if the Holders
of Series A Preferred Stock and Series B Preferred Stock of the
Company and the holders of the Priority Preferred Shares, together
with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable
Securities and such other securities at an aggregate price to the
public of less than One Million Dollars ($1,000,000); or (iii) if the
Company shall furnish to All Preferred Holders that requested to be
included in such registration, a certificate signed by the President
of the Company stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 registration to be
effected at such time, in which event the Company shall have the
right to defer the filing of the Form S-3 registration statement for
a period of not more than ninety (90) days after receipt of request
of the Majority Series A/B Holders or the Majority Priority Preferred
Holders, as the case may be, under this Section 9.10; provided,
--------
however, that the Company shall not utilize this right more than
-------
once in any twelve (12) month period.
Subject to the foregoing, the Company shall file and use its best
efforts to bring effective a registration statement covering the Registrable
Securities and other securities so requested to be registered as soon as
practicable after receipt of the request of either the Majority Series A/B
Holders or the Majority Priority Preferred Holders.
10. Financial Statements, Reports, Etc. The Company shall furnish to All
-----------------------------------
Preferred Holders:
(a) within forty-five (45) days following the Closing Date, the audited
consolidated balance sheet of the Company and its subsidiaries as of
December 31, 1998 and the audited consolidated statement of income
and retained earnings and the audited consolidated statement of cash
flows of the Company and its subsidiaries, each for the fiscal year
ended December 31, 1998;
(b) as soon as practicable, but in any event within forty-five (45) days
after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited balance sheet and income statement
as of the end of such fiscal quarter, in reasonable detail and
prepared in accordance with GAAP;
(c) as soon as available, and in any event within 90 days after the end
of each subsequent fiscal year of the Company, (i) an audited
consolidated financial statement of the Company and its subsidiaries
as of the end of such fiscal year, together with the related audited
consolidated statements of income, stockholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with
20
<PAGE>
GAAP and certified by a "Big 5" firm of independent public
accountants selected by the board of directors of the Company (the
"Board") (the "Annual Financial Statement"); and (ii) any related
management letters from such accounting firm. The Annual Financial
Statement shall be accompanied by comparative statements from the
prior fiscal year and the most recent 12-month budget delivered by
the Company pursuant to Section 10(d) hereof;
(d) as soon as available after the end of each month in each fiscal year
(other than the last month in each fiscal year) a monthly, unaudited
consolidated balance sheet of the Company and its subsidiaries and
the related unaudited consolidated statements of income,
stockholders' equity and cash flows (the "Monthly Balance Sheet").
The Company will furnish the Monthly Balance Sheet within 20 days
after the end of each such month. The Monthly Balance Sheet shall be
accompanied by a monthly management report describing the current
status of the Company and its operations and prospects. The Monthly
Balance Sheet should be prepared as of the end of such month with
statements of income, stockholders' equity and cash flows to be for
such month and for the period from the beginning of the fiscal year
to the end of such month, in each case with comparative statements
for the prior fiscal year and the most recent 12-month budget
delivered by the Company pursuant to Section 10(d) hereof, and which
shall specifically note and describe all expenditures (in any single
transaction or series of related transactions) in excess of $50,000
not included in the most recent 12-month budget delivered by the
Company pursuant to Section 10(d) hereof;
(e) as soon as available, and in any event no later than 15 days prior to
the start of each fiscal year, capital and operating expense budget,
cash flow projections and income and loss projections for the Company
in respect of such fiscal year, all itemized in reasonable detail and
prepared on a monthly basis, and, promptly after preparation, any
revisions to any of the foregoing;
(f) promptly, notice, and in any event within five days after notice has
been received by the Company, of any material adverse event, claim,
dispute or any other development which is material to operations,
assets or properties of the Company;
(g) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or
affairs of the Company that All Preferred Holders may reasonably
request; provided, that if such other information is not so provided,
--------
All Preferred Holders and their Representatives shall be entitled,
upon reasonable notice, and at their own expense, to make such
investigation of the properties, business and operations of the
Company and such examination of the books, records and financial
condition of the Company as they reasonably request and to make
extracts and copies of such books and records.
21
<PAGE>
Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances without
material interference with the Company's normal business operations,
and the Company and its Representatives shall cooperate fully
therein.
11. Additional Covenants.
--------------------
(a) Subject to the execution of such confidentiality agreement as may be
reasonably required by the Company, Weiss, Peck & Greer Venture
Partners shall have the right to attend meetings of the Board;
(b) The Company agrees that to the extent permitted by law, all Common
Stock issued to Employees subsequent to the date of this Agreement
shall be subject to a repurchase option which provides that upon
termination of the employment of such individual, with or without
cause, the Company has the option to repurchase at cost any unvested
shares held by the individual, which repurchase option shall lapse
over four (4) years with twenty-five percent (25%) to vest at the end
of the first year following the vesting commencement date, with the
remaining seventy-five percent (75%) to vest monthly over the three
(3) years thereafter, unless otherwise determined unanimously by the
Board; provided, however, that shares issued pursuant to a stock
-------- -------
option plan or arrangement shall have similarly applicable vesting
provisions such that unvested shares shall revert to the Company
under any applicable stock option plan or arrangement.
12. Termination of Rights and Obligations. The rights and obligations of the
-------------------------------------
holders of Priority Preferred Shares set forth in this Agreement, except
rights and obligations under Section 4, shall terminate in the event that
the holders of Priority Preferred Shares and/or their Permitted Transferees
do not own at least five percent (5%) of the Fully Diluted Common Stock.
The rights and obligations of the Series A Holders or the Series B Holders,
as the case may be, set forth in this Agreement, except rights and
obligations under Section 4, shall terminate in the event that the Series A
Holders and their Permitted Transferees or the Series B Holders and their
Permitted Transferees, as the case may be, do not own at least five percent
(5%) of the Fully Diluted Common Stock. The rights and obligations of the
Founders set forth in this Agreement, except rights and obligations under
Section 4, shall terminate in the event the Founders and their Permitted
Transferees cease to own in the aggregate at least five percent (5%) of the
Fully Diluted Common Stock. Any such termination of the rights and
obligations of any party shall not affect the rights and obligations of the
remaining parties. In addition, the preemptive rights provided in Section
6 shall terminate upon the consummation of a Qualifying IPO and the
covenants set forth in Section 11 shall terminate upon the earlier to occur
of (i) the effective date of a Qualifying IPO and (ii) the date on which
the Company first becomes
22
<PAGE>
subject to the periodic reporting requirements of Section 12(g) or 15(d) of
the Securities Exchange Act of 1934.
13. Rights Regarding Issuance of Priority Preferred Shares. Except for the
------------------------------------------------------
purchase by the Series A Holders and Series B Holders of Series C Stock and
its right to purchase up to Eight Million Dollars ($8,000,000) of Series D
Stock in each case as provided in the Securities Purchase Agreement, the
Series A and Series B Holders hereby waive any other rights they may have
to purchase Priority Preferred Shares, including, without limitation, any
right of first offer or preemptive rights; provided, however, nothing
-------- -------
herein shall preclude the Series A Holders and the Series B Holders from
purchasing additional shares of Series D Stock in the event that Baker does
not exercise the Baker Option.
14. Grant of Proxy. Should Section 1 of this Agreement be construed to
--------------
constitute the granting of proxies with respect to the election of
directors, such proxies shall be deemed coupled with an interest and are
irrevocable for the term of this Agreement.
15. Specific Enforcement. It is agreed and understood that monetary damages
--------------------
would not adequately compensate an injured party for the breach of this
Agreement by any other party to this Agreement, that this Agreement shall
be specifically enforceable, and that any breach of this Agreement shall be
the proper subject of a temporary or permanent injunction or restraining
order. Each party hereto waives any claim or defense that there is an
adequate remedy at law for such breach or threatened breach.
16. Stock Splits, Stock Dividends, etc. In the event of any stock split, stock
-----------------------------------
dividend, recapitalization, reorganization or combination, any securities
issued to the parties shall be subject to this Agreement.
17. Merger. This Agreement supersedes, merges and renders void any and all
------
prior agreements and/or understandings among or between the parties, oral
or written, with respect to its subject matter including the Investor
Rights Agreement, dated as of January 29, 1998, by and among the Company
and each of the persons who purchased shares of Series A Preferred Stock of
the Company (the "Series A Purchasers"), as amended by Amendment No. 1
dated as of September 9, 1998; the Co-Sale and Right of First Refusal
Agreement, dated as of January 29, 1998 by and among the Company, the
Founders and each of the Series A Purchasers; and the Voting Agreement,
dated as of January 29, 1998, by and among the Company, the Founders and
each of the Series A Purchasers.
18. Manner of Voting. The voting of shares pursuant to this Agreement may be
----------------
effected in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
23
<PAGE>
19. Term. This Agreement shall continue in full force and effect for a period
----
of ten (10) years commencing from the date of this Agreement.
20. Miscellaneous. Any reference in this Agreement to a requirement for a
-------------
request by a majority in interest or seventy-five percent (75%) of a class
of preferred stock of the Company shall be deemed to include any Common
Stock into which such series of preferred stock has been converted.
21. Certain Definitions. The following capitalized terms shall have the
-------------------
meanings ascribed to them below:
"Affiliate" means any Person that directly or indirectly controls, or
is under control with, or is controlled by such Person. As used in
this definition, "control" (including with its correlative meanings,
"controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person (whether
through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
"Common Stock" means the common stock, $0.01 par value per share, of
the Company.
"Employees" means any current, former, or retired employee, office
consultant, advisor, independent contractor, agent, officer or
director of the Company.
"Fully Diluted Common Stock" means, at any given time, all shares of
Common Stock issued and outstanding at such time, plus all shares of
Common Stock then issuable upon exercise of any then outstanding
options and convertible securities of the Company, whether or not such
options or convertible securities are actually exercisable or
convertible at such time.
"Permitted Transferee" means in the case of each of the parties to
this Agreement, and upon the condition that such transferee becomes a
party to this Agreement, (i) a Person to whom securities of the
Company are transferred from such transferring party by will or the
laws of descent and distribution or by gift without consideration of
any kind; provided that such transferee is the issue, adopted issue,
--------
stepchild, parent or spouse of such transferring party, (ii) a trust
that is for the exclusive benefit of, or a partnership the partners of
which are exclusively, such transferring party or his or her Permitted
Transferees under (i) above, (iii) the transfer of securities to an
Affiliate, (iv) a Person to whom securities of the Company are
transferred pursuant to (a) a public offering registered under the
Securities Act of 1933, as amended, or (b) a merger, sale,
consolidation,
24
<PAGE>
reorganization or recapitalization or other business combination with,
to, or into one or more third parties which (1) has been approved by
the Board of the Company and a majority of its outstanding shares in
accordance with New York law and (2) after such event the Company is
not the surviving entity or the shareholders of the Company do not own
a majority in interest of the resulting entity, or (v) a Person to
whom securities of the Company are transferred with the consent of the
other parties. A Permitted Transferee shall also include, upon the
condition that such transferee becomes a party to this Agreement, the
transfer of securities from (i) one Founder to another Founder, (ii)
one Series A Holder to another Series A Holder, (iii) one Series B
Holder to another Series B Holder, and (iv) one holder of Priority
Preferred Shares to an officer or principal of such holder.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization, governmental body or other entity.
"Registrable Securities" means (i) any shares of Common Stock issued
or issuable upon conversion of the Priority Preferred Shares held by
Baker or the Holders, (ii) any shares of Common Stock issued or
issuable upon conversion of the Series A Preferred Stock or the Series
B Preferred Stock of the Company held by the Holders, (iii) any other
shares of Common Stock held by the holders in clauses (i) and (ii),
and (iv) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i)
through (iii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares constituting
Registrable Securities, such shares will cease to be Registrable
Securities when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with a registration
statement covering them or (y) sold to the public pursuant to Rule 144
(or by similar provision under the Securities Act).
"Qualifying IPO" as defined in the Certificate of Designation,
Preferences and Rights of the Series C Stock.
"Year 2000 Problem" means (i) any material error relating to or
resulting from date data which represents or references more than one
century ("Century-Based Data"); (ii) any abnormal ending or provision
of materially invalid or incorrect results as a result of any Century-
Based Data; or (iii) any material error relating to century
recognition or calculations accommodating Century-Based Data, values
or formulae, and the implementation of such plan is expected in good
faith to be completed in a timely manner.
25
<PAGE>
22. Severability. Whenever possible, each provision of this Agreement shall be
------------
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be held to be prohibited
by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this
Agreement.
23. Counterparts. This Agreement may be executed in one or more counterparts
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
24. Notices. Any notice required or permitted by this Agreement shall be in
-------
writing and shall be deemed given when delivered personally, by telecopy or
mailed by certified mail, return receipt requested, to the parties at the
addresses opposite their signature or at such other address as a party may
specify by giving notice to the other parties pursuant to this Section 24.
25. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to the
conflicts of laws rules or provisions.
26. Consent to Jurisdiction.
-----------------------
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the Borough
of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated
hereby and each party hereby irrevocably agrees that all claims in
respect of such dispute or any suit, action or proceeding related
thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law,
any objection which they may now or hereafter have to the laying of
venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the
parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law.
(b) Each of the parties hereto hereby consents to process being served by
any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section
24 hereof.
27. Assignees and Transferees. This Agreement shall be binding upon and inure
-------------------------
to the benefit of the parties and their respective successors and permitted
assigns. The parties
26
<PAGE>
hereby agree that any transfer or assignment of voting securities of the
Company to a Permitted Transferee is conditioned upon such Permitted
Transferee's execution and delivery of this Agreement prior to such
transfer or assignment for the purpose of becoming a party to this
Agreement. The Company hereby agrees that any transfer or assignment of its
voting securities is conditioned upon such transferee's or assignee's
execution and delivery of this Agreement prior to such transfer or
assignment for the purpose of becoming a party to this Agreement.
28. Captions. The captions, headings and arrangements used in this Agreement
--------
are for convenience only and do not in any way limit or amplify the terms
and provisions hereof.
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COAXICOM, INC.
By: /s/ Vern Kennedy
--------------------------------
Name: Vern Kennedy
Title: President and CEO
<PAGE>
BAKER COMMUNICATIONS FUND, L.P.,
By: Baker Capital Partners, LLC
Its General Partner
By: /s/ Edward Scott
--------------------------------
Name: Edward Scott
Title:Manager
COMMUNICATIONS VENTURES II, L.P.
By: /s/ Roland A. Van der Meer
--------------------------------
Name: Roland A. Van der Meer
Title:Managing Member
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
By: /s/ Roland A. Van der Meer
--------------------------------
Name: Roland A. Van der Meer
Title:Managing Member
NEW ENTERPRISE ASSOCIATES VII, L.P.
By: NEA Partners VII, L.P.,
General Partner
By: /s/ Nancy Dorman
--------------------------------
Name: Nancy Dorman
Title:
Shareholder Agreement Signature Page
<PAGE>
NEA PRESIDENTS FUND
By: /s/ Nancy Dorman
---------------------------------
Name: Nancy Dorman
Title:General Partner
NEA VENTURES 1998, L.P.
By: /s/ Nancy Dorman
---------------------------------
Name: Nancy Dorman
Title:Vice President
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Barry Eggers
---------------------------------
Name: Barry Eggers
Title:Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Barry Eggers
---------------------------------
Name: Barry Eggers
Title:Managing Member
Shareholder Agreement Signature Page
<PAGE>
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.,
General Partner
By: /s/ Barry Eggers
----------------------------------
Name: Barry Eggers
Title:Managing Member
Shareholder Agreement Signature Page
<PAGE>
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG Venture Advisers, Ltd.
Administrative General Partner
By: /s/ Scott Dakers
--------------------------------
Name: Scott Dakers
Title:Director
Shareholder Agreement Signature Page
<PAGE>
/s/ Vern M. Kennedy
------------------------------
Vern M. Kennedy
/s/ Terrence J. Anderson
------------------------------
Terrence J. Anderson
/s/ Philip B. Smith
------------------------------
Philip B. Smith
/s/ Tracy W. Korman
------------------------------
Tracy W. Korman
Shareholder Agreement Signature Page
<PAGE>
Exhibit 10.21
AMENDMENT NO. 1 TO SHAREHOLDERS' AGREEMENT
AMENDMENT NO. 1 TO SHAREHOLDERS' AGREEMENT, dated as of February 2, 2000
(this "Amendment") to that certain Shareholders' Agreement dated as of April 23,
---------
1999 between BROADVIEW NETWORKS HOLDINGS, INC. (f/k/a Coaxicom, Inc.), a
Delaware corporation (the "Company"), Baker Communications Fund, L.P. ("Baker"),
------- -----
those parties listed on Schedule I to the (i) Series A Preferred Stock Purchase
Agreement, dated as of January 29, 1998, by and among the Company and the Series
A Holders, and (ii) the Series B Preferred Stock Purchase Agreement, dated as of
September 9, 1998, by and among the Company and the Series B Holders, and each
of the individuals listed on the signature pages thereto under the heading
"Founders" (collectively the "Shareholders"), is made by and between the Company
------------
and the Shareholders.
WHEREAS, Baker desires to assign portions of its option (the "Baker
-----
Option") to purchase shares of 8% Series D Convertible Redeemable Preferred
Stock of the Company ("Series D Preferred Stock") to Joel Gross and to certain
------------------------
other parties (together with Joel Gross, the "Assignees"), and the Company and
---------
the Shareholders desire to approve and consent to such assignment;
WHEREAS, the Shareholders that hold Series C Convertible Redeemable
Preferred Stock of the Company and the Assignees desire to exercise their
options and purchase, and the Company desires to issue and sell, an aggregate of
6,006,959 shares of Series D Preferred Stock;
WHEREAS, the Shareholders desire to acknowledge that each Assignee is a
Permitted Transferee of Baker, and waive any and all rights of first offer, tag
along rights and preemptive rights to which they may be entitled under the
Shareholders' Agreement with respect to Baker's assignment of portions of the
Baker Option or the Company's issuance of Series D Preferred Stock; and
WHEREAS, the Shareholders desire to extend the date by which the Board of
Directors of the Company must be reconstituted under the Shareholders'
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the Company and the Purchasers hereby agree
as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise defined
-----------
herein shall have the meaning given to them in the Shareholders' Agreement or,
if not defined therein, in the Company's Certificate of Incorporation, as
amended.
SECTION 2. Amendments to Shareholders' Agreement. The Shareholders'
-------------------------------------
Agreement is hereby amended as of the date hereof as follows:
<PAGE>
(a) The first sentence is amended and restated in its entirety as follows:
"THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and
entered into effective as of April 23, 1999 among Broadview Networks
Holdings, Inc. (f/k/a Coaxicom, Inc.), a Delaware corporation (the
"Company"), Baker Communications Fund, L.P. ("Baker"), Baker's
Permitted Transferees who appear as signatories to this Agreement,
Joel Gross, those parties listed on Schedule I to the (i) Series A
Preferred Stock Purchase Agreement (the "Series A Holders"), dated as
of January 29, 1998, by and among the Company and the Series A
Holders, and (ii) Series B Preferred Stock Purchase Agreement (the
"Series B Holders"), dated as of September 9, 1998, by and among the
Company and the Series B Holders (the Series A Holders and the Series
B Holders are collectively referred to herein as, the "Holders"), and
each of the individuals listed on the signature pages hereto under the
heading "Founders" (collectively, the Founders, the Holders, Baker,
Joel Gross and their respective Permitted Transferees (as defined
herein) are collectively referred to herein, as the "Stockholders").
(b) subsection (iii) of the first recital is amended and restated in its
entirety as follows:
(iii) the purchase by the Holders of an aggregate of 6,006,959
shares of 8% Series D Convertible Redeemable Preferred Stock of the
Company (the "Series D Preferred Shares" and, together with the Series
C Preferred Shares, the "Priority Preferred Shares"), for an aggregate
additional purchase price of Twenty Eight Million Dollars
($28,000,000);
(c) Section 1(a) is amended by substituting "January 31, 2000" for
"December 31, 1999" as the date by which the Board shall be reconstituted to
provide for five (5) members.
(d) Section 13 is hereby amended and restated in its entirety as follows:
13. Rights Regarding Issuance of Priority Preferred Shares. Except
------------------------------------------------------
for the purchase by the Series A Holders and Series B Holders of
Series C Stock and Series D Stock, in each case as provided in
the Securities Purchase Agreement, as amended, the Stockholders
hereby waive any other rights they may have to purchase Priority
Preferred Shares, including, without limitation, any right of
first offer or preemptive rights with respect to Baker's
assignment of portions of the Baker Option to its Permitted
Transferees and to Joel Gross or the Company's issuance of Series
D
<PAGE>
Preferred Stock to each of Baker's Permitted Transferees and to
Joel Gross.
SECTION 3. Consent to Assignment by Baker. The Shareholders hereby
------------------------------
approve and consent to Baker's assignment of its option to purchase 214,534
shares of Series D Preferred Stock to Joel Gross and to Baker's assignment of
its option to purchase 2,038,075 shares of Series D Preferred Stock to the State
Treasurer of the State of Michigan, Custodian of the Michigan Public School
Employees' Retirement System, State Employees' Retirement System and Michigan
State Police Retirement System (the "State of Michigan") on or before February
-----------------
4, 2000, conditional upon the State of Michigan exercising its assigned option
on or before such date. Baker agrees that any portion of such option that
remains unexercised after such date will be exercised within two business days
by Baker. The Shareholders acknowledge that, as a result of such approval and
consent, the Assignees are each a Permitted Transferee of Baker and the
provisions of Section 3 and Section 4 of the Shareholders' Agreement are not
applicable to such assignments and transfers by Baker.
SECTION 4. Agreement to be Bound by Shareholders' Agreement. Upon each of
------------------------------------------------
the Assignees' execution of this Amendment, the Shareholders' Agreement shall be
binding upon and inure to the benefit of each of them and their respective
permitted assigns.
SECTION 5. Capitalization. The Company hereby represents and warrants to
--------------
the Shareholders that the authorized and issued capital stock of the Company
immediately prior to and immediately after the Closing is set forth in Schedule
A attached hereto.
SECTION 6. Waiver of Preemptive Rights. Each Shareholder hereby waives
---------------------------
any preemptive rights to which he or it may be entitled under the Stockholders
Agreement with respect to all issuances of capital stock or other securities by
the Company prior to the date hereof that are reflected in Schedule A.
SECTION 7. No Implied Amendments. Except as herein amended, the
---------------------
Shareholders' Agreement shall remain in full force and effect and is ratified in
all respects. On and after the effectiveness of this Amendment, each reference
in the Shareholders' Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference to the Shareholders'
Agreement in any other agreements, documents or instruments executed and
delivered pursuant to the Securities Purchase Agreement, shall mean and be a
reference to the Shareholders' Agreement, as amended by this Amendment.
SECTION 8. Effective Date. This Amendment shall be effective as of the
--------------
date hereof.
SECTION 9. Counterparts. This Amendment may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
3
<PAGE>
* * * *
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BROADVIEW NETWORKS HOLDING, INC.
/s/ Vern Kennedy
By:______________________________
Name:
Title:
BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
Its General Partner
/s/ Edward Scott
By:______________________________
Name:
Title:
The State Treasurer of the State of Michigan,
Custodian of the Michigan Public School
Employees' Retirement System, State Employees'
Retirement System and Michigan State Police
Retirement System
By:______________________________
Name:
Title:
JOEL GROSS
______________________________
<PAGE>
COMMUNICATIONS VENTURES II, L.P.
/s/ Roland Van der Meer
By:______________________________
Name:
Title:
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
/s/ Roland Van der Meer
By:______________________________
Name:
Title:
NEW ENTERPRISE ASSOCIATES VII, L.P.
By: NEA Partners VII, L.P.,
General Partner
/s/ Peter Barris
By:______________________________
Name:
Title:
NEA PRESIDENTS FUND
/s/ Peter Barris
By:______________________________
Name:
Title:
NEA VENTURES 1998, L.P.
/s/ Peter Barris
By:______________________________
Name:
Title:
<PAGE>
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, LLC.,
Fund Investment Advisory Member
By:______________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By:________________________________
Name: Barry Eggers
Title: Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
General Partner
By:________________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
<PAGE>
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Partner
By:________________________________
Name: Barry Eggers
Title: Managing Member
/s/ Vern Kennedy
________________________________
Vern M. Kennedy
/s/ Terrence Andersom
________________________________
Terrence J. Anderson
/s/ Philip Smith
________________________________
Philip B. Smith
/s/ Tracy Korman
________________________________
Tracy W. Korman
<PAGE>
EXHIBIT 10.22
AMENDMENT NO. 2 TO SHAREHOLDERS' AGREEMENT
AMENDMENT NO. 2 TO SHAREHOLDERS' AGREEMENT, dated as of February 4, 2000
(this "Amendment") to that certain Shareholders' Agreement dated as of April 23,
---------
1999, as amended by Amendment No. 1 dated February 2, 2000 ("Amendment No. 1"),
---------------
between BROADVIEW NETWORKS HOLDINGS, INC. (f/k/a Coaxicom, Inc.), a Delaware
corporation (the "Company"), Baker Communications Fund, L.P. ("Baker"), Joel
------- -----
Gross, those parties listed on Schedule I to the (i) Series A Preferred Stock
Purchase Agreement, dated as of January 29, 1998, by and among the Company and
the Series A Holders, and (ii) the Series B Preferred Stock Purchase Agreement,
dated as of September 9, 1998, by and among the Company and the Series B
Holders, and each of the individuals listed on the signature pages thereto under
the heading "Founders", is made by and between the Company the other parties who
appear as signatories to this Amendment (collectively, the "Shareholders").
------------
WHEREAS, Section 3 of Amendment No. 1 contemplated Baker assigning the
remainder of its option (the "Baker Option") to purchase shares of 8% Series D
------------
Convertible Redeemable Preferred Stock of the Company ("Series D Preferred
------------------
Stock") to the State Treasurer of the State of Michigan, as Custodian of the
Michigan Public School Employees' Retirement System, State Employees' Retirement
System and Michigan State Police Retirement System (the "State of Michigan
-----------------
Retirement Systems") on or before February 4, 2000, conditional upon the State
- ------------------
of Michigan Retirement Systems exercising their assigned option on or before
such date.
WHEREAS, Baker now desires to assign the remainder of its option to the
State of Michigan Retirement Systems, and the State of Michigan Retirement
Systems desire to exercise their assigned option as of the date hereof, subject
to the terms of this Amendment, and the Company and the Purchasers desire to
approve and consent to such exercise; and
WHEREAS, the Shareholders have previously acknowledged that the State of
Michigan Retirement Systems are collectively a Permitted Transferee of Baker,
and waived any and all rights of first offer, tag along rights and preemptive
rights to which they may have been entitled under the Shareholders' Agreement
with respect to Baker's assignment of portions of the Baker Option or the
Company's issuance of Series D Preferred Stock; and
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the Company and the Purchasers hereby agree
as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise defined
-----------
herein shall have the meaning given to them in the Shareholders' Agreement or,
if not defined therein, in the Company's Certificate of Incorporation, as
amended.
SECTION 2. Amendments to Shareholders' Agreement. The Shareholders'
-------------------------------------
Agreement is hereby amended as of the date hereof as follows:
(a) The first sentence is amended and restated in its entirety as follows:
<PAGE>
"THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and
entered into effective as of April 23, 1999 among Broadview Networks
Holdings, Inc. (f/k/a Coaxicom, Inc.), a Delaware corporation (the
"Company"), Baker Communications Fund, L.P. ("Baker"), the State
Treasurer of the State of Michigan, as Custodian of the Michigan
Public School Employees' Retirement System, State Employees'
Retirement System and Michigan State Police Retirement System (the
"State of Michigan Retirement Systems"), Joel Gross, those parties
listed on Schedule I to the (i) Series A Preferred Stock Purchase
Agreement (the "Series A Holders"), dated as of January 29, 1998, by
and among the Company and the Series A Holders, and (ii) Series B
Preferred Stock Purchase Agreement (the "Series B Holders"), dated as
of September 9, 1998, by and among the Company and the Series B
Holders (the Series A Holders and the Series B Holders are
collectively referred to herein as, the "Holders"), and each of the
individuals listed on the signature pages hereto under the heading
"Founders" (collectively, the Founders, the Holders, Baker, the State
of Michigan Retirement Systems, Joel Gross and their respective
Permitted Transferees (as defined herein) are collectively referred to
herein, as the "Stockholders").
(b) Section 26(a) is hereby amended and restated in its entirety as
-------------
follows:
(a) To the fullest extent permitted by applicable law and public
policy, the parties hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the Borough
of Manhattan, State of New York over any dispute arising or relating
to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of
such dispute or any suit, action or proceeding related thereto may be
heard and determined in such courts. The parties hereby irrevocably
waive, to the fullest extent permitted by applicable law and public
policy, any objection which they may now or hereafter have to the
laying of venue of any such dispute brought in such court or any
defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
SECTION 3. Agreement to be Bound by Shareholders' Agreement. Upon the
------------------------------------------------
State of Michigan Retirement Systems' execution of this Amendment, the
Shareholders' Agreement shall be binding upon and inure to the benefit of the
State of Michigan Retirement Systems and their permitted assigns.
SECTION 4. Capitalization. The Company hereby represents and warrants to
--------------
the Shareholders that the authorized and issued capital stock of the Company
immediately prior to and immediately after the February 2, 2000 and February 4,
2000 closings of the sale of shares of Series D Preferred Stock is set forth in
Schedule A attached hereto.
2
<PAGE>
SECTION 5. Waiver of Preemptive Rights. Each Shareholder hereby waives
---------------------------
any preemptive rights to which he or it may be entitled under the Stockholders
Agreement with respect to all issuances of capital stock or other securities by
the Company prior to the date hereof that are reflected in Schedule A.
SECTION 6. No Implied Amendments. Except as herein amended, the
---------------------
Shareholders' Agreement shall remain in full force and effect and is ratified in
all respects. On and after the effectiveness of this Amendment, each reference
in the Shareholders' Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference to the Shareholders'
Agreement in any other agreements, documents or instruments executed and
delivered pursuant to the Securities Purchase Agreement, shall mean and be a
reference to the Shareholders' Agreement, as amended by this Amendment.
SECTION 7. Effective Date. This Amendment shall be effective as of the
--------------
date hereof.
SECTION 8. Counterparts. This Amendment may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
* * * *
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
BROADVIEW NETWORKS HOLDING, INC.
By: /s/ Vern M. Kennedy
------------------------------
Name: Vern M. Kennedy
Title: President and CEO
BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
Its General Partner
By: /s/ Edward Scott
------------------------------
Name: Edward Scott
Title: General Partner
The State Treasurer of the State of Michigan, as
Custodian of the Michigan Public School Employees'
Retirement System, State Employees' Retirement
System and Michigan State Police Retirement System
By: /s/ David C. Turner
------------------------------
Name: David C. Turner
Title: Administrator, Alternative
Investments Division
JOEL GROSS
/s/ Joel Gross
------------------------------
<PAGE>
COMMUNICATIONS VENTURES II, L.P.
By its General Partner ComVenII, LLC
By: /s/ Roland A. Van der Meer
------------------------------
Name: Roland A. Van der Meer
Title: Member
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
By: /s/ Roland A. Van der Meer
------------------------------
Name: Roland A. Van der Meer
Title: Member
NEW ENTERPRISE ASSOCIATES VII, L.P.
By: NEA Partners VII, L.P.,
General Partner
By: /s/ Peter Barris
------------------------------
Name:
Title:
NEA PRESIDENTS FUND
By: /s/ Peter Barris
------------------------------
Name:
Title:
NEA VENTURES 1998, L.P.
By: /s/ Peter Barris
------------------------------
Name:
Title:
<PAGE>
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, LLC.,
Fund Investment Advisory Member
By: /s/ Barry Eggers
------------------------------
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Barry Eggers
------------------------------
Name: Barry Eggers
Title: Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
General Partner
By: /s/ Barry Eggers
------------------------------
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Partner
By: /s/ Barry Eggers
------------------------------
Name: Barry Eggers
Title: Managing Member
<PAGE>
/s/ Vern M. Kennedy
--------------------------------
Vern M. Kennedy
/s/ Terrence J. Anderson
--------------------------------
Terrence J. Anderson
/s/ Philip B. Smith
--------------------------------
Philip B. Smith
/s/ Tracy W. Korman
--------------------------------
Tracy W. Korman
<PAGE>
Exhibit 10.23
AMENDMENT NO. 3 TO SHAREHOLDERS' AGREEMENT
AMENDMENT NO. 3 TO SHAREHOLDERS' AGREEMENT, dated as of February 7, 2000
(this "Amendment") to that certain Shareholders' Agreement dated as of April 23,
---------
1999, as amended by Amendment No. 1 dated February 2, 2000 and Amendment No. 2
dated February 4, 2000 (the Shareholders' Agreement") between BROADVIEW NETWORKS
-----------------------
HOLDINGS, INC. (f/k/a Coaxicom, Inc.), a Delaware corporation (the "Company"),
-------
and each of the shareholders listed on the signature pages thereto
(collectively, the "Shareholders") is made by and between the Company and the
------------
Shareholders.
WHEREAS, in connection with the proposed initial public offering of the
Company's common stock (the "IPO"), the underwriters of the IPO have advised the
---
Company that the special veto rights of All Preferred Holders and the board
representation rights of the Shareholders could adversely affect the marketing
of the IPO and, accordingly, have requested that such rights be terminated;
WHEREAS, the managing underwriter of the IPO has advised the Company in
writing that in its opinion it is necessary for the Stockholders to waive the
preemptive rights granted under the Shareholders' Agreement in order for the IPO
to achieve its maximum benefit;
WHEREAS, the Company and the Shareholders desire to amend the Shareholders'
Agreement in order to (a) eliminate All Preferred Holders' special veto rights
and modify the Shareholders' board representation rights, in each case effective
upon the consummation of a Qualifying IPO and (b) waive All Preferred Holders'
rights to first offer to provide equity financing and the Shareholders'
preemptive rights with respect to the issuance of common stock pursuant to the
IPO, in each case effective as of the date of this Amendment;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the Company and the Shareholders hereby agree
as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise defined
-----------
herein shall have the meaning given to them in the Shareholders' Agreement or,
if not defined therein, in the Company's Certificate of Incorporation, as
amended.
SECTION 2. Amendments to Shareholders' Agreement. The Shareholders'
-------------------------------------
Agreement shall be amended, effective upon the consummation of a Qualifying IPO,
as follows:
(a) Section 1 shall be amended and restated in its entirety as follows:
---------
1. Voting Rights. For so long as this Agreement is in effect, the
-------------
Stockholders shall each vote all of their securities of the Company,
including any securities of the Company acquired after the date of
this Agreement, in favor of the size of the
<PAGE>
Board of Directors of the Company (the "Board") and the election of
each of the other Stockholders' designees to the Board, or any
committee thereof, as provided below:
(a) The Board shall consist of five (5) members;
(b) One designee to the Board who is selected by holders of at least
a majority in interest of the then outstanding Priority Preferred
Shares ("Majority Priority Preferred Holders"). The designee
selected by the Majority Priority Preferred Holders shall have
the right to serve on all of the Board's committees; and
(c) One designee to the Board who is jointly selected by the Series A
Holders and the Series B Holders.
(b) Section 2 shall be deleted in its entirety and replaced with the
---------
following:
2. Restrictions. [Intentionally deleted.]
------------
SECTION 3. Waiver of Preemptive Rights. Each Shareholder hereby waives,
---------------------------
effective as of the date of this Amendment, any preemptive rights to which he
or it may be entitled under the Shareholders' Agreement with respect to the
issuance of common stock by the Company pursuant to a Qualifying IPO.
SECTION 4. Waiver of Rights to First Offer to Provide Equity Financing.
-----------------------------------------------------------
All Preferred Holders hereby waive, effective as of the date of this Amendment,
any rights of first offer to provide equity financing to which he or it may be
entitled under the Shareholders' Agreement with respect to the issuance of
common stock by the Company pursuant to a Qualifying IPO.
SECTION 5. No Implied Amendments. Except as herein amended, the
---------------------
Shareholders' Agreement shall remain in full force and effect and is ratified in
all respects. On and after the effectiveness of this Amendment, each reference
in the Shareholders' Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference to the Shareholders'
Agreement in any other agreements, documents or instruments executed and
delivered pursuant to the Securities Purchase Agreement, shall mean and be a
reference to the Shareholders' Agreement, as amended by this Amendment.
SECTION 6. Effective Date. This Amendment shall be effective as of the
--------------
date hereof; provided, however, that the provisions of Section 2 of this
-------- -------
Amendment shall be effective upon the consummation of a Qualifying IPO;
provided, further, however, that if a Qualifying IPO is not consummated within
- -------- -------
90 days, following the date hereof, this Amendment shall become null and void.
2
<PAGE>
SECTION 7. Counterparts. This Amendment may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
BROADVIEW NETWORKS HOLDING, INC.
/s/ Vern Kennedy
By:______________________________
Name:
Title:
BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
Its General Partner
/s/ Edward Scott
By:______________________________
Name:
Title:
The State Treasurer of the State of Michigan,
as Custodian of the Michigan Public School
Employees' Retirement System, State Employees'
Retirement System and Michigan State Police
Retirement System
By:______________________________
Name:
Title:
JOEL GROSS
______________________________
<PAGE>
COMMUNICATIONS VENTURES II, L.P.
/s/ Roland Van der Meer
By:______________________________
Name:
Title:
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
/s/ Roland Van der Meer
By:______________________________
Name:
Title:
NEW ENTERPRISE ASSOCIATES VII, L.P.
By: NEA Partners VII, L.P.,
General Partner
/s/ Peter Barris
By:______________________________
Name:
Title:
NEA PRESIDENTS FUND
/s/ Peter Barris
By:______________________________
Name:
Title:
NEA VENTURES 1998, L.P.
/s/ Peter Barris
By:______________________________
Name:
Title:
<PAGE>
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, LLC.,
Fund Investment Advisory Member
/s/ Barry Eggers
By:______________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
/s/ Barry Eggers
By:________________________________
Name: Barry Eggers
Title: Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
General Partner
/s/ Barry Eggers
By:________________________________
Name: Barry Eggers
Title: Managing Member
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Partner
/s/ Barry Eggers
By:________________________________
Name: Barry Eggers
<PAGE>
Title: Managing Member
/s/ Vern Kennedy
________________________________
Vern M. Kennedy
/s/ Terrance Anderson
________________________________
Terrence J. Anderson
/s/ Philip Smith
________________________________
Philip B. Smith
/s/ Tracy Korman
________________________________
Tracy W. Korman
<PAGE>
EXHIBIT 10.24
INTERCONNECTION AGREEMENT UNDER SECTIONS 251 AND 252 OF THE
TELECOMMUNICATIONS ACT OF 1996
Dated as of September 4, 1998
by and between
NEW ENGLAND TELEPHONE & TELEGRAPH COMPANY, dba
BELL ATLANTIC - MASSACHUSETTS
and
COMMUNITY NETWORKS OF MASSACHUSETTS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
(1) GENERAL TERMS AND CONDITIONS
(2) PART I - Telecommunications Services Provided for Resale
Appendix A
(3) PART II - Unbundled Network Elements and Combinations
Exhibit A - Bona Fide Request Process
Exhibit B - Timetable for Providing Elements
(4) PART III - Service Description: Ancillary Functions
Exhibit A -
Appendix A - Collocation Schedule
Appendix B - Application for Collocation
Appendix C - Insurance Certification
Appendix D - Grounding Requirements
Appendix E - Construction Work Completion Notice
(5) PART IV - Pricing Schedule
Exhibit A - Local and Toll Call Flows and Intercarrier Billing in the
Competitive Telecommunications Environment
Attachment A - Unbundled Network Elements
Attachment B - Call Flow Diagram
(6) Attachment 1 - Definitions
(7) Attachment 2 - Operations Plan and Implementation Team
(8) Attachment 3 - Intentionally Omitted
(9) Attachment 4 - Intentionally Omitted
(10) Attachment 5 - Intentionally Omitted
(11) Attachment 6 - Billing and Recording
</TABLE>
<PAGE>
TABLE OF CONTENTS
General Terms and Conditions
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS................................................................. 1
DEFINITIONS.............................................................. 2
GENERAL TERMS AND CONDITIONS............................................. 2
1. Scope of the Agreement......................................... 2
2. Term of Agreement; Termination................................. 2
3. Transitional Support........................................... 4
4. Good Faith Performance......................................... 4
5. Option to Obtain Local Services, Network Elements or
Combinations Under Other Agreements..................... 4
6. Responsibility of Each Party................................... 5
7. Government Compliance.......................................... 5
8. Regulatory Matters............................................. 6
9. Liability and Indemnity........................................ 7
9.1 Indemnification......................................... 7
9.2 Limitation of Liability................................. 8
10. Payment Terms, Disputed Amounts and Audits..................... 8
10.1 Local Services.......................................... 8
10.2 Payment Terms - Other than Local Services............... 9
10.3 Disputed Amounts - Other than Local Services............ 10
10.4 Audits and Inspections.................................. 13
10.5 Alternate Billing to Third Numbers...................... 14
10.6 Reciprocal Compensation................................. 17
11. Service Standards.............................................. 19
12. OSS/Electronic Interfaces...................................... 19
13. Operations Plan and Implementation Team........................ 22
14. Force Majeure.................................................. 22
15. Certain State and Local Taxes.................................. 23
16. Dispute Resolution............................................. 23
17. Notices........................................................ 27
18. Confidentiality................................................ 29
19. Number Portability............................................. 30
19.1 Interim Number Portability.............................. 30
19.2 Number Reassignment..................................... 33
</TABLE>
<PAGE>
<TABLE>
<S> <C>
20. Directory Listings and Directory Distributions................. 33
21. Subscriber List Information.................................... 35
22. Miscellaneous.................................................. 35
22.1 Delegation or Assignment................................ 35
22.2 Nonexclusive Remedies................................... 35
22.3 No Third Party Beneficiaries............................ 36
22.4 Referenced Documents.................................... 36
22.5 Governing Law........................................... 36
22.6 Publicity and Advertising............................... 36
22.7 Amendments or Waivers................................... 36
22.8 Severability............................................ 37
22.9 Entire Agreement........................................ 37
22.10 Survival of Obligations................................. 37
22.11 Executed in Counterparts................................ 37
22.12 Headings of No Force or Effect.......................... 37
22.13 Joint Work Product...................................... 38
22.14 Nonexclusive Dealings................................... 38
22.15 No License.............................................. 38
22.16 Dialing Parity.......................................... 38
22.17 Disclaimer of Warranties................................ 38
</TABLE>
ii
<PAGE>
AGREEMENT
between
New England Telephone and Telegraph Company
d/b/a BA
and
AT&T Communications of New England, Inc.
Dated as of April 13, 1998
<PAGE>
INTERCONNECTION AGREEMENT
-------------------------
This Agreement, which shall become effective upon the date executed in
accordance with Section 2(a), is entered into by and between AT&T Communications
of New England, Inc., a Massachusetts corporation, having an office at 32 Avenue
of the Americas, New York, New York 10013 ("AT&T"), and New England Telephone
and Telegraph Company, d/b/a Bell Atlantic -Massachusetts, a New York
corporation, having an office at 185 Franklin Street, Boston, Massachusetts
02110 ("BA").
RECITALS
--------
WHEREAS, the Telecommunications Act of 1996 (as amended or modified from
time to time, the "Act") was signed into law on February 8, 1996; and
WHEREAS, the Act places certain duties and obligations upon, and grants
certain rights to, Telecommunications Carriers; and
WHEREAS, the Federal Communications Commission (the "FCC") has issued rules
to implement the Act (including In the Matter of the Local Competition
Provisions in the Telecommunications Act of 1996, FCC 96-325 (hereinafter, as
amended, modified, stayed or reconsidered from time to time, the "Order"); and
WHEREAS, the Parties are entering into this Agreement to set forth the
respective obligations of the Parties and the terms and conditions under which
AT&T will interconnect with the BA network in the BA service territory within
the Commonwealth of Massachusetts (the "MA Region") and BA will provide services
to AT&T as required by the Act and Order and additional services as set forth
herein; and
WHEREAS, the Parties have arrived at this Agreement through negotiations
and arbitration proceedings undertaken pursuant to the Act.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of this Agreement and other good and valuable consideration, AT&T and BA hereby
agree as follows:
<PAGE>
DEFINITIONS
-----------
For purposes of this Agreement, certain terms have been defined in
Attachment 1 and elsewhere in this Agreement to encompass meanings that may
differ from, or be in addition to, the normal connotation of the defined word.
Unless the context clearly indicates otherwise, any term defined or used in the
singular shall include the plural. The words "shall" and "will" are used
interchangeably throughout the Agreement and the use of either connotes a
mandatory requirement. The use of one or the other shall not mean a different
degree of right or obligation for either Party. A defined word intended to
convey its special meaning is capitalized when used. Other terms that are
capitalized, and not defined in this Agreement, shall have the meaning in the
Act.
GENERAL TERMS AND CONDITIONS
-----------------------------
1. Scope of the Agreement. This Agreement, together with all applicable
----------------------
tariffs as referenced herein (as in effect from time to time except with respect
to those provisions in this Agreement in which it is expressly provided
otherwise), set forth the terms, conditions and prices to which BA and AT&T have
agreed in respect of the following: (a) Local Services, (b) certain unbundled
network elements, (hereinafter collectively referred to as "Network Elements")
or combinations of such Network Elements ("Combinations")*, (c) Collocation,
(d) Number Portability, (e) Access to Rights of Way, Ducts, Conduits and Pole
Attachments, (f) Directory Assistance and Operator Services and Directory
Listings, (g) Reciprocal Compensation, (h) E911 and 911 services, (i) Meet-Point
Billing, (j) Dialing Parity, (k) Transient Tandem Service, (1) Interconnection
of AT&T's network to BA's network and (m) Access to Telephone Numbers. This
Agreement includes the General Terms and Conditions, Parts I through IV, and
their Attachments and all accompanying Appendices and Exhibits. Unless otherwise
provided in this Agreement, the rights and obligations of the Parties hereunder
shall apply throughout the MA Region.
2. Term of Agreement; Termination.
------------------------------
(a) The initial term of this Agreement shall commence on the date on which
this Agreement has been executed by both Parties (the "Effective
Date") and shall expire on April 12, 2001, except as otherwise
provided in Section 2(d) below.
___________________
* The Parties acknowledge and agree that the issue of BA's obligation to
combine unbundled Network Elements is presently before the Department in the
Consolidated Arbitrations D.P.U. 96-73, 96-74, 96-80/81, 96-83 and before the
U.S. Supreme Court. Accordingly, it is agreed that, pending a decision of either
the Department or the U.S. Supreme Court requiring BA to provide combinations of
unbundled Network Elements, BA has no obligation to combine unbundled Network
Elements. When the Department, the U.S. Supreme Court or any court of competent
jurisdiction issues a decision or order upon this issue, upon written request of
either Party, the Parties agree to meet and expeditiously negotiate in good
faith to arrive at modifications to this Agreement if necessary, to comply with
such decision. Notwithstanding the foregoing, nothing in this Agreement shall
prevent either Party from appealing or otherwise contesting the Department's or
any court's decisions or orders.
2
<PAGE>
(b) AT&T (i) shall, at BA's request, or (ii) may, at its option, nine
months prior to the expiration of the Term, with respect to the entire
Agreement, and/or eighteen months prior to the expiration of the Term, in
the case of the terms and provisions with respect to Local Services set
forth in Part I hereof (such terms and provisions, other than with respect
to the wholesale discounts set forth in Part IV hereof, hereinafter the
"Resale Terms"), make a request to BA to renegotiate all of the terms of
this Agreement or the Resale Terms pursuant to Section 251(c)(1) of the
Act. The date(s) of BA's receipt of such request(s) shall be hereinafter
referred to as the "Renegotiation Request Date". The Parties agree that
within sixty (60) days of such Renegotiation Request Date each Party will
provide to the other a written description of its proposed changes to,
and/or extension of, the terms of this Agreement or the Resale Terms. The
Parties shall enter into negotiations on such proposed changes seventy-five
(75) days after such Renegotiation Request Date.
(c) In the event that, notwithstanding, the good faith efforts of both
Parties, they are unable to agree on terms and conditions of a new
agreement and/or new Resale Terms, then either Party may, beginning 135
days after the Renegotiation Request Date, file a petition for arbitration
by the Department pursuant to Section 252(b) of the Act.
(d) The terms and conditions of this Agreement shall only continue in full
force and effect until the Effective Date of the Department's decision
pursuant to any petition filed under Section 2(c) above (the "Arbitration
Decision") if AT&T requests to renegotiate pursuant to Section 2(b) above;
provided, however, that the prices, and, where feasible, any other terms
-------- -------
and conditions of this Agreement shall be trued up to conform with the
Arbitration Decision back to the date of expiration of the Term or, with
respect to modification of Resale Terms, back to the applicable
Renegotiation Request Date.
(e) Nothing in this Section 2 shall be construed as a waiver by either
Party of its right to appeal any decision of the Department, including the
Arbitration Decision.
(f) Upon termination or expiration of this Agreement in accordance with
this Section 2:
(i) each Party shall comply with its obligations set forth in
paragraph (c) of Section 18 of the General Terms and Conditions of
this Agreement;
(ii) each Party shall promptly pay all amounts (including any late
payment charges or cancellation charges, if any) owed under this
Agreement; and
(iii) each Party's obligations that by their terms continue in force
and effect after termination or expiration of this Agreement
(including, without limitation,
3
<PAGE>
indemnification obligations) shall survive termination or expiration
of this Agreement.
3. Transitional Support. Upon the termination or expiration of this
--------------------
Agreement, AT&T may itself provide or retain another vendor to provide Local
Services, Network Elements, Combinations or other access or services comparable
to those furnished under the terms of this Agreement. BA agrees to cooperate
with AT&T and to use commercially reasonable efforts to effect an orderly and
efficient transition to AT&T or AT&T's new vendor, subject to the payment by
AT&T to BA of the reasonable costs incurred in providing such cooperation.
4. Good Faith Performance. In the performance of their obligations under this
----------------------
Agreement, the Parties shall act in good faith and consistently with the
provisions of the Act and the applicable effective provisions of the Order.
Except to the extent a different standard is expressly set forth in this
Agreement, in which case such other standard shall apply, where notice, approval
or similar action by a Party is permitted or required by any provision of this
Agreement, (including, without limitation, the obligation of the Parties to
further negotiate the resolution of new or open issues under this Agreement)
such notice, approval or similar action shall not be unreasonably delayed or
withheld.
5. Option to Obtain Local Services, Network Elements or
Combinations Under Other Agreements.
-----------------------------------
(a) If BA enters into an agreement approved by the Department or the FCC
pursuant to Section 252 of the Act which provides for the provision in
the Commonwealth of Massachusetts of services covered in this Agreement
to another requesting Telecommunications Carrier (the "Other
Agreement"), BA shall make available to AT&T upon request such Other
Agreement to the extent required by Section 252(i) of the Act.
If AT&T enters into an agreement with a Telecommunications Carrier
approved by the Department or the FCC pursuant to Section 252 of the
Act with respect to services in the Commonwealth of Massachusetts (the
"Other AT&T Agreement"), then AT&T shall make available to BA upon
request such Other AT&T Agreement to the extent required by Section
252(i) of the Act.
(b) Notwithstanding the terms and provisions of paragraph (a) of this
Section 5, in the event that as a result of any decision, order or
determination of any judicial or regulatory authority, it is determined
that all or any portion of such paragraph (a) above is found invalid or
unenforceable, or if such decision, order or determination interprets
Section 252 (i) to require BA to offer Telecommunications Carriers the
right to select less than the entire Other Agreement, the Parties agree
to abide by such decision, order or determination and to amend
paragraph (a) of this Section 5 to the
4
<PAGE>
extent that it conflicts with such decision, order or determination.
6. Responsibility of Each Party. Each Party has and hereby retains the right
----------------------------
to exercise full control of and supervision over its own performance of its
obligations under this Agreement, and retains full control over the employment,
direction, compensation and discharge of all employees assisting in the
performance of such obligations. Each Party will be solely responsible for all
matters relating to payment of such employees, including compliance with social
security taxes, withholding taxes and all other regulations governing such
matters. Subject to the limitations on liability set forth in Section 9 of the
General Terms and Conditions of this Agreement and except as otherwise expressly
provided in this Agreement, each Party shall be responsible for (i) its own acts
and performance of all obligations imposed by all applicable federal, state or
local statutes, laws, rules, regulations, codes, orders, decisions, injunctions,
judgments, awards and decrees (collectively, "Applicable Laws") in connection
with its activities, legal status and property, real or personal, and (ii) the
acts of its own affiliates, employees, agents and contractors during the
performance of that Party's obligations hereunder. Neither this Agreement, nor
any actions taken by BA or AT&T in compliance with this Agreement, shall be
deemed to create an agency, joint venture, or other relationship between AT&T
and BA of any kind, other than that of purchaser and seller of services. Neither
this Agreement, nor any actions taken by BA or AT&T in compliance with this
Agreement, shall create a contractual, agency, or any other type of relationship
or third party liability between BA and AT&T`s end users or others.
7. Government Compliance.
---------------------
7.1 The provisions of this Agreement are subject in their entirety to the
applicable provisions of the Act and any other orders, restrictions
and requirements of governmental and regulatory authorities with
competent jurisdiction over the subject matter thereof and, in the
event of any direct conflict between the provisions of this Agreement
and the requirements of such governmental and regulatory authorities,
the requirements of such authorities shall prevail.
7.2 BA represents and AT&T acknowledges that BA is entering into this
Agreement specifically in order to satisfy the obligations of BA as
set forth in the Act and the Order.
7.3 In the event that any legislative, regulatory, judicial or other legal
action materially affects any material terms of this Agreement or the
rights or obligations of either AT&T or BA hereunder or the ability of
AT&T or BA to perform any material provision hereof, the Parties shall
renegotiate in good faith such affected provisions with a view toward
agreeing to acceptable new terms as may be required or permitted as a
result of such legislative, regulatory, judicial or other legal
action.
5
<PAGE>
7.4 Notwithstanding anything herein to the contrary, in the event that as
a result of any decision, order or determination of any judicial or
regulatory authority with jurisdiction over the subject matter hereof,
it is determined that BA shall not be required to furnish any service
or item or provide any benefit required to be furnished or provided to
AT&T hereunder, then AT&T and BA shall promptly commence and conduct
negotiations in good faith with a view toward agreeing to mutually
acceptable new terms as may be required or permitted as a result of
such decision, order or determination; provided, however, that BA
expressly reserves all rights it may have to discontinue any such
service or item or benefit provided under this Agreement to the extent
permitted by any such decision, order or determination and AT&T
expressly reserves all rights it may have to oppose any such
discontinuance by BA.
7.5 The Parties hereby agree that where a clause from the Interconnection
Agreement between AT&T Communications of New York, Inc. and New York
Telephone Company (the "NY Agreement") submitted to the New York
Public Service Commission (the "NY PSC") has been incorporated in this
Agreement and such clause or provision is subsequently amended in the
NY Agreement to conform to an effective order of a governmental agency
or court of competent jurisdiction resulting from an appeal of a NY
PSC Order in Cases No. 96-C-0723 and No. 96-C-0724, such clause or
provision shall be simultaneously amended in this Agreement to conform
with any such amendments to the NY Agreement.
8. Regulatory Matters.
------------------
8.1 Each Party shall reasonably cooperate with the other in obtaining and
maintaining any required regulatory approvals for which the Party is
responsible in connection with the performance of its obligations
under this Agreement.
8.2 The Parties understand and agree that this Agreement will be filed
with the Department and may thereafter be filed with the FCC. The
Parties covenant and agree that this Agreement satisfies the
requirements of an agreement under Section 251 of the Act. Each Party
covenants and agrees to fully support approval of this Agreement by
the Department or the FCC under Section 252 of the Act without
modification, subject to the rights of the Parties to appeal or
challenge arbitrated provisions or arbitration decisions. The Parties
also reserve the right to seek regulatory relief and otherwise seek
redress from each other regarding performance and implementation of
this Agreement. In the event the Department, FCC or any court rejects
this Agreement in whole or in part, the Parties agree to meet and
negotiate in good faith to arrive at a mutually acceptable
modification of the rejected portion(s). If such new terms are not
renegotiated within 30 days after such rejection, the dispute shall be
referred to the Dispute Resolution process set forth in Section 16
6
<PAGE>
of the General Terms and Conditions of this Agreement.
9. Liability and Indemnity.
-----------------------
9.1 Indemnification.
---------------
(a) With respect to all matters under this Agreement other than Local
Services (which shall be governed by the provisions of Appendix A
to Part I of this Agreement), to the extent not prohibited by any
Applicable Law, each Party (the "Indemnifying Party") shall
indemnify and hold harmless the other Party ("Indemnified Party")
from and against loss, cost, claim, liability, damage, and
expense (including reasonable attorney's fees) to third parties
for:
(i) damage to tangible personal property or for personal injury
proximately caused by the negligence or willful misconduct
of the Indemnifying Party, its employees, agents or
contractors; and
(ii) claims for libel, slander, infringement of copyright
arising from the material transmitted over the Indemnified
Party's facilities arising from the Indemnifying Party's
own communications or the communications of such
Indemnifying Party's Customers; and
(iii) claims for infringement of patents arising from combining
the Indemnified Party's facilities or services with, or the
using of the Indemnified Party's services or facilities in
connection with, facilities of the Indemnifying Party.
(b) The Indemnified Party will notify the Indemnifying Party promptly
in writing of any claims, lawsuits, or demands by third parties
for which the Indemnified Party alleges that the Indemnifying
Party is responsible under this Section, and, if requested by the
Indemnifying Party, will tender the defense of such claim,
lawsuit or demand. In the event the Indemnifying Party does not
promptly assume or diligently pursue the defense of the tendered
action, then the Indemnified Party may proceed to defend or
settle said action and the Indemnifying Party shall hold harmless
the Indemnified Party from any loss, cost, liability, damage and
expense. In the event the Party otherwise entitled to
indemnification from the other elects to decline such
indemnification, then the Party making such an election may, at
its own expense, assume defense and settlement of the claim,
lawsuit or demand. The Parties will cooperate in every reasonable
manner with the defense or settlement of any claim, demand, or
lawsuit.
7
<PAGE>
9.2 Limitation of Liability.
-----------------------
(a) Except as otherwise provided in Section 9.1 of the General Terms
and Conditions of this Agreement, no liability shall attach to
either Party, its parents, subsidiaries, affiliates, agents,
servants or employees for any cost, expense, claim, liability,
damage, expense or other Loss in the absence of gross negligence
or willful misconduct.
(b) Except as otherwise expressly provided in Section 9.1 of the
General Terms and Conditions of this Agreement, no Party shall be
liable to the other Party for any cost, expense, claim,
liability, damage, expense or other Loss caused by the conduct of
the other Party, the other Party's agents, servants, contractors
or others acting in aid or concert with the other Party.
(c) In no event shall either Party have any liability whatsoever to
the other Party for any indirect, special, consequential,
incidental or punitive damages, including, but not limited to
loss of anticipated profits or revenue or other economic loss in
connection with or arising from anything said, omitted or done
hereunder (collectively, "Consequential Damages"), even if the
other Party has been advised of the possibility of such damages.
(d) Except as otherwise provided in Section 9.1 of the General Terms
and Conditions, each Party's liability to the other Party for any
Loss relating to or arising out of any negligent act or omission
in its performance of this Agreement, whether in contract or in
tort, shall be limited to the amount that is or would have been
charged to the other Party by such negligent or breaching Party
for the specific service(s) or function(s) not performed or
improperly performed, and only for the period of time such
service or function was not performed or improperly performed.
(e) Nothing in this Section 9.2 shall excuse the payment of any award
of collocation remedies made pursuant to Section 2.2.20.2 of Part
III hereof or any remedy provided pursuant to Section 11 of the
General Terms and Conditions of this Agreement.
10. Payment Terms, Disputed Amounts and Audits.
------------------------------------------
10. Local Services.
--------------
All payments, disputes in regard to payments and (except as provided
in 10.4 below) audits for Local Services (if any) shall be on the
terms and conditions set forth in Appendix A to Part I of this
Agreement. All bills for Local Services provided to one
8
<PAGE>
Party by the other are due within thirty-one (31) calendar days of the
bill day (payment date) unless the billed Party is able to establish
that the bill was not timely received (i.e., at least 20 days prior to
----
the payment date), in which case the payment date shall be twenty (20)
calendar days from the receipt of the bill. The Parties agree that
Local Services wholesale bills will be rendered and received
electronically. The above provisions shall be in addition to the terms
and conditions of Appendix A to Part I of this Agreement and shall be
interpreted as not in conflict therewith.
10.2 Payment Terms - Other than Local Services.
-----------------------------------------
This Section 10.2 does not apply to Local Services. Except for
alternately billed calls and meet-point billed calls, each Party shall
bill on a current basis all charges incurred by and credits due to the
other Party under this Agreement attributable to services established,
discontinued or performed during the preceding billing period. In
addition, either Party may bill in advance charges for all services to
be provided during the ensuing billing period except for charges
associated with measured service usage which will be billed in
arrears. The bill day (i.e., the billing date of a bill for a Party
----
for services under this Agreement), the period of service each bill
covers, and the payment date will be as follows:
(a) Each Party will establish a bill day each month for the other
Party's account. If payment is not received by the payment date,
as set forth in (b) following, in immediately available funds, a
late payment penalty will apply as set forth in (b) following.
(b) All bills dated as set forth in (a) preceding for service
provided to one Party by the other are due within thirty-one (31)
calendar days (payment date) unless the billed Party is able to
establish that the bill was not timely received (i.e., at least
----
20 days prior to the payment date), in which case the payment
date shall be twenty (20) calendar days from the receipt of the
bill. All bills are payable in immediately available funds. If
such payment date would cause payment to be due on a Saturday,
Sunday or Legal Holiday, payment for such bills will be due from
the billed Party as follows:
(i) If such payment date falls on a Sunday or on a Legal
Holiday which is observed on a Monday, the payment date
shall be the first non-holiday day following such Sunday or
Legal Holiday.
(ii) If such payment date falls on a Saturday or on a Legal
Holiday which is observed on Tuesday, Wednesday, Thursday
or Friday, the payment date shall be the last non-holiday
day preceding such Saturday or Legal Holiday.
9
<PAGE>
(iii) Further, if any portion of the payment is received by the
billing Party after the payment date, or if any portion of
the payment is received by the billing Party in funds which
are not immediately available to the billing Party, then a
late penalty shall be due to the billing Party. The late
payment penalty shall be the portion of the payment not
received by the payment date or not immediately available
times a late factor. The late factor shall be the lesser
of:
(x) The highest interest rate (in decimal value) which
may be allowed by law for commercial transactions,
for the number of days from the payment date to
and including the date that the billed Party,
actually makes the payment to the billing Party,
or
(y) 0.0005 per day, simple interest, for the. number
of days from the payment date to and including the
date that the billed Party actually makes the
payment to the billing Party.
10.3 Disputed Amounts -Other than Local Services.
-------------------------------------------
Except with respect to Local Services, in the event that a billing dispute
occurs concerning any charges billed to the billed Party by the billing
Party the following provisions will apply.
(a) The first day of the dispute shall be the date on which the billed
Party furnishes in writing the billing Party with the account number
under which the bill has been rendered, the date of the bill and the
specific items on the bill being disputed.
(b) If the Parties are unable to resolve the issues related to the
disputed amounts in the normal course of business within ninety (90)
days after delivery to the billing Party of notice of the disputed
amounts, each of the Parties shall appoint a designated representative
who has authority to settle the dispute and who is at a higher level
of management than the persons with direct responsibility for
administration of this Agreement. The designated representatives shall
meet as often as they reasonably deem necessary in order to discuss
the dispute and negotiate in good faith in an effort to resolve such
dispute. The specific format for such discussions will be left to the
discretion of the designated representatives, however all reasonable
requests for relevant information made by one Party to the other Party
shall be honored.
10
<PAGE>
(c) If the Parties are unable to resolve issues related to the
disputed amounts within forty-five (45) days after the Parties'
appointment of designated representatives pursuant to paragraph (b)
above, then the matter shall be decided pursuant to Section 16 of the
General Terms and Conditions of this Agreement.
(d) The Parties agree that all negotiations pursuant to this Section
10.3 with respect to disputed amounts shall remain confidential and
shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
(e) If a billing dispute is resolved in favor of the billing Party,
any payments withheld pending resolution of the dispute shall be
subject to the late payment penalty as set forth in paragraph 10.2
(b)(iii) above. Further, the billed Party will not receive a disputed
amount penalty credit and/or a late payment penalty credit.
(f) If a billed Party disputes a bill within three months of the
payment date and pays the total billed amount on or before the payment
date, and the billing dispute is resolved in favor of the billed
Party, the billed Party will receive a credit for a disputed amount
penalty from the billing Party for the period starting with the date
of payment and ending on the date of resolution. The credit for a
disputed amount penalty shall be the following:
The disputed amount penalty shall be calculated by multiplying that
portion of the disputed amount paid and resolved in the billed Party's
favor times the lesser of:
(i) The highest interest rate (in decimal value) which may be allowed
by law for commercial transactions, for the number of days from
the first date to and including the last date of the period
involved, or
(ii) 0.0005 per day for the number of days from the first date to
and including the last date of the period involved.
(g) If the billed Party disputes a bill within three months of the
payment date and pays the total billed amount after the payment date
and the billing dispute is resolved in favor of the billed Party, the
billed Party will receive a credit for a disputed amount penalty from
the billing Party for the period starting with the date of payment and
ending on the date of resolution. The credit for a disputed amount
penalty shall be as set forth following. In addition, the late payment
penalty applied to the disputed amount resolved in the billed Party's
11
<PAGE>
favor as set forth in paragraph 10.2(b)(iii) preceding will be
credited.
(h) If the billed Party disputes a bill within three months of the
payment date and does not pay the disputed amount or does not pay the
billed amount (i.e., the non-disputed and disputed amount), and the
billing dispute is resolved in favor of the billed Party, the billed
Party will not receive a credit for a disputed amount penalty from the
billing Party. The late payment penalty applied to the disputed
amount resolved in the billing Party's favor as set forth in paragraph
10.2(b)(iii) preceding will not be credited.
(i) If a billed Party disputes a bill after three months from the
payment date and pays the total billed amount on or before the dispute
date or after the dispute date but prior to the date of resolution,
and the billing dispute is resolved in favor of the billed Party, the
billed Party will receive a credit for a disputed amount penalty from
the billing Party for the period starting with the date of dispute (if
the payment was received before or on the dispute date) or the date of
payment (if the payment was received after the dispute date) and
ending on the date of resolution., The credit for a disputed amount
penalty shall be as set forth following. The billed Party will not
receive a credit for the late payment penalty applied to the disputed
amount resolved in the billed Party's favor if the payment was
received on or before the dispute date. If the payment was received
after the dispute date but prior to the date of resolution, the billed
Party will receive a credit for a late payment penalty applied to the
disputed amount resolved in the billed Party's favor times a late
payment penalty factor for the period starting with the date of
dispute and ending on the date of payment. The penalty factor shall be
as set forth in paragraph 10.2(b)(iii) preceding.
(j) If the billed Party disputes a bill after three months from the
payment date and does not pay the disputed amount or does not pay the
billed amount (i.e., the non-disputed amount and disputed amount) and
the billing dispute is resolved in favor of the billed Party, the
billed Party will not receive a credit for a disputed amount penalty
from the billing Party. The billed Party will receive a credit for the
late payment penalty applied to the disputed amount resolved in the
billed Party's favor times a late payment penalty factor for the
period starting with the date of dispute and ending on the date of
resolution. The penalty factor shall be as set forth in paragraph
10.2(b)(iii) preceding.
(k) Adjustments for the quantities of services established or
discontinued in any billing period will be prorated to the number of
days or major fraction of days based on a thirty (30) day month. The
billing Party will, upon request and if available, furnish to the
billed Party such detailed information as may
12
<PAGE>
reasonably be required for verification of any bill.
(l) When a rate as set forth in this Agreement is shown to
more than two decimal places, the charges will be
determined using the rate shown. The resulting amount
will then be rounded to the nearest penny (i.e.,
rounded to two decimal places).
(m) The Parties agree to establish a process by which
closure of a specific billing period will occur by
joint agreement. The purpose of a closure process is
for the Parties to jointly agree to close a billing
period to all further analysis and billing
transactions. Closure documentation at a minimum should
consist of a mutually developed agreement outlining the
process, a sign-off document to formalize the closure
of a specific period, and documented specific issues
which would be exempt from closure. The intent of a
closure process is for the Parties to agree that except
for exempted issues, all billing and financial
adjustments have been processed and rendered for a
specific bill period. The Parties agree to a bill
closure process which will be established within twelve
(12) months of the Effective Date of this Agreement.
10.4 Audits and Inspections.
----------------------
(a) Subject to the terms and conditions of this Section
10.4, the restrictions set forth in Section 18 of the
General Terms and Conditions and the reasonable
security requirements of each Party and except as may
be otherwise specifically provided in this Agreement,
each Party (the "Auditing Party") may audit the other
Party's (the "Audited Party") books, records and other
documents which relate solely to the Parties' billing
to the other Party under this Agreement (other than in
connection with Local Services, with respect to which
no such audit right shall be available except to the
extent BA develops an audit of the bill certification
process pursuant to an industry collaborative process,
in which event such audit rights shall be governed by
such developed process and not by this Agreement) once
each year at the conclusion of each calendar year, in
order to evaluate the accuracy of such other Party's
billing and invoicing. The Parties may employ other
persons or firms for this purpose. Such audit shall
take place at a time and place agreed to by the Parties
no later than thirty (30) days after notice thereof to
such other Party.
(b) Each Audited Party shall promptly correct any billing
error that is revealed in an audit, including
reimbursing any overpayment in the form of a credit to
the Auditing Party on the invoice for the first full
billing cycle after the Parties have agreed upon the
accuracy of the audit results. Any disputes
13
<PAGE>
concerning audit results shall be resolved pursuant to
the procedures described in Section 16 of the General
Terms and Conditions of this Agreement.
(c) Each Audited Party shall cooperate fully in any such
audit, providing reasonable access to any and all
appropriate employees and relevant books, records and
other documents reasonably necessary to assess the
accuracy of its bills.
(d) Each Auditing Party may perform a single additional
audit of the Audited Party's relevant books, records
and documents during any calendar year if the previous
audit uncovered uncorrected net variances or errors in
invoices in favor of the Audited Party having an
aggregate value (except for Local Services purchases)
of not less than two percent (2%) of the total amount
payable by the Auditing Party during the period covered
by the audit.
(e) All audits shall be conducted at the sole cost and
expense of the Auditing Party.
(f) Upon (i) the discovery by either Party of overcharges
not previously reimbursed to the other Party or
underpayments by a Party or (ii) the resolution of
disputed audits, each Party shall promptly reimburse or
pay to the Party entitled thereto the amount of any
overpayment or underpayment, together with interest
thereon at a rate per month equal to the lesser of 1.5%
or the maximum permitted legal rate of interest for the
number of days from the date such Party received such
overpayment or, in the case of an underpayment, should
have received such payment through but excluding the
date such reimbursement or payment is made. In no
event, however, shall interest be assessed on any
previously assessed or accrued late payment charges.
10.5 Alternate Billing to Third Numbers.
----------------------------------
10.5.1 Calls on BA resold Lines using BA's Operator Services.
-----------------------------------------------------
The following procedures shall apply for Alternately
Billed Calls which are local calls or IntraLATA toll
calls carried by BA and originating or terminating over
a BA line (x) which has been resold by AT&T pursuant to
the terms of Part I of this Agreement and (y) for which
BA is providing operator and directory assistance
services:
14
<PAGE>
10.5.1.1 AT&T Originating Call charged to Customer Served by a
------------------------------------------------------
BA Line. In the case of a call which originates from an
-------
AT&T Customer being served by a resold line in the BA
territory within Massachusetts (hereinafter "AT&T
Customer Resold Line") which is charged to a retail
Customer served by a BA line including a resold line in
BA territory within Massachusetts (hereinafter "BA
Massachusetts Territory"), BA shall record and process
such call, and transmit to AT&T an unrated call record.
AT&T shall rate such call for purposes of charging the
retail Customer and send such rated record to BA or a
resale carrier designated by BA in billable form for
billing and collection purposes, at which point AT&T
shall have no further responsibility for billing or
collecting for such call for BA retail Customers. BA,
for BA retail Customers only, shall pay AT&T for such
call the billed amount less the billing and collection
fee specified in Part IV. AT&T shall pay BA for the
call at the wholesale discount rate set forth in Part
IV as billed on the wholesale bill.
10.5.1.2 BA Originating Call charged to AT&T Customer. In the
--------------------------------------------
case of a call which originates from a BA retail
Customer within Massachusetts and is charged to an AT&T
Customer Resold Line, BA shall record and process such
call and rate such call for purposes of charging AT&T's
Customer. BA shall send such rated record to AT&T in
billable form for billing and collection purposes, at
which point BA shall have no further responsibility for
billing or collecting for such call. AT&T shall pay BA
for such call the billed amount less the billing and
collection fee specified in Part IV.
10.5.1.3 AT&T Originating Call charged to Other Carrier. In the
----------------------------------------------
case of a call which originates from an AT&T Customer
Resold Line which is charged to a customer of a third
party Telecommunications Carrier outside BA
Massachusetts Territory, BA shall record and process
such call and transmit to AT&T an unrated call record,
at which point BA shall have no further responsibility
for rating, billing, or collecting for such call. AT&T
shall pay BA for such call at the wholesale discount
rate set forth in Part IV as billed on the wholesale
bill.
15
<PAGE>
10.5.2 Calls on BA Resold Lines Using AT&T's Operator Services. The following
-------------------------------------------------------
procedures shall apply for Alternately Billed Calls which are local
calls or IntraLATA toll calls carried by BA and originating or
terminating over a BA line (x) which has been resold by AT&T pursuant
to the terms of Part I of this Agreement and (y) for which BA is not
providing operator and directory assistance services:
10.5.2.1 AT&T Originating Call charged to BA Customer. In the
--------------------------------------------
case of a call which originates from an AT&T Customer
Resold Line and is charged to a BA retail Customer
within BA Massachusetts Territory, AT&T shall record
and process such call at its OSPS and rate such call
for purposes of charging BA's Customer and send such
rated record to BA in billable form for billing and
collection purposes, at which point AT&T shall have no
further responsibility for billing or collecting for
such call. BA shall pay AT&T for such call the billed
amount less the billing and collection fee specified in
Part IV. AT&T shall pay charges for Customized Routing
in accordance with Part IV, Section B. XIII of this
Agreement. Appropriate Reciprocal Compensation charges
for terminating to a BA line will apply pursuant to
Section 10.6 of this Agreement.
10.5.2.2 BA Originating Call charged to AT&T Customer. In the
--------------------------------------------
case of a call which originates from a BA retail
Customer within Massachusetts and is charged to an AT&T
Customer Resold Line, BA shall record and process such
call and rate such call for purposes of charging AT&T's
Customer. BA shall send such rated record to AT&T in
billable form for billing and collection purposes, at
which point BA shall have no further responsibility for
billing or collecting for such call. AT&T shall pay BA
for such call the billed amount less the billing and
collection fee specified in Part IV.
10.5.2.3 AT&T Originating Call charged to Other Carrier. In the
----------------------------------------------
case of a call which originates from an AT&T Customer
Resold Line which is charged to a customer of a third
party Telecommunications Carrier providing services
outside BA Massachusetts Territory, AT&T shall record
and process such call. AT&T shall pay charges for
Customized Routing in accordance with Part IV, Section
B. XIII of this Agreement. Appropriate Reciprocal
Compensation charges for terminating to a BA line will
apply pursuant to Section 10.6
16
<PAGE>
of this Agreement.
10.5.3 Calls Billed to BA Resold Lines and Carried through CMDS and
------------------------------------------------------------
CATS. The following procedures shall apply for Alternately
----
Billed Calls which are local calls or IntraLATA toll calls
billed through the Centralized Message Distribution System
("CMDS") and originating or terminating over a third
company's line and charged to a BA line which has been
resold by AT&T pursuant to the terms of Part I of this
Agreement.
10.5.3.1 Calls Carried through CMDS and CATS. In the case
-----------------------------------
of a call which originates and terminates outside
BA Massachusetts Territory and is charged to an
AT&T Customer Resold Line, BA shall provide to
AT&T the information and charges with respect to
such call received from the out-of-region
Telecommunications Carrier via the daily usage
feed. BA shall have no further responsibility for
rating, billing and collecting for such call. AT&T
shall pay BA for such call an amount equal to the
amount charged to BA through the CATS settlement
process by such out-of-region Telecommunications
Carrier with respect to such call as billed on the
wholesale bill and a Call Usage Detail Service
charge in accordance with Part IV, Section B, XI.
B1 of this Agreement.
10.5.4 Administrative Matters. All other matters relating to the
----------------------
rating, billing, payment and transmission of records with
respect to Alternately Billed Calls which are not set forth
above, including, without limitation, the timing of payments
and billings, the frequency of transmission of records and
the eligibility of messages for billing, shall be governed
by the other applicable provisions of this Agreement or, to
the extent not so provided, by the Joint Operations Plan.
10.5.5 Other Alternate Billed Calls. A BA territory intraregion
----------------------------
Alternate Billed Call clearinghouse will be used for
settling Alternately Billed Calls for facility-based and
unbundled Network Element purposes and, to the extent it can
be implemented, for calls originating or charged to an AT&T
Customer Resold Line (including BA lines resold by third
party carriers within Massachusetts).
10.6 Reciprocal Compensation.
-----------------------
(a) Reciprocal Compensation only applies to the transport and
termination of Reciprocal Compensation Traffic.
17
<PAGE>
(b) The Parties shall compensate each other for transport and
termination of Reciprocal Compensation Traffic, based on
actual usage, at the rates set forth in Part IV hereof.
(c) The Reciprocal Compensation arrangements set forth in this
Agreement are not applicable to interLATA calls, intraLATA
toll calls or to intraLATA calls originated on a third-party
carrier's network on a 1 + presubscribed basis or a casual
dialed (10XXX or 101XXXX) basis. All such calls shall
continue to be governed by the terms and conditions of the
applicable federal and state tariffs.
(d) When either Party delivers seven (7) or ten (10) digit
translated intraLATA 800/888 service to the other Party for
termination, where the originating Party uses its own switch
(i.e., not utilizing unbundled switching from the terminating
----
Party), the originating Party shall provide the terminating Party
with customer billing records in industry standard format (EMR)
if required by the terminating Party. Where the originating Party
utilizes unbundled switching from the terminating Party, the
Party with recording capability will provide such records. Where
the originating Party uses its own switch (not utilizing
unbundled switching) to originate the call, the originating Party
may bill the terminating Party for the delivery of the traffic at
Reciprocal Compensation rates. The terminating Party may not bill
the originating Party for Reciprocal Compensation under this
Agreement, except where the originating Party fails to provide
the terminating Party with useable EMR records in a timely
manner. The originating Party shall bear the entire cost of any
systems development and production of such records; provided that
the terminating Party that is providing the 800/888 service shall
pay for each record provided by the originating Party at the
reciprocal record exchange rate set forth in Part IV hereof. If
the originating Party performs the 800 database query for the
terminating Party, the originating Party may charge the
terminating Party for such a query at the rate set forth in Part
IV hereof.
(e) Each Party shall charge the other Party its effective
applicable tariffed IntraLATA switched access rates for the
transport and termination of all IntraLATA Toll Traffic.
(f) The rates for termination of Reciprocal Compensation Traffic
are set forth in Part IV.
18
<PAGE>
11. Service Standards.
-----------------
The Parties hereby agree that the performance standards and remedies
approved by the Department in the Consolidated Arbitrations, D.P.U. 96-73/74,
96-75, 96-80/81, 96-83 and 96-94, shall be incorporated by reference into this
Agreement and shall govern the provision of services hereunder, as applicable.
12. OSS/Electronic Interfaces.
-------------------------
(a) Each BA service order completion (with the exception of complete
account conversions processed through the BA Service Order Processor
("SOP") system, e.g., complex services or accounts of 10 lines or
greater) shall contain all working telephone numbers ("WTNs") that
were processed on the service order. Should BA develop the capability
of providing WTNs on orders completed through the SOP system for
itself during the Term of this Agreement, BA will make such capability
for SOP-processed orders available to AT&T. The Parties mutually agree
to continue discussions regarding the feasibility, timeframes and cost
to implement such SOP capabilities for AT&T Customers.
(b) Migration as Specified.
(i) With respect to Local Services customers, AT&T may submit service
orders for agreed upon service types for BA end users who convert
their existing local exchange service to services resold by AT&T
by submitting a service order which indicates the desired service
configuration for each end user line being converted. By
submitting such service orders, AT&T directs BA to remove all
services except for those delineated below and to connect only
those services stated on the service order without disconnecting
the line. At this time, BA will not support this migration-as-
specified service order process for partial acquisitions (i.e.
those end user accounts for which AT&T seeks to convert some, but
not all, of the end user lines associated with a single Billed
Telephone Number). BA agrees that BA will explore the possibility
of performing migration-as-specified service order processing for
partial migrations in the future. BA shall convert such end user
line retaining the end user's existing telephone number (except
as otherwise provided in Part I(E)), directory listing
information, appearance in the E911 database, disability
designations, demarcation information, and voluntary blocking
selection. BA shall provision such resold line only with the
existing above referenced line characteristics and the service
configuration provided by AT&T in the service order.
(ii) [Intentionally omitted]
19
<PAGE>
(iii) If the service order is incomplete, insufficient, incorrect,
or contains conflicting information such that BA is not able
to process the order, BA may reject such service order. Any
such rejection shall not be considered in any manner in
measuring or calculating BA's service performance or
satisfying any measurements. Notwithstanding anything to the
contrary set forth in this Agreement, (x) in the absence of
gross negligence or willful misconduct, BA shall have no
liability to AT&T, any AT&T customer, or any other third
party as a result of or otherwise in connection with the
rejection of any migration-as-specified service order; and
(y) AT&T shall indemnify BA and hold BA harmless from and
against any and all claims, losses, liabilities and damages
to third parties incurred by BA by reason of such
incomplete, insufficient, incorrect or otherwise erroneous
migration-as-specified service order.
(iv) BA shall develop this new service order capability and have
it in service to handle a commercially reasonable volume of
service orders by March 1, 1998 for Local Services. The
Parties shall mutually agree to the expansion of this
service order capability to additional service types.
(v) Appropriate OSS charges as set forth in Part IV shall apply.
Additionally, AT&T shall pay BA its apportioned share of
reasonable direct development costs, to the extent not
previously recovered from AT&T, for migration-as specified
capability (collectively, "Migration-as-Specified Costs").
Prior to incurring such Migration-as Specified Costs, BA
shall submit a good faith estimate of such development costs
to AT&T. AT&T shall notify BA within ten (10) business days
from receipt of such estimate as to whether or not BA should
proceed with the development of migration-as-specified
capability for Local Services. If AT&T notifies BA to
proceed, BA shall continue to develop such capability and
AT&T shall be obligated, as stated herein, to pay BA its
development costs. Subsequent to the implementation of
migration-as specified capability by BA, the parties agree
that BA will calculate Migration-as-Specified Costs and
submit such costs to AT&T. If AT&T disputes such costs, such
dispute shall be submitted pursuant to Section 16 of the
General Terms and Conditions to determine (x) if BA actually
incurred such costs for the development of this service
order process capability to AT&T; and (y) that such costs
were reasonably incurred in order to provide this service
order process capability to AT&T.
(vi) The Parties shall negotiate in good faith to agree on
documented interface specifications and a mutually
acceptable testing period for the service order capability
described above. AT&T agrees to provide prior written notice
to BA in the event it decides to use such service order
capability for any high
20
<PAGE>
volume, unusual quantity or other non-ordinary course of
business request sufficiently prior to the date it expects
to effect such order so that BA may adequately implement the
same, and will agree to further testing in connection
therewith to the extent required to assure proper
implementation. The Parties shall work cooperatively to
assure that any problems in connection with implementation
and the provision of such service order capabilities are
resolved.
(vii) AT&T and BA acknowledge and agree that the new service order
process provided herein shall only be utilized by AT&T to
place orders in a fully mechanized flow through environment.
The parties further agree that any changes to this service
order type that the parties may undertake to negotiate shall
preserve and not degrade such fully mechanized processes.
(viii) AT&T's agreement to pay such development costs herein does
not preclude AT&T from asserting a position against BA's
recovery of other development costs before appropriate
regulatory bodies. The Parties agree that this migration-as-
specified provision shall not be used to support either
Party's position as to the appropriate means for BA to
recover its costs to develop service order processing
capabilities.
(c) AT&T may submit a service order correction, change, supplement or
cancellation (a "Change Order") with respect to an initial service
order for Local Services and unbundled Network Elements at any time
after such service order has been transmitted to BA. BA anticipates
rejecting such Orders (i) for incorrect information contained in the
Change Order; and (ii) in those instances when the Order has been
removed from queue for processing. If such Change Order is rejected
for reasons other than incorrect information supplied with the Change
Order, AT&T may, at its option, contact its BA service representative
for manual intervention on a real time basis. The Parties shall
cooperate to resolve any problems which may arise in connection with
such service order process. For Local Services, BA will use
commercially reasonable efforts to implement the new process by
December 1, 1997 or sooner, as mutually agreed to by the parties. The
Parties shall mutually agree to an implementation date for unbundled
Network Elements.
(d) As further described in the attached Appendix A to the General Terms
and Conditions of this Agreement, the parties agree to work together
to develop and implement application-to-application electronic
interfaces which already conform or will conform to national standards
for primary interfaces* adopted by appropriate
______________________________
* As used herein, the term "Primary Interface" relates to the interface which
is designated as primary interface amongst more than one alternative offering by
an impartial, recognized standards body in the United States.
21
<PAGE>
industry standards bodies, for the conduct of local service resale,
unbundled Network Elements, and the interconnect business between
ILECs and CLECs. The specifications stated in Appendix A reflect the
Parties' reasonable interpretation of what they believe, at the
present time, to be the future national standards. Both Parties agree
that the interfaces which will be implemented pursuant to Appendix A
will not be proprietary to either party and that information related
to these interfaces will be made publicly available in accordance with
Applicable Laws. Neither party waives any of its rights as a
participant in industry forums in the development and implementation
of national standards. The Parties acknowledge that the state of the
art in this area is rapidly changing. The Parties agree that this
Section 12(d) of the Agreement and Appendix A hereto and any joint
implementation plans pursuant to Appendix A do not imply and shall not
be used in any manner to demonstrate that (i) existing BA interfaces
do or do not meet OSS requirements established by appropriate
regulatory bodies; (ii) adoption of national standards is a
requirement under the Act, the Order, or Applicable Laws; or (iii) a
particular means of cost recovery is appropriate or not, except to the
extent the Parties have agreed to cost recovery herein. Except for the
foregoing neither party waives its rights to present its positions
with respect to the adequacy of BA's existing and future interfaces
and the need for national standards.
(e) The Parties acknowledge that activities similar to those described in
this Section 12 and Appendix A to these General Terms and Conditions
are currently underway in New York pursuant to the NY Agreement and
that, where practical, the Parties do not intend unnecessarily to
duplicate performance thereunder.
13. Operations Plan and Implementation Team. The Parties agree to an
---------------------------------------
Implementation Plan as set forth in Attachment 2 to this Agreement.
14. Force Majeure.
-------------
(a) Neither Party shall be liable for any delay or failure in performance
of any part of this Agreement (other than an obligation to make money
payments) from any cause beyond its reasonable control and without its
fault or negligence including, without limitation, acts of nature,
acts of civil or military authority, government regulations,
embargoes, epidemics, terrorist acts, riots, insurrections, fires,
explosions, earthquakes, nuclear accidents, floods, work stoppages,
strikes, equipment failure, power blackouts, volcanic action, other
major environmental disturbances, unusually severe weather conditions,
inability to secure products or services of other persons or
transportation facilities, or acts or omissions of transportation
carriers (each, a "Force Majeure Event"). If any Force Majeure Event
occurs, the Party delayed or unable to perform shall give prompt
notice to the other Party and shall take all reasonable steps to
mitigate the effects of such Force Majeure Event. During the
22
<PAGE>
pendency of the Force Majeure Event, the duties of the Parties under
this Agreement affected by the Force Majeure Event shall be abated
and, upon cessation of such Force Majeure Event, shall resume as
promptly as reasonably practicable, without liability thereafter.
(b) Notwithstanding paragraph (a) of this Section 14, no delay or other
failure to perform shall be excused pursuant to this Section 14 by the
acts or omissions of a Party's subcontractors, materialmen, suppliers
or other third persons providing products or services to such Party
unless such acts or omissions are themselves the product of a Force
Majeure Event, or unless such delay or failure and the consequences
thereof are beyond the reasonable control and without the fault or
negligence of the Party claiming excusable delay or other failure to
perform.
15. Certain State and Local Taxes. Each Party purchasing services hereunder
-----------------------------
shall pay or otherwise be responsible for all federal, state, or local sales,
use, excise, gross receipts, transaction or similar taxes, fees or surcharges
levied against or upon such purchasing Party (or the providing Party when such
providing Party is permitted to pass along to the purchasing Party such taxes,
fees or surcharges), except for any tax on either Party's corporate existence,
status or income (other than income taxes included in rates through the
computation of carrying charge factors). Whenever possible, these amounts shall
be billed as a separate item on the invoice. To the extent a sale is claimed to
be qualified for resale tax exemption, the purchasing Party shall furnish the
providing Party a proper resale tax exemption certificate as authorized or
required by statute or regulation by the jurisdiction providing said resale tax
exemption. Failure to timely provide said resale tax exemption certificate will
result in no exemption being available to the purchasing Party.
16. Dispute Resolution.
------------------
(A) Inter-Company Review Board:
---------------------------
(1) The Parties to this Agreement shall establish an Inter-Company
Review Board consisting of at least one representative from each
Party at the managing director or above level (or such lower
level as the Parties agree) to assist in the resolution of
disputes between BA and AT&T.
(a) Each Party must designate its initial representative to the
Inter-Company Review Board within 15 days of the Effective
Date of this Agreement.
(b) The Parties may change their designee, or select an
alternative designee, as required or deemed appropriate,
without notice.
23
<PAGE>
(B) Non-Service Affecting Disputes:
------------------------------
If a non-service affecting dispute arises between BA and AT&T during the
Term of the Agreement, the following process, which shall be overseen by
the Department, shall be followed to resolve such dispute. In the event the
Parties, in good faith, do not agree that a non-service affecting dispute
exists, the dispute shall be assumed to be a service affecting dispute
(except as provided in Paragraph (C) below) and the process for resolving a
service affecting dispute, as described in Paragraph (C) below, shall be
followed.
(1) Informal Negotiation of Non-Service Affecting Dispute.
-----------------------------------------------------
If the Parties have a non-service affecting dispute either Party
may initiate the procedures set forth herein by providing notice
of the existence of a non-service affecting dispute as set forth
in Section 17 of the General Terms and Conditions of the
Agreement. The petitioning party shall also serve the Department
and the Inter-Company Review Board with a copy of the notice.
(a) The Parties shall have an initial 30-day period beginning
from the date on which either Party has provided written
notice to the other Party identifying the existence of a
non-service affecting dispute within which to resolve the
dispute themselves, without mediation or arbitration as
provided below. The Parties shall make a reasonable effort
to meet as often as necessary but not less than one time
each week in an effort to resolve a dispute.
(b) The Parties may also mutually agree to other informal
resolution processes for specific circumstances, including,
but not limited to commercial mediation or arbitration prior
to requesting the Department initiate mediation or
arbitration of any non-service affecting dispute between BA
and AT&T.
(2) Formal Mediation or Expedited Investigation/Arbitration of Non-
----------------------------------------------------------------
Service Affecting Dispute by the Department.
-------------------------------------------
If the Inter-Company Review Board is unable to resolve a non-
service affecting dispute within thirty (30) days (or such other
period agreed to in writing by the Parties) either Party may
petition the Department. The initial petition shall be for
mediation. If agreement cannot be reached through mediation, the
aggrieved Party may then petition the Department for expedited
investigation/arbitration. The mediation and expedited
investigation/arbitration process shall be overseen by the
Department.
24
<PAGE>
(a) A request for mediation shall be submitted in writing to the
Department, with a copy served on the other Party.
(b) The period of mediation shall be 60 days commencing on the date
of filing of such petition for mediation. Such petition shall
include a request to the Department to choose a mediator within
the first 10 days of such 60 day period, and the mediation shall
be conducted by a mediator designated by the Department. The
Department may assign a staff person or a professional mediator,
funded equally by the Parties, to conduct the mediation. The
Parties shall cooperate in good faith with the mediator to
resolve the dispute within such 60 day period. If, at any date
following the 45th day of such 60 day period, the Parties have
not resolved their dispute, the Parties may request the mediator
formally declare a deadlock.
(c) Following the earlier to occur of (i) expiration of the 60-day
mediation period without resolution of the dispute between the
Parties or (ii) formal declaration of a deadlock by the mediator
as contemplated in preceding paragraph (b), either Party may
petition the Department to open an expedited
investigation/arbitration into the dispute. The petition should
include a comprehensive explanation of the dispute (e.g.,
unresolved issues, areas of agreement, stipulations of fact), as
well as all relevant correspondence exchanged during negotiations
or mediation. The petitioning Party shall provide a copy of the
petition to the other Party on the same day that it is filed with
the Department. The petition shall include a request to open an
expedited investigation/arbitration within 10 business days of
receipt of its petition. The Department may assign a staff person
or a professional arbitrator, funded equally by the Parties, to
conduct the expedited investigation/arbitration which shall be no
more than 60 days. The staff person or arbitrator shall issue and
serve his or her decision and award on the Parties within 20
business days of the close of the investigation/arbitration. Any
such decision shall be submitted to the Department for approval,
unless otherwise provided by the Department.
(C) Service Affecting Disputes:
--------------------------
If a service affecting dispute arises between BA and AT&T during the
Term of the Agreement, the following process, which shall be overseen
by the Department, shall be followed to resolve such dispute. Any
disputes over a matter that directly affects the ability of a Party to
provide uninterrupted high-quality services to its customers
25
<PAGE>
shall be considered a service affecting dispute. However, in the sole
discretion of the Party identifying the existence of the service affecting
dispute, said dispute may be resolved in accordance with the general
procedures/timeframes for a non-service affecting dispute, as described
above. The Parties agree that disputes regarding collocation remedies in
Exhibit A to Part III hereof shall not constitute service affecting
disputes.
(1) Informal Negotiation of Service Affecting Dispute.
-------------------------------------------------
If the Parties have a service affecting dispute either Party may
initiate the procedures set forth herein by providing notice of the
existence of a service affecting dispute as set forth in Section 17 of
the General Terms and Conditions of the Agreement. The petitioning
party shall also serve the Department and the Inter-Company Review
Board with a copy of the notice.
(a) The Parties shall have an initial 5 business day period beginning
from the date on which either Party has provided written notice
to the other Party identifying the existence of a service
affecting dispute and seeking to resolve it, within which to
resolve the dispute themselves through the Inter-Company Review
Board, without mediation or arbitration as provided below, except
as set forth in subsection (b) below. The Parties shall make a
reasonable effort to meet as often as necessary but not less than
once in an effort to resolve the dispute.
(b) The Parties may also mutually agree to other informal resolution
processes for specific circumstances, including, but not limited
to commercial mediation or arbitration prior to requesting the
Department to initiate mediation or arbitration of a service
affecting dispute between BA and AT&T.
(2) Formal Expedited Investigation/Arbitration of Service Affecting
---------------------------------------------------------------
Dispute by the Department.
-------------------------
If the Inter-Company Review Board is unable to resolve a service
affecting dispute within 5 business days (or such other period agreed
to in writing by the Parties) either Party may petition the Department
for expedited consideration and disposition of such dispute pursuant
to paragraph B(2)(c) above. There shall be no period of mediation. The
other Party shall assent to such request for expedition. In addition,
to the extent technically and operationally feasible, the Party
against whom the complaint has been made, shall take immediate
remedial action to correct the service affecting condition, without
prejudice to its position on the merits of the dispute or its
26
<PAGE>
right to recover any costs incurred in implementing an interim
solution. The staff person or arbitrator appointed by the Department
shall issue and serve his or her decision and award on the Parties
within 10 business days of the close of the investigation/arbitration.
Such decision shall be submitted for approval by the Department,
unless otherwise provided by the Department.
(D) Confidentiality:
---------------
(1) BA, AT&T, and the arbitrator will treat the arbitration proceedings,
including the hearings and conferences, discovery, or other related
events, as confidential, except as necessary in connection with a
judicial challenge to, or enforcement of, an award, or unless
otherwise required by an order or lawful process of a court or
governmental body.
(2) In order to maintain the privacy of all arbitration conferences and
hearings, the arbitrator shall have the power to require the exclusion
of any person, other than a Party, counsel thereto, or other essential
persons.
(3) To the extent that any information or materials disclosed in the
course of an arbitration proceeding contain proprietary, trade secret
or confidential information of either Party, it shall be safeguarded
in accordance with an appropriate agreement for the protection of
proprietary, trade secret or confidential information that the Parties
agree to negotiate. However, nothing in such negotiated agreement
shall be construed to prevent either Party from disclosing the other
Party's information to the arbitrator in connection with or in
anticipation of an arbitration proceeding. In addition, the arbitrator
may issue orders to protect the confidentiality of proprietary
information, trade secrets, or other sensitive information in the
event the Parties cannot agree upon an agreement to govern the
handling of such information.
17. Notices. Any notices or other communications required or permitted to be
-------
given or delivered under this Agreement shall be in hard-copy writing (unless
otherwise specifically provided herein) and shall be sufficiently given if (a)
delivered personally, (b) delivered by prepaid overnight express service or (c)
delivered by confirmed telecopier transmission with a copy delivered thereafter
in the manner set forth in (a) or (b) above, to the following (unless otherwise
specifically required by this Agreement to be delivered by other means or to
another representative or point of contact and except for notices required in
the ordinary course of business):
27
<PAGE>
If to AT&T:
AT&T Communications of New England, Inc.
32 Avenue of the Americas
New York, NY 10013
Attention: Vice President-Northeast States, LSO
Telecopier: (212) 387-4908
with a copy of each notice relating to an action, suit,
proceeding or claim to be sent simultaneously to:
AT&T Corp.
32 Avenue of the Americas
26th Floor
New York, NY 10013
Attention: Regional V.P. - Law and Government Affairs
Telecopier: (212) 387-5613
If to BA:
BA
1095 Avenue of the Americas
40th Floor
New York, NY 10036
Attention: President -Telecom Industry Services
Telecopier: (212) 597-2562
with a copy of each notice relating to an action, suit,
proceeding or claim to be sent simultaneously to:
BA
1095 Avenue of the Americas
40th Floor
New York, NY 10036
Attention: General Counsel
Telecopier: (212) 597-2560
Either Party may unilaterally change its designated representative and/or
address for the receipt of notices by giving seven (7) days' prior written
notice to the other Party in compliance with this Section. Any notice or other
communication shall be deemed given when received.
28
<PAGE>
18. Confidentiality.
---------------
(a) Any information such as specifications, drawings, sketches, business
information, forecasts, models, samples, data, computer programs and
other software and documentation of one Party (a "Disclosing Party")
that is furnished or made available or otherwise disclosed to the
other Party or any of its employees, contractors, agents or Affiliates
(its "Representatives" and, together with a Party, a "Receiving
Party") pursuant to this Agreement (such information, other than
customer proprietary network information, as defined in Section
222(f)(1) of the Act, being hereinafter collectively referred to as
"Proprietary Information") shall be deemed the property of the
Disclosing Party. Proprietary Information, if written, shall be marked
"Confidential" or "Proprietary" or by other similar notice, and, if
oral or visual, shall be confirmed in writing as confidential by the
Disclosing Party to the Receiving Party within ten (10) days after
disclosure. Unless Proprietary Information was previously known by the
Receiving Party free of any obligation to keep it confidential, or has
been or is subsequently made public by an act not attributable to the
Receiving Party, or is explicitly agreed in writing not to be regarded
as confidential, or is independently developed by the Receiving Party,
the Parties hereby agree that in addition to the confidentiality
requirements set forth in the Act and the Order, all Proprietary
Information (i) shall be held in confidence by each Receiving Party;
(ii) shall be disclosed on a confidential basis to only those persons
who have a need for it in connection with the provision of services
required to fulfill this Agreement and shall be used only for such
purposes; and (iii) may be used for other purposes only upon such
terms and conditions as may be mutually agreed to in advance of use in
writing by the Parties. Notwithstanding the foregoing sentence, a
Receiving Party shall be entitled to disclose or provide Proprietary
Information as required by any governmental authority or applicable
law only in accordance with Section 18(b) below.
(b) If any Receiving Party is required by any governmental authority or by
applicable law to disclose any Proprietary Information, then such
Receiving Party shall provide the Disclosing Party with written notice
of such requirement, to the extent permitted by law, as soon as
possible and, where possible, prior to such disclosure. The Disclosing
Party may then seek appropriate protective relief from all or part of
such requirement, and the Receiving Party shall use all commercially
reasonable efforts to cooperate with the Disclosing Party in
attempting to obtain any protective relief which such Disclosing Party
chooses to obtain. Absent any restraining order or other relief
prohibiting any such disclosure by the Receiving Party, then the
Receiving Party shall be entitled to disclose such Proprietary
Information and shall incur no liability hereunder as a result
thereof.
29
<PAGE>
(c) In the event of the expiration or termination of this Agreement for
any reason whatsoever, each Party shall return to the other Party or
destroy all Proprietary Information and other documents, work papers
and other material (including all copies thereof) obtained from the
other Party in connection with this Agreement and shall use all
reasonable efforts, including instructing its employees and others who
have had access to such information, to keep confidential and not to
use any such information, unless such information is now, or is
hereafter disclosed, through no act, omission or fault of such Party,
in any manner making it available to the general public.
(d) Except as may be otherwise provided herein, by Applicable Law or in
any FCC rules or procedures hereinafter issued, BA shall not use any
AT&T data, even if the AT&T data is in aggregated form, for retail
marketing purposes, unless such data was previously known by BA free
of any obligation not to use such data for retail marketing purposes,
has been or is subsequently made public by an act not attributable to
BA or is explicitly agreed in writing not to be subject to the
restriction set forth in this Section 18(d).
(e) BA shall provide to AT&T documentation of BA operational flows within
60 days after the Effective Date of this Agreement to help ensure that
Section 18(d) above is being complied with by BA.
(f) The Receiving Party may make copies of Proprietary Information only as
reasonably necessary to perform its obligations under this Agreement.
All such copies shall bear the same copyright and proprietary rights
notices as are contained on the original.
(g) Except as otherwise expressly provided elsewhere in this Agreement, no
license is hereby granted under any patent, trademark, or copyright,
nor is any such license implied, solely by virtue of the disclosure of
any Proprietary Information.
(h) The Parties acknowledge and agree that CPNI is governed by Section 222
of the Act.
19. Number Portability.
------------------
19. Interim Number Portability.
--------------------------
(a) Until Number Portability is implemented on an industry-wide basis
pursuant to an order or regulation issued by the FCC or the
Department, the Parties agree to provide to each other Interim
Number Portability as defined in the Act, ("INP") through remote
call forwarding, route indexing, and full NXX code migration as
set forth below or through any other technical solution which
may, at the option of the Parties, be mutually agreed to by the
Parties.
30
<PAGE>
(b) Upon implementation of Number Portability pursuant to an FCC or
Department regulation, both Parties agree to conform and provide
such Number Portability in accordance with said regulation. Once
Number Portability is implemented, either Party may withdraw, at
any time and at its sole discretion, its INP offerings, subject
to reasonable advance written notice to the other Party.
(c) In the event a Customer of one Party ("Party A") elects to become
a Customer of the other Party ("Party B") and such Customer
continues to reside within the same central office boundary and
Rate Center, and elects to utilize the original telephone
number(s) corresponding to the Exchange Service(s) it previously
received from Party A in conjunction with the Exchange Service(s)
it will now receive from Party B:
(i) Party B shall, upon receipt from such Customer of the
type of customer authorization required by the
Department or the FCC (together with an associated
service order which, among other things, indicates that
Party B has obtained the required customer
authorization permitting assignment of the number to
Party B), place an order with Party A to implement an
arrangement whereby all calls to the original telephone
number(s) will be forwarded to Party B over the
appropriate Local/IntraLATA trunks for purposes of
forwarding the call.
(ii) Party B shall become the customer of record for the
original Party A telephone numbers subject to the INP
arrangements provided that Party B continues to use the
INP service for the use of the end user customer
originally assigned such number, and in all respects
shall be treated as the customer as to such number as
if Party B has been assigned such number. Party A shall
use its reasonable efforts to consolidate into as few
billing statements as possible all collect, calling
card, and third-number billed calls associated with
those numbers, with sub-account detail by retained
number. The parties shall work cooperatively to enable
Party A to provide such billing statement to Party B in
an agreed-upon format via either electronic file
transfer, daily magnetic tape, or monthly magnetic
tape.
(iii) Party A will update its Line Information Database
("LIDB") listings for retained numbers, as directed by
Party B, and cancel calling cards associated with those
forwarded numbers.
31
<PAGE>
(iv) Within two (2) business days of receiving notification
from the new Local Services carrier or the Customer
terminating service with Party B, Party B shall notify
Party A of the Customer's termination of service with
Party B. Party A will cancel the INP arrangements for
such Customer's telephone number(s). In the event Party
A changes its telephone numbers, it may discontinue
providing INP service as to such numbers.
(d) Procedures for Providing INP Through Route Indexing. Either Party
---------------------------------------------------
may deploy a Route Index arrangement which combines direct trunks
provisioned between BA's and AT&T's end offices with trunk side
routing translations. Under this arrangement, inbound calls to a
ported number will be pointed at a Route Index that sends the
call to a dedicated trunk group, built as a direct final, for the
sole purpose of facilitating completion for calls to a ported
number. Each Party will coordinate with the other to provide this
solution in a mutually agreeable and administratively manageable
manner (e.g., NXX level) so as to minimize switch resource
utilization for both Parties. AT&T shall pay to BA all costs and
expenses incurred by BA in implementing such Route Indexing
through tandems as requested by AT&T including, without
limitation, all costs and expenses arising out of the development
of necessary translations/reprogramming of existing trunk
routing, the provision of additional dedicated trunks serving
each affected tandem and the establishment of increased call
processing and memory capacity to handle the increased volume of
traffic, codes, translations and routing domains for all affected
tandem or end office switches.
(e) Procedures for Providing INP Through Full NXX Code Migration.
------------------------------------------------------------
Where either Party has activated an entire NXX for a single
Customer, or activated a portion consisting in excess of fifty
percent (50%) of an NXX Code for a single Customer with the
remaining numbers in that NXX either reserved for future use or
otherwise unused, if such Customer chooses to receive service
from the other Party, the first Party shall cooperate with the
second Party to have the entire NXX reassigned in the LERG (and
associated industry databases, routing tables, etc.) to an end
office operated by the second Party. Such transfer will be
accomplished with appropriate coordination between the Parties
and subject to lead times specified in ATTIS Numbering Committee
Guidelines 95-0407-008 C.O. code (NXX) Assignment guidelines and
NOF Reference Document, Part II, Section 2.3, NXX Code Openings,
for movements of NXXs from one switch to another.
(f) The Parties shall pay to each other for ported telephone numbers
the amounts determined in accordance with the Rochester Plan
formula as referenced in
32
<PAGE>
Phase 3 of the Arbitration Award. Terminating IXC access charges
shall be shared between BA and AT&T pursuant to meet-point
billing arrangements between the Parties using special estimated
studies until such time as actual meet-point billing records are
available.
19.2 Number Reassignment. BA shall not be required to reassign to AT&T
-------------------
thousand number blocks (i.e., split NXX codes into blocks of a thousand numbers)
in the Local Exchange Routing Guide ("LERG") except to the extent that BA agrees
to such reassignment consistent with a change in the national guidelines for
Central Office Code assignments.
20. Directory Listings and Directory Distributions.
----------------------------------------------
(a) BA will include those AT&T Customers of Local Services resold by AT&T
from BA pursuant to Part I hereof in its "White Pages" and "Yellow
Pages" directory listings in accordance with the terms of Appendix A
of Part I, and will distribute such directories to such customers, in
an identical and transparent manner in which it provides those
functions for its own customers' telephone numbers.
(b) With respect to all other AT&T Customers, BA will include such AT&T
Customers' telephone numbers in all of its "White Pages" and "Yellow
Pages" directory listings (including electronic directories) and
directory assistance databases associated with the areas in which AT&T
provides services to such Customers, and will distribute such
directories to such Customers, in an identical and transparent manner
in which it provides those functions for its own Customers' telephone
numbers. In this Section 20, references to AT&T Customer telephone
numbers means telephone numbers falling within NXX codes directly
assigned to AT&T and to numbers which are retained by AT&T on the
customer's behalf pursuant to Interim Number Portability arrangements
described in Section 19 of the General Terms and Conditions of this
Agreement.
(c) BA will include all AT&T NXX codes on appropriate existing calling
charts in the BA Customer Guide section of the directory in the same
manner as it provides this information for its own NXX Codes. BA shall
assist AT&T in dealing with Bell Atlantic Yellow Pages Company to
facilitate Bell Atlantic Yellow Pages Company's publication of AT&T
Calling Charts or other AT&T information in the front portion of Bell
Atlantic Yellow Pages Company directories distributed in the MA
Region.
(d) AT&T will provide BA with its directory listings and daily updates to
those listings (including new, changes, and deleted listings) on a
non-exclusive basis in a mutually agreed upon format at no charge.
33
<PAGE>
(e) BA will accord AT&T's directory listing information the same level of
confidentiality which BA accords its own directory listing
information.
(f) BA shall provide AT&T at no charge with directory distribution for
AT&T Customers. The Parties hereby acknowledge and agree that BA is
not required, as per applicable tariffs, to provide more than one free
white pages directory listing for each CENTREX system purchased for
resale, regardless of the number of CENTREX lines purchased as part of
such system.
(g) BA will provide AT&T with a report of all AT&T customer listings 90
days prior to directory publication in such form and format as may be
mutually agreed to by both parties. Both Parties shall use their best
efforts to ensure the accurate listing of such information.
(h) BA will work cooperatively with AT&T so that Yellow Page
advertisements purchased by Customers who switch their service to AT&T
(including Customers utilizing Interim Number Portability) are
maintained without interruption. BA will allow AT&T customers to
purchase new Yellow Pages advertisements without discrimination, under
the identical rates, terms and conditions that apply to BA's
customers.
(i) BA will include, on one-eighth of a page, in the "Information Pages"
or comparable section of its White Pages Directories for areas served
by AT&T in the MA Region, listings provided by AT&T for AT&T's
installation, repair and customer service and other customer service-
oriented information, including appropriate identifying logo. Such
listings shall appear in the manner that such information appears for
subscribers of BA and other LECs. BA shall not charge AT&T for
inclusion of this information.
(j) Electronic Format Directory Assistance. Upon at least thirty days
--------------------------------------
notice from AT&T, BA shall provide to AT&T in electronic format BA's
master directory assistance listing for BA end user customers in the
MA Region, exclusive of non-published numbers to the extent that BA is
prohibited from selling or offering to sell such numbers under
Applicable Law. BA shall also provide AT&T with updates (containing
adds, deletes and changes only) to these listings, at the same
frequency that BA updates its own directory assistance databases. The
Parties shall mutually agree to content, format and timing
specifications for these directory assistance listings. Such directory
assistance listings shall only be used by AT&T for the purpose of
providing local directory assistance to AT&T local exchange service
customers. AT&T shall pay BA a rate based on the cost of providing
directory assistance listings and updates in an electronic format,
including a reasonable profit.
34
<PAGE>
21. Subscriber List Information.
---------------------------
(a) At AT&T's request, in accordance with Section 222(e) and (f) of
the Act, for the purpose of publishing a directory in any format,
BA shall provide to AT&T published Subscriber List Information on
a timely basis via readily accessible tape or electronic formats
on the same terms and conditions and at the same rates that BA
provides its own Subscriber List Information to third party
directory publishers. Changes to the Subscriber List Information
shall be available on a timely basis through the same tape or
electronic transfer means used to transmit the initial Subscriber
List Information at the same rates and on the same terms and
conditions that BA provides its own Subscriber List Information
to third party directory publishers. Subscriber List Information
provided by BA shall indicate whether the customer is a residence
or business customer.
(b) BA shall provide Subscriber List information that includes AT&T
Customers to third parties, as required by the Act, on the same
terms and conditions and at the same rates that BA provides its
own Subscriber List Information to third parties. AT&T shall
receive its pro-rata share (calculated based on the proportionate
share of AT&T Customers to the total number of customers included
in the Subscriber List Information) of net proceeds realized by
BA from third parties for such Subscriber List Information;
provided, however, that BA shall not be required to include AT&T
Customers in Subscriber List Information sales to third parties
(other than AT&T) if BA promptly notifies AT&T of all requests by
third party directory publishers and others for AT&T Subscriber
List Information thus permitting AT&T to deal directly with said
third parties.
22. Miscellaneous.
-------------
22.1 Delegation or Assignment - Neither Party may assign or transfer
------------------------
(whether by operation of law or otherwise) this Agreement (or any
rights or obligations hereunder) to a third party without the
prior written consent of the other Party which consent shall not
be unreasonably withheld or delayed; provided, however, each
Party may assign this Agreement to a corporate Affiliate or an
entity under its common control or an entity acquiring all or
substantially all of its assets or equity by providing prior
written notice to the other Party of such assignment or transfer.
Any attempted assignment or transfer that is not permitted shall
be void ab initio. All obligations and duties of any Party shall
be binding on all successors in interest and assigns of such
Party.
22.2 Nonexclusive Remedies - Except as otherwise expressly provided in
---------------------
this Agreement, each of the remedies provided under this
Agreement is cumulative and is in addition to any remedies that
may be available at law or in equity.
35
<PAGE>
22.3 No Third Party Beneficiaries - Except as may be specifically set
----------------------------
forth in this Agreement, this Agreement does not provide and
shall not be construed to provide third parties with any remedy,
claim, liability, reimbursement, cause of action, or other
privilege.
22.4 Referenced Documents - Unless otherwise specifically provided
--------------------
herein, whenever any provision of this Agreement refers to a
technical reference, technical publication, AT&T Practice, BA
Practice, any publication of telecommunications industry
administrative or technical standards, or any other document
specifically incorporated into this Agreement, it will be deemed
to be a reference to the most recent version or edition
(including any amendments, supplements, addenda, or successors)
of such document that is in effect, and will include the most
recent version or edition (including any amendments, supplements,
addenda, or successors) of each document incorporated by
reference in such a technical reference, technical publication,
AT&T Practice, BA Practice, or publication of industry standards.
22.5 Governing Law - The validity of this Agreement, the construction
-------------
and enforcement of its terms, and the interpretation of the
rights and duties of the Parties shall be governed by the laws of
the Commonwealth of Massachusetts other than as to conflicts of
laws, except insofar as federal law may control any aspect of
this Agreement, in which case federal law shall govern such
aspect.
22.6 Publicity and Advertising - Neither Party shall publish or use
-------------------------
any advertising, sales promotions or other publicity materials
that use the other Party's logo, trademarks or service marks
without the prior written approval of the other Party. Neither BA
nor AT&T may offer services to its end users or others under any
of the brand names of the other Party or any of its parents,
subsidiaries or affiliates, regardless of whether or not such
brand names are registered trademarks or servicemarks, without
the other Party's prior written authorization. Neither Party
shall state or imply that there is any partnership or other joint
business arrangement with the other Party, its parent,
subsidiaries, or affiliates, for the provision of services to the
other Party's end users or others. BA and AT&T may jointly
develop a press release publicizing their relationship under this
Agreement, subject to both (1) any prior non-disclosure
agreement, and (2) mutually agreed upon language and media.
Notwithstanding this section, AT&T is entitled to identify BA as
the underlying carrier of the services provided hereunder.
22.7 Amendments or Waivers - Except as otherwise provided in this
---------------------
Agreement, no amendment or waiver of any provision of this
Agreement, and no consent to any default under this Agreement,
shall be effective unless the same is in writing and signed by
both Parties. In addition, no course of dealing or failure of a
Party strictly to enforce any term, right or condition of this
Agreement shall be construed as a
36
<PAGE>
waiver of such term, right or condition. By entering into this
Agreement neither Party waives any right granted to it pursuant
to the Act and/or the Order, except to the extent the Act or the
Order permits such rights to be modified or waived and such
modification or waiver is expressly set forth herein.
22.8 Severability - If any term, condition or provision of this
------------
Agreement is held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not invalidate the
entire Agreement, unless such construction would be unreasonable.
However, the Parties agree to meet and negotiate in good faith to
arrive at a mutually acceptable modification of the invalid or
unenforceable provision. If the Parties are unable to agree on
such modification within 30 days after the Agreement provision(s)
is held to be illegal, invalid or enforceable, such failure to
agree shall be resolved in accordance with the Dispute Resolution
process in Section 16 of the General Terms and Conditions.
22.9 Entire Agreement - This Agreement, which shall include the
----------------
Attachments, Appendices, Exhibits and other documents referenced
herein, including all applicable tariffs as referenced herein (as
in effect from time to time except with respect to those
provisions in this Agreement in which it is expressly provided
otherwise), constitutes the entire Agreement between the Parties
concerning the subject matter hereof and supersedes any prior
agreements, representations, statements, negotiations,
understandings, proposals or undertakings, oral or written, with
respect to the subject matter expressly set forth herein. Neither
Party shall be bound by any terms additional to or different from
those in this Agreement that may appear subsequently in the other
Party's form documents, purchase orders, quotations,
acknowledgments, invoices or other communications.
22.10 Survival of Obligations - Any liabilities or obligations of a
-----------------------
Party for acts or omissions prior to the cancellation or
termination of this Agreement; any obligation of a Party under
the provisions regarding indemnification, Proprietary
Information, limitations on liability, and any other provisions
of this Agreement which, by their terms, are contemplated to
survive (or to be performed after) termination of this Agreement,
shall survive expiration or termination hereof.
22.11 Executed in Counterparts - This Agreement may be executed in any
------------------------
number of counterparts, each of which shall be deemed an
original, but such counterparts shall together constitute one and
the same instrument.
22.12 Headings of No Force or Effect - The headings of Articles and
------------------------------
Sections of this Agreement are for convenience of reference only,
and shall in no way define, modify or restrict the meaning or
interpretation of the terms or provisions of this Agreement.
37
<PAGE>
22.13 Joint Work Product - This Agreement is the joint work product of
------------------
the Parties and their respective counsel and shall be fairly
interpreted in accordance with its terms and, in the event of any
ambiguities, no inferences shall be drawn against either Party.
22.14 Nonexclusive Dealings - This Agreement does not prevent either
---------------------
Party from providing or purchasing services to or from any other
person nor, except as provided in Section 5 of the General Terms
and Conditions and Exhibit A (Bona Fide Request Process) of Part
II hereof, does it obligate either Party to provide or purchase
any services not specifically provided herein.
22.15 No License - No license under patents, copyrights or any other
----------
intellectual property right (other than the limited license to
use consistent with the terms, conditions and restrictions of
this Agreement) is granted by either Party or shall be implied or
arise by estoppel with respect to any transactions contemplated
under this Agreement.
22.16 Dialing Parity - In addition to the parity requirements set forth
--------------
in Section E of Part I, the Parties shall provide dialing parity
to each other as required under Section 251(b)(3) of the Act,
except as may be limited by Section 271 (e)(2)(B) of the Act.
22.17 Disclaimer of Warranties - Upon the Department's ruling that it
------------------------
has substantially completed the establishment of performance
standards and remedies in the Consolidated Arbitrations, D.P.U.
96-73/74, 96-75, 96-80/81, 96-83 and 96-94, the following
disclaimer shall take effect: EXCEPT AS EXPRESSLY PROVIDED UNDER
THIS AGREEMENT, NO PARTY MAKES OR RECEIVES ANY WARRANTY, EXPRESS
OR IMPLIED, WITH RESPECT TO THE SERVICES, FUNCTIONS AND PRODUCTS
IT PROVIDES UNDER OR CONTEMPLATED BY THIS AGREEMENT AND THE
PARTIES DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY OR OF
FITNESS FOR A PARTICULAR PURPOSE.
38
<PAGE>
EXHIBIT 10.25
INTERCONNECTION AGREEMENT UNDER SECTIONS 251 AND 252 OF THE
TELECOMMUNICATIONS ACT OF 1996
Dated as of December 18, 1998
by and between
NEW YORK TELEPHONE COMPANY,
d/b/a
BELL ATLANTIC - NEW YORK
and
COMMUNITY NETWORKS, INC.
<PAGE>
APPENDIX 1
INTERCONNECTION AGREEMENT UNDER SECTIONS 251 AND 252 OF THE
TELECOMMUNICATIONS ACT OF 1996
Dated as of April 3, 1998
by and between
BELL ATLANTIC - NEW YORK
and
MGC COMMUNICATIONS, INC.
<PAGE>
MGC COMMUNICATIONS, INC.- BELL ATLANTIC Interconnection Agreement
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1.0 DEFINITIONS..................................................... 2
2.0 INTERPRETATION AND CONSTRUCTION................................. 13
3.0 SCOPE........................................................... 13
4.0 INTERCONNECTION PURSUANT TO SECTION 251(c)(2)................... 14
4.1 Scope.................................................... 14
4.2 Physical Architecture.................................... 15
4.3 Technical Specifications................................. 16
4.4 Interconnection in Additional LATAs...................... 17
5.0 TRANSMISSION AND ROUTING OF TELEPHONE EXCHANGE SERVICE
TRAFFIC PURSUANT TO SECTION 251(c)(2)........................... 17
5.1 Scope of Traffic......................................... 17
5.2 Switching System Hierarchy............................... 18
5.3 Trunk Group Architecture and Traffic Routing............. 19
5.4 Signaling................................................ 20
5.5 Grades of Service........................................ 20
5.6 Measurement and Billing.................................. 21
5.7 Reciprocal Compensation Arrangements -- Section 251(b)(5) 21
6.0 TRANSMISSION AND ROUTING OF EXCHANGE ACCESS TRAFFIC
PURSUANT TO 251(c)(2)........................................... 23
6.1 Scope of Traffic......................................... 23
6.2 Trunk Group Architecture and Traffic Routing............. 23
6.3 Meet-Point Billing Arrangements.......................... 24
7.0 TRANSPORT AND TERMINATION OF OTHER TYPES OF TRAFFIC............. 24
7.1 Information Services Traffic............................. 24
7.2 Tandem Transit Service ("Transit Service")............... 26
7.3 911/E911 Arrangements.................................... 27
8.0 NUMBER RESOURCES, RATE CENTERS AND RATING POINTS................ 28
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
9.0 NETWORK MAINTENANCE AND MANAGEMENT; OUTAGES..................... 29
9.1 Cooperation.............................................. 29
9.2 Responsibility for Following Standards................... 29
9.3 Interference or Impairment............................... 29
9.4 Repeated or Willful Noncompliance........................ 30
9.5 Outage Repair Standard................................... 30
9.6 Notice of Changes -- Section 251(c)(5)................... 30
9.7 Fraud.................................................... 30
10.0 JOINT NETWORK CONFIGURATION AND GROOMING PROCESS; AND
INSTALLATION, MAINTENANCE, TESTING AND REPAIR................... 31
10.1 Joint Network Configuration and Grooming Process......... 31
10.2 Installation, Maintenance, Testing and Repair............ 31
10.3 Network Reliability Council.............................. 32
10.4 Forecasting, Requirements for Trunk Provisioning......... 32
10.5 Demand Management Forecasts.............................. 33
11.0 UNBUNDLED ACCESS -- SECTION 251(c)(3)........................... 33
11.1 Available Network Elements............................... 34
11.2 Unbundled Local Loop ("ULL") Types....................... 34
11.3 Unbundled Switching Elements............................. 36
11.4 Unbundled Inter Office Facilities........................ 36
11.5 Operations Support Systems............................... 36
11.6 Limitations on Unbundled Access.......................... 36
11.7 Availability of Other Network Elements on
an Unbundled Basis....................................... 37
11.8 Provisioning of Unbundled Local Loops.................... 38
11.9 Maintenance of Unbundled Network Elements................ 39
11.10 Other Terms and Conditions Including Rates and Charges... 40
12.0 RESALE -- SECTIONS 251(c)(4) and 251(b)(1)...................... 40
12.1 Availability of Wholesale Rates for Resale............... 40
12.2 Availability of Retail Rates for Resale.................. 40
12.3 Additional Terms Governing Resale and Use of BA Services. 40
13.0 COLLOCATION -- SECTION 251(c)(6)................................ 41
13.6 Dedicated Transit Service................................ 43
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
14.0 NUMBER PORTABILITY -- SECTION 251(b)(2)......................... 43
14.1 Scope.................................................... 43
14.2 Procedures for Providing INP Through Remote
Call Forwarding.......................................... 44
14.3 Procedures for Providing INP Through Route Indexing...... 45
14.4 Procedures for Providing INP Through Full NXX
Code Migration........................................... 46
14.5 Other Interim Number Portability Options................. 46
14.6 Receipt of Terminating Compensation on Traffic
to INP'ed Numbers........................................ 46
14.7 Recovery of INP Costs Pursuant to FCC Order
and Rulemaking........................................... 47
15.0 DIALING PARITY -- SECTION 251(b)(3)............................. 48
16.0 ACCESS TO RIGHTS-OF-WAY -- SECTION 251(b)(4).................... 48
17.0 DATABASES AND SIGNALING......................................... 48
18.0 COORDINATED SERVICE ARRANGEMENTS................................ 48
18.1 Intercept and Referral Announcements..................... 48
18.2 Coordinated Repair Calls................................. 49
18.3 Customer Authorization................................... 49
19.0 DIRECTORY SERVICES ARRANGEMENTS................................. 50
19.1 Directory Listings and Directory Distributions........... 50
19.2 Directory Assistance and Operator Services............... 52
19.3 Directory Assistance Call Completion..................... 53
19.4 Directory Assistance Credits............................. 54
19.5 Direct Access to Directory Assistance.................... 55
19.6 Inward Operator Services................................. 55
19.7 Operator Services........................................ 56
19.8 0+ Mechanized Operator Calls (Calling Card,
Collect, Bill to Third Number)........................... 57
19.9 0- Operator Handled Calls (Calling Card, Collect, Bill to
Third Number)............................................ 57
19.10 Operator Emergency Bulletin Service...................... 58
19.11 Operator Passthrough Service............................. 58
20.0 COORDINATION WITH TARIFF TERMS.................................. 59
21.0 INSURANCE....................................................... 60
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
22.0 TERM AND TERMINATION............................................ 61
23.0 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.................... 61
24.0 CANCELLATION CHARGES............................................ 62
25.0 INDEMNIFICATION................................................. 62
26.0 LIMITATION OF LIABILITY......................................... 63
27.0 PERFORMANCE STANDARDS FOR SPECIFIED ACTIVITIES.................. 64
27.1 Performance Standards.................................... 64
27.2 Performance Reporting.................................... 64
28.0 COMPLIANCE WITH LAWS; REGULATORY APPROVAL....................... 64
29.0 MISCELLANEOUS................................................... 66
29.1 Authorization............................................ 66
29.2 Independent Contractor................................... 66
29.3 Force Majeure............................................ 66
29.4 Confidentiality.......................................... 67
29.5 Choice of Law............................................ 68
29.6 Taxes.................................................... 68
29.7 Assignment............................................... 69
29.8 Billing and Payment; Disputed Amounts.................... 69
29.9 Dispute Resolution....................................... 70
29.10 Notices.................................................. 72
29.11 Section 252(i) Obligations............................... 73
29.12 Joint Work Product....................................... 73
29.13 No Third Party Beneficiaries; Disclaimer of Agency....... 73
29.14 No License............................................... 74
29.15 Technology Upgrades...................................... 75
29.16 Survival................................................. 75
29.17 Entire Agreement......................................... 75
29.18 Counterparts............................................. 75
29.19 Modification, Amendment, Supplement, or Waiver........... 75
29.20 Successors and Assigns................................... 76
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
29.21 Publicity and Use of Trademarks or Service Marks......... 76
29.22 Restructured/New Rates................................... 76
29.23 Integrity of BELL ATLANTIC Network....................... 76
</TABLE>
LIST OF SCHEDULES AND EXHIBITS
Schedules
- ---------
Schedule 1.0 Certain Terms As Defined in the Act
Schedule 4.0 Network Interconnection Schedule
Schedule 7.1.4 Billing Arrangements for Variable-Rated Information Services
Calls
Exhibits
- --------
Exhibit A Bell Atlantic - New York and MGC Pricing Schedule
Exhibit B Network Element Bona Fide Request
-v-
<PAGE>
MGC COMMUNICATIONS, INC.-BELL ATLANTIC Interconnection Agreement
INTERCONNECTION AGREEMENT UNDER SECTIONS 251 AND 252 OF THE
TELECOMMUNICATIONS ACT OF 1996
This Interconnection Agreement under Sections 251 and 252 of the
Telecommunications Act of 1996 ("Agreement"), is effective as of the Third day
of April, 1998 (the "Effective Date"), by and between New York Telephone Company
d/b/a Bell Atlantic-New York ("BA" or "Bell Atlantic"), a New York corporation
with offices at 1095 Avenue of the Americas, New York NY 10036, and MGC
Communications, Inc. ("MGC"), a Nevada corporation, with offices at 3301 North
Buffalo Drive, Las Vegas, Nevada 89129.
WHEREAS, the Parties want to interconnect their networks at mutually agreed
upon points of interconnection to provide Telephone Exchange Services, Switched
Exchange Access Services, and other Telecommunications Services (all as defined
below) to their respective customers;
WHEREAS, the Parties are entering into this Agreement to set forth the
respective obligations of the Parties and the terms and conditions under which
the Parties will interconnect their networks and provide other services as
required by the Act (as defined below) and additional services as set forth
herein; and
WHEREAS, Sections 251, 252, and 271 of the Telecommunications Act of 1996
have specific requirements for interconnection, unbundling, and service resale,
commonly referred to as the "Checklist", and the Parties intend that this
Agreement meet those Checklist requirements.
NOW, THEREFORE, in consideration of the mutual provisions contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, MGC and BA hereby agree as follows:
This Agreement sets forth the terms, conditions and pricing under which BA
and MGC (individually, a "Party" and collectively, the "Parties") will offer and
provide to each other network Interconnection, access to Network Elements,
ancillary services, and wholesale Telecommunications Services available for
resale within each LATA in which they both operate within New York State. As
such, this Agreement is an integrated package that reflects a balancing of
interests critical to the Parties. It will be submitted to the New York Public
Service Commission, and the Parties will specifically request that the
Commission refrain from taking any action to change, suspend or otherwise delay
implementation of the Agreement. So long as the Agreement remains in effect,
neither Party shall advocate before any legislative, regulatory, or other public
forum that any terms of this Agreement be modified or eliminated, unless
mutually agreed to by the Parties.
<PAGE>
1.0 DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
specified below in this Section 1.0. For convenience of reference only, the
definitions of certain terms that are As Defined in the Act (as defined below)
are set forth on Schedule 1.0. Schedule 1.0 sets forth the definitions of such
terms as of the date specified on such Schedule and neither Schedule 1.0 nor any
revision, amendment or supplement thereof intended to reflect any revised or
subsequent interpretation of any term that is set forth in the Act is intended
to be a part of or to affect the meaning or interpretation of this Agreement.
1.1 "Act" means the Communications Act of 1934 (47 U.S.C.(S)151 et seq.)
------
as amended by the Telecommunications Act of 1996, and as from time to time
interpreted in the duly authorized rules and regulations of the FCC or a
Commission within its state of jurisdiction.
1.2 "ADSL" or "Asymmetrical Digital Subscriber Line" is a digital loop
transmission technology which permits the transmission of up to 6 Mbps
downstream (from the CO to the end-user customer) and up to 640 kbps digital
signal upstream (from the end-user customer to the CO).
1.3 "Affiliate" is As Defined in the Act.
1.4 "Agreement" means this Interconnection Agreement under Sections 251
and 252 of the Act and all the Exhibits, Schedules, addenda, and attachments
referenced herein and/or appended hereto.
1.5 "Agreement for Switched Access Meet Point Billing" means the Agreement
for Switched Access Meet Point Billing between the Parties.
1.6 "Ancillary Traffic" means all traffic that is destined for ancillary
services, or that may have special billing requirements, including but not
limited to the following: BLV/BLVI, Directory Assistance, 911/E911, Operator
Services (IntraLATA call completion), IntraLATA third party, collect and calling
card, 800/888 database query, LIDB, and information services requiring special
billing arrangements between the Parties.
1.7 "Applicable Laws" or "Applicable Law" means all laws, regulations, and
orders applicable to each Party's performance of its obligations hereunder.
-2-
<PAGE>
1.8 "As Defined in the Act" means as specifically defined by the Act and
as from time to time interpreted in the duly authorized rules and regulations of
the FCC or the Commission.
1.9 "As Described in the Act" means as described in or required by the
Act and as from time to time interpreted in the duly authorized rules and
regulations of the FCC or the Commission.
1.10 "Automatic Number Identification" or "ANI" means a Feature Group D
signaling parameter which refers to the number transmitted through a network
identifying the billing number of the calling party.
1.11 "Bona Fide Request" or "BFR" means the process described on Exhibit B
that prescribes the terms and conditions relating to a Party's request that the
other Party provide a BFR Item (as defined in Exhibit B) not otherwise provided
by the terms of this Agreement.
1.12 "Busy Line Verification" or "BLV" means an operator request for a
status check on the line of a called party. The request is made by one Party's
operator to an operator of the other Party. The verification of the status
check is provided to the requesting operator.
1.13 "Busy Line Verification Interrupt" or "BLVI" means a service that may
be requested and provided when Busy Line Verification has determined that a line
is busy due to an ongoing call. BLVI is an operator interruption of that ongoing
call to inform the called party that a calling party is seeking to complete his
or her call to the called party.
1.14 "Calling Party Number" or "CPN" is a Common Channel Signaling ("CCS")
parameter which refers to the number transmitted through a network identifying
the calling Party.
1.15 "Central Office Switch" means a switch used to provide
Telecommunications Services, including, but not limited to:
(a) "End Office Switch" or "End Office" is a switching entity that is
used to terminate Customer station Loops for the purpose of Interconnection
to each other and to trunks; and
(b) "Tandem Office Switch" or "Tandem Office" or "Tandem" is a
switching entity that has billing and recording capabilities and is used to
connect and switch trunk circuits between and among End Office Switches and
between and among
-3-
<PAGE>
End Office Switches and carriers' aggregation points, points of
termination, or points of presence, and to provide Switched Exchange Access
Services.
A Central Office Switch may also be employed as a combination End
Office/Tandem Office Switch.
1.16 "CLASS Features" means certain CCS-based features available to
Customers including, but not limited to: Automatic Call Back; Call Trace; Caller
Identification; Call Return and future CCS-based offerings.
1.17 "Collocation" means an arrangement whereby one Party's (the
"Collocating Party") facilities are terminated in its equipment necessary for
Interconnection or for access to Network Elements offered by the second Party on
an unbundled basis that has been installed and maintained at the premises of a
second Party (the "Housing Party"). For purposes of Collocation, the "premises"
of a Housing Party is limited to a Housing Party Wire Center, other mutually
agreed-upon locations of the Housing Party, or any location for which
Collocation has been ordered by the FCC or Commission. Collocation may be
"physical" or "virtual". In "Physical Collocation", the Collocating Party
installs and maintains its own equipment in the Housing Party's premises. In
"Virtual Collocation", the Housing Party owns, installs, and maintains equipment
dedicated to use by the Collocating Party in the Housing Party's premises. BA
currently provides Collocation under terms, rates, and conditions as described
in tariffs on file or soon to be filed with the FCC or the Commission.
1.18 "Commission" or "PSC" means the New York State Public Service
Commission.
1.19 "Common Channel Signaling" or "CCS" means the signaling system,
developed for use between switching systems with stored-program control, in
which all of the signaling information for one or more groups of trunks is
transmitted over a dedicated high-speed data link rather than on a per-trunk
basis and, unless otherwise agreed by the Parties, the CCS used by the Parties
shall be SS7.
1.20 "Competitive Local Exchange Carrier" or "CLEC" means any Local
Exchange Carrier other than BA, operating as such in BA's service territory in
New York. MGC is or will shortly become a CLEC.
1.21 "Cross Connection" means a jumper cable or similar connection
provided pursuant to Collocation at the Digital Signal Cross Connect, Main
Distribution Frame or other
-4-
<PAGE>
suitable frame or panel between (i) the Collocating Party's equipment and (ii)
the equipment or facilities of the Housing Party.
1.22 "Customer" means a third-Party residence or business that subscribes
to Telecommunications Services provided by either of the Parties.
1.23 "Customer Proprietary Network Information" or "CPNI" is as Defined in
the Act.
1.24 "Dialing Parity" is As Defined in the Act. As used in this Agreement,
Dialing Parity refers to both Local Dialing Parity and Toll Dialing Parity.
"Local Dialing Parity" means the ability of Telephone Exchange Service Customers
of one LEC to select a provider and make local calls without dialing extra
digits. "Toll Dialing Parity" means the ability of Telephone Exchange Service
Customers of a LEC to place toll calls (inter or IntraLATA) which are routed to
a toll carrier (IntraLATA or InterLATA) of their selection without dialing
access codes or additional digits and with no unreasonable dialing delay.
1.25 "Digital Signal Level" means one of several transmission rates in the
time-division multiplex hierarchy.
1.26 "Digital Signal Level 0" or "DS0" means the 64 Kbps zero-level signal
in the time-division multiplex hierarchy.
1.27 "Digital Signal Level 1" or "DS1" means the 1.544 Mbps first-level
signal in the time-division multiplex hierarchy. In the time-division
multiplexing hierarchy of the telephone network, DS1 is the initial level of
multiplexing.
1.28 "Digital Signal Level 3" or "DS3" means the 44.736 Mbps third-level
in the time-division multiplex hierarchy. In the time-division multiplexing
hierarchy of the telephone network, DS3 is defined as the third level of
multiplexing.
1.29 "Exchange Access" is As Defined in the Act.
1.30 "Exchange Message Record" or "EMR" means the standard used for
exchange of telecommunications message information among Telecommunications
Carriers for billable, nonbillable, sample, settlement and study data. EMR
format is contained in Bellcore Practice BR-010-200-010 CRIS Exchange Message
Record, a Bell Communications Research, Inc. ("Bellcore") document that defines
industry standards for Exchange Message Records.
-5-
<PAGE>
1.31 "FCC" means the Federal Communications Commission.
1.32 "FCC Regulations" means Title 47 of the Code of Federal Regulations.
1.33 "Fiber Meet" means an Interconnection architecture method whereby the
Parties physically Interconnect their networks via an optical fiber interface
(as opposed to an electrical interface) at a mutually agreed upon location.
1.34 HDSL is a digital loop transmission technology which permits the
transmission of up to 768 kbps simultaneously in both directions on a single
non-loaded, twisted copper pair or up to 1544 kbps simultaneously in both
directions on two non-loaded, twisted copper pairs.
1.35 "Incumbent Local Exchange Carrier" or "ILEC" is As Defined in the
Act. For purposes of this Agreement, BA is an Incumbent Local Exchange Carrier.
1.36 "Independent Telephone Company" or "ITC" means any entity other than
BA which, with respect to its operations within [STATE), is an Incumbent Local
Exchange Carrier.
1.37 "Information Services" is As Defined in the Act.
1.38 "Information Service Traffic" means Local Traffic or IntraLATA Toll
Traffic which originates on a Telephone Exchange Service line and which is
addressed to an information service provided over a Party's switched voice
information services platform (i.e., 976, 550, 540, 970, 940).
-----
1.39 "Inside Wire" or "Inside Wiring" means all wire, cable, terminals,
hardware, and other equipment or materials on the Customer's side of the Rate
Demarcation Point.
1.40 "Integrated Digital Loop Carrier" or "IDLC" means a subscriber loop
carrier system which integrates within the switch at a DS1 level that is twenty-
four (24) loop transmission paths combined into a 1.544 Mbps digital signal.
1.41 "Integrated Services Digital Network" or "ISDN" means a switched
network service that provides end-to-end digital connectivity for the
simultaneous transmission of voice and data. Basic Rate Interface-ISDN (BRI-
ISDN) provides for a digital transmission of two 64 Kbps bearer channels and one
16 Kbps data and signaling channel (2B+D). Primary Rate Interface-ISDN ("PRI-
ISDN") provides for digital transmission of twenty three (23) 64 kbps bearer
channels and one (1) 64 kpbs data and signaling channel (23 B+D).
-6-
<PAGE>
1.42 "Interconnection" is As Described in the Act and refers to the
connection of separate pieces of equipment or transmission facilities within,
between, or among networks for the purpose of transmission and routing of
Telephone Exchange Service traffic and Exchange Access traffic.
1.43 "Interexchange Carrier" or "IXC" means a carrier that provides,
directly or indirectly, InterLATA or IntraLATA Telephone Toll Services.
1.44 "Interim Telecommunications Number Portability" or "INP" is As
Described in the Act.
1.45 "InterLATA Service" is As Defined in the Act.
1.46 "IntraLATA Toll Traffic" means those intraLATA calls that are not
defined as Local Traffic in this Agreement.
1.47 "Line Side" means an End Office Switch connection that provides
transmission, switching and optional features suitable for Customer connection
to the public switched network, including loop start supervision, ground start
supervision, and signaling for basic rate ISDN service.
1.48 "Local Access and Transport Area" or "LATA" is As Defined in the Act.
1.49 "Local Exchange Carrier" or "LEC" is As Defined in the Act. The
Parties to this Agreement are or will shortly become Local Exchange Carriers.
1.50 "Local Traffic", means traffic that is originated by a Customer of
one Party on that Party's network and terminates to a Customer of the other
Party on that other Party's network, within a given local calling area, or
expanded area service ("EAS") area, as defined in BA's effective Customer
tariffs, or, if the Commission has defined local calling areas applicable to all
LEC's, then as so defined by the Commission.
1.51 "Main Distribution Frame" or "MDF" means the ultimate point at which
outside plant facilities terminate within a Wire Center, for interconnection to
other telecommunications facilities within the Wire Center.
-7-
<PAGE>
1.52 "Meet-Point Billing" or "MPB" means the process whereby each Party
bills the appropriate tariffed rate for its portion of a jointly provided
Switched Exchange Access Service as agreed to in the Agreement for Switched
Access Meet Point Billing.
1.53 "Network Element" is As Defined in the Act.
1.54 "Network Interface Device" or "NID" means the BA-provided interface
terminating BA's telecommunications network on the property where the Customer's
service is located at a point determined by BA.
1.55 "North American Numbering Plan" or "NANP" means the numbering plan
used in the United States, Canada, Bermuda, Puerto Rico and certain Caribbean
Islands. The NANP format is a 10-digit number that consists of a 3-digit NPA
code (commonly referred to as the area code), followed by a 3-digit NXX code and
4-digit line number.
1.56 "Numbering Plan Area", or "NPA" is also sometimes referred to as an
area code. there are two general categories of NPAs. "Geographic NPAs" and "Non-
Geographic NPAs". A Geographic NPA is associated with a defined geographic area,
and all telephone numbers bearing such NPA are associated with services provided
within that geographic area. A Non-Geographic NPA, also known as a "Service
Access Code" or "SAC Code", is typically associated with a specialized
telecommunications service which may be provided across multiple geographic NPA
areas; 800, 900, 700, 500 and 888 are examples of Non-Geographic NPAs.
1.57 "Number Portability" or "NP" is As Defined in the Act.
1.58 "NXX", "NXX Code", or "End Office Code" means the three-digit switch
entity indicator (i.e. the first three digits of a seven digit telephone
number).
1.59 "Party" means either BA or MGC and "Parties" means BA and MGC.
1.60 "Permanent Number Portability" or "PNP" means the use of a database
or other technical solution that comports with regulations issued by the FCC to
provide Number Portability for all customers and service providers.
1.61 "Port Element" or "Port" means a termination on a Central Office
Switch that permits Customers to send or receive Telecommunications over the
public switched network, but does not include switch features or switching
functionality.
-8-
<PAGE>
1.62 "POT Bay" or "Point of Termination Bay" means the intermediate
distributing frame system which serves as the point of demarcation for
collocated Interconnection.
1.63 "Rate Center" or "Rate Center Area" or "Exchange Area" means the
geographic area that has been identified by a given LEC as being associated with
a particular NPA-NXX code which has been assigned to the LEC for its provision
of Telephone Exchange Services. The Rate Center Area is the exclusive geographic
area which the LEC has identified as the area within which it will provide
Telephone Exchange Services bearing the particular NPA-NXX designation
associated with the specific Rate Center Area. A "Rate Center Point" is the
finite geographic point identified by a specific V&H coordinate (as defined in
Bellcore Special Report SR-TSV-002275), located within the Rate Center Area and
used by that LEC to measure distance for the purpose of billing Customers for
distance sensitive Telephone Exchange Services and Toll Traffic. Rate Centers
will be identical for each Party until such time as MGC is permitted by an
appropriate regulatory body to create its own Rate Centers within an area.
1.64 "Rate Demarcation Point" means the point where network access
recurring charges and BA responsibility stop and beyond which Customer
responsibility begins, determined in accordance with FCC rules and BA standard
operating practices.
1.65 "Rating Point" or "Routing Point" means a specific geographic point
identified by a specific V&H coordinate. The Rating Point is used to route
inbound traffic to specified NPA-NXXs and to calculate mileage measurements for
the distance-sensitive transport charges of switched access services. Pursuant
to Bell Communications Research, Inc. ("Bellcore") Practice BR 795-100-100 (the
"Bellcore Practice"), the Rating Point may be an End Office location. or a "LEC
Consortium Point of Interconnection." Pursuant to that same Bellcore Practice,
each "LEC Consortium Point of Interconnection" shall be designated by a common
language location identifier ("CLLI") code with (x)KD in positions 9, 10, 11,
where (x) may be any alphanumeric A-Z or 0-9. The Rating Point must be located
within the LATA in which the corresponding NPA-NXX is located. However, the
Rating Point associated with each NPA-NXX need not be the same as the
corresponding Rate Center Point, nor must it be located within the corresponding
Rate Center Area, nor must there be a unique and separate Rating Point
corresponding to each unique and separate Rate Center.
1.66 "Reciprocal Compensation" is As Described in the Act, and refers to
the payment arrangements that recover costs incurred for the transport and
termination of Reciprocal Compensation Traffic originating on one Party's
network and terminating on the other Party's network.
-9-
<PAGE>
1.67 "Reciprocal Compensation Call" or "Reciprocal Compensation Traffic"
means a Telephone Exchange Service Call completed between the Parties, which
qualifies for Reciprocal Compensation pursuant to the terms of this Agreement
and prevailing Commission or FCC rules that may exist.
1.68 "Route Indexing" means the provision of Interim Number Portability
through the use of direct trunks provisioned between end offices of BA and MGC
over which inbound traffic to a ported number will be routed.
1.69 "Service Control Point" or "SCP" means a node in the Common Channel
Signaling network to which informational requests for service handling, such as
routing, are directed and processed. The SCP is a real time database system
that, based on a query from a service switching point and via a Signaling
Transfer Point, performs subscriber or application-specific service logic, and
then sends instructions back to the SSP on how to continue call processing.
1.70 "Signaling Transfer Point" or "STP" means a specialized switch that
provides SS7 network access and performs SS7 message routing and screening.
1.71 "Single Bill/Multiple Tariff' shall mean that one bill is rendered to
the IXC from all LECs who are jointly providing access service. A single bill
consists of all rate elements applicable to access services billed on one
statement of charges under one billing account number using each Party's
appropriate access tariffs. The bill could be rendered by or on behalf of,
either of the Parties.
1.72 "Strapping" means the act of installing a permanent connection
between a point of termination bay and a collocated interconnector's physical
Collocation node.
1.73 "Switched Access Detail Usage Data" means a category 1101XX record as
defined in the EMR Bellcore Practice BR-010-200-100.
1.74 "Switched Access Summary Usage Data" means a category 1150XX record
as defined in the EMR Bellcore Practice BR-010-200-010.
1.75 "Switched Exchange Access Service" means the offering of transmission
or switching services to Telecommunications Carriers for the purpose of the
origination or termination of Telephone Toll Service. Switched Exchange Access
Services include but may not
-10-
<PAGE>
be limited to: Feature Group A, Feature Group B, Feature Group D, 700 access,
800 access, 888 access, and 900 access.
1.76 "Switching Element" is the unbundled Network Element that provides a
CLEC the ability to use switching functionality in a BA End Office switch,
including all vertical services that are available on that switch, to provide
Telephone Exchange Service to its end user customer(s).
1.77 "Synchronous Optical Network" or "SONET" means an optical interface
standard that allows inter-networking of transmission products from multiple
vendors. The base transmission rate is 51.84 Mbps (OC-1/STS-1) and higher rates
are direct multiples of the base rate.
1.78 "Tariff" means any applicable federal or state tariff of a Party, or
standard agreement or other document that sets forth the generally available
terms and conditions, each as may be amended by the Party from time to time,
under which a Party offers a particular service, facility, or arrangement. A
Tariff shall not include BA's "Statement of Generally Available Terms and
Conditions for Interconnection, Unbundled Network Elements, Ancillary Services
and Resale of Telecommunications Services" which has been approved or is pending
approval by the Commission pursuant to Section 252(f) of the Communications Act
of 1934, 47 U.S.C. (S)252(f).
1.79 "Technically Feasible Point" is As Described in the Act.
1.80 "Telecommunications" is As Defined in the Act.
1.81 "Telecommunications Act" means the Telecommunications Act of 1996 and
any rules and regulations promulgated thereunder.
1.82 "Telecommunications Carrier" is As Defined in the Act.
1.83 "Telecommunications Service" is As Defined in the Act.
1.84 "Telephone Exchange Service" sometimes also referred to as "Exchange
Service," is As Defined in the Act. Telephone Exchange Service generally
provides the Customer with a telephonic connection to, and a unique telephone
number address on, the public switched telecommunications network, and enables
such Customer to place or receive calls to all other stations on the public
switched telecommunications network.
-11-
<PAGE>
1.85 "Telephone Exchange Service Call" or "Telephone Exchange Service
Traffic" means a call completed between two Telephone Exchange Service Customers
of the Parties located in the same LATA, originated on one Party's network and
terminated on the other Party's network where such call was not carried by a
third Party as either a presubscribed call (1+) or a casual dialed (10XXX) or
(101XXX) call. Telephone Exchange Service Traffic is transported over Traffic
Exchange Trunks.
1.86 "Telephone Toll Service" (or "Toll Traffic"), is as defined in the
Act.
1.87 "Transit Traffic" means any traffic that originates from or
terminates at MGC's network, "transits" BA's network substantially unchanged,
and terminates to or originates from a third carrier's network, as the case may
be. "Transit Service" provides MGC with the ability to use its connection to a
BA Tandem for the delivery of calls which originate or terminate with MGC and
terminate or originate from a carrier other than BA, such as another CLEC, a LEC
other than BA, or a wireless carrier. In these cases, neither the originating
nor terminating Customer is a Customer of BA. This service is provided through
BA's Tandems and applies only where the terminating End Office of the third
carrier subtends the BA Tandem. "Transit Traffic" and "Transit Service" do not
include or apply to traffic that is subject to an effective Meet-Point Billing
arrangement.
1.88 "Trunk Side" means a Central Office Switch connection that is capable
of, and has been programmed to treat the circuit as, connecting to another
switching entity (e.g. another carrier's network). Trunk Side connections offer
----
those transmission and signaling features appropriate for the connection of
switching entities.
1.89 "Unbundled Local Loop" or "ULL" or "Loop" means a transmission path
that extends from the Main Distribution Frame, DSX panel or functionally
comparable piece of equipment in the Customer's serving End Office to the Rate
Demarcation Point (or network interface device (NID) if installed) in or at a
Customer's premises. The actual loop transmission facilities used to provide an
ULL may utilize any of several technologies.
1.90 "Undefined Terms" means the Parties acknowledge that terms may appear
in this Agreement which are not defined and agree that any such terms shall be
construed in accordance with their customary usage in the telecommunications
industry as of the effective date of this Agreement, except that any undefined
term herein shall be interpreted in accordance with the definition or its use in
the FCC Interconnection Order and the FCC Further Interconnection Order.
-12-
<PAGE>
1.91 "Voice Grade" means either an analog signal of 300 to 3000 Hz or a
digital signal of 56/64 kilobits per second. When referring to digital voice
grade service (a 56/64 kbps channel), the terms "DS-0" or "sub-DS-1" may also be
used.
1.92 "Wire Center" means a building or portion thereof in which a Party
has the exclusive right of occupancy and which serves as Routing Point for
Switched Exchange Access Service.
2.0 INTERPRETATION AND CONSTRUCTION
2.1 All references to Sections, Exhibits and Schedules shall be deemed to
be references to Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. The headings used in this Agreement
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning of this Agreement. Unless the context shall
otherwise require, any reference to any agreement, other instrument (including
BA or other third Party offerings, guides or practices), statute, regulation,
rule or tariff is to such agreement, instrument, statute, regulation, or rule or
tariff as amended and supplemented from time to time (and, in the case of a
statute, regulation, rule or tariff, to any successor provision).
2.2 Subject to the terms set forth in Section 20 regarding rates and
charges, each Party hereby incorporates by reference those provisions of its
tariffs that govern the provision of any of the services or facilities provided
hereunder. If any provision of this Agreement and an applicable tariff cannot
be reasonably construed or interpreted to avoid conflict, the provision
contained in this Agreement shall prevail, provided that in all cases the more
specific shall prevail over the more general. If any provision contained in
this main body of the Agreement and any Schedule or Exhibit hereto cannot be
reasonably construed or interpreted to avoid conflict, the provision contained
in this main body of the Agreement shall prevail. The fact that a condition,
right, obligation, or other term appears in this Agreement but not in any such
tariff shall not be interpreted as, or be deemed grounds for finding, a conflict
for purposes of this Section 2.
3.0 SCOPE
This Agreement sets forth the terms and conditions under which MGC can
obtain access to Unbundled Network Elements, Resale and Interconnection from BA,
consistent with the rights and obligations set forth in the Act, in order for
MGC to provide Telecommunication Services to its own customers. MGC warrants
and represents that it is a Telecommunications Carrier ("TC")
-13-
<PAGE>
under the Act. Each Party is solely responsible for the services it provides to
its Customers and to other Telecommunications Carriers.
4.0 INTERCONNECTION PURSUANT TO SECTION 251(c)(2)
The types of Traffic to be exchanged under this Agreement shall be Local
Traffic, IntraLATA Toll (and InterLATA Toll, as applicable) Traffic, Transit
Traffic, Meet Point Billing Traffic, and Ancillary Traffic. Subject to the
terms and conditions of this Agreement, Interconnection of the Parties
facilities and equipment pursuant to this Section 4.0 for the transmission and
routing of Telephone Exchange Service traffic and Exchange Access traffic shall
be established on or before the corresponding "Interconnection Activation Date"
shown for each such LATA within the State of New York on Schedule 4.0. Schedule
4.0 may be revised and supplemented from time to time upon the mutual agreement
of the Parties to reflect additional or changed Interconnection Points in New
York State pursuant to subsection 4.4 by attaching one or more supplementary
addenda to such Schedule. Interconnection in the LATA shall be accomplished
through either (i) Collocation as provided in Section 13.0, (ii) a Fiber Meet as
provided in subsection 4.2, (iii) any other Interconnection method provided by
applicable tariff, law, rule or regulation, or (iv) any other Interconnection
method to which the Parties may agree.
4.1 Scope
4.1 Section 4 describes the architecture for interconnection of the
Parties' facilities and equipment over which the Parties shall configure the
following separate and distinct trunk groups:
Traffic Exchange Trunks for the transmission and routing of
-----------------------
terminating Local Traffic, Transit Traffic, translated LEC IntraLATA 800/888
traffic, IntraLATA Toll Traffic, and, where agreed to between the Parties and as
set forth in subsection 5.3.3 below, InterLATA Toll Traffic between their
respective Telephone Exchange Service customers pursuant to Section 251(c)(2) of
the Act, in accordance with Section 5 below;
Access Toll Connecting Trunks for the transmission and routing of
-----------------------------
Exchange Access traffic, including translated InterLATA 800/888 traffic, between
MGC Telephone Exchange Service customers and purchasers of Switched Exchange
Access Service via a BA Tandem, pursuant to Section 251(c)(2) of the Act, in
accordance with Section 6 below;
-14-
<PAGE>
Information Services Trunks for the transmission and routing of
---------------------------
terminating Information Services Traffic in accordance with Section 7 below;
BLV/BLVI Trunks for the transmission and routing of terminating
---------------
BLV/BLVI traffic, in accordance with Section 19 below;
911/E911 Trunks for the transmission and routing of terminating
---------------
E911/911 traffic, in accordance with Section 7 below;
Directory Assistance Trunks for the transmission and routing of
---------------------------
terminating directory assistance traffic, in accordance with Section 19.0 below;
Operator Services (IntraLATA call completion) Trunks for the
----------------------------------------------------
transmission and routing of terminating IntraLATA call completion traffic, in
accordance with Section 19.0 below;
Choke Trunks for traffic congestion and testing; and
------------
Others as may be requested and agreed to by the Parties.
------
4.1.2 The Parties shall configure separate trunk groups (as described
in subsection 4.1.1 above) for traffic from MGC to BA, and for traffic from BA
to MGC, respectively; however, the trunk groups shall be equipped as two-way
trunks for testing purposes. As provided in Section 10 below, the Parties agree
to consider as part of the Joint Grooming Process the feasibility of combining
any of the separate trunk groups into a single two-way trunk group.
4.2 Physical Architecture
In each LATA identified on Schedule 4.0, MGC and BA shall utilize the
Interconnection points designated in such Schedule to configure a network
Interconnection arrangement under a joint network configuration and Grooming
Process ("Joint Grooming Process" as defined in Section 10.1). Both Parties
will endeavor to provision a diverse, reliable network that incorporates the
most practicable technologies.
4.2.1 Network architecture shall be defined under the Joint
Grooming Process.
4.2 The Parties shall establish physical Interconnection
points at the locations designated on Schedule 4.0. Points on the MGC
network from which MGC will provide transport and termination of
traffic are designated as the MGC
-15-
<PAGE>
Interconnection Points ("MGC-IP" or "[C]-IP"). Points on the BA
network from which BA will provide transport and termination of
traffic are designated as the BA Interconnection Points ("BA-IP").
Additional Interconnection points may be established by mutual
agreement of both parties at any technically feasible points
consistent with Act.
4.2.1.2 Each Party will provide owned or leased facilities to
deliver traffic originated on its respective networks to the
designated Interconnection Points of the other Party's network. The
Party terminating the traffic will be responsible for all transport
and termination of calls beyond the designated Interconnection point.
4.2.2 The Parties may implement one of the following configurations
as part of the Joint Grooming Process, unless an alternative plan is mutually
agreed to by both Parties.
(a) a jointly maintained SONET network, in which each Party is
responsible for the procurement, installation, and
maintenance of mutually agreed-upon Optical Line Terminating
Multiplexer ("OLTM") equipment at its respective premises.
Additionally, each Party will be responsible for the
installation and maintenance of one-half of a fiber optic
ring;
(b) Interconnection of networks at an optical level via a Fiber
Meet or other comparable means.
4.3 Technical Specifications
4.3.1 MGC and BA shall work cooperatively to install and maintain
a reliable network. MGC and BA shall exchange appropriate information (e.g.,
---
maintenance contact numbers, network information, information required to comply
with law enforcement and other security agencies of the Government and such
other information as the Parties shall mutually agree) to achieve this desired
reliability.
4.3.2 MGC and BA shall work cooperatively to apply sound network
management principles by invoking network management controls to alleviate or to
prevent congestion.
-16-
<PAGE>
4.3.3 The publication "Bellcore Technical Publication GR-342-CORE;
High Capacity Digital Special Access Service, Transmission Parameter Limits and
Interface Combinations" describes the practices, procedures, specifications and
interfaces generally utilized by BA and is referenced herein to assist the
Parties in meeting their respective Interconnection responsibilities related to
electrical/optical interfaces.
4.4 Interconnection in Additional LATAs
4.4.1 If MGC determines to offer Telephone Exchange Services in
any other LATA in which BA also offers Telephone Exchange Services in New York
State, MGC shall provide written notice to BA of the need to establish
Interconnection in such LATA pursuant to this Agreement.
4.4.2 The notice provided in subsection 4.4.1 shall include (i)
the initial Rating Point MGC has designated in the new LATA; (ii) MGC's
requested Interconnection Activation Date; and (iii) a non-binding forecast of
MGC's trunking requirements.
4.4.3 Unless otherwise agreed by the Parties, the Parties shall
designate the Wire Center(s) MGC has identified as its initial Rating Point(s)
in the LATA as the MGC-IP(s) in that LATA and shall designate the BA Tandem
Office Wire Center within the LATA nearest to the MGC-IP (as measured in airline
miles utilizing the V&H coordinates method as defined in Bellcore Special Report
SR-TSV-002275) as the BA-IP in that LATA.
5.0 TRANSMISSION AND ROUTING OF TELEPHONE EXCHANGE SERVICE TRAFFIC PURSUANT
TO SECTION 251(c)(2)
5.1 Scope of Traffic
Section 5.0 prescribes parameters for trunk groups (the "Traffic Exchange
Trunks") to be effected over the Interconnections specified in Section 4.0 for
the transmission and routing of Local Traffic, Transit Traffic, translated LEC
IntraLATA 800/888 traffic, InterLATA Toll Traffic (to the extent applicable),
and IntraLATA Toll Traffic between the Parties' respective Telephone Exchange
Service Customers.
-17-
<PAGE>
5.2 Switching System Hierarchy
5.2.1 For purposes of this Section 5.0, each of the following
Central Office Switches shall be designated as a "Primary Switch":
(a) Each Tandem Office BA operates in the LATA;
(b) The initial switch MGC employs to provide Telephone Exchange
Service in the LATA;
(c) Any Tandem Office MGC may establish for provision of Exchange
Access in the LATA;
(d) Any additional switch MGC may subsequently employ to provide
Telephone Exchange Service in the LATA which MGC may at its sole
option designate as a Primary Switch; provided that the total
number of MGC Primary Switches for a LATA may not exceed the
total number of BA Primary Switches for that LATA. To the extent
MGC chooses to designate any additional switch as a Primary
Switch, it shall provide notice to BA of such designation at
least ninety (90) days in advance of the date on which MGC
activates such switch as a Primary Switch; and
(e) Any additional tandem switch BA may subsequently employ to
provide access and/or sector traffic capacity within a LATA.
Traffic destined to sub-tending Secondary Switches routed via
such a tandem(s) would be determined by network requirements and
notice made available to all LECs at least one hundred and eighty
(180) days prior to service introduction.
5.2.2 For purposes of this Section 5.0, each of the following
Central Office Switches shall be designated as a "Secondary Switch".
(a) Each Central Office Switch operated by the Parties which is not
designated as a Primary Switch pursuant to Section 5.2.1 shall be
designated as a "Secondary Switch".
-18-
<PAGE>
(b) A geographically relevant End Office or functional equivalent, at
a technically feasible IP established by one Party at the other
Party's request (collectively, a "Virtual End Office"). For
purposes of this Agreement, a "geographically relevant" IP shall
mean an IP that is located within the same Rate Center Area as
the NXX's to which traffic is to be terminated are assigned, or,
with the mutual agreement of the Parties, an existing and
currently utilized IP within the LATA but outside the applicable
Rate Center Area. If after sixty (60) days following said
request, the Parties have been unable to reach agreement on the
additional Interconnection Point(s), then either Party may file a
complaint with the Commission to resolve such impasse or pursue
any other remedy available under law or equity.
5.2.3 For purposes of MGC routing traffic to BA, the sub-tending
arrangements between BA Primary Switches and BA Secondary Switches shall be the
same as the Tandem/End Office sub-tending arrangements which BA maintains for
the routing of its own or other carriers' traffic. For purposes of BA routing
traffic to MGC, the sub-tending arrangements between MGC Primary Switches and
MGC Secondary Switches shall be the same as the Tandem/End Office sub-tending
arrangements which MGC maintains for the routing of its own or other carriers'
traffic.
5.3 Trunk Group Architecture and Traffic Routing
The Parties shall jointly engineer and configure Traffic Exchange Trunks
over the physical Interconnection arrangements where such arrangements exist for
the transport and termination of Telephone Exchange Service Traffic as follows:
5.3.1 The Parties shall each initially configure a separate two-way
trunk group as direct transmission path between each MGC Primary Switch and each
BA Primary Switch.
5.3.2 Notwithstanding anything to the contrary in this Section 5.0,
if the individual trunk group volumes between any two Central Office Switches
(whether Primary-Primary, Primary-Secondary, or Secondary-Secondary)
consistently exceed the blocking parameters established in the Joint Grooming
Process, the Parties will augment such trunk groups so as to achieve established
service objectives. Such augmentation shall be consistent with established
network design methods using modular trunk engineering techniques where
practical.
-19-
<PAGE>
5.3.3 BA and MGC will allow each other to route their intrastate and
interstate switched access service traffic over the Traffic Exchange Trunk
Groups, pursuant to the rates, terms and conditions specified in each Party's
effective intrastate and interstate access tariffs or at Generally available and
prevailing rates, terms and conditions.
5.4 Signaling
Each Party will provide the other Party with access to its databases and
associated signaling necessary for the routine and completion of the other
Party's traffic in accordance with the following, provisions, and with Section
17.0 below:
5.4.1 Where available, CCS signaling shall be used by the Parties to
set up calls between the Parties' Telephone Exchange Service networks. If CCS
signaling is unavailable, MF ("Multi-Frequency") signaling shall be used by the
Parties. Each Party shall charge the other Party equal and reciprocal rates for
CCS signaling in accordance with applicable tariffs.
5.4.2 The publication "Bellcore Special Report SR-TSV-002275, BOC
Notes on the LEC Networks-Signaling" describes the practices, procedures and
specifications Generally utilized by BA for signaling, purposes and is
referenced herein to assist the Parties in meeting their respective
Interconnection responsibilities related to signaling.
5.4.3 The Parties will cooperate on the exchange of Transactional
Capabilities Application Part ("TCAP") messages to facilitate interoperability
of CCS-based features between their respective networks, including all CLASS
features and functions, to the extent each Party offers such features and
functions to its Customers. All CCS signaling parameters will be provided
including, calling Party number ("CPN"), originating line information ("OLI"),
calling Party category and charge number.
5.4.4 Upon request, each Party shall provide trunk groups where
available that are configured utilizing the B8ZS ESF protocol for 64 Kbps clear
channel transmission to allow for ISDN interoperability between the Parties'
respective networks.
5.5 Grades of Service
The Parties shall engineer and shall jointly monitor and enhance all trunk
groups consistent with the Joint Grooming Process as set forth in Section 10.
-20-
<PAGE>
5.6 Measurement and Billing
5.6.1 For billing purposes, each Party shall pass Calling Party
Number ("CPN") information on each call carried over the Traffic Exchange
Trunks; provided, however, that so long as the percentage of calls passed with
CPN is greater than ninety percent (90%), all calls exchanged without CPN
information shall be billed as either Local Traffic or IntraLATA Toll Traffic in
direct proportion to the minutes of use of calls exchanged with CPN information.
5.6.2 Measurement of billing minutes (except for originating 800/888
calls) shall be in actual conversation seconds. Measurement of billing minutes
for originating 800/888 calls shall be in accordance with applicable tariffs.
5.6.3 Where CPN is not available in a LATA for greater than ten
percent (10%) of the traffic, the Party sending the traffic shall provide
factors to determine the jurisdiction, as well as local vs. toll distinction, of
the traffic. Such factors shall be supported by call record details that will
be made available for review upon request when a Party is passing CPN but the
receiving Party is not properly receiving or recording the information. The
Parties shall cooperatively work to correctly identify the traffic, and
establish a mutually agreeable mechanism that will prevent improperly rated
traffic. Notwithstanding this, if any improperly rated traffic occurs, the
Parties agree to reconcile it.
5.7 Reciprocal Compensation Arrangements -- Section 251(b)(5)
5.7.1 Reciprocal Compensation only applies to the transport and
termination of Reciprocal Compensation Traffic billable by BA or MGC which a
Telephone Exchange Service Customer originates on BA's or MGC's network for
termination on the other Party's network within the same LATA except as provided
in Section 5.7.6 below.
5.7.2 The Parties shall compensate each other for transport and
termination of Reciprocal Compensation Traffic in an equal and symmetrical
manner for the application of rates as provided in the Pricing Schedule (Exhibit
A hereto).These rates are to be applied at the MGC-IP for traffic delivered by
BA, and at the BA-IP for traffic delivered by MGC. Tandem rates will be applied
for traffic terminated to a Primary Switch; End Office rates will be applied for
traffic terminated to a Secondary Switch. No additional charges, including port
or transport charges, shall apply for the termination of Reciprocal Compensation
Traffic delivered to the MGC-IP or the BA-IP. When Reciprocal Compensation
Traffic is terminated over the same trunks as Switched Exchange Access Service,
any port or transport or other applicable access charges
-21-
<PAGE>
related to the Switched Exchange Access Service shall be prorated to be applied
only to such other Switched Exchange Access Service.
5.7.3 The Reciprocal Compensation arrangements set forth in this
Agreement are not applicable to Switched Exchange Access Service or to any other
IntraLATA or InterLATA calls originated on a third party carrier's network on a
1+ presubscribed basis or a casual dialed (10XXX or 101XXXX) basis. All
Switched Exchange Access Service and all Toll Traffic shall continue to be
governed by the terms and conditions of the applicable federal and state Tariffs
or the terms and conditions of section 6.3, if applicable. Similarly, the
Parties agree that the issue of what, if any, compensation is applicable to
traffic handed off from one Party to the other Party, within a BA local calling
area (or other calling area otherwise applicable for Reciprocal Compensation),
for delivery to an Internet Service Provider (ISP) for carriage over the
Internet is currently pending before the FCC. Until such time as the issue is
resolved by the FCC or by an applicable order of the Commission or Court with
jurisdiction over the appropriate compensation for such traffic exchange, the
Parties agree that the Reciprocal Compensation arrangements contained in this
subsection 5.7 shall not apply to such traffic. To the extent that either Party
is unable to measure the volume of such traffic, the Parties agree to work
cooperatively to estimate such traffic volume. Unless otherwise provided under
Applicable Law, Reciprocal Compensation arrangements shall apply to IntraLATA
Toll Traffic originated on one Party's network and delivered by that Party to
the other Party's network.
5.7.4 The rates for termination of Reciprocal Compensation Traffic
are set forth in Exhibit A which is incorporated by reference herein.
5.7.5 The designation of Traffic as Local or Toll for purposes of
compensation shall be based on the actual originating and terminating points of
the complete end-to-end call, regardless of the entities involved in carrying
any segment of the call.
5.7.6 Compensation for transport and termination of all traffic
which is subject to performance of INP by one Party for the other Party pursuant
to Section 14.0 shall be as specified in subsection 14.6.
5.7.7 Each Party reserves the right to measure and audit all
Reciprocal Compensation Traffic, up to a maximum of two audits per calendar
year, to ensure that proper rates are being applied appropriately, provided,
however, that either Party shall have the right to conduct additional audit(s)
if the preceding audit disclosed material errors or discrepancies. Each Party
agrees to provide the necessary Reciprocal Compensation Traffic data or permit
the other
-22-
<PAGE>
Party's recording equipment to be installed for sampling purposes in conjunction
with any such audit.
5.7.8 When either Party delivers seven (7) or ten (10) digit
translated IntraLATA toll-free service access codes (e.g., 800/888) service to
----
the other Party for termination, the originating Party shall provide the
terminating Party with billing records in industry standard format (EMR) if
required by the terminating Party. The originating Party may bill the
terminating, Party for the delivery of the traffic at local reciprocal
compensation rates. The terminating Party may not bill the originating Party
reciprocal compensation under this Agreement. The Party that is providing the
toll-free service access codes (e.g. 800/888) service shall pay the database
----
inquiry charge per the Pricing Schedule to the Party that performed the database
inquiry.
6.0 TRANSMISSION AND ROUTING OF EXCHANGE ACCESS TRAFFIC PURSUANT TO 251(c)(2)
6.1 Scope of Traffic
Section 6.0 prescribes parameters for certain trunk groups ("Access Toll
Connecting Trunks") to be established over the Interconnections specified in
Section 4.0 for the transmission and routing of Exchange Access traffic between
MGC's Telephone Exchange Service Customers and Interexchange Carriers ("IXC's").
6.2 Trunk Group Architecture and Traffic Routing
6.2.1 The Parties shall jointly establish Access Toll Connecting
Trunks by which they will jointly provide tandem-transported Switched Exchange
Access Services to Interexchange Carriers to enable such Interexchange Carriers
to originate and terminate traffic from/to MGC's Customers.
6.2.2 Access Toll Connecting Trunks shall be used solely for the
transmission and routing of Exchange Access to allow MGC's Customers to connect
to or be connected to the interexchange trunks of any Interexchange Carrier
which is connected to a BA Tandem.
6.2.3 The Access Toll Connecting Trunks shall be two-way trunks
connecting an End Office Switch MGC utilizes to provide Telephone Exchange
Service and Switched Exchange Access in a given LATA to a Tandem Switch BA
utilizes to provide Exchange Access in such LATA.
-23-
<PAGE>
6.2.4 The Parties shall jointly determine which BA Tandem(s) will be
subtended by each MGC End Office Switch. MGC's end office switch shall sub-tend
the BA Tandem that would have served the same rate center on BA's network.
6.3 Meet-Point Billing Arrangements
6.3.1 Meet-Point Billing arrangements between the Parties for
jointly-provided Switched Exchange Access Services on Access Toll Connecting
Trunks will be governed by the terms and conditions of a mutually agreeable
arrangement which the Parties will work to develop.
6.3.2 With respect to the Meet Point Billing arrangements, until and
unless changed by the FCC on a going forward basis, MGC shall retain one hundred
percent (100%) of the Residual Interconnection Charge in instances in which MGC
provides the end office switching.
7.0 TRANSPORT AND TERMINATION OF OTHER TYPES OF TRAFFIC
7.1 Information Services Traffic
The following provisions shall apply only to MGC-originated Information
Services Traffic directed to an information services platform connected to BA's
network. At such time as MGC connects information services platforms to its
network, the Parties shall agree upon a comparable arrangement for BA-originated
Information Services Traffic. The Information Services Traffic subject to the
following provisions is switched voice traffic, delivered to service providers
who offer recorded announcement information or open discussion information
programs to the general public; it is not Internet traffic.
7.1.1 MGC shall have the option to route Information Services
Traffic that originates on its own network to the appropriate information
services platform(s) connected to BA's network. In the event MGC exercises such
option, MGC will establish a dedicated trunk group to the BA information
services serving switch. This trunk group will be utilized to allow MGC to route
information service traffic originated on its network to BA.
Where MGC serves a Customer through the purchase of a BA unbundled Port
Element, information service traffic from that Customer may be routed over BA
information service trunks on a shared basis.
-24-
<PAGE>
7.1.2 Nothing in this Agreement shall restrict either Party from
offering or obviate either Party's obligations, if any, under Applicable Laws,
to offer to its Telephone Exchange Service Customers the ability to block the
completion of Information Service Traffic.
7.1.3 For calls to an "Information Mass Announcement Service"
("IMAS"), which service is only available in the New York Metro LATA (LATA 132),
MGC shall bill and collect the information services provider charges as defined
in the existing New York PSC No. 900 Tariff, as may be amended from time to
time. BA will bill MGC for such charges less the Information Services Billing
and Collection fee set forth in Exhibit A. MGC shall pay BA in full regardless
of uncollectible charges to its own Customers. BA may request recorded call
information from MGC, to be delivered in unrated EMR format via electronic file
transfer or other medium mutually agreeable to the two Parties, at the customer
usage detail charges specified in Exhibit A. This arrangement shall apply
whether MGC serves its customer from switching facilities outside the BA
network, or from a BA unbundled Port Element.
7.1.4 For calls to variable rated information services (e.g., NXX
---
550, 540, 976, 970, 940 as applicable), the Parties shall agree to implement
either of two separate billing arrangements, as set forth in Schedule 7.1.4.
Under either arrangement, MGC shall bill and collect information services
provider charges from its Customers. BA shall charge MGC, and the Parties shall
exchange call detail information and handle adjustments, according to the terms
set forth in the agreed upon billing arrangement, at customer usage detail rates
specified in Exhibit A. Applicable information shall be provided in as timely a
fashion as practical in order to facilitate record review and reflect actual
prices set by the individual information services providers. The same billing
arrangements shall apply whether MGC serves its Customer from switching
facilities outside the BA network, or from BA unbundled Local Switching
Elements, and agreement to mutually support one or the other billing arrangement
shall precede interconnection of the MGC network to the appropriate information
services platform(s) connected to BA's network. BA may require reasonable
demonstration, as defined in the applicable billing arrangement, that the agreed
upon arrangement has been implemented by MGC prior to establishing such
interconnection.
7.1.5 Where BA agrees to accept adjustments from MGC for calls
originated by MGC Customers to information services platform(s) connected to
BA's network, MGC shall follow the same policy in allowing adjustments to its
Customers as BA follows with its own Customers. MGC shall provide to BA
sufficient information regarding uncollectibles and Customer adjustments to
allow BA to pass through the adjustments to the information services provider,
and BA shall pass through such adjustments. However, if the information
services provider disputes such adjustments and refuses to accept such
adjustments, MGC shall reimburse
-25-
<PAGE>
BA for all such disputed adjustments. Final resolution regarding all disputed
adjustments shall be solely between MGC and the information services provider.
7.1.6 The Information Services Traffic addressed herein does not
include 555 traffic or similar traffic with AIN service interfaces, which
traffic shall be subject to separate arrangements between the Parties.
7.2 Tandem Transit Service ("Transit Service")
7.2.1 "Transit Service" means the delivery of certain traffic
between MGC and another Local Exchange Carrier by BA over the Telephone Exchange
Service Trunks, where both carriers' End Offices subtend a BA tandem. The
following traffic types will be delivered: (i) Local Traffic or IntraLATA Toll
originated from MGC to such LEC and (ii) Local or IntraLATA Toll Traffic
originated from such LEC and terminated to MGC where BA carries such traffic
pursuant to the Commission's primary toll carrier plan or other similar plan.
7.2.2 Subject to Section 7.2.4, the Parties shall compensate each
other for Transit Service as follows:
(a) MGC shall pay BA for Local Traffic that MGC originates over
the Transit Service at the rate specified in Pricing Schedule
plus any additional charges or costs such terminating LEC
imposes or levies on BA for the delivery or termination of
such traffic, including any switched access charges; and
(b) BA shall pay MGC for Local, InterLATA, or IntraLATA Toll
Traffic terminated to MGC from such LEC at the appropriate
reciprocal compensation rates described in Section 5.7,
InterLATA access rates, or (where BA delivers such traffic
pursuant to the Commission's primary toll carrier plan or
other similar plan) at MGC's applicable switched access rates
or local termination rate, whichever is appropriate.
7.2.3 BA expects that all networks involved in Transit traffic will
deliver each call to each involved network with CCS and the appropriate
Transactional Capabilities Application Part ("TCAP") message to facilitate full
interoperability of those CLASS Features supported by BA and billing functions.
In all cases, each Party shall follow the Exchange Message Record ("EMR")
standard and exchange records between the Parties and [?] with the terminating
carrier to facilitate the billing process to the originating network.
-26-
<PAGE>
7.2.4 Each Party shall exercise all reasonable efforts to enter into
a reciprocal local traffic exchange arrangement (either via written agreement or
mutual tariffs) with any wireless carrier, ITC, CLEC or other LEC to which it
sends, or from which it receives, local traffic that transits the other Party's
facilities over Traffic Exchange Trunks. Each Party will, upon request, provide
the other Party with all reasonable cooperation and assistance in obtaining such
arrangements. In addition, neither Party shall take any actions to prevent the
other Party from entering into a direct and reciprocal local traffic exchange
arrangement (either via written agreement or mutual tariffs) with any wireless
carrier, ITC, CLEC, or other LEC to which it sends, or from which it receives,
local traffic that does not utilize the Transit Service of the first Party. The
Parties agree to work cooperatively in appropriate industry fora to promote the
adoption of reasonable industry guidelines relating to Transit Traffic.
7.3 911/E911 Arrangements
7.3.1 MGC will interconnect to the BA 911/E911 selective router or
911 Tandem Offices, as appropriate, that serve the areas in which MGC provides
exchange services, for the provision of 911/E911 services and for access to all
sub-tending Public Safety Answering Points ("PSAP"). BA will provide MGC with
the appropriate CLLI codes and specifications of the tandem serving area.
7.3.2 Path and route diverse Interconnections for 911/E911 shall be
made at the MGC-IP, the BA-IP, or other points as necessary and mutually agreed,
and as required by law or regulation.
7.3.3 BA will provide MGC with an electronic interface through which
MGC shall input and provide a daily update of 911/E911 database information
related to appropriate MGC customers. BA will provide, as permitted by the PSC,
MGC with the Master Street Address Guide ("MSAG") so that MGC can ensure the
accuracy of the data transfer. Additionally, BA shall assist MGC in identifying
the appropriate person in each municipality for the purpose of obtaining the
ten-digit Subscriber number of each PSAP.
7.3.4 BA and MGC will use their best efforts to facilitate the
prompt, robust, reliable and efficient Interconnection of MGC systems to the
911/E911 platforms.
7.3.5 BA and MGC will work cooperatively to arrange meetings with
PSAPs to answer any technical questions the PSAPS, or county or municipal
coordinators may have regarding the 911/E911 arrangements.
-27-
<PAGE>
7.3.6 MGC will compensate BA for connections to its 911/E911
pursuant to Exhibit A.
7.3.7 MGC comply with all applicable rules and regulations
pertaining to the provision of 911/E911 services in the State of New York.
8.0 NUMBER RESOURCES, RATE CENTERS AND RATING POINTS
8.1 Nothing in this Agreement shall be construed to limit or otherwise
adversely affect in any manner either Party's right to employ or to request and
be assigned any Central Office (NXX) Codes pursuant to the Central Office Code
Assignment Guidelines, as may be amended from time to time, or to establish, by
Tariff or otherwise, Rate Centers and Rating Points corresponding to such NXX
codes. Until such time as number administration is provided by a third party,
BA shall provide MGC access to telephone numbers by assigning NXX codes to MGC
in accordance with such Assignment Guidelines.
8.2 It shall be the responsibility of each Party to program and update its
own switches and network systems in accordance with the Local Exchange Routing
Guide ("LERG") in order to recognize and route traffic to the other Party's
assigned NXX codes at all times. Neither Party shall impose any fees or charges
whatsoever on the other Party for such activities, except as expressly set forth
in this Agreement.
8.3 Unless mandated otherwise by a Commission order, the Rate Center Areas
will be the same for each Party. During the term of this Agreement, MGC shall
adopt the Rate Center Areas and Rate Center Points that the Commission has
approved for BA, in all areas where BA and MGC service areas overlap, and MGC
shall assign whole NPA-NXX codes to each Rate Center unless the LEC industry
adopts alternative methods of utilizing NXXs in the manner adopted by the NANP.
8.4 MGC will also designate a Rating Point for each assigned NXX code.
MGC shall designate one location for each Rate Center Area as the Rating Point
for the NPA-NXXs associated with that Area and such Rating Point shall be within
the same LATA as the Rate Center Area but not necessarily within the Rate Center
Area itself
8.5 Notwithstanding anything to the contrary contained herein, nothing in
this Agreement is intended to, and nothing, in this Agreement shall be construed
to, in any way constrain MGC's choices regarding the size of the local calling
area(s) that MGC may establish
-28-
<PAGE>
for its Customers, which local calling areas may be larger than, smaller than,
or identical to, BA's local calling areas.
9.0 NETWORK MAINTENANCE AND MANAGEMENT; OUTAGES
9.1 Cooperation
The Parties will work cooperatively to install and maintain a reliable
network. MGC and BA will exchange appropriate information (e.g., maintenance
----
contact numbers, escalation procedures, network information, information
required to comply with law enforcement and other security agencies of the
Government) to achieve this desired reliability. In addition, the Parties will
work cooperatively to apply sound network management principles to alleviate or
to prevent congestion.
9.2 Responsibility for Following Standards
Each Party recognizes a responsibility to follow the standards that may be
agreed to between the Parties and to employ characteristics and methods of
operation that will not interfere with or impair the service or any facilities
of the other or any third parties connected with or involved directly in the
network of the other.
9.3 Interference or Impairment
If Bell Atlantic reasonably determines that the characteristics and methods
of operation used by MGC will or may interfere with or impair its provision of
services, BA shall have the right to discontinue service subject, however, to
the following:
9.3.1 BA shall have given MGC at least ten (10) days' prior written
notice of the interference or impairment or potential interference or impairment
and the need to correct the condition within said time period.
9.3.2 BA shall have concurrently provided a copy of the notice
provided to MGC under (9.3.1) above to the appropriate federal and/or state
regulatory bodies.
9.3.3 Notice in accord with subsections 9.3.1 and 9.3.2 above shall
not be required in emergencies and BA may immediately discontinue service if
reasonably necessary to meet its obligations. In such case, however, BA shall
use all reasonable means to notify MGC and the appropriate federal and/or state
regulatory bodies.
-29-
<PAGE>
9.3.4 Upon correction of the interference or impairment, BA will
promptly renew service to MGC. During such period of discontinuance, there will
be no compensation or credit allowance by BA to MGC for interruptions.
9.4 Repeated or Willful Noncompliance
The Interconnection, unbundled Network Elements, and services provided
hereunder may be discontinued by either Party upon thirty (30) days' written
notice to the other for repeated or willful violation of and/or a refusal to
comply with this Agreement in any material respect. The Party discontinuing
will notify the appropriate federal and/or state regulatory bodies concurrently
with the notice to the other Party of the prospective discontinuance.
9.5 Outage Repair Standard
In the event of an outage or trouble in any arrangement, facility, or
service being provided by a Party hereunder, the providing Party will follow
procedures for isolating and clearing the outage or trouble that are no less
favorable than those that apply to comparable arrangements, facilities, or
services being provided by the providing Party to any other carrier whose
network is connected to that of the providing Party. MGC and BA may agree to
modify those procedures from time to time based on their experience with
comparable Interconnection arrangements with other carriers.
9.6 Notice of Changes -- Section 251(c)(5)
If a Party makes a change in the information necessary for the
transmission and routing of services using that Party's network, or any other
change in its network which it believes will materially affect the inter-
operability of its network with the other Party's network, the Party making the
change shall provide at least ninety (90) days' advance written notice of such
change to the other Party. In addition, the Parties will comply with the Network
Disclosure rules adopted by the FCC in CC Docket No. 86-79 as may be amended
from time to time.
9.7 Fraud
The Parties shall work cooperatively to minimize fraud associated with
third-number billed calls, calling card calls, and any other services related to
this Agreement.
-30-
<PAGE>
10.0 JOINT NETWORK CONFIGURATION AND GROOMING PROCESS; AND INSTALLATION,
MAINTENANCE, TESTING AND REPAIR.
10.1 Joint Network Configuration and Grooming Process
Upon request of either Party, the Parties shall jointly develop an
implementation and grooming process (the "Joint Grooming Process" or "Joint
Process") which may define and detail, inter alia,
----- ----
(a) agreement on Physical Architecture consistent with the guidelines
defined in Section 4.0;
(b) standards to ensure that Interconnection trunk groups experience a
grade of service, availability and quality which is comparable to
that achieved on interoffice trunks within BA's network and in
accord with all appropriate relevant industry-accepted quality,
reliability and availability standards;
(c) the respective duties and responsibilities of the Parties with
respect to the administration and maintenance of the trunk groups,
including but not limited to standards and procedures for
notification and discoveries of trunk disconnects;
(d) disaster recovery provision escalations;
(e) additional technically feasible IP(s) in a LATA as provided in
Section 4.0 above; and
(f) such other matters as the Parties may agree, including, e.g., End
----
Office to End Office high usage trunks as good engineering
practices may dictate.
The initial mutual Interconnection is not dependent upon completion of the Joint
Grooming Process.
10.2 Installation, Maintenance, Testing and Repair
Unless otherwise agreed to by the Parties, Interconnection shall be
provided at parity. For purposes of this Agreement, a Party's obligation to
provide parity shall be in accordance with Applicable Laws. If either Party is
unable to fulfill its obligations under this subsection 10.2, it shall notify
the other Party of its inability to do so and will negotiate alternative
intervals in good
-31-
<PAGE>
faith. The Parties agree that the standards to be used by each Party for
isolating and clearing any disconnections and/or other outages or troubles shall
be at parity.
10.3 Network Reliability Council
The Parties will carefully review the Network Reliability Council's
recommendations and, as part of the Joint Grooming Plan, implement such
recommendations where technically and economically feasible pursuant to the
NYPSC Order in Case 96-C-0917, released December 2, 1996.
10.4 Forecasting, Requirements for Trunk Provisioning
Within ninety (90) days of executing this Agreement, each Party shall
provide the other Party a one (1) year traffic forecast. This initial forecast
will provide the amount of traffic to be delivered to BA over each of the
Traffic Exchange Trunk groups over the next four (4) quarters. The forecast
shall be updated and provided to BA on an as-needed but no less frequently than
quarterly. All forecasts shall include Access Carrier Terminal Location (ACTL),
traffic type (local/toll, operator services, 911, etc.), code (identifies trunk
group), A locations/Z location (CLLI codes for MGC-IPs and BA-IPs, interface
type (e.g., DS1), and trunks in service each year (cumulative).
----
10.4.1 Trunk Provisioning Pursuant to Forecasts. Because BA's
trunking requirements will be dependent on the Customer segments and service
segments within Customer segments to whom MGC decides to market its services, BA
will be dependent on MGC to provide accurate trunk forecasts for both inbound
(from BA) and outbound (from MGC) traffic. BA will, as an initial matter and
upon request, provide the same number of trunks to terminate local traffic to
MGC as MGC provides to terminate local traffic to BA, unless MGC expressly
identifies particular situations that are expected to produce traffic that is
substantially skewed in either the inbound or outbound direction, in which case
BA will provide the number of trunks MGC suggests; provided, however, that in
all cases BA's provision of the forecasted number of trunks to MGC is
conditioned on the following: that such forecast is based on reasonable
engineering criteria, there are no capacity constraints, and MGC's previous
forecasts have proven to be reliable and accurate.
10.4.2 Monitoring and Adjusting Forecasts. BA will, for ninety (90)
days, monitor traffic on each trunk group that it establishes at MGC's
suggestion or request pursuant to the procedures identified in subsection 10.4.1
above. At the end of such ninety (90) day period, BA may disconnect trunks
that, based on reasonable engineering criteria and capacity constraints,
-32-
<PAGE>
are not warranted by the actual traffic volume experienced. If, after such
initial ninety (90) day period for a trunk group, BA determines that any trunks
in the trunk group in excess of four (4) DS-1s are not warranted by actual
traffic volumes (considering engineering criteria for busy hour CCS and
blocking, percentages), then BA may hold MGC financially responsible for the
excess facilities. In subsequent periods, BA may also monitor traffic for ninety
(90) days on additional trunk groups that MGC suggests or requests BA to
establish. If, after any such (90) day period, BA determines that any trunks in
the trunk group are not warranted by actual traffic volumes (considering
engineering criteria for busy hour call seconds and blocking, percentages), then
BA may hold MGC financially responsible for the excess facilities. At any time
during the relevant ninety (90) day period, MGC may request that BA disconnect
trunks to meet a revised forecast. In such instances, BA may hold MGC
financially responsible for the disconnected trunks retroactive to the start of
the ninety (90) day period through the date such trunks are disconnected.
10.4.3 Reciprocal Responsibility. To the extent that BA requires MGC
to install trunks for delivery of traffic to BA, MGC may apply the same
procedures with respect to BA's trunking requirements.
10.5 Demand Management Forecasts
10.5.1 MGC will furnish BA with good faith demand management
forecasts to enable BA to effectively plan its network infrastructure and work
force levels to accommodate anticipated MGC demand for BA services and products.
Such forecasts will describe MGC's expected needs for service volumes, and
timeframes for service deployment, by wire center. MGC agrees to provide such
forecasts to BA thirty (30) days following the Effective Date, with updates to
follow every six months thereafter. BA agrees that such forecasts shall be
subject to the confidentiality provisions defined in subsection 29.4 below, and
that such Information will only be used by BA to provide Interconnection
pursuant to this Agreement.
11.0 UNBUNDLED ACCESS -- SECTION 251(c)(3)
To the extent required of each Party by Section 251 of the Act, each Party
shall offer to the other Party nondiscriminatory access to Network Elements on
an unbundled basis at any technically feasible point. BA shall unbundle and
separately price and offer Network Elements such that MGC will be able to lease
and interconnect to whichever of the Network Elements MGC requires, and to allow
MGC to combine the BA-provided elements with any facilities and services that
MGC may itself provide, except that MGC shall not recombine Network Elements
purchased from BA for use as a substitute for the purchase at wholesale rates of
-33-
<PAGE>
Telecommunications Services that BA provides unless otherwise mandated by the
FCC or the Commission or agreed to by BA with other carriers. Any combination by
MGC of unbundled Network Elements purchased from BA shall be through a
Collocation arrangement pursuant to Section 13.0.
11.1 Available Network Elements
At the request of MGC, BA shall provide MGC access to the following
unbundled Network Elements in accordance with the requirements of the FCC
Regulations:
11.1.1 Local Loops, as set forth in subsection 11.2;
11.1.2 The Network Interface Device;
11.1.3 Switching Capability, as set forth in subsection 11.3;
11.1.4 Interoffice Transmission Facilities, as set forth in subsection
11.4;
11.1.5 Signaling Links and Call-Related Databases, as set forth in
subsection 5.4 and Section 17;
11.1.6 Operations Support Systems, as set forth in subsection 11.5:
11.1.7 Operator Services and Direction, Assistance, as set forth in
Section 19;
and
11.1.8 such other Network Elements in accordance with subsection 11.7
below.
11.2 Unbundled Local Loop ("ULL") Types
Subject to subsection 11.7, BA shall allow MGC to access the following
Unbundled Local Loop ("ULL") types unbundled from local switching and local
transport in accordance with the terms and conditions set forth in this
subsection 11.2.
11.2.1 "2-Wire Analog Voice Grade ULL" or "Analog 2W" which support
analog transmission of 300-3000 Hz, repeat link start, link reverse battery, or
ground start seizure and disconnect in one direction (toward the End Office
Switch), and repeat ringing in the other
-34-
<PAGE>
direction (toward the Customer). Analog 2W include Loops sufficient for the
provision of PBX trunks, pay telephone lines and electronic key system lines.
11.2.2 "4-Wire Analog, Voice Grade ULL" or "Analog 4W" which support
transmission of voice grade signals using separate transmit and receive paths
and terminate in a 4-wire electrical interface.
11.2.3 "2-Wire ISDN Digital Grade ULL" or "BRI ISDN" (Premium Link)
which support digital transmission of two 64 Kbps bearer channels and one 16
Kbps data channel. BRI ISDN is a 2B+D Basic Rate Interface-Integrated Services
Digital Network (BRI-ISDN) Loop which will meet national ISDN standards and
conform to ANSI T1.601-1992 & TlEl.4 90-004R3).
11.2.4 2-Wire ADSL-Compatible ULL or ADSL 2W is a 2-wire, non-loaded,
twisted copper pair that meets revised resistance design or carrier serving area
design guidelines. The upstream and downstream ADSL power spectral density masks
and dc line power limits in BA TR 72575, Issue 2 must be met. ADSL-compatible
local loops are subject to availability.
11.2.5 2-Wire HDSL-Compatible ULL or HDSL 2W consists of a single 2-
wire, non-loaded, twisted copper pair that meets the carrier serving area design
criteria. The HDSL power spectral density mask and dc line power limits
referenced in BA TR 72575, Issue 2 must be met. 2-Wire HDSL-compatible local
loops are subject to availability.
11.2.6 4-Wire HDSL-Compatible ULL or HDSL 4W consists of two 2-wire,
non-loaded, twisted copper pairs that meet the carrier serving area design
criteria. The HDSL power spectral density mask and dc line power limits
referenced in BA TR 72575, Issue 2 must be met. 4-Wire HDSL-compatible local
loops are subject to availability.
11.2.7 "4-Wire DS-1-compatible ULL" (Digital Grade Loop) provides a
channel which provides 1.544 Mbps digital transmission path between a Customer
premises and a MGC Collocation node at a BA central office, and is capable of
operating in a full duplex, time division (digital) multiplexing mode. A DS-1
Digital Grade Loop provides transmission capacity equivalent to 24 voice grade
channels with associated signaling, twenty-four 56 Kbps digital channels when in
band signaling is provided or twenty-four 64 Kbps channels with the selection of
the Clear Channel signaling option.
-35-
<PAGE>
11.2.8 BA will make Analog 2-Wire ULLS, BRI ISDN ULLS, Analog 4-Wire
ULLs and 4-Wire DS-1-compatible ULLs available for purchase by MGC at any time
after the Effective Date.
11.2.9 BA will make HDSL 4-Wire, HDSL 2-Wire, and ADSL 2-Wire ULLs
available to MGC no later than the date on which it makes such ULLs commercially
available to any other Telecommunications Carrier in New York State. The Parties
shall amend Exhibit A to add the appropriate rates and charges.
11.3 Unbundled Switching Elements
BA shall make available to MGC the local Switching Element and tandem
Switching Element unbundled from transport, local loop transmission, or other
services in accordance with the terms and conditions of and at the rates
specified in BA's New York PSC No. 916 Tariff, as amended from time to time.
11.4 Unbundled Inter Office Facilities
BA shall provide MGC Inter Office Facilities ("IOF"), unbundled from
switching, unbundled interoffice facilities, and other services as required by
Applicable Law, at the rates, terms and conditions set forth in BA's NYPSC No.
916 Tariff, as amended from time to time.
11.5 Operations Support Systems
BA shall provide MGC with access via electronic interfaces to databases
required for pre-ordering, ordering, provisioning, maintenance and repair, and
billing as soon as practicable.
11.6 Limitations on Unbundled Access
11.6.1 BA shall only be required to provide ULLs and Ports where such
Loops and Ports are available.
11.6.2 MGC shall access BA's unbundled Network Elements specifically
identified in this Agreement via Collocation in accordance with Section 13 at
the BA Wire Center where those elements exist, and each ULL or Port shall, in
the case of Collocation, be delivered to MGC's Collocation node by means of a
Cross Connection or Strapping.
-36-
<PAGE>
11.6.3 BA shall provide MGC access to its Unbundled Local Loops at
each of BA's Wire Centers for loops terminating in that Wire Center. In
addition, if MGC orders one or more ULL provisioned via Integrated Digital Link
Carrier or Remote Switching technology deployed as a ULL concentrator, BA shall,
where available, move the requested ULL(s) to a spare, existing physical ULL at
no additional charge to MGC. If, however, no spare physical ULL is available, BA
shall within three (3) Business days of MGC's request notify MGC of the lack of
available facilities. MGC may then at its discretion make a Network Element Bona
Fide Request to BA to provide the unbundled Local Loop through the
demultiplexing of the integrated digitized ULL(s). MGC may also make a Network
Element Bona Fide Request for access to Unbundled Local Loops at the ULL
concentration site point. Notwithstanding anything to the contrary in this
Agreement, standard provisioning intervals shall not apply to ULL provided under
this subsection 11.6.3.
11.6.4 If MGC orders a ULL type and the distance requested on such
ULL exceeds the transmission characteristics in applicable technical references,
as specified below, distance extensions may be required and additional rates and
charges shall apply as set forth in Exhibit A or applicable Tariffs.
Loop Type Technical Reference/Limitation
Electronic Key Line 2.5 miles
ISDN Bellcore TA-NWT-000393
HDSL 2W T1E1 Technical Report Number 28
HDSL 4W T1E1 Technical Report Number 2S
ADSL 2W ANSI T1.413 1995 Specification
11.7 Availability of Other Network Elements on an Unbundled Basis
11.7.1 BA shall, upon request of MGC, and to the extent required by
Applicable Law, provide to MGC access to its Network Elements on an unbundled
basis for the provision of MGC's Telecommunications Service. Any request by MGC
for access to a BA Network Element that is not already available shall be
treated as a Network Element Bona Fide Request. MGC shall provide BA access to
its Network Elements as mutually agreed by the Parties or as required by
Applicable Laws.
11.7.2 A Network Element obtained by one Party from the other Party
under this subsection 11.7 may be used in combination with the facilities of the
requesting Party only to provide a Telecommunications Service, including
obtaining billing and collection, transmission, and routing of the
Telecommunications Service.
-37-
<PAGE>
11.7.3 Notwithstanding anything to the contrary in this subsection
11.7, a Party shall not be required to provide a proprietary Network Element to
the other Party under this subsection 11.7 except as required by the Commission
or FCC.
11.8 Provisioning of Unbundled Local Loops
The following coordination procedures shall apply for conversions of
"live" Telephone Exchange Services to Unbundled Local Loops (also referred to as
"hot cuts"). These and other mutually agreed-upon procedures shall apply
reciprocally for the "live" cutover of Customers from BA to MGC and from MGC to
BA.
11.8.1 MGC shall request ULLs from BA by delivering to BA a valid
electronic transmittal Service Order using the BA electronic ordering platform
or another mutually agreed upon system. Within two (2) business days of BA's
receipt of such valid Service Order, BA shall provide MGC the firm order
commitment ("FOC") date by which the Loop(s) covered by such Service Order will
be installed.
11.8.2 BA agrees to accept from MGC at the time the service request
is submitted for scheduled conversion of hot cut ULL orders, a desired date and
A.M. or P.M. designation (the "Scheduled Conversion Time") to the extent
available (as applicable, the "Conversion Window") for the hot cut.
11.8.3 BA shall test for MGC dial tone at the POT bay by testing
through the tie cable provisioned between the BA main distributing frame and the
MGC expanded Inter-connection node forty-eight (48) hours prior to the Scheduled
Conversion Time.
11.8.4 Not less than one hour prior to the Scheduled Conversion Time,
either Party may contact the other Party and unilaterally designate a new
Scheduled Conversion Time (the "New Conversion Time"). If the New Conversion
Time is within the Conversion Window, no charges shall be assessed on or waived
by either Party. If, however, the New Conversion Time is outside of the
Conversion Window, the Party requesting such New Conversion Time shall be
subject to the following:
If BA requests the New Conversion Time, the applicable Line Connection
Charge shall be waived; and
-38-
<PAGE>
If MGC requests the New Conversion Time, MGC shall be assessed a Line
Connection Charge in addition to the Line Connection Charge that will
be incurred for the New Conversion Time.
11.8.5 Except as otherwise agreed by the Parties for a specific
conversion such as large cutovers of ten (10) lines or more that have been
negotiated, the Parties agree that the time interval expected from disconnection
of BA's "live" Telephone Exchange Service to the connection of an unbundled
Network Element at the MGC Collocation node will be accomplished within a window
of time of sixty (60) minutes or less. If MGC has ordered INP with the
installation of a Loop, BA will coordinate the implementation of INP with the
Loop conversion during with the above stated intervals at no additional charge.
11.8.6 If MGC requests or approves a BA technician to perform
services in excess of or not otherwise contemplated by the Line Connection
Service Charge BA may Charge MGC for any additional and reasonable labor charges
to perform such services.
11.8.7 If as the result of end user actions (e.g. Customer not ready
---
["CNR"]), BA cannot complete requested work activity when technician has been
dispatched to the site, MGC will be assessed a non-recurring charge associated
with this visit. This charge will be the sum of the Service Order Charge and
Premises Visit Charge as specified in the NYPSC Tariffs Nos. 900/914.
11.9 Maintenance of Unbundled Network Elements
If (i) MGC reports to BA a Customer trouble, (ii) MGC requests a dispatch,
(iii) BA dispatches a technician, and (iv) such trouble was not caused by BA
facilities or equipment in whole or in part, then MGC shall pay BA a charge set
forth in Exhibit A for time associated with said dispatch. In addition, this
charge also applies when the Customer contact as designated by MGC is not
available at the appointed time. MGC accepts responsibility for initial trouble
isolation and providing BA with appropriate dispatch information based on its
test results. If as the result of MGC instructions, BA is erroneously requested
to dispatch within a BA Central Office or to a POT Bav ("dispatch in"), a charge
set forth in Exhibit A will be assessed per occurrence to MGC by BA. If as the
result of MGC instructions, BA is erroneously requested to dispatch outside a BA
Central Office or to a POT Bay ("dispatch out"), a charge set forth in Exhibit A
will be assessed per occurrence to MGC by BA. BA agrees to respond to MGC
trouble reports on a non-discriminatory basis consistent with the manner in
which it provides service to its own retail customers or to any other similarly
initiated Telecommunications Carrier.
-39-
<PAGE>
11.10 Other Terms and Conditions Including Rates and Charges
11.10.1 ULLs and other Network Elements will be offered on the terms
and conditions, including rates and charges, specified herein and on such other
terms as stated in applicable Tariffs, as amended from time to time, that are
not inconsistent with the terms and conditions set forth herein.
11.10.2 BA shall charge the non-recurring and monthly recurring,
rates for ULLs and other Network Elements set forth in Exhibit A as interim
rates until such time as the Commission adopts permanent rates consistent with
the requirements of the FCC Regulations. Such permanent rates shall be applied
in the manner described in Exhibit A and subsection 20.1.2 below.
12.0 RESALE -- SECTIONS 251(c)(4) and 251(b)(1)
12.1 Availability of Wholesale Rates for Resale
BA shall make available to MGC for resale all Telecommunications Services
as described in Section 251(c)(4) of the Act, pursuant to the rates, terms and
conditions of BA's NYPSC No. 915 tariff, as may be amended from time to time.
12.2 Availability of Retail Rates for Resale
Each Party shall make available its Telecommunications Services for
resale at the retail rates set forth in its Tariffs to the other Party in
accordance with Section 251 (b)(1) of the Act. In addition, BA and MGC shall
each allow the resale by the other of all Telecommunications Services that are
offered primarily or entirely to other Telecommunications Carriers (e.g.
Switched and special Exchange Access Services) at the rates already applicable
to such services. BA shall also allow the resale by MGC of such other non-
Telecommunications Services as BA, in its sole discretion, determines to provide
for resale under terms and conditions to be agreed to by the Parties.
12.3 Additional Terms Governing Resale and Use of BA Services
12.3.1 MGC shall comply with the provisions of this Agreement
(including, but not limited to, all applicable BA Tariffs) regarding resale or
use of BA services. In addition, MGC shall undertake in good faith to ensure
that its Customers comply with the provisions of BA's Tariffs applicable to
their use of BA's Telecommunications Services.
-40-
<PAGE>
12.3.2 Without in any way limiting subsection 12.3.1, MGC shall not
resell (a) residential service to business or other nonresidential Customers of
MGC, (b) Lifeline or other means-tested service offerings, or grandfathered
service offerings, to persons not eligible to subscribe to such service
offerings from BA, or (c) any other BA service in violation of any user or user
group restriction that may be contained in the BA Tariff applicable to such
service to the extent such restriction is not prohibited by Applicable Laws. In
addition, MGC shall be subject to the same limitations that BA's own retail
Customers may be subject to with respect to any Telecommunications Service that
BA may, in its discretion and to the extent not prohibited by Applicable Law,
discontinue offering.
12.3.3 BA shall not be obligated to offer to MGC at a wholesale
discount Telecommunications Services that BA offers at a special promotional
rate if such promotions are for a limited duration of ninety (90) days or less.
12.3.4 Upon request by BA, MGC shall provide to BA adequate assurance
of payment of charges due to BA in connection with MGC's purchase of BA services
for resale. Assurance of payment of charges may be requested by BA: if MGC (a)
in BA's reasonable judgment, at the Effective Date or at any time thereafter, is
unable to show itself to be creditworthy; (b) in BA's reasonable judgment, at
the Effective Date or at any time thereafter, is not creditworthy; or, (c) fails
to timely pay a bill rendered to MGC by BA. Unless otherwise agreed by the
Parties, the assurance of payment shall be in the form of a cash deposit and
shall be in an amount equal to the charges for BA services that MGC may
reasonably be expected to incur during, a period of two (2) months. BA may at
any time use the deposit or other assurance of payment to pay amounts due from
MGC.
12.3.5 MGC shall not be eligible to participate in any BA plan or
program under which BA end user retail Customers may obtain products or
merchandise, or services which are not BA Retail Telecommunications Services, in
return for trying, agreeing to purchase, purchasing, or using BA Retail
Telecommunications Services.
12.3.6 BA may impose additional restrictions on MGC's resale of BA's
retail Telecommunications Services to the extent permitted by Applicable Laws.
13.0 COLLOCATION -- SECTION 251(c)(6)
13.1 BA shall offer to MGC Physical Collocation of equipment necessary
for Interconnection (pursuant to Section 4.0) or for access to unbundled Network
Elements (pursuant to Section 11.0), except that BA may offer only Virtual
Collocation if BA demonstrates to the
-41-
<PAGE>
Commission that Physical Collocation is not practical for technical reasons or
because of space limitations, as provided in Section 251 (c)(6) of the Act. BA
shall provide Collocation solely for the purpose of Interconnection with
facilities or services of BA or access to unbundled Network Elements of BA,
except as otherwise mutually agreed to in writing by the Parties or as required
by the FCC or the Commission, subject to applicable federal and state Tariffs
and license agreements.
13.2 MGC agrees to offer to BA Collocation of equipment for purposes of
Interconnection (pursuant to Section 4) on a non-discriminatory basis and at
comparable rates, terms and conditions as MGC may provide to other third
parties. MGC shall provide such collocation subject to applicable Tariffs.
13.3 In the course of implementation of a Collocation project, BA shall:
(a) identify the Collocation project manager assigned to the
project;
(b) develop a written comprehensive "critical tasks" timeline
detailing the work (and relative sequence thereof) that is to
be performed by each Party or jointly by both Parties; and
(c) provide MGC with the relevant engineering, requirements.
13.4 The Collocating Party shall purchase Cross Connection to services
or facilities as described in applicable Tariffs.
13.5 Collocation shall occur under the terms of each Party's applicable
and available Tariffs, except that MGC reserves the right to collocate Remote
Switching Concentrators ("RSCs") only to the extent that any and all switching
functionality of such equipment has been rendered inoperative and constitutes
equipment that is used solely for the purpose of interconnection and access to
unbundled network elements to provide Telephone Exchange Service to its end user
customer(s). MGC recognizes and agrees that BA shall only be required to provide
an environment suitable for placement of toll transmission equipment ("Toll
Transmission Environment"). If, pursuant to Applicable Law, BA is required at
any future time to provide other than a Toll Transmission Environment, then MGC
shall pay all additional costs incurred by BA to provide such an environment.
-42-
<PAGE>
13.6 Dedicated Transit Service
13.6.1 "Dedicated Transit Service" provides for the dedicated
connection between a MGC Collocation arrangement established pursuant to
applicable tariffs and/or license agreements at a BA premises and a Collocation
arrangement of a third Party carrier that maintains a Collocation arrangement at
the same premises. Dedicated Transit Service shall be provided using a cross-
connection (dedicated connection) using suitable BA -provided cable or
transmission facilities or any other mutually agreed upon arrangement.
13.6.2 The carrier that requests the Dedicated Transit Service
shall be the customer of record for both ends of the service in terms of
ordering, provisioning, maintenance, and billing. Alternative arrangements may
be utilized if agreed upon by all three parties. Rates and charges for Dedicated
Transit Service are stated in Exhibit A.
SECTION 251(b) PROVISIONS
14.0 NUMBER PORTABILITY -- SECTION 251(b)(2)
14.1 Scope
14.1.1 The Parties shall provide Number Portability on a reciprocal
basis to each other to the extent technically feasible, and in accordance with
rules and regulations as from time to time prescribed by the FCC and/or the
Commission. The Parties shall provide Number Portability to each other in the
event a Customer of one Party ("Party A") elects to become a Customer of the
other Party ("Party B") and the Customer (i) remains within the same central
office district and within the boundary of the smallest geographical area that
is significant for billing (e.g. exchange zone) as defined by the LEC to whom
----
the ported Customer's NXX code was originally assigned and (ii) elects to
utilize the original telephone number(s) correspondent to the Exchange
Service(s) it previously received from Party A in conjunction with the Exchange
Service(s) it will now receive from Party B.
14.1.2 Until Permanent Number Portability is implemented by the
industry pursuant to regulations issued by the FCC and/or the Commission, the
Parties agree to reciprocally provide Interim Number Portability ("INP") to each
other at the prices listed in Exhibit A. Such agreed-upon prices for INP are not
intended to reflect either Party's views on the cost recovery mechanisms being
considered by the FCC in its current proceeding on number portability issues.
-43-
<PAGE>
14.1.3 Upon the agreement of the Parties or issuance of applicable
FCC and/or Commission order(s) or regulations mandating the adoption of a
Permanent Number Portability ("PNP") arrangement, BA and MGC will commence
migration from INP to the agreed-upon or mandated PNP arrangement as quickly as
practically possible while minimizing interruption or degradation of service to
their respective Customers. Once Permanent Number Portability is implemented,
either Party may withdraw, at any time and at its sole discretion, its INP
offerings, subject to advance notice to the other Party and coordination to
allow the seamless and transparent conversion of INTP Customer numbers to
Permanent Number Portability. Upon implementation of Permanent Number
Portability pursuant to FCC or Commission regulation, both Parties agree to
conform and provide such Permanent Number Portability. To the extent PNP rates
or cost recovery mechanisms are not established by the applicable FCC or
Commission order or regulation mandating the adoption of PNP, the Parties will
negotiate in good faith the charges or cost recovery mechanism for PNP service
at such time as a PNP arrangement is adopted by the Parties.
14.1.4 Under either an INP or PNP arrangement, MGC and BA will
implement a process to coordinate Number Portability cutovers with ULL
conversions (as described in Section 11 of this Agreement).
14.2 Procedures for Providing INP Through Remote Call Forwarding
MGC and BA will provide INIP through Remote Call Forwarding as follows:
14.2.1 A Customer of one Party ("Party A") elects to become a
Customer of the other Party ("Party B"). The Customer elects to utilize the
original telephone number(s) corresponding to the Telephone Exchange Service(s)
it previously received from Party A, in conjunction with the Telephone Exchange
Service(s) it will now receive from Party B. Upon receipt of confirmation of a
signed letter of agency ("LOA") from the Customer (and an associated service
order) assigning the number to Party B, Party A will implement an arrangement
whereby all calls to the original telephone number(s) will be forwarded to a new
telephone number(s) designated by Party B, only within the same Exchange Area as
the original telephone number(s). It is Party B's responsibility to maintain a
file of all LOAs and Party A may request, upon reasonable notice, a copy of the
LOA. Party A will route the forwarded traffic to Party B over the appropriate
Telephone Exchange Service Trunks as if the call had originated on Party A's
network.
14.2.2 Party B will become the customer of record for the original
Party A telephone numbers subject to the INP arrangements. Party A shall use its
reasonable efforts to
-44-
<PAGE>
consolidate into as few billing statements as possible all collect, calling
card, and 3rd-number billed calls associated with those numbers, with sub-
account detail by retained number. Such billing statement shall be delivered to
Party B in a mutually agreed-upon format via either electronic file transfer,
magnetic tape, or other mutually acceptable medium.
14.2.3 Party A will update its Line Information Database ("LIDB")
listings for retained numbers, with the screening options provided by Party B on
a per order basis. Party B shall determine which of the screening options
offered by Party A should apply to the Party B Customer account. Party A will
cancel calling cards associated with those forwarded numbers assigned to Party
B.
14.2.4 Party B will outpulse the telephone number to which the call
has been forwarded to the 911 Tandem Office. Party B will also provide the 911
database with both the forwarded number and the directory number, as well as the
appropriate address information of the Customer.
14.2.5 Within two (2) business days of receiving notification from
the Customer, Party B shall notify Party A of the Customer's termination of
service with Party B, and shall further notify Party A as to that Customer's
instructions regarding its telephone number(s). Party A will reinstate service
to that Customer, cancel the INIP arrangements for that Customer's telephone
number(s), or redirect the INP arrangement to another INP-participating LEC
pursuant to the Customer's instructions at the time.
14.2.6 Party A shall be permitted to cancel INP arrangements and
reassign the telephone number(s) upon receipt of notification from Party B or a
third party that is authorized to act on behalf of the Customer. The Parties
agree to work cooperatively to develop procedures or adopt industry standards or
practices concerning the initiation and termination of INP service in a
multicarrier environment.
14.3 Procedures for Providing INP Through Route Indexing
Upon mutual agreement, BA will deploy a Route Index arrangement which
combines direct trunks, provisioned between BA's and MGC's end offices, with
trunk side routing translations and full functionality for those CLASS services
deployed in the specific BA switch. Under this arrangement, inbound calls to a
ported number will be pointed at a route index that sends the call to a
dedicated trunk group, built as a direct final, for the sole purpose of
facilitating completion of calls to a ported number. BA will coordinate with
MGC to provide this solution in
-45-
<PAGE>
a mutually agreeable and administratively manageable manner (e.g. NXX level) so
---
as to minimize switch resource utilization for both Parties.
14.4 Procedures for Providing INP Through Full NXX Code Migration
Where either Party has activated an entire NXX for a single Customer, or
activated at least eighty percent (80%) of an NXX for a single Customer, with
the remaining numbers in that NXX either reserved for future use by that
Customer or otherwise unused, if such Customer chooses to receive Telephone
Exchange Service from the other Party, the first Party shall cooperate with the
second Party to have the entire NXX reassigned in the LERG (and associated
industry databases, routing tables, etc.) to an End Office operated by the
second Party. Such transfer will be accomplished with appropriate coordination
between the Parties and subject to appropriate industry lead-times for movements
of NXXs from one switch to another. Neither Party shall charge the other in
connection with this coordinated transfer.
14.5 Other Interim Number Portability Options
MGC may also request Direct Inward Dial Trunks pursuant to applicable
tariffs.
14.6 Receipt of Terminating Compensation on Traffic to INP'ed Numbers
The Parties agree in principle that, under the INP arrangements described
in subsections 14.2 and 14.3 above, terminating compensation on calls to INP'ed
numbers should be received by each Customer's chosen LEC as if each call to the
Customer had been originally addressed by the caller to a telephone number
bearing an NPA-NXX directly assigned to the Customer's chosen LEC. In order to
accomplish this objective where INP is employed, the Parties shall utilize the
process set forth in this subsection 14.6 thereby terminating compensation on
calls subject to INP will be passed from the Party (the "Performing Party")
which performs the INP to the other Party (the "Receiving Party") for whose
Customer the INP is provided.
14.6.1 The Parties shall individually and collectively make best
efforts to track and quantify INIP traffic between their networks based on the
CPN of each call by identifying CPNs which are INP'ed numbers. The Receiving
Party shall charge the Performing Party for each minute of INP traffic at the
INP Traffic Rate specified in subsection 14.6.3 in lieu of any other
compensation charges for terminating such traffic, except as provided in
subsection 14.6.2.
14.6.2 By the Interconnection Activation Date in each LATA, the
Parties shall jointly estimate for the prospective six months, based on historic
data of all traffic in the LATA,
-46-
<PAGE>
the percentages of such traffic that, if dialed to telephone numbers bearing
NPA-NXXs directly assigned to a Receiving Party (as opposed to the INP'ed
number), would have been subject to (i) Reciprocal Compensation ("Recip
Traffic"), (ii) appropriate intrastate FGD charges ("Intra Traffic"), (iii)
interstate FGD charges ("Inter Traffic"), or (iv) handling, as Transit Traffic.
On the date which is six (6) months after the Interconnection Activation Date,
and thereafter on each succeeding six month anniversary of such Interconnection
Activation Date, the Parties shall establish new INIP traffic percentages to be
applied in the prospective six (6) month period, based on the Performing Party's
choice of actual INP traffic percentages from the preceding six (6) month period
or historic data of all traffic in the LATA.
14.6.3 The INP Traffic Rate shall be equal to the sum of:
(Recip Traffic percentage times the Reciprocal Compensation Rate set forth in
-----
Exhibit A)
plus
----
(Intra Traffic percentage times Receiving Party's effective intrastate FGD
-----
rates)
plus
----
(Inter Traffic percentage times Receiving Party's effective interstate FGD
-----
rates).
14.7 Recovery of INP Costs Pursuant to FCC Order and Rulemaking
Notwithstanding anything to the contrary contained in this Section 14, in
light of the FCC's First Report and Order and Further Notice of Proposed
Rulemaking, adopted June 27, 1996, in CC Docket 95-116 (the "Order"), the
Parties stipulate and agree as follows:
14.7.1 The rates listed in Exhibit A for the provision of INP are
appropriate amounts that each Party providing INP service should recover for the
provision of those INP functionalities in BA's operating territory on an interim
basis until the Commission mandates an alternative cost recovery mechanism for
the provision of INP. For the INP functions it provides, each Party should be
allowed to recover these amounts in a manner consistent with any final FCC
and/or Commission order on INP cost recovery (such as a state-wide fund
contributed to by all telecommunications carriers).
14.7.2 The Parties agree that neither Party waives its rights to
advocate its views that are consistent with this subsection 14.7 on the
appropriate INP cost recovery mechanism, or to present such views before any
relevant regulatory body or other agency as they relate to FCC or Commission
actions on INP cost recovery.
-47-
<PAGE>
15.0 DIALING PARITY -- SECTION 251(b)(3)
BA and MGC shall each provide the other with nondiscriminatory access to
such services and information as are necessary to allow the other Party to
implement Dialing Parity for Telephone Exchange Service, operator services,
directory assistance, and directory listing information with no unreasonable
dialing delays, as required under Section 251(b)(3) of the Act.
16.0 ACCESS TO RIGHTS-OF-WAY -- SECTION 251(b)(4)
Each Party ("Licensor") shall provide the other Party ("Licensee")
access for purposes of making attachments to the poles, ducts, rights-of-way and
conduits it owns or controls, pursuant to any existing or future license
agreement between the Parties, and in conformance with 47 U.S.C. 224, where
facilities are available, on terms, conditions and prices comparable to those
offered to any other entity pursuant to each Party's applicable Tariffs
(including generally available license agreements). Where no such Tariffs exist,
such access shall be provided in accordance with the requirements of 47 U.S.C.
224, including any applicable FCC regulations that may be issued.
17.0 DATABASES AND SIGNALING
BA shall provide MGC with interfaces to access BA's databases, including
LIDB and toll-free service access codes (i.e.; 800/888), and associated
signaling necessary for the routing and completion of MGC's traffic through the
provision of SS7 under its applicable tariffs.
18.0 COORDINATED SERVICE ARRANGEMENTS
18.1 Intercept and Referral Announcements
When a Customer changes its service provider from BA to MGC, or from MGC
to BA, and does not retain its original telephone number, the Party formerly
providing service to such Customer shall provide a referral announcement
("Referral Announcement") on the abandoned telephone number which provides
details on the Customer's new number or provide other appropriate information to
the extent known. Referral Announcements shall be provided reciprocally, free of
charge to either the other Party or the Customer, for a period of not less than
one hundred and eighty days (180) days after the date the Customer changes its
telephone number in the case of business Customers and not less than ninety (90)
days after the date the Customer changes its telephone number in the case of
residential Customers or other time periods as may be required by the
Commission. The periods for referral announcement may be
-48-
<PAGE>
shorter if a number shortage conditions is in effect for a particular NXX code.
However, if either Party provides Referral Announcements for a period different
than the above respective periods when its Customers change their telephone
numbers, such Party shall provide the same level of service to Customers of the
other Party.
18.2 Coordinated Repair Calls
MGC and BA will employ the following procedures for handling misdirected
repair calls:
18.2.1 MGC and BA will educate their respective Customers as to
the correct telephone numbers to call in order to access their respective repair
bureaus.
18.2.2 To the extent Party A is identifiable as the correct
provider of service to Customers that make misdirected repair calls to Party B,
Party B will immediately refer the Customers to the telephone number provided by
Party A, or to an information source that can provide the telephone number of
Party A, in a courteous manner and at no charge.
18.2.3 MGC and BA will provide their respective repair contact
numbers to one another on a reciprocal basis.
18.3 Customer Authorization
18.3.1 Without in any way limiting either Party's obligations
under subsection 28.1, each Party shall comply with Applicable Laws with regard
to Customer selection of a primary Telephone Exchange Service provider. Until
the Commission and/or FCC adopts regulations and/or orders applicable to
Customer selection of a primary Telephone Exchange Service provider, each Party
shall adhere to the rules and procedures set forth in Section 64.1100 of the FCC
Rules, 47 CFR (S) 64.1100, in effect on the Effective Date hereof when ordering,
terminating, or otherwise changing Telephone Exchange Service on behalf of the
other Party's or another carrier's Customers.
18.3.2 In the event either Party requests that the other Party
install, provide, change, or terminate a Customer's Telecommunications Service
(including, but not limited to, a Customer's selection of a primary Telephone
Exchange Service Provider) and (a) fails to provide documentary evidence of the
Customer's primary Telephone Exchange Service Provider selection upon request,
or (b) without having obtained authorization from the Customer for such
installation, provision, selection, change or termination in accordance with
Applicable Laws (or as provided in subsection 18.3.1 above), the requesting
Party shall be liable to the other Party for
-49-
<PAGE>
all charges that would be applicable to the Customer for the initial change in
the Customer's Telecommunications Service and any charges for restoring the
Customer's Telecommunications Service to its Customer-authorized condition,
including to the appropriate primary Telephone Exchange Service provider.
18.3.3 Without in any way limiting MGC's obligations under
subsection 28.1, MGC shall comply with Applicable Laws with regard to Customer
Proprietary Network Information, including, but not limited to, 47 U.S.C. (S)
222. MGC shall not access (including, but not limited to, through BA OSS
Services and BA Pre-OSS Services), use, or disclose Customer Proprietary Network
Information made available to MGC by BA pursuant to this Agreement unless MGC
has obtained any Customer authorization for such access, use and/or disclosure
required by Applicable Laws. By accessing, using or disclosing Customer
Proprietary Network Information, MGC represents and wan-ants that it has
obtained authorization for such action from the applicable Customer in the
manner required by Applicable Laws and this Agreement. MGC shall, upon request
by BA, provide proof of such authorization (including a copy of any written
authorization).
18.3.4 BA shall have the right to monitor and/or audit MGC's access
to and use and/or disclosure of Customer Proprietary Network Information that is
made available by BA to MGC pursuant to this Agreement to ascertain whether MGC
is complying with the requirements of Applicable Laws and this Agreement with
regard to such access, use, and/or disclosure. To the extent permitted by
Applicable Laws, the foregoing right shall include, but not be limited to, the
right to electronically monitor MGC's access to and use of Customer Proprietary
Network Information that is made available by BA to MGC pursuant to this
Agreement.
19.0 DIRECTORY SERVICES ARRANGEMENTS
BA will provide certain directory services to MGC as defined herein. In
this Section 19 of this Agreement, references to MGC customer telephone numbers
means telephone numbers falling within NXX codes directly assigned to MGC and to
numbers which are retained by MGC on the customer's behalf pursuant to Interim
Telephone Number Portability arrangements described in Section 14.0 of this
Agreement.
19.1 Directory Listings and Directory Distributions
19.1.1 BA will include MGC's Customers telephone numbers in all
of its "White Pages" and "Yellow Pages" directory listings (including electronic
directories) and directory assistance databases associated with the areas in
which MGC provides services to such
-50-
<PAGE>
customers, and will distribute such directories to such customers, in an
identical and transparent manner in which it provides those functions for its
own customers' telephone numbers.
19.1.2 BA will include all MGC NXX codes on appropriate existing
calling charts in the BA customer Guide section of the directory in the same
manner as it provides this conformation for its own NXX Codes.
19.1.3 MGC will provide BA with its directory listings and daily
updates to those listings (including new, changed, and deleted listings) in a
mutually agreed upon format at no charge.
19.1.4 BA will accord MGC's directory listing information the
same level of confidentiality which BA accords its own directory listing
information.
19.1.5 BA will include, without charge, an Other Local Service
Provider section in its Primary White and Primary White and Yellow Page
Telephone Directories. When MGC is operating with established end users in the
geographic region covered by a specific White Page or Primary White and Yellow
Page Directory, MGC will be included, at its request, in the Other Local Service
Provider section of that specific directory. MGC will be responsible for
providing the Other Local Service Provider Information Pages Input Form to Bell
Atlantic Yellow Pages Company for each directory. MGC telephone numbers for
installation, repair and billing departments, and logo information that appears
in the directory will be in accordance with BA's generally applicable policies.
MGC shall comply with the Other Local Service Provider Information Pages General
Guidelines.
19.1.6 BA will provide MGC with a report of all MGC customer
listings ninety (90) days prior to service order close date for that directory
in such form and format as may be mutually agreed to by both parties. Both
Parties shall use their best efforts to ensure the accurate listing of such
information. BA will process any corrections made by MGC with respect to its
listings, provided such corrections are received prior to the close date of the
particular directory. BA will provide appropriate advance notice of applicable
close dates.
19.1.7 Yellow Page Maintenance
BA will work cooperatively with MGC so that Yellow Page
advertisements purchased by customers who switch their service to MGC (including
customers utilizing Interim Telephone Number Portability) are maintained without
interruption. BA will allow MGC
-51-
<PAGE>
customers to purchase new yellow pages advertisements without discrimination,
under the identical rates, terms and conditions that apply to BA's customers.
19.2 Directory Assistance and Operator Services
At the option of MGC, BA will provide Directory Assistance to MGC
Customers on behalf of MGC under the following terms and conditions:
BA provides Directory Assistance ("DA") service to MGC's customers
served by MGC's own switching facilities over separate trunk groups ordered or
provided by MGC to the BA Traffic Operation Position Systems ("TOPS") switch(es)
designated by BA. Access to the BA DA platform from MGC's local switch requires
that MGC utilize Feature Group C ("FG-C") Modified Operator Services Signaling.
The Interoffice Transmission Facility ("IOF") mileage rate for the facility will
be based on airline mileage using V&H coordinate methods from the MGC location
to the designated BA TOPS. Trunk terminations at the TOPS switch(es) require MGC
to purchase trunk ports at rates specified in Exhibit A. For each trunk group
MGC must indicate the DA option selected from those set forth in 19.2.2 (a), (b)
and (c) below; and/or
BA provides MGC access to DA service for MGC Customers served by BA
unbundled local Switching Elements, through dedicated IOF and trunk ports
between the BA End Office in which MGC has unbundled local switching ports and
the BA TOPS switches. Additional per minute of use ("MOU") local switching
charges, set forth in Exhibit A, will apply for all calls which interconnect
from the unbundled local switching ports to the BA TOPS.
19.2.1 Directory Assistance
At MGC's option, BA will provide MGC Customers access to Telephone
Directory Assistance operators via 411, 555-1212, or 1+ (NPA) 555-
1212 dialing.
Rates for requests for Directory Assistance will be billed to MGC
and are stated in Exhibit A.
BA will not provide Directory Assistance call allowances to MGC or
MGC's Customers.
-52-
<PAGE>
19.2.2 Directory Assistance with Branding
This service allows MGC to select only one of the three options as
follows:
. (a) MGC may provide BA with a MGC branded, introductory
Directory Assistance and Operator Services announcement
which will be played for all MGC Customers completing DA
or Operator Services calls over the trunk group to the
BA TOPS.
Such branding announcement may be a maximum of eighteen (18)
seconds, recorded by MGC or, at MGC's request and subject to
charges to be determined on an individual case basis, by BA. MGC
must provide a minimum of two (2) audio cassette recordings of the
MGC branding announcement.
. (b) MGC may request BA branded announcement.
. (c) MGC may request an unbranded, generic announcement.
Rates for requests for Directory Assistance with branding will be
billed to MGC and are stated in Exhibit A.
19.3 Directory Assistance Call Completion
At MGC's option BA will provide Directory Assistance Call Completion
("DACC") for automatic connection of a MGC Customer calling BA DA and the
published telephone number requested.
After the BA DA operator provides the requested number, a recorded
service message will offer to connect the MGC Customer to that number for a
specified additional charge.
The MGC Customer can accept the offer for DACC by depressing a button
(touch tone) or responding by voice (dial), as instructed by the voice message.
The DACC charge will apply as set forth in Exhibit A. In addition, for
calls originating from a facilities-based MGC switch or for calls from MGC
unbundled local switching line ports, there will be charges to terminate the
call from the TOPS Tandem to the called party. These include applicable per
minute of use Unbundled Tandem Transport Charges ("UTTC") for each call
transported between the TOPS Tandem and the originating End Office, per minute
of use
-53-
<PAGE>
Tandem Transit Switching Charge ("TTSC") for each call that traverses a BA
Tandem switch, and the appropriate per minute of use charges for Reciprocal
Compensation ("UNRCC" or "UCRCC") depending on the terminating End Office
Switch, as set forth in Exhibit A.
DACC is available to MGC residence and business Customers and from
public telephones on a collect, bill to third number or calling card basis.
Appropriate charges for the selected billing option will apply in addition to
the DACC charge.
DACC is available with all telephone numbers in the BA DA database with
the following exceptions:
- non-published telephone numbers
- interLATA numbers
- 700, 800 and 900 numbers.
When a caller requests more than one number for Directory Assistance,
DACC is offered only for the first eligible listing that was selected by the
operator.
The DACC charge applies only to calls actually completed.
The DACC charge will be credited for completion of calls to the wrong
number, incomplete connections or calls with unsatisfactory transmission as set
forth in Section 19.4 following.
Rates for requests for DACC will be billed to MGC as set forth in
Exhibit A.
19.4 Directory Assistance Credits
Directory Assistance credits will apply to MGC for directory
inaccessibility, wrong numbers, cut-offs and poor transmission. When a MGC
Customer reports such a call, i.e. the requested number, the provided number,
and the reason the provided number is incorrect, to the BA directory assistance
operator, the number of calls for which a credit will apply will be developed by
the BA DA operator and credited to MGC. BA will identify the specific MGC
Customer to whom the credit applies.
-54-
<PAGE>
19.5 Direct Access to Directory Assistance
Direct Access to Directory Assistance ("DADA") is a database service
that provides access to BA listings to a MGC operator. The DADA database is a
physically distinct entity from the BA DA database, populated with identical
listing data, and updated from the same source on a daily basis.
To obtain access, MGC is required to arrange for interconnection to the
database. BA will interconnect at any technically feasible point designated by
MGC.
BA will provide MGC with a User Guide for training its agents.
Rates and Charges for DADA are stated in Exhibit A.
19.6 Inward Operator Services
Inward Operator Services enables MGC or its operator service provider to
connect to the BA TOPS office(s) for the purpose of providing certain operator
services to MGC Customers. There are two types of Inward Operator Services:
19.6.1 Busy Line Verification ("BLV"):
BLV is service wherein, at the request of MGC's Customer or
operator service provider, a BA operator will attempt to determine the status of
an exchange service line (e.g., conversation in progress, available to receive a
---
call or out of service) and report to MGC's Customer or operator service
provider.
19.6.2 Busy Line Verification/Interrupt ("BLV/I")
BLV/I is a service wherein, at the request of MGC's Customer or
operator service provider, a BA operator will determine and report whether a
conversation is in progress on an exchange service line, and then interrupt such
conversation to request that it be terminated so that MGC's Customer may
complete a call to the line. MGC may order Inward Operator Services under the
following terms and conditions:
Inward Operator Services are provided over trunk groups ordered by
MGC or its alternate operator service provider to BA TOPS switch(es) as
specified by BA.
-55-
<PAGE>
Inward Operator Services cannot be provided for ported telephone
numbers, or telephone numbers which forward calls using Call Forwarding Variable
service features.
BA will provide BLV and BLV/I for telephone numbers provided in its
operating territory.
The BA operator will respond to one telephone number per call on
requests for BLV or BLV/I.
BA will designate the TOPS switch(es) serving specific NXXs and make
such information available to MGC.
MGC and its Customer shall indemnify and save BA harmless against all
claims that may arise from either party to the interrupted call or any other
person.
Rates and Charges for Inward Operator Services are set forth in
Exhibit A.
19.7 Operator Services
At MGC's option, BA will provide for the routing of Operator Services
("OS") calls dialed by MGC Customers directly to either the MGC Operator
Services platform or to the BA Operator Services platform.
BA provides OS to MGC Customers served by MGC switches over separate trunk
groups ordered or provided by MGC to the BA TOPS switch(es) as specified by BA.
Access to the BA OS platform from MGC's local switch requires that MGC utilize
Feature Group C Modified Operator Services Signaling. The Interoffice
Transmission Facility mileage rate for the facility will be based on airline
mileage using V&H coordinate methods from the MGC location to the designated BA
TOPS. Trunk terminations at the TOPS switch(es) require MGC to purchase trunk
ports at rates specified in Exhibit A. For each trunk group, MGC must indicate
the branding option selected as set forth in Sections 19.2.2 (a), (b), and (c)
preceding; and/or
BA also provides MGC access to OS for MGC Customers served by BA unbundled
local Switching Elements, through dedicated IOF and trunk ports between the BA
End Office in which MGC has unbundled local switching ports and the BA TOPS
switches. Additional per minute of use ("MOU") local switching charges, set
forth in Exhibit A, will apply for all calls which interconnect from the
unbundled local switching ports to the BA TOPS.
-56-
<PAGE>
19.8 0+ Mechanized Operator Calls (Calling Card, Collect, Bill to Third
Number)
At MGC's option, the mechanized BA operator interface will provide MGC's
Customer the ability to complete 0+ mechanized operator calls using alternate
billing capabilities without live operator assistance. Alternate billing call
completions can be calling card, collect or bill-to-third-number.
0+ mechanized calls may be routed over the same DA trunk groups which
provide interconnection from the MGC switch or from the MGC unbundled local
switching line ports to the BA TOPS.
Rates for requests for 0+ mechanized calls will be billed to MGC and are
set forth in Exhibit A. In addition, for calls originating from a facilities-
based MGC switch or for calls from MGC unbundled local switching line ports,
there will be charges to terminate the call from the TOPS Tandem to the called
party. These include applicable per minute of use Unbundled
Tandem Transport Charges ("UTTC") for each call transported between the
TOPS Tandem and the originating End Office, per minute of use Tandem Transit
Switching Charge ("TTSC') for each call that traverses a BA Tandem switch, and
the appropriate per minute of use charges for Reciprocal Compensation ("UNRCC"
or "UCRCC") depending on the terminating End Office Switch, as set forth in
Exhibit A.
19.9 0- Operator Handled Calls (Calling Card, Collect, Bill to Third
Number)
At MGC's option, the BA will provide live operator assistance to the MGC
Customer for intraLATA calls completion via 0- dialing with alternate billing
capabilities. Alternate billing capabilities include calling card, collect and
bill-to-third-number, station-to-station and person-to-person.
0- operator handled calls may be routed over the same DA trunk groups which
provide interconnection from the MGC switch or the MGC unbundled local switching
line ports to the BA TOPS.
Rates for requests for 0- operator handled calls will be billed to MGC and
are set forth in Exhibit A. In addition, for calls originating from a
facilities-based MGC switch or for calls from MGC unbundled local switching line
ports, there will be charges to terminate the call from the TOPS Tandem to the
called party. These include applicable per minute of use Unbundled Tandem
Transport Charges ("UTTC") for each call transported between the TOPS Tandem and
-57-
<PAGE>
the originating End Office, per minute of use Tandem Transit Switching Charge
("TTSC") for each call that traverses a BA Tandem switch, and the appropriate
per minute of use charges for Reciprocal Compensation ("UNRCC" or "UCRCC")
depending on the terminating End Office Switch, as set forth in Exhibit A.
19.10 Operator Emergency Bulletin Service
At MGC's option, BA will provide MGC with emergency numbers for police,
fire, ambulance and Public Safety Answering Points (PSAP) in the BA serving area
so that MGC operators can connect callers directly to the proper emergency
bureaus.
The BA Operator Emergency Bulletin Service lists the emergency, police,
fire, ambulance and PSAP telephone numbers by municipality and in alphabetical
order for each of the areas served by BA.
Operator Emergency Bulletin Service is available for use by MGC operators
solely for the purpose of assisting callers in reaching an emergency bureau.
Operator Emergency Bulletin Service provides a copy of BA's own emergency
bulletin. This service includes one annual copy of the bulletin plus periodic
updates during the year. Other Local Exchange Carrier emergency numbers are not
included.
Rates and charges for Operator Emergency Bulletin service are set forth in
Exhibit A.
19.11 Operator Passthrough Service
At MGC's option, BA will, provide MGC's Customers with operator passthrough
service to access their presubscribed Interexchange Carrier's operators for
operator assisted call completion. Such access will be available only where the
presubscribed IXC provides operator services for MGC's Customers for calls
originating from a particular LATA, and where the IXC OS has the capability to
receive calls passed from BA within the LATA.
If an IXC does not provide operator services for MGC's Customer, BA will
provide MGC's Customer with access to an IXC designated operator services
provider or to a BA provided announcement which will direct MGC's Customer to
contact the Customer's presubscribed IXC for dialing instructions.
-58-
<PAGE>
The Operator Passthrough charge is applied on an operator work second
basis, and rated using the 0- operator handled calls in Exhibit A.
MGC will be charged for calls passed through to either the Presubscribed
IXC's operator, or to a BA provided recording indicating that the IXC does not
provide service in that area.
Rates and charges for operator passthrough service are stated in Exhibit
A.
20.0 COORDINATION WITH TARIFF TERMS
20.1 The Parties acknowledge that some of the services, facilities, and
arrangements described herein are or will be available under and subject to the
terms of the federal or state tariffs of the other Party applicable to such
services, facilities, and arrangements. To the extent a Tariff of the providing
Party applies to any service, facility, and arrangement described herein, the
Parties agree as follows:
20.1.1 Those rates and charges set forth in Exhibit A for the
services, facilities, and arrangements described herein that reference or are
identical to a rate contained in an existing Tariff of the providing Party,
shall conform with those contained in the then-prevailing Tariff and vary in
accordance with any changes that may be made to the Tariff rates and charges
subsequent to the Effective Date.
20.1.2 As applied to wholesale discount rates, unbundled Network
Elements or termination of Reciprocal Compensation Traffic and other
Interconnection services purchased for the provision of Telephone Exchange
Service or Exchange Access, the rates and charges set forth in Exhibit A shall
apply until such time as they are replaced by new rates as may be approved by
the Commission from time to time, subject to a stay or other order issued by any
court of competent jurisdiction. At such time(s) as such new rates have been
approved by the Commission, the Parties shall amend Exhibit A to reflect the new
approved rates.
20.2 Except with respect to the rates and charges described in subsection
20.1 above, all other terms contained in an applicable Tariff of the providing
Party shall apply in connection with its provision of the particular service,
facility, and arrangement hereunder.
-59-
<PAGE>
21.0 INSURANCE
21.1 MGC shall maintain, during the term of this Agreement, all
insurance and/or bonds required by law and necessary to satisfy its obligations
under this Agreement, including, without limitation, its obligations set forth
in Section 25 hereof. At a minimum and without limiting the foregoing covenant,
MGC shall maintain the following insurance:
(a) Commercial General Liability Insurance, on an occurrence basis,
including but not limited to, premises-operations, broad form property
damage, products/completed operations, contractual liability,
independent contractors, and personal injury, with limits of at least
$2,000,000 combined single limit for each occurrence.
(b) Automobile Liability, Comprehensive Form, with limits of at least
$500,000 combined single limit for each occurrence.
(c) Excess Liability, in the umbrella form, with limits of at least
$10,000,000 combined single limit for each occurrence.
(d) Worker's Compensation Insurance as required by law and Employer's
Liability Insurance with limits of not less than $1,000,000 per
occurrence.
21.2 MGC shall name BA as an additional insured on the foregoing insurance.
21.3 MGC shall, within two (2) weeks of the date hereof and on a semi-
annual basis thereafter, furnish certificates or other adequate proof of the
foregoing insurance. The certificates or other proof of the foregoing insurance
shall be sent to: [Bell Atlantic, Insurance Administration Group, 1320 N. Court
House Road, 4th Floor, Arlington, Virginia, 22201]. In addition, MGC shall
require its agents, representatives, or contractors, if any, that may enter upon
the premises of BA or BA's affiliated companies to maintain similar and
appropriate insurance and, if requested, to furnish BA certificates or other
adequate proof of such insurance. Certificates furnished by MGC or MGC's agents,
representatives, or contractors shall contain a clause stating: "BA - New York
shall be notified in writing at least thirty (30) days prior to cancellation of,
or any material change in, the insurance."
-60-
<PAGE>
22.0 TERM AND TERMINATION
22.1 This Agreement shall be effective as of the date first above
written and continue in effect until December 31, 1999, and thereafter the
Agreement shall continue in force and effect unless and until terminated as
provided herein. Upon the expiration of the initial term, either Party may
terminate this Agreement by providing written notice of termination to the other
Party, such written notice to be provided at least ninety (90) days in advance
of the date of termination. In the event of such termination, those service
arrangements made available under this Agreement and existing at the time of
termination shall continue without interruption under (a) a new agreement
executed by the Parties, (b) standard Interconnection terms and conditions
approved and made generally effective by the Commission, (c) Tariff terms and
conditions generally available to CLECs, or (d) if none of the above is
available, under the terms of this Agreement on a month-to-month basis until
such time as (a), (b), or (c) becomes available.
22.2 For service arrangements made available under this Agreement and
existing at the time of termination, if the standard Interconnection terms and
conditions or Tariff terms and conditions result in the non-terminating Party
physically rearranging facilities or incurring programming expense, the non-
terminating Party shall be entitled to recover such rearrangement or programming
costs from the terminating Party.
22.3 If either Party defaults in the payment of any amount due
hereunder, or if either Party violates any other provision of this Agreement,
and such default or violation shall continue for sixty (60) days after written
notice thereof, the other Party may terminate this Agreement and services
hereunder by written notice; provided the other Party has provided the
defaulting Party and the appropriate federal and/or state regulatory bodies with
written notice at least twenty-five (25) days prior to terminating service.
Notice shall be posted by overnight mail, return receipt requested. If the
defaulting Party cures the default or violation within the twenty-five (25) day
period, the other Party will not terminate service or this Agreement but shall
be entitled to recover all costs, if any, incurred by it in connection with the
default or violation, including, without limitation, costs incurred to prepare
for the termination of service.
23.0 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
EXCEPT AS EXPRESSLY PROVIDED UNDER THIS AGREEMENT, NO PARTY MAKES OR
RECEIVES ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES,
FUNCTIONS AND PRODUCTS IT PROVIDES UNDER OR CONTEMPLATED BY THIS AGREEMENT AND
THE PARTIES DISCLAIM THE IMPLIED
-61-
<PAGE>
WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
24.0 CANCELLATION CHARGES
Except as provided in this Agreement or as otherwise provided in any
applicable Tariff, no cancellation charges shall apply.
25.0 INDEMNIFICATION
25.1 Each Party agrees to release, indemnify, defend and hold
harmless the other Party from and against all losses, claims, demands, damages,
expenses, suits or other actions, or any liability whatsoever, including, but
not limited to, costs and attorneys' fees (collectively, a "Loss"), (a) whether
suffered, made, instituted, or asserted by any other party or person, relating
to personal injury to or death of any person, or for loss, damage to, or
destruction of real and/or personal property, whether or not owned by others,
arising from transactions or activities relating to this Agreement and to the
extent proximately caused by the negligent or willful acts or omissions of the
indemnifying Party, regardless of the form of action, or (b) suffered, made,
instituted, or asserted by its own customer(s) against the other Party arising
out of the other Party's provision of services to the indemnifying Party under
this Agreement. Notwithstanding the foregoing indemnification, nothing in this
Section 25.0 shall affect or limit any claims, remedies, or other actions the
indemnifying Party may have against the indemnified Party under this Agreement,
any other contract, or any applicable Tariff(s), regulations or laws for the
indemnified Party's provision of said services.
25.2 The indemnification provided herein shall be conditioned upon:
(a) The indemnified Party shall promptly notify the indemnifying
Party of any action taken against the indemnified Party relating
to the indemnification.
(b) The indemnifying Party shall have sole authority to defend any
such action, including the selection of legal counsel, and the
indemnified Party may engage separate legal counsel only at its
sole cost and expense.
(c) In no event shall the indemnifying Party settle or consent to
any judgment pertaining to any such action without the prior
written consent of the indemnified Party, which consent shall
not be unreasonably withheld. However, in the event the
settlement or judgment requires a contribution from or affects
the rights of the
-62-
<PAGE>
Indemnified Party, the Indemnified Party shall have the right to
refuse such settlement or judgment and, at its own cost and
expense, take over the defense against such Loss, provided that
in such event the indemnifying Party shall not be responsible
for, nor shall it be obligated to indemnify the indemnified
Party against, the Loss for any amount in excess of such refused
settlement or judgment.
(d) The indemnified Party shall, in all cases, assert any and all
provisions in its Tariffs that limit liability to third parties
as a bar to any recovery by the third party claimant in excess
of such limitation of liability.
(e) The indemnified Party shall offer the indemnifying Party all
reasonable cooperation and assistance in the defense of any such
action.
26.0 LIMITATION OF LIABILITY
26.1 The liability of either Party to the other Party for damages
arising out of failure to comply with a direction to install, restore or
terminate facilities; or out of failures, mistakes, omissions, interruptions,
delays, errors, or defects (collectively, "Errors") occurring in the course of
furnishing any services, arrangements, or facilities hereunder shall be
determined in accordance with the terms of the applicable tariff(s) of the
providing Party. In the event no tariff(s) apply, the providing Party's
liability for such Errors shall not exceed an amount equal to the pro rata
monthly charge for the period in which such failures, mistakes, omissions,
interruptions, delays, errors or defects occur. Recovery of said amount shall be
the injured Party's sole and exclusive remedy against the providing Party for
such failures, mistakes, omissions, interruptions, delays, errors or defects.
26.2 Neither Party shall be liable to the other in connection with
the provision or use of services offered under this Agreement for indirect,
incidental, consequential, reliance or special damages, including (without
limitation) damages for lost profits (collectively, "Consequential Damages"),
regardless of the form of action, whether in contract, warranty, strict
liability, or tort, including, without limitation, negligence of any kind, even
if the other Party has been advised of the possibility of such damages;
provided, that the foregoing shall not limit a Party's obligation under Section
25.
26.3 The Parties agree that neither Party shall be liable to the
customers of the other Party in connection with its provision of services to the
other Party under this Agreement. Nothing in this Agreement shall be deemed to
create a third party beneficiary relationship between the Party providing the
service and the customers of the Party purchasing the service. In
-63-
<PAGE>
the event of a dispute involving both Parties with a customer of one Party, both
Parties shall assert the applicability of any limitations on liability to
customers that may be contained in either Party's applicable Tariff(s).
27.0 PERFORMANCE STANDARDS FOR SPECIFIED ACTIVITIES
27.1 Performance Standards
BA shall provide the Interconnection and unbundled Network Elements
contemplated hereunder in accordance with the performance standards set forth in
Section 251(c) of the Act and the FCC Regulations.
27.2 Performance Reporting
27.2.1 At such time as BA makes available the Performance
Monitoring Reports described by the FCC Order in the Application of BELL
ATLANTIC Corporation, Transferee, For Consent to Transfer Control of BELL
ATLANTIC Corporation and its Subsidiaries, NSD-L-96-10, Memorandum Opinion and
Order (August 14, 1997) ("the FCC Merger Order") to other Telecommunications
Carriers purchasing Interconnection from BA, BA shall provide MGC with the
Performance Monitoring Reports applicable to MGC in accordance with the
requirements of said FCC Merger Order.
27.2.2 MGC agrees that the performance information included in
the Performance Monitoring Reports is confidential and proprietary to BA, and
shall be used by MGC solely for internal performance assessment purposes, for
purposes of joint MGC and BA assessments of service performance, and for
reporting to the Commission, the FCC, or courts of competent jurisdiction, under
cover of an agreed-upon protective order, for the sole purpose of enforcing BA's
obligations hereunder. MGC shall not otherwise disclose this information to
third parties.
28.0 COMPLIANCE WITH LAWS; REGULATORY APPROVAL
28.1 Each Party shall promptly notify the other Party in writing of
any governmental action that suspends, cancels, withdraws, limits, or otherwise
materially affects its ability to perform its obligations hereunder.
28.2 The Parties understand and agree that this Agreement will be
filed with the Commission and may thereafter be filed with the FCC as an
integral part of BA's application
-64-
<PAGE>
pursuant to Section 271(d) of the Act. The Parties covenant and agree that this
Agreement is satisfactory to them as an agreement under Section 251 of the Act.
Each Party covenants and agrees to fully support approval of this Agreement by
the Commission or the FCC under Section 252 of the Act without modification. The
Parties, however, reserve the right to seek regulatory relief and otherwise seek
redress from each other regarding performance and implementation of this
Agreement, including, without limitation, the conformance of this Agreement to
the FCC Regulations as provided in subsection 28.3 below.
28.3 The Parties recognize that the FCC has issued and may continue
to issue regulations implementing Sections 251, 252, and 271 of the Act that
affect certain terms contained in this Agreement. In the event that any one or
more of the provisions contained herein is inconsistent with any applicable rule
contained in such FCC Regulations or, in BA's reasonable determination, affects
BA's application pursuant to Section 271(d) of the Act, the Parties agree to
make only the minimum revisions necessary to eliminate the inconsistency or
amend the application-affecting provision(s). Such minimum revisions shall not
be considered material, and shall not require further Commission approval
(beyond any Commission approval required under Section 252(e) of the Act).
28.4 In the event any Applicable Law other than the FCC Regulations
requires modification of any material term(s) contained in this Agreement,
either Party may require a renegotiation of the term(s) that require direct
modification as well as of any term(s) that are reasonably affected thereby. If
neither Party requests a renegotiation or if an Applicable Law requires
modification of any non-material term(s), then the Parties agree to make only
the minimum modifications necessary, and the remaining provisions of this
Agreement shall remain in full force and effect. For purposes of this
subsection 28.4 and without limitation of any other modifications required by
Applicable Laws, the Parties agree that any modification required by Applicable
Laws (i) to the two-tier Reciprocal Call Termination compensation structure for
the transport and termination of Reciprocal Compensation Traffic described in
Exhibit A, or (ii) that affects either Party's receipt of reciprocal
compensation for the transport and termination of Reciprocal Compensation
Traffic, shall be deemed to be a modification of a material term that requires
immediate good faith renegotiation between the Parties.
28.5 Compliance with the Communications Assistance for Law
Enforcement Act of 1994 ("CALEA"). Each Party represents and warrants that any
equipment, facilities or services provided to the other Party under this
Agreement comply with CALEA. Each Party shall indemnify and hold the other Party
harmless from any and all penalties imposed upon the other Party for such
noncompliance and shall at the non-compliant Party's sole cost and expense,
-65-
<PAGE>
modify or replace any equipment, facilities or services provided to the other
Party under this Agreement to ensure that such equipment, facilities and
services fully comply with CALEA.
29.0 MISCELLANEOUS
29.1 Authorization
29.1.1 BA is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has full power and
authority to execute and deliver this Agreement and to perform the obligations
hereunder.
29.1.2 MGC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, and has full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder.
29.2 Independent Contractor
Each Party shall perform services hereunder as an independent
contractor and nothing herein shall be construed as creating any other
relationship between the Parties. Each Party and each Party's contractor shall
be solely responsible for the withholding or payment of all applicable federal,
state and local income taxes, social security taxes and other payroll taxes with
respect to their employees, as well as any taxes, contributions or other
obligations imposed by applicable state unemployment or workers' compensation
acts. Each Party has sole authority and responsibility to hire, fire and
otherwise control its employees.
29.3 Force Majeure
Neither Party shall be responsible for delays or failures in
performance resulting from acts or occurrences beyond the reasonable control of
such Party, regardless of whether such delays or failures in performance were
foreseen or foreseeable as of the date of this Agreement, including, without
limitation: adverse weather conditions, fire, explosion, power failure, acts of
God, war, revolution, civil commotion, or acts of public enemies; any law,
order, regulation, ordinance or requirement of any government or legal body; or
labor unrest, including, without limitation, strikes, slowdowns, picketing or
boycotts; or delays caused by the other Party or by other service or equipment
vendors; or any other circumstances beyond the Party's reasonable control. In
such event, the affected Party shall, upon giving prompt notice to the other
Party, be excused from such performance on a day-to-day basis to the extent
-66-
<PAGE>
such Party's obligations relate to the performance so interfered with). The
affected Party shall use its best efforts to avoid or remove the cause(s) of
non-performance and both Parties shall proceed to perform with dispatch once the
cause(s) are removed or cease.
29.4 Confidentiality
29.4.1 All information, including but not limited to specification,
microfilm, photocopies, magnetic disks, magnetic tapes, drawings, sketches,
models, samples, tools, technical information, data, employee records, maps,
financial reports, and market data, (i) furnished by one Party to the other
Party dealing with customer specific, facility specific, or usage specific
information, other than customer information communicated for the purpose of
publication or directory database inclusion, or (ii) in written, graphic,
electromagnetic, or other tangible form and marked at the time of delivery as
"Confidential" or "Proprietary," or (iii) communicated orally and declared to
the receiving Party at the time of delivery, and by written notice given to the
receiving Party within ten (10) days after delivery, to be "Confidential" or
"Proprietary" (collectively referred to as "Proprietary Information"), shall
remain the property of the disclosing Party.
29.4.2 Each Party shall keep all of the other Party's Proprietary
Information confidential in the same manner it holds its own Proprietary
Information confidential (which in all cases shall be no less than reasonable)
and shall use the other Party's Proprietary Information only for performing the
covenants contained in this Agreement. Neither Party shall use the other
Party's Proprietary Information for any other purpose except upon such terms and
conditions as may be agreed upon between the Parties in writing.
29.4.3 Unless otherwise agreed, the obligations of confidentiality
and non-use set forth in this Agreement do not apply to such Proprietary
Information that:
(a) was, at the time of receipt, already known to the receiving
Party free of any obligation to keep it confidential as
evidenced by written records prepared prior to delivery by
the disclosing Party; or
(b) is or becomes publicly known through no wrongful act of the
receiving Party; or
(c) is rightfully received from a third person having no direct
or indirect secrecy or confidentiality obligation to the
disclosing Party with respect to such information; or
-67-
<PAGE>
(d) is independently developed by an employee, agent, or
contractor of the receiving Party that is not involved in
any manner with the provision of services pursuant to this
Agreement and does not have any direct or indirect access to
the Proprietary Information; or
(e) is approved for release by written authorization of the
disclosing Party; or
(f) is required to be made public by the receiving Party
pursuant to applicable law or regulation, provided that the
receiving Party shall give sufficient notice of the
requirement to the disclosing Party to enable the disclosing
Party to seek protective orders.
29.4.4 Upon request by the disclosing Party, the receiving Party
shall return all tangible copies of Proprietary Information, whether written,
graphic, electromagnetic or otherwise, except that the receiving Party may
retain one copy for archival purposes only.
29.4.5 Notwithstanding any other provision of this Agreement, the
provisions of this subsection 29.4 shall apply to all Proprietary Information
furnished by either Party to the other in furtherance of the purpose of this
Agreement, even if furnished before the Effective Date.
29.5 Choice of Law
The construction, interpretation and performance of this Agreement shall be
governed by and construed in accordance with the laws of the state in which this
Agreement is to be performed, except for its conflicts of laws provisions. In
addition, insofar as and to the extent federal law may apply, federal law will
control.
29.6 Taxes
Each Party purchasing services hereunder shall pay or otherwise be
responsible for all federal, state, or local sales, use, excise, gross receipts,
transaction or similar taxes, fees or surcharges levied against or upon such
purchasing Party (or the providing Party when such providing Party is permitted
to pass along to the purchasing Party such taxes, fees or surcharges), except
for any tax on either Party's corporate existence, status or income. Whenever
possible, these amounts shall be billed as a separate item on the invoice. To
the extent a sale is claimed to be for resale tax exemption, the purchasing
Party shall furnish the providing Party a proper resale
-68-
<PAGE>
tax exemption certificate as authorized or required by statute or regulation by
the jurisdiction providing said resale tax exemption. Failure to timely provide
said resale tax exemption certificate will result in no exemption being
available to the purchasing Party.
29.7 Assignment
Either Party may assign this Agreement or any of its rights or obligations
hereunder to a third party, including, without limitation, its parent or other
affiliate, with the other Party's prior written consent, which consent shall not
be unreasonably withheld upon the provision of reasonable evidence by the
proposed assignee that it has the resources, ability, and authority to provide
satisfactory performance under this Agreement. Any assignment or delegation in
violation of this subsection 29.7 shall be void and ineffective and constitute a
default of this Agreement.
29.8 Billing and Payment; Disputed Amounts
29.8.1 Except as may otherwise be provided in this Agreement, each
Party shall submit on a monthly basis an itemized statement of charges incurred
by the other Party during the preceding month(s) for services rendered
hereunder. Payment of billed amounts under this Agreement, whether billed on a
monthly basis or as otherwise provided herein, shall be due, in immediately
available U.S. funds, within thirty (30) days of the date of such statement.
29.8.2 Although it is the intent of both Parties to submit timely
and accurate statements of charges, failure by either Party to present
statements to the other Party in a timely manner shall not constitute a breach
or default, or a waiver of the right to payment of the incurred charges, by the
billing Party under this Agreement, and the billed Party shall not be entitled
to dispute the billing Party's statement(s) based on such Party's failure to
submit them in a timely fashion.
29.8.3 If any portion of an amount due to a Party (the "Billing
Party") under this Agreement is subject to a bona fide dispute between the
Parties, the Party billed (the "Non-Paying Party") shall within thirty (30) days
of its receipt of the invoice containing such disputed amount give notice to the
Billing Party of the amounts it disputes ("Disputed Amounts") and include in
such notice the specific details and reasons for disputing each item. The Non-
Paying Party shall pay when due (i) all undisputed amounts to the Billing Party
and (ii) all Disputed Amounts into an interest bearing escrow account with a
third Party escrow agent mutually agreed upon by the Parties.
-69-
<PAGE>
29.8.4 If the Parties are unable to resolve the issues related to
the Disputed Amounts in the normal course of business within ninety (90) days
after delivery to the Billing Party of notice of the Disputed Amounts, each of
the Parties shall appoint a designated representative who has authority to
settle the dispute and who is at a higher level of management than the persons
with direct responsibility for administration of this Agreement. The designated
representatives shall meet as often as they reasonably deem necessary in order
to discuss the dispute and negotiate in good faith in an effort to resolve such
dispute. The specific format for such discussions will be left to the discretion
of the designated representatives, however all reasonable requests for relevant
information made by one Party to the other Party shall be honored.
29.8.5 If the Parties are unable to resolve issues related to the
Disputed Amounts within forty-five (45) days after the Parties' appointment of
designated representatives pursuant to subsection 29.9, then either Party may
file a complaint with the Commission to resolve such issues or proceed with any
other remedy pursuant to law or equity. The Commission may direct release of
any or all funds (including any accrued interest) in the escrow account, plus
applicable late fees, to be paid to either Party.
29.8.6 The Parties agree that all negotiations pursuant to this
subsection 29.8 shall remain confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
29.8.7 Any undisputed amounts not paid when due shall accrue
interest from the date such amounts were due at the lesser of (i) one and one-
half percent (1-1/2%) per month or (ii) the highest rate of interest that may be
charged under applicable law.
29.9 Dispute Resolution
29.9.1 Any dispute between the Parties regarding the interpretation
or enforcement of this Agreement or the provision of any services hereunder
shall be addressed by good faith negotiation between the Parties, in the first
instance, according to the escalation procedures in Subsection 29.9.2 below,
other than billing disputes which shall be addressed according to the procedures
established in Section 29.8. Should such negotiations fail to resolve the
dispute in the appropriate time periods as specified in Subsection 29.9.2,
either Party may initiate an appropriate action in any regulatory or judicial
forum of competent jurisdiction. The Parties may also agree to other informal
resolution processes for specific circumstances prior to initiating a regulatory
or judicial action.
-70-
<PAGE>
29.9.2 Escalation Procedures
The Parties shall submit any dispute between BA and MGC for
resolution to an Inter-Company Review Board consisting of one representative
from each Party at the vice-president or above level (or such lower level as the
Parties agree) according to the following procedures:
(a) Each Party must designate its initial representative to the
Inter-Company Review Board within (15) days of the Effective
Date of this Agreement.
(b) A Party may change its designee, or select an alternative
designee, on one (1) day's notice to the other Party.
(c) A dispute will be deemed submitted to the Inter-Company
Review Board on the date a Party requests Inter-Company
Review Board action in writing, transmitted by facsimile as
set forth in Section 29.10 of the Agreement and to each
Party's representative designated pursuant to Section 29.9.2
(a).
(d) If the Inter-Company Review Board is unable to resolve a
service affecting dispute within five business days (or such
longer period as agreed to in writing by the Parties) of
submission to it of the dispute, a Party may initiate a
judicial or regulatory proceeding in accordance with the
requirements of Section 29.9.1.
(e) If the Inter-Company Review Board is unable to resolve a non-
service affecting dispute within thirty (30) days (or such
longer period as agreed to in writing by the Parties) of
submission to it of the dispute, a Party may initiate a
judicial or regulatory proceeding in accordance with the
requirements of Section 29.9.1.
(f) The Parties agree that all negotiations pursuant to this
Section 29.9 shall be confidential and shall be treated as
compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and state rules of evidence.
-71-
<PAGE>
29.10 Notices
Except as otherwise provided in this Agreement, notices given by one Party
to the other Party under this Agreement shall be in writing and shall be (a)
delivered personally, (b) delivered by express delivery service, (c) mailed,
certified mail or first class U.S. mail postage prepaid, return receipt
requested, or (d) delivered by telecopy to the following addresses of the
Parties:
To MGC:
MGC COMMUNICATIONS, INC.
3301 North Buffalo Drive
Las Vegas, Nevada 89129
Attn: Kent F. Heyman
Vice President and General Counsel
Facsimile: 702-310-5689
To BA:
BELL ATLANTIC
1095 Avenue of Americas
40th Floor
New York, NY 10036
Attn: President - Telecommunications Industry Services
Facsimile: (212) 597-2585
with a copy to:
BELL ATLANTIC
1095 Avenue of Americas
40th Floor
New York, NY 10036
Attn: General Counsel
Facsimile: (212) 597-2560
or to such other address as either Party shall designate by proper notice.
Notices will be deemed given as of the earlier of (i) the date of actual
receipt, (ii) the next business day when notice is sent via express mail or
personal delivery, (iii) three (3) days after mailing in the case of first
-72-
<PAGE>
class or certified U.S. mail, or (iv) on the date set forth on the confirmation
in the case of telecopy.
29.11 Section 252(i) Obligations
29.11.1 To the extent required under Applicable Law, BA shall make
available without unreasonable delay to MGC any individual interconnection,
service or network element contained in any agreement to which it is a party
that is approved by the Commission pursuant to Section 252 of the Act, upon the
same rates, terms, and conditions as those provided in the agreement.
29.11.2 To the extent the exercise of the foregoing options
requires a rearrangement of facilities by the providing Party, the opting Party
shall be liable for the non-recurring charges associated therewith.
29.11.3 The Party electing to exercise such option shall do so by
delivering written notice to the first Party. Upon receipt of said notice by
the first Party, the Parties shall amend this Agreement to provide the same
rates, terms and conditions to the notifying Party for the remaining term of
this Agreement; provided, however, that the Party exercising its option under
this subsection 29.11 must continue to provide the same services or arrangements
to the first Party as required by this Agreement, subject either to the rates,
terms, and conditions applicable to the first Party in its agreement with the
third party or to the rates, terms, and conditions of this Agreement, whichever
is more favorable to the first Party in its sole determination.
29.12 Joint Work Product
This Agreement is the joint work product of the Parties and has been
negotiated by the Parties and their respective counsel and shall be fairly
interpreted in accordance with its terms and, in the event of any ambiguities,
no inferences shall be drawn against either Party.
29.13 No Third Party Beneficiaries; Disclaimer of Agency
This Agreement is for the sole benefit of the Parties and their permitted
assigns, and nothing herein express or implied shall create or be construed to
create any third-party beneficiary rights hereunder. Except for provisions
herein expressly authorizing a Party to act for another, nothing in this
Agreement shall constitute a Party as a legal representative or agent of the
other Party, nor shall a Party have the right or authority to assume, create or
incur any liability
-73-
<PAGE>
or any obligation of any kind, express or implied, against or in the name or on
behalf of the other Party unless otherwise expressly permitted by such other
Party. Except as otherwise expressly provided in this Agreement, no Party
undertakes to perform any obligation of the other Party, whether regulatory or
contractual, or to assume any responsibility for the management of the other
Party's business.
29.14 No License
29.14.1 Except as may be expressly provided herein, nothing in this
Agreement shall be construed as the grant of a license with respect to any
patent, copyright, trademark, trade name, trade secret or any other proprietary
or intellectual property now or hereafter owned, controlled or licensable by
either Party. Neither Party may use any patent, copyrightable materials,
trademark, trade name, trade secret or other intellectual property right of the
other Party except in accordance with the terms of a separate license agreement
between the Parties granting such rights.
29.14.2 Neither Party shall have any obligation to defend,
indemnify or hold harmless, or acquire any license or right for the benefit of,
or owe any other obligation or have any liability to, the other Party or its
customers based on or arising from any, claim, demand, or proceeding by any
third party alleging or asserting that the use of any circuit, apparatus, or
system, or the use of any software, or the performance of any service or method,
or the provision of any facilities by either Party under this Agreement, alone
or in combination with that of the other Party, constitutes direct, vicarious or
contributory infringement or inducement to infringe, misuse or misappropriation
of any patent, copyright, trademark, trade secret, or any other proprietary or
intellectual property right of any Party or third party. Each Party, however,
shall offer to the other reasonable cooperation and assistance in the defense of
any such claim.
29.14.3 NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, THE
PARTIES AGREE THAT NEITHER PARTY HAS MADE, AND THAT THERE DOES NOT EXIST, ANY
WARRANTY, EXPRESS OR IMPLIED, THAT THE USE BY THE PARTIES OF THE OTHER'S
FACILITIES, ARRANGEMENTS, OR SERVICES PROVIDED UNDER THIS AGREEMENT SHALL NOT
GIVE RISE TO A CLAIM BY ANY THIRD PARTY OF INFRINGEMENT, MISUSE, OR
MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHT OF SUCH THIRD PARTY.
-74-
<PAGE>
29.15 Technology Upgrades
Nothing in this Agreement shall limit BA's ability to upgrade its network
through the incorporation of new equipment, new software or otherwise. BA shall
provide MGC written notice at least ninety (90) days prior to the incorporation
of any such upgrades in BA's network that will materially affect MGC's service,
and shall exercise reasonable efforts to provide at least one hundred eighty
(180) days notice where practicable. In addition, BA shall comply with the FCC
Network Disclosure rules set forth in the FCC Regulations to the extent
applicable. MGC shall be solely responsible for the cost and effort of
accommodating such changes in its own network.
29.16 Survival
The Parties' obligations under this Agreement which by their nature are
intended to continue beyond the termination or expiration of this Agreement
shall survive the termination or expiration of this Agreement.
29.17 Entire Agreement
The terms contained in this Agreement and any Schedules, Exhibits, tariffs
and other documents or instruments referred to herein, which are incorporated
into this Agreement by this reference, constitute the entire agreement between
the Parties with respect to the subject matter hereof, superseding all prior
understandings, proposals and other communications, oral or written. Neither
Party shall be bound by any preprinted terms additional to or different from
those in this Agreement that may appear subsequently in the other Party's form
documents, purchase orders, quotations, acknowledgments, invoices or other
communications.
29.18 Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
29.19 Modification, Amendment, Supplement, or Waiver
No modification, amendment, supplement to, or waiver of the Agreement or
any of its provisions shall be effective and binding upon the Parties unless it
is made in writing and duly signed by the Parties. A failure or delay of either
Party to enforce any of the provisions hereof, to
-75-
<PAGE>
exercise any option which is herein provided, or to require performance of any
of the provisions hereof shall in no way be construed to be a waiver of such
provisions or options.
29.20 Successors and Assigns
This Agreement shall be binding on and inure to the benefit of the Parties
and their respective legal successors and permitted assigns.
29.21 Publicity and Use of Trademarks or Service Marks
Neither Party nor its subcontractors or agents shall use the other Party's
trademarks, service marks, logos or other proprietary trade dress in any
advertising, press releases, publicity matters or other promotional materials
without such Party's prior written consent.
29.22 Restructured/New Rates
Nothing in this Agreement shall affect or limit (i) BA's right with respect
to a new element or service not offered to MGC under this Agreement on the
Effective Date of this Agreement, or (ii) BA's right to modify, restructure or
change an existing element or service and to charge MGC such rates as approved
by the PSC for such modified, restructured or altered element or service. BA
shall be entitled to recover from MGC such new, additional or restructured
rates, charges or prices effective from the date when and to the extent BA seeks
approval from the PSC of such new, additional or restructured rates, charges or
prices, either pursuant to a tariff filing or other application to the PSC,
subject to later true-up on the date such new additional or restructured rates,
charges or prices are actually approved by the PSC.
29.23 Integrity of BELL ATLANTIC Network
The Parties acknowledge that BELL ATLANTIC, at its election, may deploy
fiber throughout its network and that such fiber deployment may inhibit or
facilitate MGC's ability to provide service using certain technologies.
Notwithstanding any other provision of this Agreement, BELL ATLANTIC shall have
the right to deploy, upgrade, migrate and maintain its network at its
discretion.
-76-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of this Third day of April, 1998.
MGC COMMUNICATIONS, INC. BELL ATLANTIC - NEW YORK
By:_______________________________ By:____________________________________
Printed: Kent F. Heyman Printed: Jacob J. Goldberg
-------------------------- --------------------------------
Title: Vice President and General Title: President - Telecommunications
--------------------------- --------------------------------
Counsel Industry Services
------------------------ ------------------------------
-77-
<PAGE>
EXHIBIT 10.26
LOAN AND SECURITY AGREEMENT
---------------------------
This LOAN AND SECURITY AGREEMENT ("Agreement") is dated as of October 22,
---------
1999 (the "Closing Date"), by and between the following parties:
LENDER/SECURED PARTY: NTFC CAPITAL CORPORATION, a Delaware corporation with
offices at 501 Corporate Centre Drive, Franklin,
Tennessee 37067 ("Lender").
------
BORROWERS/DEBTORS: BROADVIEW NETWORKS HOLDINGS, INC., a Delaware
corporation, Broadview Networks, Inc., a New York
corporation, and Broadview Networks of Massachusetts,
Inc., a Delaware corporation, each with its principal
place of business at 45-18 Court Square, Ste. 403, Long
Island City, NY 11101 ("BNH"), and the Subsidiaries of
BNH which subsequently become a party to this Agreement
pursuant to Section 2.11 of this Agreement (the
"Borrowers").
---------
This Agreement includes the general terms and conditions contained herein
and all the exhibits and schedules attached hereto, all of which are
incorporated herein. In the event of a conflict between the general terms and
conditions and any schedule, the additional terms and conditions stated in the
schedule shall control.
By executing this Agreement, Lender agrees to make loans to Borrowers, and
Borrowers agree to borrow from Lender and to provide collateral to secure such
loans, all on the terms and conditions set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives:
LENDER: BORROWERS:
- ------ ---------
NTFC CAPITAL CORPORATION BROADVIEW NETWORKS HOLDINGS, INC.
BY:_______________________________ BY:____________________________________
TITLE:____________________________ TITLE:_________________________________
DATE:_____________________________ DATE:__________________________________
BROADVIEW NETWORKS
BY:____________________________________
TITLE:_________________________________
DATE:__________________________________
BROADVIEW NETWORKS OF
MASSACHUSETTS, INC.
BY:____________________________________
TITLE:_________________________________
DATE:__________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1: DEFINITIONS.................................................... 1
1.01. Certain Definitions............................................ 1
1.02. Accounting Principles; Subsidiaries............................ 12
1.03. UCC Terms...................................................... 12
1.04. General Construction; Captions................................. 12
1.05. References to Documents and Laws............................... 12
ARTICLE 2: LOANS.......................................................... 12
2.01. Commitment..................................................... 12
2.02. Notes and Payment Terms........................................ 13
2.03. Procedures for Borrowing....................................... 15
2.04. Prepayments.................................................... 16
2.05. Computation of Interest........................................ 17
2.06. Payments....................................................... 17
2.07. Indemnity...................................................... 17
2.08. Use of Proceeds................................................ 18
2.09. Fees........................................................... 18
2.10. Lender's Expense............................................... 18
2.11. Joint and Several Liability; Additional Subsidiaries........... 19
2.12. Taxes.......................................................... 19
ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT.............................. 20
3.01. Grant of Security Interest..................................... 20
3.02. Priority of Security Interests................................. 21
3.03. Further Documentation; Pledge of Instruments................... 21
3.04. Further Identification of Collateral........................... 22
3.05. Remedies....................................................... 22
3.06. Standard of Care............................................... 22
3.07. Advances to Protect Collateral................................. 22
3.08. License to Use................................................. 22
3.09. Collateral Assignment of NTI Purchase Agreement................ 23
3.10. Priority of Security Interests and Liens on Equipment Outside
United States.................................................. 23
ARTICLE 4: REPRESENTATIONS AND WARRANTIES................................. 24
4.01. Organization and Qualification................................. 24
4.02. Authority and Authorization.................................... 24
4.03. Execution and Binding Effect................................... 24
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.04. Governmental Authorizations.................................... 24
4.05. Regulatory Authorizations...................................... 24
4.06. Material Agreement; Absence of Conflicts....................... 25
4.07. No Restrictions................................................ 25
4.08. Financial Statements........................................... 25
4.09. Financial Accounting Practices................................. 25
4.10. Accurate and Complete Disclosure............................... 26
4.11. No Event of Default; Compliance with Material Agreements....... 26
4.12. Litigation..................................................... 26
4.13. Rights to Property; Intellectual Property...................... 26
4.14. Financial Condition............................................ 26
4.15. Taxes.......................................................... 26
4.16. No Material Adverse Change..................................... 27
4.17. No Regulatory Event............................................ 27
4.18. Trade Relations................................................ 27
4.19. No Brokerage Fees.............................................. 27
4.20. Margin Stock; Regulation U..................................... 27
4.21. Investment Company; Public Utility Holding Company............. 27
4.22. Personal Holding Company; Subchapter S......................... 27
4.23. ERISA.......................................................... 28
4.24. Environmental Warranties....................................... 28
4.25. Security Interests............................................. 28
4.26. Place of Business.............................................. 28
4.27. Location of Collateral......................................... 28
4.28. Clear Title To Collateral...................................... 28
4.29. Assumed Names.................................................. 29
4.30. Transactions with Affiliates................................... 29
4.31. NTI Purchase Agreement......................................... 29
ARTICLE 5: CONDITIONS OF CLOSING.......................................... 29
5.01. Closing Certificates........................................... 29
5.02. Opinions of Counsel............................................ 29
5.03. Closing Documents.............................................. 30
ARTICLE 6: CONDITIONS OF LENDING.......................................... 30
6.01. Conditions for Initial Advance................................. 30
6.02. Conditions for All Advances.................................... 31
6.03. Affirmation of Representations and Warranties.................. 32
6.04. Deadline for Funding Conditions................................ 33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 7: AFFIRMATIVE COVENANTS.......................................... 33
7.01. Reporting and Information Requirements......................... 33
7.02 Other Notices.................................................. 35
7.03. Notice of Pension-Related Events............................... 35
7.04. Inspection Rights.............................................. 35
7.05. Preservation of Corporate Existence and Qualification.......... 36
7.06. Continuation of Business....................................... 36
7.07. Insurance...................................................... 36
7.08. Payment of Taxes, Charges, Claims and Current Liabilities...... 37
7.09. Financial Accounting Practices................................. 38
7.10. Compliance with Laws........................................... 38
7.11. Use of Proceeds................................................ 38
7.12. Government Authorizations; Regulatory Authorizations, Etc...... 39
7.13. Contracts and Franchises....................................... 39
7.14. Consents....................................................... 39
7.15. Financial Covenants............................................ 39
7.16. Construction and Storage....................................... 39
7.17. Upgrade Equipment.............................................. 39
7.18. Additional Subsidiaries........................................ 40
ARTICLE 8: NEGATIVE COVENANTS.............................................. 40
8.01. Restrictions on Additional Indebtedness........................ 40
8.02. Restrictions on Liens and Sale of Collateral................... 40
8.03. Limitation on Contingent Obligations........................... 41
8.04. Fees and Commissions........................................... 41
8.05. Prohibition of Mergers, Acquisitions, Name, Office
or Business Changes, Etc............................... 41
8.07. Limitation on Investments, Advances and Loans.................. 42
8.08. Capital Expenditures........................................... 42
8.09. Limitation on Leases........................................... 42
8.10. Transactions with Affiliates................................... 42
8.11. Termination of Purchase Agreement.............................. 43
8.12. Removal of Collateral.......................................... 43
8.13. Assumed Names.................................................. 43
ARTICLE 9: EVENTS OF DEFAULT.............................................. 43
9.01. Events of Default.............................................. 43
9.02. Consequences of an Event of Default............................ 46
9.03. Exercise of Rights............................................. 46
9.04. Rights of Secured Party: Possession or Sale of Collateral...... 46
9.05. Notices, Etc., Waived.......................................... 47
9.06. Additional Remedies............................................ 47
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
9.07. Application of Proceeds..................................... 48
9.08. Discontinuance of Proceeding................................ 48
9.09. Power of Attorney........................................... 48
9.10. Regulatory Matters.......................................... 49
ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS............................. 49
10.01. Modifications and Waivers................................... 49
10.02. Advances Not Implied Waivers................................ 50
10.03. Deviation from Covenants.................................... 50
10.04. Holidays.................................................... 50
10.05. Records..................................................... 51
10.06. Notices..................................................... 51
10.07. FCC and PUC Approval........................................ 51
10.08. Lender Sole Beneficiary..................................... 52
10.09. Lender's Review of Information.............................. 52
10.10. No Joint Venture............................................ 52
10.11. Severability................................................ 52
10.12. Rights Cumulative........................................... 52
10.13. Duration: Survival.......................................... 52
10.14. Governing Law............................................... 53
10.15. Counterparts................................................ 53
10.16. Successors and Assigns...................................... 53
10.17. Participation............................................... 54
10.18. Time of Essence............................................. 54
10.19. Disclosures and Confidentiality............................. 54
10.20. Jurisdiction and Venue...................................... 55
10.21. Jury Waiver................................................. 56
10.22. Limitation on Liability..................................... 56
10.23. Borrowers' Waivers.......................................... 56
10.24. Schedules................................................... 57
10.25. Agreement to Govern......................................... 57
10.26. Entire Agreement............................................ 57
</TABLE>
iv
<PAGE>
SCHEDULES TO LOAN AND SECURITY AGREEMENT
----------------------------------------
Schedule 1 Borrowers Information and Defined Terms
Schedule 2.01 Maximum Loan Amounts
Schedule 2.02 Payment Terms and Governing Law
Schedule 2.09 Fees
Schedule 2.11 Annex A to Loan and Security Agreement
Schedule 2.11(b) Additional Subsidiary Information
Schedule 4.04 Required Consents
Schedule 4.05 Regulatory Authorizations
Schedule 4.07 Restrictions on Loans
Schedule 4.08 Financial Statements
Schedule 4.12 Pending Litigation
Schedule 4.25 UCC Filing Offices
Schedule 4.26 Principal Offices and Location of Collateral
Schedule 4.29 Assumed Names
Schedule 4.30 Transactions with Affiliates
Schedule 4.31 NTI Purchase Agreement
Schedule 6.02 Post-Closing Items
Schedule 7.07 Insurance
Schedule 7.15 Financial Covenants
Schedule 8.01 Permitted Specific Encumbrances
Schedule 8.06 Permitted Equity Payments
EXHIBITS TO LOAN AND SECURITY AGREEMENT
---------------------------------------
Exhibit A Form of Notes
Exhibit B Form of Borrowing Certificate
Exhibit C Form of Opinion of Counsel for Borrowers
Exhibit D Form of Opinion of Regulatory Counsel for Borrowers
Exhibit E Form of Landlord's Consent
Exhibit F Form of Mortgagee's Consent
Exhibit G Form of Certificate of Financial Condition
Exhibit H Form of Subordination Agreement
Exhibit I Form of Collateral Assignment of Purchase Agreement
Exhibit J Form of Consent to Collateral Assignment of Purchase
Agreement
v
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is dated as of the "Closing
--------- -------
Date" set forth on Schedule 1 hereto, by and between BROADVIEW NETWORKS
- ----
HOLDINGS, INC. (collectively, "BNH"), the other Borrowers (as defined below),
---
and NTFC CAPITAL CORPORATION, a Delaware corporation ("Lender"), with offices at
------
501 Corporate Centre Drive, Suite 600, Franklin, Tennessee 37067.
BACKGROUND:
----------
A. Broadview Networks, Inc., f/k/a Community Networks, Inc., a Domestic
Subsidiary of BNH, has entered into a certain purchase agreement with Northern
Telecom Inc., as described on Schedule 4.31 hereto, providing for the purchase
-------------
by it or its Subsidiaries of certain telecommunications equipment and the
license of associated software, all as described therein, and has requested
Lender to extend credit to Borrowers to finance such purchase and license, as
described on Schedule 1 hereto, and to make credit available for the purchase of
----------
additional telecommunications equipment, in each case as described herein.
B. Lender is willing to extend such credit to Borrowers upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1: DEFINITIONS
----------------------
1.01. Certain Definitions. Certain terms are defined on Schedule 2.01
------------------- -------------
hereto. In addition to other words and terms defined in the preamble hereof or
elsewhere in this Agreement, or on the schedules hereto, the following words and
terms shall have the following meanings unless the context otherwise clearly
requires:
"Advance(s)": any advance or loan of funds (including Capitalized Interest)
----------
made by Lender to Borrower pursuant to this Agreement.
"Affiliate": as applied to any Person, any second Person directly or
---------
indirectly controlling, controlled by, or under common control with that Person,
or related to such Person by blood, marriage or adoption. For purposes of this
definition and the definition of "Subsidiary," a Person shall be deemed to
control another Person if such first Person possesses, directly or indirectly,
the power to direct, or to cause the direction of, the management and policies
of such other Person, whether through ownership of voting securities, by
contract or otherwise.
<PAGE>
"Basic Agreements": a collective reference to this Agreement, each Note,
----------------
and the Security Documents.
"Borrowing Certificate": a certificate substantially in the form of Exhibit
--------------------- -------
B hereto, designating the applicable Borrower(s) under this Agreement, and
- -
executed by BNH and the applicable Borrower(s), if other than BNH.
"Borrower": BNH; each Domestic Subsidiary and Foreign Subsidiary which has
--------
signed this Agreement and which subsequently becomes a party to this Agreement
pursuant to Section 2.11 of this Agreement; and each of their respective
successors.
"Borrowing Date": any Business Day on which an Advance is made to a
--------------
Borrower hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
------------
commercial banks in New York, New York, are authorized or required by law to
close.
"Business Plan": the business plan of BNH, a copy of which is attached to
-------------
Schedule 1 to this Agreement.
- ----------
"Calendar Quarter": each three month period starting on each January 1,
----------------
April 1, July 1, and October 1, during the term of this Agreement.
"Capitalized Interest": the accrued but unpaid interest on any Advance that
--------------------
accrues during the Capitalized Interest Period, if any Capitalized Interest
Period is defined on Schedule 2.02 hereto, and is added to and deemed to be
-------------
principal due under any Note, in accordance with Section 2.02(b) hereof.
---------------
"Capitalized Interest Period": as defined on Schedule 2.02 hereto.
--------------------------- -------------
"Carrier": any interexchange carrier or other provider of
-------
telecommunications long distance service or any local exchange company or other
provider of local telecommunications service.
"Certificate of Financial Condition": a certificate in the form of Exhibit
---------------------------------- -------
G hereto, executed by BNH.
- -
"Change in Control": any change in the direct or indirect control of, or
-----------------
the ability or right to control, a majority of the voting shares of any class of
securities or ownership rights in a Borrower or in the right and/or the power to
control the election of the board of directors of a Borrower.
"Closing Date": as defined on Schedule 1 hereto.
------------ ----------
2
<PAGE>
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
"Collateral": as defined in Section 3.01 hereof.
---------- ------------
"Co-Location Site": a space located in an ILEC central office for the
----------------
exclusive use of the Borrower in which a Borrower's equipment is located.
"Commitment": as defined in Section 2.01 hereof.
---------- ------------
"Communications Law": any and all of (i) the Communications Act of 1934, as
------------------
amended and any similar or successor federal statute, and the rules and
regulations of the FCC thereunder, (ii) any state law governing the provision of
telecommunications services, and the rules and regulations of the PUC, all as
the same may be in effect from time to time.
"Consent": a consent to a collateral assignment of the NTI Purchase
-------
Agreement, a consent to a collateral assignment of the Vendor Purchase
Agreement, a Landlord Consent, and/or a Mortgagee's Consent.
"Contingent Obligation": as to any Person, any obligation of such Person
---------------------
guaranteeing, directly or indirectly, any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof.
"Contributed Equity": the cumulative amount of cash equity received by BNH.
------------------
"Conversion Date": as defined on Schedule 2.02 hereto.
--------------- -------------
"Debt Service": for the most recent four full fiscal quarters of BNH being
------------
measured, the sum of (i) all amortized principal and interest payments that BNH
is required to make during such period on account of all of its Total Debt
including, without limitation, (a) amounts due during such period on account of
capitalized leases, (b) the then current portion of any long-term Total Debt of
BNH calculated in accordance with GAAP, (c) amounts due on short-term Total Debt
of BNH and (d) amounts due under this Loan Agreement and the Note, plus (ii)
capitalized expenditures not paid with proceeds of any Indebtedness.
3
<PAGE>
"Default": any of the conditions or occurrences specified in Section 9.01,
------- ------------
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition has been satisfied.
"Default Rate": a rate of interest equal to the lesser of (i) three
------------
percentage points in excess of the Interest Rate or (ii) the maximum permissible
rate under applicable law in effect at any time.
"Domestic Borrower": each Borrower formed under the laws of the United
-----------------
States; any state of the United States, the District of Columbia; or any
territory, possession or protectorate of the United States.
"Domestic Borrower Obligations": all Obligations of all Borrowers.
-----------------------------
"Domestic Subsidiary": each Subsidiary of BNH formed under the laws of the
-------------------
United State; any state of the United States, the District of Columbia; or any
territory, possession or protectorate of the United States.
"EBITDA": for any fiscal period, BNH's actual operating earnings on a
------
consolidated basis from ongoing operations before interest, taxes, depreciation
and amortization for such fiscal period.
"Environmental Law": any current or future federal, state and local law
-----------------
(including common law), statute, regulation, ordinance, rulings, codes, judicial
order, administrative order or terms of licenses or permits applicable to
environmental conditions (including without limitation conditions relating to
ambient air, surface water, groundwater, land surface or subsurface strata),
including without limitation all such laws governing employment, the generation,
use, storage, disposal or transportation of toxic or hazardous substances or
wastes (including, without limitation, asbestos and petroleum products), the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Superfund Amendment and
Reauthorization Act of 1986, the Toxic Substances Control Act, the Clean Air
Act, the Water Pollution Control Act, the Hazardous Waste Management Act, the
Mineral Lands and Leasing Act, the Surface Mining Control and Reclamation Act,
U.S. Department of Transportation Regulations, and all similar state and local
laws, regulations, all as now or hereafter amended.
"Equipment": the equipment defined in Section 3.01 hereof.
--------- ------------
"Equity Payment": any distribution of earnings or capital to any Owner
--------------
that is not a Borrower hereunder, any management fee or other fee paid to any
Affiliate that is not a Borrower hereunder not reasonably related to services
actually performed, or any redemption of equity ownership interests, either
directly or indirectly, whether in cash or property or in obligations of a
Borrower held by an Owner that is not a Borrower hereunder.
4
<PAGE>
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time, and any successor statute.
"Event of Default": any of the events specified in Section 9.01 hereof,
---------------- ------------
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, under Section 9.01 or otherwise, has been
------------
satisfied.
"Excluded Indebtedness": (i) Subordinated Indebtedness, (ii) Indebtedness
---------------------
which by its terms is unsecured, has a stated maturity date at least twelve
months after the Maturity Date hereof, requires no principal repayments until at
least twelve months after the Maturity Date hereof, provides for no right of
prepayment, redemption or put rights (whether exercisable at the option of the
borrower or lender) prior to its stated maturity date, is issued on market terms
prevailing at the time, and which in any event provides for a cash payment of
interest at a rate not greater than the prime rate of interest most recently
announced by Citibank, N.A., plus 1000 basis points, and (iii) Indebtedness
under one or more receivables financing facility in an aggregate principal
amount not exceeding 85% of the net book value of the accounts receivables of
the Borrowers liable thereunder which are pledged as collateral for the
repayment of such Indebtedness.
"FCC": the Federal Communications Commission of the United States of
---
America, and any successor, in whole or in part, to its jurisdiction.
"Financing Termination Date": as defined on Schedule 2.02 hereto.
-------------------------- -------------
"First Borrowing Date": the date of the first borrowing by a Borrower
--------------------
hereunder.
"Fixed Charge Coverage Ratio" means the ratio of EBITDA during the four
---------------------------
full fiscal quarters then ended ("the Four Quarter Period") to Debt Service for
the Four Quarter Period.
"Foreign Borrower": each Borrower formed under the laws of any
----------------
jurisdiction other than the United States; the District of Columbia; or any
territory, possession or protectorate of the United States.
"Foreign Borrower Obligations": all Obligations of all Foreign Borrowers.
----------------------------
"Foreign Subsidiary": each Subsidiary of BNH formed under the laws of any
------------------
jurisdiction other than the United States; the District of Columbia; or any
territory, possession or protectorate of the United States.
"GAAP": subject to Section 1.02 hereof, generally accepted accounting
---- ------------
principles in the United States of America (as such principles may change from
time to time) applied on a consistent basis (except for changes in application
in which BNH's independent certified public accountants concur), applied both to
classification of items and amounts.
5
<PAGE>
"General Intangibles": as defined in Section 3.01 hereof.
------------------- ------------
"Governmental Actions": actions by any Governmental Authority.
--------------------
"Governmental Authority": the federal government, any state or political
----------------------
subdivision thereof, any city or municipal entity, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Indebtedness": as to any Person, at a particular time, (a) indebtedness for
------------
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise assures a
creditor against loss; (b) obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases in respect of
which obligations such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations such Person assures a
creditor against loss; (c) obligations of such Person to purchase or repurchase
accounts receivable, chattel paper or other payment rights sold or assigned by
such Person; and (d) indebtedness or obligations of such Person under or with
respect to letters of credit, notes, bonds or other debt instruments.
"Initial Payment Date": as defined on Schedule 2.02 hereto.
-------------------- -------------
"Interest Payment Date": as defined on Schedule 2.02 hereto.
--------------------- -------------
"Interest Rate": as defined on Schedule 2.02 hereto.
------------- -------------
"Landlord Consent": a consent substantially in the form of Exhibit E hereto or
---------------- ---------
in other form acceptable to Lender, to be executed by the owner/landlord,
sublessor and/or licensor (including Carriers) of any real property where any of
the Collateral is to be located.
"Law": any law (including common law), constitution, statute, regulation,
---
rule, ordinance, order, injunction, writ, decree or award of any governmental
body or court of competent jurisdiction or of any arbitrator (including but not
limited to ERISA, the Code, the UCC, any applicable tax law, product safety law,
occupational safety or health law, Communications Law, Environmental Law and/or
securities laws).
"Lender's Expenses": as defined in Section 2.10 hereof.
----------------- ------------
"Leverage Ratio": The ratio of Total Debt (other than Excluded Indebtedness
--------------
and current trade payables incurred in the ordinary course of business payable
in accordance with customary practices and not more than 90 days past due) to
Contributed Equity.
6
<PAGE>
"Lien": any mortgage, pledge, hypothecation, lien (statutory or other),
----
judgment lien, security interest, security agreement, charge or other
encumbrance, or other security arrangement of any nature whatsoever, including,
without limitation, any installment contract, conditional sale or other title
retention arrangement, any sale of accounts receivable or chattel paper, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and the filing of any financing statement under the UCC or comparable
law of any jurisdiction.
"Loans": the loans and loan facilities described in Section 2.01 hereof and
----- ------------
all Advances pursuant hereto.
"Loan Documents": a collective reference to this Agreement, each Note, the
--------------
Security Documents, and all other documents, instruments, agreements and
certificates evidencing or securing any advance hereunder or any obligation for
the payment or performance thereof and/or executed and delivered in connection
with any of the foregoing.
"Mandatory Prepayments": as defined in Section 2.04(b) hereof.
--------------------- ---------------
"Material Adverse Effect": or "Material Adverse Change": a material adverse
----------------------- -----------------------
effect on, or material adverse change in, (i) the business, operations or
financial condition of BNH and its Subsidiaries taken as a whole, (ii) the
ability of a Borrower to perform its obligations under this Loan Agreement, a
Note, or the other Loan Documents, or (iii) Lender's ability to enforce the
rights and remedies granted under this Agreement or the other Loan Documents, in
all cases whether attributable to a single circumstance or event or an
aggregation of circumstances or events.
"Mortgagee's Consent": a consent substantially in the form of Exhibit F
------------------- ---------
hereto, to be executed by any Person holding a lien on real property leased or
otherwise provided to a Borrower, on which any of the Equipment is located.
"Maturity Date": the date defined on Schedule 2.02 hereto, on which all
------------- -------------
principal, interest, premium, expenses, fees, penalties and other amounts due
under a Note shall be finally due and payable.
"Note": collectively, one or more promissory notes issued by a Borrower to
----
Lender pursuant to this Agreement, and all extensions, renewals, modifications,
replacements, amendments, restatements and refinancings thereof.
"NTI": Northern Telecom Inc., a Delaware corporation.
---
"NTI Equipment": the equipment and licensed or sub-licensed Software
-------------
manufactured or supplied by NTI to a Borrower with respect to which Advances
hereunder are used directly or indirectly to finance the acquisition cost
thereof at any time pursuant to the NTI Purchase Agreement
7
<PAGE>
or any purchase order issued by a Borrower to NTI or otherwise, including
installation and construction services provided by NTI pursuant thereto.
"NTI Purchase Agreement": the NTI Purchase Agreement identified on Schedule
---------------------- --------
4.31 hereto, together with any amendments or supplements thereto, and any other
- ----
purchase agreement between NTI and a Borrower and all purchase orders and
invoices issued pursuant thereto, all subject to the approval of Lender.
"Obligations": all indebtedness, liabilities and obligations of a Borrower to
-----------
Lender of any class or nature, whether arising under or in connection with this
Agreement and/or the other Loan Documents or otherwise, whether now existing or
hereafter incurred, direct or indirect, absolute or contingent, secured or
unsecured, matured or unmatured, joint or several, whether for principal,
interest, fees, expenses, lease obligations, indemnities or otherwise,
including, without limitation, future advances of any sort, all future advances
made by Lender for taxes, levies, insurance and/or repairs to or maintenance of
the Collateral, the unpaid principal amount of, and accrued interest on, a Note,
and any expenses of collection or protection of Lender's rights, including
reasonable attorneys' fees.
"Organizational Documents": with respect to a corporation, the articles of
------------------------
incorporation and bylaws of such corporation; with respect to a partnership, the
certificate of partnership (or limited partnership, as applicable) and
partnership agreement, together with the analogous documents for any corporate
or partnership general partner; with respect to a limited liability company, the
articles of organization and operating agreement of such limited liability
company; and in any case, any other document governing the formation and conduct
of business by such entity.
"Owner(s)": the owner or owners, as the context requires, of any equity
--------
securities of BNH or any Subsidiary of BNH, now or in the future.
"Payment Date": as defined on Schedule 2.02 hereto.
------------ -------------
"PBGC": the Pension Benefit Guaranty Corporation established under Title IV of
----
ERISA or any other governmental agency, department or instrumentality succeeding
to its functions.
"Permits": all consents, licenses, notices, approvals, authorizations,
-------
filings, orders, registrations, and permits required by any Governmental
Authority for the construction and operation of the Equipment (excluding
Regulatory Authorizations), issued or obtained as and when required in
accordance with all Requirements of Law.
"Permitted Encumbrances": the Liens permitted under Section 8.02 hereof.
---------------------- ------------
"Person": an individual, corporation, limited liability company, partnership,
------
business or other trust, unincorporated association, joint venture, joint-stock
company, Governmental Authority or any other entity.
8
<PAGE>
"Plan": any employee pension benefit plan to which Section 4021 of ERISA
----
applies and (i) which is maintained for employees of BNH and/or its Subsidiaries
or (ii) to which a Borrower made, or was required to make, contributions at any
time within the preceding five (5) years.
"Proceeds": as defined in Section 3.01 hereof.
-------- ------------
"PUC": the public utilities commission for the state or any other jurisdiction
---
in which a Borrower operates its telecommunications business or any portion of
the Equipment is located, or any successor agency, and any successor, in whole
or in part, to its functions or jurisdictions, and any other Persons specified
as such on Schedule 1 hereto.
----------
"Purchase Agreement": individually and collectively, the NTI Purchase
------------------
Agreement and the Vendor Purchase Agreement.
"Regulatory Authorizations": all material approvals, authorizations, licenses,
-------------------------
filings, notices, registrations, consents, permits, exemptions, registrations,
qualifications, designations, declarations, or other actions or undertakings now
or hereafter made by, to or in respect of any telecommunications governmental or
other regulatory authority, including, without limitation, any certificates of
public convenience and all grants, approvals, licenses, filings and
registrations from or to the FCC or PUC or under any Communications Law
necessary in order to enable BNH or any of its Subsidiaries to own, construct,
maintain and operate the Equipment, and any authorizations specified on Schedule
--------
1 hereto.
- -
"Regulatory Event": any of the following events: (i) Lender becomes subject to
----------------
regulation as a "carrier," a "telephone company," a "common carrier," a "public
utility" or otherwise under any applicable law or governmental regulation,
federal, state or local, solely as a result of the transactions contemplated by
this Agreement and the other Loan Documents, or (ii) BNH or any of its
Subsidiaries becomes subject to regulation by any Governmental Authority in any
way that is materially different from the regulation existing at the Closing
Date and that could materially adversely affect BNH's ability to perform its
material obligations under the Loan Documents or Lender's rights thereunder or
the Collateral, or (iii) the FCC or PUC issues an order revoking, denying or
refusing to renew, or recommending the revocation, denial or non-renewal of, any
Regulatory Authorization.
"Reportable Event": (i) a reportable event described in Section 4043 of ERISA
----------------
and regulations thereunder, (ii) a withdrawal by a substantial employer from a
Plan to which more than one employer contributes, as referred to in Section
4063(b) of ERISA, or (iii) a cessation of operations at a facility causing more
than twenty percent (20%) of Plan participants to be separated from employment,
as referred to in Section 4062(f) of ERISA.
9
<PAGE>
"Required Consents": the Governmental Authority approvals or consents of other
-----------------
Persons required with respect to a Borrower's execution, delivery and
performance of this Agreement and the other Loan Documents, as described in
Section 4.04 hereto.
- ------------
"Requirement of Law": as to any Person, the Organizational Documents of such
------------------
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or transactions or to
which such Person or any of its property or transactions is subject, including
without limitation, all applicable common law and equitable principles, all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and orders of governmental bodies, all Permits or Regulatory
Authorizations issued to BNH and each of its Subsidiaries, all Communications
Laws, and all Environmental Laws.
"Responsible Officer": with respect to a corporation, its President, Chief
-------------------
Executive Officer(s), any Vice President or Treasurer; with respect to a
partnership, its general partner (or the President, Chief Executive Officer(s),
any Vice President or Treasurer of any corporate general partner, as
applicable); with respect to a limited liability company, a member or manager
(or the President, Chief Executive Officer(s), any Vice President or Treasurer
of any corporate member or manager), or the President, Chief Executive
Officer(s) or any Vice President of any other Person.
"Security Documents": this Agreement, the Consents, all financing statements,
------------------
all documents and instruments executed and/or delivered by or on behalf of any
Borrower in favor of Lender granting and perfecting liens and security interests
on and in any Collateral located outside the United States as Lender may
approve, and any other documents granting, evidencing, or perfecting any
security interest or Lien with respect to or securing any of the Obligations.
"Site(s)": any of the sites where Equipment is or is to be located.
-------
"Software" and "Software Licenses": any software now or hereafter owned by, or
--------------------------------
licensed to, a Borrower or any of its Subsidiaries or with respect to which BNH
or any of its Subsidiaries has or may have license or use rights.
"Subsidiary": as to any Person, a corporation, partnership, limited liability
----------
company, or other entity in which equity interests having ordinary voting power
to elect a majority of the board of directors, managers or similar persons of
the entity are at the time directly or indirectly owned or controlled by such
Person (regardless of any contingency which does or may suspend or dilute the
voting rights of such class).
"Subordination Agreement": one or more Subordination Agreements substantially
-----------------------
in the form of Exhibit H hereto or otherwise as accepted by Lender.
---------
10
<PAGE>
"Subordinated Indebtedness": Indebtedness that (i) does not require any
-------------------------
payment of principal until twelve (12) months after the Maturity Date, and
requires no principal repayments until at least twelve months after the Maturity
Date hereof, and provides for no right of prepayment, redemption or put rights
(whether exercisable at the option of the borrower or lender) prior to its
stated maturity date, (ii) is issued on market terms prevailing at the time, and
which in any event provides for a cash payment of interest at a rate not greater
than the prime rate of interest most recently announced by Citibank, N.A., plus
1000 basis points and (iii) is subordinated on terms reasonably acceptable to
Lender in a Subordination Agreement to the payment of Indebtedness created
hereunder and pursuant to any other Loan Document.
"System": BNH's complete telecommunications network or system constructed
------
and/or operated by BNH and its Subsidiaries (including any future development
and expansions thereof), of which the Equipment forms a part, as described on
Schedule 1 hereto.
- ----------
"Total Debt": of any person means, without duplication, (a) all items of
----------
indebtedness or liability which in accordance with generally accepted accounting
principles, consistently applied, would be included in determining total
liabilities as shown on the liability side of a balance sheet as of the date as
of which indebtedness is to be determined, (b) indebtedness or other liabilities
secured by any mortgage, security agreement, pledge, or lien existing on or
encumbering property owned by such person, whether or not the indebtedness or
other liabilities secured thereby shall have been assumed by such person, (c)
all indebtedness of such person (i) which such person has directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), discounted with recourse, agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, (ii) in respect of
which such person has agreed to supply or advance funds (whether by way of loan,
purchase of securities or capital contribution, through a commitment to pay for
property or services regardless of the nondelivery of such property or the
nonfurnishing of such services or otherwise), or (iii) in respect of which such
person has otherwise become directly or indirectly liable, and (d) all
obligations of such person under any now or hereafter existing interest swap or
hedge agreements (net of any amounts owed to that person under any such swap or
hedge agreements).
"UCC": the Uniform Commercial Code as the same may from time to time be in
---
effect in the State of Tennessee, or the Uniform Commercial Code of another
jurisdiction, to the extent it may be required to apply to any item or items of
Collateral.
"Unrestricted Subsidiary": (i) Open Support Systems, LLC, a Connecticut
-----------------------
limited liability company and a Subsidiary of BNH ("OSS"), and (ii) wholly-owned
Subsidiaries of OSS formed after the date hereof, provided that they only engage
in businesses substantially similar to that of OSS.
"Vendor" means any manufacturer or supplier of Vendor Equipment or licensor or
------
supplier of Software, in each case other than NTI.
11
<PAGE>
"Vendor Equipment" means any equipment, upgrades, switches and licensed or
----------------
sub-licensed Software manufactured, or supplied to a Borrower, by a Vendor.
"Vendor Purchase Agreement": any purchase agreement, together with any
-------------------------
amendments or supplements thereto, between a Vendor and a Borrower or an
assignor of a Borrower and all purchase orders and invoices issued pursuant
thereto for the sale of Vendor Equipment, all subject to the approval of Lender,
not to be unreasonably withheld or delayed.
1.02. Accounting Principles; Subsidiaries. Except as otherwise provided in
-----------------------------------
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), consistently applied, and all
accounting or financial terms shall have the meanings ascribed to such terms by
GAAP. All accounting and financial terms herein shall be deemed to include
references to consolidated and consolidating principles, and covenants,
representations and agreements with respect to the Borrowers and their
properties and activities shall be deemed to refer to BNH and its consolidated
Subsidiaries collectively.
1.03. UCC Terms. Except as otherwise provided or amplified (but not limited)
---------
herein, terms used in this Agreement that are defined in the UCC shall have the
same meanings herein.
1.04. General Construction; Captions. All definitions and other terms used
------------------------------
in this Agreement shall be equally applicable to the singular and plural forms
thereof, and all references to any gender shall include all other genders. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. The
captions and table of contents in this Agreement and the other Loan Documents
are for convenience only, and in no way limit or amplify the provisions hereof.
1.05. References to Documents and Laws. All defined terms and references in
--------------------------------
this Agreement or the other Loan Documents with respect to any agreements,
notes, instruments, certificates or other documents shall be deemed to refer to
such documents and to any amendments, modifications, renewals, extensions,
replacements, restatements, substitutions and supplements of and to such
documents. All references to statutes and related regulations shall include any
amendments thereof and any successor statutes and regulations.
ARTICLE 2: LOANS
----------------
2.01. Commitment. Subject to the terms and conditions herein provided, and
----------
so long as no Default has occurred and is continuing hereunder, Lender agrees to
lend to the Borrowers from
12
<PAGE>
time to time before the Financing Termination Date, an aggregate principal
amount not to exceed the amount set forth on Schedule 2.01 hereto as the maximum
-------------
principal amount, plus Capitalized Interest, if any, set forth on Schedule 2.01
-------------
hereto (the "Commitment"). If BNH or NTI should terminate the NTI Purchase
----------
Agreement at any time prior to the Initial Payment Date, then the Commitment
shall automatically terminate, subject to Lender's right to make further
Advances hereunder, including, but not limited to, Advances under Section 2.03
------------
hereof. All amounts advanced hereunder shall be used solely for the purchase of
NTI Equipment and related services (exclusive of sales tax) associated with the
installation and operation of the NTI Equipment from NTI, and amounts not
exceeding the amount (if any) specified on Schedule 2.01 hereto may be used for
-------------
legal fees, charges, expenses and closing costs and other expenses incurred by a
Borrower or incurred by Lender and payable by a Borrower under Section 2.10
------------
hereof; provided, however, that not exceeding (i) forty percent (40%) of the
-------- -------
aggregate of the principal amount of all Advances made hereunder may be used for
purchases of Vendor Equipment and related services associated with the
installation and operation of the Vendor Equipment, and (ii) eighteen and ten
one hundredths percent (18.10%) of the aggregate of the principal amount of all
Advances made hereunder may be used to finance the buildout, construction and
equipping of Co-Location Sites and related line conversion costs.
2.02. Notes and Payment Terms.
-----------------------
(a) Promissory Notes. The Loans shall be a Note substantially in
----------------
the form of Exhibit A hereto, with appropriate insertions, shall be
---------
executed by the applicable Borrowers, payable to the order of Lender, and
shall evidence the joint and several obligation of such Borrowers to repay
all principal amounts advanced under or pursuant to the terms of the Note,
together with interest and all other amounts due thereunder. Each Note
shall be dated as of the Closing Date, have a stated maturity that is the
Maturity Date, and bear interest at the Interest Rate from the Borrowing
Date until the Note or any amount thereunder is paid in full (whether on
the Maturity Date, by acceleration or otherwise). All schedules attached to
a Note shall be deemed a part thereof. Any such schedule may be amended by
Lender from time to time to reflect Advances made thereunder upon notice to
and consent from the applicable Borrowers which consent will not be
unreasonably withheld or delayed.
(b) Capitalized Interest Period. During the Capitalized Interest
---------------------------
Period applicable to each Advance, interest shall accrue on principal
amounts of such Advance under the Note at the Interest Rate, and up to an
aggregate of the maximum amount of Capitalized Interest set forth on
Schedule 2.02 hereto of such interest shall be capitalized, in arrears, and
-------------
added to the principal amount of the Note by Lender, on behalf of the
Borrowers, on the first day of each calendar month, thereby increasing the
principal amount of the Note. The Lender may also evidence such increase by
noting the date and amount of each such addition on a schedule to the Note.
Interest accruing during the Capitalized Interest Period in excess of the
maximum aggregate amount of Capitalized Interest set forth on Schedule 2.02
-------------
hereto shall be paid by the Borrowers monthly in arrears, on the first day
of each calendar month, commencing on the first day of the month after the
month in which such limit is exceeded.
13
<PAGE>
(c) Interest Payments. After the expiration of the Capitalized
-----------------
Interest Period for an Advance, interest shall continue to accrue on the
principal amount of such Advance under a Note (together with Capitalized
Interest) at the Interest Rate and shall be payable, in arrears, on each
Interest Payment Date.
(d) Principal Payments. On the Conversion Date for each Advance, the
------------------
principal amount of such Advance (including Capitalized Interest) shall be
payable in installments in accordance with the Payment Schedule set forth
on Schedule 2.02 hereto, plus accrued interest, commencing on the Initial
-------------
Payment Date and on each Payment Date there after until the Maturity Date.
Borrower and Lender understand that this payment schedule is intended to
amortize fully the principal amount of the Note and any other principal and
interest amounts outstanding will be added to the final payment on the
Maturity Date. In any event, the entire outstanding principal amount of the
Note and all accrued but unpaid interest and all other outstanding amounts
due thereunder shall be paid on the Maturity Date.
(e) Late Payments and Default Rate. Notwithstanding the foregoing, if
------------------------------
the applicable Borrowers shall fail to pay within ten (10) days after the
due date any principal amount or interest or other amount payable under
this Agreement or under a Note, the applicable Borrowers shall pay to
Lender, to defray the administrative costs of handling such late payments,
an amount equal to interest on the amount unpaid, to the extent permitted
under applicable law, at the Default Rate (instead of the Interest Rate),
from the due date until such overdue principal amount, interest or other
unpaid amount is paid in full (both before and after judgment) whether or
not any notice of default in the payment thereof has been delivered under
Section 9.01 hereof. In addition, but without duplication, upon the
------------
occurrence and during the continuance of an Event of Default, all
outstanding amounts hereunder shall bear interest at the Default Rate
(instead of the Interest Rate) until such amounts are paid in full or such
Event of Default is waived in writing by Lender.
(f) Excess Interest. Notwithstanding any provision of a Note, this
---------------
Agreement or any other Loan Document to the contrary, it is the intent of
Lender and the Borrowers that Lender or any subsequent holder of either of
the Notes shall never be entitled to receive, collect, reserve or apply, as
interest, any amount in excess of the maximum rate of interest permitted to
be charged by applicable Law, as amended or enacted from time to time. In
the event Lender, or any subsequent holder of a Note, ever receives,
collects, reserves or applies, as interest, any such excess, such amount
which would be excessive interest shall be deemed a partial prepayment of
principal and treated as such, or, if the principal indebtedness and all
other amounts due are paid in full, any remaining excess funds shall
immediately be applied to any other outstanding indebtedness of the
applicable Borrowers due to Lender, and if none is outstanding, shall be
paid to the applicable Borrowers. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, the Borrowers and Lender shall, to the maximum extent
permitted under applicable law, (a) exclude voluntary prepayments and the
effects thereof as it may relate to any fees charged
14
<PAGE>
by Lender, and (b) amortize, prorate, allocate, and spread, in equal parts,
the total amount of interest throughout the entire term of the
indebtedness; provided that if the indebtedness is paid and performed in
full prior to the end of the full contemplated term hereof, and if the
interest received for the actual period of existence hereof exceeds the
maximum lawful rate, Lender or any subsequent holder of any Note shall
refund to the applicable Borrowers the amount of such excess or credit the
amount of such excess against the principal portion of the indebtedness, as
of the date it was received, and, in such event, Lender shall not be
subject to any penalties provided by any laws for contracting for,
charging, reserving or receiving interest in excess of the maximum lawful
rate.
2.03. Procedures for Borrowing.
------------------------
(a) Timing of Advances. Advances shall not be made more than once per
------------------
calendar month, and all Advances in any calendar month shall be made on the
same Borrowing Date. Each Advance (other than the last Advance) shall be
in an aggregate principal amount of not less than $250,000. No amounts may
be borrowed hereunder on or after the Financing Termination Date. Lender
is hereby authorized to retain from each Advance all amounts of Lender's
Expenses accrued and unpaid by Borrowers, for which invoices have been sent
to Borrowers at least two (2) Business Days before such Advance. In any
event, all outstanding legal fees, charges and expenses not paid by
Borrowers prior to any Borrowing Date shall be paid before any Advance is
made or concurrently with such Advance.
(b) Borrowing Certificates. To request an Advance hereunder, BNH, and
----------------------
if the proceeds of an Advance are to be used to finance or refinance
Collateral or the construction, buildout and equipping of a Co-Location
Site to be owned or used by a Borrower other than BNH, such other Borrower,
shall send to Lender, at least ten (10) Business Days prior to the
requested Borrowing Date, a completed Borrowing Certificate, along with
invoices and such other supporting documentation as Lender may reasonably
request. Lender is hereby authorized upon notice to the BNH to add to any
Borrowing Certificate all amounts payable by Borrowers to Lender in respect
of legal fees, charges and expenses arising or incurred by Lender, to the
extent such fees, charges and expenses have then been incurred or charged
and may be paid from proceeds of the Loans.
(c) Transmission of Advances. Advances shall be made by wire transfer
------------------------
to the account(s) specified in the applicable Borrowing Certificate, except
that (i) proceeds of the Loans may be transmitted, at Lender's option,
directly to an NTI or Vendor account for payment of any unpaid NTI or
Vendor invoices, and (ii) Advances shall be made to a Borrower only to the
extent the Borrower provides Lender with satisfactory evidence that the
amount of such Advance has been paid to NTI or the Vendor. No further
authorization shall be necessary for any such direct disbursements, and
each such Advance shall satisfy pro tanto the obligations of Lender under
--- -----
this Agreement.
(d) Borrowing Dates. Advances shall be made by Lender on the
---------------
Borrowing Date specified in the applicable Borrowing Certificate if all
conditions for such Advance have been satisfied, or on such later Business
Date as all conditions for such Advance shall have been satisfied, as
determined by Lender.
(e) Advances After Default. At its option, after the occurrence and
----------------------
continuance of a Default, Lender may but shall not be obligated to make
advances of portions of the Loans to any Person (including without
limitation NTI and any Vendor, suppliers, sub-contractors and materialmen)
to whom Lender in good faith determines payment is due with respect to the
Equipment, and any proceeds so disbursed by Lender shall be deemed
disbursed as of the date on which the Person to whom payment is made
receives the same. No further authorization from a Borrower shall be
necessary to warrant such direct advances, and the execution of this Loan
Agreement by a Borrower shall, and hereby does, constitute an irrevocable
authorization and power of attorney so to advance
15
<PAGE>
proceeds hereunder. All such Advances shall satisfy pro tanto the obligations of
--- -----
Lender hereunder and shall be secured by the Security Documents as fully as if
made directly to the Borrower.
2.04. Prepayments.
-----------
(a) Voluntary Prepayments. Borrowers may, at their option, at any
---------------------
time after the first (1/st/) anniversary of the date of the applicable
Advance) and from time to time thereafter, prepay such Advance in whole or
in part, upon at least thirty (30) days prior written notice to Lender
specifying the date and amount of prepayment, in a minimum amount of
$50,000, plus the premium described below, and all accrued but unpaid
interest thereon. Such notice shall be irrevocable and the principal
amount specified in such notice shall be due and payable on the date
specified together with accrued interest on the amount prepaid. Any such
prepayment shall be subject to a prepayment premium equal to a percentage
of the amount prepaid as follows: three percent (3%) if the prepayment is
made after the first (1/st/) but before the second (2/nd/) anniversary of
the date of the applicable Advance (or portion thereof) being prepaid; two
percent (2%) if the prepayment is made after the second (2/nd/) but before
the third (3/rd/) anniversary of the date of the applicable Advance (or
portion thereof) being prepaid; one percent (1%) if the prepayment is made
after the third (3/rd/) but before the fourth (4/th/) anniversary of the
date of the applicable Advance (or portion thereof) being prepaid; and
without a premium if the prepayment is made after the third (3/rd/) but
before the fourth (4/th/) anniversary of the date of the applicable Advance
(or portion thereof) being prepaid. Amounts prepaid may not be reborrowed
and shall be applied as provided in Section 2.04(c). Mandatory Prepayments,
---------------
excess interest payments under Section 2.02(g), or prepayments made from
---------------
insurance proceeds pursuant to Section 6.03 or with any condemnation
------------
proceeds shall not be subject to a prepayment premium. No voluntary
prepayments shall be permitted prior to the Initial Payment Date.
(b) Mandatory Prepayment. Upon Lender's demand, Borrowers shall
--------------------
immediately prepay the Loans in full, including all principal, accrued
interest, and expenses ("Mandatory Prepayments") , all of which shall be
---------------------
made upon Lender's demand and shall not be subject to any prepayment
premium:
(i) If, prior to the completion of the installation of the
subject Equipment for which an Advance has been made, the Borrowers
fail to satisfy its purchase obligations under the related Purchase
Agreement or terminate the related Purchase Agreement, at Lender's
option Borrower shall prepay the Loans in full, including all
principal, accrued interest, and expenses, within five (5) Business
Days of Lender's demand.
(ii) If (i) the percentage of the aggregate amount of all
Advances made hereunder to finance the purchase of NTI Equipment and
services under the NTI Purchase Agreement, as of the Financing
Termination Date, is less than sixty percent
16
<PAGE>
(60%) of the total amount of Advances made hereunder (excluding
Capitalized Interest) of (ii) the percentage of the aggregate amount
of all Advances made hereunder to finance the buildout, construction
and equipping of Co-Location Sites ever exceeds eighteen and ten one
hundredths percent (18.10%) of the aggregate of the principal amount
of all Advances made hereunder (excluding Capitalized Interest),
then Borrower shall pay to Lender sufficient amounts to reduce the
outstanding principal amount of the Note to a principal amount
(excluding Capitalized Interest) necessary so as to comply with
Section 2.01. Any such Mandatory Prepayments under this Section
------------ -------
2.04(b)(ii) shall be deemed to be applied first to pay the amounts
-----------
of Advances made for purposes other than the purchase of NTI
Equipment, and shall otherwise be applied as set forth in Section
-------
2.04(c) hereof.
-------
(c) Application of Prepayments. Any prepayments shall be applied
--------------------------
first to Capitalized Interest, if any, then to interest, then to premium,
then to expenses, and then to the installments of principal in reverse
chronological order.
2.05. Computation of Interest. Interest shall be calculated daily on the
-----------------------
basis of a 360-day year for the actual days elapsed in the period during which
it accrues.
2.06. Payments. All payments and prepayments to be made in respect of
--------
principal, interest, prepayment premiums or other amounts due from a Borrower
hereunder or under a Note shall be payable on or before 1:00 p.m., Nashville
time, on the day when due, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, and an action therefor shall
immediately accrue. Such payments shall be made to Lender at Lender's office at
501 Corporate Centre Drive, Franklin, Tennessee 37067, or such other location
specified in writing by Lender, in immediately available funds, without setoff,
recoupment, counterclaims or any other deduction of any nature.
2.07. Indemnity. Borrowers hereby, jointly and severally, indemnify
---------
Lender against any losses, claims, penalties, expenses, actions, suits,
obligations, liabilities and Liens (and all costs and expenses, including
reasonable attorneys' fees incurred in connection therewith), that Lender has
sustained or incurred or may sustain or incur in connection with any of the
Collateral, or the enforcement, performance or administration of the Loan
Documents, or as a consequence of any default by a Borrower in the performance
or observance of any covenant or condition contained in this Agreement or the
Loan Documents, including without limitation, the breach of any representation
or warranty, any failure of a Borrower to pay when due (by acceleration or
otherwise) any principal, interest, fee or any other amount due hereunder or
under a Note, and any failure of a Borrower to comply with all applicable
Requirements of Law (collectively, "Claims") except to the extent of any Claims
------
caused solely by Lender's gross negligence or willful misconduct. Borrowers'
obligations under this Section 2.07 shall be part of the Obligations and shall
------------
be secured by the Collateral. Borrowers agree that upon written notice by
Lender of the assertion of any Claims, Borrowers shall, at Lender's option,
either assume full responsibility for, or reimburse Lender for
17
<PAGE>
the reasonable costs and expenses of, the defense thereof. Lender shall have no
liability for consequential or incidental damages of any nature. The provisions
of this Section 2.07 shall survive the termination of this Agreement and payment
------------
of the Obligations.
2.08. Use of Proceeds. The proceeds of the Advances hereunder shall be
---------------
used by a Borrower only for the purposes and in the amounts described in Section
-------
2.01 hereof, and no amounts repaid may be reborrowed.
- ----
2.09. Fees. Borrowers shall pay Lender the fees described on Schedule
---- --------
2.09 hereto in connection with this Agreement.
- ----
2.10. Lender's Expenses. Borrowers agree, jointly and severally, (a) to
-----------------
pay or reimburse Lender for all its reasonable costs, fees, charges and expenses
incurred or arising in connection with the negotiation, review, preparation and
execution of this Agreement, the Loan Documents, any commitment or proposal
letter, or any amendment, supplement, waiver, modification to, or restructuring
of this Agreement, the Obligations or the other Loan Documents, including,
without limitation, reasonable and customary legal fees and disbursements,
expenses, document charges and other charges and expenses of Lender, (b) to pay
or reimburse Lender for all its reasonable costs, fees, charges and expenses
incurred in connection with the administration of the Loans or the enforcement,
protection or preservation of any rights under or in connection with this
Agreement or any other Loan Documents, including, without limitation, reasonable
legal fees and disbursements, audit fees and charges, and all out-of-pocket
expenses, and (c) to pay, indemnify, and to hold Lender harmless from, any and
all recording and filing fees and taxes and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other taxes
(excluding income and franchise taxes and taxes of similar nature), if any,
which may be payable or determined to be payable in connection with the
execution and delivery or recordation or filing of, or consummation of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement and the
other Loan Documents subject to Schedule 2.09. All of the amounts described as
-------------
payable in this Section are referred to collectively as the "Lender's Expenses",
-----------------
shall be payable upon Lender's demand, and shall accrue interest at the Interest
Rate in effect when such demand is made from fifteen (15) days after the date of
demand until paid in full. All Lender's Expenses, and interest thereon, shall be
part of the Obligations and shall be secured by the Collateral. The agreements
in this Section 2.10 shall survive repayment of the Obligations. All Lender's
------------
Expenses that are outstanding on any Borrowing Date shall be paid before or with
such advance. If Borrowers have not paid to Lender the amount of all Lender's
Expenses billed to Borrowers at least five (5) Business Days before such
Borrowing Date, Lender shall be authorized to retain from any Advance on such
Borrowing Date the amount of such Lender's Expenses that remain unpaid or delay
funding such requested Advance until the payment of such amounts. Borrowers'
obligation to pay Lender's Expenses shall not be limited by any limitation on
the amount of the Commitment that may be designated as available for such
purposes, and any amounts so designated shall be used to pay Lender's Expenses
accrued at the time of any Advance before any of Borrowers' legal fees or
similar expenses.
18
<PAGE>
2.11 Joint and Several Liability; Additional Subsidiaries. All Borrowers
----------------------------------------------------
shall be jointly and severally liable with all other Borrowers for all other
Obligations hereunder. The undersigned Borrowers acknowledge and agree that:
(i) future Subsidiaries of BNH are required to become additional Borrowers under
the Agreement without the consent of any other Borrower by execution by such
Subsidiary of a copy of Annex A attached as Schedule 2.11 to this Agreement;
-------------
(ii) Lender is willing to extend certain credit to the undersigned Borrowers,
subject to the terms and conditions set forth in the Agreement, including the
condition that the undersigned Borrowers will be jointly and severally liable
for the payment of all Indebtedness owed by BNH and any other Borrower to Lender
under the Agreement; (iii) without this condition of joint and several
liability, Lender would not be willing to extend credit to any Borrower; and
(iv) the undersigned Borrowers and other Subsidiaries of BNH which may become
additional Borrowers under the Agreement are (or will be) related entities, and
the undersigned Borrowers expect to increase their respective businesses, and to
benefit directly and indirectly, through the use of the equipment to be acquired
by it and the other Borrowers with the proceeds of the loans to be made pursuant
to the Agreement. BNH shall cause each Person that becomes a Subsidiary of BNH
after the date of this Agreement to become a Borrower hereunder by executing a
copy of Annex A attached as Schedule 2.11 to this Agreement and provide the
-------------
information required to be set forth in Schedule 2.11(b) hereto, and if required
----------------
by Lender cause the delivery of an opinion of legal counsel to BNH and such
additional Subsidiary dated the date of the execution of the Annex A in form and
substance satisfactory to Lender and such other documents as the Lender may
request, including but not limited to a certificate of a responsible officer of
such additional Subsidiary as to the authority of such additional Subsidiary to
execute, deliver and perform this Agreement and the applicable Note and as to
the incumbency and signature of the officer or officers signing the Borrowing
Certificate and the applicable Note.
2.12 Taxes. (a) Any and all payments by any Borrower hereunder or under a
-----
Note executed by such Borrower shall be made, in accordance with Section 2.12,
------------
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of Lender, taxes that are imposed on its
---------
net income by the United States or any state thereof and taxes that are imposed
on its net income (and franchise taxes imposed in lieu thereof) by the state or
foreign jurisdiction under the laws of which Lender is organized or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If any
-----
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note executed by such Borrower to Lender, (i)
the sum payable by such Borrower shall be increased as may be necessary so that,
after such Borrower and Lender have made all required deductions (including
deductions applicable to additional sums payable under this Section 2.12),
------------
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make all such deductions, and
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
19
<PAGE>
(b) In addition, each Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Note executed by such Borrower or
from the execution, delivery or registration of, performance under, or otherwise
with respect to, this Agreement or the Note executed by such Borrower
(hereinafter referred to as "Other Taxes").
-----------
(c) Each Borrower shall jointly and severally indemnify Lender for and
hold it harmless against the full amount of Taxes and Other Taxes, and for the
full amount of taxes of any kind imposed by any jurisdiction on amounts payable
under this section imposed on or paid by Lender and any liability (including
penalties, additions to tax, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 30 days from the date
Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to Lender, at its address referred to above, the original or a
certified copy of a receipt evidencing such payment.
(e) In the event that Lender determines in its reasonable discretion,
that it has actually and finally realized a refund of or credit for taxes
withheld or paid pursuant to this section, which credit or refund is
identifiable by Lender as being a result of taxes withheld in connection with
sums payable hereunder or under any other Loan Document, Lender shall promptly
notify such Borrower and shall remit to such Borrower, the amount of such refund
or credit allocable to payments made hereunder or under the other Loan
Documents; provided, however, that in the event of any subsequent disallowance
-------- -------
of any such refund or credit on account of which Lender has made a payment
pursuant to this paragraph, the amount so disallowed shall be deemed to be a Tax
(notwithstanding any exclusions in the definition of "Taxes") for which Lender
-----
shall be entitled to indemnification under of this section, but only to the
extent of any payment by such Lender pursuant to this paragraph.
ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT
--------------------------------------------
3.01. Grant of Security Interest. As security for the Obligations, in the
--------------------------
case of the Domestic Borrowers, and for the Foreign Borrower Obligations in the
case of the Foreign Borrowers, each Borrower (as debtor) hereby assigns to
Lender as collateral, and grants to Lender (as secured party) a continuing
security interest in and to, all of Borrower's right, title and interest in and
to the following kinds and types of property, whether now owned or hereafter
acquired or arising, wherever located, together with all substitutions therefor
and all accessions, replacements and renewals thereof, and in all proceeds and
products thereof (collectively, the "Collateral"):
----------
(a) All NTI Equipment financed or refinanced with proceeds of an
Advance and all Vendor Equipment financed or refinanced with proceeds of an
Advance, and in each case
20
<PAGE>
any and all additions, substitutions, and replacements to or of any of the
foregoing, together with all attachments thereto (other than attachments
(i) not financed or refinanced with proceeds of an Advance or which are not
required to be attached thereto by the terms of this Loan Agreement, and
(ii) which are not an integral part of the Collateral, and are severable
from the Collateral without damaging the functionality or value of the
remaining Collateral), and all components, parts, improvements, upgrades,
and accessions installed thereon or affixed thereto, including installation
services provided by NTI or any other Vendor in connection therewith
(collectively, "Equipment") and each Borrower's rights under each NTI
---------
Purchase Agreement and each Vendor Purchase Agreement relating to such
Equipment;
(b) All general intangibles and intangible property (including all
contracts and contract rights) constituting part of, or provided by or
through NTI or any Vendor in connection with, the Equipment that are
necessary for the proper operation of the Equipment, including without
limitation licenses, license rights, rights in intellectual property,
Software, Software Licenses, computer programming (including source codes,
object codes and all other embodiments of computer programming or
information), insurance proceeds and amounts due under insurance policies,
refunds, warranties and indemnification rights, and all amounts owed at any
time to each Borrower by Lender or NTI or by a Vendor in connection with a
Vendor Purchase Agreement relating to Equipment (collectively, "General
-------
Intangibles"); and
-----------
(c) All proceeds and products of any of the foregoing, including
without limitation (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to each Borrower from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to each Borrower from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of governmental authority), and
(iii) any and all cash proceeds and non-cash proceeds in the form of
equipment, inventory, contracts, accounts, general intangibles, chattel
paper, documents, instruments, securities, or other proceeds (collectively,
"Proceeds").
--------
3.02. Priority of Security Interests. The security interests granted by
------------------------------
each Borrower to Lender are and shall be continuing and indefeasible first-
priority security interests in the Collateral, subject to no Liens except for
Liens permitted under Section 8.01 hereof.
------------
3.03. Further Documentation; Pledge of Instruments. At any time and from
--------------------------------------------
time to time, upon the written request of Lender, and at the sole expense of the
applicable Borrowers, each Borrower shall promptly execute, deliver and record
any documents, instruments, agreements and amendments, and take all such further
action, as Lender may reasonably deem desirable in obtaining the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing statements or amendments under
the UCC. Each Borrower
21
<PAGE>
also hereby authorizes Lender to file any such financing statement or amendment
thereto, without the signature of Borrower, or with a copy or telecopy of the
Borrower's signature, to the extent permitted by applicable law, or to execute
any financing statement or amendment thereof on behalf of the Borrower as the
Borrower's attorney-in-fact. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any promissory note or
other instrument or any certificated securities, such note, instrument or
certificate shall be immediately pledged and delivered to Lender hereunder, duly
endorsed in a manner satisfactory to Lender.
3.04. Further Identification of Collateral. Each Borrower shall furnish
------------------------------------
to Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Lender may reasonably request, all in reasonable detail.
3.05. Remedies. Lender shall have all the rights and remedies of a
--------
secured party under the UCC, and shall be entitled to exercise any and all
remedies available under Article 9 hereof or otherwise available at law or in
---------
equity upon the occurrence of an Event of Default.
3.06. Standard of Care. Lender shall be deemed to have exercised
----------------
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as any Borrower requests in
writing, but Lender's failure to comply with any such request shall not of
itself be deemed a failure to exercise reasonable care, and no failure of Lender
to preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by a Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
3.07. Advances to Protect Collateral. All insurance expense and all
------------------------------
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral (including, without limitation, all rent payable by
the Borrowers to any landlord of any premises where any of the Collateral may be
located), and, any and all taxes shall be borne and paid by the Borrowers.
Lender may (but shall not be obligated to) make advances to preserve, protect or
obtain any of the Collateral, including advances to cure defaults under any
lease agreements for Sites or advances to pay taxes, insurance and the like, and
all such advances shall become part of the Obligations owing to Lender hereunder
and shall be payable to Lender on demand, with interest thereon from the date of
such advance until paid at the Default Rate in effect on the date of such
advance.
3.08. License to Use. Lender is hereby granted a license or other right
--------------
to use, after the occurrence of an Event of Default, without charge, in
advertising for the sole purpose of the sale and selling any Collateral, each
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any tangible or
intangible property or rights of a similar nature, as it pertains to the
Collateral, and each Borrower's rights under all licenses and franchise
agreements with respect to the Collateral shall inure to Lender's benefit.
22
<PAGE>
3.09. Collateral Assignment of NTI Purchase Agreement. (a) On the Closing
-----------------------------------------------
Date, the Borrowers shall assign to the Lender, as additional collateral
security, all of the Borrowers' right, title and interest in and to the NTI
Purchase Agreement pursuant to the form of Collateral Assignment of Purchase
Agreement attached as Exhibit I to this Agreement and shall obtain the consent
---------
of NTI to that assignment pursuant to the form of Consent to Collateral
Assignment of Purchase Agreement attached as Exhibit J to this Agreement. The
---------
Borrowers shall make future collateral assignments to the Lender of any
additional purchase agreements subsequently entered into with NTI and shall
deliver consents to the Lender from NTI for those subsequent assignments within
10 business days after the effective date of each subsequent purchase agreement
using substantially the same forms as attached as exhibits to this Agreement.
(b) The Borrowers shall make collateral assignments to the Lender of
each "co-locate" agreement, arrangement or other understanding or right relating
to or providing for the use by a Borrower of a Co-Location Site at which
Collateral is located or with respect to which Advances hereunder have financed
or refinanced the construction, buildout or equipping thereof; provided,
--------
however, such collateral assignments shall expressly provide that such
- -------
agreements shall be enforceable only to the extent that such co-location
agreements do not prohibit such assignment to be effected except upon the
consent of the counter-party to such agreement and the execution of such
collateral assignment would not constitute a breach (or an event that, upon
notice or the passage of time, or both, would constitute a breach) of such co-
location agreement.
3.10 Priority of Security Interests and Liens on Equipment Outside United
--------------------------------------------------------------------
States. As a condition to any Advance by Lender to a Borrower to finance the
- ------
acquisition of NTI Equipment to be located outside the United States, such
Borrower shall (i) deliver a list identifying all NTI Equipment and specifying
where in such country such NTI Equipment will be located, (ii) at the sole
expense of such Borrower, execute, deliver and record any documents,
instruments, agreements and amendments, and take all such further action as
Lender may reasonably deem desirable, to grant and perfect a security interest
and/or lien on the Collateral in favor of Lender under the laws of such country
where such NTI Equipment will be located, which security interest and/or lien
will be enforceable against the Borrower and third parties in accordance with
its terms, and subject to no other liens or security interest other than
Permitted Encumbrances, and (iii) deliver an opinion of counsel in favor of
Lender, in form and substance to the reasonable satisfaction of the Lender,
confirming that (x) all steps have been taken to grant and perfect the security
interest and/or lien in such Collateral in favor of Lender which is enforceable
against the Borrower and third parties in accordance with its terms, subject to
no other liens or security interests, and (y) compliance with all regulatory
requirements in such jurisdiction for the installation and operation of the
Collateral in such jurisdiction and the right of Lender to exercise foreclosure
or repossession remedies without the necessity of regulatory approval or
licensing.
23
<PAGE>
ARTICLE 4: REPRESENTATIONS AND WARRANTIES
-----------------------------------------
Each Borrower hereby represents and warrants to Lender as follows:
4.01. Organization and Qualification. BNH and each of its Subsidiaries is
------------------------------
duly organized, validly existing and in good standing as a corporation under the
laws of its state of organization. BNH and each of its Subsidiaries is duly
qualified to do business and in good standing in each jurisdiction in which the
failure to receive or retain such qualification would have a Material Adverse
Effect.
4.02. Authority and Authorization. BNH and each of its Subsidiaries has
---------------------------
all requisite corporate right, power, authority and legal right to execute and
deliver and perform its obligations under this Agreement, to make the borrowings
provided for herein, and to execute and deliver and to perform its obligations
under each Note. BNH's and each Subsidiary's execution, delivery and
performance of the Basic Agreements have been duly and validly authorized by all
necessary corporate proceedings on the part of BNH and each Subsidiary.
4.03. Execution and Binding Effect. This Agreement, each Note, and all
----------------------------
other Basic Agreements have been or will be duly and validly executed and
delivered by BNH and each of its Subsidiaries, and constitute or, when executed
and delivered will constitute, the legal, valid and binding obligations of BNH
and each of its Subsidiaries enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other laws affecting creditors'
rights generally.
4.04. Governmental Authorizations. Except for the consents identified on
---------------------------
Schedule 4.04 hereto (the "Required Consents"), no authorization, consent,
- ------------- -----------------
approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority (other than (i) the filing of financing statements and continuation
statements and (ii) those that have otherwise been obtained or made on or prior
to the Initial Borrowing Date and which remain in full force and effect on the
Initial Borrowing Date) is or will be necessary in connection with execution and
delivery of this Agreement either, of the Notes, or any other Loan Documents by
BNH and each of its Subsidiaries, consummation of the transactions herein or
therein contemplated, performance of or compliance by BNH and each of its
Subsidiaries with the terms and conditions hereof or thereof or the legality,
validity and enforceability hereof or thereof.
4.05. Regulatory Authorizations. BNH and each of its Subsidiaries holds
-------------------------
all authorizations, permits and licenses required by the FCC or the PUC or any
Communications Law for the construction and operation of the System, and all
such Regulatory Authorizations are in full force and effect, are subject to no
further administrative or judicial review and are therefore final, except to the
extent described in Schedule 4.05. With respect to the Regulatory
-------------
Authorizations listed in Schedule 6.02, the Borrower will use its best efforts
-------------
to obtain those regulatory consents in the most expedient manner possible, but
in any event prior to the first anniversary of the Initial Borrowing
24
<PAGE>
Date. Lender will not by reason of the execution, delivery and performance
(other than the enforcement of remedies) of any of the Loan Documents, be
subject to the regulation or control of either the FCC or the PUC. The
Regulatory Authorizations are described on Schedule 4.05.
-------------
4.06. Material Agreement; Absence of Conflicts. The execution and
----------------------------------------
delivery of this Agreement, each Note, and the other Loan Documents; the
consummation of the transactions herein or therein contemplated; and the
performance of or compliance with the terms and conditions hereof or thereof by
BNH and each of its Subsidiaries will not (a) materially violate any applicable
Law; (b) conflict with or result in a material breach of or a default under the
Organizational Documents of BNH and each of its Subsidiaries or any agreement or
instrument to which BNH or any of its Subsidiaries is a party or by which BNH,
any of its Subsidiaries, or their properties are bound; or (c) result in the
creation or imposition of any Lien upon any property (now owned or hereafter
acquired) of BNH or any of its Subsidiaries except as otherwise contemplated by
this Agreement.
4.07. No Restrictions. BNH and each of its Subsidiaries is not a party or
---------------
subject to any contract, agreement, or restriction in its Organizational
Documents that materially and adversely affects its business or the use or
ownership of any of its properties or operation of its business. BNH and each
of its Subsidiaries is not a party or subject to any contract or agreement which
restricts its right or ability to incur Indebtedness, other than as set forth on
Schedule 4.07, none of which prohibit BNH's or any of its Subsidiaries'
- -------------
execution of or compliance with this Agreement. BNH and each of its Subsidiaries
has not agreed or consented to cause or permit in the future (upon the happening
of a contingency or otherwise) any of the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien that is not a Permitted Encumbrance.
4.08. Financial Statements. BNH has furnished to Lender the most recent
--------------------
annual or quarterly financial statements of BNH, certified by a Responsible
Officer of BNH, including balance sheets and related statements of income and
retained earnings and changes in financial position, as described on Schedule
--------
4.08 hereof. Such financial statements (including the notes thereto) present
- ----
fairly the financial condition of BNH on a consolidated basis as of the end of
such fiscal period and the results of its operations and the changes in its
financial position for the fiscal period then ended, all in conformity with GAAP
applied on a basis consistent with that of the preceding fiscal period. Any
projections and pro forma financial statements delivered by BNH to Lender were
prepared in good faith, based on reasonable assumptions, including without
limitation, the cost of capital.
4.09. Financial Accounting Practices. BNH and each of its Subsidiaries
------------------------------
has made and kept books, records and accounts which, in reasonable detail,
accurately and fairly reflect its respective transactions and dispositions of
its assets, and BNH and each of its Subsidiaries shall maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP and (ii) to maintain
accountability
25
<PAGE>
for assets, (c) access to assets is permitted only in accordance with
management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
4.10. Accurate and Complete Disclosure. No representation or warranty
--------------------------------
made by any Borrower under this Agreement and no statement made by any Borrower
in any financial statement, certificate, report, exhibit or document furnished
by the Borrower to Lender pursuant to or in connection with this Agreement
(including without limitation any filings with the Securities Exchange
Commission, the FCC or the PUC) is or was false or misleading as of the date
made in any material respect (including by omission of material information
necessary to make such representation, warranty or statement not misleading).
There are no facts that evidence or create a Material Adverse Effect, or, so far
as any Borrower can now foresee, will evidence or create a Material Adverse
Effect, which has not been set forth in the financial statements referred to in
Section 4.08 hereof or otherwise disclosed in writing to Lender prior to the
- ------------
First Borrowing Date.
4.11. No Event of Default; Compliance with Material Agreements. No event
--------------------------------------------------------
has occurred and is continuing and no condition exists which constitutes a
Default or an Event of Default after giving effect to the Advance to be made on
the First Borrowing Date. As of the date hereof, BNH and each of its
Subsidiaries is not in violation of any term of its material agreements or
instruments to which it is a party or by which it or its properties is bound.
4.12. Litigation. Except as set forth in Schedule 4.12, there is no
---------- -------------
pending action, suit or threatened proceeding by or before any Governmental
Authority against or affecting BNH, any of its Subsidiaries, or any of their
properties, rights or licenses which if adversely decided would have a Material
Adverse Effect.
4.13. Rights to Property; Intellectual Property. BNH and each of its
-----------------------------------------
Subsidiaries, as applicable, has good and marketable title, subject only to the
Permitted Encumbrances, to the Collateral and to all personal and real property
purported to be owned by it as reflected in the most recent balance sheet
referred to in Section 4.08 hereof (except as sold or otherwise disposed of in
------------
the ordinary course of business as no longer used or useful in the conduct of
the business). BNH and each of its Subsidiaries, as applicable, owns or
possesses the right to use all patents, trademarks, service marks, trade names,
copyrights, know-how, franchises, software and software licenses necessary for
the operation of its business, free from burdensome restrictions.
4.14. Financial Condition. BNH's financial condition is accurately
-------------------
described in the Certificate of Financial Condition executed by BNH pursuant
hereto.
4.15. Taxes. BNH's federal tax identification number is set forth on
-----
Schedule 1 hereto. All tax returns required to be filed by BNH have been
- ----------
properly prepared, executed and filed, and all material taxes, assessments, fees
and other governmental charges upon BNH, each of its Subsidiaries, or upon any
of their respective properties, incomes, sales or franchises which are shown to
be due and payable thereon have been paid, other than taxes or assessments the
validity or amount
26
<PAGE>
of which BNH or any of its Subsidiaries is contesting in good faith. The
reserves and provisions for taxes on the books of BNH and each of its
Subsidiaries are adequate for all open years and for its current fiscal period.
4.16. No Material Adverse Change. Since the date of the financial
--------------------------
statements referenced in Section 4.08, there has been no Material Adverse
------------
Change.
4.17. No Regulatory Event. No Regulatory Event has occurred and is
-------------------
continuing.
4.18. Trade Relations. There exists no actual or threatened termination,
---------------
cancellation or limitation of, or any modification or change in, the business
relationship between BNH or any of its Subsidiaries and any Carrier, any labor
organizations, any customer or any group thereof whose agreements with BNH or
any of its Subsidiaries or use of the System individually or in the aggregate
are material to the business of BNH and its Subsidiaries, or with any material
Supplier, and there exists no present condition or state of facts or
circumstances which would have a Material Adverse Effect or prevent BNH and each
of the Subsidiaries from conducting its business after the consummation of the
transaction contemplated by this Agreement.
4.19. No Brokerage Fees. No brokerage or other fee, commission or
-----------------
compensation is to be paid by BNH or any of its Subsidiaries to any Person in
connection with the Loans to be made hereunder. Each Borrower hereby indemnifies
Lender against any claims brought against Lender for brokerage fees or
commissions of any Person based on an agreement with BNH or any of its
Subsidiaries and agrees to pay all expenses incurred by Lender in connection
with the defense of any action or proceeding brought to collect any such
brokerage fees or commissions.
4.20. Margin Stock; Regulation U. BNH or any of its Subsidiaries is not
--------------------------
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock. The
making of the Advances and the use of the proceeds thereof will not violate
Regulations G, U or X of the Board of Governors of the Federal Reserve System.
4.21. Investment Company; Public Utility Holding Company. BNH or any of
--------------------------------------------------
its Subsidiaries 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, or a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.22. Personal Holding Company; Subchapter S. BNH is not a "personal
--------------------------------------
holding company" as defined in Section 542 of the Code, and BNH is not a
"Subchapter S" corporation within the meaning of the Code.
27
<PAGE>
4.23. ERISA. (i) With respect to any Plan, there is no Reportable Event
-----
currently under consideration by the PBGC which may reasonably result in any
material liability to the PBGC with respect to any Plan, (ii) no Plan has been
terminated, (iii) no trustee has been appointed by any United States District
Court to administer any Plan, (iv) the PBGC has not instituted proceedings to
terminate any Plan or to appoint a trustee to administer any such Plan, (v)
neither BNH nor any Affiliate has withdrawn, completely or partially, from any
Plan and (vi) neither BNH nor any Affiliate has incurred secondary liability for
withdrawal liability payments under any Plan.
4.24. Environmental Warranties. BNH and each of its Subsidiaries is in
------------------------
compliance with all Environmental Laws applicable to BNH, each of its
Subsidiaries, or its business or to the real or personal property owned, leased
or operated by BNH and each of its Subsidiaries. BNH and each of its
Subsidiaries has not received notice of, and is not aware of, any violations or
alleged violations, or any liability or asserted liability, under any such
Environmental Laws, with respect to BNH, any of its Subsidiaries, or their
business or properties.
4.25. Security Interests. The provisions of Article 3 hereof are effective
------------------ ---------
to create in favor of Lender a legal, valid and enforceable Lien on or security
interest in all of the Collateral, and, when the recordings and filings
described on Schedule 4.25 hereto have been effected in the public offices
-------------
listed on said Schedule 4.25, this Agreement will create a perfected first-
-------------
priority security interest in all right, title, estate and interest of BNH and
each of its Subsidiaries in the Collateral, and subject to no other Liens except
for Permitted Encumbrances. All action necessary or desirable to protect and
perfect such security interest in each item of the Collateral will have been
duly taken prior to the First Borrowing Date. The recordings and filings shown
on said Schedule 4.25 are all the actions necessary or advisable in order to
-------------
establish, protect and perfect the interest of Lender in the Collateral.
4.26. Place of Business. The chief executive offices of BNH and each of
-----------------
its Subsidiaries which are Borrowers are identified on Schedule 4.26 hereto.
-------------
BNH and each of its Subsidiaries' principal place of business in the state(s)
where the Equipment is located is identified on Schedule 4.26 hereto. BNH's and
-------------
each of its Subsidiaries' records concerning the Collateral are kept at one or
both of these addresses.
4.27. Location of Collateral. The Collateral is and will be kept at the
----------------------
locations identified on Schedule 4.26 hereto, or for subsequently acquired
-------------
Equipment, on the Borrowing Certificate pursuant to which Advances financing
such Equipment are made, or such other locations as may be permitted under
Section 8.12.
- ------------
4.28. Clear Title To Collateral. Subject to Article 5 of the NTI Purchase
-------------------------
Agreement, BNH or each of its Subsidiaries, as applicable, is the sole owner of
each item of the Collateral, having good and marketable title thereto, free and
clear of any and all Liens, claims, or rights of others, except for the security
interest granted herein to Lender and the other Permitted Encumbrances.
28
<PAGE>
4.29. Assumed Names. Except as set forth on Schedule 4.29 hereto, BNH or
------------- -------------
any of its Subsidiaries does not conduct business under any assumed names or
trade names, and has not conducted business under any other names, or any
assumed names or trade names, at any time during the six months immediately
prior to the date hereof.
4.30. Transactions with Affiliates. No Affiliate and no officer or
----------------------------
director of BNH or any of its Subsidiaries or any individual related by blood,
marriage, adoption or otherwise to any such officer or director, or any Person
in which any such officer, director or individual related thereto owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with BNH or any of its Subsidiaries or has any material interest in
any material property used by BNH or any of its Subsidiaries, except as set
forth on Schedule 4.30 hereto.
-------------
4.31. NTI Purchase Agreement. The NTI Purchase Agreement for NTI
----------------------
Equipment already acquired has been duly executed and delivered by Community
Networks, Inc., and NTI, is in full force and effect, and a true, correct and
complete copy thereof (including all annexes, attachments and amendments
thereto) has been delivered to Lender, and there are no other side letters,
waivers or other agreements affecting the terms thereof.
ARTICLE 5: CONDITIONS OF CLOSING
--------------------------------
On or before the Closing Date, the following conditions shall have been
satisfied:
5.01. Closing Certificates. A certificate of the applicable Borrowers
--------------------
signed by a duly authorized Responsible Officer, certifying as to (i) true
copies of Organizational Documents of each Borrower in effect on such date; (ii)
true copies of all corporate action taken by each Borrower relative to this
Agreement, each Note, and the other Loan Documents; (iii) the names, true
signatures and incumbency of the Responsible Officers of each Borrower
authorized to execute and deliver this Agreement, each Note, and the other Loan
Documents; (iv) a Certificate of Good Standing (or equivalent certificate) for
each Borrower duly issued by the Secretary of State of each state in which such
Borrower currently does business; and (v) such other matters as Lender shall
reasonably request.
5.02. Opinions of Counsel. Lender shall have received the following
-------------------
opinions, all dated as of the Closing Date and in form and substance
satisfactory to Lender:
(a) A written opinion of counsel to each Borrower, substantially in
the form of Exhibit C hereto;
---------
(b) A written opinion of regulatory counsel for each Borrower,
substantially in the form of Exhibit D hereto; and
---------
29
<PAGE>
5.03. Closing Documents. Lender shall have received the following
-----------------
documents, all in form and substance satisfactory to Lender:
(a) Agreement. This Agreement, duly executed by each Borrower;
---------
(b) Notes. Each Note, duly executed by the applicable Borrowers;
-----
(c) Financing Statements. All UCC-1 financing statements
--------------------
necessary to perfect the Liens granted hereby, each duly executed by the
applicable Borrowers, and duly recorded in all the offices identified on
Schedule 4.25 hereto;
-------------
(d) Collateral Assignment of Purchase Agreement. The Collateral
-------------------------------------------
Assignment of Purchase Agreement, duly executed by the applicable
Borrowers, and the Consent to Collateral Assignment of Purchase Agreement,
duly executed by NTI;
(e) Insurance. Policies and certificates of insurance required by
---------
Section 7.07, accompanied by evidence of the payment of the premiums
------------
therefor;
(f) Financial Statements. The financial statements described in
--------------------
Section 4.08 hereof;
------------
(g) Balance Sheet. A balance sheet of BNH, dated as of the end of
-------------
month preceding the Closing Date, certified by a Responsible Officer as
fairly presenting the financial condition of BNH.
(h) Certificate of Financial Condition. A Certificate of Financial
----------------------------------
Condition, duly executed by a Responsible Officer of BNH.
(i) Pre-Closing Lien Searches. Lien searches from all jurisdictions
-------------------------
reasonably determined by Lender to be appropriate, effective as of a date
reasonably close to the Closing Date, reflecting no other Liens (other than
Permitted Encumbrances) on any of the Collateral.
ARTICLE 6: CONDITIONS OF LENDING
--------------------------------
6.01. Conditions for Initial Advance. On or before the First Borrowing
------------------------------
Date, the following conditions shall have been met to Lender's satisfaction:
(a) Post-Closing Lien Searches. Lender shall have received
--------------------------
satisfactory results of Lien searches in all jurisdictions reasonably
determined by Lender to be appropriate, reflecting the filing of financing
statements in favor of Lender pursuant hereto and no other Liens other than
Permitted Encumbrances.
30
<PAGE>
(b) Required Consents. Lender shall have received satisfactory
-----------------
evidence of Borrowers' obtaining the Required Consents.
6.02. Conditions for All Advances. The obligation of Lender to make any
---------------------------
Advance hereunder is subject to each Borrower's performance of its obligations
hereunder on or before the date of such Advance, and to the satisfaction of the
following further conditions on or before the Borrowing Date for any Advance,
including the first Advance:
(a) Filings, Registrations and Recordings. Any financing statements
-------------------------------------
or other recordings required hereunder shall have been properly filed,
registered or recorded in each office in each jurisdiction required in
order to create in favor of Lender a perfected first-priority Lien on the
Collateral, subject to no other Lien; Lender shall have received
acknowledgment copies of all such filings, registrations and recordations
stamped by the appropriate filing officer; and Lender shall have received
results of searches of such filing offices, and satisfactory evidence that
any other Liens (other than Permitted Encumbrances) on the Collateral have
been duly released, that all necessary filing fees, recording fees, taxes
and other expenses related to such filings, registrations and recordings
have been paid in full.
(b) Borrowing Certificate. Lender shall have received a duly
---------------------
executed Borrowing Certificate in the form of Exhibit B, including a
---------
detailed itemization of all costs of goods and services to be paid with the
proceeds of the Advance and accompanied by supporting documentation
satisfactory to Lender.
(c) Reporting Requirements. Borrowers shall have provided Lender
----------------------
with all relevant reports and information required under Article 7 hereof.
---------
(d) No Regulatory Event. No Regulatory Event (in either Borrowers'
-------------------
or Lender's reasonable determination) shall have occurred and be
continuing or would exist upon the consummation of transactions to occur on
such Borrowing Date.
(e) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing or would exist upon the consummation
of transactions to occur on such Borrowing Date.
(f) No Material Adverse Change. No Material Adverse Change shall
--------------------------
have occurred, or would occur after giving effect to such Advance, since
the date of the last financial statements delivered to Lender pursuant to
Section 4.08 or 7.01 hereof.
------------ ----
(g) Representations and Warranties. The representations and
------------------------------
warranties contained in Article 4 hereof shall be true on and as of the
---------
date of each such Advance hereunder.
31
<PAGE>
(h) Lender's Expenses. All closing costs, and other Lender's
-----------------
Expenses shall have been paid in full, (or shall be paid first from such
Advance as provided in Section 2.03 hereof).
------------
(i) Opinions. Lender shall have received from each Borrower such
--------
opinions of counsel for the Borrower as may be reasonably acceptable to
Lender in form and substance with respect to the perfection and priority of
the Liens created by the Security Documents in each such jurisdictional
location.
(j) Details, Proceedings and Documents. All legal details and
----------------------------------
proceedings in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory to Lender and Lender shall have
received all such counterpart originals or certified or other copies of
such documents and proceedings in connection with such transactions, in
form and substance reasonably satisfactory to Lender, as Lender may from
time to time request.
(k) Consents. Lender shall have received Consents duly executed by
--------
all parties and in form satisfactory to Lender.
(l) Fees. Lender shall have received the fee(s) described in
----
Section 2.09 hereof.
------------
(m) Purchase Agreements. Lender shall have received a copy of each
-------------------
executed NTI Purchase Agreement and/or Vendor Purchase Agreement with
respect to which proceeds of an Advance shall be used to acquire NTI
Equipment or other Equipment, and Lender's shall have reviewed and approved
the Equipment to be acquired with proceeds of an Advance, together with the
collateral assignment and consent specified in Section 3.10 of this
------------
Agreement.
(n) Post-Closing Items. The post-closing items described on
------------------
Schedule 6.02 hereto, if any, shall have been completed in the time
-------------
permitted, and each Borrower shall have provided Lender with satisfactory
evidence thereof.
6.03. Affirmation of Representations and Warranties. Any Borrowing
---------------------------------------------
Certificate or other request for any Advance hereunder shall constitute a
representation and warranty that (a) the representations and warranties
contained in Article 4 hereof are true and correct on and as of the date of such
---------
request with the same effect as though made on and as of the date of such
request and (b) on the date of such request no Default or Event of Default has
occurred and is continuing or exists or will occur or exist after giving effect
to such Advance (for this purpose such Advance being deemed to have been made on
the date of such request). Failure of Lender to receive notice from a Borrower
to the contrary before such Advance is made shall constitute a further
representation and warranty by the Borrower that (x) the representations and
warranties of the Borrower contained in the first sentence of this Section 6.03
------------
are true and correct on and as of the date of such Advance with the
32
<PAGE>
same effect as though made on and as of the date of such Advance and (y) on the
date of the Advance no Default or Event of Default has occurred and is
continuing or exists or will occur or exist after giving effect to such Advance.
6.04. Deadline for Funding Conditions. Lender shall have no obligation to
-------------------------------
make any Advances hereunder if all of the conditions set forth in Article 5 and
---------
in Sections 6.01 and 6.02 hereof have not been fully satisfied, and the first
------------- ----
Advance made hereunder, within the period of twelve (12) calendar months
following the Closing Date.
ARTICLE 7: AFFIRMATIVE COVENANTS
--------------------------------
Each Borrower hereby agrees that as long as the commitment hereunder
remains in effect, either Note remains outstanding or unpaid, or any other
amount is owing to Lender hereunder or under any of the Loan Documents, each
Borrower shall keep and perform fully each and all of the following covenants:
7.01. Reporting and Information Requirements.
--------------------------------------
(a) Annual Audit Reports. As soon as practicable, and in any event
--------------------
within one hundred twenty (120) days after the close of each fiscal year of
BNH, BNH shall furnish or cause to be furnished to Lender audited
statements of income, statements of cash flow and retained earnings for
such fiscal year and BNH's balance sheet as of the close of such fiscal
year, and notes to each, all in reasonable detail, and beginning with BNH's
second full fiscal year setting forth in comparative form the corresponding
figures for the preceding fiscal year, with such statements and balance
sheet to be certified without qualification by independent certified public
accountants of recognized regional or national standing selected by BNH and
reasonably satisfactory to Lender.
(b) Quarterly Reports. Within forty-five (45) days after the end of
-----------------
each fiscal quarter, BNH shall furnish to Lender (i) unaudited consolidated
statements of income, statements of cash flow and retained earnings for BNH
for such quarter and for the period from the beginning of BNH's then
current fiscal year to the end of such quarter, and an unaudited
consolidated balance sheet of BNH as of the end of such quarter, all in
reasonable detail and certified by a Responsible Officer of BNH as
presenting fairly the financial position of BNH as of the end of such
quarter and the results of its operations and the changes in its financial
position for such quarter, in conformity with GAAP (except for accompanying
notes thereto), subject to year-end audit adjustments, and (ii) upon
Lender's request, an aging of accounts payable and accounts receivable.
(c) Compliance Certificates. Within thirty (30) days after the end
-----------------------
of each fiscal quarter, BNH shall deliver to Lender a certificate dated as
of the end of such fiscal quarter,
33
<PAGE>
signed on behalf of BNH by a Responsible Officer of BNH (i) stating that as
of the date thereof no Event of Default has occurred and is continuing or
exists, or if an Event of Default has occurred and is continuing or exists,
specifying in detail the nature and period of existence thereof and any
action with respect thereto taken or contemplated to be taken by BNH and/or
any of its Subsidiaries; (ii) stating that the signer has personally
reviewed this Agreement and that such certificate is based on an
examination made by or under the supervision of the signer sufficient to
assure that such certificate is accurate; and (iii) calculating and
certifying BNH's compliance with the financial covenants set forth in
Section 7.15 hereof.
------------
(d) Accountants' Certificate. Each set of year-end audited
------------------------
consolidated statements and balance sheet delivered pursuant to Section
-------
7.01(a) hereof shall be accompanied by, or shall contain within, a
-------
certificate or report dated the date of such statement and balance sheet by
the accountants who certified such statements and balance sheet stating in
substance that they have reviewed this Agreement and that in making the
examination necessary for their certification of such statements and
balance sheet they did not become aware of any Default, or if they did
become so aware, such certificate or report shall state the nature and
period of existence thereof.
(e) Projections. If requested by Lender, BNH shall deliver to Lender
-----------
within thirty (30) days prior to the beginning of each calendar year
projections of its anticipated income, expenses, cash flow, assets and
liabilities for each month of such calendar year, prepared in good faith
and in a manner and format consistent with other financial statements
provided by BNH to Lender. Such projections shall present fairly the
anticipated financial condition of BNH and shall be certified by a
Responsible Officer of BNH. Upon Lender's request, or following any
material change in BNH's financial condition or business, such reports
shall be provided to Lender quarterly, within thirty (30) days prior to the
beginning of each Calendar Quarter.
(f) Other Reports and Information. Promptly upon their becoming
-----------------------------
available to BNH, BNH shall deliver to Lender copies of (i) all regular or
special reports or effective registration statements which BNH or any of
its Subsidiaries shall file with Governmental Authorities, the FCC or the
PUC (or any successor thereto) or any securities exchange, (ii) financial
statements, material reports, and other information distributed by BNH or
any of its Subsidiaries to its creditors or the financial community in
general, and (iii) all press releases issued by or concerning BNH or the
System.
(g) Further Information. Each Borrower will promptly furnish to
-------------------
Lender such other information (including any report by independent
auditors) in such form as Lender may reasonably request.
34
<PAGE>
7.02. Other Notices. Promptly upon a Responsible Officer of a Borrower
-------------
becoming aware of any of the following, the Borrower shall give Lender notice
thereof, together with a written statement of a Responsible Officer of the
Borrower setting forth the details thereof and any action with respect thereto
taken or contemplated to be taken by the Borrower:
(a) a Default or Event of Default;
(b) any Material Adverse Change;
(c) a material default or breach by the Borrower under any other
contractual obligation to which it is a party or by which it or its
properties is bound, if the consequences of such breach of default are
material to the business, operations or financial condition of the
Borrower;
(d) any event that the Borrower reasonably determines would constitute
a Regulatory Event;
(e) the commencement, existence or threat of any proceeding by or
before any Governmental Authority against the Borrower which, if adversely
decided, would have a Material Adverse Effect;
(f) the Borrower's receipt of any notice of violation of, or liability
under, any Environmental Laws affecting the Borrower or any of its
properties; or
(g) any Change in Control or any material change in the management of
the Borrower.
7.03. Notice of Pension-Related Events. Each Borrower shall promptly
--------------------------------
furnish Lender with written notice upon the receipt by the Borrower or the
administrator of any Plan of any notice, correspondence or other communication
from the PBGC, the IRS, the Secretary of Treasury, the Department of Labor, or
any other Person, as the case may be, relating to (i) any Reportable Event, (ii)
any funding deficiency with respect to any Plan, (iii) any liability, either
primary or secondary, with respect to complete or partial withdrawal from any
Plan, (iv) proceedings to terminate any Plan or (v) the appointment of a trustee
for any Plan. Such notice shall be accompanied by any pertinent documents
including, but not limited to, the relevant notice, correspondence or other
communication and a statement of a Responsible Officer of the Borrower
describing the event or the action taken and the reasons therefor.
7.04. Inspection Rights. Each Borrower shall upon reasonable notice
-----------------
permit such persons as Lender may designate to visit and inspect the Collateral
or any other properties of the Borrower, to examine its books and records and
take copies and extracts therefrom and discuss its respective affairs with its
officers, employees and independent engineers, in each case during normal
business
35
<PAGE>
hours and as often as Lender may reasonably request. Each Borrower hereby
authorizes such officers, employees, and independent engineers to discuss with
Lender the affairs of the Borrower.
7.05. Preservation of Corporate Existence and Qualification. Each
-----------------------------------------------------
Borrower shall maintain its existence, good standing and rights in full force
and effect in its jurisdiction of organization. Each Borrower shall qualify to
do business and remain qualified and in good standing and obtain all necessary
authorizations to do business in each jurisdiction in which failure to receive
or retain such would have a Material Adverse Effect.
7.06. Continuation of Business. Each Borrower shall continue to engage
------------------------
solely in the business described on Schedule 1 hereto, and shall acquire and
----------
maintain in full force and effect all rights, privileges, franchises and
licenses necessary for the operation and maintenance of the System (including,
without limitation any license or authorization required by the FCC or any PUC).
7.07. Insurance.
---------
(a) Each Borrower shall provide and maintain or cause to be maintained
at all times insurance in such forms and covering such risks and hazards
and in such amounts and with an insurance corporation with a Best rating of
"A" or above, licensed to do business in the states where the System and
the Borrower are located, as may be satisfactory to Lender, as shown on
Schedule 7.07 hereto, and otherwise as may be required by the Security
-------------
Documents.
(b) As soon as practicable following the Closing Date, each Borrower
shall cause (i) all liability insurance policies to name Lender as an
additional insured, (ii) all physical damage insurance policies to contain
a lender's or mortgagee's loss payable provision acceptable to Lender with
respect to the Collateral, (iii) all insurance policies to provide that no
assignment, cancellation, modification, reduction in amount or adverse
change in coverage thereof shall be effective until at least thirty (30)
days after receipt by Lender of written notice thereof, (iv) all insurance
policies to insure the interests of Lender with respect to the Collateral
regardless of any breach of or violation by any Borrower of any warranties,
declarations or conditions contained therein and (v) all insurance policies
to provide that Lender shall have no obligation or liability for premiums,
commissions, assessments or calls in connection with such insurance.
Lender shall be under no obligation to verify the adequacy or existence of
any insurance coverage. Each Borrower shall furnish Lender copies of, or
acceptable certificates with respect to, all such policies prior to the
Closing Date, and shall provide to Lender, at least thirty days prior to
each policy expiration date, evidence of the insurance being maintained by
the Borrower in compliance with this Section 7.07(b). Certificates for
---------------
insurance required under subsection (i) above shall be in ACORD Form 27
(attached hereto at Schedule 7.07(), and all certificates shall be
---------------
satisfactory in form and substance to Lender.
36
<PAGE>
(c) If the Collateral is partially or totally damaged or destroyed,
the applicable Borrower shall give prompt notice to Lender, and all
insurance proceeds, less the costs of collection thereof, shall be paid to
or retained by Lender. Settlements, adjustments or compromises of any
claims for loss, damage or destruction to the Collateral shall be made by
the Borrower and Lender as long as no Event of Default has occurred and is
continuing, and otherwise shall be made solely by Lender. Each Borrower
hereby authorizes and directs any affected insurance company to pay such
proceeds directly to Lender, and to rely on Lender's statement as to
whether an Event of Default has occurred. Each Borrower shall pay all
costs of collection of insurance proceeds payable on account of such damage
or destruction. If no Default or Event of Default has occurred and is
continuing on the date the Collateral is partially or totally damaged or
destroyed, Lender shall make available to the applicable Borrower the
proceeds of any physical damage insurance actually paid to Lender in
respect of such damage or destruction of the Collateral (after deducting
therefrom any sums retained by Lender in reimbursement for costs of
collection) to pay the cost of restoration, and the Borrower shall proceed
promptly with the work of restoration of the Collateral and shall pursue
the work of restoration diligently to completion. If any Default or Event
of Default has occurred and is continuing either on the date of such damage
or destruction or on the date such insurance proceeds are paid, or if any
Default or Event of Default shall occur prior to completion of such work of
restoration, then Lender, at its option, may apply such insurance proceeds
in payment of any of the Obligations, in such order as Lender may elect in
its sole discretion. Any insurance proceeds remaining after completion of
work or restoration shall, at Lender's election, be applied in accordance
with Section 2.04(c) hereof (but without prepayment premium), or paid over
---------------
to the applicable Borrower. Upon completion of any restoration, the
Borrower shall deliver to Lender a certificate stating that the restoration
has been duly completed and accounting for the use of any insurance
proceeds in such restoration.
7.08. Payment of Taxes, Charges, Claims and Current Liabilities. Each
---------------------------------------------------------
Borrower shall pay or discharge:
(a) on or prior to the date on which penalties thereto accrue, all
material taxes, assessments and other government charges or levies imposed
upon it or any of its properties or income (including such as may arise
under Section 4062, Section 4063 or Section 4064 of ERISA, or any similar
provision of law);
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, and other like persons
which could result in creation of a Lien upon any such property;
(c) on or prior to the date when due, all other lawful claims which,
if unpaid, might result in the creation of a Lien upon any such property
(other than Permitted Encumbrances) or which, if unpaid, might give rise to
a claim entitled to priority over
37
<PAGE>
general creditors of the Borrower in a case under Title 11 (Bankruptcy) of
the United States Code, as amended, or in any insolvency proceeding or
dissolution or winding-up involving the Borrower; and
(d) all other current liabilities so that none is overdue more than
sixty (60) days.
Notwithstanding the foregoing, each Borrower shall be entitled to contest
or appeal the requirements of any Law or Governmental Authority or the payment
of any tax, assessment, charge, levy or claim, or any judgment entered against
the Borrower (collectively, in this Section 7.08, the "requirements"), as long
------------ ------------
as (i) such requirements are being contested in good faith by appropriate
proceedings diligently conducted; (ii) the Borrower has given Lender written
notice of such requirements and the intent to contest them, with supporting
reasons for such contest, before the addition of any interest or penalties that
may accrue on such requirements; (iii) the Borrower maintains adequate cash
reserves and makes other appropriate provisions as may be required by GAAP to
provide for any liability arising from such requirements; (iv) the contesting
of, or failure to comply with, such requirements does not in any way jeopardize
the Borrower's ability or authority to operate all or any part of the Collateral
or the continuing priority of Lender's security interests in the Collateral;
(vi) the contesting of, or failure to comply with, such requirements does not
have a Material Adverse Effect; and (vii) any foreclosure, attachment,
execution, sale or similar proceeding against the Borrower or any of its
properties in connection with any such requirements is duly stayed by posting of
a bond or security deposit or by other action sufficient under applicable law to
stay such foreclosure, attachment, execution, sale or other proceedings.
7.09. Financial Accounting Practices. Each Borrower shall make and keep
------------------------------
books, records and accounts which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets and maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP and (ii) to maintain
accountability for assets, (c) access to assets is permitted only in accordance
with management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
7.10. Compliance with Laws. Each Borrower shall comply in all respects
--------------------
with all Laws applicable to the Borrower, provided that the Borrower shall not
be deemed to be in violation of this Section 7.10 as a result of any failure to
------------
comply which would not result in any liability or exposure to Lender or any
fines, penalties, injunctive relief or other civil or criminal liabilities
which, in the aggregate, would materially affect the business, operations or
financial condition of the Borrower or the ability of the Borrower to perform
its obligations under this Agreement or the applicable Note.
7.11. Use of Proceeds. Each Borrower shall use the proceeds of Advances
---------------
hereunder only as set forth in Section 2.01 hereof.
------------
38
<PAGE>
7.12. Government Authorizations; Regulatory Authorizations, Etc. Each
---------------------------------------------------------
Borrower shall at all times obtain and maintain in force all Regulatory
Authorizations and all other authorizations, permits, consents, approvals,
licenses, exemptions and other actions by, and all registrations,
qualifications, designations, declarations and other filings with, any
Governmental Authority necessary in connection with execution and delivery of
this Agreement, the applicable Note, the consummation of the transactions herein
or therein contemplated, the performance of or compliance with the terms and
conditions hereof or thereof, or to ensure the legality, validity and
enforceability hereof or thereof.
7.13. Contracts and Franchises. Each Borrower shall comply with all
------------------------
agreements or instruments to which it is a party or by which it or any of its
properties (now owned or hereafter acquired) may be subject or bound and shall
maintain any and all franchises it may have or hereafter acquire, provided that
the Borrower shall not be deemed to be in violation of this Section 7.13 as a
------------
result of any failure to comply with any agreement if such failure would not
have Material Adverse Effect.
7.14. Consents. Each Borrower shall use all reasonable efforts to obtain
--------
such Landlord's Consents, Mortgagee's Consents and other third party consents as
Lender shall reasonably request to protect its Liens and its access to the
Collateral.
7.15. Financial Covenants. BNH shall comply with the financial covenants
-------------------
set forth on Schedule 7.15 hereto.
-------------
7.16. Construction and Storage. The Collateral shall be installed and
------------------------
equipped in full compliance with the Requirements of Law affecting the
Collateral except to the extent a failure to so comply would not have a Material
Adverse Effect on the construction or operation of the Collateral. All
Equipment financed with the proceeds of the Loans shall be safeguarded and
stored until installed in appropriate storage facilities owned or leased by the
applicable Borrower. In the event of any cessation of construction for more
than fifteen (15) successive calendar days, the applicable Borrower shall make
adequate provision, reasonably acceptable to Lender, for the protection of all
materials stored on site against deterioration, loss or damage.
7.17. Upgrade Equipment. Each Borrower shall update the software
-----------------
customarily used in equipment of the same type as the Equipment within two
releases of the most current batch change supplement release. Each Borrower
shall maintain its Equipment in good working order in accordance with
established maintenance procedures such that the Equipment performs to published
specifications and upgrade its functionality to include batch change supplements
releases generally available to customers of NTI or the applicable Vendor, as
the case may be, and batch change supplements upgrades included in the original
purchase price of the Purchase Agreement in the form in effect on the date of
the Closing Date.
39
<PAGE>
7.18. Additional Subsidiaries. BNH shall cause each direct and indirect
-----------------------
Subsidiary formed or acquired after the date of this Agreement to become a
Borrower under this Agreement in conformity with the terms and conditions of
Section 2.11 of this Agreement.
ARTICLE 8: NEGATIVE COVENANTS
-----------------------------
Each Borrower hereby agrees that, so long as the Commitment hereunder
remains in effect, either of the Notes remains outstanding and unpaid, or any
other amount is owing to Lender hereunder or under any of the Loan Documents,
each Borrower shall not directly or indirectly without prior written consent of
Lender, do or permit to exist any of the following:
8.01. Restrictions on Additional Indebtedness. Create, incur, assume or
---------------------------------------
suffer to exist at any one time any Indebtedness in excess of $50,000 in the
aggregate except for (a) trade payables incurred in the ordinary course of
business, and (b) any Indebtedness described on Schedule 8.01 hereto.
-------------
8.02. Restrictions on Liens and Sale of Collateral. Create or suffer to
--------------------------------------------
exist any Lien on the Collateral or on any other property of a Borrower, or any
--------------------------------------
part thereof, whether superior or subordinate to the Lien of the Security
Documents, or assign, convey, sell or otherwise dispose of or encumber its
interest in the Collateral, or any part thereof (including, without limitation,
execution of any lease), nor permit any such action to be taken, except for the
following permitted dispositions and encumbrances (the "Permitted
---------
Encumbrances"): (i) the Lien created hereby; (ii) Liens for taxes not yet due,
- ------------
or which are being contested in good faith and by appropriate proceedings in
accordance with Section 7.08 hereof; (iii) carriers', warehousemen's,
------------
mechanics', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business which are overdue for a period not longer than
thirty (30) days or which are being contested in good faith and by appropriate
proceedings in accordance with Section 7.08 hereof; (iv) pledges or liens in
------------
connection with workers' compensation, unemployment insurance and other social
security legislation; (v) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business; (vi) easements, rights-of-way,
restrictions and other similar encumbrances that are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business of a
Borrower; (vii) judgment liens with respect to which execution has been stayed
within ten (10) days by appropriate judicial proceedings and the posting of
adequate security which may not be any of the Collateral; and (viii) specific
liens, if any, identified on Schedule 8.02 hereto. Any of the foregoing Liens
-------------
shall remain "Permitted Encumbrances" as long as they are being contested by
Borrower in compliance with Section 7.08 hereof.
------------
40
<PAGE>
8.03. Limitation on Contingent Obligations. Other than for Indebtedness of
------------------------------------
a Borrower, agree to, or assume, guarantee, endorse or otherwise in any way be
or become responsible or liable for, directly or indirectly, any Contingent
Obligation except for those created or contemplated by the Loan Documents.
8.04. Fees and Commissions.
--------------------
[INTENTIONALLY DELETED]
8.05. Prohibition of Mergers, Acquisitions, Name, Office or Business
--------------------------------------------------------------
Changes, Etc.
------------
(a) Enter into or become the subject of, any transaction of merger,
acquisition or consolidation or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all
or any substantial part of a Borrower's business or assets, whether now
owned or hereafter acquired, provided, however, that any Borrower may enter
into a transaction of merger, acquisition or consolidation with a
telecommunications company if such transaction is consistent with the
Business Plan, immediately before, and after giving effect to, the
consummation of such transaction, there is no Default or Event of Default
under any Loan Document, and such Borrower is the surviving entity of such
transaction.
(b) Change its name or corporate structure without giving Lender at
least ten (10) days advance written notice of such change, and previously
ensuring that any steps that Lender may deem necessary to continue the
perfection and priority of Lender's security interests in the Collateral
shall have been taken.
(c) Change the fiscal year end of the Borrower from December 31,
except with the prior written consent of Lender, which consent shall not be
unreasonably withheld.
(d) Amend, restate or otherwise modify, or violate any terms of, its
Organizational Documents in a manner adverse to Lenders without the prior
written consent of Lender.
(e) Become or agree to become a general or limited partner in any
general or limited partnership, or a member in a limited liability company
or a joint venturer in any joint venture, except that a Borrower may become
so involved in the aforementioned types of entities if such entity is, or
thereupon becomes, a Subsidiary of BNH and becomes a Borrower hereunder.
(f) Acquire or purchase substantially all of the stock, partnership,
membership or other ownership interests in, or substantially all of the
business, assets, customers or operations of, any other entity unless such
transaction is an acquisition consistent with the Business Plan.
41
<PAGE>
(g) Enter into any new business or make any material change in any of
Borrower's business objectives, purposes and operations from those
contemplated in the Business Plan.
8.06. Limitation on Equity Payments. Make any Equity Payment to any
-----------------------------
Person, except that, as long as no Default or Event of Default has occurred and
is continuing, or would be caused thereby, and if no other provision contained
herein will be violated by the disbursement of such Equity Payment, Borrowers
may make Equity Payments described on Schedule 8.06 hereto. Before making any
-------------
Equity Payment in accordance with this Section 8.06, a Borrower shall deliver to
------------
Lender a certificate of a Responsible Officer of such Borrower, setting forth in
detail the calculation supporting BNH's compliance with the financial covenants,
stating that no Material Adverse Change has occurred since the date of the
latest financial statement delivered pursuant to Section 7.01(a), and stating
---------------
that no Default or Event of Default has occurred and is continuing or will be
caused by such Equity Payment.
8.07. Limitation on Investments, Advances and Loans. Other than in the
---------------------------------------------
ordinary course of business or as set forth on Schedule 8.07 and in either case
-------------
only for a purpose consistent with the Business Plan, organize, create, acquire,
capitalize or own any Subsidiaries without Lender's prior written consent, or
make or commit to make any advance, loan, guarantee of any Indebtedness,
extension of credit or capital contribution to, or hold or invest in or purchase
or otherwise acquire any stock, bonds, notes, debentures or other securities of,
or make any other investment in, any Person including, without limitation, any
officers of any Borrower, any Affiliate of any Borrower or any Owner, or any
officers of any Affiliate of any Borrower except in the ordinary course of
business.
8.08. Capital Expenditures. Directly or indirectly make or commit to make
--------------------
any expenditure in respect of the purchase or other acquisition (including
installment purchases or capital leases) of fixed or capital assets, except for
expenditures in accordance with the Business Plan and normal replacements and
maintenance which are properly charged to current operations.
8.09. Limitation on Leases. Enter into any agreement, or be or become
--------------------
liable under any agreement, not in existence as of the date hereof and reflected
on BNH's financial statements, for the lease, hire or use of any real or
personal property in excess of $100,000 in the aggregate, including, without
limitation, capital or operating leases, except that a Borrower may, in the
ordinary course of business and on term standard in the industry, enter into
such leases or agreements if immediately before, and after giving effect to the
incurrence thereof BNH is in compliance with its financial covenants required by
Schedule 7.15.
- -------------
8.10. Transactions with Affiliates. Except as described in Schedule 4.30
---------------------------- -------------
and Schedule 8.07 hereto, enter into any transactions, including, without
-------------
limitation, any loans or advances, any repayment of loans or advances, or the
purchase, sale or exchange of property or the rendering of any services, with
any Affiliate, or enter into, assume or suffer to exist any employment or
42
<PAGE>
consulting contract with any Affiliate, or otherwise pay any fees or expenses
to, or reimburse or assume any obligation for the reimbursement of any expenses
incurred by, any Affiliate.
8.11. Termination of Purchase Agreement. Prior to the completion of the
---------------------------------
installation of the subject Equipment (i) fail to satisfy its purchase
obligations under the related Purchase Agreement or (ii) terminate the related
Purchase Agreement.
8.12. Removal of Collateral. Remove or permit the removal of any material
---------------------
part of the Collateral from the locations identified on Schedule 4.25, without
-------------
giving Lender thirty (30) days prior written notice of such move and ensuring
that any steps the Lender may deem necessary to continue the perfection and
priority of Lender's security interest in the Collateral shall have been taken.
8.13. Assumed Names. Transact or engage in business under any assumed
-------------
name, fictitious name, tradestyle or "d/b/a" except those identified on
Schedule 4.29.
- -------------
ARTICLE 9: EVENTS OF DEFAULT AND REMEDIES
-----------------------------------------
9.01. Events of Default. An Event of Default shall mean the occurrence or
-----------------
existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of Law):
(a) Payment Default. If a Borrower fails to pay any sum, whether of
---------------
principal or interest on a Note or any prepayment premiums, or any other
amount due hereunder or under a Note within five (5) Business Days after
such amount becomes due; or
(b) False Statement. If any statement, representation or warranty made
---------------
by a Borrower in any Loan Document or made in any financial statement,
certificate, report, exhibit or document furnished to Lender pursuant to
any Loan Document, proves to have been untrue, incomplete, false or
misleading in any material respect as of the time when made (including by
omission of material information necessary to make such representation,
warranty or statement not misleading) and such untruth, falsity, misleading
statement or omission shall not have been corrected or remedied to the
satisfaction of Lender within ten (10) Business Days after the earlier of a
Borrower's (or Owner's) knowledge thereof or receipt of written notice
thereof from Lender; or
(c) Covenant Defaults. If a Borrower defaults in the performance or
-----------------
observance of any material covenant or agreement in this Agreement, and
such default continues for a period of ten (10) Business Days after the
earlier of the Borrower's knowledge thereof or receipt of written notice
from Lender thereof, except for violations of Section 7.08(d), which shall
---------------
become an Event of Default at the end of the sixty (60) day period stated
therein and
43
<PAGE>
except for specific Defaults listed elsewhere in this Section 9.01, as to
which no notice or cure period shall apply unless specified; or
(d) Failure of Conditions. If a Borrower fails to meet any condition
---------------------
of lending under Article 6 hereof, and such condition is not waived by
---------
Lender;
(e) Undischarged Judgments. If one or more judgments for the payment
----------------------
of money has been entered against a Borrower in an amount in excess of
$100,000, and such judgment or judgments have remained undischarged and
unstayed for a period of thirty (30) calendar days, unless the validity
thereof is contested in compliance with Section 7.08 hereof; or
----
(f) Attachments, etc. If a writ or warrant of attachment,
----------------
garnishment, execution, distraint or similar process has been issued
against a Borrower or any of its properties which has remained undischarged
and unstayed for a period of thirty (30) consecutive days and is not being
contested in compliance with Section 7.08 hereof; or
------------
(g) Default Under Third Party Agreements. If a default, or event or
------------------------------------
condition which with notice or lapse of time or both would become a
default, occurs that gives the creditor the right to accelerate in respect
of any other obligation of a Borrower for borrowed money (including lease
obligations) in the amount of $100,000 in the aggregate, or under any two
or more such other obligations of any amount; or
(h) Dissolution: Etc. If a Borrower dissolves, has its Organizational
----------------
Document revoked, winds up or liquidates itself or its business; or
(i) Involuntary Bankruptcy or Receivership Proceedings. If a
--------------------------------------------------
receiver, custodian, liquidator, or trustee of a Borrower or of any of its
property is appointed by the order or decree of any court or agency or
supervisory authority having jurisdiction; or an order is entered
adjudicating a Borrower as bankrupt or insolvent; or any of the property of
a Borrower is sequestered by court order; or a petition is filed against a
Borrower under any state or federal bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation, or
receivership law of any jurisdiction, whether now or hereafter in effect;
or
(j) Voluntary Bankruptcy. If a Borrower takes affirmative steps to
--------------------
prepare to file, or files, a petition in voluntary bankruptcy or to seek
relief under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the filing
of any petition against it under any such law; or
(k) Assignments for Benefit of Creditors, Etc. If a Borrower makes an
-----------------------------------------
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts generally as they
44
<PAGE>
become due, or consents to the appointment of a receiver, trustee, or
liquidator of itself or of all or any part of its properties; or
(l) Non-compliance with Governmental Requirements. If a Borrower
---------------------------------------------
fails to comply with any material requirement of any Governmental Authority
within ten (10) Business Days after notice in writing of such requirement
shall have been given to the Borrower by such Governmental Authority, or
such longer period of time permitted the Borrower by such Governmental
Authority; or
(m) Regulatory Authorizations. If any Regulatory Authorization in
-------------------------
connection with this Agreement or any other Loan Document or any such
Regulatory Authorization now or hereafter necessary or advisable to make
this Agreement or the other Loan Documents legal, valid, enforceable and
admissible in evidence or to permit a Borrower to conduct its business is
not obtained or has ceased to be in full force and effect or has been
modified or amended or has been held to be illegal or invalid or is revoked
or terminated, and is not being contested by the Borrower in compliance
with Section 7.08 hereof and Lender has reasonably determined in good faith
------------
(which determination shall be conclusive) that such event or occurrence may
have a Material Adverse Effect or a material adverse effect on Lender's
rights under this Agreement or any other Loan Documents; or
(n) Damage or Destruction. If the proceeds of any physical damage
---------------------
insurance actually paid in respect of the partial or total damage or
destruction of the Collateral are insufficient to cover the cost of the
restoration thereof or if Lender determines that such damage or destruction
is so extensive that repair or restoration cannot be expected within a time
period short enough to prevent a Material Adverse Effect;
(o) Consents. If a Borrower fails to provide any Consent required
--------
hereunder and Lender determines in its sole discretion that such failure
results in a material impairment of Lender's security for the Loans; or
(p) Change in Control. If any Change in Control should occur without
-----------------
Lender's prior written consent, which consent may be withheld in Lender's
sole and absolute discretion; or
(q) ERISA Defaults. If, with respect to any Plan, (i) there has
--------------
occurred a Reportable Event being considered by the PBGC which may
reasonably result in any material liability to the PBGC with respect to any
Plan, (ii) a Plan has been terminated, (iii) a trustee has been appointed
by a United States District Court to administer a Plan, (iv) a PBGC or any
other person has instituted proceedings to terminate a Plan or to appoint a
trustee to administer any such Plan, (v) either a Borrower or any Affiliate
has withdrawn, completely or partially, from any Plan (vi) either a
Borrower or any Affiliate has incurred
45
<PAGE>
secondary liability for withdrawal liability payments under any Plan or
(vii) a Plan has failed to meet the minimum funding standards established
under the Code or ERISA; or
(r) Defaults Under Other Loan Documents. If any default,
-----------------------------------
misrepresentation or breach should occur under any Security Document or
other Loan Document and is not cured or waived within the time permitted
therein, or any such Loan Documents should cease to be in full force and
effect, or any party thereto should assert any unenforceability of, or deny
liability on, or admit inability to perform under, any such Loan Document.
9.02. Consequences of an Event of Default. If any Event of Default shall
-----------------------------------
occur and be continuing or shall exist, Lender shall be under no further
obligation to make Advances hereunder, any remaining commitment hereunder shall
immediately terminate, with no further notice, and Lender may, by notice to the
Borrowers, declare the unpaid principal amount of each Note, interest accrued
thereon and all other amounts owing by Borrowers hereunder or under each Note to
be immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue. Such consequences shall occur automatically
upon the occurrence of an Event of Default under Section 9.01 (h), (i), (j) or
-----------------------------
(k), without any notice or demand. Upon the occurrence and continuance of an
- ---
Event of Default, Lender may, in its sole discretion, exercise any and all
remedies available to it under this Article 9 or under any of the Loan Documents
---------
or under applicable law without further notice or period of grace or opportunity
to cure.
9.03. Exercise of Rights. Subject to any requirements for FCC or other
------------------
governmental approval upon the occurrence of any Event of Default, the rights,
powers and privileges provided in this section and all other remedies available
to Lender under this Agreement or by statute or by rule of law may be exercised
by Lender at any time from time to time whether or not the Obligations shall be
due and payable, and whether or not Lender shall have instituted any foreclosure
or other action for the enforcement of this Agreement or the Note. No failure
to exercise nor any delay in exercising on the part of Lender, any right,
remedy, power or privilege hereunder or under any of the other Loan Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
future exercise thereof or the exercise of any other right, remedy, power or
privilege.
9.04. Rights of Secured Party; Possession or Sale of Collateral. Without
---------------------------------------------------------
limiting the generality of the foregoing, Lender shall have all the rights and
remedies of a secured party under the UCC, and Lender may, without demand and
without advertisement or notice, all of which each Borrower waives, at any time
or times, sell and deliver any or all Collateral held by or for it at public or
private sale, for cash, upon credit or otherwise, at such prices and upon such
terms as Lender deems advisable, in its sole discretion, and/or collect, or
enforce the collection of, the Collateral. Lender may be the purchaser at any
such sale. Upon the occurrence of an Event of Default and upon Lender's
request, the applicable Borrower shall assemble, at its own expense, any or all
Equipment and other Collateral at a convenient place acceptable to Lender and
shall pay to Lender or reimburse
46
<PAGE>
Lender for, on demand, all costs of collection of all amounts due, and
enforcement of all rights hereunder, including reasonable attorneys' fees and
legal expenses, and expenses of any repairs to any realty or other property to
which any of such Collateral may be affixed. Upon an Event of Default Lender
may, to the full extent permitted by applicable law, without notice,
advertisement, hearing or process of law of any kind, enter upon any premises
where any of the Collateral may be located and take possession of and remove
such Collateral.
9.05. Notices, Etc., Waived. Except as expressly provided in this Article
-------------------- -------
9, each Borrower hereby expressly waives, to the full extent permitted by
- -
applicable law, presentment, demand, protest, any and all notices of any kind,
advertisements, hearing or process of law in connection with the exercise by
Lender of any of its rights and remedies upon the occurrence of an Event of
Default. If any notification of intended disposition of any of the Collateral
is required by law, such notification shall be deemed reasonably and properly
given if given in accordance with Section 10.06 hereto at least ten (10) days
-------------
before such disposition.
9.06. Additional Remedies. Lender's remedies upon the occurrence and
-------------------
during the continuance of an Event of Default shall include, in addition to, and
not in lieu of, such remedies as are available at law or in equity or provided
for in any of the Loan Documents, the following:
(a) Foreclosure; Receivership. Lender shall be entitled to file one
-------------------------
or more suits at law or in equity to collect the Obligations and/or to
foreclose on Lender's Liens on and security interests created by this
Agreement or the Security Documents. Lender may apply or require each
Borrower to apply for any necessary transfers, assignments, orders,
consents or licenses in connection with the operation or abandonment of the
Collateral or any part thereof, and Lender shall also be entitled as a
matter of right and without notice and without requiring bond (notice and
bond being hereby waived), without regard to the solvency or insolvency of
a Borrower at the time of application and without regard to the value of
the Collateral at that time, to have a receiver appointed by a court of
competent jurisdiction in order to manage, protect, and preserve the
Collateral and to continue the operation of the business of a Borrower, and
to collect all revenues and profits thereof and apply the same to the
payment of all expenses and other charges of such receivership until the
sale or other final disposition of the Collateral. Each Borrower hereby
consents to the appointment of such receiver.
(b) Right to Cure. If a Borrower fails in any material respect to
-------------
perform or comply with any of its agreements contained herein or in any of
the other Loan Documents, Lender may take whatever actions it may deem
appropriate to perform or comply or otherwise cause performance or
compliance with such agreement, all at the risk, cost and expense of the
Borrower.
(c) Setoff. If the unpaid principal amount of a Note, interest
------
accrued thereon or any other amount owing by a Borrower hereunder or under
the Note shall have become due
47
<PAGE>
and payable (by acceleration or otherwise), Lender shall have the right, in
addition to all other rights and remedies available to it, without notice
to the Borrower, to setoff against and to appropriate and apply to such due
and payable amounts any debt owing to, and any other funds held in any
manner for the account of, the Borrower by Lender. Such right shall exist
whether or not Lender shall have given notice or made any demand hereunder
or under the Note, whether or not such debt owing to or funds held for the
account of the Borrower is or are matured or unmatured, and regardless of
the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to Lender. Each Borrower hereby
consents to and confirms the foregoing arrangements and confirms Lender's
rights of setoff.
9.07. Application of Proceeds. Any proceeds of any of the Collateral,
-----------------------
received by Lender through sale or disposition of the Collateral or otherwise,
may be applied by Lender toward the payment of the Obligations, including
expenses in connection with the Collateral (including reasonable fees and legal
expenses) in such order of application as Lender may from time to time elect.
9.08. Discontinuance of Proceedings. If Lender should proceed to enforce
-----------------------------
any right or remedy under this Agreement or any other Loan Document, and then
discontinue or abandon such proceeding for any reason, all rights, powers and
remedies of Lender hereunder shall continue as if no such proceeding had been
taken.
9.09. Power of Attorney. For the purpose of carrying out the provisions
-----------------
and exercising the rights, powers and privileges granted by the Loan Documents,
including, without limitation, this Article 9, each Borrower hereby irrevocably
constitutes and appoints Lender its true and lawful attorney-in-fact to execute,
acknowledge and deliver any instruments and do and perform any acts such as are
referred to in the Loan Documents, including, without limitation, this Article
-------
9, in the name and on behalf of the Borrower, from time to time in Lender's
- -
reasonable discretion after the occurrence and during the continuance of an
Event of Default, in accordance with the Loan Documents and any statute or rule
of law. This power of attorney is a power coupled with an interest and cannot
be revoked. Each Borrower hereby ratifies all that said attorney-in-fact shall
lawfully do or cause to be done by virtue and in accordance with the terms
hereof. Without limiting the generality of the foregoing, Lender may after the
occurrence and during the continuance of an Event of Default do the following
without notice to or assent by the Borrower to accomplish the purposes of this
Agreement:
(a) upon failure of a Borrower to timely pay or discharge taxes or
Liens levied or placed on or threatened against the Collateral, effect any
repairs or any insurance called for by the terms of this Loan Agreement or
any other Loan Document, and pay all or any part of the premiums therefor
and the costs thereof;
(b) (i) direct any party liable for any payment on any Collateral to
make payment of any and all monies due and to become due thereunder
directly to Lender or as Lender shall
48
<PAGE>
direct; (ii) in the name of the applicable Borrower or its own name or
otherwise, take possession of and endorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of monies due
under, or otherwise receive payment of and receipt for any and all monies,
claims and other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) sign and endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
the Collateral; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect all or any of the Collateral and to enforce any other right in
respect of any Collateral; (v) defend any suit, action or proceeding
brought against the Borrower with respect to any Collateral; (vi) settle,
compromise or adjust any suit, action or proceeding described above upon
commercially reasonable terms under the circumstances and, in connection
therewith, give such discharges or releases as Lender may reasonably deem
appropriate; and (vii) generally sell, use, operate, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Lender were the absolute owner thereof
for all purposes, and, at Lender's option and the Borrower's expense, at
any time or from time to time after the occurrence and during the
continuance of an Event of Default, all other acts and things that Lender
reasonably deems necessary to protect, preserve or realize upon the
Collateral and Lender's security interest therein, in order to effect the
intent of this Agreement and the other Loan Documents all as fully and
effectively as the Borrower might do.
9.10. Regulatory Matters. Notwithstanding any provision to the contrary
------------------
contained herein, Lender will not exercise any right or remedy under this
Agreement that requires prior FCC or PUC approval without first obtaining such
approval. If counsel to Lender reasonably determines that the consent of the
FCC or PUC is required in connection with any of the actions that may be taken
by Lender in the exercise of its rights hereunder or under any of the other Loan
Documents, then the applicable Borrower, at its sole cost and expense, agrees to
use its best efforts to secure such consent and to cooperate with Lender in any
action commenced by Lender to secure such consent. Upon the occurrence and
during the continuation of an Event of Default, the applicable Borrower shall
promptly execute and/or cause the execution of all applications, certificates,
instruments and other documents and papers that may be required in order to
obtain any necessary governmental consent, approval or authorization, and if the
Borrower fails or refuses to execute such documents, the clerk of the court with
jurisdiction may execute such documents on behalf of the Borrower.
ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS
--------------------------------------------
The following conditions shall be applicable throughout the term of this
Agreement:
10.01. Modifications and Waivers. This Agreement, the other Loan
-------------------------
Documents, or any provision thereof may not be changed, waived or terminated
orally, but only by an instrument in
49
<PAGE>
writing signed by the party against whom enforcement of the change, waiver or
termination is sought. No action or course of dealing on the part of Lender, its
officers, employees, consultants, or agents, nor any failure or delay by Lender
with respect to exercising any right, power, or privilege of Lender under the
Note, this Agreement, or any other Loan Document shall operate as a waiver
thereof, except as otherwise provided in this Agreement. Any waiver shall be
effective only to the extent and for the instance specifically identified in
such writing, and shall not be deemed to imply any future waivers or other
waivers. No amendment to the Loan Documents shall be effective without written
agreement signed by both the Borrowers and Lender.
10.02. Advances Not Implied Waivers. No waiver of the requirements
----------------------------
contained in any Loan Document shall be effective unless in writing duly signed
by Lender. No Advance hereunder shall constitute a waiver of any of the
conditions of Lender's obligation to make further Advances nor, in the event a
Borrower is unable to satisfy any such condition, shall any waiver of such
condition have the effect of precluding Lender from thereafter declaring such
inability to be an Event of Default as herein provided. Any Advance made by
Lender and any sums expended by Lender pursuant to the Loan Documents shall be
deemed to have been made pursuant to this Agreement, notwithstanding, the
existence of an uncured Default or Event of Default. No Advance at a time when
an Event of Default exists shall constitute a waiver of any right or remedy of
Lender existing by reason of such Event of Default, including, without
limitation, the right to accelerate the maturity of the Indebtedness evidenced
by the Note or to foreclose the Lien on the Collateral or to refuse to make
further advances hereunder.
10.03. Deviation from Covenants. The procedure to be followed by a
------------------------
Borrower to obtain the consent of Lender to any deviation from the covenants
contained in this Agreement or any other Loan Document shall be as follows:
(a) The Borrower shall send a written notice to Lender setting
forth (i) the covenant(s) relevant to the matter, (ii) the requested
deviation from the covenant(s) involved, and (iii) the reason for the
requested deviation from the covenant(s); and
(b) Lender, within a reasonable time, will send a written notice to
the Borrower, permitting or refusing the request, but in no event will any
deviation from the covenants of this Agreement or any other Loan Document
be effective without the express prior written consent of Lender. Lender's
failure to provide such written notice shall be deemed a refusal of such
request.
10.04. Holidays. Except as otherwise provided herein, whenever any
--------
payment or action to be made or taken hereunder or under a Note shall be stated
to be due on a day which is not a Business Day, such payment or action shall be
made or taken on the next following Business Day and such extension of time
shall be included in computing interest or fees, if any, in connection with such
payment or action.
50
<PAGE>
10.05. Records. From time to time Lender may send BNH statements of the
-------
unpaid principal amount of a Note, the unpaid interest accrued thereon, the
Interest Rate or rates applicable to such unpaid principal amount, the duration
of such applicability, and the amount remaining available on any Loan, and each
statement shall be deemed correct and conclusively binding on the Borrowers
(absent manifest error) unless Borrower notifies Lender of an error in the
statement in writing within thirty (30) days of the date of any such statement
is provided to BNH.
10.06. Notices. All notices, requests, demands, directions and other
-------
communications (collectively, "notices") required under the provisions of this
Agreement or any other Loan Document shall be in writing (including
communication by facsimile transmission) unless otherwise expressly permitted
hereunder and shall be sent by hand, by registered or certified mail return
receipt requested, by overnight courier service maintaining records of receipt,
or by facsimile transmission with confirmation in writing mailed first-class, in
all cases with charges prepaid, and any such properly given notice shall be
effective upon the earlier of receipt or (i) when delivered by hand, or (ii) the
third Business Day after being mailed, or (iii) the following Business Day if
sent by overnight courier service, or (iv) when sent by facsimile, answer back
received. All notices shall be addressed as follows:
If to any Borrower: To the Notice
Address set forth on Schedule 1, with
----------
copies, if any, as set forth on Schedule 1.
----------
If to Lender: NTFC Capital Corporation
501 Corporate Centre Drive
Franklin, Tennessee 37067
Attention: Manager, Credit
Telecopy: (615) 771-6626
With a copy to: NTFC Capital Corporation
501 Corporate Centre Drive
Franklin, Tennessee 37067
Attention: Legal Department
Telecopy: (615) 771-6187
All notices shall be sent to the applicable party at the address stated
above or in accordance with the last unrevoked written direction from such party
to the other party hereto, given in accordance with the terms hereof.
10.07. FCC and PUC Approval. The exercise of any rights or remedies
--------------------
hereunder or under any other Loan Document by Lender that may require FCC or PUC
approval shall be subject to obtaining such approval. Pending the receipt of
any PUC or FCC approval, a Borrower shall not do
51
<PAGE>
anything to delay, hinder, interfere with or obstruct the exercise of Lender's
rights or remedies hereunder or the obtaining of such approvals.
10.08. Lender Sole Beneficiary. All conditions of the obligation of
-----------------------
Lender to make any Advances hereunder are imposed solely and exclusively for the
benefit of Lender and its assigns and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make any Advances in the absence
of strict compliance with any or all such conditions, and no Person shall under
any circumstances be deemed to be a beneficiary of such conditions, any or all
of which may be freely waived in whole or in part by Lender at any time if in
its sole discretion it deems it advisable to do so. Inspections and approvals
of the System, and the workmanship and materials used therein impose no
responsibility or liability of any nature whatsoever on Lender, and no Person
shall, under any circumstances, be entitled to rely upon such inspections and
approvals by Lender for any reason. Lender's sole obligation hereunder is to
make the Advances if and to the extent required by this Agreement or the Notes.
10.09. Lender's Review of Information. Each Borrower acknowledges and
------------------------------
agrees that any review or analysis by Lender of financial information, operating
information, marketing data or other information provided to Lender by or on
behalf of any Borrower at any time is and shall be conducted solely for Lender's
benefit and internal use and that Lender is under no duty or obligation to make
the results of such review or analysis available to any Borrower. Each Borrower
is not relying, and will not rely, on Lender for financial or business advice.
10.10. No Joint Venture. Nothing in any of the Loan Documents or in this
----------------
Agreement shall be deemed to constitute any kind of partnership, joint venture
or fiduciary relationship between Lender and any Borrower or between Lender and
any Owners.
10.11. Severability. The provisions of this Agreement are intended to be
------------
severable. If any provision of this Agreement or the other Loan Documents shall
be held invalid or unenforceable in whole or in part in any jurisdiction such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof or thereof in any jurisdiction.
10.12. Rights Cumulative. All rights, powers and remedies herein given to
-----------------
Lender are cumulative and not alternative, and are in addition to all statutes
or rules of law.
10.13. Duration; Survival. All representations and warranties of each
------------------
Borrower contained herein or made in connection herewith shall survive the
making of and shall not be waived by the execution and delivery of this
Agreement and the other Loan Documents, any investigation by Lender, or the
making of any Advances hereunder. All covenants and agreements of each Borrower
contained herein shall continue in full force and effect from and after the date
hereof so long as it
52
<PAGE>
may borrow hereunder and until payment in full of the Notes, interest thereon,
all fees and all other Obligations of each Borrower. Without limitation, it is
understood that all obligations of each Borrower to make payments to or
indemnify Lender shall survive the payment in full of the Notes and of all other
Obligations.
10.14. Governing Law. This Agreement and the Notes and each of the other
-------------
Loan Documents shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, except to the extent, if any,
set forth on Schedule 2.02 hereto, and except to the extent that the laws of
-------------
jurisdictions where the Collateral is located may be required to apply to the
Collateral or the enforcement of Lender's rights therein.
10.15. Counterparts. This Agreement may be executed in any number of
------------
counterparts (by facsimile transmission or otherwise) and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same instrument.
10.16. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of Lender and each Borrower and their respective successors
and assigns; provided, however, that a Borrower may not assign or transfer any
-----------------
of its rights or obligations hereunder or under the other Loan Documents (in
whole or in part) without the prior written consent of Lender. Lender may
assign, transfer or pledge any of its respective rights or obligations hereunder
or under the other Loan Documents without notice to or the prior written consent
of any Borrower. Upon receipt of written notice from Lender of such assignment,
each Borrower shall promptly acknowledge receipt thereof in writing. If a
Borrower is given written notice of any assignment, it shall perform its
obligations with respect to this Agreement for the ratable benefit of the
applicable assignee(s), and, if so directed, shall pay all amounts due or to
become due hereunder directly to the applicable assignee(s) or to any other
party designated by such assignee(s). Each Borrower shall not assert against
any such assignee any set-off, defense or counterclaim that the Borrower may
have against Lender or any person other than such assignee. Each Borrower shall
also execute and deliver to Lender such documentation as any such assignee may
reasonably require, including but not limited to amended promissory notes and
acknowledgment of or consent to the assignment which may require the Borrower to
make certain representations or reaffirmations as to some of the basic terms and
covenants contained herein. Lender shall not be relieved of its obligations
hereunder as a result of any such sale, assignment, transfer, grant or pledge,
unless such assignee specifically assumes all of Lender's future obligations
hereunder in a writing, a copy of which shall be delivered to the applicable
Borrower, in which event after the date of such assignment, the Borrower's
obligations to any such assignee shall be proportionately as set forth herein
with respect to Lender, and the Borrower shall not look to Lender to perform any
of such assignee's obligations hereunder which arise after the date thereof.
Any assignee shall be entitled to rely on each Borrower's agreements as stated
herein, as applicable, and shall be considered a third party beneficiary
thereof. Except to the extent otherwise required by the context of this
Agreement, the word "Lender" where used in this Agreement shall mean and include
any holder of any Note originally issued to Lender hereunder,
53
<PAGE>
and any such holder of any Note shall be bound by and have the benefits of this
Agreement the same as if such holder had been a signatory hereto.
10.17. Participation. Lender shall have the right to enter into one or
-------------
more participation agreements, syndication agreements or similar agreements with
one or more participating lenders or other parties approved by Lender on such
terms and conditions as Lender shall deem advisable. Each Borrower shall
furnish a sufficient number of copies of reports and certificates to Lender so
that Lender and each participating lender shall receive a copy of each such
document.
10.18. Time of Essence. Time is of the essence of this Agreement, each
---------------
Note, and the other Loan Documents.
10.19. Disclosures and Confidentiality.
-------------------------------
(a) Each Borrower agrees that it will obtain Lender's written
consent before using or generating any press release, advertisement,
publicity materials or other publication in which the name or logo of
Lender or any of its Affiliates is used or may be reasonably inferred, and
will not distribute any such materials in the absence of such prior written
approval.
(b) Each Borrower agrees that it will not, directly or indirectly,
disclose to any third party the terms of this Agreement or the other Loan
Documents or prior or future correspondence relating thereto, or the
transactions contemplated hereby, or any other information regarding Lender
or its Affiliates learned by the Borrower during the course of negotiation
thereof. The term "third party" shall exclude only the Borrowers, its
Affiliates and their respective attorney(s) and certified public
accountant(s). This Section 10.19(b) shall not restrict the disclosure of
----------------
information if such disclosure is required by law, to the extent required
to fulfill a duty of disclosure of a Borrower to a prospective lender, by
order of any court or by the order, rule or regulation of any
administrative agency, including without limitation any requirements of the
FCC, any PUC, or any state or federal securities commissions (the
"Commissions"); provided, however, that, except for disclosures required by
----------- -------- -------
the FCC, PUC or Commissions, each Borrower shall provide Lender with
advance notice of any such required disclosure of information so that
Lender may seek an appropriate protective order and/or waive compliance
with this section. Each Borrower shall not oppose any action taken by
Lender to obtain an appropriate protective order or other reliable
assurance that the information will be accorded confidential treatment.
The obligations set forth in this Section 10.19(b) shall survive the
----------------
termination of this Agreement.
(c) The disclosure of information by either Lender or a Borrower
will not be restricted under this Agreement if such information (i) has
been or becomes published or is now, or in the future, in the public domain
through (A) no fault of the parties, (B) disclosure other than unauthorized
disclosure by the party to whom the information is disclosed, or (C)
disclosure to third parties by the disclosing party without similar
restriction; (ii) is property
54
<PAGE>
(other than proposal letters, commitment letters or other correspondence
between Lender and a Borrower) within the legitimate possession of the
receiving party prior to disclosure hereunder; (iii) subsequent to
disclosure hereunder, is lawfully received from a third party having rights
therein without restriction of the third party's or receiving party's
rights to disseminate the information and without notice of any restriction
against its further disclosure; (iv) is disclosed with the written approval
of the other party; (v) is or becomes publicly available free of any
obligation to keep it confidential.
(d) Each Borrower authorizes Lender to discuss with and furnish to
any Affiliate of Lender, to any government or self-regulatory agency with
jurisdiction over Lender, to any other Governmental Authority or to any
assignee, successor, participant, successor, or prospective assignee,
successor or participant, all financial statements, audit reports and other
information pertaining to the Borrower whether such information was
provided by the Borrower or prepared or obtained by Lender or third
parties. Neither Lender nor any of its employees, officers, directors or
agents makes any representation or warranty to any existing or prospective
assignee, successor or participant regarding any audit reports or other
analyses of a Borrower that Lender may distribute, whether such information
was provided by a Borrower or prepared or obtained by Lender or third
parties, nor shall Lender or any of its employees, officers, directors or
agents be liable to any Person receiving a copy of such reports or analyses
for any inaccuracy or omission contained in such reports or analyses or
relating thereto.
(e) Every reference in this Agreement to disclosures of a Borrower
to Lender (except the financial statements), to the extent that such
references refer or are intended to refer to disclosures at or prior to the
execution of this Agreement, shall be deemed strictly to refer only to
written disclosures delivered to Lender concurrently with the execution of
this Agreement and referred to specifically in the Loan Documents. The
parties intend that such disclosures are to be limited to those presented
in an orderly manner at the time of executing this Agreement and are not to
be deemed to include expressly or impliedly any disclosures that previously
may have been delivered from time to time to Lender, except to the extent
that such previous disclosures are again presented to Lender in writing
concurrently with the execution of this Agreement.
10.20. Jurisdiction and Venue. EACH BORROWER HEREBY IRREVOCABLY CONSENTS
----------------------
TO THE JURISDICTION OF THE COURTS LOCATED IN DAVIDSON OR WILLIAMSON COUNTY,
TENNESSEE, INCLUDING WITHOUT LIMITATION FEDERAL COURTS SITTING IN THE MIDDLE
DISTRICT OF TENNESSEE AND THE CHANCERY COURT FOR DAVIDSON OR WILLIAMSON COUNTY,
TENNESSEE, FOR ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS, AND AGREES NOT TO
CONTEST VENUE OR JURISDICTION IN ANY SUCH COURTS. In any such litigation, each
Borrower waives personal service of any summons, complaint or other process, and
agrees that the service
55
<PAGE>
thereof may be made by certified or registered mail direct to the Borrower at
its address set forth in Section 10.06 hereof. Within thirty (30) days after
-------------
such mailing, the Borrower shall appear and answer to such summons, complaint or
other process. Should the Borrower fail to appear or answer within the said 30-
day period, then such party shall be deemed in default and judgment may be
entered against the Borrower for the amount or other relief as demanded in any
summons, complaint or other process so served. In the alternative, in its sole
discretion, Lender may effect service upon the Borrower in any other form or
manner permitted by law. The choice of forum set forth herein shall not be
deemed to preclude the enforcement of any judgment obtained in such forum or the
taking of any action under this Agreement to enforce the same in any appropriate
jurisdiction.
10.21. Jury Waiver. EACH BORROWER AND LENDER HEREBY KNOWINGLY AND
-----------
WILLINGLY WAIVE THEIR RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR PROCEEDING
INVOLVING THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, THE OBLIGATIONS, OR ANY
RELATIONSHIP BETWEEN LENDER AND THE BORROWER. EACH BORROWER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.22. Limitation on Liability. LENDER SHALL HAVE NO LIABILITY UNDER OR
-----------------------
IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS FOR
SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
ANY SORT IN ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS, AND, EXCEPT TO THE
EXTENT PROHIBITED BY LAW, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY SORT OTHER THAN ACTUAL DAMAGES.
10.23. Borrowers Waivers. To the full extent permitted by law, each
-----------------
Borrower hereby waives (i) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Lender on which the Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (ii) notice prior
to taking possession or control of the Collateral or any bond or security which
might be required by any court prior to allowing Lender to exercise any of
Lender's remedies, including the issuance of an immediate writ of possession,
except as expressly required in any of the Loan Documents; (iii) any marshalling
of assets, or any right to compel Lender to resort first to any Collateral or
other Persons before pursuing a Borrower for payment of the Obligations and any
defenses based on suretyship or impairment of Collateral; (iv) the benefit of
all valuation, appraisement and exemption laws; (v) any right to require Lender
to terminate its security
56
<PAGE>
interest in the Collateral or in any other property of the Borrower until
termination of this Agreement and the execution by the Borrower and by any
person whose Loans to the Borrower are used in whole or in part to satisfy the
Obligations, of an agreement indemnifying Lender from any loss or damage Lender
may incur as the result of dishonored or unsatisfied items of any account debtor
applied to the Obligations; and (vi) notice of acceptance hereof. Each Borrower
acknowledges that the foregoing waivers are a material inducement to Lender's
entering into this Agreement and that Lender is relying upon the foregoing
waivers in its future dealings with all of the Borrowers.
10.24. Schedules. The schedules and exhibits attached to this Agreement
---------
are an integral part hereof, and are hereby made a part of this Agreement.
10.25. Agreement to Govern. In case of any conflict between the terms of
-------------------
this Agreement and any of the other Loan Documents, the terms of this Agreement
shall govern.
10.26. Entire Agreement. This Agreement, the other Loan Documents and
----------------
other documents, agreements and certificates executed by the parties
contemporaneously herewith or subsequent hereto constitute the entire agreement
of the parties and supersede all prior understandings and agreements, written or
oral, between the parties hereto relating to the subject matter hereof. Each
Borrower is not entering into this Agreement in reliance on statements or
representations made by any Person other than as set forth herein.
[END OF GENERAL TERMS AND CONDITIONS. NEXT PAGE IS SCHEDULE 1.]
[SIGNATURES APPEAR ON THE COVER PAGE. ]
57
<PAGE>
[EXHIBIT A]
[Floor Plan]
<PAGE>
month following the date of such Advance, interest on such Advance shall accrue
at the Interest Rate applicable to such Advance and shall be capitalized and
added to the principal amount of such Advance outstanding hereunder
("Capitalized Interest"). Following the end of the Capitalized Interest Period
--------------------
for such Advance, interest shall accrue at the Interest Rate for such Advance on
the principal amount of such Advance (including Capitalized Interest) and shall
be payable in arrears (together with principal payable in accordance with the
amortization schedule described in the following paragraph), commencing on the
first day of the first calendar month following the Conversion Date (the
"Initial Payment Date"), and on the first day of each consecutive calendar month
thereafter (together with the Initial Payment Date, a "Payment Date").
Principal (and Capitalized Interest thereon) of each Advance made by Lender
pursuant to the request of a Borrower under a Borrowing Certificate shall be
repaid pursuant to the following amortization schedule. At the Conversion Date
applicable to an Advance, all principal amounts of such Advance (including
Capitalized Interest thereon) shall be amortized and repaid monthly in arrears
over forty-eight (48) consecutive months in payments of principal calculated as
follows: (i) the first twelve (12) payments of principal shall each be equal to
0.833% of the principal amount (including Capitalized Interest thereon) of such
Advance as of the Conversion Date; (ii) the next twelve (12) payments of
principal shall each be equal to 1.6667% of the principal amount (including
Capitalized Interest thereon) of such Advance as of the Conversion Date; (iii)
the next twelve (12) payments shall each be equal to 2.50% of the principal
amount (including Capitalized Interest thereon) of such Advance as of the
Conversion Date; and (iv) the next twelve (12) payments shall each be equal to
3.33% of the principal amount (including Capitalized Interest thereon) of such
Advance as of the Conversion Date. The first payment shall be due on the first
day of the first month following the Conversion Date.
The principal payment amounts shall be recalculated by Lender if any
Advances are made hereunder after the Financing Termination Date, based on the
aggregate amount of all Advances (including Capitalized Interest) made at any
time. It is intended that the above amortization schedule will fully amortize
the principal amounts advanced under this Note. If any principal, interest, or
other charge or expense remains outstanding on November 1, 2007 or such earlier
date as all principal amounts of Advances hereunder are required to be repaid
pursuant to the amortization schedule described in the preceding paragraph (the
"Maturity Date"), such amount shall be added to the payment due on the Maturity
Date.
Notwithstanding the foregoing, if Makers shall fail to pay within five (5)
days after the due date any principal amount or interest or other amount payable
under this Note, Makers shall pay, jointly and severally, to Lender, to defray
the administrative costs of handling such late payments, an amount equal to
interest on the amount unpaid, to the extent permitted under applicable law, at
a rate equal to the lesser of three percent (3%) higher than the then applicable
interest rate or the maximum permissible interest rate under applicable law (the
"Default Rate") (instead of the Interest Rate), from the due date until such
------------
overdue principal amount, interest or other unpaid amount is paid in full (both
before and after judgment) whether or not any notice of default in the payment
thereof has been delivered under the Loan Agreement. In addition, but without
duplication, upon the occurrence and during the continuance of an Event of
Default, all outstanding amounts hereunder shall bear interest at
<PAGE>
the Default Rate (instead of the Interest Rate) until such amounts are paid in
full or such Event of Default is waived in writing by Lender.
Notwithstanding any provision of this Note or the Loan Agreement to the
contrary, it is the intent of the Lender and the Makers that the Lender or any
subsequent holder of this Note shall never be entitled to receive, collect,
reserve or apply, as interest, any amount in excess of the maximum rate of
interest permitted to be charged by applicable Law, as amended or enacted, from
time to time. In the event Lender, or any subsequent holder of this Note, ever
receives, collects, reserves or applies, as interest, any such excess, such
amount which would be excessive interest shall be deemed a partial prepayment of
principal and treated as such (except that no prepayment premium will be payable
thereon), or, if the principal indebtedness and all other amounts due are paid
in full, any remaining excess funds shall immediately be paid to the Makers. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the highest lawful rate, the Makers and the Lender shall,
to the maximum extent permitted under applicable law, (a) exclude voluntary
prepayments and the effects thereof as it may relate to any fees charged by the
Lender, and (b) amortize, prorate, allocate, and spread, in equal parts, the
total amount of interest throughout the entire term of the indebtedness;
provided that if the indebtedness is paid and performed in full prior to the end
of the full contemplated term hereof, and if the interest received for the
actual period of existence hereof exceeds the maximum lawful rate, the Lender or
any subsequent holder of the Note shall refund to the Makers the amount of such
excess or credit the amount of such excess against the principal portion of the
indebtedness, as of the date it was received, and, in such event, the Lender
shall not be subject to any penalties provided by any laws for contracting for,
charging, reserving or receiving interest in excess of the maximum lawful rate.
All amounts received for payment under this Note shall at the option of
Lender be applied first to any unpaid expenses due Lender under this Note or
under any other documents evidencing or securing the obligations of any Maker to
Lender, then to any unpaid late charges, then to any unpaid interest accrued at
the Default Rate, then to all other accrued but unpaid interest due under this
Note and finally to the reduction of outstanding principal due under this Note.
Upon the occurrence of any one or more of the Events of Default specified
in the Loan Agreement (each, an "Event of Default"), all amounts then remaining
----------------
unpaid on this Note shall be, or may be declared to be, immediately due and
payable as provided in the Loan Agreement, without further notice, at the option
of the Lender. Lender may waive any Event of Default before or after the same
has been declared and restore this Note to full force and effect without
impairing any rights hereunder, such right of waiver being a continuing one, but
one waiver shall not imply any additional or subsequent waiver. Time is of the
essence of this Note.
Each Maker hereby expressly waives demand, presentment, notice and protest.
Each Maker and any and all endorsers, guarantors and other parties liable on
this Note, and any and all general partners of any Maker or of any endorsers,
guarantors or other parties liable on this Note (collectively, the "Obligors")
--------
jointly and severally waive presentment for payment, protest, notice of protest,
notice of nonpayment of this Note, demand and all legal
<PAGE>
diligence in enforcing collection, and all other claims and defenses based on
suretyship principles, and hereby expressly consent to (i) any and all delays,
extensions, renewals or other modifications of this Note or any waivers of any
term hereof, (ii) any release or discharge by Lender of any of the Obligors,
(iii) any release, substitution or exchange of any security for the payment
hereof, (iv) any failure to act on the part of Lender, and (vi) any indulgence
shown by Lender from time to time (without notice or further assent from any of
the Obligors) and hereby agree that no such action, failure to act or failure to
exercise any right or remedy by Lender shall in any way affect or impair the
obligations of any of the Obligors.
EACH MAKER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS
LOCATED IN DAVIDSON COUNTY, TENNESSEE, AND WILLIAMSON COUNTY, TENNESSEE,
INCLUDING WITHOUT LIMITATION FEDERAL COURTS SITTING IN THE MIDDLE DISTRICT OF
TENNESSEE AND THE CHANCERY COURT FOR DAVIDSON COUNTY, TENNESSEE, AND THE
CHANCERY COURT FOR WILLIAMSON COUNTY, TENNESSEE, FOR ANY SUIT BROUGHT OR ACTION
COMMENCED IN CONNECTION WITH THIS NOTE, ANY DOCUMENTS EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, INCLUDING WITHOUT LIMITATION THE LOAN AGREEMENT, OR ANY
RELATIONSHIP BETWEEN LENDER AND ANY MAKER, AND AGREES NOT TO CONTEST OR
CHALLENGE VENUE IN ANY SUCH COURTS.
Each Maker irrevocably consents to the service of process of any such
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, return receipt requested, to such
Maker at the address set forth in the Loan Agreement or to such other address as
such Maker may have furnished to Lender in writing, and agrees that such service
shall become effective thirty (30) days after such mailing. However, nothing
herein shall affect the right of Lender or any Maker to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against Lender or any Maker in any other jurisdiction.
EACH MAKER HEREBY KNOWINGLY, WILLINGLY AND IRREVOCABLY WAIVES ITS RIGHTS
TO DEMAND A JURY TRIAL IN ANY ACTION OR PROCEEDING INVOLVING THIS NOTE, ANY
DOCUMENTS EXECUTED OR DELIVERED IN CONNECTION HEREWITH INCLUDING WITHOUT
LIMITATION THE LOAN AGREEMENT OR ANY RELATIONSHIP BETWEEN SUCH MAKER AND LENDER.
EACH MAKER AGREES THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS
PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF SUCH MAKER'S EXPRESS WAIVER OF
ITS RIGHT TO TRIAL BY JURY.
IN ANY ACTION TO ENFORCE THIS NOTE, EACH MAKER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL
RIGHTS UNDER THE LAWS OF ANY STATE OR OTHER JURISDICTION CLAIM OR RECOVER ANY
SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN ACTUAL
DIRECT DAMAGES.
In the event this Note is placed in the hands of one or more attorneys
for collection or
<PAGE>
enforcement or protection of the holder's rights described herein or in the Loan
Agreement or the other Loan Documents, the Makers agrees to pay, jointly and
severally, all reasonable attorneys' fees and all court and other out-of-pocket
costs incurred by the holder hereof (as of which shall be due on demand and
shall bear interest at the rate then payable hereunder from five (5) days after
such demand is made until paid).
This Note is governed by and shall be construed in accordance with the
internal laws of the State of New York. If any provision of this Note should for
any reason be invalid or unenforceable, the remaining provisions hereof shall
remain in full force and effect.
<PAGE>
This Note may not be changed, extended or terminated except in writing. No
waiver of any term or provision hereof shall be valid unless in writing signed
by Lender.
Executed as of the date first written above.
BROADVIEW NETWORKS HOLDINGS, INC.
By: /s/
---------------------------------
Title: President
------------------------------
BROADVIEW NETWORKS, INC.
By: /s/
---------------------------------
Title: President
------------------------------
BROADVIEW NETWORKS OF MASSACHUSETTS, INC.
By: /s/
--------------------------------
Title: President
-----------------------------
<PAGE>
SCHEDULE A TO NOTE
------------------
ADVANCES AND PAYMENTS
---------------------
Initial Payment Date:
Maturity Date:
Amount Advanced Date of Advance Payment Amount Payment Date Balance
- --------------- --------------- -------------- ------------ -------
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
____________ ____________ ____________ ____________ _______
<PAGE>
SCHEDULE B TO NOTE
------------------
CAPITALIZED INTEREST
--------------------
Original Capitalized Principal
Principal Interest Date Balance
--------- ----------- ---- ---------
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
____________ _____________ __________
<PAGE>
SCHEDULE 1 TO
-------------
LOAN AND SECURITY AGREEMENT
---------------------------
BORROWERS INFORMATION AND DEFINED TERMS
---------------------------------------
Closing Date: October 22, 1999
Borrowers: Broadview Networks Holdings, Inc., a Delaware
corporation Tax Identification Number: 11-
3310798
Broadview Networks, Inc., a New York
corporation Tax Identification Number: 16-
1401082
Broadview Networks of Massachusetts, Inc., a
Delaware corporation
Tax Identification Number: 11-3448054
Chief Executive Offices: 45-18 Court Square, Ste 403
Long Island City, New York 11101
Notice Address: 45-18 Court Square, Ste 403
Long Island City, New York 11101
PUC: The New York Public Service Commission and
the Massachusetts Department of
Transportation and Energy
Regulatory Authorizations: The term "Regulatory Authorizations" shall
include, without limitation, the approval of
the transactions contemplated by this
Agreement by the New York Public Service
Commission.
Business Plan: Broadview Networks Holdings, Inc. (Broadview)
is an Integrated Communications Provider.
Broadview's business plan is to build a
sizable customer base offering voice and data
communications products as both a carrier and
a provider of both horizontal and vertical,
value-added communications related products
and services. Broadview intends to build its
customer base through a combination of its
own sales and marketing activities, as well
as strategic alliances and acquisitions of
customer bases and acquisitions of corporate
entities with customer bases. Broadview
intends to provide such products and services
utilizing a combination of its own
facilities, leased facilities of other
carriers and resale of other carrier services
and products. Broadview intends to
incorporate into its network architecture a
variety of traditional Class V circuit based
switching capabilities, data transport and
routing capabilities, and evolving internet
protocol and other switching/transmission
technologies. Broadview intends
<PAGE>
to offer communications services in multiple
geographic markets, initially targeting the
Northeast United States, with anticipated
significant expansions of geographic focus.
Broadview intends to differentiate itself by
making significant ongoing investments in its
proprietary operating software systems and
other software based operational systems to
develop cost efficiencies and service quality
improvements.
<PAGE>
SCHEDULE 2.01 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
MAXIMUM LOAN AMOUNTS
--------------------
Maximum Principal Amount of All Loans: Thirty-six Million (US) Dollars
($36,000,000) (plus Capitalized
Interest thereon) available for
drawing on or before September 30,
2001.
<PAGE>
SCHEDULE 2.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAYMENT TERMS AND GOVERNING LAW
-------------------------------
Amortization of Term Loan or Payment Schedule: Principal (and Capitalized
Interest thereon) of each Advance made by Lender pursuant to the request of a
Borrower under a Borrowing Certificate shall be repaid pursuant to the following
amortization schedule. At the Conversion Date applicable to an Advance, all
principal amounts of such Advance (including Capitalized Interest thereon) shall
be amortized and repaid monthly in arrears over forty-eight (48) consecutive
months in payments of principal calculated as follows: (i) the first twelve (12)
payments of principal shall each be equal to 0.833% of the principal amount
(including Capitalized Interest thereon) of such Advance as of the Conversion
Date; (ii) the next twelve (12) payments of principal shall each be equal to
1.6667% of the principal amount (including Capitalized Interest thereon) of such
Advance as of the Conversion Date; (iii) the next twelve (12) payments shall
each be equal to 2.50% of the principal amount (including Capitalized Interest
thereon) such of Advance as of the Conversion Date; and (iv) the next twelve
(12) payments shall each be equal to 3.33% of the principal amount (including
Capitalized Interest thereon) such Advance as of the Conversion Date. The first
payment shall be due on the first day of the first month following the
Conversion Date.
Capitalized Interest Period: for each Advance made by Lender pursuant to
the request of a Borrower under a Borrowing Certificate, the period from the
date of such Advance through the last day of the twelfth (12th) calendar month
following the date of such Advance
Closing Date: October 22, 1999
Conversion Date: For each Advance made by Lender pursuant to the request of
a Borrower under a Borrowing Certificate, the expiration of the Capitalized
Interest Period applicable to such Advance.
Financing Termination Date: September 30, 2001.
Governing Law: Determined pursuant to Section 10.14 of the Agreement.
=============
Initial Borrowing Date: The date of the first Advance hereunder.
Initial Payment Date: The first day of the first calendar month next
following the Conversion Date.
Interest Payment Date: Monthly in arrears commencing on the first day of
the calendar month next following the Conversion Date and monthly thereafter
through the Maturity Date.
Interest Rate: For each Advance, the Five Year Swap Rate, as reported on
page 19901 of the Dow Jones & Company Telerate screen (or any successor page) on
the date such Advance is made, plus 475 basis points. If Dow Jones & Company
Telerate screen should cease service or cease publishing such rate, the Lender
shall designate a comparable reference rate for use in determining the Interest
Rate hereunder.
Maturity Date: November 1, 2007, or such earlier date as all principal
amounts of Advances hereunder are required to be repaid pursuant to the
Amortization of Term Loan (provided that the Maturity
<PAGE>
Date shall automatically be shortened to the Initial Borrowing Date plus 364
days in the event that the Borrowers have not obtained all of the Regulatory
Authorizations and delivered, if required by Lender, evidence of same to the
Lender by such date, unless the Borrowers have delivered an opinion of FCC
regulatory counsel, in form and substance acceptable to the Lender, to the
effect that one or more of such Required Approvals are no longer necessary), on
which date all then-outstanding Obligations under a Note shall be finally due
and payable.
Payment Date: The Initial Payment Date and the first day of each calendar
month thereafter.
<PAGE>
SCHEDULE 2.09 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
FEES
----
(a) Commitment Fee. Borrower shall pay Lender at the Closing Date a
--------------
commitment fee equal to one and one-half percent (1 1/2%) of the Commitment
Amount.
<PAGE>
SCHEDULE 2.11 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
ANNEX A TO LOAN AND SECURITY AGREEMENT
--------------------------------------
By executing this Annex to and forming a part of the Loan and Security
Agreement dated as of October 22, 1999 (the "Agreement"), by and among NTFC
Capital Corporation; Broadview Networks Holdings, Inc. ("BNH"); each direct or
indirect Subsidiary of BNH which signed the Agreement; and each Subsidiary which
subsequently becomes a party thereto pursuant to Section 2.11 of the Agreement
============
by executing this Annex, the undersigned represents and warrants that it is a
[FOREIGN or DOMESTIC] Subsidiary of BNH, joins as a party to the Agreement,
- ---------------------
assumes the obligations of a [FOREIGN/DOMESTIC] Borrower under the Agreement,
------------------
and confirms that it is bound by the terms and conditions of the Agreement,
including but not limited to the grant by the undersigned to Lender of a
security interest in all of its right, title and interest in and to the
Collateral as provided in the Agreement. (The execution of this instrument
constitutes a grant by the undersigned of a security interest in the
Collateral). The undersigned further acknowledges and agrees that (i) one or
more other Subsidiaries of BNH may become additional Borrowers under the
Agreement without the consent of any other Borrower by execution of a copy of
this Annex; (ii) the Lender is willing to extend certain credit to the
Borrowers, subject to the terms and conditions set forth in the Agreement,
including the condition that all Domestic Borrowers will be jointly and
severally liable for the payment of all Indebtedness owed by BNH or any Borrower
to Lender under the Agreement and the condition that all Foreign Borrowers will
be jointly and severally liable for the payment of all Indebtedness owed by any
Foreign Borrower to Lender under the Agreement; (iii) without this condition of
joint and several liability, Lender would not be willing to extend credit to any
Borrower; and (iv) the undersigned, the existing Borrowers, and the Subsidiaries
of BNH which may become additional Borrowers under the Agreement are (or will
be) related entities, and the undersigned expects to increase its business and
to benefit directly and indirectly through the use of the equipment to be
acquired by it and the other Borrowers with the proceeds of the loans to be made
pursuant to the Agreement.
The undersigned authorizes the Lender to attach this Annex to the Agreement
and, thereby, form a part of the Agreement. This Annex shall be construed in
accordance with and governed by the laws of the jurisdiction stated in Schedule
--------
2.02 to the Agreement under the caption "Governing Law," except to the extent
- ----
the internal laws of another jurisdiction are required to be applied in
connection with the exercise of rights pertaining to Collateral in that
jurisdiction. Capitalized terms used in this Annex without definition shall have
the meanings set forth in the Agreement to which this Annex is attached and form
a part.
This Annex may be executed in any number of counterparts (by facsimile
transmission or otherwise) and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all of such counterparts shall constitute but one and the same document.
IN WITNESS WHEREOF, the undersigned has executed this Annex to Loan and
Security Agreement by its duly authorized officer or representative this ____
day of __________, ____.
Borrower: _________________________________
- --------
By: ____________________________
Its: ____________________________
<PAGE>
SCHEDULE 2.11(b) TO
-------------------
LOAN AND SECURITY AGREEMENT
---------------------------
ADDITIONAL SUBSIDIARY INFORMATION
---------------------------------
Name
- ----
Jurisdiction of Formation
- -------------------------
Taxpayer Identification Number
- ------------------------------
Principal Place of Business
- ---------------------------
Location of Collateral Owned Directly
- -------------------------------------
<PAGE>
SCHEDULE 4.04 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
REQUIRED CONSENTS
-----------------
The transactions contemplated by this Agreement must be approved by the New York
Public Service Commission. The following applications for such Approval were
filed on September 27, 1999 and are pending:
1. Joint Petition of Coaxicom, Inc., and Community Networks, Inc. for
Approval Nunc Pro Tunc of Transfer of Assets (filed 9/27/99); and
2. Joint Petition of Coaxicom, Inc., and Community Networks, Inc. for
Authority to Enter Inter Secured Financing Agreement (filed 9/27/99)
<PAGE>
SCHEDULE 4.05 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
REGULATORY AUTHORIZATIONS
-------------------------
The transactions contemplated by this Agreement must be approved by the New York
Public Service Commission. The following applications for such Approval were
filed on September 27, 1999 and are pending:
1. Joint Petition of Coaxicom, Inc., and Community Networks, Inc. for
Approval Nunc Pro Tunc of Transfer of Assets (filed 9/27/99); and
2. Joint Petition of Coaxicom, Inc., and Community Networks, Inc. for
Authority to Enter Inter Secured Financing Agreement (filed 9/27/99)
<PAGE>
SCHEDULE 4.07 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
RESTRICTIONS ON LOANS
---------------------
1. Under the Stockholders Agreement among BNH (formerly known as Coaxicom,
Inc.) Baker Communications Fund, L.P., Vern M. Kennedy, Terrence J.
Anderson, Philip B. Smith, Tracey W. Korman, and those parties listed on
Schedule I to the (i) Series A Preferred Stock Purchase Agreement (the
"Series A Holders") dated as of January 29, 1998, by and among BNH and the
Series A Holders and (ii) Series B Preferred Stock Purchase Agreement (the
"Series B Holders") dated as of September 9, 1998, by and among BNH and the
Series B Holders, BNH may not incur any debt or enter into any commitments
to incur debt without the prior written approval of at least a majority of
the then outstanding shares held by All Preferred Holders (as defined in
such Shareholders Agreement). BNH has obtained the written approval of at
least a majority of the outstanding shares held by All Preferred Holders to
BNH's execution of this Agreement and the incurrence of the Obligations
thereunder.
2. Under the Certificate of Incorporation of BNH, BNH may not, without the
affirmative vote or consent of the holders of a majority of the shares of
(i) Series A Preferred Stock and Series B Preferred Stock then outstanding
(voting or consenting, as the case may be, together as one class ) and (ii)
Series C Preferred Stock and Series D Stock then outstanding (voting or
consenting, as the case may be, together as one class), encumber, in one
transaction or a series of related transactions, all or substantially all
of the assets of BNH and its subsidiaries on a consolidated basis.
<PAGE>
SCHEDULE 4.08 TO LOAN AND SECURITY AGREEMENT
---------------- ---------------------------
FINANCIAL STATEMENTS
--------------------
[Separately provided]
<PAGE>
SCHEDULE 4.12 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PENDING LITIGATION
------------------
None
<PAGE>
SCHEDULE 4.25 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
UCC FILING OFFICES
------------------
[To be provided by Lender's counsel]
<PAGE>
SCHEDULE 4.26 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PRINCIPAL OFFICES AND LOCATION OF COLLATERAL
--------------------------------------------
Broadview Networks Holdings's Chief Executive Office and that of each of its
Subsidiaries, which are Borrowers, is listed on Schedule 1:
Locations of Collateral:
See attached list
<PAGE>
SCHEDULE 4.29 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
ASSUMED NAMES
-------------
1. BNH changed its name from "Coaxicom, Inc." to "Broadview Networks Holdings,
Inc." on October 5, 1999. Coaxicom was also authorized to do business in
New York under the Name "Coaxicom - DE."
2. BNI changed its name from "Community Networks, Inc." to "Broadview
Networks, Inc." on October 6, 1999.
3. BNI of Massachusetts changed its name from "Community Networks of
Massachusetts, Inc." to "Broadview Networks of Massachusetts, Inc. on
October 5, 1999.
<PAGE>
SCHEDULE 4.30 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
TRANSACTIONS WITH AFFILIATES
----------------------------
1. Employment agreements with employees entered into in the ordinary course of
business of such Borrower that do provide for (i) annual base compensation,
together with any other annual base compensation under any other employment
agreements with other Borrowers, not in excess of $250,000 and (ii)
additional compensation subject to the consent of Lender, such consent not
to be unreasonably withheld
<PAGE>
SCHEDULE 4.31 TO
-----------------
LOAN AND SECURITY AGREEMENT
---------------------------
NTI PURCHASE AGREEMENT
----------------------
Agreement dated as of March 30, 1999, as amended, between Broadview Networks,
Inc. (f/k/a Community Networks, Inc.) and Northern Telecom Inc.
<PAGE>
SCHEDULE 6.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
POST-CLOSING ITEMS
------------------
1. Regulatory Authorizations: the approval of the transactions contemplated
by this Agreement by the New York Public Service Commission.
<PAGE>
SCHEDULE 7.07 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
INSURANCE
---------
[See attached certificate(s)]
<PAGE>
SCHEDULE 7.15 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
FINANCIAL COVENANTS
-------------------
BROADVIEW NETWORK HOLDINGS, Inc.
Financial Covenants
All accounting and financial terms herein shall be deemed to include
references to consolidated and consolidating principles, and covenants,
representations and agreements with respect to the Borrowers and their
properties and activities shall be deemed to refer to BNH and its
consolidated Subsidiaries collectively, provided, however, the results of
operations and activities of the Unrestricted Subsidiary shall be excluded
for purposes of determining BNH's compliance with the covenants set forth in
Schedule 7.15.
-------------
. Minimum Revenues: BNH shall have revenues (calculated at the end of each
fiscal quarter as the sum of the revenue of the last four consecutive
fiscal quarters then ending) equal to or greater than the level projected
for the sum of such fiscal quarters in the Projected Revenue Table below
(amounts in table expressed as $millions).
Projected Revenue Table
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Date 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 N/A 43.5 62.5 72.5 83.8 93.9
- ------------------------------------------------------------------------------------------------------
June 30 N/A 51.2 65.0 75.2 86.5 96.3
- ------------------------------------------------------------------------------------------------------
September 30 N/A 56.7 67.4 78.8 88.4 98.7
- ------------------------------------------------------------------------------------------------------
December 31 33.6 60.1 69.9 80.9 91.6 101.2
- ------------------------------------------------------------------------------------------------------
</TABLE>
. Minimum Gross Margins: BNH shall maintain Minimum Gross Margins
(calculated at the end of each fiscal quarter) equal to or greater than
those set forth below (amounts expressed as a percentage of actual
revenues for the fiscal quarter).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Date 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 N/A 14.0 36.0 36.5 37.0 38.0
- ------------------------------------------------------------------------------------------------------
June 30 N/A 21.0 36.0 36.5 37.0 38.0
- ------------------------------------------------------------------------------------------------------
September 30 N/A 31.0 36.5 36.5 37.0 38.0
- ------------------------------------------------------------------------------------------------------
December 31 10.0 35.5 36.5 36.5 37.0 38.0
- ------------------------------------------------------------------------------------------------------
</TABLE>
. Fixed Charge Coverage Ratio: Borrower shall maintain a Fixed Charge
Coverage Ratio of not less than 1.25:1. For purposes of calculating BNH's
Fixed Charge Coverage Ratio for such four fiscal quarter periods ending on
or before September 30, 2001, (i) EBITDA shall include all unrestricted
cash on BNH's balance sheet at the beginning of such four fiscal quarter
period, plus net proceeds received on amounts borrowed during such four
fiscal quarter period plus any cash equity received during such four
fiscal quarter period, and (ii) Debt Service shall include capital
expenditures paid with proceeds of Indebtedness.
<PAGE>
. Leverage: BNH shall at all times maintain a Leverage Ratio not greater
than 1.05:1. This ratio shall be calculated as a condition to each funding
of an Advance.
<PAGE>
SCHEDULE 8.01 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PERMITTED INDEBTEDNESS
----------------------
1. Borrowers may incur Indebtedness consisting of (i) Excluded Indebtedness,
and (ii) other Indebtedness if immediately before, and after giving effect
to the incurrence, of such Indebtedness BNH is in compliance with its
financial covenants required by Schedule 7.15.
--------------
<PAGE>
SCHEDULE 8.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PERMITTED SPECIFIC ENCUMBRANCES
-------------------------------
1. Liens on property of a Borrower not constituting Collateral which are
granted to secure Indebtedness other than Indebtedness defined in clauses
(i) and (ii) of the definition of Excluded Indebtedness.
2. Liens evidenced by any of the following UCC searches attached hereto.
<PAGE>
Exhibit 10.27
WAIVER AGREEMENT NO. 1
TO
SECOND AMENDED AND RESTATED
LOAN AND
SECURITY AGREEMENT
THIS WAIVER AGREEMENT NO. 1 dated as of December 31, 1999 (the "Waiver
Agreement No. 1), to the Loan and Security Agreement dated as of October 22,
1999 (as may be further amended, supplemented, amended and restated or otherwise
modified from time to time, the "Loan Agreement"), is among Broadview Networks
Holdings, Inc., a Delaware corporation ("BNH"), Broadview Networks, Inc., a Now
York corporation, and Broadview Networks of Massachusetts, Inc., a Delaware
corporation, each with its principal place of business at 45-18 Court Square,
Ste. 403, Long Island City, NY 11101, and the Subsidiaries of BNH which
subsequently become a party to the Loan Agreement pursuant to Section 2.11 of
the Loan Agreement (individually a "Borrower" and collectively the "Borrowers"),
and NTFC Capital Corporation, a Delaware corporation (the "Lender").
WITNESSETH:
WHEREAS, the Borrowers have requested that certain provisions of the Loan
Agreement be waived in certain respects as set forth herein; and
WHEREAS, the Lender is willing to waive such provisions of the Loan
Agreement and to take or permit the taking of certain actions as set forth
herein, but only on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used in this Waiver Agreement
No. 1, including its preamble and recitals, have the meanings
<PAGE>
provided in the Loan Agreement.
ARTICLE II
WAIVER OF LOAN AGREEMENT
AS OF THE WAIVER EFFECTIVE DATE
Effective on (and subject to the occurrence of) the Waiver Effective Date,
the provisions of the Loan Agreement referred to below are hereby waived in
accordance with this Article II. Except as expressly so waived, the Loan
Agreement shall continue in full force and effect in accordance with its terms.
SECTION 2.1. Limited Waiver of Article VII (Covenants). ArticIe VII of the
Loan Agreement is hereby waived to the extent, but only to the extent, necessary
so that the Borrower's obligation to comply with the financial covenant of a
minimum Fixed Charge Coverage Ratio set forth in Schedule 7.15 of the Loan
Agreement is hereby waived for the period measured ending December 31,1999.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Waiver Effective Date. This Waiver Agreement No. 1 shall
become effective as of the date fist above written (the "Waiver Effective
Date"), when all of the conditions set forth in Sections 3.1.1 through 3.1.2
shall have been satisfied:
SECTION 3.1.1. Execution of Counterparts. The Lender Shall have received
counterparts of this Waiver Agreement No. 1 duly executed by each Borrower and
the Lender.
SECTION 3.1.2. Compliance with Warranties; No Default etc. The Lender
shall have received from a Responsible Officer of BNH a certificate, dated the
date first above written, stating that
(a) the representations and warranties of the Borrowers set forth
in the Loan Agreement and the representations and warranties of
the Borrowers set forth in each of the other Loan Documents, in
each case as waived in accordance herewith, are true and correct
in all material respects with the same effect as if then made
(unless stated to relate solely to an earlier date, in which case
such representations and warranties were true and correct as of
such earlier date); and
<PAGE>
(b) no Default or Event of Default has occurred and is
continuing.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Cross References. References in this Waiver Agreement No. 1 to
any article or section are, unless otherwise specified, to such article or
section of this Waiver Agreement No. 1.
SECTION 4.2. Instrument Pursuant to Loan Agreement. This Waiver Agreement
No. 1 is a Loan Document executed pursuant to the Loan Agreement and shall
(unless otherwise expressly indicated therein) be construed, administered, and
applied in accordance with all of the terms and provisions of the Loan
Agreement. Except to the extent otherwise provided in the Loan Agreement, this
First Amendment shall be governed by and construed in accordance with the laws
of the State of New York. Any term or provision of and any waiver effected by
this Waiver Agreement No. 1 may be modified in any manner by an instrument in
writing executed by the Borrowers and the Lender. Except as expressly waived
hereby, all of the representations, warranties, terms, covenants and conditions
of the Loan Agreement shall remain unmodified and unwaived. The waivers set
forth herein shall be limited precisely as provided for herein to the provisions
expressly waived herein and shall not be deemed to be a waiver of, amendment of,
consent to or modification of any other term or provision of any other Loan
Document or of any transaction or further or future action on the part of any
Borrower which could require the consent of the Lender under the Loan Agreement.
SECTION 4.3. Successors and Assigns. This Waiver Agreement No. 1 shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 4.4. Counteparts. This Waiver Agreement No. 1 may be executed by
the parties hereto in several counterparts which shall be executed by the
Borrowers and the Lender, as the case may be, all of which shall be deemed to be
an original and which shall constitute together but one and the same agreement.
SECTION 4.5. Event of Default. It is understood and agreed that any breach
of any representation or warranty or covenant contained herein shall constitute
an Event of Default.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver Agreement
No. 1 to be executed by the respective officers hereunder duly authorized as of
the day and year first above written.
BROADVIEW NETWORKS HOLDINGS,
INC.
BY: /s/ Terrence J. Anderson
TITLE: Executive Vice President - Finance
BROADVIEW NETWORKS INC.
BY: /s/ Terrence J. Anderson
TITLE: Executive Vice President
BROADVIEW NETWORKS OF
MASSACHUSETTES, INC.
BY: /s/ Terrence J. Anderson
TITLE: Executive Vice President -
Finance
LENDER:
------
NTFC CAPITAL CORPORATION
BY: /s/ Henry Cruz
TITLE: Vice President - Portfolio Mgr.
<PAGE>
EXHIBIT 10.28
Community NetWorks, Inc.
MPA
MASTER PURCHASE AGREEMENT
BETWEEN
COMMUNITY NETWORKS, INC.
AND
NORTHERN TELECOM INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Articles:
- --------
Article 1 - Definitions
Article 2 - Scope of Agreement
Article 3 - Placement of Orders
Article 4 - Price and Payment
Article 5 - Shipment, Title and Risk of Loss
Article 6 - Testing, Turnover and Acceptance
Article 7 - Order Cancellation
Article 8 - Warranty
Article 9 - Nortel's Additional Obligations
Article 10 - Software License
Article 11 - Liability for Bodily Injury, Property Damage and Patent
Infringement
Article 12 - Remedies and Limitation of Liability
Article 13 - Term and Termination
Article 14 - Confidentiality
Article 15 - Miscellaneous
2
<PAGE>
Exhibits:
- --------
Exhibit A - Product Annexes including Lists of Product and Prices
Exhibit B - Master Services Agreement
3
<PAGE>
MASTER PURCHASE AGREEMENT
This Master Purchase Agreement ("Agreement"), effective as of the 30 day of
March, 1999, is entered into by and between Community NetWorks. Inc.
(hereinafter "Company"), a New York corporation with offices located at 45-18
Court Square, Suite 502, Long Island City, New York 11101, and Northern Telecom
Inc. (hereinafter "Nortel"), a Delaware corporation with offices located at 2350
Lakeside Boulevard, Richardson, Texas 75082-4399.
WHEREAS, Company is engaged in providing communication services and products,
and providing and maintaining public and private communication networks; and
WHEREAS, Nortel, in conjunction with Nortel Affiliates, is engaged in the
design, development, manufacture and sale of various products and offers
services associated with such products, which can be used in connection with the
communication services, products and networks of Company; and
WHEREAS, Company wishes to be able to purchase and/or license various products
and services for delivery and installation in the United States from Nortel,
which Company will use for its own internal use and not for resale or as stock
in trade, and Nortel is willing to sell and/or license such products to Company,
subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth, the parties agree as follows:
ARTICLE 1. DEFINITIONS
The following words shall have the meanings set forth below. Words in the
singular shall be held to include the plural and vice versa, and words of gender
shall be held to include the other gender as the context requires.
1.1 "Acceptance" shall mean that either (i) Company has indicated that an
ordered Product is operating substantially in accordance with the applicable
Specification; or (ii) an ordered Product has been deemed to be accepted
pursuant to criteria set forth in Article 6.
1.2 "Applications" shall mean any program, product, service, development
or invention developed by a party using the Building Blocks, including any
modified or created Building Blocks, created by Company.
1.3 "Building Block(s)" shall mean those Software files provided by Nortel
with
4
<PAGE>
Modifiable Software that are manipulatable or which may be created by Company
with such Modifiable Software and which can be used, created or manipulated by
Company to create Applications.
1.4 "Confidential Information" shall mean all information, including
without limitation, specifications, drawings, documentation, know-how and
pricing information, of every kind or description which may be disclosed by one
party to the other party in connection with this Agreement; provided that, the
disclosing party shall clearly mark all such information disclosed in writing as
the confidential or proprietary property of the disclosing party and, in the
case of oral disclosure, the disclosing party shall identify the confidential or
proprietary nature of any such information at the time of such oral disclosure
and shall provide a written summary (labeled as confidential or proprietary) of
the orally disclosed information to the recipient within fifteen (15) business
days following such disclosure.
1.5 "Customer" shall mean entities to whom Company provides communication
services as a result of Company's internal use of the Products.
1.6 "Customer Information" or "CT" shall mean the information provided by
Company to Nortel in order for Nortel to engineer and/or provide the components
of Systems.
1.7 "Documentation" shall mean the documents which Nortel generally makes
available to its customers containing descriptive, operating, installation,
engineering and maintenance information for Products, including Specifications,
as such documents may be amended from time to time.
1.8 "Effective Date" shall mean the date this Agreement becomes effective
which shall be the date first identified above.
1.9 "Extension" shall mean Hardware and/or Software which is engineered by
Nortel and added to an Initial System after the Turnover Date of the Initial
System.
1.10 "Hardware" shall mean, individually and collectively, the Nortel
equipment listed in the Product Annexes of Exhibit A, and shall be deemed to
include any equipment which Nortel adds to its generally available Hardware
price lists or so identifies to Company in a Quotation.
1.11 "Hazardous Material" shall mean any pollutants or dangerous, toxic or
hazardous substances (including without limitation, asbestos) as defined in, or
pursuant to the OSHA Hazard Communication Standard (29 CFR Part 1910, Subpart
Z), the Resource Conservation and Recovery Act (15 USC Section 6901, et seq.),
the Toxic Substances Control Act (15 USC Section 2601, et
5
<PAGE>
seq.), the Comprehensive Environmental Response Compensation and Liability Act
(42 USC Section 9601, et seq.), and any other federal, state or local
environmental law, ordinance, rule or regulation or equivalent law or regulation
in the location to which the Product is shipped by Nortel.
1.12 "Initial System" shall mean Hardware and Software, inclusive of a
central processor unit, included in a configuration which Nortel identifies as a
System and which is initially engineered by Nortel and installed at a specific
Installation Site.
1.13 "Installation Site" shall mean the location or facility identified in
an Order at which the applicable Products will be installed.
1.14 "Licensed Software" shall mean the Software which Company has licensed
pursuant to this Agreement.
1.15 "Merchandise" shall mean any Hardware or other parts or components
which are not ordered as part of a System and with respect to which no
engineering, installation or other Services are provided by Nortel.
1.16 "Modifiable Software" shall mean Software, or a portion of Software
that is identified as such by Nortel in its applicable Documentation, which
Company may have certain rights to modify and potentially create Applications or
Building Blocks in accordance with the applicable Documentation.
1.17 "Non-Licensed Software" shall mean Software for which Company has not
yet obtained a license nor paid applicable right to use fees, but which Software
may be included with Software loads delivered to Company hereunder.
1.18 "Nortel Affiliate" shall mean Nortel's parent corporation, Northern
Telecom Limited and any corporation controlled directly or indirectly by
Northern Telecom Limited through the ownership or control of shares or other
securities in such corporation.
1.19 "Order" shall mean a numerically controlled purchase authorization
document issued by Company to Nortel specifying the types and quantities of
Products and Services to be furnished by Nortel,
1.20 "Product(s)" shall mean, individually and collectively, the Hardware,
Software, and Documentation.
1.21 "Product Annex" shall mean, with respect to a specific Product,
additional or
6
<PAGE>
modified terms and conditions as set forth in Exhibit A, inclusive of but not
limited to those that may apply to any Third Party Hardware or Third Party
Software, unique to such Product.
1.22 "Quotation" shall mean a written budgetary or firm price quotation
issued by Nortel to Company for the supply of any Products or Services pursuant
to this Agreement.
1.23 "Service(s)" shall mean, individually and collectively, any of the
services set forth in this Agreement that Company may acquire from Nortel, such
as but not limited to maintenance, engineering, installation, training, data
management, program management, project management, commissioning, testing,
technical assistance Service with respect to Products and installation, and
consulting.
1.24 "Services Software" shall mean that Software and related documentation
made available by Nortel which may be used by Company for estimation, planning
or information purposes.
1.25 "Ship Date" shall mean the date as agreed to by the parties, on which
a Product ordered by Company is scheduled to be shipped from Nortel's facility
or, in the case of Software which is downloaded, the date upon which such
Software is to be downloaded to the System; however, Ship Date shall not mean
the date on which Non-Licensed Software is activated.
1.26 "Software" shall mean (i) computer programs in object code form or
firmware which (a) are owned by, or licensed to, Nortel, (b) reside in Product
memories, tapes, disks or other media, and (c) provide basic logic operating
instructions and user-related application instructions; and (ii) documentation
associated with such computer programs, which may be furnished by Nortel to
Company from time to time, including both Licensed Software and Non-Licensed
Software, but in no event shall Software include source code.
1.27 "Software Release" shall mean Software or revisions to Software
containing problem fixes, new features and/or enhancements.
1.28 "Specifications" shall mean with respect to any Product the
specifications and/or practices set forth in Northern Telecom Practices ("NTPs")
or similar documents published by Nortel which Nortel identifies as the standard
performance specifications and practices for such Product.
1.29 "System" shall mean a configuration of Hardware and Software providing
a specified functionality and includes an Initial System and its Extensions, if
any.
7
<PAGE>
1.30 "Third Party Hardware" shall mean any hardware not of Nortel's
manufacture which shall be deemed to include any such hardware which Nortel adds
to its generally available Third Party Hardware price lists or so identifies to
Company in a Quotation.
1.31 "Third Party Software" shall mean any Software not owned by Nortel
which is included within Licensed Software or Non-Licensed Software.
1.32 "Turnover" shall mean, with respect to any System installed by Nortel,
that Nortel has completed its standard manufacturing test procedures, as
applicable, and that the System is ready for acceptance testing by Company.
1.33 "Turnover Date" shall mean, with respect to any Product installed by
Nortel hereunder, the date on which Nortel provides a notice of Turnover to
Company.
ARTICLE 2. SCOPE OF AGREEMENT
2.1 This Agreement sets forth the terms and conditions under which Company
may order Products and/or Services from Nortel. Company may use the Products
itself, including use to provide services to others, subject to the terms and
conditions of this Agreement. Company expressly represents that it is not
buying Product for resale. All Products shall be delivered and installed in the
United States.
2.2 To the extent any terms and conditions set forth in this Agreement are
inapplicable to a Product, the applicable terms and conditions and any
additional terms and conditions for such Product shall be set forth in a Product
Annex.
2.3 If specified in a Product Annex as a requirement, Company shall,
fifteen (15) days prior to each calendar quarter, submit to Nortel a
consolidated non-binding forecast of Products by geographic region, that Company
anticipates purchasing or licensing over the next four (4) calendar quarters.
In addition to the type, quantity and cumulative dollar amount of Products, the
parties may agree upon additional information to be included in such forecast.
2.4 All references to prices, charges, fees or other amounts herein shall
be in U.S. dollars and all documentation, correspondence and communication shall
be in the English language.
ARTICLE 3. PLACEMENT OF ORDERS
3.1 To order Products and/or Services, Company shall submit to such person
as Nortel shall designate, an Order which shall at a minimum specify the
following, if applicable:
8
<PAGE>
(i) the types and quantities of Products and Services to be
furnished by Nortel;
(ii) the applicable prices, charges and fees with respect to such
Products and Services;
(iii) the location or facility to which the Products are to be
delivered;
(iv) the incorporation by reference of this Agreement;
(v) the Installation Site, if known;
(vi) the requested Ship Date and Turnover Date of the System; and
(vii) any other information required under this Agreement to be
included in an Order.
3.2 All purchases pursuant to this Agreement shall be made by means of
Orders issued from time to time by Company and accepted by Nortel in writing
within fifteen (15) days after receipt of the Order. In the event that Nortel
fails to provide its acceptance of an Order in writing within such fifteen (15)
day period, such Order shall be deemed to be accepted; subject to Section 3.3.
Nortel shall have the right to reject any Order, or the applicable portion of
such Order, placed hereunder where Company has a separate agreement with Nortel
for the provision of the Products or Services requested in such Order or the
Order is otherwise not in accordance with this Agreement.
3.3 All Orders issued by Company pursuant to this Agreement shall refer to
and specifically incorporate this Agreement by reference and the terms and
conditions herein shall govern the transaction resulting from such Order;
provided that such Order is accepted or deemed accepted by Nortel. Additional
or conflicting terms and conditions set forth in or otherwise incorporated into
Orders issued by Company, or in any prior Quotations, acknowledgments or other
related documentation issued by any party, shall be considered null and void and
shall have no force or effect. Any additional or conflicting terms and
conditions set forth in or otherwise incorporated into an Order shall, upon
express acceptance of the same in writing by Nortel, and for such Order only,
supersede the terms and conditions contained in this Agreement, including all
Exhibits attached hereto, which are in conflict, but only to the extent of such
conflict.
3.4 Company may at any time request additions, alterations, deductions or
deviations to an Order, subject to the condition that such changes and any
adjustments resulting from such changes, including, but not limited to,
schedules and prices, shall be mutually agreed upon and, if so agreed,
subsequently detailed in a written revision to the applicable Order ("Change
Order").
9
<PAGE>
Company acknowledges that a premium charge may be applied by Nortel should
Nortel agree to process a Change Order outside of its standard Order processing
cycle for a Product or in the event that a Change Order requires an additional
amount of work (such as engineering) to be undertaken to comply with such
changes.
3.5 If Company desires to receive a budgetary or firm Quotation from
Nortel for a Product or Service, Company shall submit such request in writing to
Nortel's Director. Commercial Marketing, or such other person as designated by
Nortel. The request for Quotation shall include the information listed in
Section 3.1, as applicable.
3.6 Nortel shall respond in writing to requests for budgetary Quotations
and requests for firm Quotations. Unless otherwise specified in the firm
Quotation, such firm Quotation shall be valid for ninety (90) days from the date
of such Quotation. Budgetary Quotations shall be provided for information and
planning purposes only and shall not be considered to be a final or firm
statement binding on either party. The Quotations shall include the following
information:
(i) Budgetary Quotations
(a) preliminary Hardware and Software lists;
(b) the estimated charges for the Products;
(c) the estimated charges for Services requested; and
(d) any other information requested by Company.
(ii) Firm Quotations
(a) the price to be paid by Company for the Products, after
applying the applicable discounts, if any;
(b) fixed charges for Services requested;
(c) complete Hardware and Software lists and project schedules;
and
(d) any other information requested by Company.
3.7 The Ship Date shall be based on Nortel's standard intervals for the
applicable Product; however, the parties shall always mutually agree on the Ship
Date and take into consideration any unique aspect of the applicable project.
3.8 Orders may be issued either electronically, such as through electronic
data interchange, or via traditional manual methods, as mutually agreed to by
the parties.
ARTICLE 4. PRICE AND PAYMENT
4.1 Nortel shall charge Company for each Product and/or Service ordered by
Company
10
<PAGE>
in accordance with the prices set forth in each accepted Order, which prices
shall be based upon prices identified in one of (i) a Product Annex; (ii) a Firm
Quotation; (iii) Nortel's then current prices; or (iv) as specified elsewhere in
this Agreement or as otherwise mutually agreed in writing.
4.2 For all Orders, Nortel shall invoice Company for Products and Services
as follows, unless otherwise agreed to in writing:
(i) for Systems, whether or not installation has been ordered from
Nortel, one hundred percent (100%) of the price of the Products on the
Ship Date, one hundred percent (100%) of the price of any Services
upon the date of completion of such Services, except with respect to
installation Services, if any, which shall be invoiced one hundred
percent (100%) upon Turnover. Except for installation Services, for
Services that have a duration of more than one (1) month to complete,
Nortel may invoice Company monthly for that portion of such Services
which have been performed as of such invoicing date];
(ii) for Merchandise or Documentation provided on a furnish-only
basis, one hundred percent (100%) of the price on the Ship Date; and
(iii) for Orders covering Services only, one hundred percent (100%)
of the price for such Services following completion of performance,
except for recurring support Services which shall be billed quarterly
in advance unless otherwise agreed. Some Services may be subject to
monthly invoicing as set out in a Product Annex or separate Services
agreement. To the extent such Services are to be invoiced differently
than set out in this paragraph (iii), such differences shall be set
forth in the applicable Product Annex or separate Services agreement
and such provisions shall take precedence.
4.3 Each invoice shall be paid in full within thirty (30) days after the
date of such invoice. In the event that Company does not pay an invoice in full
within such thirty (30) day period, then Nortel may charge Company interest on
the outstanding portion of such invoice, from day thirty one (31) forward, at
the rate of one and one half percent (1.5%) simple compound interest per month,
or such lesser amount as may be the maximum permissible rate under applicable
law, until such time as the outstanding invoice is paid. In addition, Company
agrees to pay all collection costs and reasonable legal fees incurred by Nortel
as a result of late payment or non-payment by Company.
11
<PAGE>
ARTICLE 5. SHIPMENT, TITLE AND RISK OF LOSS
5.1 Prior to the Ship Date, Company shall have the right to reschedule any
pending Orders; provided that (i) a minimum period of notice prior to such Ship
Date is given to Nortel by Company in accordance with the applicable Product
Annex; and (ii) the new Ship Date is within ninety (90) days of the original
Ship Date. However, each Order may only be rescheduled once. Company shall
reimburse Nortel for any storage fees, insurance and demurrage costs incurred
with respect to such rescheduled Orders.
5.2 Risk of loss and damage to Products shall pass to Company upon
delivery to the loading dock at the Installation Site or other delivery location
specified by Company in an Order. Company shall keep such Products fully insured
for the total amount then due Nortel for such Products. Company shall pay
transportation charges, including insurance, associated with the shipment of
Products; provided however, that if the parties agree, Nortel shall prepay
transportation charges, and insurance for delivery of Products to the
Installation Site or other delivery location or other designated receiving point
as specified in an Order. The charges therefor shall be invoiced by Nortel and
paid by Company to Nortel in accordance, with Article 4 above.
5.3 Good title to Hardware furnished hereunder, free and clear of all
liens and encumbrances, shall vest in Company upon full payment to Nortel of the
total amount payable by Company for such Hardware and any related Licensed
Software or Services ("Total Fee") furnished by Nortel in connection with such
Hardware. Prior to payment of the Total Fee for the Products and Services in an
Order, Company shall not sell or lease the Hardware, or allow any liens or
encumbrances to attach to the Hardware or Software, or remove the Hardware or
Software from the Installation Site without the prior written consent of Nortel,
such consent not to be unreasonably withheld.
5.4 If Company notifies Nortel prior to a Ship Date that Company does not
wish to receive such Product on the Ship Date, or the Installation Site or other
delivery location is not prepared in sufficient time for Nortel to make delivery
in accordance with such date, or Company fails to take delivery of any portion
of the Products in an Order when shipped, Nortel may place the applicable
Products in storage. In that event, Company shall be liable for all additional
costs thereby incurred by Nortel. Delivery by Nortel of any Products to a
storage location as provided above shall be deemed to constitute delivery of the
Products to Company for purposes of this Agreement, including, without
limitation, provisions for payment, invoicing, passage of risk of loss, and
commencement of the warranty period.
5.5 Until the Total Fee is paid, Company grants to Nortel and/or its
agents a purchase money security interest in the Products in an Order and their
proceeds or such other similar
12
<PAGE>
protection as may be available in the applicable jurisdiction. Company shall
cooperate with Nortel in preserving and perfecting Nortel's security interest in
the Products and Company shall promptly (i) execute and deliver to Nortel such
financing statements as Nortel may require; and (ii) execute and deliver to
Nortel such other agreements, documents and instruments as Nortel may require to
perfect and maintain the validity, effectiveness and priority of the security
interest created or intended to be created by this Agreement.
5.5.1 Company authorizes Nortel to file one or more financing or
continuation statements and amendments thereto, relating to all or any part of
the Products in an Order without signature of the Company where permitted by
law. A carbon, photographic or other reproduction of any financing statement
covering the Products or any part thereof shall be sufficient as a financing
statement and may be filed as a financing statement.
5.6 Company shall provide Nortel or its subcontractors with access to
its Installation Sites or other Company facilities during the times specified by
Nortel and as are reasonably necessary for Nortel to perform its obligations
hereunder. Nortel shall comply with Company's reasonable site and security
regulations of which Nortel is informed by Company.
5.6.1 All sites at which the Products shall be delivered or installed
shall be prepared by Company in accordance with Nortel's standards, including,
without limitation, environmental requirements. Prior to and during
installation, Company shall ensure the timely and adequate delivery,
installation and functioning of the electrical and communications connections
and other environmental requirements, including but not limited to, HVAC
systems, specified in Nortel's instructions, Specifications, Documentation or in
a Product Annex.
5.6.2 Company shall provide reasonable working space and facilities,
including heat, light, ventilation, telephones, electrical current, waste
removal and other necessary utilities, for use by Nortel personnel performing
installation or other Services, and adequate secure storage space, if required
by Nortel, for Products and materials. Company shall also provide adequate
security against theft, damage or other loss for the Products while on Company's
Installation Site or other delivery location specified by Company.
5.6.3 Company shall obtain all necessary governmental permits applicable
to Company in connection with the installation, operation, and maintenance of
Products furnished hereunder, excluding any applicable permits required in the
normal course of Nortel's doing business. Any information which Nortel
reasonably requests from Company and which is necessary for Nortel to properly
install or maintain the Products shall be provided by Company to Nortel in a
timely fashion and in a form reasonably specified by Nortel.
13
<PAGE>
ARTICLE 6. TESTING, TURNOVER AND ACCEPTANCE
6.1 If installation Services are ordered by Company, Nortel shall, upon
completion of such installation, test the Products in accordance with Nortel's
Turnover procedures to verify that such Products function substantially in
accordance with the applicable Specifications. Upon completion of such
verification, Nortel shall provide to Company a written notice of Turnover.
Company shall be permitted an opportunity to have an appropriately qualified
individual in attendance to observe the performance of such tests, however, the
absence of such Company individual for any reason shall not invalidate the tests
nor be a reason for Company to withhold Acceptance.
6.2 Within ten (10) business days after the Turnover Date, Company shall
either accept the Product in writing by execution of a notice of Acceptance, or
notify Nortel in writing, specifying in reasonable detail those particulars in
which, in Company's opinion, the Product is not in material conformance with the
Specifications. If Acceptance does not occur within such ten (10) days after
the Turnover Date and Company has not indicated to Nortel in writing its basis
for not accepting such Product, then Acceptance shall be deemed to have
occurred.
6.3 If Nortel does not install Products furnished hereunder, Nortel shall,
prior to delivery of the Products, perform such factory tests as Nortel
determines to be appropriate in order to confirm that such Products perform
substantially in accordance with the applicable Specifications. Company shall
be deemed to have accepted the Products based upon such tests and Acceptance
shall be deemed to have occurred upon the Ship Date. In the event that Company
or any other entity intends to perform installation of Products, (except for
installation of Products which are not permitted to be installed other than by
Nortel, as specified in the applicable Product Annex or Documentation) Company
or such entity may be required to complete prerequisite training or
certification prior to Company being allowed to install such Products.
6.4 In the event that Company is utilizing any Product in a revenue-
generating capacity, Acceptance shall be deemed to have occurred without
limitation or restriction, upon the date of placement of such Product into
revenue-generating service.
6.5 Products, such as Merchandise, which are purchased separately from a
System, shall be deemed accepted upon the Ship Date. Services which are
purchased separately from a Product shall be deemed to be accepted upon
completion of such Services or upon specific milestones as may be identified in
a Product Annex.
6.6 Company shall not unreasonably withhold Acceptance. Nortel shall
correct any deficiencies identified by Company in the manner described in this
Article whereby such Products
14
<PAGE>
do not materially conform to the Specifications. When Nortel has corrected such
deficiencies, Company shall accept the Products in writing, Company's failure to
either accept or provide notice of non-conformance within the time frame from
the Turnover Date, as prescribed in Section 6.2, shall constitute Acceptance of
the Products.
6.7 Following Acceptance of Products, Company shall execute Nortel's
Acceptance notice, confirming Acceptance without any conditions, restrictions,
or limitations of any nature whatsoever.
6.8 Acceptance shall not be withheld or postponed due to:
(i) Deficiencies of such Products resulting from causes not
attributable to Nortel, such as, but not limited to (a) material
change or inaccuracy of Customer Information, (b) inadequacy or
deficiencies of any materials, information, facilities or services
provided directly or indirectly by Company and tested in conjunction
with the applicable Products, or spurious outputs from adjacent
material, or (c) other conditions external to the Products which are
beyond the limits specified by Nortel in the Specifications for the
Products; or
(ii) Minor deficiencies or shortages with respect to such Products
which are attributable to Nortel, but of a nature that do not prevent
operation of the Products in revenue-generating service.
6.9 With respect to any deficiencies of the type described in Section
6.8(i), Nortel shall at Company's request and expense assist Company in the
elimination or minimization of any such deficiencies. With respect to any
deficiencies or shortages as described in Section 6.8(ii), Nortel shall, at
Nortel's expense, correct any such deficiencies or shortages within thirty (30)
days of the date of Acceptance or as otherwise agreed by the parties.
6.10 In the event that Company notifies Nortel of non-acceptance of a
Product and Nortel personnel travels to the Installation Site to remedy such
non-acceptance and determines that non-acceptance is due to a deficiency of the
type described in Section 6.8(i), Nortel will invoice Company for Nortel's
investigation of the matter, consisting of the standard labor rate for Nortel's
personnel who travel to the Installation Site and the reasonable travel and
living expenses incurred by such personnel.
ARTICLE 7. ORDER CANCELLATION
7.1 If, prior to the Ship Date, Company cancels all or any part of an
Order, Company
15
<PAGE>
shall pay to Nortel a cancellation charge for the Products or each item of Third
Party Hardware or Third Party Software that has been canceled in accordance with
the schedule set forth in the applicable Product Annex.
7.2 Orders for Products that have been shipped may not be canceled.
Furthermore, Orders for Products which Nortel customizes in accordance with a
specific Company request may not be canceled.
ARTICLE 8. WARRANTY
8.1 Nortel warrants that for a period of twelve (12) months from the Ship
Date of a System, the Hardware contained in such System under normal use and
service will be free from defective material and faulty workmanship and shall
comply with the applicable Specifications. The warranty period for Merchandise
shall be ninety (90) days from the Ship Date of such Merchandise. The foregoing
warranties shall not apply to items normally consumed during operation of a
System such as, but not limited to, lamps and fuses.
8.2 Nortel warrants that any installation Services performed by Nortel
with respect to a System will be free from defects in workmanship for a period
of twelve (12) months from the completion date of such Services.
8.3 Nortel warrants that any Licensed Software shall function during the
warranty period of the Hardware with respect to which such Licensed Software is
furnished without any material, service-affecting, non-conformance to the
applicable Specifications. Licensed Software that is delivered separately from
Hardware is warranted for a period of twelve (12) months from the applicable
Ship Date. If the Licensed Software fails to so function, Company's exclusive
remedy and Nortel's sole obligation under this warranty is for Nortel to correct
such failure through, at Nortel's option, the replacement or modification of the
Licensed Software or such other actions as Nortel reasonably determines to be
appropriate, all within a reasonable time having regard to all of the
circumstances and failing which the parties agree to negotiate a commercially
reasonable solution. Any modification to the Software not performed by Nortel,
other than with respect to Modifiable Software, shall void this warranty.
8.4 If Hardware is not free from defects in material or workmanship and
fails to comply with the applicable Specifications during the warranty period,
Nortel will repair, replace or modify at its sole option the defective Hardware
so that it substantially complies with the applicable Specifications. The
warranty service shall be performed at the Installation Site or Nortel's
facility as determined by Nortel. If Nortel is unable to repair or modify the
defective Hardware within a reasonable period of time so that such Hardware
conforms to the applicable Specification, Nortel
16
<PAGE>
shall replace the defective Hardware with Hardware that conforms to such
Specifications. Replacement Hardware may be new or reconditioned at Nortel's
option. Nortel's sole obligation and Company's exclusive remedy under the
warranty provisions of this Article with respect to Hardware and installation
Services shall be limited to repair, modification or replacement of the
defective Hardware or correction of the defective installation Services.
8.5 Notwithstanding the foregoing, the warranty period of Hardware which
has been subject to repair or replacement by Nortel shall commence upon the Ship
Date of the repaired or replacement Hardware to Company and shall expire on the
later of ninety (90) days or the last day of the original warranty period with
respect to the Hardware which was repaired or replaced. The warranty period of
Licensed Software which has been corrected, due to a material, service-affecting
non-conformance found in such Licensed Software, shall expire on the later of
ninety (90) days from the Ship Date of the corrected Licensed Software to
Company or the last day of the original warranty period with respect to such
Licensed Software.
8.6 Nortel warrants that its Products shall comply in all material aspects
with all applicable laws and regulations known to Nortel, which are in force on
the date of acceptance of the applicable Order therefor, which laws or
regulations directly impose obligations upon any manufacturer, seller or, if
applicable, installer of such Products.
8.7 The performance by Nortel of any of its obligations described in this
Article 8 shall not extend the applicable warranty period.
8.8 The warranties set forth in this Article shall not apply to any
Products where the defect or non-conformance is due to (i) accident, fire,
explosion, power failure, power surge or other power irregularity, lightning,
alteration, abuse, misuse or repair not performed by Nortel; (ii) improper
storage; (iii) failure to comply with all applicable environmental requirements
for the Products as specified by Nortel or any other applicable supplier, such
as but not limited to temperature or humidity ranges; (iv) improper performance
of installation, maintenance, operation or other service in connection with the
Products, provided that such service was not performed by Nortel or on Nortel's
behalf; (v) use in conjunction with an incompatible product or a product not
purchased under this Agreement; (vi) any error, act or omission by anyone other
than Nortel; or (vii) where written notice of the defect has not been given to
Nortel within the applicable warranty period. The warranties set forth in this
Article shall not apply to (i) Non-Licensed Software for which the applicable
right to use fees have not been paid; or (ii) Third Party Software or Third
Party Hardware, provided however that Nortel shall assign to Company (to the
extent of Nortel's right to do so) the warranty rights granted to Nortel by the
appropriate vendor of such Third Party Software or Third Party Hardware.
17
<PAGE>
8.9 Unless Nortel elects to repair or replace defective Hardware at
Company's facility, all Hardware to be repaired or replaced, whether in or out
of warranty, shall be de-installed and packed by Company in accordance with
Nortel's instructions. Nortel shall use reasonable efforts to ship repaired or
replacement Hardware within thirty (30) days of receipt of the defective
Hardware. To facilitate the processing of the defective Hardware returned
hereunder, Nortel may ship replacement Hardware prior to Nortel receiving the
defective Hardware. In the event that Company fails to return defective Hardware
and Nortel has shipped such replacement Hardware, Nortel shall invoice Company
at Nortel's applicable then-current prices for such replacement Hardware, thirty
(30) days after the Ship Date of such replacement Hardware. If mutually agreed,
Nortel will make repairs on-site at Nortel's then-current charge for such
repairs.
8.10 If the Hardware returned to Nortel pursuant to Section 8.9 is
determined by Nortel to be beyond repair and is outside the warranty period,
Nortel shall notify Company and if requested Nortel shall sell Company
replacement Hardware at Nortel's then-current prices for such replacement
Hardware.
8.11 Company shall bear risk of loss or damage and shall pay for all
transportation charges for Hardware returned to Nortel, and Nortel shall bear
risk of loss or damage and pay for transportation charges for repaired or
replacement Hardware shipped to Company. Title to returned Hardware shall pass
to Nortel upon receipt. Title to replacement Hardware shall pass to Company
upon receipt.
8.12 Nortel and Nortel's vendors of Third Party Hardware and Third Party
Software, as appropriate, shall not have any responsibility to Customers for
warranties offered by Company to such Customers and Company hereby indemnifies
and holds harmless Nortel and Nortel's vendors, as appropriate, from any claims,
damages or liabilities arising out of, or relating to, any warranties offered by
Company to such Customers.
8.13 THE WARRANTIES, CONDITIONS AND REMEDIES SET FORTH HEREIN CONSTITUTE
THE ONLY WARRANTIES, OBLIGATIONS OR CONDITIONS OF NORTEL WITH RESPECT TO THE
PRODUCTS AND SERVICES AND ARE COMPANY'S SOLE AND EXCLUSIVE REMEDIES IN THE EVENT
THAT SUCH WARRANTIES OR CONDITIONS ARE BREACHED. THEY ARE IN LIEU OF ALL OTHER
WARRANTIES OR CONDITIONS, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. NORTEL SHALL NOT BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION LOST REVENUES OR PROFITS OR OTHER ECONOMIC LOSS, OF ANY NATURE
WHATSOEVER ARISING OUT OF NORTEL'S BREACH OF WARRANTY OR
18
<PAGE>
CONDITION.
ARTICLE 9. NORTEL'S ADDITIONAL OBLIGATIONS
9.1 Nortel shall make training available to representatives of Company
with respect to the operation, configuration, installation, service, maintenance
and support of the Products at Nortel's then current prices and at Nortel's
facilities, subject to course and class availability. Nortel shall provide
Company with a certain number of training credits ("Training Credits"), as set
forth in the applicable Product Annex, to be used by Company in any of Nortel's
training courses related to the Products that Company has purchased. The
Training Credits for each Product may only be used in connection with such
Product and must be used within one (1) year from the date such Training Credits
were earned, after which such Training Credits will be forfeited by Company.
9.2 Upon request, Nortel shall provide Company with copies of its then
current training catalogue. Company shall provide Nortel with a reasonable
number of names and addresses of people to whom this catalogue should be sent.
Upon the request of Company, Nortel shall provide to Company such additional
training as Company requests, at a time and place mutually agreed upon and at
the prices to be quoted for such training. The cancellation fees set forth in
the training catalogues shall apply.
9.3 Nortel shall include its standard Documentation package, if any, with
each shipment of Products. Nortel shall make the Documentation available on its
choice of media, which may include CD-ROM or other electronic media. Nortel
shall provide Company with any other Documentation that is ordered at its then-
current prices therefor. Documentation provided via Nortel's CD-ROM media may
be printed and copied and Documentation provided in paper format may be copied,
to the extent such Documentation so provides, and only to the extent such
printing or copying is necessary for the operation and maintenance of the
Products to which the Documentation pertains. However, Company may not press or
burn any copies of CD-ROM discs.
9.4 During the Term of this Agreement, Company may acquire various support
Services from Nortel in connection with the Products that Company acquires from
Nortel under this Agreement. These Services may include, but are not limited to
the following: technical assistance Services, installation Services, Hardware
maintenance Services, Software maintenance Services and parts repair and
replacement Services. Certain support Services that Company may acquire are
described in Exhibit B, the Master Services Agreement, which is attached hereto
and incorporated herein. The fees for such Services, if ascertained upon
execution of this Agreement, are set forth in Exhibit B. Fees for any support
Services not specified in Exhibit B shall be provided on an as-quoted basis
pursuant to Nortel's applicable terms and conditions.
19
<PAGE>
Community NetWorks, Inc.
MPA
ARTICLE 10. SOFTWARE LICENSE
10.1 Company acknowledges that the Software may contain programs which
have been supplied by, and are proprietary to, Third Party Software vendors. In
addition to the terms and conditions herein, Company shall abide by any
additional terms and conditions specified in a Product Annex with respect to any
Software provided by any Third Party Software vendor.
10.2 Upon Company's payment to Nortel of the applicable fees with respect
to any Software furnished to Company pursuant to this Agreement, Nortel hereby
grants to Company, subject to the applicable terms and conditions of this
Article 10, a personal, non-exclusive, right and license to use the Licensed
Software furnished to Company, but only in conjunction with Company's use of the
Hardware or the Documentation with respect to which such Licensed Software was
furnished. The duration of such right to use shall last (i) with respect to
Licensed Software furnished in connection with Hardware, for the life of that
Hardware as it may be repaired or modified, and (ii) with respect to Licensed
Software furnished in connection with Documentation, for the duration of
Company's right to use the Documentation. Company shall be granted no title or
ownership rights to the Software, which rights shall remain in Nortel or its
suppliers.
10.3 As a condition precedent to this license and to the supply of
Software by Nortel pursuant to this Agreement, Nortel requires Company to give
proper assurances to Nortel for the protection of the Software. Accordingly, all
Software supplied by Nortel under or in implementation of this Agreement shall
be treated by Company as the exclusive property, and as proprietary and a trade
secret, of Nortel and/or its suppliers, as appropriate, and Company shall: (i)
hold the Software, including, without limitation, any methods or concepts
utilized therein in confidence for the benefit of Nortel and/or its suppliers,
as appropriate; (ii) not provide or make the Software available to any person
except to its employees on a 'need to know' basis and then only under
confidentiality obligations; (iii) not reproduce, copy, or modify the Software
in whole or in part except as authorized by Nortel; (iv) not attempt to
decompile, reverse engineer, disassemble, reverse translate, or in any other
manner decode the Software; (v) issue adequate instructions to all persons, and
take all actions reasonably necessary to satisfy Company's obligations under
this license; and (vi) forthwith return to Nortel, or with Nortel's consent
destroy (a) upon termination of the license for any reason, or (b) upon receipt
of replacement, modified, or updated Software, any magnetic tape, disc,
semiconductor device or other memory device or system memory and/or
Documentation or other material regarding such Software, including, but not
limited to all printed material furnished by Nortel to Company.
10.4 The obligations of Company hereunder shall not extend to any
information or data relating to the Software which is now available to the
general public or becomes available by reason of acts or failures to act not
attributable to Company.
20
<PAGE>
Community NetWorks, Inc.
MPA
10.5 Nortel may issue updates to the Software from time to time, and upon
Company's payment of applicable right to use fees, if any, shall license such
updates to Company. The right to use fees for such updates do not include the
price of any associated Hardware that may be required to use such updates.
10.6 Neither Company nor any successor to Company's title in the
applicable Hardware shall have the right to (i) assign this license as to the
applicable Licensed Software to any other person who acquires legal title to
such Hardware; or (ii) sublicense the rights herein granted as to such Licensed
Software to any other person who subsequently acquires the right to use such
Hardware, unless agreed to in writing by both Nortel and Company. Such consent
shall not be unreasonably withheld.
10.7 Company shall indemnify and hold Nortel and its suppliers, as
appropriate, harmless from any loss or damage resulting from a breach of this
Article 10. The obligations of Company under this Article 10 shall survive the
termination of the Agreement and shall continue if the Software is removed from
service.
Non-Licensed Software
- ---------------------
10.8 Certain Software delivered by Nortel may include Non-Licensed
Software. Non-Licensed Software includes (i) any Software for which the
applicable right to use fees have not been paid; and (ii) Software for which a
periodic right to use fee has expired and the applicable additional periodic
right to use fees have not been paid. Company shall submit to Nortel an Order
for any Non-Licensed Software that Company desires to license or renew.
10.9 When Non-Licensed Software is placed into service, the applicable
right to use fees shall be payable. Company shall also have the option to pay
the applicable right to use fees for any Non-Licensed Software upon installation
of a Software load containing such Non-Licensed Software.
10.10 To ensure Company's proper activation and/or usage of only the
appropriate Software, Company shall complete the appropriate form designated by
Nortel prior to the activation and/or usage by Company of any Non-Licensed
Software. Company shall identify all Software desired to be activated and/or
used (including the number of lines or other units activated, if applicable) in
each System and shall transmit such form to Nortel.
10.11 Nortel shall promptly review any form submitted pursuant to Section
10.10 and respond in writing, identifying whether (i) any applicable
prerequisite Hardware or Software is required by Company prior to activation
and/or usage of the applicable Software; or (ii) whether the
21
<PAGE>
Community NetWorks, Inc.
MPA
use of such Software requires Nortel to determine whether the current System
configuration will require additional elements, such as Hardware, other hardware
and/or System memory, prior to activation and/or usage; or (iii) whether Company
can use such Software without the addition of any additional Hardware or
Software.
10.12 Nortel reserves the right to access by remote polling any site in
which Software has been installed to determine which Software has been
activated. Such polling shall be done so as not to unreasonably interfere with
Company's use of the Products.
10.13 Nortel shall issue invoices to Company, in addition to those amounts
previously invoiced, for amounts found to be payable as a result of Company's
activation and/or usage of any Software which Nortel determines as a result of
the remote polling of a site and for which Company has not previously paid the
appropriate right to use fees.
10.14 The warranty period for Software activated later than the original
Ship Date of the Software load shall be for the same period as such original
Software load and shall not be extended to provide for an additional period of
warranty based upon the date individual features or units are activated and/or
utilized by Company or the date Company pays any applicable right to use fees.
10.15 Nortel shall provide the Software support Services specified in
Article 9 or in a separate Services agreement, provided that Company operates
the Software at Nortel's current Software release level or within at least two
previous Software release levels, or as otherwise specified in the Services
agreement.
Modifiable Software
- -------------------
10.16.1 Notwithstanding anything to the contrary above, upon payment to
Nortel of the applicable fees, Nortel hereby grants to Company, subject to the
applicable terms and conditions of this Article 10, a personal, non-
transferable, non-assignable and non-exclusive right and license to modify
Licensed Software which Nortel identifies as Modifiable Software. Upon the
modification or creation of any Applications, or the modification or creation of
any Building Blocks, Nortel shall have no obligations with regard to warranty
under Article 8 or indemnity under Article 11 for such Applications or Building
Blocks.
10.16.2 Nothing contained in Sections 10.16.1 through 10.16.5 shall
transfer, or be deemed to transfer, or contemplate the transfer of, any rights
in or to the Software other than those rights specifically granted herein, and
in particular but without restricting the generality of the foregoing, Nortel
does not in any way transfer any right, title or interest in or to the Software
or any element constituting a portion thereof to Company, other than the right
of Company to modify or
22
<PAGE>
Community NetWorks, Inc.
MPA
create Building Blocks and Applications.
10.16.3 For any Building Blocks and Applications created solely by
Company, and for all Company-modified portions of the Nortel-provided Building
Blocks with respect to such modified portion only, Company shall own all forms
of intellectual property rights (including but not limited to patent, trade
secret, copyright and mask rights) pertaining to such Applications, Building
Blocks or portions thereof and shall have the right to file for or otherwise
secure and protect such rights. For all such Company created Applications or
Building Blocks or modified portions of Building Blocks, the parties shall, on a
case by case basis, negotiate in good faith to determine whether Company may
desire to license any such Applications or Building Blocks to Nortel.
10.16.4 For any Applications created solely by Nortel, and for the Nortel
provided Building Blocks, Nortel shall own all forms of intellectual property
rights (including but not limited to patent, trade secret, copyright and mask
rights) pertaining to such Applications or Building Blocks and shall have the
right to file for or otherwise secure and protect such rights. For all such
Nortel Applications or Building Blocks, Company may license any such additional
Nortel Products upon Nortel making such software generally available to its
customers.
10.16.5 In the event that Company and Nortel intend to jointly create
Applications or Building Blocks, the parties shall mutually agree as to
applicable terms and conditions.
Services Software
- -----------------
10.17.1 With respect to Services Software, Company shall: (i) utilize such
Services Software and the results thereof solely for the purposes described in
Section 1.24; and (ii) comply with additional terms, if any, applicable to such
Services Software as specified in a Product Annex. Nortel may, at any time and
without liability or obligation to Company, modify the Services Software, any
computer equipment of Nortel or suppliers used in connection with such Services
Software, and identification codes, manuals or other information or
Documentation used in connection with the Services Software.
10.17.2 SERVICES SOFTWARE IS PROVIDED AS IS AND WITHOUT WARRANTY OR
CONDITION OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
NORTEL DOES NOT AND CANNOT WARRANT THE PERFORMANCE OR RESULTS THAT MAY BE
OBTAINED BY USING SERVICES SOFTWARE, COMPANY ASSUMES SOLE RESPONSIBILITY FOR THE
SELECTION OF THE SERVICES SOFTWARE TO ACHIEVE COMPANY'S INTENDED
23
<PAGE>
Community NetWorks, Inc.
MPA
RESULTS, AND FOR THE INSTALLATION, USE, AND RESULTS OBTAINED FROM THE SERVICES
SOFTWARE. IN NO EVENT SHALL NORTEL BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST
REVENUES OR PROFITS OR OTHER ECONOMIC LOSS, OF ANY NATURE WHATSOEVER ARISING OUT
OF COMPANY'S USE OF SERVICES SOFTWARE.
ARTICLE 11. LIABILITY FOR BODILY INJURY, PROPERTY DAMAGE AND PATENT
INFRINGEMENT
11.1 A party hereto shall defend the other party against any suit, claim,
or proceeding brought against the other party for direct damages due to bodily
injuries (including death) or damage to tangible property which allegedly result
from the negligence or willful misconduct of the defending party in the
performance of this Agreement. The defending party shall pay all litigation
costs, reasonable attorney's fees, settlement payments and such direct damages
awarded or resulting from any such suit, claim or proceeding.
11.2 Nortel shall defend Company against any suit, claim or proceeding
brought against Company alleging that the sale to, or use by Company of, any
Products, excluding Third Party Hardware or Third Party Software, furnished
hereunder infringes any patent ("Infringement Claim"). Nortel shall pay, subject
to Section 11.3 below, all litigation costs, reasonable attorney's fees,
settlement payments and damages awarded or resulting from any such suit, claim
or proceeding. With respect to Third Party Hardware or Third Party Software,
Nortel shall assign any rights with respect to infringement of patents granted
to Nortel by the supplier of such items to the extent of Nortel's right to do
so.
11.3 Nortel's cumulative liability, pursuant to this Article 11, other
than Section 11.1, and including its costs and expenses included in satisfying
its obligations set forth below, shall not exceed one hundred percent (100%) of
the purchase price of the Products giving rise to the Infringement Claim.
11.4 Nortel shall not be liable and Company shall indemnify Nortel for any
costs incurred by Nortel or liabilities of Nortel arising under this Article in
excess of the amounts so stated above.
11.5 Nortel shall have no liability, in respect of any Infringement Claim
based on the use of a Product in the event that such Product: (i) is
manufactured, designed or supplied by Nortel in accordance with any design or
any special instruction furnished by Company; (ii) is used by Company in a
manner or for a purpose not contemplated or authorized by this Agreement; (iii)
is used by Company in combination with other products not provided by Nortel,
including, without
24
<PAGE>
Community NetWorks, Inc.
MPA
limitation, any software developed solely by Company through the permitted use
of Products furnished hereunder, provided that the Infringement Claim arises
from such combination or the use thereof; or (iv) is modified by Company where
such modification is not authorized by Nortel. In the excepted cases stated
above, Company shall indemnify and hold Nortel harmless against any loss, cost,
expense, damage, settlement or other liability, including, but not limited to,
attorneys' fees, which may be incurred by Nortel with respect to any suit,
claim, or proceeding described in this Section 11.5.
11.6 Nortel shall not be liable for, and Company shall indemnify Nortel in
respect of, any damages awarded based on Company's willful, knowing or
deliberate infringement of a patent, copyright, trade secret, trademark or other
proprietary right where such infringement results in a pecuniary damage award.
11.7 Nortel may provide Company with notice of an actual or potential
Infringement Claim. Nortel shall consult with Company regarding the
Infringement Claim and the course of action to be pursued as a result thereof.
In the event that the parties fail to agree on a satisfactory course of action
for dealing with the matter, Company may either:
(i) return to Nortel the affected portion of the Product(s) in
return for a refund of the depreciated value (as carried on the books
of Company) of the Product(s) so returned; or
(ii) continue to use the Product(s) at Company's own risk.
11.8 Nortel shall not be liable for, and Company shall indemnify Nortel in
respect of any Infringement Claim(s) where Nortel has provided notice to Company
of the Infringement Claim(s) and Company elects to continue its use of the
Product(s) covered by the Infringement Claim.
11.9 If as a result of an Infringement Claim, other than those
contemplated in Section 11.7(i) and 11.7(ii) above, an injunction is obtained
against Company's use of any Product, Nortel shall, at Nortel's option:
(i) procure for Company the right to continue using the alleged
infringing Product(s);
(ii) replace or modify the same with equivalent or better Product(s)
so that Company's use is non-infringing; or
(iii) accept return of the affected portion of the Product(s) and
refund to Company
25
<PAGE>
the depreciated value (as carried on the books of Company) of the
Product(s) so returned.
11.10 The defense of any claim which is predominantly covered by the
provisions of this Agreement shall be controlled by the party upon whom the
majority of the ultimate liability is likely to be imposed. Such controlling
party shall give the other party a reasonable opportunity to participate in
negotiation or defense of the claim so that such other Party may reasonably
protect its own interests. Neither Party shall be liable for any settlement
obligation incurred without its written consent.
11.11 Company shall waive any and all claims that Company may have against
Nortel that Company may have due to any use by Company of Modifiable Software
and any modification Company may have made to a Product as a result of such use.
Further, Company shall be responsible for any additional hardware, software or
services required as a result of such use.
11.12 THE REMEDIES SET FORTH IN THIS ARTICLE 11 ESTABLISH THE ENTIRE
OBLIGATION OF THE PARTIES IN REGARD TO CLAIMS RELATING TO INTELLECTUAL PROPERTY
RIGHTS INCLUDING CLAIMS DIRECTED TO THE INFRINGEMENT OF PATENTS, COPYRIGHT,
TRADE SECRETS AND OTHER PROPRIETARY RIGHTS. IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES,
INCLUDING WITHOUT LIMITATION, LOST REVENUES OR PROFITS OR OTHER ECONOMIC LOSS OF
ANY NATURE WHATSOEVER, ARISING FROM SUCH INFRINGEMENT CLAIMS AND/OR RELATED
MATTERS, OTHER THAN AS SPECIFICALLY SET FORTH HEREIN.
ARTICLE 12. REMEDIES AND LIMITATIONS OF LIABILITY
12.1 Nortel shall have the right to suspend its performance, upon written
notice to Company, and forthwith remove and take possession of all Products that
shall have been delivered to Company, if, prior to payment to Nortel of any
amounts due pursuant to this Agreement with respect to such Products, Company
shall (i) become insolvent or bankrupt or cease, be unable, or admit in writing
its inability, to pay all debts as they mature, or make a general assignment for
the benefit of, or enter into any arrangement with, creditors; (ii) authorize,
apply for, or consent to the appointment of, a receiver, trustee, or liquidator
of all or a substantial part of its assets or have proceedings seeking such
appointment commenced against it which are not terminated within sixty (60) days
of such commencement; or (iii) file a voluntary petition under any bankruptcy or
insolvency law or under the reorganization or arrangement provisions of the
United States Bankruptcy Code or any similar law of any jurisdiction or have
proceedings under any such law instituted against it which are not terminated
within sixty (60) days of such commencement.
26
<PAGE>
Community NetWorks, Inc.
MPA
12.2 In the event of any material breach of this Agreement which shall
continue for thirty (30) or more days after written notice of such breach
(including a reasonably detailed statement of the nature of such breach) shall
have been given to the breaching party by the aggrieved party, the aggrieved
party shall be entitled at its option to avail itself of any and all remedies
available at law or equity, except as otherwise limited in this Agreement,
provided, however, that nothing contained in this Section 12.2 or elsewhere in
this Agreement shall make Nortel liable for any indirect, incidental, punitive,
special, or consequential damages of any nature whatsoever for any breach of
this Agreement whether the claims for such damages arise in tort (including
negligence regardless of degree of fault), contract, or otherwise.
12.3 Nortel shall not be liable for any additional costs, expenses, losses
or damages resulting from errors, acts or omissions of Company, including, but
not limited to, inaccuracy, incompleteness or untimeliness in the provision of
information by Company to Nortel or fulfillment by Company of any of its
obligations under this Agreement. Company shall pay Nortel the amount of any
such costs, expenses, losses or damage incurred by Nortel.
12.4 Any action for breach of this Agreement or to enforce any right
hereunder shall be commenced within two (2) years after the cause of action
accrues or it shall be deemed waived and barred, except any action for
nonpayment by Company of any prices, charges, fees or other amounts payable
hereunder may be brought by Nortel at any time permitted by applicable law, and
Nortel may suspend performance of any of its obligations hereunder until all
such payments are made.
ARTICLE 13. TERM AND TERMINATION
13.1 This Agreement will be in effect from the Effective Date for a period
of three (3) years (the "Original Term"). Thereafter, this Agreement shall
automatically renew for one (1) year terms (each, a "Renewal Period" and
collectively and together with the Original Term, the "Term"), unless either
party provides the other party with written notice of its intent not to renew at
least sixty (60) days prior to the end of the Original Term or any Renewal
Period.
13.2 Either party may delay performance under this Agreement or terminate
this Agreement, in whole or in part, in the event of a default by the other,
provided that the non-defaulting party so advises the defaulting party in
writing of the event of alleged default and the defaulting party does not remedy
the alleged default within thirty (30) days after written notice thereof. If
the alleged default is not capable of being remedied within thirty (30) days,
the defaulting party must commence to remedy the alleged default within such
thirty (30) day period and provide to the non-defaulting party a plan for timely
remedying the alleged default in order to avoid termination. A default shall
include:
27
<PAGE>
Community NetWorks, Inc.
MPA
(i) a party's insolvency or initiation of bankruptcy or receivership
proceedings by or against a party or the execution of an assignment
for the benefit of creditors; or
(ii) either party's material breach of any of the terms or conditions
hereof including the failure to make any payment when due.
13.3 The expiration or termination of this Agreement for any cause shall
not release either party from:
(i) any obligations and duties remaining under any Order accepted by
Nortel prior to such expiration or termination;
(ii) any liability which at the time of expiration or termination has
already accrued to the other party, or, which thereafter may accrue in
respect to any event prior to expiration or termination; or
(iii) any liability from any obligation specified in Section 15.18
below to survive expiration or termination.
ARTICLE 14. CONFIDENTIALITY
14.1 Each party which receives the other party's Confidential Information
shall use reasonable care to hold such Confidential Information in confidence
and not disclose such Confidential Information to anyone other than to its
employees and employees of a Nortel Affiliate, as applicable, with a need to
know. A party that receives the other party's Confidential Information shall not
reproduce such Confidential Information, except to the extent reasonably
required for the performance of its obligations pursuant to this Agreement and
in connection with any permitted use of such Confidential Information.
14.2 Company shall take reasonable care to use Nortel's Confidential
Information only for study, operating, or maintenance purposes in connection
with Company's use of Products furnished by Nortel pursuant to this Agreement.
14.3 Notwithstanding the foregoing, either party shall be free to use that
portion of the Confidential Information which may be retained in intangible form
by those employees who have had access to the Confidential Information, for any
purpose, including use in the development, manufacture, marketing and
maintenance of its products and services. The marketing of any product or
service, including the dissemination of supporting documentation, which
inherently discloses the
28
<PAGE>
disclosing party's Confidential Information shall not be deemed a breach by the
recipient of such obligations; provided however, that ownership of the
Confidential Information and all intellectual property rights to such
Confidential Information remain with the disclosing party.
14.4 The obligations of either party pursuant to this Article 14 shall not
extend to any Confidential Information which a recipient can demonstrate through
written documentation was already known to the recipient prior to its disclosure
to the recipient and without confidential obligations was known or generally
available to the public at the time of disclosure to the recipient, becomes
known or generally available to the public (other than by act of the recipient)
subsequent to its disclosure to the recipient, is disclosed or made available in
writing to the recipient by a third party having a bona fide right to do so and
without similar confidentiality obligations, is independently developed by
recipient, or is required to be disclosed by subpoena or other process of law,
provided that the recipient shall notify the disclosing party promptly of any
such subpoena or other process of law requiring disclosure.
ARTICLE 15. MISCELLANEOUS
15.1 Publicity - A party shall not release any advertising or other
---------
publicity relating to this Agreement or the contents hereof wherein such other
party may reasonably be identified without the prior written approval of the
other party. In addition, each party shall take reasonable precautions to keep
the existence and the contents of this Agreement confidential so long as this
Agreement remains in effect and for a period of five (5) years thereafter,
except as may be otherwise expressly provided in this Agreement or as may be
reasonably required to enforce this Agreement by law.
15.2 Applicable Law - The validity, construction and performance of this
--------------
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Texas, except for its rules with regard to the conflict of laws.
15.3 Effects of Headings - All headings used herein are for index and
-------------------
reference purposes only, and shall not be given any substantive effect. This
Agreement has been created jointly by the parties and no rule of construction
requiring interpretation against the drafter of this Agreement shall apply in
its interpretation.
15.4.1 Assignment - Other than as explicitly stated below, neither party
----------
may assign or transfer this Agreement or any of its rights hereunder without the
prior written consent of the other party, such consent not to be unreasonably
withheld. A change in control of Company shall be deemed an assignment
hereunder. A change in control shall occur if ownership or control of more than
fifty percent (50%) of the shares of the Company entitled to elect the board of
directors changes during the Term of this Agreement. Company's consent shall not
be required for any assignment
29
<PAGE>
or transfer by Nortel (i) to any Nortel Affiliate of all or any part of this
Agreement or of Nortel's rights hereunder; or (ii) to any third party of
Nortel's right to receive any monies ("Receivables") which may become due to
Nortel pursuant to this Agreement.
15.4.2 Company hereby consents to the sale of Receivables by Nortel
without the necessity for any further notice and without any qualification on
such consent. Company grants permission for Nortel to disclose the provisions of
this Agreement to purchasers and prospective purchasers of Receivables, or their
affiliates and others with a present or prospective financial interest in such
Receivables, and their respective agents, attorneys, auditors, rating agencies
and other advisors.
15.5 Subcontracting - Nortel may subcontract any of its obligations
--------------
under this Agreement, but no such subcontract shall relieve Nortel of primary
responsibility for performance of its obligations.
15.6 Non-Waiver - The failure by either party hereto at any time to
----------
require performance by the other party or to claim a breach of any provision of
this Agreement shall not be construed as affecting any subsequent breach or the
right to require the performance with respect thereto or to claim a breach with
respect thereto.
15.7 Relationship of the Parties - The provisions of this Agreement
---------------------------
shall not be construed to establish any form of partnership, agency or joint
venture of any kind between Nortel and Company, nor to constitute either party
as the agent, employee or legal representative of the other. All persons
furnished by either party to accomplish the intent of this Agreement shall be
considered solely as the furnishing party's employees or agents and the
furnishing party shall be solely responsible for compliance with respect to its
employees with all laws, rules and regulations involving, but not limited to,
employment of labor, hours of labor, working conditions, workers' compensation,
payment of wages, and withholding and payment of applicable taxes, including,
but not limited to income taxes, unemployment taxes, and social security taxes.
15.8 Force Majeure - If the performance by a party of any of its
-------------
obligations under this Agreement shall be interfered with by reason of any
circumstances beyond the reasonable control of that party, including without
limitation, fire, explosion, acts of God, war, revolution, civil commotion,
unavailability of supplies or sources of energy, power failure, breakdown of
machinery, delays regarding zoning, easements or deed restrictions, any legal
proceedings between third parties or labor difficulties, including without
limitation, strikes, slowdowns, picketing or boycotts, then that party shall be
excused from such performance for a period equal to the delay resulting from the
applicable circumstances and such additional period as may be reasonably
necessary to allow that party to resume its performance. With respect to labor
difficulties as described above, a party shall not be obligated to accede to any
demands being made by employees or other personnel.
30
<PAGE>
Community NetWorks, Inc.
MPA
15.9 Taxes - Company shall at Nortel's direction promptly reimburse
-----
Nortel or pay directly to the applicable government or taxing authority all
taxes and charges arising hereunder, including, without limitation, penalties
and interest, except for taxes computed upon the net income of Nortel. If
Company provides Nortel with a certificate of exemption for the applicable
taxes, in a timely manner, then Nortel shall not invoice Company for such taxes.
15.10.1 Hazardous Materials - Prior to issuing any Order for Services to
-------------------
be performed at Company's facilities, Company shall identify and notify Nortel
in writing of the existence of all Hazardous Materials which Nortel may
encounter during the performance of such Services, including without limitation,
any Hazardous Materials contained within any equipment to be removed by Nortel.
15.10.2 If Company breaches its obligations pursuant to Section 15.10.1,
(i) Nortel may discontinue the performance of the applicable Services until all
the Hazardous Materials have been removed or abated to Nortel's satisfaction by
Company at Company's sole expense; and (ii) Company shall defend, indemnify and
hold Nortel harmless from any and all damages, claims, losses, liabilities and
expenses, including without limitation, attorney's fees, which arise out of
Company's breach of such obligations.
15.11 Notice - All notices required or permitted to be given hereunder
------
shall be in writing and shall be deemed given when delivered (i) by hand; or
(ii) by facsimile transmission (confirming the same by mail); or (iii) by
certified or next-day mail addressed as follows:
If to Company:
Community NetWorks, Inc.
45-18 Court Square, Suite 502
Long Island City, New York 11101
Attention: Mr. Eric Roden, Chief Operating Officer
Facsimile: (718) 706-9411
If to Nortel:
Northern Telecom Inc.
2350 Lakeside Boulevard
Richardson, Texas 75082-4399
Attention: Senior Manager, Contracts Mgmt & Negotiations
Facsimile: (972) 685-3284
Either party hereto may change its address by a notice given to the other party
hereto in the manner set forth above.
31
<PAGE>
Community NetWorks, Inc.
MPA
15.12 Information and Documentation - Company shall provide any
-----------------------------
information and/or documentation that Nortel reasonably requests from Company
and that is necessary for Nortel to properly perform any of its obligations
hereunder. Such information shall be provided in a form reasonably specified by
Nortel by the dates specified by Nortel.
15.13 Export - Company shall not export any Products or technical data
------
received from Nortel pursuant to this Agreement, or release any such Products or
technical data with the knowledge or intent that such Products or technical data
will be exported or transmitted to any country or to foreign nationals of any
country, except in accordance with applicable U.S. laws and regulations
concerning exporting and with written consent of Nortel. Company shall obtain
all government authorizations, in accordance with applicable law prior to
exporting or transmitting any such Products or technical data.
15.14 Severability - If any provision of this Agreement is declared or
------------
determined to be invalid or unenforceable under applicable law, the remaining
provisions shall continue in full force and effect and the parties shall
substitute for the invalid provision a valid provision which most closely
approximates the economic effect and intent of the invalid provision.
15.15 Modification of Agreement - No addition to or modification of this
-------------------------
Agreement shall be effective or binding on either of the parties hereto unless
reduced to writing and executed by the respective duly authorized
representatives of each of the parties hereto.
15.16 Regulatory Compliance - In the event of any change in the
---------------------
Specifications or Nortel's manufacturing or delivery processes for any Products
as a result of the imposition of requirements by any government, Nortel may upon
notice to Company, increase its prices, charges and fees to cover the added
costs and expenses directly and indirectly incurred by Nortel as a result of
such change.
15.17 Entire Agreement - This Agreement, including the Exhibits and
Annexes which are attached hereto and incorporated herein, comprises all the
terms, conditions and agreements of the parties hereto with respect to the
subject matter hereof and supersedes all previous negotiations, proposals,
commitments, writings, publications and understandings of any nature whatsoever.
No Exhibits or Annexes modified or created subsequent to the execution of this
Agreement shall be deemed to be incorporated into this Agreement unless mutually
agreed in a writing and executed by a duly authorized representative of each
party. Company hereby acknowledges and agrees that it has not relied on any
representations or warranties other than those expressly set forth in this
Agreement.
15.18 Survivorship - Any terms of this Agreement, which by their nature
------------
are intended to
32
<PAGE>
Community NetWorks, Inc.
MPA
survive, including but not limited to Articles 8, 10, 11, 12, 14 and 15 and
Sections 4.4, 9.3 and 13.3, shall survive the termination or expiration of this
Agreement.
33
<PAGE>
Community NetWorks, Inc.
MPA
IN WITNESS WHEREOF, the parties have executed this Agreement.
NORTHERN TELECOM INC. COMMUNITY NETWORKS, INC.
By:___________________________ By:______________________________
ILLEGIBLE ILLEGIBLE
Name:_________________________ Name:____________________________
Title:________________________ Title:___________________________
Date:_________________________ Date:____________________________
34
<PAGE>
EXHIBIT 10.29
Frontier Communications
[LOGO OF FRONTIER]
30300 Telegraph Road
Bingham Farms, MI 48025-4510
810-647-6920
April 8, 1996
Mr. Frank Caruso
SCC Telecommunications
108 East Washington
Syracuse, NY 13202
Dear: Mr. Caruso:
Enclosed is your original copy of the Agreement. Should you have questions,
please contact me at (810) 258-6260.
Sincerely,
Jacqueline Rutherford
Frontier Communications, Inc.
Enclosure
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. SERVICES; PURCHASER REPRESENTATIONS.................................... 1
2. TERM OF THE AGREEMENT.................................................. 2
3. BILLING AND PAYMENT.................................................... 2
4. BILLING DISPUTES....................................................... 6
5. TERMINATION RIGHTS..................................................... 6
6. LIMITATION OF ACTION................................................... 8
7. TAXES AND ASSESSMENTS.................................................. 9
8. AMENDMENT.............................................................. 9
9. WARRANTIES AND LIMITATION OF LIABILITY................................. 9
10. INDEMNIFICATION........................................................ 9
11. REPRESENTATION......................................................... 10
12. FORCE MAJEURE.......................................................... 10
13. WAIVERS................................................................ 10
14. ASSIGNMENT............................................................. 10
15. CONFIDENTIALITY........................................................ 11
16. INTEGRATION............................................................ 12
17. CONSTRUCTION........................................................... 13
18. GOVERNING LAW.......................................................... 13
19. NOTICES................................................................ 13
20. COUNTERPARTS........................................................... 13
21. COMPLIANCE WITH LAWS................................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
22. THIRD PARTIES.......................................................... 14
23. SURVIVAL OF PROVISIONS................................................. 14
24. UNENFORCEABILITY OF PROVISIONS......................................... 14
</TABLE>
EXHIBITS
- --------
A GENERAL AND SERVICE DEFINITIONS
B ANCILLARY FEE SCHEDULE
C CALL DETAIL RECORDS; ORDER PROCESSING PROCEDURES; LETTER OF
AGENCY REQUIREMENTS
<PAGE>
WHOLESALE SERVICE AGREEMENT
This Wholesale Service Agreement ("Agreement") is entered into between the
provider of service, Frontier Communications of the West, Inc. on behalf of
itself and its affiliates ("Frontier"), a California corporation located at 135
East Ortega Street, Santa Barbara, CA 93101 and Briar Joy Development
Corporation, d/b/a SCC Telecommunications ("Purchaser"), a New York corporation
with its principal place of business located at 108 East Washington Street,
Syracuse, NY 13202 (hereinafter, Frontier and Purchaser may be referred to in
the aggregate as "Parties", and each singularly as a "Party".)
PURPOSE
The Parties are telecommunications carriers subject to the Communications Act of
1934, as amended. Purchaser desires to purchase network transport and other
telecommunication services from Frontier for Purchaser's resale to business and
residential customers on a common carrier basis. The Parties agree as follows:
1. SERVICES: PURCHASER REPRESENTATIONS:
-----------------------------------
(a) Frontier shall, in accordance with the rates, terms and conditions set
forth herein, provide services to Purchaser, as those services are
defined herein or identified on exhibits, schedules or other
attachments appended hereto and made a part of this Agreement from
time-to-time in accordance with the terms hereof (collectively,
"Services").
(b) Purchaser agrees to provide Frontier with at least 30 days prior
written notice of Service requirements that may exceed anticipated or
normal course of Service requirements utilized by Purchaser. Provision
of Services is contingent on availability of facilities and resources
of Frontier.
(c) Purchaser shall provide Frontier with a forecast covering a good faith
estimate based on historical information (if available) of the monthly
traffic volume and geographic distribution for the ordered Services.
The estimate will be for the 3 calendar month period following the
desired activation date. The forecast is to be in the format supplied
or approved by Frontier. Frontier reserves the right to request
updated forecasts. Forecasts do not constitute a binding commitment on
the part of Purchaser.
(d) Orders for Services will be transmitted and processed in accordance
with the procedures set out in Exhibit C attached hereto and made a
part hereof as the same may be modified from time to time by Frontier.
<PAGE>
(e) Any Carrier Identification Code ("CIC") arrangement between the
Parties will be set out in writing as an attachment to this Agreement.
Purchaser is responsible for obtaining its own CIC.
(f) Purchaser is solely responsible for all billing, collection and
customer service activities for End-Users, except as may otherwise be
provided herein. Purchaser acknowledges and affirms that Purchaser's
financial obligations to Frontier regarding Services provided must be
satisfied in full, as hereinafter provided, whether or not Purchaser
has billed or collected from End-Users.
(g) Purchaser represents and warrants that prior to obtaining the Services
in any jurisdiction it will be qualified to do business in such
jurisdiction and will maintain good standing in such jurisdiction
during the term of this Agreement. Purchaser further represents and
warrants that prior to obtaining the Services in any jurisdiction it
will be certified by the proper regulatory agencies to provide the
Services purchased hereunder to End-Users in such jurisdiction.
(h) Purchaser represents and warrants that the End-Users will be
residential and business users of the Services and will not be other
telecommunications carriers, resellers or aggregators.
2. TERM OF THE AGREEMENT:
---------------------
(a) INITIAL TERM: This Agreement is effective and the Parties'
obligations commence upon the date of execution by Frontier
("Effective Date") and continues in effect for a period of 3 years
("Initial Term") from either the day Service is first utilized by
Purchaser on Frontier's network (as determined by Frontier's records),
or the 90th day after the Effective Date, whichever date occurs first.
(b) AUTOMATIC RENEWAL: This Agreement renews automatically for a 1 year
period at the expiration of the Initial Term, unless canceled in
accordance with the terms hereof ("Subsequent Term"). Each Subsequent
Term renews automatically for a 1 year period upon its expiration,
unless canceled in accordance with the terms hereof.
(c) CANCELLATION: If either Party desires to terminate this Agreement
upon expiration of any term, such Party shall give the other Party
written notice of its intent to cancel at least 90 days prior to
expiration of the then current term.
3. BILLING AND PAYMENT: Purchaser shall pay Frontier for the Services at the
-------------------
rates and charges set out in the attached Services Schedules and such other
exhibits, schedules or attachments as may be attached hereto and made a
part hereof from time to time. If Purchaser is required to pay a set-up fee
or make an initial pre-payment or other assurance of payment, then Frontier
is not obligated to begin processing Purchaser's account,
-2-
<PAGE>
accepting orders or providing Service until the set-up fee, pre-payment or
other assurance of payment is received.
(a) The initial assurance of payment shall be a letter of credit for
$75,000 from a financial institution acceptable to Frontier in the
format attached hereto.
(b) Frontier invoices Purchaser via facsimile on or about the fifth
Business Day after the close of each Billing Cycle for the Services
and for any other sums due Frontier ("Invoice"). Each Invoice details:
(i) the amount due Frontier, or the credit due Purchaser, after a
reconciliation between the actual charges for the Services for the
prior Billing Cycle and any pre-payment for the prior Billing Cycle,
and (ii) any other sums due Frontier. In addition to the amounts under
(i) and (ii) above, the Invoice will provide for a pre-payment equal
to 150% of the actual charges for the Services for the prior Billing
Cycle (exclusive of any non-recurring charges). If Purchaser has
submitted a letter of credit that has an expiration date greater than
45 days after the Invoice date, or a cash deposit or other assurance
of payment, the pre-payment will be Reduced by the amount of the
security (but to not less than zero).
(c) Each Invoice shall be paid by Purchaser via wire transfer of
immediately available U.S. funds to an account designated by Frontier
so that the payment is received by Frontier no later than 21 calendar
days from the date of the Invoice (the "Due Date"). Frontier agrees
that (i) the Invoice date will be the same day the Invoice is faxed to
Purchaser, and (ii) the Invoice will be faxed on a Business Day. Any
Invoice net paid by the Due Date shall bear late payment fees at the
rate of 1-1/2% per month (or such lower amount as maybe required by
law) until paid.
(d) The Purchaser facsimile number and contact for purposes of this
Section 3. is 315-425-1149, Attention: Patrick McKenna. Purchaser may
change the facsimile number and contact upon written notice to
Frontier.
(e) If Purchaser is delinquent in payment of an Invoice or Frontier does
not have security from Purchaser equal to Purchaser's prior month
usage charges, Frontier may demand and receive additional security of
its choice from Purchaser.
(f) FRAUDULENT USAGE: Frontier is not responsible for, and Purchaser
shall defend and indemnify Frontier against, any fraudulent use of
Service. Any claims of fraud shall not constitute valid justification
for dispute of an Invoice. Purchaser is solely responsible for all
Services usage, allegedly fraudulent or otherwise, and for all
additional charges as may be associated with such usage. If Frontier
determines that fraud is or may be occurring, Frontier has the right,
but not the obligation, to block Service associated with the suspected
fraud. If Frontier elects to block Service it will use reasonable
efforts to promptly notify Purchaser of the blockage via facsimile,
but in no event later than 24 hours after the blockage. Frontier will
remove a blockage or replace a Code within 24 hours of receipt of
Purchaser's written request.
-3-
<PAGE>
ORIGINAL
frontier
AMENDMENT #3 TO WHOLESALE SERVICE AGREEMENT
SCC Telecommunications
January 21,1997
This is Amendment #3 to the Wholesale Service Agreement between Frontier
Communications of the West, Inc. ("Frontier") and SCC Telecommunications
("Purchaser"), dated April 8, 1996, as amended (the "Agreement").
1. Purchaser's 800 PIN Service as defined in Amendment # 1 shall be amended to
extend Purchaser's monthly minimum usage charge to commence with the tenth
Billing Cycle following the assignment of the first 800 PIN Number to
Purchaser.
2. Purchaser's Amendment # 2, Item #6 B shall be amended to read: "Credit
Month" means the 12th full month following the effective date of January 1,
1997.
3. The balance of the Agreement and any amendments or addenda thereto not
modified by this Amendment #I shall remain in full force and effect.
Except as otherwise stated, capitalized terms used herein have the some
meaning as set forth in the Agreement.
4. This Amendment is effective as of the date signed by Frontier below.
FRONTIER COMMUNICATIONS OF THE WEST, INC. SCC TELECOMMUNICATIONS
By:____________________________________ By:/s/ Frank Caruso
-------------------------
Brian V. Fitzpatrick, Vice President Frank Caruso, President
Frontier Carrier Services
Dated: ______________________ Date: 1/21/97
-----------------------
CONFIDENTIAL
<PAGE>
(g) Purchaser agrees to pay to Frontier any and all local exchange carrier-
assessed and governmentally imposed charges levied upon Frontier as a
result of Services provided to Purchaser, including but not limited to:
(i) primary Interexchange carrier ("PIC") change charges. Because of
the cost to Frontier associated with administering PIC
retractions, Frontier may at any time assess the administrative
fee(s) set out in Exhibit B for PIC change reversals;
(ii) assessments by the National Exchange Carrier's Association, Inc.
(NECA) including but not limited to, the Universal Service
Fund/Lifeline Assistance (USF/LA), the Telecommunications Relay
Service (TRS) Fund, and other assessments as may be assessed by
NECA in the future relative to the Services;
(iii) assessments by federal, state and local governmental entities,
including but not limited to, the Federal Communications
Commission (FCC), state, city and county Departments of Revenue;
(iv) National Administrative Services Center assessments (including
any monthly recurring charges) for "800"/ "888" service
installation;
(v) charges set out in the Schedule of Ancillary Fees attached
hereto as Exhibit B and made a part hereof.
(h) Commencing with Purchaser's fifth Invoice, Purchaser is liable for a
monthly minimum usage charge for the Services of $25,000 (the "Minimum
Charge"). If Purchaser's net charges (after any discounts or credits)
for the Services are less than the Minimum Charge in any month,
Purchaser shall pay the shortfall (the "Monthly Surcharge"). If this
Agreement is terminated prior to the time the Minimum Charge becomes
effective (other than termination by Purchaser for an uncured breach
by Frontier), Purchaser shall pay an amount equal to the difference
between: (i) the actual charges to Purchaser for usage of the Services
for the period up to the date of termination, and (ii) the amount of
charges for such usage calculated at the applicable Frontier rates in
effect at the time the Services were provided (the "Discount Make-up
Charge").
(i) Frontier may revise the rates and monthly recurring and other charges
in this Agreement (and any exhibit, attachment or schedule) at any
time upon written notice to Purchaser. If the effective rates for the
Services (other than the rates for the International Services) are
increased pursuant to this paragraph, then Purchaser may upon 90 days
written notice cancel the Service subject to the rate increase. In
order to be effective, Purchaser's notice of cancellation must be
received by Frontier within 30 days after Purchaser's receipt of
Frontier's notice of the rate increase. Cancellation of a Service
under this paragraph includes cancellation of
-5-
<PAGE>
any monthly minimum usage charge associated with the canceled Service
that accrues after the date of cancellation as well as a pro-rata
reduction in the Minimum Charge to adjust for the Service being
canceled. If the cancellation notice is not received by Frontier
within the 30 day period, Purchaser will have irrevocably waived its
right to cancel the affected Service for that particular rate
increase. If Purchaser does not timely provide notice of cancellation,
or if any Purchaser traffic for a canceled Service remains on
Frontier's network after the effective date of cancellation, Purchaser
shall pay the increased rates for the affected Service and such
traffic.
(j) Purchaser agrees that any make up to minimum charges, shortfall
charges and surcharges for which it is liable under this Agreement are
based on agreed upon minimum commitments on its part and corresponding
rate concessions on Frontier's part, and are not penalties or
consequential damages. Frontier may charge Purchaser, and Purchaser
agrees to pay, reasonable attorneys' fees and all costs incurred by
Frontier in the collection of any unpaid amounts due from Purchaser,
whether or not suit is instituted.
4. BILLING DISPUTES: The Parties agree that time is of essence for payment of
----------------
all Invoices. Purchaser has the affirmative obligation of providing written
notice and supporting documentation for any good-faith dispute with an
Invoice ("Dispute") within 30 Business Days after Purchaser's receipt. If
Purchaser does not report a Dispute within the 30 Business Day period,
Purchaser shall have irrevocably waived its dispute rights for that
Invoice. Purchaser shall pay disputed amounts, subject to resolution of the
Dispute. Frontier will use reasonable efforts to resolve timely Disputes
within 30 Business Days after its receipt of the Dispute notice. If a
Dispute is not resolved within the 30 Business Day period, then at
Purchaser's request the Dispute will be referred to an executive officer of
Frontier. If the Dispute is not resolved within 10 Business Days after the
referral, then Purchaser may commence suit against Frontier in accordance
with Section 18, provided that the prevailing Party in such suit shall be
entitled to payment of its reasonable attorney fees and costs by the other
Party. The Parties agree to exercise all reasonable efforts to resolve
Disputes within the time frames established herein.
5. TERMINATION RIGHTS:
------------------
(a) REGULATORY CHANGES: If the FCC, a state PUT or a court of competent
jurisdiction issues a rule, regulation, law or order which has the
effect of canceling, changing, or superseding any material term or
provision of this Agreement (collectively, "Regulatory Requirement"),
then this Agreement shall be deemed modified in such a way as the
Parties mutually agree is consistent with the form, intent and purpose
of this Agreement and is necessary to comply with such Regulatory
Requirement. Should the Parties not be able to agree on modifications
necessary to comply with a Regulatory Requirement that materially
affects the rights of either Party within 30 days after the Regulatory
Requirement
-6-
<PAGE>
is effective, then upon written notice either Parry may, to the extent
practicable, terminate that portion of this Agreement impacted by the
Regulatory Requirement.
(b) Without affecting any amounts due it, Frontier may terminate this
Agreement upon (i) Purchaser's insolvency, dissolution or cessation of
business operations, or (ii) Purchaser's failure to pay any delinquent
Invoice, or to maintain any other assurance of payment provided to
Frontier by Purchaser, within 2 Business Days following Purchaser's
receipt of written notice from Frontier.
(c) In the event of a breach of any material term or condition of this
Agreement by a Party (other than a payment breach covered under (b)
above), the other Party may terminate this Agreement upon 30 days
written notice, unless the breaching Party cures the breach during the
30 day period. A breach that cannot be reasonably cured within a 30
day period may be addressed by a written waiver of this section signed
by the Parties.
(d) Upon any uncured breach by Purchaser, Frontier may at its sole option
do any or all of the following:
(i) cease accepting or processing orders for Service and suspend
Service;
(ii) cease all electronically and manually generated information
and reports;
(iii) draw on any letter of credit, security deposit or other
assurance of payment provided by Purchaser;
(iv) enforce any security interest granted by Purchaser to Frontier
hereunder;
(v) terminate this Agreement and the Services without liability to
Frontier;
(vi) contact the End-Users directly to inform them that their
telecommunications service will no longer be provided through
the Purchaser, but may be continued through Frontier directly;
(vi) bill and collect from the End-Users directly (or through its
billing agents) for services;
(vi) treat the End-Users as Frontier customers for all purposes;
(ix) collect from Purchaser for future Services that would have been
provided, but for Purchaser's breach, including but not limited
to monthly minimums; and
(x) pursue such other legal or equitable remedy or relief as may be
appropriate.
-7-
<PAGE>
Termination of this Agreement or the conversion of the End-Users to direct
Frontier customers as contemplated above does not relieve Purchaser of any
obligations for payment of funds otherwise due Frontier.
(e) Exercise by Frontier of its remedies under items (v) through (viii)
above is referred to as the "End-User Purchase" and is limited to
Presubscribed End-Users. As consideration for the End-User Purchase,
Frontier agrees to pay Purchaser the amount of the net charges
(tariffed charges, less governmental assessments and discounts) billed
by Frontier directly to acquired End-Users for actual usage of
Frontier services in the first full billing cycle in which Frontier
invoices such End-Users (the "Transfer Price").
(f) The Transfer Price may be setoff by Frontier against any outstanding
amounts due Frontier from Purchaser. Frontier shall pay any balance of
the Transfer Price remaining after setoff to Purchaser within 30 days
after the close of the aforesaid Frontier billing cycle. If the total
of outstanding amounts due Frontier exceeds the Transfer Price,
Purchaser continues to be liable to Frontier for the excess. As a
condition for Purchaser's receipt or credit of the Transfer Price,
Purchaser agrees to fully cooperate with Frontier in implementation of
the transfer of the End-Users to direct Frontier customers. Such
cooperation includes without limitation:
(i) joint correspondence to the End-Users explaining the mechanics
and impact of the transfer;
(ii) Purchaser promptly providing Frontier with all End-User
information in its possession reasonably required by Frontier
to administer End-User accounts; and
(iii) Purchaser promptly providing Frontier with all LOAs for such
End-Users and a written assignment of all Purchaser's rights to
such LOAs.
(g) Upon termination of this Agreement and in addition to its right to
convert End-Users to Frontier customers, Frontier may continue
providing services to Presubscribed End-Users in accordance with the
rates and terms Frontier and an End-User may agree upon and to treat
such continuing End-Users as Frontier customers for all purposes.
6. LIMITATION OF ACTION:
--------------------
Purchaser shall not seek legal or equitable remedies, including
without limitation, injunctive relief, that would require Frontier to
continue providing Service to Purchaser or to End-Users through
Purchaser while any delinquent amounts due Frontier remain unpaid.
-8-
<PAGE>
7. TAXES AND ASSESSMENTS:
---------------------
Purchaser is responsible for the collection and remittance of all
governmental assessments, surcharges and fees pertaining to the
Services (other than taxes on Frontier's net income) (collectively,
"Taxes"). Purchaser shall provide Frontier with valid and properly
executed certificate(s) of exemption for the Taxes, as applicable.
8. AMENDMENT:
---------
Except as may be otherwise provided herein, this Agreement may not be
amended or modified, in whole or in part, except by the Parties in
writing.
9. WARRANTIES AND LIMITATION OF LIABILITY:
--------------------------------------
(a) Service will be provided by Frontier to Purchaser according to the
technical standards established for the telecommunication industry,
and within industry standards for order entry, maintenance and
administration. FRONTIER MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO TRANSMISSION OR SERVICE PROVIDED HEREUNDER, AND
EXPRESSLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OR FUNCTION.
(b) As a material inducement for Frontier to provide Service and the rates
and charges stated herein, Purchaser agrees that Frontier shall in no
event be liable for:
(i) any loss, expense or damage associated with Purchaser's or a
third party's loss of revenue, profits, savings, business or
goodwill; and
(ii) indirect, exemplary, proximate, consequential or incidental
damages and expenses of any nature relating to this Agreement or
the Services.
(c) It is the express intent of the Parties that Purchaser be solely
responsible for all claims of End-Users relating to the Services.
Consequently, Purchaser agrees that it is solely responsible for any
credits or adjustments that may be issued or required to be issued to
End-Users and that it is not entitled to any credits or adjustments to
its Frontier account.
(d) Purchaser's sole and exclusive remedy in the case of a breach of the
Agreement by Frontier shall be a refund of the purchase price paid for
those Services not provided in accordance with the terms of this
Agreement as a result of Frontier's breach.
-9-
<PAGE>
10. INDEMNIFICATION:
---------------
Purchaser shall defend and indemnify Frontier and its directors, officers,
employees, representatives and agents from any and all claims (including
any claims of End-Users and regulatory agencies), Taxes, penalties,
interest, expenses, damages, lawsuits or other liabilities (including
without limitation, reasonable attorney fees and court costs) relating to
or arising out of (i) the operation of Purchaser's business; and (ii)
Purchaser's breach of this Agreement. Purchaser shall not be liable to any
indemnified party for such party's indirect, exemplary, consequential or
incidental damages or expenses of any nature relating to this Agreement.
11. REPRESENTATION:
--------------
The Parties acknowledge and agree that the relationship between them is
solely that of independent contractors, and nothing in this Agreement is to
be construed to constitute the Parties as employer/employee, partners,
franchise/franchisee, or otherwise as participants in a joint or common
undertaking. Neither Party, nor their respective employees, agents or
representatives, has any right, power or authority to act or create any
obligation, express or implied, on behalf of the other Party.
12. FORCE MAJEURE:
-------------
Other than with respect to failure to make payments due hereunder, neither
Party shall be liable under this Agreement for delays, failures to perform,
damages, losses or destruction, or malfunction of any equipment, or any
consequence thereof, caused or occasioned by, or due to fire, earthquake,
flood, water, the elements, labor disputes or shortages, utility
curtailments, power failures, explosions, civil disturbances, governmental
actions, shortages of equipment or supplies, unavailability of
transportation, acts or omissions of third parties, or any other cause
beyond their reasonable control.
13. WAIVERS:
-------
Failure of either Party to enforce or insist upon compliance with the
provisions of this Agreement, or waive compliance with any provisions of
this Agreement in any instance, shall not be construed as a general waiver
or relinquishment of any provision or right of this Agreement.
14. ASSIGNMENT:
----------
(a) Neither Party may assign or transfer its rights or obligations under this
Agreement without the other Party's written consent, which consent may not
be unreasonably withheld, except that Frontier may assign this Agreement to
its parent, successor in interest, or an affiliate or subsidiary without
Purchaser's consent. Any assignment or transfer without the required
consent is void.
-10-
<PAGE>
(b) Purchaser may not assign, sell, convey or otherwise transfer all or a
portion of its Presubscribed End-User base (collectively "Transfer")
without the prior written consent of Frontier, which consent Frontier
may not unreasonably withhold. Purchaser must provide Frontier with at
least 15 days prior written notice of Purchaser's intent to initiate a
Transfer. Within 15 days from the date of receipt of Frontier of
Purchaser's notice of intent, Frontier will in writing inform
Purchaser of any conditions required by Frontier for its consent to
the Transfer. If Frontier fails to respond and provide the required
conditions within the 15 day period, Frontier is deemed to have
consented to the Transfer. Purchaser understands and agrees that:
(i) its breach of this Section 14(b) is an incurable breach, unless
Frontier elects in writing to allow Purchaser to cure; and
(ii) upon the occurrence of such breach Frontier may immediately
proceed with its remedies under Section 5.
15. CONFIDENTIALITY:
---------------
(a) Each Party agrees that all information furnished to and identified by
the other Party as being confidential or proprietary information or
trade secrets (collectively referred to as "Proprietary Information"),
is and continuously remains, the sole and exclusive property of the
Party furnishing the same (the Party furnishing the Proprietary
Information hereinafter referred to as the "Disclosing Party" and the
other Party hereinafter referred to as the "Receiving Party"). Each
Party shall treat the Proprietary Information and the contents of this
Agreement in a confidential manner and, except to the extent necessary
in connection with the performance of its obligations under this
Agreement, neither Party may directly or indirectly disclose the same
to any third parry without the written consent of the Disclosing
Party.
(i) The Proprietary Information is to be used by the Receiving Party
only for the purposes contemplated in this Agreement and the
Receiving Party may not disclose the same to anyone other than
its employees on a need to know basis and who agree to be bound
by the terms of this Section. The Proprietary Information may not
be retained by the Receiving Party and all originals and any
copies or summaries shall be returned to the Disclosing Party
upon request.
(b) The confidentiality of obligations of the Section do not apply to any
portion of the Proprietary Information which:
(i) is or becomes public knowledge through no fault of the
Receiving Party;
(ii) is in the lawful possession of Receiving Party prior to
disclosure to it by the Disclosing Party (as confirmed by the
Receiving Party's records);
-11-
<PAGE>
(iii) is disclosed to the Receiving Party without restriction on
disclosure by a person who has the lawful right to disclose the
information; or
(iv) is disclosed pursuant to the lawful requirements or formal
request of a governmental agency. If the Receiving Party is
requested or legally compelled by a governmental agency to
disclose any of the Proprietary Information of the Disclosing
Party, the Receiving Party agrees on behalf of itself and its
representatives that it will provide the Disclosing Party with
prompt written notice of such requests so that the Disclosing
Party has the opportunity to pursue its legal and equitable
remedies regarding potential disclosure.
(c) Each Party acknowledges that its breach or threatened breach of this
Section may cause the Disclosing Party irreparable harm which would
not be adequately compensated by monetary damages. Accordingly, in the
event of any such breach or threatened breach, the Receiving Party
agrees that equitable relief, including temporary restraining, orders
or preliminary or permanent injunctions, is an available remedy in
addition to any legal remedies to which the Disclosing Party may be
entitled.
(d) Neither Party may use the name, logo, trade name, service marks, trade
marks, or printed materials of the other Party, in any promotional or
advertising material, statement, document, press release or broadcast
without the prior written consent of the other Party, which consent
may be granted or withheld at the other Party's sole discretion.
(e) The Parties acknowledge the existence of a highly competitive
telecommunications marketplace and understand and agree that either
Party may offer to provide services to customers of the other Party
(including, End-Users) in accordance with such rates and terms as a
Party and a customer may agree upon, provided however, a Party may not
use Proprietary Information of the other Party in soliciting customers
for services. Provided further, neither Party may, in any marketing
activities to existing customers of the other Party, use the fact that
Frontier is the Purchaser's underlying carrier as an inducement for
such customers to switch their services.
(f) Notwithstanding the restrictions set forth in this Section, Frontier
may use End-User Information in furtherance of its rights under
Section 5.
16. INTEGRATION:
------------
This Agreement and all Exhibits, Schedules and other attachments hereto,
represent the entire agreement between the Parties with respect to the
subject matter hereof and supersede and merge all prior agreements,
promises, understandings, statements,
-12-
<PAGE>
representations, warranties, indemnities and inducements to the making of
this Agreement relied upon by either Party, whether written or oral.
17. CONSTRUCTION:
-------------
The language used in this Agreement is deemed the language chosen by the
Parties to express their mutual intent. No rule of strict construction
shall be applied against either Party.
18. GOVERNING LAW:
--------------
This Agreement shall, in all respects, be governed by and enforced in
accordance with the laws of the State of New York, excluding its choice of
law provisions. For valuable consideration, both Parties acknowledge and
agree that any action to enforce or interpret the terms of this Agreement
shall be instituted and maintained only in the Federal Court for the
Western District of New York, or if jurisdiction is not available in the
Federal Court, then a state court located in Rochester, New York. Purchaser
hereby consents to the jurisdiction and venue of such courts and waives any
right to object to such jurisdiction and venue.
19. NOTICES:
--------
All notices, including but not limited to, demands, requests and other
communications required or permitted hereunder (not including Invoices)
shall be in writing and shall be deemed to be delivered when actually
received, whether upon personal delivery or if sent by common carrier. All
notices given by mail or other means of delivery shall be sent by first
class mail, duly addressed and with proper postage, to the following
address, or such other address as each of the Parties hereto may notify the
other:
Frontier Communications Purchaser
ATTN: VP Carrier Sales SCC Telecommunications
------------------------
30300 Telegraph Road 108 E. Washington St.
------------------------
Bingham Farms, MI 48025-4510 Syracuse, NY 13202
------------------------
Facsimile #810-258-6278 Facsimile# 315 425-1149
20. COUNTERPARTS:
-------------
This Agreement may be executed in several counterparts, each of which shall
constitute an original, but all of which shall constitute one and the same
instrument.
-13-
<PAGE>
21. COMPLIANCE WITH LAWS:
---------------------
During the term of this Agreement, the Parties shall comply with all local,
state and federal laws and regulations applicable to this Agreement and to
their respective businesses. Further, Purchaser shall obtain, file and
maintain any tariffs, permits, certifications, authorizations, licenses or
similar documentation as may be required by the FCC, a state Public Utility
or Service Commission, or any other governmental body or agency having
jurisdiction over its business. Upon request, Purchaser will supply
Frontier with copies of such tariffs, permits, certifications,
authorizations, licenses and similar documentation.
22. THIRD PARTIES:
-------------
The provisions of this Agreement and the rights and obligations created
hereunder are intended for the sole benefit of Frontier and Purchaser, and
do not create any right, claim or benefit on the part of any person not a
Party to this Agreement, including End-Users.
23. SURVIVAL OF PROVISIONS:
-----------------------
Any obligations of the Parties relating to monies owed, as well as those
provisions relating to confidentiality, assurances of payment, limitations
on liability and actions and indemnification, survive termination of this
Agreement.
24. UNENFORCEABILITY OF PROVISIONS:
------------------------------
The illegality or unenforceability of any provision of this Agreement does
not affect the legality or enforceability of any other provision or
portion. If any provision or portion of this Agreement is deemed illegal or
unenforceable for any reason, there shall be deemed to be made such minimum
change in such provision or portion as is necessary to make it valid and
enforceable as so modified.
-14-
<PAGE>
EXHIBIT A
GENERAL DEFINITIONS
(not otherwise defined in the body of the Agreement or its attachments)
1. Frontier 800 Numbers are 800/888 telephone numbers ordered onto the
Frontier network by Purchaser and for which Frontier has either (i) been
appointed the RespOrg, or (ii) reserved and issued the 800 telephone number
to Purchaser. Frontier shall be deemed to be the RespOrg for all 800/888
telephone numbers reserved and issued by it under (ii) above.
2. ANI is a telephone number.
3. ANI Information is the adds, moves and terminations of End-user ANIs.
4. Billing Cycle is the Frontier billing cycle to which Purchaser's account
hereunder is assigned by Frontier (a full billing cycle equals
approximately 30 days of Services usage).
5. Business Day is Monday through Friday, 8:30 am to 5:30 pm Detroit, MI local
time, excluding nationally recognized holidays. Unless otherwise stated,
"days" refers to calendar days.
6. Presubscribed means that (i) an End-User has had its ANIs placed on
Frontier's CIC, or (ii) an End-User's ANIs have been placed on Purchaser's
CIC and such CIC has been directed or translated to the Frontier network.
For example, if Purchaser has ordered an End-User onto Frontier's network
directly, or if an End-User has selected Purchaser as its primary carrier
and Purchaser has directed its CIC to Frontier, such End-Users are deemed
to be Presubscribed to Frontier.
7. Carrier 800 Numbers are 800/888 telephone numbers ordered onto the Frontier
network by Purchaser for which a party other than Frontier or Purchaser has
been appointed the RespOrg.
8. Code is a calling card authorization number used to access the Calling Card
Services.
9. CDR means call detail records and CDR Tape is a magnetic tape containing
CDR.
10. Purchaser 800 Numbers are 800/888 telephone numbers ordered onto the
Frontier network by Purchaser for which Purchaser has been appointed the
RespOrg.
11. Effective Date is the date this Agreement is signed by a Frontier officer
as set forth on the signature page.
<PAGE>
12. End-Users are customers of Purchaser for which Purchaser has submitted an
order that has been accepted by Frontier during the term of this Agreement.
To the extent that Purchaser subscribes to the Services for its own use,
Purchaser is deemed to be an End-User.
13. 800 Numbers collectively refers to the Frontier 800 Numbers, Carrier 800
Numbers, Purchaser 800 Numbers and PIN 800 Numbers.
14. Guidelines refer to the telecommunications industry's general rules with
respect to 800/888 number portability, including but not limited to, (i)
the Federal Communications Commission's ("FCC") 800/888 (and other toll-
free) number portability policies and rules, (ii) the SMS 800 requirements
set forth in the Bell Operating Companies' Tariff FCC No. 1, and (iii) the
CLC 800 DataBase Ad-Hoc Committee's Guidelines for 800 DataBase, as all of
the foregoing may be replaced or modified from time to time.
15. PIN 800 Numbers are Frontier 800 Numbers assigned to Purchaser for use with
the 800 PIN Service.
16. RespOrg is a responsible organization as defined in the Guidelines. A
RespOrg is the entity that is responsible for managing and administering
the account records in the 800 Service Management System DataBase.
SERVICE DEFINITIONS
1. Ancillary Services consist of calling card operator assisted calls and
calling card traffic generated via Codes which access the following
Frontier special features: teleconferencing, voice mail, Frontier Call
Delivery, Frontier InfoReach, SpeedLink(R), Option USA(R) and such
other special features as Frontier may from time to time add to its calling
card platform and make available to Purchaser. The Ancillary Services are
only available in conjunction with the Calling Card Services.
2. Calling Card Services consist of calling card traffic generated via Codes.
3. 800 PIN Service consists of inbound Switched Services combined with a PIN
800 Number accessed via four digit personal identification numbers ("PIN
Numbers") used by End-Users ("0000", "466", "9675" and "9999" are not
available as PIN Numbers). The use of the PIN Numbers with a PIN 800 Number
permits multiple End-Users to utilize the same 800/888 telephone number on
an individual basis. 800 Directory Assistance is not available with the 800
PIN Service.
4. Dedicated Services consist of: (i) switched outbound long distance traffic
delivered to a Frontier Point of Presence ("POP") via dedicated facilities
and terminated over the Frontier network, and (ii) switched inbound 800/888
traffic generated via 800 Numbers which traffic originates on the Frontier
network and is terminated by Frontier onto Purchaser's or an End User's
dedicated facilities.
A-2
<PAGE>
5. Directory Assistance Transport consists of Frontier terminating calls made
by End-Users to directory providers for assistance in locating a non-800
Number. "800 Directory Assistance" consists of calls made to directory
providers for assistance in locating a Frontier 800 Number.
6. Inbound Services collectively refers to inbound traffic under the Dedicated
Services, Switched Services and 800 PIN Service.
7. International Services consist of international traffic generated via the
Dedicated Services, Switched Services and Calling Card Services.
8. Switched Services consist of switched inbound and outbound long distance
traffic generated by End-Users that originates and terminates on the
Frontier network.
A-3
<PAGE>
EXHIBIT B
SCHEDULE OF ANCILLARY FEES
Electronic Exchange
(Account Management and CDR Transfer System)
Setup
Refund at Monthly billed usage of $ 25,000
Monthly service charge $ 250
Call Detail Record Stand Alone (no EE)
Monthly per billing cycle, first tape $ 115
Additional tapes $ 15
Programming charges to change CDR format, per hour $ 120
Branded 700 Test Number
Setup $ 350
Monthly service charge $ 0
Rejected Order resolution with LECs $ 0
Negotiation of Disputed PIC charges $ 0
Accounting Codes
Non-validated, per account with codes $ 0
Validated, per account with codes. $ 5
NECA and Lifeline charges: Pass through of NECA
charges per ANI PICed to Frontier CIC (current charge) $ 0.5110
800 SMS database administration (pass through) $ 0.70
Per active 800 number with Frontier as RespOrg
800 RespOrg (Frontier assessed service charges) $ 0
800 Directory Assistance listing, MRC per number $ 15
Install charge, per number $ 15
800 P.I.N.
Set up charge, per PIN program $ 1,000
Set up charge to be refunded with monthly PIN usage $ 2,500
Dedicated Services
"B" city Monthly Recurring Charges, per DS-1 $ 95
Channel Bank/CSU/Cards:
Non-Recurring Charge $ 495
Monthly Recurring Charge $ 340
Stand Alone SCU:
Non Recurring Charge $ 100
Monthly Recurring Charge $ 240
<PAGE>
Dedicated 800 Applications Charges
ANI/DNS Deliver
Monthly Recurring Charge: $ 75
Non Recurring Charge: $ 450
Stand Alone DNIS
Monthly Recurring Charge: $ 50
Non Recurring Charge: $ 200
B-2
<PAGE>
EXHIBIT C
CALL DETAIL RECORDS
ORDER PROCESSING PROCEDURES
LETTER OF AGENCY REQUIREMENTS
I. Call Detail Records.
1. Purchaser has the option of receiving call detail records for usage of
the Services ("CDR") on (i) a monthly basis, (ii) a daily pre-bill run basis, or
(iii) no CDR at all. Purchaser may also elect both options (i) and (ii), as
further detailed below. Regardless of the option selected, Purchaser shall upon
its execution of this Agreement, pay Frontier the non-refundable account set up
fee set out in Exhibit B. Provided Purchaser is not in default under this
Agreement, the account set up fee will be credited to the Invoice following the
Billing Cycle in which Purchaser's Minimum Charge first becomes effective and is
met or paid.
2. If Purchaser elects option 1. (i), then on or about the fifth Business
Day following the end of a Billing Cycle, Frontier will deposit with an
overnight delivery service for delivery to Purchaser a CDR Tape in the format
established by Frontier. CDR Tapes rate the Services at the standard Frontier
rates in effect at the time the Services were provided and must be re-rated by
Purchaser at its tariffed rates. Purchaser shall pay the monthly recurring
charge set out in Exhibit B. Software modifications to the CDR Tape format
requested by Purchaser are subject to Frontier approval and will be invoiced to
Purchaser at the charges set out in Exhibit B.
3. If Purchaser elects option 1. (ii), then Frontier will provide CDR on
a pre-bill basis once a day, Monday through Saturday, excluding nationally
recognized holidays, for the prior period's traffic. For each pre-bill computer
run performed by Frontier (during Frontier established time periods), Frontier
will deliver CDR by electronic data exchange ("Electronic Exchange") to either
(i) Purchaser's designated mainframe computer via the IBM Information Network
("IIN") via Network Data Mover ("NDM"), or (ii) dedicated personal computer via
Procomm+ software. Purchaser is liable for all transmission charges together
with the cost of hardware and software necessary at its location for use of IIN,
NDM or Procomm +, which hardware and software must comply with the formats and
technical specifications that Frontier from time to time may promulgate.
Frontier will archive CDR for 8 Business Days and re-deliver CDR to Purchaser
upon request.
4. Purchaser may cancel an option at any time on 30 days written notice.
Purchaser may change an existing option or select a new option at any time upon
written notice and payment to Frontier of any then current set up charge for
such option. Changes or new selections are effective in the second Billing Cycle
following receipt of the request and any required set up charge.
<PAGE>
II. Order Processing Procedures.
1. Orders for the Services are transmitted in a format designated by
Frontier via the CDR transmission media selected by Purchaser. At the time
Purchaser submits an order for Service, Purchaser shall furnish Frontier with
the name, billing and service addresses and ANI of each Presubscribed End-User
(the "End-User Information"). The End-User Information is required for LEC
account set-up, normal call processing and handling NXX level customer service.
The End-User Information is deemed to be Purchaser's Proprietary Information in
accordance with Section 15 of the Agreement.
2. If the traffic volume of Services ordered by Purchaser is such that
Frontier determines in its sole discretion that a delay in processing orders is
required, Frontier may delay order processing for such period of time as
Frontier deems necessary in its reasonable business judgment. Any such delays
will not, however, adversely impact Purchaser for the purpose of determining
whether Purchaser has met any minimum usage requirements under the Agreement;
Frontier agrees to adjust the requirements to reflect such delay.
3. Codes and End-User ANIs:
A. Codes for existing End-User ANIs will be activated within 5
Business Days of receipt by Frontier of complete and accurate End-User
Information. Codes requested with End-User ANI orders will be activated when the
ANI is activated.
B. Purchaser understands and agrees that activation of End-User ANIs
is contingent on the End-User Information associated with such ANIs complying
with LEC established criteria. Assuming receipt of properly formatted End-User
Information that complies with the LEC established criteria, ANIs will generally
be activated within 10 Business Days of receipt by Frontier of the End-User
Information. If the End-User Information does not comply with LEC criteria,
Frontier will return the same to Purchaser for Purchaser's correction and
resubmission.
C. Once each calendar month Frontier will provide Purchaser with a
written report of ANI Information. If Purchaser has elected to receive CDR via
Electronic Exchange, then the ANI Information will be transmitted via Electronic
Exchange, rather than by a written report. If 10% or more of the aggregate End-
User Information submitted by Purchaser in any calendar month must be returned
to Purchaser for correction and resubmission, Frontier may at its discretion
either cease providing the ANI Information or charge Purchaser for continuing to
provide the same.
4. 800 Numbers:
Notwithstanding the order transmission media selected under the Agreement, until
such time as Frontier determines in its sole discretion that Electronic Exchange
and/or magnetic tape processing is available for the reservation or ordering of
800 Numbers (and informs Purchaser of such availability), orders for activation
or reservation of 800 Numbers will be by facsimile and subject to the following.
C-2
<PAGE>
A. Subject to (i) the Guidelines, (ii) delays attributable to third
parties, and (iii) paragraph II. 2. above and the provisions of the Inbound 800
Schedule, 800 Numbers will generally be activated and confirmed by Frontier
within 2 Business Days of receipt by Frontier of a proper order in accordance
with the order processing requirements set forth below.
(a) Orders must be submitted to Frontier via facsimile using the
forms supplied by Frontier, and must include: (x) a letter of
authorization in the format attached hereto as Attachment 4.A.(a)(x)
and made a part hereof, if Frontier is being appointed the RespOrg,
and (y) the End-User Information for each 800 Number, including the
ANI translation for each 800 Number.
(b) At such time as Frontier may make Frontier 800 Numbers available
to Purchaser, Purchaser may request reservation of a specific Frontier
800 Number from the SMS 800 DataBase via facsimile using the forms
supplied by Frontier. Charges for requests will be invoiced to
Purchaser at the cost set out in Exhibit B. Frontier will either
confirm reservation or indicate unavailability via facsimile generally
within 2 Business Days of its receipt of the request. Verbal requests
for, and verbal confirmations of, reservations will not be honored by
Frontier. Frontier reserves the right at any time to limit the
quantity or discontinue the availability of Frontier 800 Numbers.
(c) If Frontier has reserved a Frontier 800 Number for Purchaser and
Purchaser does not order activation of the reserved number in
accordance with item (a) above within 10 Business Days from the date
of Frontier confirmation of the reservation, the reserved number will
be assigned to the Frontier pool of 800 numbers and be available to
Frontier for its own business purposes. Purchaser understands and
agrees that it is responsible for all damages and claims if Purchaser
assigns a reserved Frontier 800 Number to an End-User without having
timely ordered activation of such 800 Number with Frontier and such
800 Number is assigned by Frontier to a third party. Purchaser agrees
to defend and indemnify Frontier from any claims and costs (including
reasonable attorney fees) relating to Purchaser's assignment of 800
Numbers.
B. The Frontier facsimile numbers and contacts to be used for 800
Number reservations are 1-800-875-HELP(4357), Attention: Special Services; and
for 800 Number orders 1 800-433-5132, Attention: Network Services/Order
Fulfillment. The Purchaser facsimile number and contacts to be used for said
purposes are 315-425-1149, Attention: Operations. Either party may change its
respective facsimile number or contact upon prior written notice to the other
party.
5. If the End-User Information or other order information submitted by
Purchaser is incomplete or inaccurate, Frontier will return the same to
Purchaser for correction and resubmission.
C-3
<PAGE>
6. Service Cancellation:
Upon Purchaser's request, Frontier will to the extent possible, block or
cancel service to End-Users. Frontier shall not be liable to Purchaser or End-
Users for any damages, costs or charges with respect to Frontier's compliance
with Purchaser's request; and Purchaser shall be solely responsible for and
shall defend and indemnify Frontier against any claims and costs (including
attorney fees) by End-Users or other third parties related to the blocking or
cancellation of an End-User's service at the request of Purchaser.
III. Letter of Agency Requirements.
1. Purchaser is responsible for obtaining valid letters of agency
from prospective End-Users to be Presubscribed in accordance with the following:
A. Frontier acknowledges that at times Purchaser may obtain
prospective End-Users through telemarketing and tape recorded third party
verifications in accordance with FCC Guideline Subpart K section 64.1100 (c) as
the same may be amended, interpreted or clarified ("Verbal LOA"). Purchaser
understands that some LECs will not accept Verbal LOAs as valid authorization
for a change of long distance carriers and agrees that for prospective End-Users
located in such LECs' jurisdictions it will use Written LOAs. If Purchaser
elects to use, or is required to use, written letters of agency ("Written LOAs")
for prospective End-Users it shall use a format that complies with FCC Guideline
Subpart K section 64.1150 as the same may be amended, interpreted or clarified.
Purchaser shall retain all Verbal LOAs tapes and transcripts and Written LOAs
used and promptly make the originals available upon the request of Frontier, a
LEC or any regulatory agency.
B. Purchaser agrees that a Verbal LOA may be used to
presubscribe a prospective End-User to Frontier, but that the Verbal LOA will
not be accepted by Frontier as documentation in any PIC or "slamming" claims.
Frontier is not obligated to "work" disputes with respect to "slamming" or
similar claims from End-Users or prospective End-Users. Frontier will refer LEC
inquiries, and pass through any LEC charges imposed on Frontier for such claims,
directly to Purchaser, including without limitation, Primary Interexchange
Carrier charges or any other charges and penalties imposed by a LEC or
regulatory agency (collectively, "PIC Charges") with respect to such claims. PIC
Charges will be billed to Purchaser periodically on an Invoice. Verbal LOAs and
Written LOAs are collectively referred to as "LOAs". Purchaser shall defend and
indemnify Frontier against any and all claims, including without limitation, any
End-User, LEC or regulatory agency claims, arising from or related to
Purchaser's failure to use or provide valid LOAs.
2. Purchaser shall not transfer a Presubscribed End-User to another
carrier (other than Purchaser's own network), except with a valid LOA.
Notwithstanding the foregoing, if Frontier is in breach of this Agreement and
fails to cure the breach in accordance with the terms hereof, then Purchaser may
transfer End-Users to another carrier.
C-4
<PAGE>
SWITCHED OUTBOUND SERVICES SCHEDULE
(NATIONAL ORIGINATION SERVICE)
The rates and discount credits described in this Schedule and any attachments
hereto are in lieu of any standard volume discounts and any promotional rates or
discounts that may from time to time be offered by Frontier for the Services.
Domestic means the 48 contiguous United States. Any discount credits are applied
against Purchaser's monthly interstate usage charges. Unless otherwise stated,
domestic switched calls are measured in 6 second increments after an 18 second
minimum and international switched calls are measured in 6 second increments
after a 30 second minimum.
1. For domestic outbound traffic, Purchaser shall pay the rates set out in the
attached pricing schedules. In any given month, a minimum of 85% of
Presubscribed End-User ANIs must be located in Regional Bell Operating Company
(RBOC) or GTE serviced areas and be subject to RBOC/GTE tariffed rates. If
Purchaser falls below the minimum in any month, Frontier may apply a $0.04 per
minute surcharge to all of Purchaser's non-RBOC/GTE domestic outbound Switched
Services usage in that month.
2. Purchaser agrees that its net charges for its outbound domestic Switched
Services measured on a quarterly basis will not decrease by more than 20% from
the prior quarter. The first quarter commences in the first calendar month
following the Effective Date. If the net charges for such Services for a quarter
decrease by more than 20% from the prior quarter (other than as a result of
documented normal customer attrition or seasonal fluctuations), Purchaser shall
pay the difference between the amount of the actual net charges for such
Services for the quarter being measured and 80% of the net charges for such
Services in the prior quarter (the "Quarterly Surcharge"). The Quarterly
Surcharge will be included in the Invoice for the last calendar month of the
quarter in question.
3. If any End-User accepted by Frontier was a Frontier customer within three
calendar months prior to application for Service under this Agreement (as
established by Frontier account records), Frontier may upon prior written notice
to Purchaser increase the rates chargeable to Purchaser for the Service usage of
such End-Users by $0.03 per minute for business hours and $0.02 per minute for
off hours, excepting only such End-Users that are activated directly by a LEC as
a new Frontier customer within 30 days prior to Purchaser's submission of End-
User Information for such End-Users.
4. Upon Purchaser's request, Frontier may make available to Purchaser: (i) an
available 700 number (1-700-555-XXXX) and a recorded message that identifies
Purchaser to Presubscribed End-Users as their carrier, (ii) 2, 3 and 4 digit
non-validated accounting codes, and (ii) 3 and 4 digit validated accounting
codes. Frontier will make the 700 number available for Purchaser's use within 15
Business Days after receipt of the request. Two digit non-validated accounting
codes are not available with the Dedicated Services; no accounting codes are
available for the Inbound Services. Purchaser shall pay any installation and
monthly recurring charges for the 700 number and the accounting codes as set out
in Exhibit B of the Agreement. Purchaser shall be liable for all charges
associated with Service usage generated by accounting codes issued by Frontier
under this Agreement.
5. For non-calling card switched International Services, Purchaser shall pay
the international rates set out in the attached pricing schedules.
<PAGE>
DEDICATED OUTBOUND SERVICES SCHEDULE
(NATIONAL ORIGINATION SERVICE)
The rates and discount credits described in this Schedule and any attachments
hereto are in lieu of any standard volume discounts and any promotional rates or
discounts that may from time to time be offered by Frontier for the Services.
Domestic means the 48 contiguous United States. Any discount credits are
applied against Purchaser's monthly interstate usage charges. Unless otherwise
stated, domestic dedicated calls are measured in 6 second increments with a 6
second minimum and international dedicated calls are measured in 6 second
increments after a 30 second minimum.
1. DS-1 Services (collectively, inbound and outbound Dedicated Services) are
available at the Frontier POPs set forth on Attachment 2.A. attached hereto and
made a part hereof. Frontier may add or delete a POP from the Attachment at any
time upon written notice (a deletion shall not impact service already being
provided to Frontier at that POP). At Purchaser's written request, its DS-1
circuits will interconnect a Frontier POP to an End-User's premise. Purchaser
is responsible for coordinating LEC installation of local loops necessary for
the DS-1 Services as well as installation and monthly recurring charges
associated with dedicated circuits necessary for the DS-1 Services.
2. At Purchaser's written request, Frontier may provide channel banks or
stand-alone CSUs (the "Equipment") to End-Users that need the same to access the
DS-1 Services. Frontier will install and maintain the Equipment. End-Users
must sign an Equipment Agreement with Frontier in the format supplied or
approved by Frontier. Purchaser shall bear the risk of loss of the Equipment if
the Equipment is not returned to Frontier in good working condition, normal wear
and tear excepted.
3. At Purchaser's written request, Frontier may provide the following special
800 applications for the dedicated Inbound Services: (i) ANI delivery/DNIS and
stand-alone DNIS, and (ii) 800 NPA blocking (collectively, the "Application").
In order to receive Application (i), the Purchaser must have equipment
compatible with the Application; Frontier will not provide such equipment. In
order to receive Application (ii), Purchaser must have implemented remote data
access with Frontier.
4. Purchaser shall be charged and pay for the DS-1 Services in accordance with
the rates set out in the attached pricing schedules. Purchaser shall be charged
for the Equipment and the Applications at the charges set out in Exhibit B.
Also, Purchaser shall be charged the monthly recurring charge set out in Exhibit
B for each DS-1 circuit connected to the POPs listed on Attachment 2.A. as "B"
city.
5. Commencing with Purchaser's first Billing Cycle following installation of a
DS-1 circuit, each DS-1 circuit interconnected to an Frontier POP has a minimum
term of 12 full months and a monthly minimum of 15,000 minutes of usage per DS-1
circuit. Any shortfall in the minimum will be charged to Purchaser at the
applicable rate under paragraph 4. above. After expiration of the full 12 month
term, the DS-1 Services for a particular DS-1 circuit will be automatically
continued until terminated by either party on 60 days written notice. If a DS-1
circuit is disconnected prior to the expiration of the minimum 12 month term
(except for termination caused by Frontier's uncured breach), Purchaser shall
pay a termination fee equal to $500 times the number of months or partial months
remaining on the 12 month term.
6. For non-calling card switched International Services, Purchaser shall pay
the international rates set out in the attached pricing schedules.
<PAGE>
INBOUND 800 SERVICES SCHEDULE
(NATIONAL ORIGINATION SERVICE)
I. 800 Number Requirements.
1. In order to protect the integrity of its network Frontier may, without
liability, temporarily block any 800 Number having usage surges. Frontier agrees
to use reasonable efforts to promptly notify Purchaser after blockage has
occurred.
2. If usage of an 800 Number impacts Frontier in such a manner that the
unbillable (non-completed) calls for such 800 Number in any month are greater
than 5% of the billable (completed) calls for such 800 Number in that month,
Frontier may charge Purchaser a non-discountable $0.50 charge for each
unbillable call in that month.
3. At Purchaser's written request and to the extent available to
Frontier, Canadian origination is available for Frontier 800 Numbers only. Due
to the fact that Canadian origination is provided through an arrangement with
third parties, Frontier does not guarantee the continuing availability of
Canadian origination. Purchaser shall inform End-Users in writing of this fact
prior to or at the time of Purchaser's sale of Canadian origination. Frontier
will provide Purchaser with prompt written notice if Canadian origination
becomes unavailable.
4. At Purchaser's written request and to the extent available to
Frontier, 800 Directory Assistance is available for Frontier 800 Numbers only at
the charge set out in Exhibit B. Due to the fact that 800 Directory Assistance
is provided through an arrangement with a third party, the provision of 800
Directory Assistance by Frontier is subject to the policies and procedures
promulgated from time to time by such third party. Purchaser understands that
any Frontier 800 Number listed with 800 Directory Assistance is not published in
any written directory, but is only available on a call-in basis. Purchaser shall
inform End-Users in writing of this fact prior to or at the time of Purchaser's
sale of 800 Directory Assistance.
5. The transfer of 800 Numbers or Inbound Services traffic to another
carrier is subject to the Guidelines and the Frontier policies and procedures
for 800/888 number/traffic transfers in effect at the time of the requested
transfer.
6. If an 800 Number is blocked at Purchaser's request, then for the
period the 800 Number is being blocked Frontier will, at Purchaser's written
request and expense, re-translate the 800 Number to Purchaser's customer service
telephone number.
<PAGE>
II. Rates for Inbound Services.
The rates and discount credits for the Inbound Services set forth in this
Schedule and any attachments are in lieu of any standard volume discounts and
any promotional rates or discounts that may be offered from time to time for the
Inbound Services. Domestic means the 48 contiguous United States. Discount
credits, if any, are applied against Purchaser's monthly interstate usage
charges. Unless otherwise stated, switched inbound calls are measured in 6
second increments after an 18 second minimum and dedicated inbound calls are
measured in 6 second increments with a 6 second minimum.
1. For inbound Switched Services traffic, Purchaser shall pay the rates
set out in the attached pricing schedules. In any given month, a minimum of 85 %
of Purchaser's 800 Number traffic must terminate to Regional Bell Operating
Company (RBOC) or GTE serviced areas and be subject to RBOC/GTE tariffed rates.
If Purchaser falls below the minimum in any month, Frontier may apply a $0.04
per minute surcharge to all of Purchaser's "non-RBOC" domestic inbound Switched
Services usage in that month.
2. In order to be eligible to order inbound Dedicated Services traffic,
Purchaser must be subscribed to the DS-1 Services. For inbound Dedicated
Services traffic, Purchaser shall pay the rates set out in the attached pricing
schedules. Inbound Dedicated Services overflow traffic is charged to Purchaser
at the inbound Switched Services rates set out in the applicable rate schedule.
<PAGE>
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), and Vern M. Kennedy (the "Executive"), dated as of
the 3rd day of February, 2000.
WHEREAS, the Company and the Executive wish to set forth the terms of
employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof and ending on December 31, 2001 or such
later date as a result of extensions pursuant to clause (b) below (the
"Employment Period"), unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement.
(b) The Employment Period shall be automatically extended for successive
one-year periods unless either party gives 120 days advance written notice prior
to the end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially
employed as President & Chief Executive Offer of the Company.
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
- --------
with the relocation of the Company's headquarters within New York State, New
Jersey or Connecticut.
3. Compensation.
------------
(a) Base Salary. During the fiscal year in which the Employment Period
-----------
begins, the Executive shall receive an annual base salary ("Annual Base Salary")
of $250,000, payable pursuant to the Company's normal payroll practices. For
each following fiscal year, the Annual Base Salary then in effect shall be
reviewed by the Board of Directors of the Company ("the Board") and may be
increased (but not decreased) as the Board in its sole discretion shall
determine based upon the performance of the Executive and the Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 60% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus"). The Executive's bonus for each fiscal year
shall be determined in accordance with an appropriate payout curve (established
annually by the Board after consultation with the Executive) if such target
performance goals are not met or are exceeded. After the first full fiscal year
of the Company, the Executive's Target Bonus may be reviewed by the Board and,
in its sole discretion, increased, but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. In addition to the grant of stock options to the
--------------------
Executive at the time of his initial employment by the Company, the Executive
shall be eligible to participate in any subsequent option grants commensurate
with that of other peer executives, as determined by the Board (or any committee
thereof) in its sole discretion.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
--------
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
3
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation of five (5) weeks per year, which shall accrue and
shall be taken in accordance with the policies of the Company.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By the Company. The Company may terminate the Executive's employment
--------------
during the Employment Period for Cause or without Cause. For purposes of this
Agreement, "Cause" shall mean the Executive's (i) conviction of or plea of nolo
contendere to a felony, (ii) willful misconduct that is materially injurious to
the Company, (iii) repeated failure to undertake communicated directives on
material business matters despite written instruction to do so or (iv) any
breach materially injurious to the Company by the Executive of Sections 7 or 8
or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) at least ten (10) days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the Company and (c)
delivery to the Executive of a notice of termination from the Board of
4
<PAGE>
Directors of the Company stating its opinion that the Executive was guilty of
the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the date of receipt of the Notice of Termination
or any later date (within 30 days following such notice) specified therein, and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date of Disability, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
5
<PAGE>
(a) Other Than for Cause, Death or Disability; Good Reason. If, during
------------------------------------------------------
the Employment Period, the Company terminates the Executive's employment, other
than for Cause, death or Disability, or if the Executive terminates employment
for Good Reason:
(i) the Company shall pay the Executive, in cash in one lump sum the amount
of 50% of the Executive's Annual Base Salary;
(ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, and any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
(iv) any vested Company stock options or stock awards held by the Executive
as of the Date of Termination will remain exercisable in accordance with
their original terms; any unvested stock options or stock awards held by
the Executive as of the Date of Termination will continue to vest as if the
Executive had remained employed by the Company for the period of twelve
(12) months following the Date of Termination; all unvested stock options
or stock awards still unvested twelve (12) months following the Date of
Termination shall be immediately canceled and forfeited;
(v) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the
Company's medical, dental, life and other
6
<PAGE>
welfare insurance plans (subject to the Executive continuing to make any
required contributions to such plans) for a period of six months following
the Date of Termination (or the Company shall provide equivalent benefits
for such period); provided that such continued benefits shall cease upon
--------
the Executive becoming eligible for comparable benefits from a subsequent
employer; and
(vi) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of
Termination, to the extent not yet paid;
(ii) all Company stock options and stock awards will vest, and such stock
options shall remain exercisable in accordance with the original terms of
such options;
(iii) other benefits, if applicable, shall be paid to the Executive (or
the Executive's Survivors, if applicable) in accordance with applicable
plans and programs of the Company.
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination and any earned bonus to the
extent not yet paid, and the Company shall have no further obligations
7
<PAGE>
under this Agreement. Upon the Executive's Date of Termination for Cause, all
unvested Company stock options and stock awards shall be immediately canceled
and forfeited. Any vested stock options may be exercised by the Executive at any
time within 30 days of such Date of Termination.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following a
Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (ii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iii) any "person" or "group" (as such terms are
used in Sections 13(d) and 14 (d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of the date
hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
8
<PAGE>
7. Confidential Information. The Executive agrees that he will not at
------------------------
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any confidential
information of the Company which are in the possession or control of the
Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) The Executive shall not hire or attempt to hire for employment any
person who is employed by the Company or attempt to influence any such person to
terminate employment with the Company, except to the extent the Executive is
acting on behalf of the company in good faith; provided, however, that nothing
-------- -------
herein shall prohibit the Executive from general advertising for personnel not
specifically targeting any employee or other personnel of the Company.
9
<PAGE>
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. The Executive and the Company agree that any dispute
-----------
between or among the parties to this Agreement relating to or in respect of this
Agreement, its negotiation, execution, performance, subject matter, or any
course of conduct or dealing or actions under or in respect of this Agreement,
shall be submitted to and resolved exclusively pursuant to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall take place in New York, New York, and shall
be subject to the substantive law of the State of New York. Decisions pursuant
to such arbitration shall be final, conclusive and binding on the parties. Upon
the conclusion of any arbitration, the Executive or the Company may apply to any
state court or any United States Federal District Court in New York, New York to
enforce the decisions pursuant to such arbitration. The Executive and the
Company consent to the jurisdiction of all such courts, agree that venue will be
proper in any such court and waive any objections based upon forum non
----- ---
conveniens with respect to any application to any such court.
- ----------
10
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any assignee to assume and agree to 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.
12. Representation of the Executive. The Executive acknowledges that he
-------------------------------
is knowledgeable and sophisticated about business matters, that he has read and
understands the terms of this Agreement, and that he has had a reasonable period
of time prior to his execution hereof to review, negotiate and consult with
counsel of his choice about this Agreement.
13. Miscellaneous.
-------------
11
<PAGE>
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Vern M. Kennedy
150 E 57th Street, Apt #5E
New York, New York 10022
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Chief Executive Officer
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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
12
<PAGE>
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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
BROADVIEW NETWORKS, INC.
/s/ Terrence J. Anderson
- ------------------------------------
By:
Title:
Executive
/s/ Vern M. Kennedy
- ------------------------------------
14
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), and Eric Roden (the "Executive"), dated as of the
3rd day of February, 2000.
WHEREAS, the Company and the Executive wish to set forth the terms of
employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof and ending on December 31, 2000 or such
later date as a result of extensions pursuant to clause (b) below (the
"Employment Period"), unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement.
(b) The Employment Period shall be automatically extended for successive
one-year periods unless either party gives 120 days advance written notice prior
to the end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially
employed as an Executive Vice President of the Company.
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
- --------
with the relocation of the Company's headquarters within New York State, New
Jersey or Connecticut.
3. Compensation.
------------
(a) Base Salary. During the fiscal year in which the Employment Period
-----------
begins, the Executive shall receive an annual base salary ("Annual Base Salary")
of $165,000, payable pursuant to the Company's normal payroll practices. For
each following fiscal year, the Annual Base Salary then in effect shall be
reviewed by the Board of Directors of the Company ("the Board") and may be
increased (but not decreased) as the Board in its sole discretion shall
determine based upon the performance of the Executive and the Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 45% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus"). The Executive's bonus for each fiscal year
shall be determined in accordance with an appropriate payout curve (established
annually by the Board after consultation with the Executive) if such target
performance goals are not met or are exceeded. After the first full fiscal year
of the Company, the Executive's Target Bonus may be reviewed by the Board and,
in its sole discretion, increased, but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. In addition to the grant of stock options to the
--------------------
Executive at the time of his initial employment by the Company, the Executive
shall be eligible to participate in any subsequent option grants commensurate
with that of other peer executives, as determined by the Board (or any committee
thereof) in its sole discretion.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
--------
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
3
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation of five (5) weeks per year, which shall accrue and
shall be taken in accordance with the policies of the Company.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By the Company. The Company may terminate the Executive's employment
--------------
during the Employment Period for Cause or without Cause. For purposes of this
Agreement, "Cause" shall mean the Executive's (i) conviction of or plea of nolo
contendere to a felony, (ii) willful misconduct that is materially injurious to
the Company, (iii) repeated failure to undertake communicated directives on
material business matters despite written instruction to do so or (iv) any
breach materially injurious to the Company by the Executive of Sections 7 or 8
or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) at least ten (10) days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the Company and (c)
delivery to the Executive of a notice of termination from the Board of
4
<PAGE>
Directors of the Company stating its opinion that the Executive was guilty of
the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the date of receipt of the Notice of Termination
or any later date (within 30 days following such notice) specified therein, and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date of Disability, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
5
<PAGE>
(a) Other Than for Cause, Death or Disability; Good Reason. If, during
------------------------------------------------------
the Employment Period, the Company terminates the Executive's employment, other
than for Cause, death or Disability, or if the Executive terminates employment
for Good Reason:
(i) the Company shall pay the Executive, in cash in one lump sum the amount
of 50% of the Executive's Annual Base Salary;
(ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, and any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
(iv) any vested Company stock options or stock awards held by the Executive
as of the Date of Termination will remain exercisable in accordance with
their original terms; any unvested stock options or stock awards held by
the Executive as of the Date of Termination will continue to vest as if the
Executive had remained employed by the Company for the period of twelve
(12) months following the Date of Termination; all unvested stock options
or stock awards still unvested twelve (12) months following the Date of
Termination shall be immediately canceled and forfeited;
(v) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the
Company's medical, dental, life and other
6
<PAGE>
welfare insurance plans (subject to the Executive continuing to make any
required contributions to such plans) for a period of six months following
the Date of Termination (or the Company shall provide equivalent benefits
for such period); provided that such continued benefits shall cease upon
--------
the Executive becoming eligible for comparable benefits from a subsequent
employer; and
(vi) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of
Termination, to the extent not yet paid;
(ii) all Company stock options and stock awards will vest, and such stock
options shall remain exercisable in accordance with the original terms of
such options;
(iii) other benefits, if applicable, shall be paid to the Executive (or
the Executive's Survivors, if applicable) in accordance with applicable
plans and programs of the Company.
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination and any earned bonus to the
extent not yet paid, and the Company shall have no further obligations
7
<PAGE>
under this Agreement. Upon the Executive's Date of Termination for Cause, all
unvested Company stock options and stock awards shall be immediately canceled
and forfeited. Any vested stock options may be exercised by the Executive at any
time within 30 days of such Date of Termination.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following a
Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (ii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iii) any "person" or "group" (as such terms are
used in Sections 13(d) and 14 (d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of the date
hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
8
<PAGE>
7. Confidential Information. The Executive agrees that he will not at
------------------------
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any confidential
information of the Company which are in the possession or control of the
Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) The Executive shall not hire or attempt to hire for employment any
person who is employed by the Company or attempt to influence any such person to
terminate employment with the Company, except to the extent the Executive is
acting on behalf of the company in good faith; provided, however, that nothing
-------- -------
herein shall prohibit the Executive from general advertising for personnel not
specifically targeting any employee or other personnel of the Company.
9
<PAGE>
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. The Executive and the Company agree that any dispute
-----------
between or among the parties to this Agreement relating to or in respect of this
Agreement, its negotiation, execution, performance, subject matter, or any
course of conduct or dealing or actions under or in respect of this Agreement,
shall be submitted to and resolved exclusively pursuant to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall take place in New York, New York, and shall
be subject to the substantive law of the State of New York. Decisions pursuant
to such arbitration shall be final, conclusive and binding on the parties. Upon
the conclusion of any arbitration, the Executive or the Company may apply to any
state court or any United States Federal District Court in New York, New York to
enforce the decisions pursuant to such arbitration. The Executive and the
Company consent to the jurisdiction of all such courts, agree that venue will be
proper in any such court and waive any objections based upon forum non
----- ---
conveniens with respect to any application to any such court.
- ----------
10
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any assignee to assume and agree to 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.
12. Representation of the Executive. The Executive acknowledges that he
-------------------------------
is knowledgeable and sophisticated about business matters, that he has read and
understands the terms of this Agreement, and that he has had a reasonable period
of time prior to his execution hereof to review, negotiate and consult with
counsel of his choice about this Agreement.
13. Miscellaneous.
-------------
11
<PAGE>
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Eric G. Roden
39 Benjamin Road
Mahopac, NY 10541
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Chief Executive Officer
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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
12
<PAGE>
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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
BROADVIEW NETWORKS, INC.
/s/ Vern Kennedy
- ------------------------------------
By: Vern Kennedy
Title: Presient
Executive
/s/ Eric G. Roden
- ------------------------------------
14
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), and Colm Kelly (the "Executive"), dated as of the
3rd day of February, 2000.
WHEREAS, the Company and the Executive wish to set forth the terms of
employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof and ending on December 31, 2000 or such
later date as a result of extensions pursuant to clause (b) below (the
"Employment Period"), unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement.
(b) The Employment Period shall be automatically extended for successive
one-year periods unless either party gives 120 days advance written notice prior
to the end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially
employed as the Chief Information Officer of the Company.
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
- --------
with the relocation of the Company's headquarters within New York State, New
Jersey or Connecticut.
3. Compensation.
------------
(a) Base Salary. During the fiscal year in which the Employment Period
-----------
begins, the Executive shall receive an annual base salary ("Annual Base Salary")
of $200,000, payable pursuant to the Company's normal payroll practices. For
each following fiscal year, the Annual Base Salary then in effect shall be
reviewed by the Board of Directors of the Company ("the Board") and may be
increased (but not decreased) as the Board in its sole discretion shall
determine based upon the performance of the Executive and the Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 20% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus"). The Executive's bonus for each fiscal year
shall be determined in accordance with an appropriate payout curve (established
annually by the Board after consultation with the Executive) if such target
performance goals are not met or are exceeded. After the first full fiscal year
of the Company, the Executive's Target Bonus may be reviewed by the Board and,
in its sole discretion, increased, but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. In addition to the grant of stock options to the
--------------------
Executive at the time of his initial employment by the Company, the Executive
shall be eligible to participate in any subsequent option grants commensurate
with that of other peer executives, as determined by the Board (or any committee
thereof) in its sole discretion.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
--------
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
3
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation of six (6) weeks per year, which shall accrue and
shall be taken in accordance with the policies of the Company.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By the Company. The Company may terminate the Executive's employment
--------------
during the Employment Period for Cause or without Cause. For purposes of this
Agreement, "Cause" shall mean the Executive's (i) conviction of or plea of nolo
contendere to a felony, (ii) willful misconduct that is materially injurious to
the Company, (iii) repeated failure to undertake communicated directives on
material business matters despite written instruction to do so or (iv) any
breach materially injurious to the Company by the Executive of Sections 7 or 8
or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) at least ten (10) days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the Company and (c)
delivery to the Executive of a notice of termination from the Board of
4
<PAGE>
Directors of the Company stating its opinion that the Executive was guilty of
the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the date of receipt of the Notice of Termination
or any later date (within 30 days following such notice) specified therein, and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date of Disability, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
5
<PAGE>
(a) Other Than for Cause, Death or Disability; Good Reason. If, during
------------------------------------------------------
the Employment Period, the Company terminates the Executive's employment, other
than for Cause, death or Disability, or if the Executive terminates employment
for Good Reason:
(i) the Company shall pay the Executive, in cash in one lump sum the amount
of 50% of the Executive's Annual Base Salary;
(ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, and any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
(iv) any vested Company stock options or stock awards held by the Executive
as of the Date of Termination will remain exercisable in accordance with
their original terms; any unvested stock options or stock awards held by
the Executive as of the Date of Termination will continue to vest as if the
Executive had remained employed by the Company for the period of twelve
(12) months following the Date of Termination; all unvested stock options
or stock awards still unvested twelve (12) months following the Date of
Termination shall be immediately canceled and forfeited;
(v) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the
Company's medical, dental, life and other
6
<PAGE>
welfare insurance plans (subject to the Executive continuing to make any
required contributions to such plans) for a period of six months following
the Date of Termination (or the Company shall provide equivalent benefits
for such period); provided that such continued benefits shall cease upon
--------
the Executive becoming eligible for comparable benefits from a subsequent
employer; and
(vi) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of
Termination, to the extent not yet paid;
(ii) all Company stock options and stock awards will vest, and such stock
options shall remain exercisable in accordance with the original terms of
such options;
(iii) other benefits, if applicable, shall be paid to the Executive (or
the Executive's Survivors, if applicable) in accordance with applicable
plans and programs of the Company.
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination and any earned bonus to the
extent not yet paid, and the Company shall have no further obligations
7
<PAGE>
under this Agreement. Upon the Executive's Date of Termination for Cause, all
unvested Company stock options and stock awards shall be immediately canceled
and forfeited. Any vested stock options may be exercised by the Executive at any
time within 30 days of such Date of Termination.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following a
Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (ii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iii) any "person" or "group" (as such terms are
used in Sections 13(d) and 14 (d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of the date
hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
8
<PAGE>
7. Confidential Information. The Executive agrees that he will not at
------------------------
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any confidential
information of the Company which are in the possession or control of the
Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) The Executive shall not hire or attempt to hire for employment any
person who is employed by the Company or attempt to influence any such person to
terminate employment with the Company, except to the extent the Executive is
acting on behalf of the company in good faith; provided, however, that nothing
-------- -------
herein shall prohibit the Executive from general advertising for personnel not
specifically targeting any employee or other personnel of the Company.
9
<PAGE>
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. The Executive and the Company agree that any dispute
-----------
between or among the parties to this Agreement relating to or in respect of this
Agreement, its negotiation, execution, performance, subject matter, or any
course of conduct or dealing or actions under or in respect of this Agreement,
shall be submitted to and resolved exclusively pursuant to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall take place in New York, New York, and shall
be subject to the substantive law of the State of New York. Decisions pursuant
to such arbitration shall be final, conclusive and binding on the parties. Upon
the conclusion of any arbitration, the Executive or the Company may apply to any
state court or any United States Federal District Court in New York, New York to
enforce the decisions pursuant to such arbitration. The Executive and the
Company consent to the jurisdiction of all such courts, agree that venue will be
proper in any such court and waive any objections based upon forum non
----- ---
conveniens with respect to any application to any such court.
- ----------
10
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any assignee to assume and agree to 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.
12. Representation of the Executive. The Executive acknowledges that he
-------------------------------
is knowledgeable and sophisticated about business matters, that he has read and
understands the terms of this Agreement, and that he has had a reasonable period
of time prior to his execution hereof to review, negotiate and consult with
counsel of his choice about this Agreement.
13. Miscellaneous.
-------------
11
<PAGE>
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Colm D. Kelly
79 Harbor Drive, #321
Stamford, CT 06902
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Chief Executive Officer
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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
12
<PAGE>
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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
BROADVIEW NETWORKS, INC.
/s/ Vern M. Kennedy
- ------------------------------------
By: Vern M. Kennedy
Title: President
Executive
/s/ Colm D. Kelly
- ------------------------------------
Colm D. Kelly
14
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), and George Holland (the "Executive"), dated as of
the 3rd day of February, 2000.
WHEREAS, the Company and the Executive wish to set forth the terms of
employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof and ending on December 31, 2001 or such
later date as a result of extensions pursuant to clause (b) below (the
"Employment Period"), unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement.
(b) The Employment Period shall be automatically extended for successive
one-year periods unless either party gives 120 days advance written notice prior
to the end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially
employed as an Executive Vice President of the Company.
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
- --------
with the relocation of the Company's headquarters within New York State, New
Jersey or Connecticut.
3. Compensation.
------------
(a) Base Salary. During the fiscal year in which the Employment Period
-----------
begins, the Executive shall receive an annual base salary ("Annual Base Salary")
of $250,000, payable pursuant to the Company's normal payroll practices. For
each following fiscal year, the Annual Base Salary then in effect shall be
reviewed by the Board of Directors of the Company ("the Board") and may be
increased (but not decreased) as the Board in its sole discretion shall
determine based upon the performance of the Executive and the Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 50% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus"). The Executive's bonus for each fiscal year
shall be determined in accordance with an appropriate payout curve (established
annually by the Board after consultation with the Executive) if such target
performance goals are not met or are exceeded. After the first full fiscal year
of the Company, the Executive's Target Bonus may be reviewed by the Board and,
in its sole discretion, increased, but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. In addition to the grant of stock options to the
--------------------
Executive at the time of his initial employment by the Company, the Executive
shall be eligible to participate in any subsequent option grants commensurate
with that of other peer executives, as determined by the Board (or any committee
thereof) in its sole discretion.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
--------
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
3
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation of five (5) weeks per year, which shall accrue and
shall be taken in accordance with the policies of the Company.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By the Company. The Company may terminate the Executive's employment
--------------
during the Employment Period for Cause or without Cause. For purposes of this
Agreement, "Cause" shall mean the Executive's (i) conviction of or plea of nolo
contendere to a felony, (ii) willful misconduct that is materially injurious to
the Company, (iii) repeated failure to undertake communicated directives on
material business matters despite written instruction to do so or (iv) any
breach materially injurious to the Company by the Executive of Sections 7 or 8
or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) at least ten (10) days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the Company and (c)
delivery to the Executive of a notice of termination from the Board of
4
<PAGE>
Directors of the Company stating its opinion that the Executive was guilty of
the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the date of receipt of the Notice of Termination
or any later date (within 30 days following such notice) specified therein, and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date of Disability, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
5
<PAGE>
(a) Other Than for Cause, Death or Disability; Good Reason. If, during
------------------------------------------------------
the Employment Period, the Company terminates the Executive's employment, other
than for Cause, death or Disability, or if the Executive terminates employment
for Good Reason:
(i) the Company shall pay the Executive, in cash in one lump sum the amount
of 50% of the Executive's Annual Base Salary;
(ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, and any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
(iv) any vested Company stock options or stock awards held by the Executive
as of the Date of Termination will remain exercisable in accordance with
their original terms; any unvested stock options or stock awards held by
the Executive as of the Date of Termination will continue to vest as if the
Executive had remained employed by the Company for the period of twelve
(12) months following the Date of Termination; all unvested stock options
or stock awards still unvested twelve (12) months following the Date of
Termination shall be immediately canceled and forfeited;
(v) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the
Company's medical, dental, life and other
6
<PAGE>
welfare insurance plans (subject to the Executive continuing to make any
required contributions to such plans) for a period of six months following
the Date of Termination (or the Company shall provide equivalent benefits
for such period); provided that such continued benefits shall cease upon
--------
the Executive becoming eligible for comparable benefits from a subsequent
employer; and
(vi) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of
Termination, to the extent not yet paid;
(ii) all Company stock options and stock awards will vest, and such stock
options shall remain exercisable in accordance with the original terms of
such options;
(iii) other benefits, if applicable, shall be paid to the Executive (or
the Executive's Survivors, if applicable) in accordance with applicable
plans and programs of the Company.
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination and any earned bonus to the
extent not yet paid, and the Company shall have no further obligations
7
<PAGE>
under this Agreement. Upon the Executive's Date of Termination for Cause, all
unvested Company stock options and stock awards shall be immediately canceled
and forfeited. Any vested stock options may be exercised by the Executive at any
time within 30 days of such Date of Termination.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following a
Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (ii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iii) any "person" or "group" (as such terms are
used in Sections 13(d) and 14 (d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of the date
hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
8
<PAGE>
7. Confidential Information. The Executive agrees that he will not at
------------------------
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any confidential
information of the Company which are in the possession or control of the
Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) The Executive shall not hire or attempt to hire for employment any
person who is employed by the Company or attempt to influence any such person to
terminate employment with the Company, except to the extent the Executive is
acting on behalf of the company in good faith; provided, however, that nothing
-------- -------
herein shall prohibit the Executive from general advertising for personnel not
specifically targeting any employee or other personnel of the Company.
9
<PAGE>
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. The Executive and the Company agree that any dispute
-----------
between or among the parties to this Agreement relating to or in respect of this
Agreement, its negotiation, execution, performance, subject matter, or any
course of conduct or dealing or actions under or in respect of this Agreement,
shall be submitted to and resolved exclusively pursuant to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall take place in New York, New York, and shall
be subject to the substantive law of the State of New York. Decisions pursuant
to such arbitration shall be final, conclusive and binding on the parties. Upon
the conclusion of any arbitration, the Executive or the Company may apply to any
state court or any United States Federal District Court in New York, New York to
enforce the decisions pursuant to such arbitration. The Executive and the
Company consent to the jurisdiction of all such courts, agree that venue will be
proper in any such court and waive any objections based upon forum non
----- ---
conveniens with respect to any application to any such court.
- ----------
10
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any assignee to assume and agree to 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.
12. Representation of the Executive. The Executive acknowledges that he
-------------------------------
is knowledgeable and sophisticated about business matters, that he has read and
understands the terms of this Agreement, and that he has had a reasonable period
of time prior to his execution hereof to review, negotiate and consult with
counsel of his choice about this Agreement.
13. Miscellaneous.
-------------
11
<PAGE>
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
George F. Holland
516 Riverside Drive
Cranford, NJ 07016
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Chief Executive Officer
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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
12
<PAGE>
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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
BROADVIEW NETWORKS, INC.
/s/ Vern M. Kennedy
- ------------------------------------
By: Vern M. Kennedy
Title: President
Executive
George F. Holland
- ------------------------------------
14
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), and Terrence J. Anderson (the "Executive"), dated
as of the 3rd day of February, 2000.
WHEREAS, the Company and the Executive wish to set forth the terms of
employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof and ending on December 31, 2001 or such
later date as a result of extensions pursuant to clause (b) below (the
"Employment Period"), unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement.
(b) The Employment Period shall be automatically extended for successive
one-year periods unless either party gives 120 days advance written notice prior
to the end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially
employed as an Executive Vice President of the Company.
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
- --------
with the relocation of the Company's headquarters within New York State, New
Jersey or Connecticut.
3. Compensation.
------------
(a) Base Salary. During the fiscal year in which the Employment Period
-----------
begins, the Executive shall receive an annual base salary ("Annual Base Salary")
of $175,000, payable pursuant to the Company's normal payroll practices. For
each following fiscal year, the Annual Base Salary then in effect shall be
reviewed by the Board of Directors of the Company ("the Board") and may be
increased (but not decreased) as the Board in its sole discretion shall
determine based upon the performance of the Executive and the Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 45% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus"). The Executive's bonus for each fiscal year
shall be determined in accordance with an appropriate payout curve (established
annually by the Board after consultation with the Executive) if such target
performance goals are not met or are exceeded. After the first full fiscal year
of the Company, the Executive's Target Bonus may be reviewed by the Board and,
in its sole discretion, increased, but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. In addition to the grant of stock options to the
--------------------
Executive at the time of his initial employment by the Company, the Executive
shall be eligible to participate in any subsequent option grants commensurate
with that of other peer executives, as determined by the Board (or any committee
thereof) in its sole discretion.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
--------
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
3
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation of five (5) weeks per year, which shall accrue and
shall be taken in accordance with the policies of the Company.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By the Company. The Company may terminate the Executive's employment
--------------
during the Employment Period for Cause or without Cause. For purposes of this
Agreement, "Cause" shall mean the Executive's (i) conviction of or plea of nolo
contendere to a felony, (ii) willful misconduct that is materially injurious to
the Company, (iii) repeated failure to undertake communicated directives on
material business matters despite written instruction to do so or (iv) any
breach materially injurious to the Company by the Executive of Sections 7 or 8
or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) at least ten (10) days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the Company and (c)
delivery to the Executive of a notice of termination from the
4
<PAGE>
Board of Directors of the Company stating its opinion that the Executive was
guilty of the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the date of receipt of the Notice of Termination
or any later date (within 30 days following such notice) specified therein, and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date of Disability, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
5
<PAGE>
(a) Other Than for Cause, Death or Disability; Good Reason. If, during
------------------------------------------------------
the Employment Period, the Company terminates the Executive's employment, other
than for Cause, death or Disability, or if the Executive terminates employment
for Good Reason:
(i) the Company shall pay the Executive, in cash in one lump sum the amount
of 50% of the Executive's Annual Base Salary;
(ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, and any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
(iv) any vested Company stock options or stock awards held by the Executive
as of the Date of Termination will remain exercisable in accordance with
their original terms; any unvested stock options or stock awards held by
the Executive as of the Date of Termination will continue to vest as if the
Executive had remained employed by the Company for the period of twelve
(12) months following the Date of Termination; all unvested stock options
or stock awards still unvested twelve (12) months following the Date of
Termination shall be immediately canceled and forfeited;
(v) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the
Company's medical, dental, life and other
6
<PAGE>
welfare insurance plans (subject to the Executive continuing to make any
required contributions to such plans) for a period of six months following
the Date of Termination (or the Company shall provide equivalent benefits
for such period); provided that such continued benefits shall cease upon
--------
the Executive becoming eligible for comparable benefits from a subsequent
employer; and
(vi) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of
Termination, to the extent not yet paid;
(ii) all Company stock options and stock awards will vest, and such stock
options shall remain exercisable in accordance with the original terms of
such options;
(iii) other benefits, if applicable, shall be paid to the Executive (or
the Executive's Survivors, if applicable) in accordance with applicable
plans and programs of the Company.
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination and any earned bonus to the
extent not yet paid, and the Company shall have no further obligations
7
<PAGE>
under this Agreement. Upon the Executive's Date of Termination for Cause, all
unvested Company stock options and stock awards shall be immediately canceled
and forfeited. Any vested stock options may be exercised by the Executive at any
time within 30 days of such Date of Termination.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following a
Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (ii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iii) any "person" or "group" (as such terms are
used in Sections 13(d) and 14 (d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of the date
hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
8
<PAGE>
7. Confidential Information. The Executive agrees that he will not at
------------------------
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any confidential
information of the Company which are in the possession or control of the
Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) The Executive shall not hire or attempt to hire for employment any
person who is employed by the Company or attempt to influence any such person to
terminate employment with the Company, except to the extent the Executive is
acting on behalf of the company in good faith; provided, however, that nothing
-------- -------
herein shall prohibit the Executive from general advertising for personnel not
specifically targeting any employee or other personnel of the Company.
9
<PAGE>
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. The Executive and the Company agree that any dispute
-----------
between or among the parties to this Agreement relating to or in respect of this
Agreement, its negotiation, execution, performance, subject matter, or any
course of conduct or dealing or actions under or in respect of this Agreement,
shall be submitted to and resolved exclusively pursuant to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall take place in New York, New York, and shall
be subject to the substantive law of the State of New York. Decisions pursuant
to such arbitration shall be final, conclusive and binding on the parties. Upon
the conclusion of any arbitration, the Executive or the Company may apply to any
state court or any United States Federal District Court in New York, New York to
enforce the decisions pursuant to such arbitration. The Executive and the
Company consent to the jurisdiction of all such courts, agree that venue will be
proper in any such court and waive any objections based upon forum non
----- ---
conveniens with respect to any application to any such court.
- ----------
10
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any assignee to assume and agree to 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.
12. Representation of the Executive. The Executive acknowledges that he
-------------------------------
is knowledgeable and sophisticated about business matters, that he has read and
understands the terms of this Agreement, and that he has had a reasonable period
of time prior to his execution hereof to review, negotiate and consult with
counsel of his choice about this Agreement.
13. Miscellaneous.
-------------
11
<PAGE>
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Chief Executive Officer
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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
12
<PAGE>
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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
BROADVIEW NETWORKS, INC.
/s/ Vern M. Kennedy
- ------------------------------------
By: Vern M. Kennedy
Title: President
Executive
/s/ Terrence Anderson
- ------------------------------------
14
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks Holdings, Inc., a Delaware
corporation (the "Company"), and Tracy W. Korman (the "Executive"), dated as of
the 3rd day of February, 2000.
WHEREAS, the Company and the Executive wish to set forth the terms of
employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof and ending on December 31, 2001 or such
later date as a result of extensions pursuant to clause (b) below (the
"Employment Period"), unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement.
(b) The Employment Period shall be automatically extended for successive
one-year periods unless either party gives 120 days advance written notice prior
to the end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially
employed as an Executive Vice President of the Company.
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
- --------
with the relocation of the Company's headquarters within New York State, New
Jersey or Connecticut.
3. Compensation.
------------
(a) Base Salary. During the fiscal year in which the Employment Period
-----------
begins, the Executive shall receive an annual base salary ("Annual Base Salary")
of $175,000, payable pursuant to the Company's normal payroll practices. For
each following fiscal year, the Annual Base Salary then in effect shall be
reviewed by the Board of Directors of the Company ("the Board") and may be
increased (but not decreased) as the Board in its sole discretion shall
determine based upon the performance of the Executive and the Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 45% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus"). The Executive's bonus for each fiscal year
shall be determined in accordance with an appropriate payout curve (established
annually by the Board after consultation with the Executive) if such target
performance goals are not met or are exceeded. After the first full fiscal year
of the Company, the Executive's Target Bonus may be reviewed by the Board and,
in its sole discretion, increased, but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. In addition to the grant of stock options to the
--------------------
Executive at the time of his initial employment by the Company, the Executive
shall be eligible to participate in any subsequent option grants commensurate
with that of other peer executives, as determined by the Board (or any committee
thereof) in its sole discretion.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
--------
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
3
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation of five (5) weeks per year, which shall accrue and
shall be taken in accordance with the policies of the Company.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By the Company. The Company may terminate the Executive's employment
--------------
during the Employment Period for Cause or without Cause. For purposes of this
Agreement, "Cause" shall mean the Executive's (i) conviction of or plea of nolo
contendere to a felony, (ii) willful misconduct that is materially injurious to
the Company, (iii) repeated failure to undertake communicated directives on
material business matters despite written instruction to do so or (iv) any
breach materially injurious to the Company by the Executive of Sections 7 or 8
or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) at least ten (10) days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the Company and (c)
delivery to the Executive of a notice of termination from the Board of
4
<PAGE>
Directors of the Company stating its opinion that the Executive was guilty of
the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the date of receipt of the Notice of Termination
or any later date (within 30 days following such notice) specified therein, and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date of Disability, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
5
<PAGE>
(a) Other Than for Cause, Death or Disability; Good Reason. If, during
------------------------------------------------------
the Employment Period, the Company terminates the Executive's employment, other
than for Cause, death or Disability, or if the Executive terminates employment
for Good Reason:
(i) the Company shall pay the Executive, in cash in one lump sum the amount
of 50% of the Executive's Annual Base Salary;
(ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, and any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
(iv) any vested Company stock options or stock awards held by the Executive
as of the Date of Termination will remain exercisable in accordance with
their original terms; any unvested stock options or stock awards held by
the Executive as of the Date of Termination will continue to vest as if the
Executive had remained employed by the Company for the period of twelve
(12) months following the Date of Termination; all unvested stock options
or stock awards still unvested twelve (12) months following the Date of
Termination shall be immediately canceled and forfeited;
(v) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the
Company's medical, dental, life and other
6
<PAGE>
welfare insurance plans (subject to the Executive continuing to make any
required contributions to such plans) for a period of six months following
the Date of Termination (or the Company shall provide equivalent benefits
for such period); provided that such continued benefits shall cease upon
--------
the Executive becoming eligible for comparable benefits from a subsequent
employer; and
(vi) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of
Termination, to the extent not yet paid;
(ii) all Company stock options and stock awards will vest, and such stock
options shall remain exercisable in accordance with the original terms of
such options;
(iii) other benefits, if applicable, shall be paid to the Executive (or
the Executive's Survivors, if applicable) in accordance with applicable
plans and programs of the Company.
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination and any earned bonus to the
extent not yet paid, and the Company shall have no further obligations
7
<PAGE>
under this Agreement. Upon the Executive's Date of Termination for Cause, all
unvested Company stock options and stock awards shall be immediately canceled
and forfeited. Any vested stock options may be exercised by the Executive at any
time within 30 days of such Date of Termination.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following a
Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (ii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iii) any "person" or "group" (as such terms are
used in Sections 13(d) and 14 (d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of the date
hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
8
<PAGE>
7. Confidential Information. The Executive agrees that he will not at
------------------------
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any confidential
information of the Company which are in the possession or control of the
Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) The Executive shall not hire or attempt to hire for employment any
person who is employed by the Company or attempt to influence any such person to
terminate employment with the Company, except to the extent the Executive is
acting on behalf of the company in good faith; provided, however, that nothing
-------- -------
herein shall prohibit the Executive from general advertising for personnel not
specifically targeting any employee or other personnel of the Company.
9
<PAGE>
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. The Executive and the Company agree that any dispute
-----------
between or among the parties to this Agreement relating to or in respect of this
Agreement, its negotiation, execution, performance, subject matter, or any
course of conduct or dealing or actions under or in respect of this Agreement,
shall be submitted to and resolved exclusively pursuant to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall take place in New York, New York, and shall
be subject to the substantive law of the State of New York. Decisions pursuant
to such arbitration shall be final, conclusive and binding on the parties. Upon
the conclusion of any arbitration, the Executive or the Company may apply to any
state court or any United States Federal District Court in New York, New York to
enforce the decisions pursuant to such arbitration. The Executive and the
Company consent to the jurisdiction of all such courts, agree that venue will be
proper in any such court and waive any objections based upon forum non
----- ---
conveniens with respect to any application to any such court.
- ----------
10
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any assignee to assume and agree to 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.
12. Representation of the Executive. The Executive acknowledges that he
-------------------------------
is knowledgeable and sophisticated about business matters, that he has read and
understands the terms of this Agreement, and that he has had a reasonable period
of time prior to his execution hereof to review, negotiate and consult with
counsel of his choice about this Agreement.
13. Miscellaneous.
-------------
11
<PAGE>
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Tracy W. Korman
34 Plaza St. E. #207
Brooklyn, NY 11238
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square, Suite 403
Long Island City, New York 11101
Attention: Chief Executive Officer
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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
12
<PAGE>
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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
BROADVIEW NETWORKS, INC.
/s/ Vern M. Kennedy
- ------------------------------------
By: Vern M. Kennedy
Title: President
Executive
/s/ Tracy W. Korman
- ------------------------------------
14
<PAGE>
Exhibit 10.31
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Coaxicom, Inc., a New York corporation (the
"Company"), and Joel D. Gross (the "Executive"), dated as of the 1st day of
October 1999.
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof (the "Commencement Date") and ending on
the second anniversary of the Commencement Date (the "Employment Period"),
unless the Executive's employment terminates earlier pursuant to Section 4 of
this Agreement.
(b) The contract shall be automatically extended for successive one year
periods unless either party gives 120 days advance written notice prior to the
end of the original Employment Period or any extension thereof
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially employed
as a Executive Vice President and CFO of the Company and as a member of the
office of the President; provided, however, that Executive shall become
President of the Company on the earlier of July 1, 2000 or upon an initial
Public Offering. In addition, the Executive shall be nominated to the Board of
Directors of the Company when the Board is expanded from 5 to 9 and, in the
interim, the Executive shall be invited to attend all meetings of the Board.
After becoming the President of the Company, the Executive shall perform such
duties as are customary for a President at the Company and from the Commencement
Date shall report to the Chief Executive Officer and the Board of Directors.
1
<PAGE>
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and shall use the Executive's best
efforts to carry out the Executive's responsibilities faithfully and efficiently
in a professional manner. It shall not be considered a violation of the
foregoing for the Executive to (a) serve on corporate or civic boards approved
by the Company (which approval shall not be unreasonably withheld) or on
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements and (c) manage personal investments, so long as the activities
referred to in clauses (a) through (c) above do not substantially interfere with
the performance of the Executive's responsibilities as a key Executive of the
Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
with the relocation of the Company's headquarters within New York, New Jersey or
Connecticut, subject to reimbursement for all of Executive's expenses in
connection with any move he is required to make.
3. Compensation.
------------
(a) Base Salary. During the first year of the Employment Period, the
-----------
Executive shall receive an annual base salary ("Annual Base Salary") of
$260,000, payable pursuant to the Company's normal payroll practices. Effective
as of the first anniversary date of Employment and each succeeding anniversary
date, the Annual Base Salary then in effect shall be reviewed by the Board of
Directors of the Company ("the Board") and increased (but not decreased) by a
minimum of 5% per annum or such greater percentage as the Board in its sole
discretion shall
2
<PAGE>
determine based upon the performance of the Executive and the Company and the
base salary (and raises) paid by the Company to the CEO of the Company or any
Executive with comparable responsibilities (the "peer executives").
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 50% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus") and shall be reduced and increased in
accordance with an appropriate payout curve (established annually by the Board
after consultation with the Executive) if such target performance goals are not
met or are exceeded. After the first full fiscal year of the Company the
Executive's Target Bonus shall be reviewed by the Board and may be increased,
but not decreased, in accordance with the principals set forth in Section 3 (a)
above for salary increases.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. The Executive shall receive an initial grant of a
--------------------
Company stock option to purchase 830,000 shares of Company common stock at a
purchase price of $3.75. Such initial Option Grant shall vest as follows;
(i)25% of such grant shall vest on the earlier of an initial public
offering or the first anniversary date of Employment,
(ii) the remaining 75% shall vest ratably on a monthly basis on the last
day of each of the 36 calendar months following the first anniversary of the
Commencement Date.
3
<PAGE>
On each Anniversary Date of Employment the Company shall make an additional
Option Grant commensurate with that of other peer executives, provided, however,
that during the first two anniversary dates of Employment the Executive shall
receive a minimum Option Grant of 75,000 shares at a purchase price equal to the
then fair market value of the Company's common stock on the date of grant. Such
option shall vest in the same manner as provided above for the initial Option
Grant unless the Board of Directors shall provide a faster vesting period.
Each grant of stock options shall be designated as incentive stock options
to the maximum extent permitted by the Internal Revenue Code of 1986, as
amended, and the Company's stock option plans, and the remainder shall be
designated as non-qualified stock option.
During the first 90 days of employment the Executive shall have the right
to purchase common shares of the Company up to a maximum of 370,000 shares at
the fair market value of the common stock, which has been established at $3.75.
The Executive may pay for such purchase by check acceptable to the Company. The
Executive agrees to make such representations and agree to such restrictions on
transfer of such shares as the Company may reasonably request to ensure
compliance with all applicable securities laws.
(e) Expenses. During the Employment Period, the Executive shall be entitled
to receive reimbursement for all reasonable business expenses incurred by the
Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
4
<PAGE>
Company and (c) delivery to the Executive of a notice of termination from the
Board of Directors of the Company stating its opinion that the Executive was
guilty of the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing,
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the Executive's
-------------------
employment is terminated by the Company or by the Executive (other than for
death or Disability), the date of receipt of the Notice of Termination or any
later date (within 30 days following such notice) specified therein, and (ii) if
the Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the date of
Disability, as the case may be.
6
<PAGE>
5. Obligations of the Company upon Termination.
-------------------------------------------
(a) Other Than for Cause, Death or Disability; Good Reason. If during the
------------------------------------------------------
Employment Period, the Company terminates the Executive's employment, other than
for Cause, death or Disability, or if the Executive terminates employment for
Good Reason:
(i) the Company shall pay the Executive, in one lump cash sum the sum of
50% of the Executive's Annual Base Salary.
(ii) within thirty (30)days following the Date of Termination, the Company
shall pay the Executive his Annual Base Salary through the Date of Termination,
or any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for such
fiscal year, to the extent not otherwise paid;
(iv) any unvested Company stock options or other stock awards held by the
Executive as of the Date of Termination will continue to vest as if Executive
had remained employed by the Company until such time as the percentages of each
such option and award determined in accordance with the following clauses has
vested: (x) if the Date of Termination is on or before the date six months
following the Commencement Date, 50%; (y) if the Date of Termination occurs
after the date six months following the Commencement Date but on or before the
date eighteen months following the Commencement Date, 50% plus 4.1667% for each
calendar month following the Commencement Date and before the Date of
Termination; and (z) if the Date of Termination is after the date eighteen
months following the Commencement Date, 100%.
7
<PAGE>
(v) to the extent exercisable, any Company stock option will remain
exercisable in accordance with their original terms.
(vi) the Executive shall continue to receive employee benefits for a period
of six months following the Date of Termination and the Executive's eligible
dependents will continue to be eligible to participate in the Company's medical,
dental, life and other welfare insurance plans (subject to the Executive
continuing to make any required contributions to such plans) for a period of six
months following the Date of Termination (or the Company shall provide
equivalent benefits for such period); provided, that such continued benefits
shall cease upon the Executive becoming eligible for comparable benefits from a
subsequent employer;
(vii) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of Termination,
to the extent not yet paid;
(ii) all Company stock options and Stock Awards will vest, and such stock
options shall remain exercisable until the original term of the stock option;
(iii) other benefits, if applicable, shall be paid to the Executive (or the
Executive's Survivors, if applicable) in accordance with applicable plans and
programs of the Company
8
<PAGE>
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination or any unearned bonus to the
extent not yet paid, and the Company shall have no further obligations under
this Agreement. Upon the Executive's Date of Termination for Cause, all unvested
Company stock options and Stock Awards shall be immediately canceled and
forfeited. The vested stock option may be exercised at any time prior to the
expiration of the original term.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following
such change of control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50 %of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (iii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iv) any "person" or "group" (as such terms are
used in Sections 13(d)and 14(d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of
9
<PAGE>
the date hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
7. Right to Require Purchase. If for any reason the Company is not a public
-------------------------
company, after the Executive's employment ends the Executive, in his sole
discretion, may require the Company to purchase acquired by the executive in
accordance with the last paragraph of Section 3(i) hereof at its then fair
market value as determined by an independent appraiser selected by the parties.
8. Confidential Information. The Executive agrees that he will not at any
------------------------
time during or after the Executive's employment with the Company for any reason,
directly or indirectly, disclose to any person any confidential information of
the Company, other than information that is already known to the public, except
as may be required in the ordinary course of business of the Company or as may
be required by law. Promptly upon the termination of this Agreement for any
reason, the Executive agrees to return to the Company any and all documents,
memoranda, drawings, notes and other papers and items (including all copies
thereof, whether electronic or otherwise) embodying any confidential information
of the Company which are in the possession or control of the Executive.
9. Intangib1e Assets and Non-Solicitation. (a) The Executive shall not at
--------------------------------------
any time have or claim any right, title or interest in any trade name,
trademark, copyright, or other similar rights belonging to or used by the
Company and shall not have or claim any rights, title or interest in any
material or matter of any sort
10
<PAGE>
prepared for or used in connection with the business of the Company or promotion
of the Company, whether produced, prepared or published in whole or in part by
the Executive.
(b) Hire or attempt to hire for employment any person who is employed by
the Company or attempt to influence any such person to terminate employment with
the Company, except to the extent the Executive is acting on behalf of the
company in good faith; provided, however, that nothing herein shall prohibit the
Executive from general advertising for personnel not specifically targeting any
employee or other personnel of the Company.
10. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
11. Arbitration. Any dispute, controversy, or question arising under, out
-----------
of, or relating to this Agreement (or the breach thereof) or, Executive's
employment with the Company or termination thereof, shall be referred for
arbitration in the State of New York to a neutral arbitrator selected by the
Executive and the Company and this shall be the exclusive and sole means for
resolving such dispute. The arbitration proceeding shall be governed by the
11
<PAGE>
Employment Rules of the American Arbitration Association then in effect or such
rules last in effect (in the event such Association is no longer in existence)
but shall not be conducted under the auspices of the Association, and the
decision of the arbitrator shall be governed by the rule of law. If the parties
are unable to agree upon a neutral arbitrator within thirty (30)days after each
party has given the other written notice of the desire to submit the dispute,
controversy or question for decision as aforesaid, then either party may apply
to the CPR of New York City for the appointment of a neutral arbitrator or, if
the CPR is not then in existence or does not desire to act in the matter, either
party may apply to the Presiding Judge of the appropriate court for the
appointment of a neutral arbitrator to hear the parties and settle the dispute,
controversy or question. Such right to submit a dispute arising hereunder to
arbitration and the decision of the neutral arbitrator shall be final,
conclusive and binding on all parties and interested persons and no action at
law or in equity shall be instituted or, if instituted, further prosecuted by
either party other than to enforce the award of the neutral arbitrator. The
arbitrator shall take submissions and hear testimony, if necessary, and shall
render a written decision as promptly as possible. The arbitrator may require
any form of discovery (e.g., depositions) in making his decision. In connection
with any arbitration, the Company will reimburse the Executive for all
reasonable attorneys' fees and disbursements as incurred in connection therewith
following the receipt of invoices for such fees and disbursements. If the
Company prevails on all substantial claims in the dispute submitted for
arbitration then the Executive will reimburse the Company for such legal fees.
12
<PAGE>
12. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any to assume and agree to 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.
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
13
<PAGE>
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Joel D. Gross
85 Knightsbridge
Watchung, NJ 07060
If to the Company:
-----------------
Coaxicom, Inc.
45-18 Court Square
Suite 403
Long Island City, NY 11101
Attention: Chief Executive Office
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph. Notices and communications shall be
effective when actually received by the addressee.
(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.
14
<PAGE>
(d) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
(h) The Company shall reimburse Executive for all fees and expenses
incurred in connection with the negotiation and preparation of this agreement.
15
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
COAXICOM, INC.
/s/ Vern Kennedy
By:
Title: President PCEO
Executive
/s/ Joel D. Gross
- ------------------------
Joel D. Gross
16
<PAGE>
Exhibit 10.32
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Broadview Networks, Inc., a New York corporation
(the "Company"), and Kenneth A. Shulman (the "Executive"), dated as of the 14th
day of December 1999.
1. Employment Period. (a) The Company hereby agrees to employ the
-----------------
Executive, and the Executive hereby agrees to remain in the employ of the
Company, pursuant to the terms and conditions set forth in this Agreement, for
the period commencing on the date hereof (the "Commencement Date") and ending on
the second anniversary of the Commencement Date (the "Employment Period"),
unless the Executive's employment terminates earlier pursuant to Section 4 of
this Agreement.
(b) The contract shall be automatically extended for successive one year
periods unless either party gives 120 days advance written notice prior to the
end of the original Employment Period or any extension thereof.
2. Position and Duties.
-------------------
(a) During the Employment Period, the Executive shall be initially employed
as the Chief Technology Officer of the Company reporting to the Chief Executive
Officer. During the term hereof Executive shall always report to the Chief
Executive Officer.
(b) During the Employment Period, and excluding any periods of vacation,
holiday, personal leave and sick leave to which the Executive is entitled, the
Executive shall devote the Executive's full business time, attention and ability
to the business and affairs of the Company and
1
<PAGE>
shall use the Executive's best efforts to carry out the Executive's
responsibilities faithfully and efficiently in a professional manner. It shall
not be considered a violation of the foregoing for the Executive to (a) serve on
corporate or civic boards approved by the Company (which approval shall not be
unreasonably withheld) or on charitable boards or committees, (b) deliver
lectures or fulfill speaking engagements and (c) manage personal investments, so
long as the activities referred to in clauses (a) through (c) above do not
substantially interfere with the performance of the Executive's responsibilities
as a key Executive of the Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York City,
provided, that the Executive's primary office may be relocated in connection
with the relocation of the Company's headquarters within New York, New Jersey or
Connecticut, subject to reimbursement for all of Executive's expenses in
connection with any move he is required to make.
3. Compensation.
------------
(a) Base Salary. During the first year of the Employment Period, the
-----------
Executive shall receive an annual base salary (" Annual Base Salary") of
$175,000, payable pursuant to the Company's normal payroll practices. Effective
as of the first anniversary date of Employment and each succeeding anniversary
date, the Annual Base Salary then in effect shall be reviewed by the Board of
Directors of the Company ("the Board") and increased (but not decreased) by a
minimum of 5% per annum or such greater percentage as the Board in its sole
discretion shall determine based upon the performance of the Executive and the
Company.
2
<PAGE>
(b) Annual Bonus. For each fiscal year or part thereof of the Company
------------
during the Employment Period, if specified target performance goals communicated
to the Executive for the Company's fiscal year are met, the Executive's annual
target bonus shall be equal to 33% of the Annual Base Salary paid during such
fiscal year (the "Target Bonus") and shall be reduced and increased in
accordance with an appropriate payout curve (established annually by the Board
after consultation with the Executive) if such target performance goals are not
met or are exceeded. After the first full fiscal year of the Company the
Executive's Target Bonus shall be reviewed by the Board and may be increased,
but not decreased.
(c) Benefit Plans. The Executive shall be treated in the same manner as,
-------------
and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to peer
executives.
(d) Long-Term Incentives. The Executive shall receive an initial grant of a
--------------------
Company stock option to purchase 250,000 shares of Company common stock at a
purchase price of $6.40. Such initial Option Grant shall vest as follows;
(i) 25% of such grant shall vest on the earlier of an initial public
offering or the first anniversary date of Employment,
(ii) the remaining 75% shall vest ratably on a monthly basis on the last
day of each of the 36 calendar months following the first anniversary of the
Commencement Date.
3
<PAGE>
On each Anniversary Date of Employment the Company consider making an
additional Option Grant commensurate with that of other peer executives. Such
option shall vest in the same manner as provided above for the initial Option
Grant unless the Board of Directors shall provide a faster vesting period.
Each grant of stock options shall be designated as incentive stock options
to the maximum extent permitted by the Internal Revenue Code of 1986, as
amended, and the Company's stock option plans, and the remainder shall be
designated as non-qualified stock option.
During the first 90 days of employment the Executive shall have the right
to purchase common shares of the Company up to a maximum of 100,000 shares at
the fair market value of the common stock, which has been established at $6.40.
The Executive may pay for such purchase by check acceptable to the Company. The
Executive agrees to make such representations and agree to such restrictions on
transfer of such shares as the Company may reasonably request to ensure
compliance with all applicable securities laws.
(e) Expenses. During the Employment Period, the Executive shall be entitled
--------
to receive reimbursement for all reasonable business expenses incurred by the
Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
4
<PAGE>
(f) Vacation. During the Employment Period, the Executive shall be entitled
--------
to paid vacation of five (5)weeks per year.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. The
Executive's employment under this Agreement shall terminate for "Disability"
upon a termination of the Executive's employment with eligibility to receive a
disability allowance under the Company's Long Term Disability Plan or a
replacement plan.
(b) By The the Company. The Company may terminate the Executive's
------------------
employment during the Employment Period for Cause or without Cause. For purposes
of this Agreement, "Cause" shall mean the Executive's (i) conviction of or plea
of nolo contendere to a felony; (ii) willful misconduct that is materially
injurious to the Company; (iii) repeated failure to undertake communicated
directives on material business matters despite written instruction to do so or
(iv) any breach materially injurious to the Company by the Executive of Sections
8 or 9 or other provisions of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (a) no less than ten (10)days prior written
notice to the Executive setting forth the reasons for the Company's intention to
terminate for Cause, (b) an opportunity for the Executive to be heard (together
with comments of counsel) before the Board of Directors of the
5
<PAGE>
Company and (c) delivery to the Executive of a notice of termination from the
Board of Directors of the Company stating its opinion that the Executive was
guilty of the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good Reason.
-----------
"Good Reason" means, without the Executive's written consent: (i) a material
adverse change in the Executive's title or the assignment of duties to the
Executive materially and adversely inconsistent with the Executive's position;
(ii) any material failure by the Company to comply with Section 3 or other
provisions of this Agreement; or (iii) any requirement by the Company that the
Executive's primary office location be other than in the states of New York, New
Jersey, or Connecticut. In the event the Executive determines that Good Reason
exists, the Executive must notify the Company of such determination in writing,
within sixty (60) days following the Executive's actual knowledge of the event
which the Executive determines constitutes Good Reason, or such event shall not
constitute Good Reason under this Agreement. Following receipt of such notice,
if the Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Date of Termination. "Date of Termination" means (i) if the Executive's
-------------------
employment is terminated by the Company or by the Executive (other than for
death or Disability), the date of receipt of the Notice of Termination or any
later date (within 30 days following such notice) specified therein, and (ii) if
the Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the date of
Disability, as the case may be.
6
<PAGE>
5. Obligations of the Company upon Termination.
-------------------------------------------
(a) Other Than for Cause, Death or Disability: Good Reason. If, during the
------------------------------------------------------
Employment Period, the Company terminates the Executive's employment, other than
for Cause, death or Disability, or if the Executive terminates employment for
Good Reason:
(i) the Company shall pay the Executive, in one lump cash sum the sum of
50% of the Executive's Annual Base Salary.
(ii) within thirty (30) days following the Date of Termination. the Company
shall pay the Executive his Annual Base Salary through the Date of Termination,
or any earned bonus to the extent not yet paid;
(iii) at the time annual bonuses for the fiscal year in which the Date of
Termination occurs are paid, the Company shall pay the Executive a pro rata
annual bonus based upon actual performance under the annual bonus plan for such
fiscal year, to the extent not otherwise paid;
(iv) any unvested Company stock options or other stock awards held by the
Executive as of the Date of Termination will continue to vest as if Executive
had remained employed by the Company until such time as the percentages of each
such option and award determined in accordance with the following clauses has
vested: (x) if the Date of Termination is on or before the date six months
following the Commencement Date, 25%; (y) if the Date of Termination occurs
after the date six months following the Commencement Date but on or before the
date 24 months following the Commencement Date, 25% plus 4.166% for each
calendar month following the Commencement Date and before the Date of
Termination; and (z) if the Date of Termination is after the date 24 months
following the Commencement Date, 100%.
7
<PAGE>
(v) to the extent exercisable, any Company stock option will remain
exercisable in accordance with their original terms.
(vi) the Executive shall continue to receive employee benefits for a
period of six months following the Date of Termination and the Executive's
eligible dependents will continue to be eligible to participate in the Company's
medical, dental, life and other welfare insurance plans (subject to the
Executive continuing to make any required contributions to such plans) for a
period of six months following the Date of Termination (or the Company shall
provide equivalent benefits for such period); provided, that such continued
benefits shall cease upon the Executive becoming eligible for comparable
benefits from a subsequent employer;
(vii) other benefits, if applicable, shall be paid to the Executive in
accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive's employment is terminated by
-------------------
reason of the Executive's death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive's survivors, if
applicable) the Executive's Annual Base Salary through the Date of Termination,
to the extent not yet paid;
(ii) all Company stock options and Stock Awards will vest, and such stock
options shall remain exercisable until the original term of the stock option;
(iii) other benefits, if applicable, shall be paid to the Executive (or the
Executive's Survivors, if applicable) in accordance with applicable plans and
programs of the Company.
8
<PAGE>
(c) Cause; Other than Good Reason. If the Executive's employment is
-----------------------------
terminated by the Company for Cause during the Employment Period or the
Executive voluntarily terminates employment during the Employment Period (other
than for Good Reason), the Company shall pay to the Executive the Executive's
Annual Base Salary through the Date of Termination or any unearned bonus to the
extent not yet paid, and the Company shall have no further obligations under
this Agreement. Upon the Executive's Date of Termination for Cause, all unvested
Company stock options and Stock Awards shall be immediately canceled and
forfeited. The vested stock option may be exercised at any time prior to the
expiration of the original term.
6. Change of Control. If there is a Change of Control of the Company (as
-----------------
defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following
such change of control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5(a) above for such Termination. As used herein,
"Change of Control" means the occurrence of any of the following: (i) the
Company consolidates with or merges with or into another person pursuant to the
transaction in which the outstanding securities of the Company are converted
into or exchanged for cash or other property or for securities possessing less
than 50% of the voting power of the outstanding securities of the person
surviving such merger or consolidation; (iii) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person; or (iv) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than the holders of the securities of the Company as of
9
<PAGE>
the date hereof, shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
7. Confidential Information. The Executive agrees that he will not at any
------------------------
time during or after the Executive's employment with the Company for any reason,
directly or indirectly, disclose to any person any confidential information of
the Company, other than information that is already known to the public, except
as may be required in the ordinary course of business of the Company or as may
be required by law. Promptly upon the termination of this Agreement for any
reason, the Executive agrees to return to the Company any and all documents,
memoranda, drawings, notes and other papers and items (including all copies
thereof, whether electronic or otherwise) embodying any confidential information
of the Company which are in the possession or control of the Executive.
8. Intangible Assets and Non-Solicitation.
--------------------------------------
(a) The Executive shall not at any time have or claim any right, title or
interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) Hire or attempt to hire for employment any person who is employed by
the Company or attempt to influence any such person to terminate employment with
the Company,
10
<PAGE>
except to the extent the Executive is acting on behalf of the company in good
faith; provided, however, that nothing herein shall prohibit the Executive from
--------
general advertising for personnel not specifically targeting any employee or
other personnel of the Company.
9. Release. Effective upon the Date of Termination pursuant to the
-------
provisions of Sections 4(a), (b) or (c) of this Agreement, in consideration of
the payments to be made to the Executive pursuant to Sections 5(a), (b) or (c)
of this Agreement and as a condition to the payment thereof, the Executive
acknowledges that all such payments, if made in accordance with the terms of
this Agreement, shall constitute complete satisfaction of all obligations owed
by the Company to the Executive and shall further constitute the Executive's
sole remedy against the Company.
10. Arbitration. Any dispute, controversy, or question arising under, out
-----------
of, or relating to this Agreement (or the breach thereof) or, Executive's
employment with the Company or termination thereof, shall be referred for
arbitration in the State of New York to a neutral arbitrator selected by the
Executive and the Company and this shall be the exclusive and sole means for
resolving such dispute. The arbitration proceeding shall be governed by the
Employment Rules of the American Arbitration Association then in effect or such
rules last in effect (in the event such Association is no longer in existence)
but shall not be conducted under the auspices of the Association, and the
decision of the arbitrator shall be governed by the rule of law. If the parties
are unable to agree upon a neutral arbitrator within thirty (30)days after each
party has given the other written notice of the desire to submit the dispute,
controversy or
11
<PAGE>
question for decision as aforesaid, then either party may apply to the CPR of
New York City for the appointment of a neutral arbitrator or, if the CPR is not
then in existence or does not desire to act in the matter, either party may
apply to the Presiding Judge of the appropriate court for the appointment of a
neutral arbitrator to hear the parties and settle the dispute, controversy or
question. Such right to submit a dispute arising hereunder to arbitration and
the decision of the neutral arbitrator shall be final, conclusive and binding on
all parties and interested persons and no action at law or in equity shall be
instituted or, if instituted, further prosecuted by either party other than to
enforce the award of the neutral arbitrator. The arbitrator shall take
submissions and hear testimony, if necessary, and shall render a written
decision as promptly as possible. The arbitrator may require any form of
discovery (e.g., depositions) in making his decision. In connection with any
arbitration, the Company will reimburse the Executive for all reasonable
attorneys' fees and disbursements as incurred in connection therewith following
the receipt of invoices for such fees and disbursements. If the Company prevails
on all substantial claims in the dispute submitted for arbitration then the
Executive will reimburse the Company for such legal fees.
11. Successors.
----------
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
12
<PAGE>
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, provided that the Company may not assign
this Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
(c) The Company shall require any to assume and agree to 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.
12. Miscellaneous.
-------------
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its conflict of law
rules. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
13
<PAGE>
If to the Executive:
-------------------
Kenneth A. Shulman
23 Alpine Way
Livingston, New Jersey 07039
If to the Company:
-----------------
Broadview Networks, Inc.
45-18 Court Square
Suite 403
Long Island City, NY 11101
Attention: Chief Executive Office
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
(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) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
14
<PAGE>
(e) 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.
(f) Except as provided herein, the Executive and the Company acknowledge
that this Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement between the Executive and the Company concerning
the subject matter hereof.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
(h) The Company shall reimburse Executive for all fees and expenses
incurred in connection with the negotiation and preparation of this agreement
but not in excess of $1,500.
15
<PAGE>
WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day and
year first above written.
BROADVIEW NETWORKS, INC.
/s/ Vern Kennedy
By: Vern Kennedy
Title: President & CEO
Executive
/s/ Kenneth A. Shulman 12/10/99
- ------------------------
Kenneth A. Shulman
16
<PAGE>
Exhibit 23.1
PRICEWATERHOUSECOOPERS [LOGO]
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York NY 10019-6013
Telephone (212) 259 1000
Facsimile (212) 259 1301
CONSENT OF INDEPENDENT ACCOUNTANTS
--------------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated February 4, 2000 relating to the financial statements and
financial statement schedule of Broadview Networks Holdings 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.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROADVIEW
NETWORKS HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,572,220
<SECURITIES> 0
<RECEIVABLES> 7,854,832
<ALLOWANCES> (1,302,491)
<INVENTORY> 0
<CURRENT-ASSETS> 14,045,317
<PP&E> 16,470,360
<DEPRECIATION> (872,766)
<TOTAL-ASSETS> 30,709,026
<CURRENT-LIABILITIES> 15,336,898
<BONDS> 7,979,027
38,888,367
52,849
<COMMON> 76,954
<OTHER-SE> (36,805,069)
<TOTAL-LIABILITY-AND-EQUITY> 30,709,026
<SALES> 37,203,295
<TOTAL-REVENUES> 37,203,295
<CGS> 33,964,926
<TOTAL-COSTS> 33,964,926
<OTHER-EXPENSES> 41,304,139
<LOSS-PROVISION> 3,955,938
<INTEREST-EXPENSE> (517,210)
<INCOME-PRETAX> (57,548,560)
<INCOME-TAX> 0
<INCOME-CONTINUING> (37,548,560)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,548,560)
<EPS-BASIC> (6.72)
<EPS-DILUTED> (6.72)
</TABLE>
<PAGE>
Exhibit 99.1
PRICEWATERHOUSECOOPERS [LOGO]
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York NY 10019-6013
Telephone (212) 259 1000
Facsimile (212) 259 1301
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Broadview Networks Holdings, Inc and Subsidiaries:
Our audits of the consolidated financial statements referred to in our report
dated February 4, 1999 appearing in this Registration Statement also included an
audit of the financial statement schedule listed in Item 16 in this Registration
Statement. In our opinion, this financial statement schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, NY
February 4, 1999
<PAGE>
Broadview Networks Holdings, Inc. and Subsidiaries
For the year ended December 31, 1999
Rule 12-09 Valuation and qualifying accounts and reserves
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
- -----------------------------------------------------------------------------------------------------------------------------------
Description Balance at Charged to costs and Charged to other accounts -- Deductions -- Balance at end of
Beginning of expenses describe Describe period
Period.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful 382,302.00 3,955,938.00 Write Offs 3,035,749.00 1,301,491.00
Accounts
Allowance for Customer .00 85,000.00 Revenue -- 15,000.00 100,000.00
Credits
Tax Valuation Allowance 3,633,910.00 NOL Increase -- 9,227,938.00 12,861,848.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total 4,016,212.00 4,040,938.00 9,242,938.00 3,035,749.00 14,264,339.00
====================================================================================================================================
</TABLE>
