<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 333-30332
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NYMEX HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6231 13-4098266
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or organization)
</TABLE>
ONE NORTH END AVENUE
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10282-1101
(212) 299-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DANIEL RAPPAPORT
CHAIRMAN OF THE BOARD
NEW YORK MERCANTILE EXCHANGE
ONE NORTH END AVENUE
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10282-1101
(212) 299-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
JOHN A. HEALY, ESQ.
KATHLEEN L. WERNER, ESQ.
CLIFFORD CHANCE ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------
Approximate date of commencement of the proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective and
after all other conditions to the demutualization described herein have been
satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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 of 1933, as amended, 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. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROXY STATEMENT AND PROSPECTUS IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT ISSUE THESE SECURITIES UNTIL WE FILE THE
REGISTRATION STATEMENT, OF WHICH THIS PROXY STATEMENT AND PROSPECTUS
FORMS A PART, WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE
REGISTRATION STATEMENT BECOMES EFFECTIVE.
SUBJECT TO COMPLETION, DATED APRIL 14, 2000
PROXY STATEMENT AND PROSPECTUS
NEW YORK MERCANTILE EXCHANGE
One North End Avenue
World Financial Center
New York, New York 10282-1101
Dear NYMEX Member:
You are being asked to vote on a proposed plan of demutualization of the
New York Mercantile Exchange. This plan was unanimously approved by your board
of directors at a meeting held on January 5, 2000. The plan approved by the
board is the first step in reorganizing NYMEX as a for-profit organization
better positioned to respond to challenges and opportunities in the marketplace
and dedicated to maximizing value for its owners. NYMEX members will have the
opportunity to realize this value through the separation of their trading rights
from their equity ownership of the organization.
It is important to point out that the demutualization is only a first step.
While we have no immediate plans to complete an initial public offering or to
sell any part of the exchange to an outside investor group, the proposed
demutualization will facilitate these types of transactions. No such additional
transaction will be able to occur without the affirmative majority vote of the
stockholders.
The demutualization will involve a two-step merger. In the demutualization,
each NYMEX Division membership will be converted into two pieces--one share of
common stock in NYMEX Holdings, Inc., a Delaware for-profit holding company, and
one Class A membership in New York Mercantile Exchange, Inc., a Delaware
non-stock corporation and wholly owned subsidiary of NYMEX Holdings. The common
stock will represent an equity interest in NYMEX Holdings. The Class A
membership will represent the trading privileges currently associated with a
NYMEX Division membership.
We encourage you to read the accompanying proxy statement and prospectus
carefully. PLEASE READ THE SECTION OF THE PROXY STATEMENT AND PROSPECTUS
ENTITLED "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF RISKS THAT YOU
SHOULD CONSIDER IN EVALUATING THE DEMUTUALIZATION.
The demutualization plan requires the approval of at least 66 2/3% of the
members of NYMEX who cast votes at the special meeting, whether in person or by
proxy, so long as at least 150 members vote in favor of the demutualization.
Owners of record of NYMEX memberships are entitled to one vote per member
regardless of the number of memberships owned.
We do not have any current plans to list the common stock of NYMEX Holdings
on an exchange or other trading system. Furthermore, transfers of common stock
and Class A memberships will be subject to transfer restrictions that are
described in this proxy statement and prospectus.
It is important that as many of our members as possible be present or
represented by proxy at our special meeting of members to be held on [date],
2000 to consider and approve the demutualization. I look forward to seeing all
of you who attend in person.
Sincerely,
Daniel Rappaport
Chairman
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN THE
DEMUTUALIZATION OR DETERMINED IF THE ACCOMPANYING PROXY STATEMENT AND PROSPECTUS
IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This proxy statement and prospectus is dated [date], 2000, and was first
mailed to members of NYMEX on or about [date], 2000.
<PAGE> 3
THE INFORMATION IN THIS PROXY STATEMENT AND PROSPECTUS IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT ISSUE THESE SECURITIES UNTIL WE FILE THE
REGISTRATION STATEMENT, OF WHICH THIS PROXY STATEMENT AND PROSPECTUS
FORMS A PART, WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE
REGISTRATION STATEMENT BECOMES EFFECTIVE.
SUBJECT TO COMPLETION, DATED APRIL 14, 2000
One North End Avenue
World Financial Center
New York, New York 10282-1101
------------------------
NOTICE OF A SPECIAL MEETING OF MEMBERS OF THE NYMEX DIVISION OF THE
NEW YORK MERCANTILE EXCHANGE
TO BE HELD ON [DATE], 2000
------------------------
This is a notice of a special meeting of members of the NYMEX Division of
the New York Mercantile Exchange that is scheduled to be held at NYMEX's offices
located at One North End Avenue, World Financial Center, New York, New York
10282-1101, at [time], local time, on [date], 2000. The board of directors asks
you to attend this meeting, in person or by proxy, to consider and approve a
plan to demutualize NYMEX. In particular, you are being asked to consider and
approve:
1. The merger of NYMEX with and into New York Mercantile Exchange, Inc., a
newly formed, non-stock corporation organized as a for-profit corporation under
the laws of Delaware. New York Mercantile Exchange, Inc. will be the surviving
company of this merger.
2. A second merger in which New York Mercantile Exchange, Inc. will merge
with a subsidiary of a newly formed corporation formed solely for the purpose of
completing the merger that is wholly owned by NYMEX Holdings, Inc. New York
Mercantile Exchange, Inc. will survive this merger and become a wholly owned
subsidiary of NYMEX Holdings, Inc., thereby creating a holding company
structure. This merger will occur as soon as possible after the first merger.
We will not transact any other business at the special meeting.
The close of business on [date], 2000 has been fixed as the record date for
determining those members entitled to vote at the special meeting and any
adjournments or postponements of the meeting. Members of the COMEX Division of
NYMEX and lessees of NYMEX Division trading privileges are not entitled to vote
at the special meeting. A list of eligible members of record as of the close of
business on the record date will be available at the special meeting for
examination by any member or the member's attorney or agent. Please note that by
delivering a proxy to vote at the special meeting, you are also granting a proxy
voting in favor of any adjournments of the special meeting.
We invite you to attend the special meeting because it is important that
you be represented at the meeting. Whether or not you plan to attend the special
meeting, please sign, date and return the enclosed ballot and proxy card in the
accompanying postage-paid envelope. If you attend the meeting, you may vote in
person, which will revoke any ballot and signed proxy you have already
submitted. You may also revoke your ballot and proxy at any time before the
meeting by notifying us in writing.
NYMEX must receive your ballot and proxy card by [time], [date], 2000.
By Order of the Board of Directors
Neil Citrone
Secretary
[date], 2000
New York, New York
YOUR VOTE IS VERY IMPORTANT.
THE BOARD OF DIRECTORS OF NYMEX UNANIMOUSLY RECOMMENDS THAT MEMBERS VOTE
FOR APPROVAL OF THE DEMUTUALIZATION PLAN.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE DEMUTUALIZATION............. 1
SUMMARY..................................................... 6
RISK FACTORS................................................ 11
NYMEX SPECIAL MEETING....................................... 16
THE DEMUTUALIZATION......................................... 18
WHERE YOU CAN FIND MORE INFORMATION......................... 21
NYMEX....................................................... 22
SELECTED FINANCIAL INFORMATION.............................. 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 48
CAPITALIZATION.............................................. 57
MANAGEMENT.................................................. 58
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 67
DESCRIPTION OF CAPITAL STOCK OF NYMEX HOLDINGS.............. 68
DESCRIPTION OF MEMBERSHIPS OF NYMEX EXCHANGE................ 69
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS OF NYMEX
HOLDINGS, INC. AND NYMEX EXCHANGE......................... 76
COMPARISON OF RIGHTS OF NYMEX MEMBERS BEFORE AND AFTER THE
DEMUTUALIZATION........................................... 78
FEDERAL INCOME TAX CONSEQUENCES OF THE DEMUTUALIZATION...... 85
LEGAL MATTERS............................................... 87
EXPERTS..................................................... 87
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL
INFORMATION............................................... F-1
Annex A -- THE FIRST MERGER AGREEMENT
Annex B -- THE SECOND MERGER AGREEMENT
Annex C -- CERTIFICATE OF INCORPORATION OF NYMEX HOLDINGS
Annex D -- BYLAWS OF NYMEX HOLDINGS
Annex E -- CERTIFICATE OF INCORPORATION OF NYMEX EXCHANGE
Annex F -- BYLAWS OF NYMEX EXCHANGE
</TABLE>
------------------------
When we refer to NYMEX members or simply members throughout this document,
we are referring to owners of record of memberships in the NYMEX Division of the
New York Mercantile Exchange, as opposed to members of the COMEX Division or
lessees of NYMEX Division memberships. The consequences of the demutualization
for COMEX Division members and lessees of NYMEX Division memberships are
discussed separately in this document.
When we refer to the NYMEX Division we are referring to New York Mercantile
Exchange excluding its wholly owned subsidiary Commodity Exchange, Inc. When we
refer to the COMEX Division we are referring to Commodity Exchange, Inc.
------------------------
You should rely only on the information contained in this proxy statement
and prospectus or to which we have referred you. We have not authorized anyone
to provide you with information that is different. Information on our Web site
is not part of this document. This proxy statement and prospectus may be used
only where it is legal to issue these securities. The information in this proxy
statement and prospectus may be accurate only on the date of this proxy
statement and prospectus.
<PAGE> 5
QUESTIONS AND ANSWERS ABOUT THE DEMUTUALIZATION
1. Q: WHAT IS THE DEMUTUALIZATION?
A: The demutualization refers to the process by which NYMEX will convert
from a New York not-for-profit membership organization into a Delaware
for-profit entity that will be organized as a stock holding company with
a subsidiary membership company. Diagrams showing the ownership structure
of NYMEX before and after the demutualization can be found on page 8.
2. Q: WHAT WILL HAPPEN TO MY NYMEX MEMBERSHIP IN THE DEMUTUALIZATION?
A: In the demutualization, each NYMEX Division membership will be converted
into two pieces--one Class A membership in NYMEX Exchange, representing
trading privileges on NYMEX Exchange, and one share of common stock of
NYMEX Holdings, representing an equity interest in NYMEX Holdings. The
demutualization will create a different legal structure for NYMEX in
which the voting and economic rights that NYMEX members have today will
be changed only in very limited respects. One change is that lessees will
not have any voting rights after the demutualization. For a comparison of
the rights of members before and after the demutualization, see the table
beginning on page 78.
3. Q: WHAT IS THE PURPOSE OF THE DEMUTUALIZATION?
A: The demutualization will potentially unlock the equity value of NYMEX
memberships while ensuring that initial ownership and control of NYMEX
stay in the hands of the NYMEX members until they decide to issue stock
to outside investors or in connection with strategic transactions. The
demutualization will position NYMEX to complete a public or private
offering of stock or a strategic transaction should the stockholders of
NYMEX Holdings approve such a transaction, and to do so more quickly
since the initial step of creating a for-profit entity will have been
completed in the demutualization.
Moving to a for-profit structure in the demutualization will also enable
NYMEX Holdings to pay dividends to its stockholders. As a not-for-profit
organization, NYMEX is currently prohibited from paying dividends to its
members, subject to limited exceptions. After the demutualization, NYMEX
Holdings will be able to pay cash dividends and dividends in kind to its
stockholders.
4. Q: WHAT TYPE OF TRANSACTION WOULD POTENTIALLY UNLOCK THE EQUITY VALUE OF
NYMEX MEMBERSHIPS AFTER THE DEMUTUALIZATION?
A: After the demutualization is completed, the board of NYMEX Holdings will
actively explore opportunities to enhance shareholder value. These
opportunities could take a number of forms, including an initial public
offering of shares of common stock of NYMEX Holdings; a strategic
business combination with another exchange; a private sale of equity
interests in NYMEX Holdings to one or more investors; or the formation of
subsidiary exchanges designed to exploit discrete lines of business,
particularly through electronic trading, which could ultimately be
transferred to stockholders of NYMEX Holdings through a spin-off in the
form of a stock dividend. These are only some examples of the types of
transactions which could occur in the future and it is also possible that
no such transaction will occur. However, the demutualization will enhance
the flexibility of NYMEX to pursue these opportunities in order to enable
members to realize value from their equity investment in NYMEX.
1
<PAGE> 6
5. Q: WHY IS NYMEX BEING REORGANIZED AS A TWO-TIERED HOLDING COMPANY?
A: The board concluded that a holding company structure would give NYMEX the
advantages of a corporation while maintaining the flexibility in
governing the operations of an exchange provided by a membership
organization. The holding company will be the primary vehicle for capital
raising and strategic transactions. Purely exchange matters, such as
trading and non-over-the-counter clearing, will be concentrated at the
NYMEX Exchange level. Furthermore, NYMEX Exchange will have the authority
under Delaware law to assess members to recoup financial losses because
it is a non-stock membership organization. This assessment authority will
be similar to the assessment authority that NYMEX has today. This
assessment authority is an important risk management tool for the
operations of an exchange.
In addition, as NYMEX inevitably will continue to face competitive
challenges from the electronic marketplace, NYMEX may choose to develop
business opportunities in the relatively unregulated over-the-counter
marketplace. The holding company structure will permit NYMEX to conduct
both regulated and unregulated activities and offer different products
and business lines from within one organization through the use of
separate subsidiaries.
Furthermore, as NYMEX continues to develop business opportunities
overseas, it needs to have a form of corporate structure that is flexible
enough to allow for the development of business opportunities outside the
jurisdiction of federal regulatory agencies. For example, had NYMEX
completed a merger with the International Petroleum Exchange, NYMEX would
have been required to form a holding company to ensure that the non-U.S.
entity that would have survived the merger would not be regulated by U.S.
regulatory authorities.
6. Q: WHY ARE NYMEX HOLDINGS AND NYMEX EXCHANGE ORGANIZED UNDER DELAWARE
LAW INSTEAD OF NEW YORK LAW?
A: Delaware is the most common choice for the organization of corporations
because Delaware is generally considered to have the most well-developed
body of state corporate law, particularly in the areas of mergers and
acquisitions. Many other states have modeled their corporation statutes
on the Delaware General Corporation Law and most state courts look to the
judicial decisions of Delaware's courts for guidance in disputes
involving corporate law principles.
7. Q:ARE THERE ANY RESTRICTIONS ON MY ABILITY TO SELL COMMON STOCK AND CLASS A
MEMBERSHIPS?
A: The organizational documents of NYMEX Exchange and NYMEX Holdings provide
that the common stock of NYMEX Holdings and the Class A memberships of
NYMEX Exchange cannot be transferred separately; they must be transferred
as a single unit. This is often referred to as a "stapling" of the two
interests. The staple feature will assure that control of NYMEX stays in
the hands of its members because Class A memberships can only be owned by
persons with membership privileges.
The staple feature can only be eliminated with the approval of holders of
at least a majority of the shares of common stock of NYMEX Holdings.
2
<PAGE> 7
8. Q. WHEN WILL THE CLASS A MEMBERSHIPS AND COMMON STOCK BE UNSTAPLED?
A: NYMEX Holdings would likely seek the unstapling of the Class A
memberships and the common stock in order to issue common stock in
connection with raising capital from non-members, such as in an initial
public offering, or in connection with a strategic transaction such as an
acquisition of or merger with a non-member-owned organization. Unstapling
will allow members to sell all or a portion of their common stock of
NYMEX Holdings, thereby monetizing their investment, while maintaining
their trading privileges in the form of Class A memberships.
9. Q: WILL I CONTINUE TO HAVE VOTING RIGHTS?
A: Yes. As a stockholder of NYMEX Holdings, you will be able to vote on all
matters submitted to the stockholders for a vote, including the election
of the board of directors; extraordinary transactions such as a merger,
consolidation, sale of all or substantially all of the assets or
dissolution of NYMEX Holdings; changes to the bylaws of NYMEX Holdings;
and the unstapling of the common stock and Class A memberships. Each share
of common stock will be entitled to one vote.
As a holder of a Class A membership in NYMEX Exchange, you will also be
able to vote on proposed changes to the bylaws of NYMEX Exchange. These
bylaws are substantially identical to the current bylaws of NYMEX except
for changes made to reflect the demutualization and to comply with
Delaware law. Each Class A membership will be entitled to one vote on
changes to NYMEX Exchange bylaws. This represents a change from existing
NYMEX voting rights, under which each member is entitled to only one vote,
regardless of the number of memberships owned by the member.
For a comparison of the rights of members before and after the
demutualization, see the table beginning on page 78.
10. Q: WILL THE DEMUTUALIZATION AFFECT CURRENT MEMBER FEES AND/OR MEMBER
BENEFITS?
A: The demutualization will not in and of itself change member fees or any
member benefits including fee rebate plans and member retention plans.
You should note however, that the board of directors of NYMEX Exchange
will continue to have the authority to set member fees, dues, assessments
and benefits in its discretion. The board does not currently have any
plans to change any fees, dues, assessments or benefits.
11. Q: WILL I RETAIN THE RIGHT TO LEASE MY TRADING PRIVILEGES ON THE EXCHANGE?
A: Yes. Members will continue to be able to act as lessors of their trading
privileges and lessees will continue to be able to act as lessees of
their trading privileges after the demutualization; however, lessees will
have no voting rights in NYMEX Exchange or NYMEX Holdings.
12. Q: WILL I RETAIN THE RIGHT TO SELL MY TRADING PRIVILEGES ON THE EXCHANGE?
A: Yes. Members will continue to be able to sell their trading privileges,
in the form of Class A memberships, to qualified members after the
demutualization. However, transfers of Class A memberships must be
accompanied by transfers of an equal number of shares of common stock of
NYMEX Holdings unless and until the stockholders of NYMEX Holdings vote
to unstaple NYMEX Holdings common stock from the Class A memberships of
NYMEX Exchange.
3
<PAGE> 8
13. Q: WILL I BE ALLOWED TO SELL MY SHARES OF NYMEX HOLDINGS?
A: Shares of NYMEX Holdings may be sold to qualified members of NYMEX
Exchange. Transfers of shares must be accompanied by transfers of an
equal number of Class A memberships in NYMEX Exchange unless and until
the stockholders of NYMEX Holdings vote to unstaple the Class A
memberships and common stock.
14. Q: HOW WILL THE DEMUTUALIZATION AFFECT THE VOTING RIGHTS OF LESSEES?
A: If the demutualization is consummated, then lessees will have no voting
rights. If the demutualization is not consummated, then lessee voting
rights will remain the same as they are today. Lessees will not be
eligible to vote on the demutualization.
15. Q: WILL THE DEMUTUALIZATION AFFECT THE RULES FOR QUALIFICATION AS A MEMBER
OF THE EXCHANGE?
A: No. The rules for the qualification of members of NYMEX Exchange will be
the same as the current rules for the qualification of members of NYMEX.
16. Q: WHAT WILL HAPPEN TO THE 84 CURRENTLY AUTHORIZED BUT UNISSUED NYMEX
MEMBERSHIPS?
A: NYMEX currently has 900 authorized memberships. 816 of these memberships
are outstanding. The remaining 84 authorized but unissued NYMEX
memberships, commonly referred to as "treasury memberships," will be
cancelled without consideration upon the effectiveness of the
demutualization.
17. Q: WHAT ARE THE TAX CONSEQUENCES OF THE DEMUTUALIZATION?
A: We have structured the demutualization with the intention that neither
NYMEX nor our existing members will recognize any gain or loss for
federal income tax purposes. Because of the novelty of the
demutualization, NYMEX has asked the IRS to issue a ruling on key aspects
of the demutualization. We expect to receive a response from the IRS in
June or July of this year.
18. Q: WHEN WILL THE DEMUTUALIZATION BE COMPLETED?
A: The demutualization will be completed as soon as practicable after the
conditions to demutualization are satisfied, including approval of the
demutualization by the members, receipt of appropriate "contract market"
designations from the Commodity Futures Trading Commission and receipt of
either a favorable tax ruling from the Internal Revenue Service or in the
absence of a ruling, a favorable tax opinion of Clifford Chance Rogers &
Wells LLP. We anticipate that these conditions will be satisfied and that
the demutualization will be completed in June or July of this year.
19. Q: WHAT WILL HAPPEN TO THE MEMBERS OF THE COMEX DIVISION OF NYMEX IN THE
DEMUTUALIZATION?
A: COMEX, which is currently a wholly-owned subsidiary of NYMEX, will be a
subsidiary of NYMEX Exchange after the demutualization. Members of the
COMEX Division will continue to have the same trading privileges on COMEX
as they have today and any other rights and obligations which a COMEX
Division member has will be unaffected by the demutualization. COMEX
Division members have no right to vote on the demutualization and will
not receive common stock of NYMEX Holdings or Class A memberships in
NYMEX Exchange upon the effectiveness of the demutualization.
4
<PAGE> 9
20. Q: WHAT WILL HAPPEN IF MEMBERS DO NOT APPROVE THE DEMUTUALIZATION?
A: If members do not approve the demutualization, or if the demutualization
is not completed for any reason, the board of directors of NYMEX
presently intends to continue to operate NYMEX in its current form.
21. Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the demutualization you should contact:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attention: Christopher Bowen
Telephone: 212-299-2200
Fax: 212-299-2299
5
<PAGE> 10
SUMMARY
This summary highlights information contained elsewhere in this proxy
statement and prospectus. This summary does not contain all of the information
you should consider with regard to the transactions described in this proxy
statement and prospectus. You should read this summary together with this entire
proxy statement and prospectus, including our financial statements and the notes
to those statements, carefully.
NYMEX
NYMEX exists principally to provide facilities for buying and selling
commodities for future delivery under rules intended to protect the interests of
all market participants. NYMEX itself does not own any commodities, trade
futures and options contracts for its own account or otherwise engage in market
activities. NYMEX provides the physical facilities necessary to conduct an
open-outcry auction market and electronic trading systems and systems for the
matching and clearing of all trades executed on NYMEX. Futures and options
markets, such as NYMEX, facilitate price discovery and provide financial risk
management instruments to a broad array of market participants including
commercial entities that produce, consume, trade or have other interests in
underlying commodities. NYMEX believes that market participants choose to trade
on centralized markets such as NYMEX because of the liquidity those markets help
to provide and because those markets perform an important price discovery
function by publishing the prices at which each trade occurs. The liquidity that
NYMEX and other centralized markets offer is achieved because the traded
contracts have standardized terms and the exchanges' clearinghouses help
minimize counterparty performance risk.
For these reasons, in general the more liquidity a commodities market
offers, the more attractive it is to market users. Conversely, if liquidity
declines, a market becomes less attractive. Market participants generally view
liquidity as having two elements--trading volume and open interest. A key factor
in the decision by NYMEX's board to recommend demutualization is the board's
belief that NYMEX must ensure that it is able to respond promptly and
effectively to competitive and technological developments. These changes in the
exchange environment could reduce NYMEX's ability to offer trading volume and
open interest and, therefore, its ability to offer liquidity to market
participants. NYMEX believes that demutualization will position it to enter into
transactions that could enhance its ability to offer liquidity to market
participants.
6
<PAGE> 11
DEMUTUALIZATION OF NYMEX
The demutualization will technically involve a two-step merger.
First Merger
- In the first merger, NYMEX will merge into a newly formed, non-stock
corporation organized under Delaware law. The surviving company of this
merger will be named New York Mercantile Exchange, Inc., which we refer
to throughout this document as NYMEX Exchange.
- In the first merger, each NYMEX member will receive one Class A
membership and one Class B membership in NYMEX Exchange for each NYMEX
Division membership that the member owns. The Class A membership
represents the trading privileges associated with a NYMEX Division
membership. The Class B membership represents an economic interest in
NYMEX Exchange--a right to dividends and liquidation proceeds.
- In the first merger, each of the 84 authorized but unissued NYMEX
memberships will be cancelled without consideration.
Second Merger
- Immediately after the first merger is completed, NYMEX Exchange will
merge with a subsidiary, named NYMEX Merger Sub, Inc., of a newly formed,
stock holding company also organized under Delaware law that will be
named NYMEX Holdings, Inc., which we refer to throughout this document as
NYMEX Holdings. NYMEX Exchange will survive this merger and become a
subsidiary of NYMEX Holdings.
- In the second merger, each member's Class B membership will be exchanged
for one share of common stock in NYMEX Holdings. NYMEX Holdings' interest
in its subsidiary will be converted into the sole outstanding Class B
membership in NYMEX Exchange.
Result
- As a result of the two-step merger:
- each NYMEX Division membership will become one Class A membership in
NYMEX Exchange and one share of common stock of NYMEX Holdings;
- NYMEX Holdings will hold the sole outstanding Class B membership in
NYMEX Exchange;
- NYMEX Exchange will be a subsidiary of NYMEX Holdings; and
- both NYMEX Exchange and NYMEX Holdings will be organized under Delaware
law.
7
<PAGE> 12
The diagrams below show the ownership structure of NYMEX both before and
after the demutualization.
[Demutualization Chart]
[Graphic: A before and after demutualization graphic consisting of two columns.
The first column consists of an oval above a rectangle with an arrow pointing
from the oval down to the rectangle. Inscribed in the oval is "New York
Mercantile Exchange Members" and inscribed in the rectangle is "New York
Mercantile Exchange (New York not-for-profit corporation)". Written beside of
the arrow is "816 Outstanding Memberships," "84 Unissued Memberships," "900
Authorized Memberships". The second column consists of an oval and two
rectangles in succession below it with an arrow pointing from the oval to the
first rectangle, and from the first rectangle to the second rectangle.
Separately, there is an arrow pointing from the oval to the second rectangle.
Inscribed in the oval is "Former New York Mercantile Exchange Members,"
inscribed in the first rectangle is "NYMEX Holdings, Inc. (Delaware stock
corporation)", and inscribed in the second rectangle is "New York Mercantile
Exchange, Inc. (Delaware non-stock corporation)". Written beside the arrow
pointing from the oval to the first rectangle is "816 Shares of Common Stock
(representing equity component)". Written beside the arrow pointing from the
first rectangle to the second rectangle is "One Class B Membership (representing
equity component)". Written beside the arrow pointing from the oval directly to
the second rectangle below is "816 Class A Memberships (representing trading
privileges)".]
BENEFITS OF DEMUTUALIZATION
We believe that demutualization will provide the following benefits to our
members:
- EXPANDS THE CHOICES AVAILABLE TO NYMEX.
- Enhances the ability of NYMEX to maintain industry leadership by
providing NYMEX with greater flexibility to enter into strategic
transactions and to raise capital to fund technological innovations and
other projects.
- Provides the opportunity to maximize stockholder value by separating
trading rights from equity ownership.
- Allows NYMEX to enter more easily into transactions with
non-member-owned entities by providing NYMEX with a currency--the
common stock of NYMEX Holdings--for acquisitions and the ability to
issue stock to outside investors in public or private offerings. These
transactions would require the approval of the stockholders of NYMEX
Holdings.
- PERMITS NYMEX TO BETTER SERVE ITS OWNERS.
- Facilitates move to for-profit business model and payment of dividends.
NYMEX is currently prohibited from paying dividends to its members
under the New York not-for-profit law, subject to limited exceptions.
NYMEX Holdings and NYMEX Exchange will not be subject to this
prohibition because they are each organized as a for-profit
corporation.
- Enhances NYMEX's ability to retain and attract professional management
by providing NYMEX with the ability to implement stock-based incentive
plans.
- PLACES NYMEX IN THE BEST POSSIBLE COMPETITIVE POSITION.
- The trading environment is becoming increasingly competitive.
- New competitors are emerging from new directions, such as Internet
exchanges.
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<PAGE> 13
- NYMEX must be able to react quickly and decisively to strategic
initiatives and challenges.
BOARDS OF DIRECTORS OF NYMEX HOLDINGS AND NYMEX EXCHANGE
The directors and executive officers of NYMEX Holdings after the
demutualization will be the same as the directors and executive officers of
NYMEX before the demutualization. The certificate of incorporation of NYMEX
Exchange requires NYMEX Holdings, as the sole Class B member, to elect the
directors of NYMEX Holdings to serve as the directors of NYMEX Exchange. NYMEX
Holdings will have a 22 person board consisting of 20 directors who meet the
qualifications of floor broker, futures commission merchant, local, trade, at
large and public directors in the same proportions as provided in NYMEX's
current bylaws. The Chairman and Vice Chairman of the NYMEX Holdings board will
be designated directly by stockholders and will be members of the at-large
category. The board of NYMEX Holdings will be divided into three classes serving
staggered three-year terms. Directors for each class will be elected at the
annual meeting of stockholders held in the year in which the term for such class
expires.
RISK FACTORS
You should carefully consider all of the information provided in this proxy
statement and prospectus and, in particular, you should evaluate the specific
factors described under "Risk Factors" on page 11 for a description of the risks
associated with the demutualization.
CHANGES IN GOVERNANCE OF NYMEX
One of the guiding principles in structuring the demutualization was to
make as few changes as possible to the governance mechanics of NYMEX unless and
until the members vote to unstaple the common stock and Class A memberships.
However, due primarily to the fact that NYMEX Holdings and NYMEX Exchange are
organized under Delaware law, as opposed to New York law, some changes will be
made to the governance mechanics. The material changes include the following:
<TABLE>
<CAPTION>
PRE-DEMUTUALIZATION POST-DEMUTUALIZATION
------------------- --------------------
<S> <C>
- - Members vote on the basis of one member - - Each NYMEX membership is represented by
one vote, regardless of the number of one share of common stock and one Class A
memberships owned. membership. Common stockholders vote on
the basis of one vote per share of common
stock. Holders of Class A memberships
vote on the basis of one membership - one
vote.
- - Extraordinary transactions, such as - Extraordinary transactions, such as
mergers and sales of all or substantially mergers and sales of all or substantially
all of NYMEX's assets, must be approved all of the assets of NYMEX Holdings, must
by at least 66 2/3% of members who cast be approved by holders of at least a
votes at a meeting held to approve such a majority of the outstanding shares of
transaction, provided that at least 150 common stock of NYMEX Holdings.
members vote in favor of the transaction.
</TABLE>
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<PAGE> 14
<TABLE>
<CAPTION>
PRE-DEMUTUALIZATION POST-DEMUTUALIZATION
------------------- --------------------
<S> <C>
- - Member directors serve staggered terms of - The board of NYMEX Holdings is divided
three years each. The chairman and vice into three classes. Each director serves a
chairman serve staggered terms of two term of three years. The board of NYMEX
years each. Public directors serve Exchange must mirror the board of NYMEX
staggered terms of two years each. Holdings.
- - The quorum requirement for meetings of - The quorum requirement for meetings of
the board is six. the board of NYMEX Holdings and NYMEX
Exchange is eight, which is one-third of
the 22 total directors.
- - NYMEX cannot pay dividends except in - NYMEX Holdings and NYMEX Exchange may pay
certain limited circumstances. dividends when, as and if declared by
their respective boards of directors.
</TABLE>
RECOMMENDATION OF THE NYMEX BOARD
THE BOARD OF DIRECTORS OF NYMEX UNANIMOUSLY RECOMMENDS THAT MEMBERS VOTE
FOR APPROVAL OF THE DEMUTUALIZATION PLAN.
VOTES REQUIRED TO APPROVE THE DEMUTUALIZATION
The demutualization requires the affirmative vote of 66 2/3% of the votes
cast at the special meeting held to approve the demutualization, so long as at
least 150 members vote in favor of the demutualization. NYMEX directors are
entitled to exercise [17] votes representing [2.6]% of the votes entitled to be
cast in the demutualization.
CONDITIONS TO THE MERGER
The mergers will not be consummated unless:
- the mergers are approved by the requisite vote of NYMEX members;
- NYMEX Exchange receives the appropriate "contract market" designations
from the Commodity Futures Trading Commission; and
- NYMEX receives a favorable ruling from the Internal Revenue Service, or a
favorable opinion of its counsel, regarding certain Federal income tax
aspects of the demutualization.
ABSENCE OF APPRAISAL OR DISSENTERS' RIGHTS
Members who object to the demutualization will have no appraisal or
dissenters' rights under applicable law.
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<PAGE> 15
RISK FACTORS
This section discusses the material risks associated with the
demutualization that you should consider when deciding whether to vote in favor
of the demutualization.
RISKS RELATED TO THE DEMUTUALIZATION
WE MAY NOT BE SUCCESSFUL IN RUNNING A FOR-PROFIT ENTERPRISE.
NYMEX has historically operated as a not-for-profit corporation. As a
result, our current management does not at present have experience in running
NYMEX as a for-profit enterprise. We have no operating history as a for-profit
business by which our management decisions and financial results can be
evaluated. It is possible that operating losses may be incurred in the future
and that profitability may never be achieved or sustained.
THE ABSENCE OF AN ACTIVE TRADING MARKET FOR OUR SHARES OR THE LACK OF
LIQUIDITY IN ANY TRADING MARKET THAT MAY DEVELOP FOR OUR SHARES MAY PREVENT
YOU FROM SELLING OUR SHARES WHENEVER YOU DESIRE.
Shares of our common stock are new securities that are subject to
significant transfer restrictions and for which there is currently no active
trading market. The shares are transferable only to qualified members of NYMEX
Exchange and any transfer of shares must be accompanied by a transfer of an
equal number of Class A memberships. Although we may seek the unstapling of our
common stock in the future, we cannot assure you that our shares will become
freely tradable, that our shares will be listed on any national securities
exchange or included in any automated quotation system or electronic
communications network. Nor can we assure you that an active trading market will
develop for our shares or that, if a trading market for our common stock
develops, there will be liquidity in that market. Therefore, you may not be able
to sell your shares at the times that you would like to sell them.
ELIMINATING THE VOTING RIGHTS OF LESSEES MAY ADVERSELY AFFECT THE ABILITY
OF MEMBERS TO LEASE THEIR SEATS.
Under the rules of NYMEX Exchange, lessees of Class A memberships will have
no voting rights with respect to their leased memberships. It is possible that
potential lessees will be unwilling to lease Class A memberships or will pay
less to lease Class A memberships because the rules of NYMEX Exchange will not
provide them with voting rights.
THE IRS MAY, IN THE FUTURE, CHALLENGE OUR CHARACTERIZATION OF THE
DEMUTUALIZATION AND DETERMINE THAT THE DEMUTUALIZATION IS A TAXABLE
TRANSACTION TO NYMEX AND ITS MEMBERS.
We filed a request for a ruling with the IRS on January 31, 2000 that
neither NYMEX nor NYMEX members will recognize gain or loss as a result of
either the first merger or the second merger. Even if the IRS issues the
requested ruling, there can be no assurance that the IRS will not, in the
future, challenge our characterization of the demutualization and determine that
the demutualization is a taxable transaction to NYMEX and its members. In that
event, each member would likely be required to recognize a gain or loss. For
further information regarding the amount of such gain or loss or other
information regarding federal income tax consequences of the demutualization,
see "Federal Income Tax Consequences of the Demutualization" beginning on page
85.
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<PAGE> 16
RISKS RELATED TO A FUTURE UNSTAPLING OF COMMON STOCK AND CLASS A MEMBERSHIPS
THE DEMUTUALIZATION WILL FACILITATE PUBLIC AND PRIVATE EQUITY OFFERINGS AND
STRATEGIC TRANSACTIONS WHICH MAY REDUCE THE INFLUENCE OF MEMBERS.
One of the purposes of the demutualization is to position NYMEX to engage
in future capital raising activities and strategic transactions such as mergers
and acquisitions. Transactions of this type would likely involve issuing or
selling equity interests in NYMEX Holdings or its subsidiaries to non-members.
Any transaction of this type would have to be approved by holders of at least a
majority of the shares of common stock of NYMEX Holdings because it would
necessitate an unstapling of the common stock and Class A memberships. The
result of an unstapling would be that non-members of NYMEX Exchange would become
stockholders of NYMEX Holdings. It is even possible that non-member stockholders
will one day control NYMEX Holdings thereby effectively controlling NYMEX
Exchange and its operations.
THE BOARD OF DIRECTORS OF NYMEX HOLDINGS WILL BE REQUIRED TO ACT ON BEHALF
OF THE STOCKHOLDERS OF NYMEX HOLDINGS.
The board of directors of NYMEX Holdings will be required under Delaware
law to make decisions and take actions designed to maximize profits and
stockholder value. While the common stock and Class A memberships are stapled,
the members of NYMEX Exchange and the stockholders of NYMEX Holdings are the
same. If the common stock and Class A membership are unstapled, particularly if
the unstapling is done in connection with an initial public offering, then the
stockholder and member groups will diverge and the board of NYMEX Holdings will
be required by its fiduciary duties to act in the best interest of the
stockholders. These interests may not always be consistent with the interests of
members of NYMEX Exchange.
FAILURE TO RECEIVE APPROVALS FROM THE CFTC MAY PREVENT MEMBERS FROM
REALIZING THE FULL EQUITY VALUE OF THEIR MEMBERSHIPS.
We may have to obtain CFTC approval for transactions that would potentially
unlock the equity value of NYMEX memberships such as an initial public offering
of shares of NYMEX Holdings or a strategic business transaction with another
entity. No assurance can be given that we will receive any required approvals
from the CFTC. If CFTC approvals were required but were not obtained, we would
not be able to complete these transactions and members may not be able to
realize the full benefits of the demutualization.
RISKS RELATED TO OUR BUSINESS
WE FACE COMPETITION FROM OTHER EXCHANGES WHO PROVIDE SERVICES SIMILAR TO
OUR OWN.
Other exchanges designated as "contract markets" by the CFTC and foreign
exchanges permitted by the CFTC to do business in this country can compete with
NYMEX in offering market trading of futures and options contracts in both the
open outcry and electronic trading formats. In addition, over-the-counter, or
OTC, trading of physical commodity instruments, such as swaps, forward contracts
and NYMEX "look alike" contracts, in which parties directly negotiate the terms
of their contracts, represent a significant source of existing and potential
competition for NYMEX. For more information regarding our competitive
environment see "NYMEX -- NYMEX's Competitive Environment" on page 27.
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<PAGE> 17
FAILURE TO ADAPT TO RAPID TECHNOLOGICAL AND OTHER CHANGES COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
The markets in which we compete are characterized by rapidly changing
technology, evolving industry standards, frequent enhancements to existing
services and products, the introduction of new services and products and
changing customer demands. These market characteristics are heightened by the
increasing use of the Internet and the trend for companies from many industries
to offer Internet-based products and services. The widespread adoption of new
Internet, networking or telecommunications technologies or other technological
changes could require us to incur substantial expenditures to modify or adapt
our services or infrastructure. Our future success will depend on our ability to
respond to changing technologies on a timely and cost-effective basis. Our
operating results may be adversely affected if we cannot successfully develop,
introduce or market new services and products. In addition, any failure by us to
anticipate or respond quickly to changes in technology and customer preferences,
or any significant delays in other product development efforts, could have a
material adverse effect on our business, financial condition and operating
results.
THE TREND TOWARDS ELECTRONIC TRADING AND AWAY FROM OPEN OUTCRY TRADING
COULD DIVERT VOLUME AWAY FROM NYMEX'S OPEN OUTCRY TRADING SYSTEM.
Both newly-formed organizations and established exchanges are increasingly
employing electronic trading systems that provide fast, low cost execution of
trades. These organizations and exchanges are routing order flow away from
exchanges employing traditional open-outcry trading systems. Many market
participants believe that these electronic trading systems represent a threat to
the continued viability of the open-outcry method of trading. Futures exchanges
such as the London International Financial Futures Exchange and the Sydney
Futures Exchange have closed traditional trading systems and replaced them with
electronic systems. NYMEX provides electronic trading of futures and options
contracts through the NYMEX ACCESS(R) system. These electronic trading systems
may divert volume away from NYMEX's open-outcry trading system. We may
experience reduced volume on our open-outcry trading system, and therefore incur
lower clearing and transaction fees, as a result of the continued development of
electronic trading systems. For further information regarding the trend toward
electronic trading systems, see the heading "NYMEX -- Technology -- Open-Outcry
versus Electronic Trading" on page 40. For further information regarding the
NYMEX ACCESS(R) system see "NYMEX -- Technology -- NYMEX ACCESS(R)" on page 41.
WE MAY NOT BE SUCCESSFUL IN EXECUTING OUR INTERNATIONAL STRATEGY.
To date, we have taken steps to internationalize our customer base as
further described under "NYMEX -- Strategy -- International Strategy" on page
25. There can be no assurance that we will be able to succeed in marketing and
operating our products and developing localized services in international
markets. We may experience difficulty in managing our international operations
because of, among other things, competitive conditions overseas, difficulties in
supervising foreign operations, managing currency risk, language and cultural
differences, political instability and unexpected changes in regulatory
requirements or the failure to obtain requested regulatory approvals overseas.
Any of these could have a material adverse effect on the success of our
international operations and, consequently, on our business.
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<PAGE> 18
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS OR OUR ABILITY TO SECURE
ADDITIONAL FINANCING.
We anticipate, based on management's experience and current industry
trends, that our existing cash resources will be sufficient to meet our
anticipated working capital and capital expenditure requirements for at least
the next twelve months. However, we may need to raise additional funds to:
- support more rapid growth;
- develop new or enhanced services and products;
- respond to competitive pressures;
- acquire or develop complementary technologies; and
- respond to unanticipated requirements.
We cannot assure you that we will be able to obtain additional financing on
acceptable terms.
THE LOSS OF OUR LARGEST MARKET DATA VENDORS COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULT OF OPERATIONS.
Of the 59 vendors through whom we distribute market data, nine represented
approximately 80% of our market data revenue in 1999. Market data revenue
represented approximately 24% of our consolidated operating revenues for 1999.
The termination of some or all of our agreements with these vendors without
customers entering new subscription agreements with another vendor, could have a
material adverse effect on our business, financial condition and results of
operations.
OUR REVENUES MAY BE ADVERSELY IMPACTED IF THE VALUE OF OUR MARKET DATA
DECLINES OR IF WE BECOME SUBJECT TO LEGISLATION OR REGULATION LIMITING THE
PRICES THAT WE CAN CHARGE FOR OUR MARKET DATA.
We derive a significant percentage of our revenues from sales of market
data. The proliferation of competing trading systems may result in competing
streams of similar market data which may diminish the value of our market data
and the prices that we can charge for it. We could also become subject to
legislation or regulation limiting the prices that we can charge for market
data. Any limitations on the prices we may charge for market data could have a
material adverse effect on our business, financial condition and operating
results.
A DECLINE IN THE TRADING VOLUME OF LIGHT SWEET CRUDE OIL OR HENRY HUB
NATURAL GAS CONTRACTS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Light sweet crude oil futures and options and Henry Hub natural gas futures
and options accounted for 42% and 21%, respectively, of our total 1999 trading
volume. Therefore, we are particularly affected by declines in trading volumes
of these contracts. Downturns in trading volumes of these contracts could have a
material adverse affect on our revenues and, therefore, on our profitability and
results of operations.
THE BOARD OF DIRECTORS OF NYMEX EXCHANGE HAS THE POWER TO DETERMINE THE
ELIGIBILITY CRITERIA FOR MEMBERSHIP.
NYMEX Exchange will be governed by rules which are substantially identical
to the rules which govern NYMEX today. Accordingly, the board of directors of
NYMEX
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<PAGE> 19
Exchange, like the board of directors of NYMEX, will have the power to determine
the eligibility criteria for membership in NYMEX Exchange and the fees and rules
attached to that membership. Therefore the board will continue to have the
discretion to determine or change the standards for membership privileges and
financial requirements for member firms at any time without a vote of members.
SYSTEM LIMITATIONS AND FAILURES COULD HARM OUR BUSINESS.
Our business depends on the integrity and performance of the computer and
communications systems supporting it. If our systems cannot be expanded to keep
pace with increased demand or fail to perform, we could experience: (1)
unanticipated disruptions in service; (2) slower response times; and (3) delays
in the introduction of new products and services. These consequences could
result in lower trading volumes, financial losses, decreased customer service
and satisfaction, litigation or customer claims and regulatory sanctions. We
have experienced occasional systems failures and delays in the past and could
experience systems failures and delays in the future.
Our systems and operations also are vulnerable to damage or interruption
from human error, natural disasters, power loss, sabotage, computer viruses,
intentional acts of vandalism and similar events. Any system failure that causes
an interruption in service or decreases the responsiveness of service could
impair our reputation, damage our brand name and negatively impact our revenues.
We also rely on a number of third parties for systems support. Any interruption
in these third-party services or a deterioration in the performance of these
services could also be disruptive to our business and have a material adverse
effect on our business, financial condition and operating results.
RISKS RELATED TO REGULATION
AMENDMENTS TO THE COMMODITY EXCHANGE ACT OR AMENDMENTS TO CFTC REGULATIONS
MAY ADVERSELY AFFECT OUR ABILITY TO CONDUCT OUR BUSINESS.
We are regulated by the CFTC under the authority given by the federal
Commodity Exchange Act. The CFTC is a sunset agency. This means that it must be
periodically reauthorized by legislation. Congress is presently reviewing the
Commodity Exchange Act in the context of its regular reauthorization process. It
is possible that Congress could amend the Commodity Exchange Act or that the
CFTC could amend its regulations in a manner which will adversely affect our
ability to conduct our business by changing regulatory requirements or by
reducing regulatory requirements and thereby permitting additional competition
from existing or new markets or from dealers in derivative instruments.
WE MAY NOT BE ABLE TO MAINTAIN OUR SELF REGULATORY RESPONSIBILITIES.
It is uncertain whether the CFTC will change its regulatory scheme in
response to the demutualizations of exchanges. It is possible that the CFTC will
take the position that exchanges, organized as for-profit corporations, are not
as capable as membership organizations in maintaining adequate compliance and
surveillance programs. This position could lead to new CFTC regulations that
would require us to modify or restructure our regulatory functions. We believe
that our regulatory programs and capabilities contribute significantly to our
brand name and reputation. Although we believe that we will retain these
responsibilities, we cannot assure you that we will not be required to rely on a
third party to perform these responsibilities. If we are required to rely on a
third party to perform regulatory and oversight functions, we may incur
substantial expenses and suffer severe harm to our reputation if the regulatory
and oversight services are inadequate.
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<PAGE> 20
NYMEX SPECIAL MEETING
GENERAL
This proxy statement and prospectus is furnished in connection with the
solicitation of proxies from the members of record of NYMEX as of the close of
business on [date], 2000 by the board of directors of NYMEX for use at NYMEX's
special meeting of members. This proxy statement and prospectus and accompanying
form of proxy are first being mailed to the respective members of NYMEX on or
about [date], 2000.
TIME AND PLACE; PURPOSES
The NYMEX special meeting will be held at NYMEX's offices located at One
North End Avenue, World Financial Center, New York, New York 10282-1101, at
[time], local time, on [date], 2000. At the NYMEX special meeting, the members
of NYMEX will be asked to approve a two-step merger that will effect the
demutualization of NYMEX. In particular, the members of NYMEX will be asked:
1. To consider and approve the merger of NYMEX with and into NYMEX
Exchange and the related merger agreement (see page 7).
2. To consider and approve the merger of NYMEX Merger Sub, Inc., a
wholly-owned subsidiary of NYMEX Holdings, with and into NYMEX
Exchange and the related merger agreement (see page 7).
We will not transact any other business at the special meeting.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The NYMEX board has fixed the close of business on [date], 2000, as the
record date for the determination of NYMEX members entitled to notice of and to
vote at the NYMEX special meeting. On [record date], 2000, there were [612]
members entitled to notice of and to vote at the special meeting. NYMEX
directors are entitled to exercise [17] votes representing [2.6]% of the votes
entitled to be cast on the demutualization. The demutualization requires the
affirmative vote of 66 2/3% of the votes cast at the NYMEX special meeting, so
long as at least a quorum of members vote in favor of the demutualization. Under
the NYMEX bylaws, the presence, either in person or by proxy of 150 members
represents a quorum.
Owners of record of NYMEX memberships are entitled to one vote per member,
regardless of the number of memberships owned, at the NYMEX special meeting. No
member is entitled to vote on any matter while any dues, assessments, fees or
fines remain unpaid or during any period of suspension of membership. Members of
the COMEX Division of NYMEX and lessees of NYMEX memberships will not be
entitled to vote at the special meeting and no vote on their part is required
for the demutualization to be effected.
VOTING PROCEDURES
If a member attends the NYMEX special meeting, that member may vote by
ballot. However, since many members may be unable to attend the NYMEX special
meeting, those members can ensure that their votes are cast at the meeting by
signing and dating the enclosed ballot and proxy and returning it in the
envelope provided. When a ballot and proxy card is returned properly signed and
dated, the vote of the NYMEX member will be
16
<PAGE> 21
cast in accordance with the instructions on the ballot. If a member does not
return a signed proxy card, no vote will be cast on behalf of that member.
Members are urged to mark the box on the ballot to indicate how their vote
is to be cast. If a member returns a signed proxy card but does not return a
ballot or does not indicate on the ballot how they wish to vote, the vote
represented by the proxy card will be cast "FOR" the proposals.
Any NYMEX member who executes and returns a proxy card may revoke the proxy
at any time before it is voted by:
- notifying in writing M. Dawn Lowe of NYMEX at One North End Avenue, World
Financial Center, New York, New York 10282-1101;
- granting a subsequent proxy; or
- appearing in person and voting at the NYMEX special meeting.
Attendance at the NYMEX special meeting will not in and of itself
constitute revocation of a proxy.
SOLICITATION OF PROXIES
NYMEX will bear the costs of solicitation of proxies, including the cost of
preparing, printing and mailing this proxy statement and prospectus. In addition
to the solicitation of proxies by use of the mails, proxies may be solicited
from NYMEX members by directors, officers and employees of NYMEX in person or by
telephone, facsimile or other appropriate means of communication. No additional
compensation, except for reimbursement of reasonable out-of-pocket expenses,
will be paid to these directors, officers and employees of NYMEX in connection
with the solicitation. Any questions or requests for assistance regarding this
proxy statement and prospectus and related proxy materials may be directed to:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attention: M. Dawn Lowe
Telephone: 212-299-2370
Fax: 212-301-4612
OTHER MATTERS
Pursuant to the current bylaws of NYMEX, no other business or matter other
than the demutualization transactions indicated above may be properly presented
at the NYMEX special meeting. Copies of NYMEX's bylaws are available to members
free of charge upon request to NYMEX.
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<PAGE> 22
THE DEMUTUALIZATION
The following is a brief summary of the terms of the demutualization,
including the significant provisions of the merger agreements for the two-step
merger. Copies of the merger agreements are attached as Annexes A and B and are
incorporated by reference into this proxy statement and prospectus. WE ENCOURAGE
YOU TO READ THE MERGER AGREEMENTS CAREFULLY AND IN THEIR ENTIRETY.
GENERAL
There are two merger agreements that together will effectuate the
demutualization of NYMEX. Pursuant to the first merger agreement, NYMEX, which
is currently organized as a New York not-for-profit corporation, will merge into
a newly formed Delaware non-stock corporation. Pursuant to the second merger
agreement, a wholly owned subsidiary of a newly formed Delaware corporation will
merge with and into the surviving entity of the first merger in order to create
a holding company structure.
Each of NYMEX Holdings, its subsidiary and NYMEX Exchange was formed solely
for the purpose of effecting the demutualization. None of them has any present
assets, any business operations, or cash flows other than the activities
associated with preparing for the demutualization.
Both merger agreements are governed by Delaware law except to the extent
that the merger agreement for the first merger is required to be governed by New
York law.
EXCHANGE OF MEMBERSHIPS
As a result of the mergers, each membership in NYMEX will be converted
automatically into one Class A membership in NYMEX Exchange and one share of
common stock of NYMEX Holdings. No exchange or transfer of any certificates
representing memberships will be necessary to effectuate the conversion.
EFFECTIVENESS OF THE MERGERS
The merger between NYMEX and NYMEX Exchange will take effect upon the
acceptance for filing of a certificate of merger by the Secretary of State of
Delaware and the Department of State of the State of New York. The merger
between NYMEX Exchange and the subsidiary of NYMEX Holdings will take effect
immediately following the first merger upon the acceptance of a certificate of
merger with the Secretary of State of the State of Delaware. The board
anticipates that the mergers will take effect shortly after the approval of the
demutualization by the members of NYMEX, assuming the conditions to the mergers
described below have been satisfied.
CONDITIONS TO THE MERGERS
The mergers will not be consummated unless approved by the requisite vote
of NYMEX members. In addition, NYMEX Exchange must receive appropriate "contract
market" designations from the Commodity Futures Trading Commission and either a
favorable ruling from the Internal Revenue Service, or in the absence of a
ruling from the IRS, an opinion of Clifford Chance Rogers & Wells LLP, regarding
certain federal income tax aspects of the demutualization. See "Federal Income
Tax Consequences of the Demutualization" on page 85.
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<PAGE> 23
TERMINATION
The merger agreements may each be terminated at any time prior to the
effectiveness of the mergers by the board of directors of NYMEX, whether before
or after approval by the members of NYMEX. The board may terminate the merger
agreements if the conditions to the demutualization are not satisfied or it
determines, for any reason, that the demutualization would not be in the best
interests of NYMEX or its members.
RECOMMENDATION OF THE BOARD
NYMEX's board of directors has unanimously approved the plan of
demutualization. The board believes that it is in the best interests of NYMEX,
its members to effectuate the transactions described in this proxy statement and
prospectus. Accordingly, the board recommends that members vote "FOR" adoption
of the two-step merger and merger agreements. If the demutualization is not
consummated for any reason, the board presently intends to continue to operate
NYMEX in its current form.
TAX TREATMENT
We have structured the demutualization with the intention that neither
NYMEX nor its members will recognize any gain or loss for federal income tax
purposes. Because of the novelty of the demutualization, NYMEX has asked the
Internal Revenue Service to issue a ruling on key aspects of the
demutualization. Please see "Federal Income Tax Consequences of the
Demutualization" on page 85 for a discussion of important tax matters.
ACCOUNTING TREATMENT
We expect the demutualization will be treated in a manner similar to a
"pooling of interests" transaction under generally accepted accounting
principles. This means that, for accounting and financial reporting purposes, no
gain or loss will be recognized at the time of the demutualization and the book
value of the assets and liabilities of NYMEX at the time of the demutualization
will carry over to NYMEX Exchange. After the demutualization, all the assets and
liabilities of NYMEX Exchange will be consolidated into the parent company,
NYMEX Holdings.
REGULATORY APPROVALS
Federal commodities law requires that each commodity futures and option
exchange obtains approval from the CFTC for each of its commodity markets. This
process is known as contract market designation. The NYMEX Division is
designated as a contract market for each of the 27 futures and options contracts
it currently lists for trading. These contracts are listed on the chart on page
36. In addition, the NYMEX Division has been designated as a contract market for
Central Appalachian coal futures, Middle East sour crude oil futures and
Mid-Columbia electricity futures. The NYMEX Division also has been designated as
a contract market for eight futures contracts that are currently delisted and
would require CFTC approval to relist. It will be necessary for either NYMEX to
obtain approval before the demutualization from the CFTC to transfer those
designations to NYMEX Exchange or NYMEX Exchange to obtain new designations for
each of the futures and options contracts noted above.
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ABSENCE OF APPRAISAL OR DISSENTERS' RIGHTS
Members who object to the demutualization will have no appraisal or
dissenters' rights under applicable law. Appraisal or dissenters' rights would,
if applicable, constitute the right to receive, instead of Class A membership
interests in NYMEX Exchange and shares of common stock of NYMEX Holdings, an
amount in cash that a court decides is the fair value of their membership in
NYMEX.
FEDERAL SECURITIES LAW CONSEQUENCES
Under United States federal securities laws, common stock of NYMEX Holdings
received in the demutualization by persons who are not "affiliates" under the
Securities Act may be resold immediately, except that these sales must be
accompanied by sales of Class A memberships of NYMEX Exchange for so long as the
common stock and Class A memberships are stapled. Common stock, and, therefore,
Class A memberships, received in the demutualization by "affiliates" of NYMEX
Holdings may be resold only pursuant to further registration under the
Securities Act or in transactions that are exempt from registration under the
Securities Act. These restrictions are expected to apply to the directors of
NYMEX.
This document cannot be used in connection with resales of common stock
received in the demutualization by any person who may be deemed to be an
affiliate of NYMEX under the Securities Act.
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WHERE YOU CAN FIND MORE INFORMATION
NYMEX Holdings has filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act of 1933 with respect
to the shares of common stock of NYMEX Holdings being offered in the
demutualization. This proxy statement and prospectus, which constitutes a part
of the registration statement, does not contain all the information set forth in
the registration statement. Some items of information are contained in exhibits
to the registration statement, as permitted by the rules and regulations of the
SEC. Statements made in this proxy statement and prospectus as to the content of
any contract, agreement or other document filed or incorporated by reference as
an exhibit to the registration statement are not necessarily complete. With
respect to such statements, you should refer to the corresponding exhibit for a
more complete description of the matter involved and read all statements in this
proxy statement and prospectus in light of that exhibit.
Following consummation of the demutualization, NYMEX Holdings will be
required to file reports and other information with the SEC. We intend to
furnish holders of the common stock of NYMEX Holdings with annual reports
containing audited financial statements with a report thereon by NYMEX Holdings'
independent certified public accountants.
You may read and copy any materials NYMEX Holdings files with the SEC at
the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.,
World Trade Center New York, New York and 1634 Chicago, Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. NYMEX Holdings filings are also available to the public at the
SEC's web site at http://www.sec.gov.
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NYMEX
The following discussion of the business of NYMEX describes the business
that will be conducted by NYMEX Holdings through NYMEX Exchange after the
demutualization.
OVERVIEW
NYMEX is the largest commodity exchange for trading energy futures and
options contracts, including contracts for crude oil, heating oil, unleaded
gasoline, propane, natural gas and electricity, based upon data reported by the
Futures Industry Association. NYMEX is also the second largest commodity
exchange for trading platinum group metals contracts, including futures
contracts for platinum and palladium and options contracts for platinum. Through
NYMEX's subsidiary, Commodity Exchange, Inc., also known as COMEX, NYMEX is the
largest commodity exchange for trading precious metals futures and options
contracts, including contracts for gold and silver, based upon data reported by
the Futures Industry Association. COMEX also provides for trading of copper and
aluminum futures and options contracts, FTSE Eurotop 100(R) stock index futures
and options and FTSE Eurotop 300(R) stock index futures. The FTSE Eurotop
contracts are based on an index designed to measure the collective performance
of a sector of the European equities market.
According to information provided by the Futures Industry Association,
based on 1999 trading volume of approximately 109.5 million contracts, NYMEX is
the largest physical commodity based futures exchange in the world and the third
largest futures exchange in the United States. Physical commodity based futures
exchanges are exchanges that primarily trade futures contracts based upon a
physical commodity such as crude oil or gold. Futures exchanges include physical
commodity based futures exchanges as well as exchanges that primarily trade
futures contracts based upon financial instruments. The two U.S. futures
exchanges with greater volume, the Chicago Board of Trade and the Chicago
Mercantile Exchange, trade primarily futures contracts based upon financial
instruments such as stock indices or fixed income products. Similarly, on a
worldwide level, those futures exchanges which had greater trading volume in
1999, including the Chicago Board of Trade and the Chicago Mercantile Exchange,
traded primarily equity based and fixed income based financial instruments.
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The chart below indicates NYMEX's annual trading volume of futures and
options contracts for each of the five years in the period ended December 31,
1999:
ANNUAL TRADING VOLUMES
[Graphic: Bar graph showing NYMEX's annual trading volume of futures and options
contracts from 1995 to 1999 for each of five categories listed from top to
bottom in a legend to the right of the bar chart including: Light Sweet Crude
Oil, Henry Hub Natural Gas, Gold, Heating Oil, and All Other. Below the
horizontal axis, each year for which trading volume is measured is written in
chronological order from left to right. The categories from top to bottom are
reflected in the bar chart as five bars above each year from left to right. The
vertical axis indicates the number of contracts traded, in thousands, beginning
with zero and increasing, in intervals of ten thousand, to fifty thousand. Each
of the five bars for each category is shaded differently as follows: dots for
Light Sweet Crude Oil, diagonal lines from bottom left to top right for Henry
Hub Natural Gas, white for Gold, diagonal lines from bottom right to top left
for Heating Oil and black for all other. Light Sweet Crude Oil contracts were
traded at a rate of 27,590 in 1995, 28,759 in 1996, 30,562 in 1997, 37,944 in
1998 and 46,022 in 1999. Henry Hub Natural Gas contracts were traded at a rate
of 9,008 in 1995, 10,049 in 1996, 14,003 in 1997, 19,094 in 1998 and 23,015 in
1999. Gold contracts were traded at a rate of 9,788 in 1995, 10,982 in 1996,
11,607 in 1997, 10,935 in 1998 and 12,392 in 1999. Heating Oil contracts were
traded at a rate of 8,970 in 1995, 9,451 in 1996, 9,518 in 1997, 9,533 in 1998
and 9,896 in 1999. All Other contracts were traded at a rate of 18,116 in 1995,
16,559 in 1996, 18,162 in 1997, 17,512 in 1998 and 18,214 in 1999.]
The aggregate trading volume on NYMEX has increased from 73.5 million
futures and options contracts in 1995 to 109.5 million futures and options
contracts in 1999. NYMEX believes that this growth has resulted principally from
increased demand for NYMEX's energy contracts.
NYMEX completed preparations in 1999 for the introduction of additional
contracts, including Middle East sour crude oil futures and options, coal
futures and options, calendar spread and average price options and an additional
electricity contract.
At March 31, 2000, NYMEX had approximately 605 employees, most of whom were
based in New York City. NYMEX also has representatives at offices maintained in
Houston, Texas, Washington, D.C. and London, England. None of NYMEX's employees
are represented by labor unions.
PURPOSE
NYMEX exists principally to provide facilities for buying and selling
commodities for future delivery under rules intended to protect the interests of
all market participants. NYMEX itself does not own any commodities, trade
futures and options contracts for its own account or otherwise engage in market
activities. NYMEX provides the physical facilities necessary to conduct an
open-outcry auction market and electronic trading systems and systems for the
matching and clearing of all trades executed on NYMEX. Futures and options
markets, such as NYMEX, facilitate price discovery and provide financial risk
management instruments to a broad array of commercial entities that produce,
consume, trade or have other interests in, underlying commodities.
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Customers of our markets primarily include commercial producers, refiners
or processors, marketers and users of energy products including industrial
consumers. These market users use NYMEX for both hedging and speculative
purposes. Hedging allows users with an interest in physical inventories to
reduce exposure to risks inherent in price fluctuations. Speculators realize
profit or loss based upon price fluctuations of the underlying commodity. NYMEX
believes that market participants choose to trade on centralized markets such as
NYMEX because of the liquidity those markets help to provide and because those
markets perform an important price discovery function by publishing the prices
at which each trade occurs. The liquidity that NYMEX and other centralized
markets offer is achieved because the traded contracts have standardized terms
and the exchanges' clearinghouses help minimize counterparty performance risk.
For these reasons, in general the more liquidity a commodities market
offers, the more attractive it is to market users. Conversely, if liquidity
declines, a market becomes less attractive. Market participants generally view
liquidity as having two elements--trading volume and open interest. A key factor
in the decision by NYMEX's board to recommend demutualization is the board's
belief that NYMEX must ensure that it is able to respond promptly and
effectively to competitive and technological developments. These changes in the
exchange environment could reduce NYMEX's ability to offer trading volume and
open interest and therefore its ability to offer liquidity to market
participants. NYMEX believes that demutualization will position it to enter into
transactions that could enhance its ability to offer liquidity.
HISTORY
NYMEX was established in 1872 as the Butter and Cheese Exchange of New York
to provide an organized forum for the trading of dairy products. Its name was
subsequently changed to the Butter, Cheese and Egg Exchange of The City of New
York. In connection with NYMEX's efforts to attract traders of groceries, dried
fruits, canned goods and poultry, the name was changed to New York Mercantile
Exchange in 1882.
COMEX was founded in 1933 from the combination of four futures markets. It
initially traded six commodities: copper, hides, rubber, silk, silver and tin.
In August 1994, NYMEX acquired COMEX which is currently a wholly owned
subsidiary of NYMEX.
STRATEGY
The commodities and securities markets are being affected by the emergence
of electronic communications networks, or ECNs, and other technological advances
such as the Internet. A major reason for the demutualization is to ensure that
NYMEX is presently positioned to address both the risks and the opportunities
that are presented by these technology-driven developments. In response to
changing market conditions, among other things, NYMEX is considering
- the pursuit of joint venture and other relationships with operators of
ECNs;
- pursuing global expansion opportunities;
- seeking to leverage its proven capabilities as a central liquid and
transparent market;
- providing clearing and settlement services by offering those services to
third parties; and
- continuing to invest in technology.
Particularly in light of the rapid pace of change in this area, it is not
possible to predict whether or to what extent these initiatives will be
successful.
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ENERGY CONTRACTS
As the largest exchange for trading energy futures and options, NYMEX
actively participates in the development and integration of the energy markets.
NYMEX understands that the ultimate success of its contracts lies in their
relevance and utility to the underlying markets. For this reason, NYMEX
provides, and actively develops and seeks expansion opportunities for a
wide-range of energy products. NYMEX has designed energy futures and options
contracts on a product-by-product basis as related sectors of the energy
industry have been deregulated. NYMEX offers "one-stop shopping" for the energy
industry by providing a wide variety of energy related products in one central
marketplace. For example, with price deregulation of the petroleum markets in
the late 1970's and early 1980s, NYMEX introduced heating oil futures contracts
in 1978, crude oil futures contracts in 1983, gasoline futures contracts in
1984, natural gas futures contracts in 1990. In each case, NYMEX participated in
opportunities created by the deregulation of relevant industries and the
physical market's need for risk management. More recently, in order to
participate in the opportunities created by the general deregulation of the
electric utility industry, NYMEX introduced electricity futures and options
contracts in the spring of 1996, added two additional sets of electricity
futures and options contracts in 1998 and one new futures contract in 1999.
METALS CONTRACTS
NYMEX is pursuing a similar strategy with respect to its metals futures and
options business, attempting to build on its status as the largest precious
metals futures exchange, by offering one-stop shopping for the metals industry.
NYMEX augmented its metals complex by adding aluminum futures and options
contracts in 1999. At the same time, NYMEX is seeking to expand its product
offerings beyond energy and metals products to other areas, thereby providing
NYMEX with what it believes to be a natural hedge that results from
diversification. NYMEX currently lists two Pan-European equity index futures
contracts, the FTSE Eurotop 100(R) and FTSE Eurotop 300(R).
INTERNATIONAL STRATEGY
In connection with each of these strategies, NYMEX is also attempting to
internationalize its customer base, in large part by undertaking a large-scale
marketing effort to introduce risk management analysis and techniques to
potential customers abroad. Toward achieving that end, NYMEX has placed
terminals for trading NYMEX ACCESS(R), NYMEX's electronic trading system, in the
United Kingdom and in Australia, through a linkage with the Sydney Futures
Exchange. In addition, NYMEX is in the process of negotiating the renewal of its
terminals for trading in Hong Kong, through a linkage with the Hong Kong Futures
Exchange, now known as the Hong Kong Exchanges and Clearing Limited. In
addition, NYMEX concluded an agreement in 1999 with the Singapore International
Monetary Exchange, now known as the Singapore Exchange Derivatives Trading
Limited, to install NYMEX ACCESS(R) terminals on the desks of experienced
traders in that country. Similar talks are underway in Japan. The design and
introduction of products aimed specifically at global markets make up a key
component of NYMEX's international strategy. While a number of NYMEX contracts
such as gold and crude oil have long had a global following, the forthcoming
Middle East sour crude oil futures and options contracts will mark the first
product designed primarily for a regional overseas market and to trade
exclusively on NYMEX ACCESS(R). A second new regional contract is now under
review for copper futures based on Asian market needs and
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<PAGE> 30
practices. The new central Appalachian coal contract is also expected to draw
strong interest from the growing international coal market.
TECHNOLOGY
Finally, NYMEX attempts to provide innovative, state-of-the-art trading
systems and facilities to enable its members to efficiently serve their
customers. To support its expanding international business and product base
NYMEX has also made sizable investments to upgrade the operational efficiency
and functionality of both its clearing systems and global electronic trading
platform. Trading on NYMEX ACCESS(R), which was initiated in 1993, climbed to
record volumes during 1999--approximately 2.4 million contracts accounting for
approximately 2% of NYMEX's total trading volume in 1999. Volume traded on NYMEX
ACCESS(R) has grown at an average annual rate of approximately 31% during the
period since its inception in 1993 through December 31, 1999. A new upgraded
version of NYMEX ACCESS(R) was launched in November 1999. The new system retains
the response time of its predecessor while expanding capacity, using a standard
Windows NT interface and is less costly to operate and easier to maintain than
the previous system. The new system offers brokers and their customers a wider
range of accounting and data tracking functions. Most importantly, NYMEX
ACCESS(R) now allows for daytime trading as well as the potential to trade
financial and other commodity products, pursuant to joint ventures, in the North
American time zone. Toward this end, in March 2000, NYMEX launched its
electricity contracts for trading exclusively on NYMEX ACCESS(R) throughout the
daytime and night sessions. Upgrading and modernizing daytime trade matching and
review and correction of clearing operations has also been the focus of a
sustained effort by NYMEX. The installation of the final subsystems of Clearing
21(R), a highly flexible, state of the art, clearing system developed jointly
with the Chicago Mercantile Exchange to process trades well into the next
century, was also rolled out in 1999 and is expected to be implemented for COMEX
in 2000.
The Clearing 21(R) system was designed to replace NYMEX's trade management
systems, data input systems and clearing systems. These applications are
expected to support any anticipated growth in volume or business expansion for
the next five to ten years. The Clearing 21(R) system clears trades originating
from two sources: the trade management system on the trading floor and NYMEX
ACCESS(R) electronic trading. The system consists of the following six modules:
- Banking -- This module has the ability to handle multi-exchange
requirements as well as process bank transactions, including payments and
receipts, and adjustments.
- Settlement -- Settlement processes and calculates the amounts applied to
margin requirements and determines the payment or amount to be received
on a transaction.
- Asset Management -- Asset management processes and calculates the asset
inventories maintained by a member as well as values them based on
settlement value.
- Deliveries -- This module handles delivery instructions as well as tracks
confirmations of trades.
- Position Management -- Position management aggregates trades to the
clearing member level.
- Performance Bond -- This module calculates margin based on both delivery
and open positions.
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NYMEX is also currently engaging in a number of projects designed to
improve the operational efficiency of the open-outcry method of trading and to
enable NYMEX to compete effectively in an increasingly electronic and
Internet-based trading environment. The underlying principle is to apply as many
technological innovations to the open-outcry method of trading as possible so
that the open-outcry method can compete openly and efficiently with electronic
methods. These technological innovations include electronic order routing and
trade submission. NYMEX is in the process of evaluating a number of feasibility
studies as to the implementation of these innovations as well as wireless voice
and data transmission.
NYMEX'S COMPETITIVE ENVIRONMENT
The marketplace for NYMEX's contracts exists both in the physical format of
open-outcry trading conducted in product-oriented trading rings, which takes
place on the floor of NYMEX, and electronically through the screen-based system
NYMEX ACCESS(R). Other exchanges designated as "contract markets" by the CFTC
and foreign exchanges permitted by the CFTC to do business in this country can
compete with NYMEX in offering market trading of futures and options contracts
in both of these formats. In addition, over-the-counter, or OTC, trading of
physical commodity instruments, such as swaps, forward contracts and NYMEX "look
alike" contracts, in which parties directly negotiate the terms of their
contracts, represents a major source of competition for NYMEX. The International
Petroleum Exchange, known as IPE, based in London, is the only other major
international exchange for the trading of energy products. Major products traded
on the IPE include Brent crude oil, the benchmark crude oil used in Europe and
Asia, and gasoil.
Many market participants believe that the unprecedented growth of
electronic trading systems and Internet-based technologies represents a major
threat to the continued viability of open-outcry trading as practiced at
commodities exchanges such as NYMEX.
NYMEX encounters competition in all aspects of its business and competes
directly with other exchanges, both domestic and foreign, and OTC entities. Some
of those competitors have substantially greater capital and resources and offer
a wider range of products and services than does NYMEX. NYMEX believes that the
principal factors affecting competition with it involve the integrity of the
marketplace provided by NYMEX, the relative prices of services and products it
offers, its substantial liquidity base, its worldwide brand recognition and the
quality of its clearing and execution services.
NYMEX, like other commodities and financial exchanges, is directly affected
by a variety of factors. These factors include broad trends in legislation and
regulations affecting NYMEX products directly, technological innovations,
national and international financial and business conditions including currency
values, the level and volatility of interest rates, fluctuation in the volume
and price levels in the commodities markets, the perception of stability in the
commodities and financial markets and taxes. These and other factors can affect
NYMEX's volume of trading and the stability and liquidity of the commodities
markets. A reduced volume of commodities transactions and reduced market
liquidity would result in lower revenues from transaction and clearing fees. In
periods of reduced transactions, profitability may be adversely affected because
some expenses are relatively fixed.
The futures and options industry is global in nature. It is comprised of
approximately 70 exchanges located in 31 countries. The global futures and
options industry is part of a broader global derivatives industry that consists
principally of OTC products such as swaps,
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<PAGE> 32
forward rate agreements and customized options. Generally speaking, those
products are not traded on futures and options exchanges but on off-exchange
markets between and among dealers and their customers, which are typically bulk
or large institutions and corporations.
NYMEX is one of six principal futures exchanges in the United States and
the sixth largest futures exchange in the world. Shown below is a list of the
largest futures exchanges in the world, their country of location, 1999 total
contract volumes and three most active products traded on each of them as
reported by the Futures Industry Association.
<TABLE>
<CAPTION>
1999 TOTAL
CONTRACT
VOLUMES MOST ACTIVE PRODUCTS
---------- --------------------
<S> <C> <C>
EUREX, Germany and Switzerland......... 378,760,300 Euro-BUND futures, Euro-BOBL
futures, DAX options
Chicago Board of Trade, U.S............ 254,561,215 U.S. T-Bond futures, U.S. T-Bond
options, Ten Year T-Note future
Chicago Mercantile Exchange, U.S....... 200,737,123 3 Month Eurodollar futures, S&P 500
Index futures, 3 Month Eurodollar
options
MONEP, France.......................... 177,329,802 CAC 40 Index (Long Term) options,
all options on individual equities,
CAC 40 10 Euro futures
London International Financial Futures
Exchange, U.K........................ 120,040,031 3 Month Euribor futures, 3 Month
Sterling futures, FTSE 100(R) Index
futures
New York Mercantile Exchange, U.S...... 109,538,831 Crude Oil futures, Natural Gas
futures, Gold futures
London Metal Exchange, U.K............. 61,597,557 High Grade Primary Aluminum futures,
Copper-Grade A futures, Special High
Grade Zinc futures
B, M & F, Brazil....................... 55,931,098 Interest Rate futures, U.S. Dollar
futures, Interest Rate swap futures
OM Stockholm, Sweden................... 53,622,623 All options on individual equities,
OMX(Index) futures, Interest Rate
futures
Amsterdam Exchanges, Netherlands....... 49,431,139 All options on individual equities,
AEX Stock Index options, AEX Stock
Index (FTI) futures
</TABLE>
Historically, the futures industry has been characterized by significant
specialization. Exchanges generally develop niches in product categories that,
for the most part, have not substantially competed with futures and options
contracts traded on other exchanges, despite the lack of significant regulatory
obstacles to doing so. The liquidity provided by trading in a particular
contract on an exchange, as described above, typically creates a competitive
advantage for that exchange as compared to other exchanges considering offering
rival contracts. With certain limited exceptions, most of the trading conducted
in a futures product occurs on a single futures exchange.
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There have been attempts to list NYMEX's most actively traded products on
other exchanges. For example, the Chicago Board of Trade trades electricity,
gold and silver contracts; the London Metal Exchange trades copper and aluminum;
and the Kansas City Board of Trade trades a natural gas futures contract having
terms similar to that of a NYMEX contract.
NYMEX has worked extensively to appeal to international markets users. In
June 1993, in an effort to directly attract more foreign participation and to
expand its international franchise, NYMEX expanded its trading hours through the
use of NYMEX ACCESS(R) to span time zones. Expanded trading hours have increased
liquidity, efficiency and greater access to markets worldwide. By accommodating
the business day hours in Hong Kong, Sydney, Singapore and the morning trading
hours in London. NYMEX now participates directly in the Far Eastern and European
markets.
NYMEX continues to evaluate all forms of competition as the world business
environment continues to change, with new products and instruments rapidly
emerging, including, for example, the OTC derivative products markets and their
perceived competition with the futures markets. NYMEX believes that OTC products
and exchange-traded futures and options contracts are complementary risk
management tools. Exchange products are standardized, liquid risk management
financial instruments, the terms of which are non-negotiable. Because of the
guarantees provided by the NYMEX clearing houses, counterparty credit risk is
diminished. See the heading "-- Clearing Operations" below for a further
description of the NYMEX clearing houses. The OTC market is a
principal-to-principal market where the participants bear counterparty risk. OTC
derivative products may not be fully offset by an opposite OTC transaction and
thus net counterparty risk may exist. OTC derivatives products are customized
financial instruments where all terms are subject to negotiation and may not
provide the liquidity of NYMEX products. However, OTC products may be more
desirable than NYMEX products where participants may require the flexibility to
deviate from the standardized terms of NYMEX products. Because of their
standardized and liquid features, NYMEX products are often used to hedge the
price risk associated with OTC exposure.
As standardized and liquid risk management instruments, products of NYMEX
and other futures exchanges are desirable to market users because they can be
entered into or liquidated with relative ease with no counterparty risk. Buyers,
for example, can generally find offsetting sellers and sellers similarly can
generally find offsetting buyers.
Volume on foreign futures and options exchanges is growing as the benefits
of risk management through futures and options trading become more appreciated
throughout the world and risk management techniques are adopted to meet the
needs of local economies. This growing global awareness has not only aided the
growth of foreign exchanges but has, to a certain extent, also benefited NYMEX
as non-U.S. enterprises become NYMEX members and customers of other NYMEX
members.
Under present competitive conditions, NYMEX believes that increasingly
liquid foreign markets generally have not taken material volume away from NYMEX
since volumes on NYMEX continue to grow. NYMEX believes that at the present time
the most active and fastest growing futures and options products listed on
foreign exchanges, including French, German, Japanese, and Brazilian bonds,
Euroyen, Euromark, U.K. Sterling and French PIBOR deposits and German and
Brazilian stock indices, have not competed with the most active and fastest
growing NYMEX products such as natural gas. This is primarily due to the fact
that the fastest growing foreign futures and options are based on financial
instruments and not on physical commodities. Nevertheless, foreign
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<PAGE> 34
futures and options exchanges may have taken and may continue to take some
volume away from NYMEX since foreign exchanges also list futures and options
based on physical commodities.
NYMEX believes that its clearing and compliance operations, including
reporting and record keeping requirements, provide greater security to market
participants than foreign exchanges and the OTC market. Accordingly, NYMEX
believes that regulation, together with NYMEX's internal controls and
surveillance, is a benefit to traders that conduct business on NYMEX as opposed
to in the OTC market.
REGULATORY OVERSIGHT
NYMEX's operations are subject to extensive regulation by the CFTC under
the Commodity Exchange Act. The Commodity Exchange Act generally requires that
futures trading in commodities be conducted on a commodity exchange designated
as a "contract market" by the CFTC. That act establishes non-financial criteria
for an exchange to be designated to list futures and options contracts.
Designation as a "contract market" for the trading of a specified futures
contract is non-exclusive; the CFTC may designate additional exchanges as
"contract markets" for trading the same or similar contracts. NYMEX has been
designated by the CFTC as a "contract market" under the Commodity Exchange Act
with respect to each of the futures and options traded on it. NYMEX is seeking
either approval to transfer its contract market designations to NYMEX Exchange
or approval for NYMEX Exchange to obtain new designations with respect to
NYMEX's futures and options contracts. This approval is a condition to the
demutualization.
NYMEX is a self-regulatory organization that is subject to the oversight of
the CFTC. In order to guard against default risk with respect to contracts
traded on NYMEX and COMEX, each of NYMEX and COMEX has instituted detailed risk
management policies and procedures. To manage the risk of financial
non-performance, each of NYMEX and COMEX:
- has established minimum capital requirements for clearing members;
- limits the number of net open contracts that can be held by any clearing
member, based upon that clearing member's capital;
- requires clearing members to post original margin collateral, in the form
of cash, U.S. treasury securities or letters of credit for all open
positions, and to collect initial margin from their customers;
- pays and collects variation margin on a marked-to-market basis at least
twice daily;
- requires clearing members to collect variation margin from their
customers;
- requires deposits to the applicable guaranty fund from NYMEX clearing
members or COMEX clearing members, as the case may be, which would be
available to cover financial non-performance; and
- has broad assessment authority to recoup financial losses.
Each of NYMEX and COMEX also has extensive surveillance and compliance
operations and procedures to monitor and enforce compliance with rules
pertaining to the trading, position sizes, delivery obligations and financial
condition of members.
30
<PAGE> 35
CLEARING OPERATIONS
NYMEX serves a clearinghouse function, standing as a financial intermediary
on every futures and option transaction cleared by NYMEX. Specifically, through
its clearinghouses, NYMEX guarantees performance of obligations owed to buyers
and sellers. As such, in the case of a customer or clearing member financial
default, to the extent that funds are not otherwise available to NYMEX to
satisfy the obligations under the applicable contract, NYMEX may be required to
perform the financial obligations. Furthermore, through its clearing and
compliance functions, NYMEX has the mechanisms in place to ensure financial
performance of and, if necessary, physical delivery of all contracts traded on
the exchange.
NYMEX contracts are currently cleared through NYMEX. COMEX contracts are
currently cleared through a wholly-owned subsidiary of COMEX, the COMEX Clearing
Association, Inc., known as CCA. NYMEX is in the process of consolidating its
clearing operations by assigning all of the assets and liabilities of CCA to
NYMEX. NYMEX and the CCA provide operational infrastructure to allow position
matching, reporting and margining for each of NYMEX's and COMEX's contracts.
This structure permits parties to trade with one another without individual
credit determinations or counterparty credit risk, allows for the daily flow of
marked-to-market variation margin payments and allows NYMEX to look to the
financial strength of its clearing members as NYMEX's only customers.
Clearing members must post with NYMEX or the CCA good-faith deposits on all
open positions, in the form of cash, U.S. treasury securities or letters of
credit. These deposits are often referred to as original margin. Upon purchase
or sale of a futures or option contract traded on NYMEX, the customer is
required to deposit initial margin with its clearing member. Customer initial
margin requirements must also be paid in the form of cash, U.S. treasury
securities or foreign currency. In the case of COMEX, the preceding forms of
margin as well as letters of credit, commodity warehouse receipts, certain stock
exchange and OTC traded securities, physical commodities or the net liquidation
value of the customer's account over the initial margin requirements for the
positions currently carried for such account may be used for payment. These
payments provide funds to offset losses they may experience in the market. NYMEX
also requires that clearing members collect 135% of clearing member margins from
non-member customers and 110% of clearing member margins from member customers
and has the power to impose limits on the number of positions any market
participant can hold. As long as any customer maintains its position, the
applicable clearing member and the customer is required to maintain minimum
margin funds for that position, as well as to deposit additional funds, known as
variation margin, to cover the market moves against the customer.
As a further safeguard to ensure proper settlement of contracts, each
clearing member is required to maintain a security deposit, in the form of cash
or U.S. treasury securities, ranging from $100,000 to $2.0 million, depending
upon the clearing member's capital, in a fund known as a guaranty fund for each
of NYMEX and CCA, as applicable. The NYMEX guaranty fund contained approximately
$84.0 million in cash and U.S. treasury securities as of December 31, 1999. The
CCA guaranty fund contained approximately $76.9 million in cash and U.S.
treasury securities as of December 31, 1999. Although the guaranty funds are
controlled by NYMEX or CCA, as applicable, and may be used to cover the
financial defaults of a clearing member, amounts on deposit in the guaranty
funds are not the property of NYMEX and are not available to pay debt service.
31
<PAGE> 36
On March 17, 1985, due to the non-receipt of customer margin payments due,
a clearing member defaulted on its financial obligation to COMEX. At no time
were funds from the CCA guaranty fund used to repay the shortfall caused by the
default. The CCA guaranty fund was merely used as collateral for the CCA to
secure a loan for satisfaction of CCA's margin obligation with respect to this
default. Neither NYMEX guaranty funds nor CCA guaranty funds have ever been
utilized to cover the financial defaults of a clearing member.
SOURCES OF REVENUE
NYMEX's operating revenues consist principally of clearing and transaction
fees earned in connection with trades effected on NYMEX and market data revenue,
which are revenues from fees earned from the sale of real-time price data.
The chart below indicates the percentage of total 1999 revenues represented
by each principal source of revenue.
1999 PERCENTAGE OF TOTAL REVENUE* BY SOURCE
[Graphic: Pie chart entitled "1999 Percentage of Total Revenue* by Source" and
representing the sources of revenue as a percentage of total revenue. The chart
is divided as follows: Clearing and Transaction Fees, Net of Rebates -- 70.90%,
Market Data Revenue -- 23.38%, Investment Income, Net -- 2.66% and Other, Net of
Rebates -- 3.06%.]
- -------------------------
* Total consolidated revenue of $148.4 million is derived from combining total
operating revenues and net investment income.
CLEARING AND TRANSACTION FEES
The largest source of exchange operating revenue is clearing and
transaction fees earned in connection with trades effected on the trading floor
and on NYMEX ACCESS(R). Members and non-members are required to pay clearing
fees based upon each contract side traded. On NYMEX, non-members are also
required to pay a transaction fee per side. On COMEX, the clearing fee for
non-members is equivalent to the clearing fee and transaction fee for
non-members on NYMEX. The fee schedule also differentiates between members'
day-trades, which are positions opened and closed during the same trading
32
<PAGE> 37
session, and trades held overnight. COMEX assesses a clearing surcharge for
lessee trading; on NYMEX, lessee trading is charged as member trading. NYMEX
ACCESS(R) trades are also assessed a surcharge. NYMEX charges additional fees
for deliveries, option notices, transfers and other services, which are not
significant in the aggregate.
In an effort to create additional privileges of membership and to stimulate
liquidity of NYMEX futures and options contracts, NYMEX has maintained the NYMEX
Division Member Fee Reduction Program, under which clearing fees of eligible
members who are owners of seats and member firms are reduced by $.24 per round
turn to $.06 for day trades and $.56 for trades held overnight, and clearing
fees of eligible lessees and individuals who hold seats beneficially owned by
member firms are reduced by $.05 per round turn to $.25 for day trades and $0.75
for overnight trades. The board of directors of NYMEX may renew the NYMEX Member
Fee Reduction Program when its current term expires in July 2000.
In addition to the Member Fee Reduction Program, NYMEX has instituted
several other similar programs to create incentives for members and further
stimulate liquidity. These programs include the Futures Commission Merchants
Rebate Program, the Floor Brokers Cost Reduction Program and the Local Owners
Fee Waiver Program on the NYMEX and COMEX Divisions and the Electricity Floor
Brokers Incentive Program on the NYMEX Division which in the year 2000 were
combined to form the Consolidated Cost Reduction Program. All of these programs
are subject to terms and qualifications specifically designed to further the
objective of that particular incentive program. Except for the Member Fee
Reduction Program, for which the only qualification is that of membership,
minimum standards were established for each program based on such factors as
volume, type and size of trades. The incentives vary with each type of program
and include the waiver of facility fees and payments if minimum levels of
trading are met.
Shown below is a table indicating the contracts traded and clearing and
transaction fees generated for the years ending December 31, 1999, 1998, 1997,
1996 and 1995 for each of NYMEX and COMEX.
VOLUME AND EXCHANGE FEES
<TABLE>
<CAPTION>
CLEARING AND
CONTRACT VOLUME TRANSACTION FEES(1)
------------------------------------- ----------------------------
YEAR NYMEX COMEX TOTAL NYMEX COMEX TOTAL
- ---- ---------- ---------- ----------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1999..................... 89,189,928 20,348,903 109,538,831 $79,867 $25,339 $105,206
1998..................... 76,482,995 18,535,690 95,018,685 67,595 23,169 90,764
1997..................... 63,970,916 19,880,430 83,851,346 55,882 24,891 80,773
1996..................... 56,495,974 19,303,318 75,799,292 52,056 24,770 76,826
1995..................... 54,650,403 18,821,937 73,472,340 56,195 24,682 80,877
</TABLE>
- -------------------------
(1) Commencing in 1996, these numbers are net of rebates of (in thousands)
$13,065, $11,272, $10,012 and $8,510 for the years ended December 31, 1999,
1998, 1997 and 1996, respectively.
The magnitude of operating revenues earned by NYMEX during any period
depends heavily on the volume of trading on NYMEX and the mix of non-member and
member business. Clearing and transaction fees represented approximately 73% of
NYMEX's consolidated operating revenues, of which approximately 76% were
attributable to the NYMEX Division's contracts, for the year ended December 31,
1999.
33
<PAGE> 38
MARKET DATA REVENUE
NYMEX sells real-time market data relating to prices of contracts traded on
NYMEX to third parties. The data is distributed to customers through information
vendors. In addition, fees from customers are collected by these vendors and
remitted to NYMEX. These information vendors include Reuters, Bridge and Dow
Jones, who distribute the data to subscribers that receive real-time data on
terminals at their business or personal locations. NYMEX and COMEX each charge a
monthly subscription fee of $55 per initial unit and $10 per additional unit at
each location. As of December 31, 1999, NYMEX had agreements with 59 vendors
representing approximately 16,400 first units and 58,700 additional units for
NYMEX and 14,200 first units and 53,400 second units for COMEX. Although no
single customer accounts for more than 5% of total market data revenue,
distribution of data and collection and remittance of fees is concentrated in
the top nine vendors who represent approximately 80% of market data revenues.
Market data revenue represented approximately 24%, 27% and 28% of NYMEX's
consolidated operating revenues for each of the years ended December 31, 1999,
1998 and 1997, respectively.
INVESTMENT INCOME
NYMEX invests primarily in various fixed income securities including U.S.
government and municipal securities. Investment income, net of investment
advisory fees, totaled approximately $3.9 million and $6.7 million for the years
ended December 31, 1999 and 1998, respectively.
OTHER
Other revenue totaled $4.5 and $5.0 million for the years ended December
31, 1999 and 1998, respectively. Other revenue consists of rental income,
membership application and transfer fees, fines levied by NYMEX from time to
time, booth licensing fees and clerk fees and other miscellaneous items. In an
effort to promote member profitability and to enhance the privileges of
ownership, some of these fees have been waived for owners of memberships.
The largest component of other revenue is rental income. Rental income
totaled $3.2 million or 70% of total other revenue for the year ended December
31, 1999. There can be no assurance that NYMEX Exchange will be able to continue
to lease available space on favorable terms.
TRADING VOLUME AND OPEN INTEREST
The following tables set forth information regarding the annual trading
volume of contracts on NYMEX and COMEX for each of the five years in the period
ended December 31, 1999 and open interest on NYMEX and COMEX at December 31 of
each of those years. Open interest denotes the number of contracts that have not
been liquidated as of the dates shown.
NYMEX
Contracts traded on NYMEX include futures and/or options contracts for
light sweet crude oil, heating oil, New York Harbor unleaded gasoline, Henry Hub
natural gas, propane, electricity and platinum group metals. Trading volume in
NYMEX's two most active contracts--light sweet crude oil futures and Henry Hub
natural gas futures--increased by 21% and 28%, respectively in 1999 and 1998
compared to the prior year. Over the period from January 1, 1995 to December 31,
1999, the trading of light
34
<PAGE> 39
sweet crude oil futures and options contracts accounted for approximately 50% of
NYMEX's trading volume and approximately 39% of NYMEX's consolidated trading
volume; clearing and transaction fees generated from the trading of such
contracts represented approximately 42%, 40% and 36% of NYMEX's consolidated
operating revenues for each of the years ended December 31, 1997, 1998 and 1999,
respectively. Set forth below is information regarding the annual volume of
contracts traded on NYMEX.
35
<PAGE> 40
NYMEX CONTRACTS TRADED
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Light Sweet Crude Oil....................... 23,613,994 3,975,611 23,487,821 5,271,456 24,771,375 5,790,333
Henry Hub Natural Gas....................... 8,086,718 921,520 8,813,867 1,234,691 11,923,628 2,079,607
Heating Oil................................. 8,266,783 703,388 8,341,877 1,108,935 8,370,964 1,147,034
New York Harbor Unleaded Gasoline........... 7,071,787 766,557 6,312,339 655,965 7,475,145 1,033,778
Platinum.................................... 846,693 43,601 802,468 36,175 698,597 31,139
Palladium................................... 166,713 N/A 205,610 N/A 238,716 N/A
California-Oregon Border Electricity........ N/A N/A 52,340 7,650 120,896 13,495
Palo Verde Electricity...................... N/A N/A 17,548 3,964 155,977 19,328
Heating Oil-Crude Oil Spread Options........ N/A 72,969 N/A 45,920 N/A 18,657
Gasoline-Crude Oil Spread Options........... N/A 64,285 N/A 31,743 N/A 41,867
Propane..................................... 49,532 N/A 53,903 N/A 40,255 N/A
Cinergy Electricity......................... N/A N/A N/A N/A N/A N/A
Entergy Electricity......................... N/A N/A N/A N/A N/A N/A
PJM Electricity............................. 0 N/A N/A N/A N/A N/A
Permian Basin Natural Gas................... N/A N/A 8,811 0 15 0
Alberta Natural Gas......................... 0 N/A 2,876 15 110 0
Sour Crude Oil.............................. 0 N/A 0 N/A 0 N/A
Gulf Coast Unleaded Gasoline................ 252 N/A 0 N/A 0 N/A
---------- ---------- ---------- ---------- ---------- ----------
Total............................... 48,102,472 6,547,931 48,099,460 8,396,514 53,795,678 10,175,238
========== ========== ========== ========== ========== ==========
<CAPTION>
1998 1999
----------------------- -----------------------
FUTURES OPTIONS FUTURES OPTIONS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Light Sweet Crude Oil....................... 30,495,647 7,448,095 37,860,064 8,161,976
Henry Hub Natural Gas....................... 15,978,286 3,115,765 19,165,096 3,849,454
Heating Oil................................. 8,863,764 669,725 9,200,703 695,558
New York Harbor Unleaded Gasoline........... 7,992,269 730,421 8,701,216 600,009
Platinum.................................... 528,269 14,183 567,268 11,146
Palladium................................... 131,250 N/A 75,394 N/A
California-Oregon Border Electricity........ 128,423 19,989 52,032 3,761
Palo Verde Electricity...................... 139,738 28,597 51,852 4,419
Heating Oil-Crude Oil Spread Options........ N/A 36,615 N/A 46,482
Gasoline-Crude Oil Spread Options........... N/A 22,575 N/A 46,281
Propane..................................... 43,868 N/A 37,544 N/A
Cinergy Electricity......................... 48,483 2,597 34,367 1,419
Entergy Electricity......................... 42,580 1,855 20,528 105
PJM Electricity............................. N/A N/A 3,254 N/A
Permian Basin Natural Gas................... 0 0 0 N/A
Alberta Natural Gas......................... 0 0 0 N/A
Sour Crude Oil.............................. 1 N/A 0 N/A
Gulf Coast Unleaded Gasoline................ 0 N/A 0 N/A
---------- ---------- ---------- ----------
Total............................... 64,392,578 12,090,417 75,769,318 13,420,610
========== ========== ========== ==========
</TABLE>
- -------------------------
"N/A" means contract was either not in existence at the time or was declared
dormant and therefore not available for trading.
"0" means contract was available for trading but no trades were executed.
36
<PAGE> 41
Set forth below is information with respect to open interest on contracts
traded on NYMEX.
NYMEX OPEN INTEREST
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998
------------------- ------------------- ----------------- -------------------
FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS
------- --------- --------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Light Sweet Crude Oil.............. 353,354 297,642 364,170 439,536 413,045 363,639 483,327 420,962
Henry Hub Natural Gas.............. 162,783 134,748 143,846 120,431 186,815 221,849 222,576 242,379
Heating Oil........................ 128,834 72,578 95,408 104,877 152,476 86,415 176,361 66,632
New York Harbor Unleaded
Gasoline......................... 61,632 23,116 59,806 32,886 100,742 25,965 100,465 26,859
Platinum........................... 23,690 2,345 25,990 3,276 10,983 1,141 11,543 413
Palladium.......................... 6,196 0 7,995 N/A 3,565 N/A 2,861 N/A
California-Oregon Border
Electricity...................... N/A N/A 3,196 1,743 5,336 2,904 2,401 268
Palo Verde Electricity............. N/A N/A 1,218 899 4,515 2,191 1,537 10
Heating Oil-Crude Oil Spread
Options.......................... N/A 9,271 N/A 2,655 N/A 1,998 N/A 4,845
Gasoline-Crude Oil Spread
Options.......................... N/A 640 N/A 1,645 N/A 2,521 N/A 977
Propane............................ 2,447 0 3,222 N/A 2,019 N/A 4,068 N/A
Cinergy Electricity................ N/A N/A N/A N/A N/A N/A 2,087 1,490
Entergy Electricity................ N/A N/A N/A N/A N/A N/A 2,653 50
PJM Electricity.................... N/A N/A N/A N/A N/A N/A N/A N/A
Permian Basin Natural Gas.......... N/A N/A 50 0 0 0 0 0
Alberta Natural Gas................ N/A N/A 162 0 0 0 0 0
Sour Crude Oil..................... 0 N/A 0 N/A 0 N/A 0 N/A
Gulf Coast Unleaded Gasoline....... 0 N/A 0 N/A 0 N/A 0 N/A
------- --------- --------- ------- ------- ------- --------- -------
Total...................... 738,936 540,340 705,063 707,948 879,496 708,623 1,009,879 764,885
======= ========= ========= ======= ======= ======= ========= =======
<CAPTION>
DECEMBER 31, 1999
-------------------
FUTURES OPTIONS
------- ---------
<S> <C> <C>
Light Sweet Crude Oil.............. 501,819 557,221
Henry Hub Natural Gas.............. 246,629 369,520
Heating Oil........................ 135,259 58,593
New York Harbor Unleaded
Gasoline......................... 89,804 45,854
Platinum........................... 11,953 326
Palladium.......................... 2,869 N/A
California-Oregon Border
Electricity...................... 1,974 1
Palo Verde Electricity............. 1,769 0
Heating Oil-Crude Oil Spread
Options.......................... N/A 5,235
Gasoline-Crude Oil Spread
Options.......................... N/A 1,411
Propane............................ 2,408 N/A
Cinergy Electricity................ 193 0
Entergy Electricity................ 25 0
PJM Electricity.................... 372 N/A
Permian Basin Natural Gas.......... 0 N/A
Alberta Natural Gas................ 0 N/A
Sour Crude Oil..................... 0 N/A
Gulf Coast Unleaded Gasoline....... 0 N/A
------- ---------
Total...................... 995,074 1,038,161
======= =========
</TABLE>
- -------------------------
"N/A" means contract was either not in existence at the time or was declared
dormant and therefore not available for trading.
"0" means contract was available for trading but no trades were executed.
37
<PAGE> 42
COMEX
Contracts traded on COMEX include futures and options contracts for
aluminum, gold, silver, high grade copper the FTSE Eurotop 100(R) Index and
futures contracts for the FTSE Eurotop 300(R) Index. Set forth below is
information regarding the annual volume of contracts traded on COMEX.
COMEX CONTRACTS TRADED
<TABLE>
<CAPTION>
1995 1996 1997 1998
---------------------- ---------------------- ---------------------- ----------
FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS FUTURES
---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gold............................... 7,781,596 2,006,695 8,902,179 2,079,663 9,541,904 2,064,883 8,990,094
Silver............................. 5,183,236 1,146,513 4,870,808 949,239 4,893,520 842,923 4,094,616
High Grade Copper.................. 2,519,414 134,212 2,311,919 150,339 2,356,170 133,603 2,483,610
Aluminum........................... N/A N/A N/A N/A N/A N/A N/A
FTSE Eurotop 100(R) Index.......... 49,328 0 38,925 0 47,427 0 50,619
FTSE Eurotop 300(R) Index.......... N/A N/A N/A N/A N/A N/A N/A
5 Day Gold Option.................. N/A 688 N/A 150 N/A N/A N/A
5 Day Silver Option................ N/A 221 N/A 96 N/A N/A N/A
5 Day High Grade Copper Option..... N/A 34 N/A 0 N/A N/A N/A
---------- --------- ---------- --------- ---------- --------- ----------
Total...................... 15,533,574 3,288,363 16,123,831 3,179,487 16,839,021 3,041,409 15,618,939
========== ========= ========== ========= ========== ========= ==========
<CAPTION>
1998 1999
--------- ----------------------
OPTIONS FUTURES OPTIONS
--------- ---------- ---------
<S> <C> <C> <C>
Gold............................... 1,945,366 9,575,788 2,815,831
Silver............................. 818,053 4,157,500 725,885
High Grade Copper.................. 153,332 2,852,962 160,857
Aluminum........................... N/A 27,978 642
FTSE Eurotop 100(R) Index.......... 0 25,181 0
FTSE Eurotop 300(R) Index.......... N/A 6,279 N/A
5 Day Gold Option.................. N/A N/A N/A
5 Day Silver Option................ N/A N/A N/A
5 Day High Grade Copper Option..... N/A N/A N/A
--------- ---------- ---------
Total...................... 2,916,751 16,645,688 3,703,215
========= ========== =========
</TABLE>
- -------------------------
"N/A" means contract was either not in existence at the time or was declared
dormant and therefore not available for trading.
"0" means contract was available for trading but no trades were executed.
38
<PAGE> 43
Set forth below is information with respect to open interest on contracts
traded on COMEX.
COMEX OPEN INTEREST
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- ----------------- ----------------- ----------------- -----------------
FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gold.......................... 142,179 276,737 189,805 328,367 177,770 404,403 162,912 432,256 155,914 629,296
Silver........................ 98,555 67,924 84,693 59,319 98,906 106,258 75,353 60,858 76,387 64,209
High Grade Copper............. 35,393 5,503 49,176 12,637 70,078 15,214 71,975 19,960 71,753 12,142
Aluminum...................... N/A N/A N/A N/A N/A N/A N/A N/A 571 0
FTSE Eurotop 100(R) Index..... 3,910 0 2,461 0 2,200 0 1,811 0 387 0
FTSE Eurotop 300(R) Index..... N/A N/A N/A N/A N/A N/A N/A N/A 552 N/A
5 Day Gold Option............. N/A 0 N/A 0 N/A N/A N/A N/A N/A N/A
5 Day Silver Option........... N/A 0 N/A 0 N/A N/A N/A N/A N/A N/A
5 Day High Grade Copper
Option...................... N/A 0 N/A 0 N/A N/A N/A N/A N/A N/A
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total................. 280,037 350,164 326,135 400,323 348,954 525,875 312,051 513,074 305,564 705,647
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- -------------------------
"N/A" means contract was either not in existence at the time or was declared
dormant and therefore not available for trading.
"0" means contract was available for trading but no trades were executed.
39
<PAGE> 44
TECHNOLOGY
GENERAL
In recent years, NYMEX has implemented several initiatives intended to
increase the range and quality of services provided to members, which is one way
to ensure that NYMEX remains competitive in a period of rapid technological
developments. NYMEX believes that open-outcry trading provides the greatest
depth of liquidity but that its electronic trading systems provide it with a
hedge for the possibility that electronic trading becomes the predominant and
preferred way energy and metals futures and options transactions are executed.
OPEN-OUTCRY VERSUS ELECTRONIC TRADING
Exchanges employing traditional open-outcry methods of trading financial
instruments and commodities, such as the method utilized by NYMEX, have come
under increasing competitive pressure from organizations and other exchanges
employing electronic trading methods. These electronic trading methods include
electronic communications networks and other Internet-based systems that
electronically match orders and provide fast, low-cost execution. Both
newly-formed ECNs, like Island, DATEK and Cantor Fitzgerald's eSpeed, as well as
established exchanges such as EUREX are implementing electronic trading methods
and routing order flow away from traditional open-outcry exchanges like the New
York Stock Exchange and the London International Financial Futures Exchange,
also known as LIFFE. While this trend has been most prevalent in the equities
and debt futures market, ECNs and Internet-based entities are emerging at a
rapid pace in the physical, forward and OTC energy marketplace. Examples are
entities such as Bloomberg, which offers a bulletin board system called
PowerMatch for physical electricity transactions; EnronOnline, an Internet-based
business-to-business offering where Enron customers trade on a
principal-to-principal basis with Enron through the Internet; and
Houstonstreet.com, an Internet-based system designed to provide energy traders
with an information-rich environment that offers flexible and anonymous trading.
Another possible Internet-based competitor is Altrade, which provides a
real-time electronic marketplace for physical natural gas, crude oil, natural
gas liquids and electricity. While none of these ECN or Internet-based entities
offer a futures market, they all represent a potential electronic threat to
NYMEX. Accordingly, in March 2000, NYMEX listed its electricity contracts in a
wholly electronic trading environment on NYMEX ACCESS(R).
Over the past year, there have been a number of traditional open-outcry
exchanges that have either moved toward or announced their intentions to close
their open-outcry trading floors and become wholly electronic marketplaces.
LIFFE closed its last futures ring in November 1999 and migrated its contracts
to its LIFFEConnect electronic trading system. LIFFE has also stated it will
close its last options ring by the middle of 2000. The Sydney Futures Exchange,
also known as SFE, closed its trading floor in November 1999 and migrated all of
its markets to its SYCOM(R) electronic trading system and the Hong Kong
Exchanges and Clearing Limited has announced it will become wholly electronic by
the end of the second quarter of 2000.
The relative size of these three exchanges according to data reported by
the Futures Industry Association is as follows. In 1999, LIFFE was the fifth
largest futures exchange in the world with a volume of 120,040,031 contracts
traded. By comparison, NYMEX was the sixth largest with a volume of 109,538,831
contracts traded in 1999. In 1999, the SFE recorded volume of 29,793,333
contracts traded and the Hong Kong Exchanges and Clearing Limited recorded
volume of 6,331,400 contracts traded.
40
<PAGE> 45
Since 1993, electronic trading has been available to NYMEX members via
NYMEX ACCESS(R), which is described below. By providing a means for
round-the-clock trading and competing electronically in ways that will enhance
the traditional open-outcry futures auction market, NYMEX believes that
electronic systems such as NYMEX ACCESS(R) will help NYMEX and the entire
futures industry to become more efficient while extending its outreach into new
markets.
NYMEX ACCESS(R)
NYMEX ACCESS(R) is an electronic trading system, initially developed for
after-hours trading only, launched in June 1993, which currently permits the
trading of futures and options contracts on crude oil, heating oil, unleaded
gasoline, natural gas and platinum, and futures contracts on gold, silver,
copper, aluminum, propane, palladium and electricity, through a worldwide
computer network. The system is currently active when the trading floor is
closed; however, NYMEX trades its electricity contracts exclusively on NYMEX
ACCESS(R) throughout the daytime and night sessions. As of March 1, 2000,
approximately 700 users were authorized to trade over the system and
approximately 300 trader workstations were in place primarily in the United
States as well as London, Sydney and Hong Kong. NYMEX ACCESS(R) volume currently
accounts for approximately 2% of NYMEX's average daily volume. In 1999,
approximately 2.4 million contracts were traded over NYMEX ACCESS(R) which
accounted for approximately 2% of NYMEX's total 1999 trading volume.
The chart below indicates the gross amount of clearing and transaction fees
generated by NYMEX ACCESS(R).
NYMEX ACCESS(R) CLEARING AND TRANSACTION FEES
[Graphic: Bar graph entitled "NYMEX Access(R) Clearing and Transaction Fees."
Below the horizontal axis each year for which clearing and transaction fees were
measured is written in chronological order from left to right. The vertical axis
indicates the amount of fees, in thousands, beginning with zero and increasing,
in intervals of two thousand, up to ten thousand. There are three bars for each
year showing from left to right the amount of fees received by COMEX, NYMEX and
Combined. Inset in a square to the right of the chart is a legend containing a
dark shaded box to the left of the word "COMEX," a dotted box to the left of the
word "NYMEX" and a white box to the left of the word "Combined." The amount of
fees collected by COMEX was approximately $121,000 in 1995, $327,000 in 1996,
$494,000 in 1997, $837,000 in 1998 and $1,026,000 in 1999. The amount of fees
collected by NYMEX was approximately $3,812,000 in 1995, $3,815,000 in 1996,
$4,023,000 in 1997, $5,669,000 in 1998 and $7,420,000 in 1999. The amount of
fees collected by the combined company was approximately $3,933,000 in 1995,
$4,142,000 in 1996, $4,517,000 in 1997, $6,506,000 in 1998 and $8,446,000 in
1999.]
NYMEX ACCESS(R) was originally developed pursuant to a joint development
agreement among NYMEX, Task Management, Inc. and AT&T. NYMEX ACCESS(R) is a
complete, integrated electronic trading system. It has been designed to take
advantage of computer technology while maintaining the efficiencies of market
pricing inherent in open-outcry trading. Included within the NYMEX ACCESS(R)
system are an order-matching system based upon the use of a matching algorithm
reflecting strict price/time priority for
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<PAGE> 46
all orders entered into the system, a unique and proactive risk management
system and a trade allocation system. The joint development agreement expired in
December 1999.
In February 1998, NYMEX entered into a joint development agreement with the
IPE to develop an updated system which would retain the benefits of the current
system while providing expansion of capacity and functionality. Pursuant to this
agreement, neither NYMEX nor the IPE retain any royalty rights or other
proprietary rights over the other's system. In November 1999, NYMEX launched
this updated version of the system and further system refinement is ongoing.
NYMEX ACCESS(R) is one of the vehicles through which NYMEX has sought to
internationalize its customer base. In November 1994, NYMEX ACCESS(R) began
operating in the United Kingdom. At the present time, 11 trader workstations are
installed in the United Kingdom. In September 1995, NYMEX's energy products,
including crude oil, heating oil, gasoline and natural gas, became available to
the SFE traders through a link of NYMEX ACCESS(R) with the SFE's SYCOM(R) after
hours electronic trading system. As originally implemented, the linkage allowed
SFE members to access NYMEX contracts and NYMEX ACCESS(R) trading systems
through their SYCOM(R) terminals. In April 1996, gold, silver and copper
contracts became available to SFE members through the system. With the updated
version of NYMEX ACCESS(R), NYMEX ACCESS(R) terminals have been placed directly
in Australia. There are currently nine NYMEX ACCESS(R) terminals located in
Australia. In June 1996, trading commenced on NYMEX ACCESS(R) terminals which
had been placed in Hong Kong pursuant to a linkage arrangement between NYMEX and
the Hong Kong Exchanges and Clearing Limited. Currently, this linkage agreement
has expired; NYMEX and the Hong Kong Exchanges and Clearing Limited are in the
process of negotiating an extension of the terms of the linkage. In 1999, NYMEX
finalized a new agreement with the Singapore Exchange Derivatives Trading
Limited that will allow it to place terminals in that oil market center. This
linkage is currently pending approval of the CFTC. Similar opportunities are
being explored in Japan, Korea, and India.
PROPERTIES
NYMEX's state-of-the-art trading facilities and corporate headquarters are
located at One North End Avenue in New York, New York. NYMEX leases the land on
which this building is located from the Battery Park City Authority. The lease
expires on June 17, 2069. Construction of the 502,000 square foot building was
completed in 1997. Each of the NYMEX and COMEX Divisions has its own 25,000
square foot trading floor in the facility. The facility also contains all of
NYMEX's back office support functions. NYMEX leases approximately 73,000 square
feet at this facility to 30 tenants who are member firms and five non-member
retail tenants.
NYMEX also leases 17,000 square feet of space at 22 Cortland Street in New
York, New York. This space is used as the NYMEX ACCESS(R) primary data center,
the NYMEX ACCESS(R) control center, known as NACC and the backup data center for
the One North End facility.
NYMEX also leases office space in Washington, D.C., at which it conducts
government relations activities, as well as office space in Houston, Texas and
London, England, at which it conducts marketing activities. These offices are
used to promote awareness of NYMEX's contracts.
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<PAGE> 47
NYMEX management believes its properties are adequate and suitable for its
business as presently conducted and are adequately maintained. For further
information concerning leases, see Note 14 of the Consolidated Financial
Statements.
MEMBERSHIP VALUE
The charts below indicate information regarding NYMEX Division memberships
for each year from 1995 to 1999.
SALE PRICE PER NYMEX MEMBERSHIP
[Graphic: Bar graph entitled "Sale Price Per NYMEX Membership". Below the
horizontal axis each year for which sale price is measured is written in
chronological order from left to right. The vertical axis indicates the sales
price beginning with zero and increasing, in intervals of two hundred thousand,
up to eight hundred thousand. There are two bars for each year. The left bar
represents the high and the right bar represents the low sales price for each
year. To the right of the chart is a square in which a legend is inset
consisting of a white square box to the left of the word "High" and a black
square box to the left of the word "Low". The high sales price per membership
was approximately $575,000 in 1995, $585,000 in 1996, $675,000 in 1997, $705,000
in 1998 and $630,000 1999. The low sales price per membership was approximately
$340,000 in 1995, $410,000 in 1996, $525,000 in 1997, $430,000 in 1998 and
$551,000 1999.]
EARNINGS PER NYMEX MEMBERSHIP
[Graphic: Bar graph entitled "Earnings Per NYMEX Membership." Below the
horizontal axis each year for which earnings was measured is written in
chronological order from left to right. The vertical axis indicates earnings
beginning with zero and increasing, in intervals of five thousand dollars,
up to twenty thousand dollars. Earnings per NYMEX membership were
approximately $16,708 in 1995, $9,504 in 1996, $1,408 in 1997, $7,449 in
1998 and $13,906 1999.]
BOOK VALUE PER NYMEX MEMBERSHIP
[Graphic: Bar graph entitled "Book Value Per NYMEX Membership." Below the
horizontal axis each year for which book value is measured is written in
chronological order from left to right. The vertical axis indicates book
value beginning at one hundred thousand dollars and increasing, in intervals
of five thousand dollars, up to one hundred fifteen thousand dollars. Book
value per NYMEX Membership was $109,393 in 1995, $112,484 in 1996, $106,085
in 1997, $105,678 in 1998 and $114,218 1999.]
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<PAGE> 48
MEMBER BENEFIT PLANS
RETENTION PLANS
NYMEX Exchange intends to continue to maintain NYMEX's Members' Retention
and Retirement Plan under which NYMEX makes annual contributions to fund the
plan from which quarterly distributions are made to vested participants. In
order to be vested, participants must complete 15 years of continuous service in
NYMEX under the terms of the plan. Payments commence for vested participants
after attaining age 59 1/2 and continue for 10 years. Payments are equal to
$25,000 per year increased by 3% each year commencing July 1, 1996. The amount
of the payments for each participant is determined at the time the participant
first becomes eligible to receive payments and remains fixed at that amount.
Payments are made from the general assets of NYMEX. Under the terms of the plan,
the commitments to members are subject to the claims of general creditors and
may be paid only if they will not render NYMEX insolvent or unable to carry on
its corporate purposes. NYMEX may terminate the plan at any time based on an
affirmative vote of three-fourths of NYMEX's board of directors. Assets
designated for the plan are segregated in a trust. If the plan is terminated,
the plan requires that assets in the trust be distributed first to vested
participants pro rata in proportion to the present value of their vested benefit
payments and thereafter to participants who have served more than ten years, but
less than 15 years, pro rata based on their actual years of service.
COMEX also maintains a retention program for COMEX members, which is
similar to the NYMEX Exchange plan except that the benefit payments are $12,500,
or $2,000 for option seatholders, per year for vested participants. No new
participants are permitted since the merger of NYMEX and COMEX. The amount of
the benefit payment to COMEX members under the COMEX plan is not subject to
increase.
SEAT FINANCING PROGRAM
NYMEX Exchange intends to continue to maintain NYMEX's seat financing
program under which NYMEX Exchange, subject to review and approval by a special
committee, may guarantee and collateralize personal loans made to members by
Brown Brothers Harriman & Co. for the purpose of purchasing a NYMEX Division or
a COMEX Division membership. Members may borrow up to the lesser of $500,000 or
60% of the purchase price of a membership. The program is presently limited to
an aggregate of $11 million in loan guarantees at any one time. Currently, NYMEX
is guarantor for 30 such loans in an aggregate amount of approximately $8.0
million.
LEGAL PROCEEDINGS
From time to time, NYMEX is involved in legal proceedings and litigation
arising in the ordinary course of business. Set forth below are descriptions of
litigation and legal proceedings to which we are a party as of the date of this
proxy statement and prospectus that could have a material adverse effect on our
business, operating results or financial condition. While the ultimate result of
the proceedings against NYMEX cannot be predicted with certainty, the management
of NYMEX believes that the resolution of these matters will not have a material
adverse effect on its consolidated financial position, results of operations or
cash flows.
NYMEX has been named as a defendant in the following legal actions:
- Ricky Barnes v. New York Mercantile Exchange, Commodity Exchange, Inc. A.
J. Contracting Company, Inc. and Zwicker Electric Company, Inc. This
action is pending in New York State Supreme Court (New York County).
NYMEX was served with the summons and complaint on or about March 4,
1998. This is a personal injury case that relates to the construction of
One North End. Plaintiff, an employee of Forest
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<PAGE> 49
Datacom Services, Inc., a subcontractor of A.J. Construction, alleges
that he was injured on December 17, 1996 while working at the One North
End construction site. Plaintiff seeks $10,000,000 in compensatory
damages. NYMEX and COMEX are represented by insurance counsel. The case
is currently in discovery.
- Electronic Trading Systems Corporation v. The Board of Trade of the City
of Chicago, New York Mercantile Exchange, Cantor Fitzgerald, L.P. and the
Chicago Mercantile Exchange. This action is pending in United States
District Court for the Northern District of Texas (Dallas Division).
NYMEX was served with a summons and complaint on or about May 10, 1999.
This is a patent infringement case. Plaintiff alleges that it is the
owner of United States Letters Patent No. 4,903,201 entitled "Automated
Futures Trade Exchange" and that defendants are infringing this patent
through use of their respective electronic trading systems. Plaintiff
seeks an unspecified amount of royalties. NYMEX is providing its own
defense to this action. NYMEX has filed motion to sever and transfer
venue to the Southern District of New York. Cantor Fitzgerald, L.P. has
settled this lawsuit and is no longer a party to this action. This case
is in discovery.
- Phillip Petruzzi and Joann Petruzzi v. New York Mercantile Exchange. This
action is pending in New York State Supreme Court (New York County).
NYMEX was served with the summons and complaint on or about October 13,
1998. This is a personal injury claim that relates to plaintiff's trading
activity when NYMEX was located at 4 World Trade Center. Plaintiff, a
NYMEX member, alleges that he was injured on July 23, 1993 while trading
in the Natural Gas Ring. Plaintiff seeks $10,750,000 in compensatory
damages and $10,000,000 in punitive damages. NYMEX is represented by
insurance counsel on the compensatory damages portion of the claims and
has retained counsel to represent it on the punitive damages claim. The
case is still in discovery. NYMEX's motion to dismiss punitive damages
was served on March 17, 2000.
- Enrique Rivera and Edith Rivera v. New York Mercantile Exchange, Mark
Kessloff, Les Faison, Brian Bartichek and John Does "1-10." This action
is pending in New York State Supreme Court (Bronx County). NYMEX was
served with the summons and complaint on or about April 22, 1999. This is
an ethnic discrimination case. Plaintiff alleges that throughout his
employment with NYMEX he was subjected to a hostile work environment and
discrimination regarding his ethnic origin. Plaintiff seeks an
unspecified amount of compensatory and punitive damages. NYMEX has
retained counsel to defend it in this matter. The case is in discovery.
- George Scivoletti and Maryanne Scivoletti v. New York Mercantile
Exchange, Commodities Exchange Center, Inc., Cushman & Wakefield, Inc.,
Paris Maintenance, Inc., A.J. Construction of New York, Inc. and
Space/Management Programs, Inc. This action is pending in United States
District Court for the Southern District of New York. The summons and
complaint were filed on or about February 2, 1998. This is a personal
injury case that related to plaintiff's trading activity at NYMEX's One
North End trading facility. Plaintiff alleges that on July 10, 1997 he
was injured while trading in the Natural Gas Ring. Plaintiffs seeks a
total of $30,000,000 in compensatory damages against defendants. NYMEX is
represented by insurance counsel. The case is in discovery.
- Robert Teofrio and Susan Teofrio v. New York Mercantile Exchange, Turner
Construction and AJ Construction of New York. This action is pending in
New York State Supreme Court (New York County). NYMEX was served with the
summons and complaint on or about July 20, 1998. This is a personal
injury case
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that relates to plaintiff's involvement in the construction of One North
End. Plaintiff is an ironworker employed by Diamond Installations, a
subcontractor of Turner Construction. Plaintiff alleges that he was
injured on September 11, 1996, while working at the One North End
construction site. Plaintiff seeks a total of $11,000,000 in compensatory
damages. NYMEX is represented by insurance counsel. This case is in
discovery.
- Western Capital Design, LLC v. New York Mercantile Exchange and John Does
"1-50." This action is pending in New York District Court for the
Southern District of New York. NYMEX was served with the summons and
complaint on or about February 17, 1999. This action relates to alleged
wrongful conduct by NYMEX and NYMEX members regarding the execution of
heating oil and natural gas options. Plaintiff alleges that the prices it
was charged for heating oil and natural gas options were improper and
that these improper transactions affected the market price at which
plaintiff transacted its trading. Plaintiff seeks $75,000,000 in
compensatory damages. NYMEX has retained counsel to represent it in this
matter. This action was commenced in State Court in Florida. It was
removed to Federal Court by notice of removal filed March 8, 1999. Venue
was transferred to the Southern District of New York by an order dated
May 11, 1999. NYMEX's motion to dismiss was filed on November 12, 1999
and granted on March 31, 2000. Plaintiff has until April 28, 2000 to
replead.
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SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial and other
information for NYMEX. The balance sheet and operating data as of and for each
of the years in the five year period ended December 31, 1999 have been derived
from the audited consolidated financial statements and notes thereto. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 48, the consolidated financial statements and the notes thereto, and other
financial information, including the pro forma consolidated financial
information, included in this proxy statement and prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER NYMEX MEMBERSHIP DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues
Clearing and transaction fees(1).... $ 105,206 $ 90,764 $ 80,773 $ 76,826 $ 80,877
Market data fees.................... 34,689 34,858 33,457 33,232 33,839
Other(2)............................ 4,540 4,961 3,557 2,532 3,198
--------------- --------------- --------------- --------------- ---------------
Operating revenues.................. 144,435 130,583 117,787 112,590 117,914
--------------- --------------- --------------- --------------- ---------------
Expenses
General and administrative.......... 89,732 86,992 83,933 73,170 74,467
Rent and facility................... 12,877 12,760 17,116 14,415 12,153
Depreciation and amortization(3).... 10,966 9,901 5,215 7,642 6,169
Marketing........................... 2,537 2,403 4,813 2,534 3,722
Amortization of goodwill............ 2,153 2,153 2,153 2,153 2,153
Loss on disposition of property and
equipment......................... 1,298 2,814 1,234 -- --
--------------- --------------- --------------- --------------- ---------------
Operating expenses.................. 119,563 117,023 114,464 99,914 98,664
--------------- --------------- --------------- --------------- ---------------
Operating income.................... 24,872 13,560 3,323 12,676 19,250
Other income and expenses
Investment income, net.............. 3,942 6,739 8,288 4,860 7,429
Interest expense.................... (7,721) (7,958) (6,967) (1,781) (1,299)
--------------- --------------- --------------- --------------- ---------------
Income before income taxes.......... 21,093 12,341 4,644 15,755 25,380
Income tax expense.................. 8,903 6,263 3,495 8,000 11,746
--------------- --------------- --------------- --------------- ---------------
Net income.......................... $ 12,190 $ 6,078 $ 1,149 $ 7,755 $ 13,634
=============== =============== =============== =============== ===============
BALANCE SHEET DATA
Total assets.......................... $ 392,494 $ 375,282 $ 372,327 $ 329,515 $ 154,986
Total liabilities..................... 299,292 289,049 285,762 237,728 65,721
Short term borrowings................. -- -- 5,043 5,043 5,043
Long term borrowings.................. 100,000 100,000 100,000 90,043 10,086
Total equity.......................... 93,202 86,233 86,565 91,787 89,265
UNAUDITED PRO FORMA DATA(4)
Pro forma net earnings................ $ 11,494
Pro forma stockholders' equity........ $ 92,506
Pro forma earnings per share.......... $ 14,086
Pro forma book value per share........ $ 113,365
Pro forma times interest earned....... 3.6
OTHER DATA
Earnings per NYMEX membership(5)...... $ 14,939 $ 7,449 $ 1,408 $ 9,504 $ 16,708
Book value per NYMEX membership(5).... $ 114,218 $ 105,678 $ 106,085 $ 112,484 $ 109,393
Current ratio(6)...................... 6.8 8.1 5.1 4.9 3.7
Working capital....................... $ 120,669 $ 112,839 $ 102,002 $ 122,438 $ 58,616
Capital expenditures.................. $ 20,022 $ 18,175 $ 82,795 $ 109,375 $ 26,374
Times interest earned(7).............. 3.7 2.6 1.7 9.8 20.5
Number of employees at end of
period.............................. 609 594 587 528 521
Sales price per NYMEX membership
High................................ $ 630,000 $ 705,000 $ 675,000 $ 585,000 $ 575,000
Low................................. $ 551,000 $ 430,000 $ 525,000 $ 410,000 $ 340,000
</TABLE>
- -------------------------
(1) Clearing and transaction fees are presented net of member fee rebates which
were $13,065, $11,272, $10,012 and $8,510 for the years ended December 31,
1999, 1998, 1997 and 1996, respectively. There were no member fee rebates
for the year ended December 31, 1995.
(2) Beginning in 1998, NYMEX introduced various other rebate programs. These
costs reduced other revenue for the years ended December 31, 1999 and 1998
by $2,399 and $1,364, respectively.
(3) Depreciation and amortization expense is net of amortization of deferred
credit for building construction of $2,145, $1,930 and $1,287 for the years
ended December 31, 1999, 1998 and 1997, respectively. There was no
amortization of deferred credit for building construction for the years
ended 1996 and 1995.
(4) Unaudited pro forma data reflects such adjustments as necessary, in the
opinion of management, for a fair presentation of the results of operations
and stockholders' equity of NYMEX Holdings on a pro forma basis. See "Pro
Forma Consolidated Financial Information" on page F-23 for more detailed
information concerning these adjustments.
(5) NYMEX has 900 authorized NYMEX memberships. The per NYMEX membership amounts
in the table are based on the 816 NYMEX memberships issued and outstanding
at the end of each of the periods shown.
(6) Equals current assets divided by current liabilities.
(7) Equals income before income taxes and interest expense divided by interest
expense.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
NYMEX's primary goal in conducting its business is to provide efficient,
orderly and well-regulated markets for trading commodity futures and options
contracts for the benefits of its members and the public.
NYMEX's principal business activity is providing facilities and clearing
and other services for the trading of commodity futures contracts and options on
futures contracts. The value of these contracts are sensitive to the volatility
of the prices of the underlying physical commodities as well as to general
economic conditions and global affairs. The composition of trading affects the
revenues generated because non-member trades generate higher fees than member
trades. The selling of market data is also a significant business activity, but
is less susceptible to the volatility of the marketplace. While a long and
sustained downturn in market activity could lead to industry downsizing and a
reduction in the placement of ticker services for NYMEX market data, this trend
would not be as erratic and volatile as the effect of these factors on trading
volume. Unless otherwise specified, all references herein to "contracts" refer
to commodity futures and options contracts and to "volume" refer to the number
of contracts traded during a specified period.
Over the past several years, NYMEX has enjoyed substantial and sustained
volume growth. Average daily contracts traded on NYMEX, excluding COMEX,
increased from approximately 218,600 during the year ended December 31, 1995 to
approximately 356,800 during the year ended December 31, 1999. NYMEX's light
sweet crude oil contract is the primary contributor to NYMEX's growth. This
contract's annual volume has increased by 67% from 1995 to 1999--see the chart
on page 23. COMEX's volume growth during these periods has not sustained the
same rate of increase as compared to NYMEX's volume growth, reflecting
relatively static volume. During the year ended December 31, 1995, COMEX
experienced average daily volume of approximately 75,300 contracts traded versus
approximately 81,400 contracts traded daily during the year ended December 31,
1999.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
For the year ended December 31, 1999, NYMEX's net income increased 100% to
$12.2 million, compared to $6.1 million in 1998. Operating revenue increased 11%
to $144.4 million in 1999, compared to $130.6 million in 1998. Clearing and
transaction fees, net of the member fee rebate which was $13.1 million for 1999
versus $11.3 million for 1998, increased by 16% in 1999 to $105.2 million from
$90.8 million last year. Overall, NYMEX's volume of contracts traded increased
by 15%. The average daily trading volume on NYMEX, excluding COMEX, for 1999 was
356,800 contracts, compared to 305,000 contracts in 1998; the average daily
trading volume on COMEX was 81,400 contracts during 1999, compared to 73,800
contracts during 1998. A slight contraction of the market data subscriber
network resulted in a $0.2 million decrease in revenue during 1999 from 1998;
NYMEX data subscriber revenue increased 1% or $0.1 million, whereas COMEX data
subscriber revenue declined $0.3 million or 2%.
Other revenue in 1999, consisting principally of rental income, decreased
$0.4 million or 8% compared to 1998. Specifically, with regard to rental income,
NYMEX subleased additional space at the One North End property resulting in a
$1.3 million increase over
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<PAGE> 53
1998. During 1999, NYMEX continued and expanded its member incentive programs.
These incentive programs resulted in a decrease in other revenue of $2.4 million
in 1999 which was $1 million greater than the effect of these programs on other
revenue in 1998. Telephone equipment fees were also waived under this program,
resulting in lower 1999 fees of $1.2 as compared to $1.5 million in 1998.
Operating expenses totaled $119.6 million in 1999 as compared to $117.0
million in 1998. The substantial portion of expenses incurred in both 1999 and
1998 were for salary and employee benefit costs; $45.8 million of these expenses
were incurred in 1999, an increase of $1.2 million or 3% over 1998. This
increase primarily resulted from greater personnel compensation costs due to
additional hires during 1999 as well as increased year-end bonus awards.
Telecommunications, equipment rentals and maintenance costs were $15.9 million
in 1999, an increase of approximately 9% or $1.3 million over 1998. This
increase was due to the $7.1 million expensed in 1999 for NYMEX ACCESS(R)
terminal data communication line fees, as compared with $5.9 million in 1998, an
increase of 20%. The increased expenditures during 1999 for data communication
line fees were largely due to additional NYMEX ACCESS(R) terminals placed in
service in the United States and the United Kingdom, as well as costs for
parallel operations of both the original NYMEX ACCESS(R) system and the updated
version of the system during the last quarter of 1999. It should be noted that
NYMEX adopted Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, in 1999 which required
capitalization of approximately $10.2 million for costs incurred in the
development of internal use software; in 1998, similar costs were expensed.
General and administrative expenses in 1999, which included travel and
related expenses of $2.5 million, software licensing fees of $2.4 million, board
stipends of $2.9 million, and other general office expenses of $6.2 million,
decreased by $1.0 million or 6% from 1998. This reduction was primarily due to
the impact of legal settlement costs, of $0.6 million in 1998, as well as lower
trading floor and office supply expenses incurred during 1999, a decrease of
$0.6 million from 1998. Rent and facility costs increased by $0.1 million over
1998. This increase was due in part to 1999 PILOT (Payment In Lieu Of Taxes)
payments to the Battery Park City Authority of $0.8 million. This expense was
not incurred in 1998 as PILOT obligations prior to 1999 were abated. In
addition, costs for repair and maintenance of the building increased in 1999 by
$0.6 million over the prior year due to the lapse of repair and maintenance
warranties with respect to building assets. These increases over the prior year
were partially offset by a reduction in expenses as a result of the payment of
$1.1 million in 1998 to the Commodity Exchange Center, Inc., known as CEC, for
residual overhead costs. Depreciation and amortization of property and
equipment, net of deferred credit amortization, increased by $1.1 million or
approximately 11% over 1998. This increase was attributable to 1999 capital
expenditures of $20.0 million of which approximately one-half was for computer
equipment related largely to the Clearing 21(R) and NYMEX ACCESS(R) upgrade
efforts. These expenditures are being depreciated over seven years. Professional
services rendered during 1999 were $9.0 million, representing an increase of
$1.5 million or 20% over the prior year. This increase was primarily the direct
result of investment banking and legal representation fees incurred during the
fourth quarter of 1999 in connection with the demutualization. Loss on the
disposition of property and assets decreased by $1.5 million or 54% from 1998.
During the fourth quarter of 1999, management reviewed NYMEX's property and
equipment records and determined that several computer assets should be written
off as they either had no value, because they were no longer in service. In
addition, previously existing leasehold improvements at the 22 Cortlandt Street
location were deemed to have no value and were written off at the end of 1999.
Other expenses decreased by $0.4 million, or 7%, from the
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<PAGE> 54
prior year largely due to lower costs for members' life insurance and long term
disability benefits. These decreases were attributable to lower insurance
premiums resulting from positive experience rate factors.
Net investment income, which is not a component of operating income,
decreased in 1999 by approximately 42% to $3.9 million, as compared to $6.7
million in 1998, primarily as a result of unrealized losses on NYMEX's fixed
income marketable securities portfolio due to a market wide decline in municipal
bond prices.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
For the year ended December 31, 1998, NYMEX's net income was $6.1 million,
compared to $1.1 million for 1997, an increase of approximately 429%. Operating
revenue for 1998 was $130.6 million versus $117.8 million for 1997, an increase
of approximately 11%. Revenue from clearing and transaction fees, the largest
component of NYMEX's revenue, increased to $90.8 million for 1998, an increase
of more than 12% from 1997. This increase in revenue from clearing and
transaction fees excludes the downward impact of the volume driven member fee
rebate programs for 1998 and 1997 that resulted in a decrease in member fees of
$11.3 million and $10.0 million, respectively. This increase in revenue from
clearing and transaction fees is attributable to greater volume generated on
NYMEX. The average daily trading volume of NYMEX, excluding COMEX, for 1998 was
approximately 305,000 contracts, compared to approximately 253,800 contracts in
1997; on COMEX, the average daily trading volume was approximately 73,800
contracts during 1998 compared to approximately 78,900 contracts in 1997.
Expansion of the market data subscriber network resulted in a $1.4 million
increase in revenue during 1998 over 1997; NYMEX data subscriber revenue
increased 6.0% or $1.1 million, and COMEX data subscriber revenue increased $0.3
million or 2.0%.
Other revenue in 1998, consisting principally of rental income, increased
$1.4 million compared to 1997. Specifically, with regard to rental revenue,
NYMEX leased additional space at the One North End property during 1998
resulting in a $1.8 million increase over 1997. Telephone equipment fees
increased in 1998 by $0.9 million due primarily to full year invoicing versus
half-year billings during 1997. These fees represent income derived from the
members' use of equipment and phones provided by NYMEX at the One North End
facility on the trading floor; these facilities were previously provided by the
CEC at 4 World Trade Center. During 1998, NYMEX instituted a cost reduction and
incentive program for its futures commission merchants. Incentives and reduced
costs in the form of credits applicable toward amounts owed by futures
commission merchants for trading floor overhead costs resulted in a reduction of
revenue of $1.4 million in 1998.
Operating expenses totaled $117.0 million in 1998 as compared to $114.5
million in 1997. The substantial portion of expenses incurred in both 1998 and
1997 were for salary and fringe benefit costs; approximately $44.6 million of
these expenses were incurred in 1998, an increase of approximately 2.0% over
1997. This increase is primarily attributable to higher personnel compensation
expenses resulting from the full year impact of additional staffing costs due to
the move to NYMEX's new headquarters facility at One North End. Increases in
1998 salaries and fringe benefits were partially offset by the termination of
the former COMEX employee defined benefit plan, as well as by reductions to
NYMEX's postemployment benefit costs resulting from plan amendments.
Telecommunications and equipment rental costs amounted to $14.6 million in 1998,
an increase of approximately 11% or $1.5 million above 1997. This increase was
due largely to the full year recognition of rental and service expenses in 1998
versus the approximate half-year recognition in 1997 as a result of the move to
the One North End facility in mid-1997. Professional services
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<PAGE> 55
rendered during 1998 were approximately $2.3 million or 44% greater than in
1997; these expenses included professional consulting fees for the Clearing
21(R) project and upgrades to NYMEX ACCESS(R) development. Depreciation and
amortization in 1998 increased by $4.7 million as compared to 1997 as a result
of recognition of a full year of depreciation cost for relocation assets versus
the approximate half-year impact during 1997.
General and administrative expenses in 1998, which include travel and
related costs of $2.9 million, software licensing fees of $2.2 million, and
other general office expenses of $9.9 million, decreased by $1.9 million from
1997. This decrease resulted primarily from the cost accrued during late 1997
for the "Global Settlement and Surrender Agreement" reached with the CEC in late
April, 1998. NYMEX paid the CEC $3.1 million in satisfaction of liabilities owed
to the CEC and relinquished its rights to use a portion of the trading floor at
the 4 World Trade Center facility. This reduction in expenses was partially
offset in 1998 by increased staff travel resulting from foreign exchange
strategic alliance initiatives, an increase of $0.4 million, as well as by legal
settlement costs with an outside vendor, $0.6 million. Rent and facility
expenses amounted to $12.8 million in 1998 as compared to $17.1 million in 1997.
The decrease in rent and facility expenses was the direct result of running two
facilities, 4 World Trade Center and One North End, for half a year during 1997
versus one facility during 1998; operating costs relating to the 4 World Trade
Center facility decreased $5.4 million. This decrease was partially offset by
the $1.1 million increase during 1998 in facility repair and maintenance costs
resulting from the impact of a full year of operations at NYMEX's One North End
facility versus the approximate half-year of operations in 1997. Marketing
expenses in 1998 decreased $2.4 million due to one-time costs related to NYMEX's
125th anniversary and new building campaigns conducted during 1997. Loss on the
disposition of assets increased $1.6 million in 1998 primarily due to leasehold
improvement write-offs as a result of the relocation to One North End. The $2.8
million written off in 1998 represents trading floor leasehold improvements
abandoned pursuant to the lease termination agreement entered into between NYMEX
and the CEC on April 22, 1998.
Investment income, which is not a component of operating income, decreased
in 1998 by $1.5 million from 1997 due primarily to a reduction in the size of
the building reserve portfolio during 1998. Interest expense increased by $1.0
million in 1998 as a result of the capitalization of interest expense in 1997 on
NYMEX's $100 million principal amount senior notes, the proceeds of which were
used to finance the construction of the new One North End facility; NYMEX began
recognizing interest expense on the senior notes when the new facility was
placed into service mid-1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, NYMEX's cash flows from operations have been adequate to fund
working capital needs. NYMEX's principal sources of cash flows have been from
operating activities which primarily include clearing and transaction fees and
market data fees from third parties. Clearing and transaction fees represented
73% of NYMEX's consolidated operating revenues, of which approximately 76% were
attributable to NYMEX's energy contracts, for the fiscal year ended December 31,
1999. NYMEX's principal uses of cash are to fund operating expenses and to
upgrade equipment and facilities.
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<PAGE> 56
The chart below indicates the percentage of total assets represented by
each principal category of asset as of December 31, 1999.
TOTAL ASSETS AS OF DECEMBER 31, 1999
[Graphic: Pie chart entitled "Total Assets as of December 31, 1999" and
representing assets of NYMEX divided into principal categories of assets as a
percentage of the total assets as of December 31, 1999. Total assets are divided
as follows: Property and Equipment, Net -- 58%, Marketable Securities -- 20%,
Cash -- 9%, Other -- 8%, Goodwill, Net -- 5%.]
For the year ended December 31, 1999, cash and cash equivalents increased
by $22.2 million. This increase consisted primarily of net income of $12.2
million net cash generated by operating activities of $31 million less capital
expenditures primarily for technology related infrastructure of $20.0 million,
and distributions from the members' retention program of $1 million.
NYMEX's investment portfolio, with a market value of $77.0 million as of
December 31, 1999, includes highly liquid marketable securities consisting
primarily of tax-exempt municipal bonds, direct obligations of the U.S.
government and its agencies and other short-term investments. These assets
include $29.5 million placed in trust in order to pay commitments to eligible
NYMEX members under the NYMEX Division member retention program. Payouts are
made from the general assets of NYMEX, and program commitments are currently
recognized by a transfer from members' equity to a subordinated commitment. For
each of the years ended December 31, 1999, 1998 and 1997, $3.6 million was
transferred. This program may be terminated at any time based on an affirmative
vote of three-fourths of NYMEX's board of directors. Although NYMEX does not
expect early termination of this program, in such event, NYMEX would be required
to provide, first, for a payout to the fully vested participants and,
secondarily, for a pro rata distribution to partially vested participants to the
extent of the assets placed in trust. The COMEX Division's member retention
program will commence making payments to eligible members on January 1, 2002.
The COMEX Division member retention program has been funded at $800,000 annually
since 1996 and the balance in the COMEX member retention fund was $7.3 million
as of December 31, 1999.
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<PAGE> 57
The table below provides information about the market values of NYMEX's
marketable securities at December 31, 1999 (in thousands).
<TABLE>
<CAPTION>
MATURITY
------------------------------------------- TOTAL TOTAL
WITHIN 10 YEARS MARKET BOOK
DESCRIPTION 1 YEAR 1-5 YEARS 5-10 YEARS AND MORE NO MATURITY VALUE VALUE
----------- ------- --------- ---------- -------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Bonds, Federal
Agency Issues............... $ 2,188 $ 3,330 $ -- $ -- $ -- $ 5,518 $ 5,500
US Treasury Issues............ 10,202 3,922 968 -- -- 15,092 15,121
Municipal Bonds............... 2,946 12,254 26,411 12,708 -- 54,319 58,262
Equities...................... -- -- -- -- 2,063 2,063 2,022
------- ------- ------- ------- ------ ------- -------
Total Marketable Securities... $15,336 $19,506 $27,379 $12,708 $2,063 $76,992 $80,905
======= ======= ======= ======= ====== ======= =======
</TABLE>
The charts below indicate the maturities and composition of the marketable
securities portfolio as of December 31, 1999.
MATURITIES OF MARKETABLE SECURITIES* AS OF DECEMBER 31, 1999
[Graphic: Pie chart entitled "Maturities of Marketable Securities as of December
31, 1999" and representing marketable securities owned by NYMEX divided into
terms of maturity. The chart is subtitled "Percentages are based on year end
market values." Maturities are divided as follows: 5-10 years -- 35%, 10 or more
years -- 17%, No Maturity -- 3%, Within 1 year -- 20%, 1-5 years -- 25%.
- -----------
* Percentages are based on year end market values.
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<PAGE> 58
MARKETABLE SECURITIES* PORTFOLIO ALLOCATION AS OF DECEMBER 31, 1999
[Graphic: Pie chart entitled "Marketable Securities Portfolio Allocation as of
December 31, 1999" and representing types of marketable securities as
percentages of total marketable securities owned by NYMEX. The chart is
subtitled "Percentages are based on year end market values." The chart is
divided as follows: Municipal Bonds -- 70%, Equities -- 3%, Government Bonds,
Federal Agency Issues -- 7%, U.S. Treasury Issues -- 20%.]
* Percentages are based on year end market values
As of December 31, 1999, NYMEX's consolidated long-term debt was $100
million. This is the result of NYMEX's private placement of debt during 1996 and
1997. The proceeds of the private placement were used to provide financing for
the new trading facility at One North End. This debt is unsecured and consists
of three senior note series each with different maturities, interest rates and
required repayment schedules. During 2000, NYMEX expects to incur interest
expense related to the debt totaling $7.7 million and expects to fund this
interest expense with operating cash flow. The $31.0 million principal amount of
7.48% Series A notes requires annual principal repayments of $2.8 million
beginning in October 2001 with a final repayment of remaining principal in
October 2011. The $54 million principal amount of 7.75% Series B notes requires
annual principal repayments of $4.9 million beginning in October 2011 with a
final repayment of remaining principal in October 2021. The $15.0 million
principal amount of 7.84% Series C notes requires annual principal repayments of
$3.0 million beginning October 2022 with a final repayment of remaining
principal in October 2026. As of December 31, 1999, NYMEX has established a
$20.9 million fund to be used to repay principal on this debt.
It is expected that during 2000, NYMEX capital expenditures will amount to
$14.7 million. Approximately 94% of such amount is expected to be committed to
technology enhancements of the open-outcry trading facilities and back office
support facilities. We expect to continue to make additional capital
expenditures after 2000 for technology enhancements to our open-outcry trading
system to improve its operational efficiency and to enable us to compete
effectively in an increasingly electronic trading environment.
After the demutualization, NYMEX expects to meet short-term liquidity
requirements such as operating expenses from its net cash flow from operations.
NYMEX expects to meet long-term liquidity requirements after the demutualization
such as scheduled debt maturities, investments in facilities and technologies,
and new strategic initiatives from available working capital, issuances of
short-term or long-term debt and, if the common
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<PAGE> 59
stock of NYMEX Holdings and membership interests of NYMEX Exchange are
unstapled, additional equity issuances by NYMEX Holdings.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Set forth below is information regarding certain quantitative and
qualitative information about market risk exposures. This information is limited
to estimates and assumptions made by management. Actual results may differ.
While NYMEX provides trading and clearing services for derivatives products, it
does not trade derivatives for its own account.
The table below provides information about NYMEX's marketable securities,
excluding equity securities, including expected principal cash flows for the
years 2000 through 2004 and thereafter (in thousands).
PRINCIPAL AMOUNTS BY EXPECTED MATURITY
<TABLE>
<CAPTION>
FAIR MARKET
VALUE AS OF
TOTAL PRINCIPAL DECEMBER 31,
2000 2001 2002 2003 2004 THEREAFTER CASH FLOWS 1999
------- ----- ------ ---- ------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government Bonds, Federal
Agency Issues................ $ 2,157 -- $2,351 -- $ 992 -- $ 5,500 $ 5,518
Weighted average interest
rate....................... 2.50% -- 5.50% -- 6.50% --
U.S. Treasury Issues........... 10,199 -- -- -- 3,948 974 15,121 15,092
Weighted average interest
rate....................... 4.45% -- -- -- 5.88% 6.00%
Municipal Bonds................ 2,959 95 3,946 898 7,352 43,012 58,262 54,319
Weighted average interest
rate....................... 4.37% 3.57% 5.53% 4.50% 5.88% 4.80%
------- ----- ------ ---- ------- ------- ------- -------
Total Portfolio, excluding
equity securities........ $15,315 $ 95 $6,297 $898 $12,292 $43,986 $78,883 $74,929
======= ===== ====== ==== ======= ======= ======= =======
</TABLE>
INTEREST RATE RISK
Current Assets. In the normal course of business, NYMEX's outside
investment advisors invest primarily in fixed income securities. Marketable
securities bought by NYMEX are typically held for the purpose of selling them in
the near term and are classified as trading securities. Unrealized gains and
losses are included in earnings. For the periods ended December 31, 1999 and
1998, NYMEX had net investment income of $3.9 million and $6.7 million,
respectively. Accordingly, a substantial portion of our income depends upon our
ability to continue to invest monies in these instruments, prevailing interest
rates and market prices. The fair value of these securities at December 31, 1999
and 1998 was $77 million and $92 million, respectively. The change in fair
value, using a hypothetical 10% decline in prices, is estimated to be a $7.7
million loss and a $9.2 million loss for December 31, 1999 and 1998,
respectively. NYMEX also invests in U.S. government securities and repurchase
agreements and maintains interest bearing balances in its trading accounts with
its investment managers. Financial instruments with maturities of three months
or less when purchased are classified as cash equivalents in the consolidated
financial statements.
Debt. The interest rate on our long-term indebtedness is a weighted
average fixed rate of 7.68%. NYMEX's fixed rate debt is exposed to the risk that
the fair market value of its debt will increase in a declining interest rate
environment. This would result in NYMEX paying a redemption premium if NYMEX
should choose to refinance this debt. Management has not deemed it necessary to
employ any market or interest risk management strategies, such as interest rate
swap agreements. In the future, as NYMEX pursues its market strategy, it may
become subject to a higher degree of interest rate sensitivity if it is required
to borrow at higher or at variable rates. This could significantly
55
<PAGE> 60
increase NYMEX's future sensitivity to interest rate fluctuations and materially
affect, in a negative manner, NYMEX's future financial position and results of
operations.
FOREIGN CURRENCY RISK
At this time, NYMEX transacts minimal business in foreign currencies. NYMEX
transacts the majority of its business in the United States dollar. To the
extent that NYMEX continues to transact its business using the United States
dollar as its functional currency, NYMEX believes that fluctuations in foreign
currency exchange rates will not have a material adverse effect on its results
of operations.
CREDIT RISK
NYMEX mitigates default risk by attempting to invest in high credit quality
securities of an intermediate maturity. NYMEX's portfolio, which is managed by
outside investment firms, is limited to marketable securities with active
secondary or resale markets to ensure portfolio liquidity. As of December 31,
1999, NYMEX had $36.6 million of cash and cash equivalents bearing an average
annual interest rate of approximately 5.0%. We do not believe there is any other
significant risk associated with our investments. However, if NYMEX in the
future invests in other income-producing securities, it could subject NYMEX's
income to greater risk and volatility.
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<PAGE> 61
CAPITALIZATION
The following table sets forth the capitalization of NYMEX as of December
31, 1999 on an historical basis as well as on a pro forma basis giving effect to
the proposed demutualization. The table should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 48 and the consolidated historical and pro forma
financial statements and notes thereto of NYMEX included elsewhere in this proxy
statement and prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
---------------------------------------
PRO FORMA
ACTUAL ADJUSTMENT(2) PRO FORMA
-------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Long term debt -- notes payable.......... $100,000 $ -- $100,000
-------- -------- --------
Members' Equity:
Members' equity........................ 93,202 (93,202) --
Common stock, $.01 par value, 816
shares authorized and
outstanding(1)...................... -- -- --
Additional paid-in capital............. -- 92,506 92,506
-------- -------- --------
Total members'
equity/stockholders' equity.... 93,202 (696) 92,506
-------- -------- --------
Total capitalization.............. $193,202 $ (696) $192,506
======== ======== ========
</TABLE>
- -------------------------
(1) Total pro forma common stock amount at December 31, 1999 is $8. Due to
rounding to '000's, this number does not appear on this table.
(2) Pro forma data reflects such adjustments as necessary, in the opinion of
management, for a fair presentation of the results of operations and
stockholders' equity of NYMEX Holdings on a pro forma basis. See "Pro Forma
Consolidated Financial Information" on page F-23 for more detailed
information concerning these adjustments.
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<PAGE> 62
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of NYMEX Holdings after the
demutualization will be the same as the directors and executive officers of
NYMEX before the demutualization. The certificate of incorporation of NYMEX
Exchange requires NYMEX Holdings, as the sole Class B member, to elect the
directors of NYMEX Holdings to serve as the directors of NYMEX Exchange. NYMEX
Holdings will have a 22 person board consisting of 20 directors who meet the
qualifications of floor broker, futures commission merchant, local, trade, at
large and public directors in the same proportions as provided in NYMEX's
current bylaws. The Chairman and Vice Chairman of the NYMEX Holdings board will
be designated directly by stockholders and will be considered members of the
at-large category. The board of NYMEX Holdings will be divided into three
classes serving staggered three-year terms. Directors for each class will be
elected at the annual meeting of stockholders held in the year in which the term
for such class expires. The board of NYMEX currently has one vacancy which is a
public director vacancy. We expect that this vacancy will be filled by the board
of directors within the next three months.
The following table sets forth certain information regarding the executive
officers and directors of NYMEX Holdings and NYMEX Exchange after the
demutualization.
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
Daniel Rappaport................. 46 Chairman of the Board 2001
Mitchell Steinhause.............. 52 Vice Chairman 2002
Richard Schaeffer................ 47 Director, Treasurer 2002
Neil Citrone..................... 36 Director, Secretary 2003
Stephen Ardizzone................ 38 Director 2001
Madeline Boyd.................... 47 Director 2001
Robert Coakley................... 36 Director 2002
John Conheeney................... 71 Director 2002
Thomas Costantino................ 49 Director 2001
Anthony George Gero.............. 63 Director 2002
David Greenberg.................. 35 Director 2003
E. Bulkeley Griswold............. 61 Director 2002
Jesse B. Harte................... 42 Director 2003
Robert Halper(1)................. 41 Director 2001
Scott Hess....................... 43 Director 2003
Steven Karvellas................. 40 Director 2002
Harley Lippman................... 45 Director 2001
Kevin McDonnell.................. 40 Director 2002
Gary Rizzi....................... 45 Director 2001
Richard Saitta................... 50 Director 2003
Robert Steele.................... 61 Director 2001
R. Patrick Thompson, Esq......... 51 President
Neal L. Wolkoff, Esq............. 44 Executive Vice President
Christopher K. Bowen, Esq........ 39 Senior Vice President & General
Counsel
Patrick F. Conroy................ 43 Senior Vice President --
Finance & Administration
</TABLE>
58
<PAGE> 63
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
Robert Levin..................... 44 Senior Vice President --
Planning & Development
Bernard J. Purta................. 56 Senior Vice President --
Operations & Regulatory Affairs
Stuart A. Smith.................. 52 Senior Vice President --
Operations
</TABLE>
- -------------------------
(1) Mr. Halper was appointed to the board of directors at its meeting held on
April 5, 2000. His term will expire on March 20, 2001, the date of the next
scheduled annual meeting of members.
Each member of the board of directors of NYMEX also serves, and after the
demutualization will continue to serve, on the board of directors of COMEX. Each
member of the NYMEX executive committee serves, and after the demutualization
will continue to serve, on the board of directors of the NYMEX Charitable
Foundation, Inc. and, other than Mr. Karvellas, the COMEX Clearing Association,
Inc.
Daniel Rappaport has been Chairman of the board of directors of NYMEX since
March 1993 and a director of NYMEX since 1986. Mr. Rappaport has also been
Chairman of the board of directors of COMEX and COMEX Clearing Association, Inc.
since August 1994 and Chairman of the board of directors of NYMEX Charitable
Foundation, Inc. since March 1993. He currently serves on the CFTC's Global
Markets Advisory Committee and National Petroleum Council as well as on the
boards of New York Law School and Connecticut Innovations. Prior to joining
NYMEX, Mr. Rappaport was a lawyer engaged in the practice of general corporate
law and was a self-employed floor trader. He was also the President of Brighton
Trading Corporation, which was formerly a clearing member of NYMEX. Mr.
Rappaport holds a B.S. from Syracuse University, an M.B.A. from Baruch College,
and a J.D. from New York Law School.
Mitchell Steinhause has been Vice Chairman of the board of directors of
NYMEX since March 2000 and has been a director of NYMEX since 1992. Mr.
Steinhause also previously served as Corporate Secretary of NYMEX. He has been a
member of NYMEX since 1975 as both a floor broker and local trader. Mr.
Steinhause received his bachelor of arts degree from the University of
Pittsburgh and a masters of business administration in accounting from St.
John's University.
Richard M. Schaeffer has been a director of NYMEX since March 1990 and the
Treasurer of NYMEX since March 1993. Mr. Schaeffer is a Senior Vice President
and Director of Global Energy Futures for ABN Amro, Inc. Prior to that, Mr.
Schaeffer was Senior Vice President/Director of The Chicago Corp., which is a
clearing member of both NYMEX and COMEX, since 1987. Mr. Schaeffer holds a B.S.
in Business Administration from the University of Maryland.
Neil Citrone has been a director of NYMEX since 1997 and has been Corporate
Secretary since 1999. Mr. Citrone is a Vice President of Pioneer Futures, Inc.
and has been employed by Pioneer since 1990. Prior to that, Mr. Citrone was
employed by Delos Commodities. Mr. Citrone has a liberal arts degree from
Westchester University.
Stephen Ardizzone has been a director of NYMEX since 1998 and also serves
as a director of NYMEX PAC. He is presently the owner of Zone Energy Group Inc.
Mr. Ardizzone attended St. John's University, and the John Jay College of
Criminal Justice.
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<PAGE> 64
Madeline Boyd has been a director of NYMEX since 1998 and has been a member
of NYMEX for over 15 years. She received her bachelor of science degree in
business from Fairleigh Dickinson University. Ms. Boyd is chairman of the NYMEX
Charitable Foundation Committee and a director of the Commodity Floor Brokers
and Traders Association.
Robert Coakley has been a director of NYMEX since 1999 and is presently a
Senior Vice President at FIMAT USA Inc. He became a member of NYMEX in 1990. Mr.
Coakley graduated from Fordham University in 1985 with a bachelor of science
degree in finance and accounting. Pursuant to a settlement agreement reached
with Mr. Coakley, the National Futures Association restricted Mr. Coakley's
registration as a floor broker for two years effective July 28, 1999. This
restriction on registration will be removed after this two year period if Mr.
Coakley is not charged with a violation of the Commodity Exchange Act, National
Futures Association requirements, self-regulatory organization rules or any
statute rule or regulation of any law enforcement or regulatory agency.
John Conheeney has been a public director of NYMEX since 1996. Mr.
Conheeney has also been a member of the boards of the Chicago Board of Trade,
the Chicago Mercantile Exchange, Globex and COMEX. He is a graduate of Manhattan
College, and also attended the Graduate School of Business at Tulane University.
Thomas Costantino has been a director of NYMEX since 1995 and has been a
member of NYMEX since 1993. He is currently employed by Unocal. Mr. Costantino
received a bachelor of science degree in economics, and a masters of business
administration in finance from the University of Maryland. He has completed
other graduate level work in accounting and finance at New York University.
Anthony George Gero has been a member of NYMEX since 1966 and has served as
a director for an aggregate of 19 years. He is presently Senior Vice President
of investments, senior spokesman for the futures division, and a President's
Council member of Prudential Securities, Incorporated. Mr. Gero is also a first
vice president of PSI. A graduate of the New York University School of Commerce,
Mr. Gero received his certificate in investment banking from the Investment
Bankers Association at the Wharton School in 1965. Mr. Gero is currently a board
member of the New York Futures Exchange and FINEX and was previously a director
of the Commodity Clearing Corporation. He is also Chairman of the NYMEX PAC and
Chairman of the Commodity Floor Brokers and Traders Association. He is a member
of the American Stock Exchange, COMEX, the New York Board of Trade, the New York
Futures Exchange, FINEX, the Coffee, Sugar & Cocoa Exchange and the New York
Cotton Exchange and authored the textbook Precious Metals.
David D. Greenberg has been a director of NYMEX since March 2000 and has
been a member of NYMEX since 1990 and of the COMEX Division since 1988. Mr.
Greenberg is also a member of the New York Board of Trade and a director of the
Commodity Floor Brokers and Traders Association. He is president of Sterling
Commodities Corp. He is a graduate of Syracuse University.
E. Bulkeley Griswold has been a public director of NYMEX since 1996. Mr.
Griswold is the Managing General Partner of L&L Capital Partners, LLC, and
serves on the boards of Scan-Optics, Inc., Trust Company of Connecticut and
Fleet Bank.
Robert Halper has been a director of NYMEX since April 2000 and has been a
member of NYMEX since 1983. Mr. Halper has a BA degree in economics from SUNY
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<PAGE> 65
Binghamton. Pursuant to a settlement agreement dated February 22, 1995 entered
into with Mr. Halper, the CFTC conditioned Mr. Halper's registration as a floor
trader on his activities being subject to a Supplemental Sponsor Certification
statement and restricted his service on self-regulatory governing boards or
other oversight committees for such period of conditional registration. This
conditional registration expired on February 22, 1996.
Jesse B. Harte has been a director of NYMEX since March 2000 and has been a
member of NYMEX since 1983. He is a former owner of Bay Area Petroleum a large,
independent floor brokerage operation and a Senior Vice President of Daiwa
Securities, a Futures Commission Merchant. Currently, Mr. Harte is employed by
Duke Energy Trading and Marketing, LLC. Mr. Harte is a graduate of The
University of Maine with a Bachelor of Science in Resource Economics.
Scott Hess has been a member of NYMEX since 1982 and a director since 1997.
He is presently a partner in G&H Commodities. He is also a director of the
Commodity Floor Brokers and Traders Association. Mr. Hess holds a business
degree from Montclair State University and a masters of business administration
in marketing from Pace University.
Steven J. Karvellas has been a director of NYMEX since 1996. After majoring
in finance at the University of Pennsylvania, Mr. Karvellas's career began in
1981 as a clerk on COMEX. In 1984, he became a member of COMEX and has been a
member of NYMEX since 1990. He was elected to the board of directors of COMEX in
1987.
Harley Lippman has been a public director of NYMEX since 1999. Mr. Lippman
is the founder and chief executive officer of Genesis 10 Corp., an information
technology company. He currently serves on the advisory board of the School of
International and Public Affairs at Columbia University. He also serves on the
board of the Middle East Forum and the national commission of the
Anti-Defamation League of New York.
Kevin McDonnell has been a director of NYMEX since 1999 and a member of
NYMEX for more than 15 years. He is a graduate of Fordham University with a
bachelor of science degree in accounting and finance.
Gary Rizzi has been a director of NYMEX since 1995. Mr. Rizzi has been an
officer of A.G. Edwards and a member of NYMEX since 1984. He is a member of the
Coffee, Sugar & Cocoa Exchange and the New York Cotton Exchange.
Richard Saitta has been a director of NYMEX since 1983. He is presently an
independent floor broker and is President of Star Futures Corp. He has been a
member since 1976 and has served on the NYMEX board since 1983.
Robert Steele has been a public director of NYMEX since 1999 and previously
served as a director from 1988 to 1995. Mr. Steele is a former public director
of NYMEX and vice chairman of the John Ryan Company, an international bank
marketing firm. He currently serves on the boards of Scan Optics, Inc.,
SmartServ Online, Inc., Accent Color Sciences and NLC Insurance Co. and is
chairman of the board of directors of Moore Medical Corp. He also served as a
U.S. Congressman from the second district in Connecticut from 1970 - 1974.
R. Patrick Thompson has been President of NYMEX since October 1989. Mr.
Thompson also serves as President of COMEX and the COMEX Clearing Association,
Inc. From March 1988 to October 1989, he served as Executive Vice President of
NYMEX. He has also held positions with NYMEX as Senior Vice President --
Compliance, and Senior Vice President and General Counsel. Mr. Thompson sits on
the
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board of directors of the National Futures Association and the Futures Industry
Institute. Earlier in his career he served as a trial attorney with the CFTC.
Mr. Thompson holds a B.S. in Biology from St. Joseph's College and a J.D. from
Catholic University.
Neal L. Wolkoff has been Executive Vice President of NYMEX since July 1993
and was Senior Vice President -- Operations and Regulatory Affairs from November
1989 to July 1993. Mr. Wolkoff has also served as Executive Vice President of
COMEX and the COMEX Clearing Association, Inc. since August 1994. He previously
served as a director of EnerSoft Inc. Earlier in his career, he served as a
trial attorney with the CFTC. Mr. Wolkoff holds a B.A. from Columbia College and
a J.D. from Boston University School of Law. He is a member of the bar of the
State of New York.
Christopher K. Bowen has been Senior Vice President and General Counsel of
NYMEX since 1997. Mr. Bowen has also held positions at the Exchange of Associate
General Counsel and Senior Associate General Counsel. He has also served as
Counsel/ Manager of Futures Compliance at Morgan Stanley & Co. Inc. and as an
attorney at the CFTC. Mr. Bowen holds a B.A. from Columbia University and a J.D.
from the University of Maryland. Mr. Bowen also serves as Senior Vice President
and General Counsel of COMEX and the COMEX Clearing Association, Inc.
Patrick F. Conroy has been the Senior Vice President -- Finance &
Administration of NYMEX since January 1993. Mr. Conroy also serves as Senior
Vice President -- Finance of COMEX and the COMEX Clearing Association, Inc. From
1987 to 1993, Mr. Conroy was employed as the Senior Vice President -- Finance of
the American Stock Exchange. Prior to such time, Mr. Conroy was employed by KPMG
Peat Marwick. Mr. Conroy is a licensed C.P.A. who holds a B.S. in Accounting
from St. John's University.
Robert Levin has been Senior Vice President -- Planning and Development of
NYMEX since June 1993. Mr. Levin was Vice President -- Product Development of
NYMEX from July 1991 until June 1993. Mr. Levin also currently serves as Senior
Vice President -- Planning and Development of COMEX. Mr. Levin holds a B.A. from
the University of Rochester and an M.A. and Ph.D. from the University of New
Mexico.
Bernard J. Purta has been Senior Vice President -- Operations and
Regulatory Affairs of NYMEX since December 1993. He also serves as Senior Vice
President -- Operations and Regulatory Affairs of COMEX and the COMEX Clearing
Association, Inc. (of which he is also Treasurer) and as Treasurer of NYMEX PAC.
He currently is a director of the FIA Operations Division (N.Y.). Mr. Purta is a
licensed C.P.A. who holds an M.B.A. in Management from Fairleigh Dickinson
University, a B.S. in Accounting from St. Peter's College and an A.A.S. in
Accounting from Bergen Community College. Earlier in his career he served as a
staff member at the CFTC.
Stuart A. Smith has been Senior Vice President -- Operations of NYMEX since
May 1992. Mr. Smith currently serves as Senior Vice President -- Operations of
COMEX. Mr. Smith previously served as Vice President of Trading Floor Operations
at NYMEX from 1986 to 1996. Prior to that time, he was an Assistant Vice
President at the American Stock Exchange. Mr. Smith holds a B.B.A. from Pace
University.
COMMITTEES OF THE BOARD
The board of NYMEX Holdings is authorized to designate from among its
members an executive committee, which will have all the authority of the board
of directors, and other committees, each consisting of two or more directors.
The Chairman of the board will be an ex officio member of all committees. The
board of NYMEX Exchange will have
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the same committees with the same functions and members as NYMEX had before the
demutualization. In addition the board of NYMEX Exchange may appoint additional
regular committees of the board of NYMEX Exchange. The executive and audit
committees are described below.
EXECUTIVE. The executive committee exercises the authority of the board of
directors when the board is not in session, as permitted by law and the bylaws
and rules of NYMEX. Members: Ms. Boyd and Messrs. Citrone, Karvellas, Rappaport,
Rizzi, Schaeffer and Steinhause.
AUDIT. The audit committee makes recommendations concerning the engagement
of independent public accountants, reviews with the independent public
accountants the scope and results of audit engagement, approves professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of audit
and non-audit fees and reviews the adequacy of NYMEX's internal accounting
controls. Members: Messrs. Griswold, Rappaport and Steele.
COMPENSATION OF DIRECTORS
Members of the board of NYMEX Exchange will receive the same compensation
as members of the board of NYMEX before the demutualization as set forth below.
The board of NYMEX Holdings does not intend to establish any compensation for
members of the board of NYMEX Holdings.
CHAIRMAN STIPEND. Effective January 1, 2000, the Chairman receives an
annual stipend of $600,000. The Chairman is also eligible to receive a year-end
bonus in an amount to be determined and approved by the board.
VICE CHAIRMAN STIPEND. Effective April 1, 2000, the Vice Chairman receives
an annual stipend of $100,000 as well as a fee of $1,000 for each board meeting
attended. The Vice Chairman is also eligible to receive a year-end bonus in an
amount to be determined and approved by the board.
DIRECTOR STIPEND. Directors receive a monthly stipend of $2,500, or
$30,000 a year. Effective April 1, 2000, directors receive an additional fee of
$1,000 for each board meeting attended. In addition, effective April 1, 2000,
directors serving on the executive committee receive a $20,000 yearly retainer.
Directors serving on the executive committee are also eligible to receive a year
end bonus in an amount to be determined and approved by the board.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of our Chairman of the board and the other four most highly paid
officers in respect of 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- -------------------------------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C>
Daniel Rappaport, Chairman............ 1999 $ -- $1,500,000 $100,000(2)
R. Patrick Thompson, Esq.,
President........................... 1999 412,500 200,000 --
Neal Wolkoff, Esq., Executive Vice
President........................... 1999 342,500 130,000 --
Albert Helmig, Jr., Vice
Chairman(3)......................... 1999 -- 300,000 50,000
Christopher Bowen, Esq., Sr. Vice
President & General Counsel......... 1999 198,450 76,923 --
</TABLE>
- -------------------------
(1) Perquisites and other personal benefits aggregating the lower of $50,000 or
10% of the sum of salary and bonus are not reported.
(2) Represents stipend payments for serving as the Chairman of the board of
directors.
(3) Mr. Helmig's term as Vice Chairman ended on March 21, 2000. The $50,000
shown under "All Other Compensation" represents stipend payments for serving
as Vice Chairman of the board of directors.
EMPLOYEE BENEFITS PLANS
401(k) PLAN
NYMEX sponsors a defined contribution plan known as the "Savings and
Investment Plan," for all eligible domestic employees with at least one year of
service, provided that they have completed 1,000 hours of employment within one
year. This plan qualifies as a deferred salary arrangement under Section 401(k)
of the Internal Revenue Code. Participating employees may elect to defer up to
15% of their base salary, subject to the annual Internal Revenue Code
contribution limit. NYMEX matches pre-tax contributions up to a maximum of 3% of
base salary. A participant may also make after-tax contributions. NYMEX does not
match these contributions. This amount may be reduced to comply with applicable
Internal Revenue Code requirements. NYMEX also makes a year end contribution
ranging from 2% to 7% of base salary based upon tenure for each eligible plan
member provided NYMEX attains certain minimum corporate profitability
thresholds. Participants are immediately vested in their before-tax and
after-tax contributions and actual earnings on their contributions. Vesting in
the matching and year end contributions vest 40% after two full years of
service, and then 20% per year up to 100% after five years of service.
Participants may receive the full value of their accounts generally only upon
termination of employment. The plan allows earlier receipt of a participant's
share in the plan, subject to certain limitations and conditions as set forth in
the plan document.
DEFERRED COMPENSATION PLAN
Effective July 1, 1997, NYMEX instituted a non-qualified deferred
compensation plan for eligible officers. The deferred compensation plan allows
participants to defer receipt of current compensation in order to provide
retirement benefits on behalf of employees. NYMEX may provide a matching and
year end contribution to the plan. Matching
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contribution percentages and vesting follow the same guidelines as NYMEX's
defined contribution plan. The deferred compensation plan is not intended to be
a qualified plan under the provisions of the Internal Revenue Code. It is
intended to be unfunded and, therefore, all compensation deferred under this
plan is held by NYMEX and commingled with its general assets. The participating
employees are general creditors of NYMEX with respect to these benefits. NYMEX
has the right to amend, modify or terminate the deferred compensation plan at
any time.
POSTRETIREMENT BENEFIT PLANS
NYMEX provides certain health care and life insurance benefit plans for
qualifying retired employees. Substantially all of NYMEX's employees may become
eligible for these benefits if they reach specified age and years of service
criteria while employed by NYMEX.
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of common stock of
NYMEX Holdings which will be beneficially owned upon the completion of the
demutualization by each director and executive officer of NYMEX Holdings. The
number of shares of common stock of NYMEX Holdings owned will be the same as the
number of memberships owned prior to the demutualization. No director or
executive officer of NYMEX Holdings will beneficially own more than one percent
of all outstanding shares of common stock upon completion of the
demutualization. No person will be the beneficial owner of 5% or more of the
shares of common stock.
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENT OF
STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED
- ------------------------ ------------ ------------------
<S> <C> <C>
Daniel Rappaport.......................... 3 *
Mitchell Steinhause....................... 1 *
Richard Schaeffer......................... 3 *
Neil Citrone(1)........................... 1 *
Stephen Ardizzone......................... 1 *
Madeline Boyd............................. 1 *
Robert Coakley(2)......................... 1 *
John Conheeney............................ 0 *
Thomas Costantino(3)...................... 1 *
Anthony George Gero....................... 2 *
David Greenberg........................... 1 *
E. Bulkeley Griswold...................... 0 *
Robert Halper............................. 2 *
Jesse B. Harte(4)......................... 1 *
Scott Hess................................ 1 *
Steven Karvellas.......................... 1 *
Harley Lippman............................ 0 *
Kevin McDonnell........................... 1 *
Gary Rizzi(5)............................. 1 *
Richard Saitta............................ 1 *
Robert Steele............................. 0 *
R. Patrick Thompson, Esq. ................ 0 *
</TABLE>
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<PAGE> 70
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENT OF
STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED
- ------------------------ ------------ ------------------
<S> <C> <C>
Neal L. Wolkoff, Esq. .................... 0 *
Christopher K. Bowen, Esq. ............... 0 *
Patrick F. Conroy......................... 0 *
Robert Levin.............................. 0 *
Bernard J. Purta.......................... 0 *
Stuart A. Smith........................... 0 *
-- ---
All directors and executive officers as a
group................................... 23 2.8%
</TABLE>
- -------------------------
* Less than one percent.
(1) Pursuant to an agreement with Pioneer Futures, Inc., a member firm of NYMEX,
Mr. Citrone is the nominal holder of Pioneer's membership and is entitled to
the privileges of the membership, including the right to vote on all matters
on which members are entitled to vote. However, the agreement also provides
that Mr. Citrone may not sell, transfer or otherwise encumber the membership
without the consent of Pioneer. This type of agreement, in which a member
designates an individual to exercise voting rights and other membership
privileges but does not give the individual the power to dispose of a
membership, is known as an "ABC Agreement." The provisions of this ABC
Agreement will also apply to the common stock of NYMEX Holdings shown to be
beneficially owned by Mr. Citrone.
(2) Mr. Coakley has entered into an ABC Agreement with FIMAT USA Inc. The
provisions of this ABC Agreement will also apply to the common stock of
NYMEX Holdings shown to be beneficially owned by Mr. Coakley.
(3) Mr. Constantino has entered into an ABC agreement with Union Oil Company of
California. The provisions of this ABC Agreement will also apply to the
common stock of NYMEX Holdings shown to be beneficially owned by Mr.
Costantino.
(4) Mr. Harte has entered into an ABC Agreement with Duke Energy Trading and
Marketing, LLC. The provisions of this ABC Agreement will also apply to the
common stock of NYMEX Holdings shown to be beneficially owned by Mr. Harte.
(5) Mr. Rizzi has entered into an ABC Agreement with AGE Commodity Clearing
Corp. The provisions of this ABC Agreement will also apply to the common
stock of NYMEX Holdings shown to be beneficially owned by Mr. Rizzi.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following are descriptions of material transactions involving NYMEX and
its directors:
- Pioneer Futures, Inc., of which Mr. Citrone is Vice President, currently
leases from NYMEX approximately 13,000 square feet of space at the One
North End facility. Pioneer has two leases, one for 2,840 square feet
expiring on December 4, 2002 and one for 10,360 square feet expiring on
December 14, 2002. The current aggregate annual rent for these spaces is
$457,320. Pioneer has signed a term sheet to lease an additional 18,893
square feet of space at the One North End facility through April 1, 2005
at an annual rent of $756,000.
- FIMAT USA Inc., of which Mr. Coakley is a Senior Vice President,
currently leases from NYMEX approximately 1,350 square feet of space at
the One North End facility. The lease expires on July 27, 2001. The
current annual rent for this space is $56,574.
- Sterling Commodities Corp., of which Mr. Greenberg is President,
currently leases from NYMEX approximately 6,253 square feet of space at
the One North End facility. The lease expires on November 23, 2002. The
current annual rent for this space is $225,108. Mr. Greenberg's father,
Martin Greenberg, is the Chief Executive Officer and 100% owner of
Sterling Commodities.
- Mr. Lippman is the founder and Chief Executive Officer of Genesis 10
Corp., a company which, among other things, places executives in the
information technology field. Mr. Lippman owns 95% of the equity interest
of Genesis 10. Genesis 10 is one of the companies which NYMEX has
consulted with regarding its search for a new Chief Information Officer.
In the event that NYMEX hires a candidate recommended by Genesis 10,
Genesis 10 will earn a fee of 30% of the annual compensation of the
candidate who is hired. Management believes this is a typical fee for
this type of consulting and recommendation service. In addition, NYMEX
has entered into a written contractual relationship with Genesis 10 under
which Genesis 10 provides the services of one temporary Senior Developer
/Architect to NYMEX. NYMEX pays Genesis 10 $115 per hour for the Senior
Developer/Architect. Approximately $104,440 has been paid by NYMEX to
Genesis 10 for services rendered from October 1999 to the present.
Furthermore, if the Senior Developer/Architect is hired on a permanent
basis, NYMEX will be obligated to pay Genesis 10 a fee of 30% of annual
compensation in accordance with the arrangement described above in this
paragraph.
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DESCRIPTION OF CAPITAL STOCK OF NYMEX HOLDINGS
The following summary of NYMEX Holdings' capital stock describes the
material terms of the stock. For a complete description, we refer you to NYMEX
Holdings' charter and bylaws, which are attached as Annexes C and D to this
proxy statement and prospectus.
GENERAL
NYMEX Holdings' charter authorizes the issuance of 816 shares of common
stock, par value $0.01 per share. This number corresponds to the number of NYMEX
memberships outstanding immediately prior to the demutualization. Immediately
following the demutualization, all 816 shares of NYMEX Holdings common stock
will be issued and outstanding.
VOTING RIGHTS, DIVIDEND RIGHTS AND LIQUIDATION RIGHTS
Each outstanding share of common stock is entitled to one vote on any
matter on which stockholders are entitled to vote. The holders of shares of
common stock are entitled to share ratably in dividends or distributions, if, as
and when dividends or distributions are declared by the board of directors of
NYMEX Holdings at its discretion. NYMEX Holdings has no current plans to pay
cash dividends on the common stock. Upon dissolution, liquidation or winding-up
of NYMEX Holdings, holders of common stock are entitled to share ratably in the
net assets available for distribution to stockholders after the payment of debts
and other liabilities subject to the prior rights of any issued preferred
shares. Holders of common stock do not have any rights to purchase additional
shares of stock from NYMEX Holdings, to have their common stock converted into
or exchanged for other securities, to have their common stock repurchased by
NYMEX Holdings or to receive a preferred return on their shares of common stock.
TRANSFER RESTRICTIONS
In the demutualization, each membership of NYMEX will be automatically
converted into one Class A membership of NYMEX Exchange as well as one share of
NYMEX Holdings common stock. Each Class A membership of NYMEX Exchange will be
"stapled" together with the corresponding share of NYMEX Holdings common stock.
The Class A memberships and the common stock of NYMEX Holdings will not be
separately transferable either by the Class A members or the stockholders of
NYMEX Holdings.
The Class A memberships may be "unstapled" from the common stock of NYMEX
Holdings by a vote of a majority of the shares of common stock. If the
stockholders approve the unstapling, the charter of NYMEX Holdings will be
amended and the Class A memberships and the common stock of NYMEX Holdings will
be separately transferable.
TRANSFER AGENT
NYMEX Holdings will be the transfer agent and registrar of the common
stock.
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DESCRIPTION OF MEMBERSHIPS OF NYMEX EXCHANGE
The following summary of the terms of NYMEX Exchange's memberships
describes the material terms of the memberships following the demutualization.
For a complete description, we refer you to NYMEX Exchange's certificate of
incorporation and bylaws, which are attached to this proxy statement and
prospectus as Annexes E and F. When we refer to NYMEX members or members
throughout this document, we are referring to owners of memberships in the NYMEX
Division of the New York Mercantile Exchange, as opposed to members of the COMEX
Division and lessees of NYMEX Division memberships.
GENERAL
NYMEX Exchange has two classes of memberships: Class A memberships and one
Class B membership. The number of Class A memberships is limited to 816. The
board of directors may create additional classes of members having rights and
limitations as the board determines, except that no additional class of
membership, other than the Class B membership, may have voting or other rights
equal to or greater than the Class A memberships.
Class A memberships may be held solely by those who qualify for membership
in NYMEX Exchange. The sole Class B membership will be held by NYMEX Holdings
following the demutualization.
The members of NYMEX's COMEX Division will continue to have the same
trading and other contractual rights following the demutualization as at
present. NYMEX Exchange, as the corporate successor to NYMEX, will assume all of
its obligations to the COMEX Division members.
TRADING PRIVILEGES
The Class A memberships have trading privileges on the NYMEX Exchange as
set forth in the rules of NYMEX Exchange. Those trading privileges are identical
to the privileges that NYMEX members enjoy today.
VOTING RIGHTS
At present, each NYMEX member is entitled to one vote on all matters on
which members are entitled to vote, even if multiple memberships are owned by
the same person. Unlike NYMEX, Class A members of NYMEX Exchange will not be
limited to one vote per member; rather each Class A member will be entitled to
one vote per each membership owned. NYMEX Holdings, as the Class B member, is
entitled to one vote on all matters including fundamental changes such as an
amendment to the certificate of incorporation or a merger of NYMEX Exchange.
NYMEX Holdings' board would exercise this vote on behalf of NYMEX Holdings.
Unless and until the common stock of NYMEX Holdings and the Class A memberships
of NYMEX Exchange are unstapled, the board of NYMEX Holdings will be the same as
the board of NYMEX Exchange. Those directors will be elected by the Class A
members of NYMEX Exchange in their capacity as stockholders of NYMEX Holdings
and are subject to the same criteria for election as the existing board members
of NYMEX.
The Class A memberships are only entitled to vote on amendments to the
bylaws of NYMEX Exchange. Amendments to the bylaws of NYMEX Exchange must be
approved by a majority of all memberships of NYMEX Exchange, voting together as
a single class.
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So long as the Class A memberships remain stapled to the common stock of
NYMEX Holdings, NYMEX Holdings, as the sole Class B member, must elect the
directors of NYMEX Holdings to serve as the directors of NYMEX Exchange and must
elect the Chairman and Vice Chairman of NYMEX Holdings to serve as the Chairman
and Vice Chairman, respectively, of NYMEX Exchange.
DISTRIBUTIONS
NYMEX Holdings, as the sole Class B member, is entitled to receive all
dividends and other distributions of any type, including upon liquidation, made
by NYMEX Exchange. The Class A members have no right to receive any dividends or
distributions made by NYMEX Exchange.
TRANSFER RESTRICTIONS
Membership in NYMEX Exchange is a personal privilege and transferable only
pursuant to the terms and conditions established by the certificate of
incorporation, bylaws and rules of NYMEX Exchange. The Class A memberships of
NYMEX Exchange are "stapled" to the shares of NYMEX Holdings common stock. This
means that the Class A memberships are not transferable and will not be
transferred upon the books of NYMEX Exchange unless a simultaneous transfer is
made by the same transferor to the same transferee of a number of shares of
NYMEX Holdings common stock equal to the number of Class A memberships being
transferred. In addition, each certificate evidencing ownership of shares of
NYMEX Holdings common stock will be deemed to evidence the same number of Class
A memberships. The Class A memberships may be "unstapled" from the common shares
of NYMEX Holdings by a vote of the holders of a majority of the outstanding
shares of common stock of NYMEX Holdings. If this occurs, the Class A
memberships and the common stock of NYMEX Holdings will be separately
transferable.
Members of NYMEX Exchange may only transfer their Class A memberships to
another member or a member-elect.
Before transferring a Class A membership, the member must first file a
notice of intention to transfer with the Office of the Secretary of NYMEX
Exchange. A member who owns a sole Class A membership will cease to have floor
trading privileges on the date a notice of intention to transfer is filed with
respect to his Class A membership.
No member may transfer a Class A membership unless and until all dues,
fees, assessments and other monies due to NYMEX Exchange have been paid. In
addition, no member may transfer a Class A membership unless and until all
claims arising out of the transaction of business on NYMEX Exchange have been
settled or discharged including all claims filed with the secretary of NYMEX
Exchange within 10 days after NYMEX Exchange notified the member of its receipt
of the notice of intention to transfer.
Notwithstanding the requirements set forth in the two preceding paragraphs,
a member may transfer a Class A membership if (1) the member owns more than one
Class A membership and the value of the claim is less than the then current
value of a Class A membership or (2) the transferor deposits a certified check
with NYMEX Exchange, payable to NYMEX Exchange, in an amount equal to the price
at which a Class A membership last sold or at which one was bid, whichever is
greater, and files an affidavit stating that all outstanding claims arising out
of the transaction of business with respect to that membership on NYMEX Exchange
have been settled or discharged.
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No member may transfer a Class A membership if the member is the subject of
any disciplinary proceeding or investigation by NYMEX Exchange under the bylaws
or rules of NYMEX Exchange unless the member submits a written agreement,
acceptable to the board of NYMEX Exchange, by which the member submits to the
continuing jurisdiction of NYMEX Exchange. This rule does not apply to lessees.
The transferee of a Class A membership must pay a transfer fee to NYMEX
Exchange in an amount to be fixed by the board of NYMEX Exchange.
All purchases and sales of Class A memberships must be made through the
Office of the Secretary, which shall maintain a file of bids and offers for
memberships. Any member desiring to buy or sell a membership must submit a
written offer to the Office of the Secretary.
Within 45 days of election to membership, a member-elect must purchase a
Class A membership. In the interim, the member-elect must abide by the
certificate of incorporation, bylaws and rules of NYMEX Exchange. If the
member-elect fails to cause the membership to be transferred within 45 days of
election to membership, his election will be void unless the time for compliance
is extended by the board of NYMEX Exchange.
The board of NYMEX Exchange may adopt rules relating to any requirements or
procedures for the acquisition or transfer of a membership as it may determine.
LEASING OF MEMBERSHIPS
A member may lease a membership to another member. Memberships subject to
outstanding seat financing agreements are prohibited from being leased. A copy
of the lease agreement must be delivered to the Office of the Secretary of NYMEX
Exchange and to the lessee's qualifying clearing member. A member may separately
lease his privileges to trade during regular trading hours and to trade
electronically on the NYMEX ACCESS(R) system.
If the member leases a membership to a member-elect, the lease agreement
must be approved by the membership committee. The agreement will not be
effective until the lessee is elected to membership and the lease agreement, or
its extension, is approved by the membership committee. The board of NYMEX
Exchange may establish requirements regarding provisions to be included in the
lease agreements.
A member who owns a sole membership and confers the benefits of membership
on a member firm may not lease such membership at any time. A member who has
leased his sole membership and seeks to regain membership status upon
termination of the lease will be required to file an application for
reinstatement to membership.
If a member leases either his regular trading privileges or his electronic
trading privileges with respect to his last or sole membership, the member will
not be entitled to member rates for trades executed for his account during the
trading session in which he has leased his rights. If a member leases only his
regular trading privileges without encumbering his electronic trading
privileges, the member will not be entitled to:
- serve on the board of NYMEX Exchange;
- receive any life insurance and/or disability insurance benefits;
- earn continuous service credits in connection with the Members Retention
and Retirement Plan;
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- place orders for the execution of any futures or options contracts,
provided that, if properly registered as a clerk, that person may
transmit customer orders for execution.
Notwithstanding the foregoing, the lessee of a membership by operation of
the lease is entitled to:
- serve on the board of NYMEX Exchange;
- receive life insurance and/or disability insurance benefits;
- vest and participate in any distributions from the Members Retention and
Retirement Plan;
- receive member rates for any trades executed for his account during any
regular trading hour.
Lessees of memberships have no voting rights in NYMEX Exchange or NYMEX
Holdings.
Lessors and lessees are permitted to serve on NYMEX Exchange committees to
the extent allowed by the certificate of incorporation, bylaws and rules and as
determined by the board of NYMEX Exchange. All lessors and lessees shall be
subject to such dues and assessments as are from time-to-time determined by the
board of NYMEX Exchange. Lessees shall not be entitled to any other residual
rights of membership not specifically granted by the lessor or the certificate
of incorporation, bylaws and rules of NYMEX Exchange.
A lessee who is the subject of any disciplinary proceeding or investigation
by NYMEX Exchange may transfer a membership back to a lessor upon the
termination of the lease provided that:
- the lessee will remain subject to NYMEX Exchange jurisdiction and be
personally liable for any fines assessed in connection with the
proceeding or investigation;
- the lessee will be deemed to have consented to the jurisdiction of the
court of the State of New York in New York County for the purpose of any
action brought by NYMEX Exchange to enforce its rights against such
lessee;
- the required trading account equity funds shall be (1) frozen until the
investigation is closed or proceeding concluded, (2) paid to NYMEX
Exchange to satisfy any outstanding fines, and (3) released only upon
written approval to the lessee's clearing member from the NYMEX
Exchange's Compliance Department.
Upon the termination of the lease agreement, whether by reason of death of
the lessee or the natural termination of the term of the lease, the parties
shall give written notice to NYMEX Exchange of the termination as promptly as
possible. The lessor of a membership shall give notice of a proposed lease
agreement or renewal thereof to the Office of the Secretary of NYMEX Exchange at
least 10 business days prior to the filing of the agreement. The lessor or
lessee of a membership who does not intend to renew a lease agreement must give
notice to the Office of the Secretary of NYMEX Exchange at least 10 business
days prior to the termination of the lease agreement. Neither the lessor nor the
lessee are permitted to sell or transfer the leased membership during the term
of the lease, unless the agreement specifically provides otherwise.
The board of NYMEX Exchange may adopt new or different rules relating to
eligibility and procedures for leasing of memberships. Rules established by the
board need
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<PAGE> 77
not be uniform and may differ among different categories of memberships as
determined by the board in its sole discretion.
ELIGIBILITY CRITERIA AND PROCEDURES
The criteria for eligibility for membership and procedures for becoming a
Class A member will be the same as the criteria and procedures currently
applicable to NYMEX members.
Every member and every applicant for membership must be at least 18 years
old or the minimum age of majority required to be responsible for his contracts
in each jurisdiction in which the member or applicant conducts business. Each
non-floor member and each applicant for membership other than as a floor member
shall have and, at all times shall maintain, net liquid assets of not less than
$25,000 or shall be guaranteed by a member firm for all obligations of such
member arising out of the transaction of business of NYMEX Exchange to the
extent of $25,000. "Floor member" means a member who has been granted floor
trading privileges. Each applicant as a floor member must be qualified to trade
on the floor by a clearing member who must execute the guarantees and other
documents as required by the board of NYMEX Exchange. With limited exceptions,
each applicant as a floor member must maintain, at all times, $50,000 equity
value in a trading account with the clearing member.
To be eligible for membership, an applicant must be sponsored by two
members in good standing. One of the sponsors must appear before the membership
committee and report the sponsor's knowledge of the personal history and
financial affairs of the applicant.
The membership committee is comprised of a number of members as the
Chairman of NYMEX Exchange may determine. The membership committee is divided
into two panels -- a NYMEX Division panel and a COMEX Division panel. The NYMEX
Division panel currently has 18 members.
Each applicant must submit an application and such other documentation as
the board of NYMEX Exchange may require. The application must be accompanied by
a non-refundable application fee in an amount as determined by the board of
NYMEX Exchange. Each member has the affirmative obligation to keep informed of
all pending applications and to provide the membership committee with any
adverse firsthand knowledge or information relating to an applicant's character
or financial or business history. Each member will be investigated and every
reference listed, all of whom must be members themselves, may be contacted.
Also, the applicant's financial statement will be verified by an independent
inquiry. However, any applicant as an non-floor member who is the subject of an
unlimited guarantee by his member firm shall not be required to provide a
financial statement.
The membership committee shall review each application and may require
additional documentation as determined by the committee. The membership
committee will vote on whether to recommend the application to the board of
NYMEX Exchange for approval. Each applicant must appear before the committee
along with at least one sponsor, unless waived by the committee. A vote of
two-thirds of the directors present at a meeting of the board of NYMEX Exchange
is required for admission as a member. An applicant who has been rejected by the
board of NYMEX Exchange may not be reconsidered for membership by the membership
committee for one year after the date of rejection.
The Chairman of the membership committee may waive certain eligibility
requirements as he may determine in the case of a member who transfers his last
membership and acquires a new membership within 45 days. Within two days after
posting his last membership for transfer, such member must notify the Office of
the Secretary of his
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<PAGE> 78
intention to acquire a new membership and file an application form with the
Office of the Secretary.
Members may confer membership privileges upon corporations, partnerships,
cooperative associations and sole proprietorships subject to the rules and
limitations set by the board of NYMEX Exchange. The board may also establish
procedures for conferring membership privileges and financial requirements for
member firms as it may determine in its sole discretion.
The board of NYMEX Exchange may adopt rules relating to the eligibility
requirements and financial standards for floor members as it may determine in
its sole discretion. These requirements and standards may differ from the
requirements set for regular membership.
The board may adopt new or different rules relating to financial standards
applicable to Class A members and member firms as a condition to becoming a
Class A member. Those rules may or may not also relate to a member's
continuation as a Class A member. Standards set by the board need not be uniform
and may differ among different categories of membership as determined by the
board in its sole discretion. Any Class A member, however, who is registered
with the CFTC must comply with the rules and regulations as the CFTC adopts
relating to financial requirements.
DUES, FEES AND ASSESSMENTS
The annual dues of Class A members will be fixed by the board at any
meeting of the board and are payable at such time as the board may determine.
The board may waive the payment of dues by all Class A members or by individual
Class A members as it determines. Dues are payable by the Class A member in
whose name the membership is registered.
From time to time the board may establish fees, in amounts as it
determines, on contracts traded on NYMEX Exchange. From time to time the board
may levy assessments as it determines to be necessary. All assessments are due
and payable if and when the board determines. All assessments are payable by the
member in whose name the membership is registered.
If a Class A member fails to pay any dues, assessments or fees when due and
the failure is not cured within 30 days after written notice to the Class A
member by NYMEX Exchange that the dues, assessments or fees are due, then the
Class A member will be suspended automatically from all rights and privileges of
membership. The suspension shall continue in effect until the failure is cured.
The Executive Committee of NYMEX Exchange, upon written application, may extend
the 30 day period, in its sole discretion.
If a Class A member who is suspended fails to pay any dues, assessments or
fees within 30 days of the suspension, then the Class A member will be expelled
from membership. The board or the Executive Committee, upon written application
received prior to the expiration of the 30 day period, and for good cause, may
extend the 30 day period.
Any Class A member who fails to pay any dues, assessments or fees after
written notice to the Class A member that such dues, assessments or fees are
payable, will pay a penalty, in addition to the sanctions imposed, as fixed from
time to time by the board, but not less than 20% of the amount due.
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Notice of all dues and assessments will be published by NYMEX Exchange and
will be given personally by delivery to a postal box located on the NYMEX
Exchange premises or by first class mail, postage prepaid and addressed to the
Class A member at the address the Class A member has filed with NYMEX Exchange.
Non-receipt of the notice will not operate to relieve the Class A member from
payment, to extend the time for payment or to relieve any Class A member from
the imposition of penalties for failing to pay dues and assessments.
EFFECT OF SUSPENSION OR EXPULSION
A Class A member or member firm whose rights and privileges of membership
have been suspended will continue to be:
- subject to the bylaws and rules of NYMEX Exchange;
- liable for all dues, assessments, fees and fines imposed by NYMEX
Exchange; and
- obligated to NYMEX Exchange and to its members for all contracts,
obligations and liabilities entered into or incurred before, during and
after the suspension.
A Class A member or member firm who has been expelled from the rights and
privileges of membership will continue to be:
- subject to the disciplinary and arbitration rules of NYMEX Exchange;
- liable for all dues, assessments, fees and fines imposed by NYMEX
Exchange prior to the expulsion; and
- obligated to NYMEX Exchange and its members for all contracts,
obligations, liabilities, fines and penalties entered into or incurred
prior to or after the expulsion.
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CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
OF NYMEX HOLDINGS, INC. AND NYMEX EXCHANGE
The summary set forth below describes the material provisions of the
certificate of incorporation and bylaws of both NYMEX Holdings and NYMEX
Exchange, each of which are attached as Annexes to this proxy statement and
prospectus.
BOARD OF DIRECTORS
The board of directors of NYMEX Holdings is divided into three classes
serving staggered three-year terms. In addition, any or all of the directors may
be removed for cause or without cause by vote of the holders of a majority of
the outstanding shares of common stock of NYMEX Holdings. Vacancies on the board
of directors may be filled by the remaining directors and the replacement
director may serve until the next annual meeting and until his successor is
elected and qualified.
The certificate of incorporation of NYMEX Exchange provides that, so long
as the common stock of NYMEX Holdings and Class A memberships of NYMEX Exchange
are stapled, the Class B member of the Exchange must elect any person who
becomes a director of NYMEX Holdings as a director of NYMEX Exchange. As a
result, the board of directors of NYMEX Exchange will be identical to and will
serve the same term as, the board of directors of NYMEX Holdings.
MEETINGS AND ACTIONS BY WRITTEN CONSENT
The presence in person or by proxy of holders of a majority of the shares
entitled to vote at a meeting of stockholders is necessary, and will constitute
a quorum, for the transaction of business at a meeting. Each stockholder will be
entitled to one vote for each share of stock held of record on the books of
NYMEX Holdings. The bylaws also allow stockholder action by written consent in
lieu of a meeting, but only if the action taken has the written consent of the
holders of shares having at least the minimum number of votes required to
authorize the action at a meeting at which all shares entitled to vote were
present and voted.
Commencing with the year 2001, annual meetings of stockholders will be held
on the third Tuesday in March of each year or if that day is a holiday, the next
business day, or as fixed by the board. At each annual meeting, the stockholders
will elect directors and transact other business that is properly brought before
the meeting.
Special meetings of stockholders may be called by the board of directors or
the Chairman at any time and for any purpose. The Chairman or the Secretary will
be required to call a special meeting upon the written request of the holders of
at least 10% of all outstanding shares entitled to vote on the action proposed
to be taken.
Notice of annual and special meetings shall be given not less than 10 nor
more than 50 days before the date of such meeting to each stockholder entitled
to vote at the meeting.
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<PAGE> 81
The bylaws of NYMEX Exchange provide that any action of NYMEX Exchange
taken by the members will require the vote of a majority of the votes cast at an
annual or special meeting of members by the members entitled to vote on such
action. The presence, in person or by proxy, of 150 members will constitute a
quorum for the transaction of business at a meeting. Each member will be
entitled to one vote for each membership owned of record by that member. A
member may not vote on any matter while any dues, assessments, fees or fines are
unpaid or during any period of suspension.
Annual meetings of members will be held on the third Tuesday in March of
each year to elect directors and transact other business that may come before
the meeting. Special meetings of members may be called by the board of directors
or the Chairman in their discretion. In addition, the Chairman or Secretary will
be required to call a special meeting upon the written request of a majority of
the board of directors or of members entitled to cast 10% of the votes entitled
to be cast at the meeting.
Notice of any meeting of the members must be given to each member not less
than 10 days nor more than 50 days before the date of the meeting.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Section 145 of the Delaware General Corporation Law authorizes a
corporation's board of directors to grant indemnity to directors and officers in
terms sufficiently broad to permit indemnification under some circumstances for
liabilities, including reimbursement for expenses incurred, arising under the
Securities Act, as amended.
As permitted by Delaware law, the certificate of incorporation of each of
NYMEX Holdings and NYMEX Exchange includes a provision that eliminates the
personal liability of directors for monetary damages for breach of fiduciary
duty as a director, except for liability:
- for any breach of the director's duty of loyalty to NYMEX Holdings, NYMEX
Exchange or its stockholders or members;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director obtained an improper personal
benefit.
Pursuant to the bylaws of NYMEX Holdings, NYMEX Holdings will indemnify its
directors, officers, employees and other agents to the fullest extent permitted
by law and may pay the expenses of indemnified persons incurred in defending a
suit or proceeding in advance of the final disposition of the suit or
proceeding. In addition, the bylaws of NYMEX Exchange provide that NYMEX
Exchange will indemnify its officers, directors and employees as well as members
of committees of NYMEX Exchange to the maximum extent permitted by law. The
NYMEX Holdings bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in that capacity, regardless of whether the bylaws would permit
indemnification.
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COMPARISON OF RIGHTS OF NYMEX MEMBERS
BEFORE AND AFTER THE DEMUTUALIZATION
The rights of members are currently governed by New York law as well as the
charter, bylaws and rules of NYMEX. Upon completion of the demutualization, the
rights of members will be governed by Delaware law, the certificate of
incorporation and bylaws of NYMEX Exchange and the certificate of incorporation
and bylaws of NYMEX Holdings. The following is a summary of the material
differences between NYMEX memberships and the combination of NYMEX Exchange
Class A memberships and common stock of NYMEX Holdings. This summary is not
intended to be a complete discussion of, and is qualified in its entirety by
reference to New York law, Delaware law, and the certificate of incorporation
and bylaws of NYMEX, NYMEX Exchange and NYMEX Holdings. Copies of the
certificate of incorporation and bylaws of NYMEX Exchange and NYMEX Holdings are
attached as Annexes to this document.
<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
DIVIDENDS - The Delaware General - The New York
Corporation Law permits not-for-profit corporation
the payment of dividends law prohibits the payment
by NYMEX Holdings and of dividends, subject only
NYMEX Exchange. The board to very limited
of each has the discretion exceptions.
to determine whether and
when to declare and
distribute dividends to
the stockholders or, in
the case of NYMEX
Exchange, the Class B
member. The Class A
members of NYMEX Exchange
have no right to receive
dividends or distributions
under the certificate of
incorporation of NYMEX
Exchange.
</TABLE>
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<PAGE> 83
<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
AUTHORIZED CAPITAL - The certificate of - The charter of NYMEX
incorporation and bylaws authorizes a total of 900
of NYMEX Exchange memberships, but the board
authorizes a total of 816 may create additional
Class A memberships and classes of memberships.
one Class B membership, However, no additional
but the board may create class of membership may
additional classes of have voting or other
memberships with rights rights equal to or greater
and limitations as it than the class of regular
determines. No additional members.
class of membership may
have voting or other
rights equal to or greater
than the Class A
memberships.
- The certificate of
incorporation of NYMEX
Holdings authorizes the
issuance of up to 816
shares of common stock.
MEMBER INTERESTS - NYMEX Exchange members - NYMEX members hold regular
hold Class A memberships memberships representing
representing trading trading, economic and
rights and the right to voting rights in NYMEX.
approve changes to the
bylaws of NYMEX Exchange.
The economic and other
voting rights are held by
NYMEX Holdings in the form
of one Class B membership.
- Members of NYMEX Exchange
also hold common stock in
NYMEX Holdings
representing economic and
voting rights in NYMEX
Holdings.
</TABLE>
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<PAGE> 84
<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
LIQUIDITY AND - The Class A memberships of - Members of NYMEX may
TRANSFERABILITY NYMEX Exchange and the transfer their memberships
common stock of NYMEX in their entirety;
Holdings are "stapled" provided that the member
together and cannot be or transferee is not the
separately transferred. A subject of any
member may transfer both disciplinary proceeding or
the member's Class A investigation, unless
membership in NYMEX certain conditions are
Exchange and the common met.
stock of NYMEX Holdings
together, provided that - There is no public market
the member or transferee for NYMEX memberships.
is not the subject of any Memberships may be
disciplinary proceeding or transferred only to
investigation, unless transferees that meet
certain conditions are certain fiscal and other
met. requirements.
- There is no public market
for the memberships of NYMEX
Exchange or the common
stock of NYMEX Holdings.
Memberships may be
transferred only to
transferees that meet
certain fiscal and other
requirements.
VOTING RIGHTS - The sole Class B - Each member of NYMEX has
membership held by NYMEX one vote regardless of the
Holdings has the sole number of memberships
voting right on matters owned.
relating to NYMEX
Exchange, except that - Lessees of NYMEX
Class A memberships have memberships may have
the right to vote with the voting rights as provided
Class B membership on for in the rules of NYMEX
proposed amendments to the from time to time.
bylaws of NYMEX Exchange.
As to any matters upon
which Class A members are
entitled to vote, each
member has one vote per
membership owned.
- Each stockholder of NYMEX
Holdings is entitled to
one vote per share on all
matters presented to the
stockholders.
- Lessees of NYMEX Exchange
memberships have no voting
rights.
</TABLE>
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<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
VOTE ON EXTRAORDINARY - Delaware law requires that - New York law requires that
TRANSACTIONS a merger, consolidation, an affirmative vote of at
sale of all or least 66 2/3% of votes
substantially all of the cast is required for the
assets or a dissolution approval of a merger,
must be approved by an consolidation, sale of all
affirmative vote of or substantially all of
holders of at least a the assets or a
majority of the dissolution of NYMEX,
memberships having the provided that the
right to vote for the affirmative vote of at
election of directors in least a quorum is also
the case of transactions obtained.
relating to NYMEX Exchange
or of outstanding shares
in the case of
transactions relating to
NYMEX Holdings.
ANNUAL MEETINGS - The bylaws of both NYMEX - The bylaws of NYMEX
Exchange and NYMEX provide for annual
Holdings provide for meetings to be held on the
annual meetings to be held third Tuesday in March of
on the third Tuesday in each year.
March of each year or if
that day is a holiday, the
next business day, or as
fixed by the board.
DUES, FEES AND ASSESSMENTS - The board of NYMEX - The board of NYMEX is
Exchange is authorized to authorized to set dues,
set dues, fees and fees and assessments and
assessments and determine determine the date for
the date for payment in payment in its discretion.
its discretion. The common
stock of NYMEX Holdings is
nonassessable.
REDEMPTION - Neither the bylaws of - The bylaws of NYMEX do not
NYMEX Exchange nor of provide for redemption
NYMEX Holdings provide for rights.
redemption rights.
</TABLE>
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<PAGE> 86
<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
AMENDMENT OF GOVERNING - The Class B member, NYMEX - Each member is entitled to
DOCUMENTS Holdings, has the sole vote on a one vote per
vote on changes to the member basis on any
charter of NYMEX Exchange. changes to the charter and
The Class A memberships bylaws of NYMEX.
have the right to vote
with the Class B member on
all proposed amendments to
the bylaws of NYMEX
Exchange.
- Each common stockholder of
NYMEX Holdings is entitled
to one vote per share on
changes to the charter of
NYMEX Holdings which,
under Delaware law, are
required to be submitted
to the stockholders for
approval. The bylaws of
NYMEX Holdings may be
amended by the
stockholders of NYMEX
Holdings.
PREEMPTIVE RIGHTS - Neither the bylaws of - The bylaws of NYMEX do not
NYMEX Exchange nor NYMEX provide for preemptive
Holdings provide for rights.
preemptive rights.
APPRAISAL RIGHTS - The bylaws of NYMEX - Neither New York law nor
Exchange do not provide the bylaws of NYMEX
for appraisal rights. provide for appraisal
rights under any
circumstances.
- Delaware law provides for
appraisal rights for
stockholders of NYMEX
Holdings in the case of
certain mergers or other
consolidations involving
NYMEX Holdings.
LIQUIDATION RIGHTS - Holders of Class A - Owners of NYMEX
memberships are not memberships are entitled
entitled to any to share ratably in any
liquidating distributions. liquidating distributions.
The holder of the Class B
membership has the right
to any distributions.
- Stockholders of NYMEX
Holdings are entitled to
share ratably in any
liquidating distributions.
</TABLE>
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<PAGE> 87
<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
ELECTION OF DIRECTORS - The board of NYMEX - The members of NYMEX are
Exchange is required to entitled to vote on a one
mirror the board of NYMEX vote per member basis for
Holdings as long as the the appointment of the
Class A memberships of member directors, the
NYMEX Exchange are Chairman and the Vice
"stapled" to the common Chairman.
stock of NYMEX Holdings.
As the sole voting member,
the Class B member is
required to appoint the
directors of NYMEX
Holdings as directors of
NYMEX Exchange. Any
director who leaves the
board of NYMEX Holdings is
required to leave the
board of NYMEX Exchange.
- Each stockholder is
entitled to cast one vote
per share for the election
of the directors and
designation of the
Chairman and Vice
Chairman.
TAXATION - NYMEX Exchange will be - NYMEX is treated as a
treated as a corporation corporation for federal
for federal income tax income tax purposes. The
purposes. Its profits will corporation is taxed on
be taxed at regular its profits. The
corporate tax rates. individual members are
taxed on dividends they
receive, if any, as
ordinary income.
- NYMEX Holdings will be
treated as a corporation
for income tax purposes.
NYMEX Holdings will be
taxed at regular corporate
tax rates. The holders of
common stock will have to
pay tax on any dividends
received as ordinary
income.
</TABLE>
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<PAGE> 88
<TABLE>
<CAPTION>
NYMEX EXCHANGE CLASS A
MEMBERSHIPS AND
NYMEX HOLDINGS COMMON
STOCK NYMEX MEMBERSHIPS
---------------------------- ----------------------------
<S> <C> <C>
LIMITED LIABILITY - Stockholders of NYMEX - Members are subject to the
Holdings are not subject assessment provisions of
to personal liability for NYMEX's charter, bylaws
the debts, obligations or and rules.
liabilities of NYMEX
Holdings. In addition the
common stock of NYMEX
Holdings is nonassessable.
- NYMEX Exchange members are
subject to the assessment
provisions of NYMEX
Exchange's certificate of
incorporation, bylaws and
rules, which are
substantially identical to
NYMEX's current charter,
bylaws and rules except
for changes made to
reflect the
demutualization and to
comply with Delaware law.
</TABLE>
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<PAGE> 89
FEDERAL INCOME TAX CONSEQUENCES OF THE DEMUTUALIZATION
The following is a summary of the material federal income tax consequences
to NYMEX and its members of the demutualization. The tax treatment of a member
may vary depending upon the member's particular situation, and certain members
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, and persons who are neither citizens nor residents
of the United States, or which are foreign corporations, foreign partnerships or
foreign estates or trusts as to the United States) may be subject to special
rules not discussed below. The following summary is based on the Internal
Revenue Code of 1986, as amended, treasury regulations promulgated under the
Code, administrative rulings and pronouncements, and judicial decisions
available on the date of this proxy statement and prospectus. This summary does
not address any state, local or foreign tax consequences.
EACH NYMEX MEMBER IS URGED TO CONSULT THE MEMBER'S TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO THE MEMBER OF THE DEMUTUALIZATION.
NYMEX has applied to the IRS for a ruling that is expected to conclude
that:
- memberships in NYMEX are treated as stock of NYMEX and the Class B
membership in NYMEX Exchange is treated as stock of NYMEX Exchange for
purposes of the Code;
- the exchange of memberships completed in the first merger will satisfy
the continuity of interest requirement for a tax-free reorganization
under Section 368 of the Code;
- assuming the first merger qualifies as a reorganization under Section
368(a)(1)(F) of the Code, the first merger and the second merger will be
treated as separate transactions in applying the reorganization and
Section 351 tax-free exchange rules of the Code;
- NYMEX will not recognize any gain or loss as a result of the first
merger;
- NYMEX members will not recognize gain or loss (and no amount will be
included in their income) as a result of the demutualization;
- the aggregate adjusted tax basis of the NYMEX Holdings stock and Class A
memberships in the hands of each member will be the same as the adjusted
tax basis of the member's interest in NYMEX immediately prior to the
demutualization, and will be allocated entirely to the Class A membership
in NYMEX Exchange owned by such member; and
- the holding period of the NYMEX Holdings stock will in each instance
include the holding period of the membership in NYMEX held immediately
before the demutualization if that member held the membership as a
capital asset on the effective date of the demutualization.
A ruling from the IRS, while generally binding on the IRS, may under
certain circumstances be revoked or modified by the IRS retroactively. NYMEX is
not currently aware of any facts or circumstances that would cause the IRS to
revoke or modify the IRS ruling.
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<PAGE> 90
In seeking the ruling NYMEX will make the representations based on the
opinion of Clifford Chance Rogers & Wells LLP, counsel to NYMEX, that:
(1) the first merger will qualify as a reorganization under Section
368(a)(1)(F) of the Code; and
(2) the second merger will qualify as a tax-free exchange under Section
351(a) of the Code.
NYMEX has obtained an opinion of its counsel as to these two issues rather than
seeking a ruling from the IRS as to these issues because the IRS takes the
position that the consequences of reorganizations are adequately established in
the tax law and it generally will not issue a ruling as to whether a transaction
qualifies as a reorganization under Section 368(a) of the Code or an exchange
under Section 351(a) of the Code.
If the requested IRS ruling is not received, NYMEX may elect to proceed
with the demutualization based solely on the opinion of Clifford Chance Rogers &
Wells LLP.
An opinion of counsel is not binding on the IRS or the courts, and no
assurance can be given that the IRS will not challenge the tax treatment of the
demutualization. Furthermore, the opinions of Clifford Chance Rogers & Wells LLP
are dependent upon future events, such as NYMEX Exchange continuing to own and
conduct NYMEX's business after the demutualization, the results of which will
not be reviewed by counsel. NYMEX is not currently aware of any facts or
circumstances that would cause the representations that they have made to the
IRS and to counsel to be untrue or incorrect in any material respect.
If the first merger does not qualify as a reorganization within the meaning
of Section 368(a) of the Code, the demutualization would be treated as a taxable
exchange for federal income tax purposes. In that event, each member likely
would be required to recognize gain or loss equal to the difference between (1)
the sum of the fair market value of the NYMEX Holdings stock and Class A
memberships received by the member and (2) the adjusted tax basis of the NYMEX
membership held by the member immediately before the demutualization, and NYMEX
would be required to recognize taxable gain in an amount equal to the excess of
(1) the sum of the aggregate fair market value of its assets and the amount of
liabilities of NYMEX assumed by NYMEX Exchange in the demutualization, over (2)
the aggregate adjusted tax basis of NYMEX's assets. If the first merger
qualifies as a reorganization but the second merger does not qualify as a tax
free exchange, each member likely would be required to recognize gain up to the
value of the NYMEX Holdings stock received by the member.
The highest marginal individual Federal income tax rate, which applies to
ordinary income and gain from the sale or exchange of capital assets held for
one year or less, is 39.6%. The maximum regular Federal income tax rate on
capital gains derived by individual taxpayers generally is 20% for sales and
exchanges of capital assets held for more than one year. All net capital gain of
a corporate taxpayer is subject to tax at ordinary corporate income tax rates of
up to 35%.
Clifford Chance Rogers & Wells LLP, counsel for NYMEX, has delivered an
opinion that the description of the Federal income tax consequences of the
demutualization, contained in this summary correctly sets forth the material
Federal income tax consequences of the demutualization to NYMEX and its members.
These opinions are based upon, among other things, the anticipated IRS Ruling
and representation letters provided by NYMEX containing customary statements
relating to certain technical
86
<PAGE> 91
requirements under the Code, including statements by NYMEX similar to those made
to the IRS in connection with the IRS Ruling request concerning the continuation
of NYMEX's business and the use of certain assets of NYMEX after the
demutualization.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
NYMEX Holdings by Clifford Chance Rogers & Wells LLP, New York, New York.
EXPERTS
The consolidated financial statements of the New York Mercantile Exchange
and subsidiaries as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999 included in this proxy statement and
prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
87
<PAGE> 92
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at December 31, 1999 and 1998... F-3
Consolidated Statements of Income and Members' Equity for
the Years Ended December 31, 1999, 1998 and 1997.......... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-5
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1999, 1998 and 1997.................... F-6
Pro Forma Consolidated Financial Information................ F-23
</TABLE>
F-1
<PAGE> 93
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of the
New York Mercantile Exchange:
We have audited the accompanying consolidated balance sheets of the New York
Mercantile Exchange and subsidiaries (the "Exchange") as of December 31, 1999
and 1998, and the related consolidated statements of income and members' equity
and of cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Exchange's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the New York Mercantile Exchange
and its subsidiaries at December 31, 1999 and 1998, 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 of America.
DELOITTE & TOUCHE LLP
New York, New York
March 31, 2000
F-2
<PAGE> 94
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 36,592 $ 14,353
Marketable securities, at market (cost of $80,905 and
$89,900)............................................... 76,992 92,259
Clearing and transaction fees receivable................. 14,421 6,075
Market data fees receivable.............................. 4,647 3,640
Prepaid taxes and expenses............................... 4,209 9,233
Deferred income taxes.................................... 476 346
Other current assets..................................... 4,172 2,794
-------- --------
Total current assets........................... 141,509 128,700
Property and equipment, net.............................. 228,613 223,000
Goodwill, net............................................ 20,635 22,788
Other assets............................................. 1,737 794
-------- --------
TOTAL ASSETS............................................. $392,494 $375,282
======== ========
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities............... $ 12,053 $ 7,829
Accrued salaries and related liabilities............... 2,848 2,924
Deferred credit -- grant for building construction..... 2,145 2,145
Accrued interest payable............................... 1,920 1,920
Other current liabilities.............................. 1,874 1,043
-------- --------
Total current liabilities...................... 20,840 15,861
Deferred income taxes.................................... 12,568 9,459
Postemployment and postretirement benefits............... 6,770 6,585
Notes payable............................................ 100,000 100,000
Deferred credit -- grant for building construction....... 121,179 123,324
Subordinated commitment -- members' retention program.... 37,935 33,820
-------- --------
Total liabilities.............................. 299,292 289,049
COMMITMENTS AND CONTINGENCIES (See Note 14)
MEMBERS' EQUITY.......................................... 93,202 86,233
-------- --------
TOTAL LIABILITIES AND MEMBERS' EQUITY.................... $392,494 $375,282
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 95
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING REVENUES:
Clearing and transaction fees, net of member
fee rebates of $13,065, $11,272 and
$10,012 in 1999, 1998 and 1997. .......... $ 105,206 $ 90,764 $ 80,773
Market data fees............................. 34,689 34,858 33,457
Other, net of rebates of $2,399, $1,364, and
$0 in 1999, 1998 and 1997................. 4,540 4,961 3,557
--------------- --------------- ---------------
Total operating revenues............. 144,435 130,583 117,787
--------------- --------------- ---------------
OPERATING EXPENSES:
Salaries and employee benefits............... 45,802 44,552 43,676
Telecommunications, equipment rentals and
maintenance............................... 15,917 14,627 13,164
General and administrative................... 14,012 14,983 16,869
Rent and facility............................ 12,877 12,760 17,116
Depreciation and amortization of property and
equipment, net of deferred credit
amortization.............................. 10,966 9,901 5,215
Professional services........................ 9,017 7,486 5,198
Marketing.................................... 2,537 2,403 4,813
Amortization of goodwill..................... 2,153 2,153 2,153
Loss on disposition of property and
equipment................................. 1,298 2,814 1,234
Other........................................ 4,984 5,344 5,026
--------------- --------------- ---------------
Total operating expenses............. 119,563 117,023 114,464
--------------- --------------- ---------------
INCOME FROM OPERATIONS......................... 24,872 13,560 3,323
OTHER INCOME (EXPENSES):
Investment income, net....................... 3,942 6,739 8,288
Interest expense............................. (7,721) (7,958) (6,967)
--------------- --------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES....... 21,093 12,341 4,644
PROVISION FOR INCOME TAXES..................... 8,903 6,263 3,495
--------------- --------------- ---------------
NET INCOME..................................... 12,190 6,078 1,149
MEMBERS' EQUITY, BEGINNING OF YEAR............. 86,233 86,565 91,787
LESS NET TRANSFER TO MEMBERS' RETENTION
PROGRAM:
NYMEX Division............................... (4,017) (5,255) (5,006)
COMEX Division............................... (1,204) (1,155) (1,365)
--------------- --------------- ---------------
MEMBERS' EQUITY, END OF YEAR................... $ 93,202 $ 86,233 $ 86,565
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 96
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 12,190 $ 6,078 $ 1,149
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and equipment,
net of deferred credit amortization................... 10,966 9,901 5,215
Amortization of goodwill................................ 2,153 2,153 2,153
Deferred income taxes................................... 2,979 8,262 4,378
Loss on disposition of property and equipment........... 1,298 2,814 1,234
Net changes in operating assets and liabilities:
Decrease (increase) in marketable securities:
Corporate funds.................................... 9,029 2,167 45,455
Members' retention funds........................... 6,238 (5,398) (5,223)
(Increase) decrease in clearing and transaction fees
receivable......................................... (8,346) 2,042 (1,477)
Increase in market data fees receivable............... (1,007) (154) (3,486)
Decrease (increase) in prepaid taxes and expenses..... 5,024 2,398 (9,353)
Increase in other current assets...................... (1,378) (366) (1,095)
Decrease in due from affiliate........................ -- -- 4,810
Decrease in prepaid pension cost...................... -- -- 2,003
Increase (decrease) in accounts payable and accrued
liabilities........................................ 4,224 (4,954) (8,590)
(Decrease) increase in accrued salaries and related
liabilities........................................ (76) 1,078 (34)
(Decrease) increase in accrued interest payable....... -- (1,196) 545
Increase in other current liabilities................. 831 906 766
Increase in postemployment and postretirement
benefits........................................... 185 420 1,905
--------------- --------------- ---------------
Net cash provided by operating activities.......... 44,310 26,151 40,355
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (20,022) (18,175) (82,795)
(Increase) decrease in other assets....................... (943) 50 (110)
--------------- --------------- ---------------
Net cash used in investing activities.............. (20,965) (18,125) (82,905)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
COMEX acquisition note repayments......................... -- (5,043) (5,043)
Proceeds from notes payable............................... -- -- 15,000
Grant receipts from EDC and ESDC for building
construction............................................ -- -- 38,698
Distributions under NYMEX Division members' retention
program................................................. (1,106) (1,012) (1,148)
--------------- --------------- ---------------
Net cash (used in) provided by financing
activities....................................... (1,106) (6,055) 47,507
--------------- --------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 22,239 1,971 4,957
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 14,353 12,382 7,425
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 36,592 $ 14,353 $ 12,382
=============== =============== ===============
SUPPLEMENTAL INFORMATION
Cash paid for:
Interest (net of $1.6 million capitalized in 1997)...... $ 7,680 $ 9,130 $ 6,914
=============== =============== ===============
Income taxes............................................ $ 704 $ -- $ 4,877
=============== =============== ===============
Cash received from:
Income tax refunds...................................... $ -- $ 3,461 $ --
=============== =============== ===============
Noncash members' equity transaction -- transfer to
subordinated commitment -- members' retention program:
NYMEX Division.......................................... $ 4,017 $ 5,255 $ 5,006
=============== =============== ===============
COMEX Division.......................................... $ 1,204 $ 1,155 $ 1,365
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 97
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF BUSINESS -- The New York Mercantile Exchange (the "Exchange") is
a membership corporation organized under the New York State Not-for-Profit
Corporation Law. Under these laws, the Exchange is prohibited from paying
dividends (subject to only very limited exceptions).
As an exchange designated for trading futures contracts and options on
futures contracts by the Commodity Futures Trading Commission, the Exchange has
the primary objective of creating and maintaining an orderly market for
contracts that are traded on the Exchange. Through its in-house clearing unit,
the Exchange stands as buyer to every seller and seller to every buyer. To
manage the risk of financial nonperformance, the Exchange requires members to
post margin, in the form of cash, U.S. government securities or irrevocable
letters of credit. The Exchange also requires guaranty fund deposits from
clearing members which would be available to cover financial nonperformance.
(See Notes 11 and 12.) The Exchange has extensive surveillance and compliance
operations and procedures to monitor and enforce the rules pertaining to
trading, position limits and financial condition of its members.
BASIS OF PRESENTATION -- The accompanying consolidated financial statements
are presented on an accrual basis in conformity with accounting principles
generally accepted in the United States of America.
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of the Exchange and its wholly-owned
subsidiaries: Commodity Exchange, Inc. ("COMEX"), COMEX Clearing Association,
Inc. and NYMEX Technology Corp. (which became inactive in November 1996). All
significant intercompany balances and transactions have been eliminated in
consolidation.
USE OF ESTIMATES -- The preparation of the accompanying consolidated
financial statements requires the Exchange's management to make estimates and
assumptions that affect the amounts reported in these consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
NEW ACCOUNTING STANDARD -- The American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, effective for fiscal
years beginning after December 15, 1998. Generally, once the capitalization
criteria of this SOP have been met, external direct costs of materials and
services used in development of internal-use software, payroll and
payroll-related costs for employees directly involved in the development of
internal-use software are to be capitalized. Beginning in 1999, the Exchange
capitalized certain software development and implementation costs. The Exchange
capitalizes internally developed software costs based on a project-by-project
analysis of each project's significance to the Exchange. The total amount of
internally developed software costs capitalized for the year ended December 31,
1999 was $10.2 million and is included in property and equipment, net in the
consolidated balance sheets. All capitalized internally developed software costs
are amortized using the straight-line method over the estimated
F-6
<PAGE> 98
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
useful lives of the software, not exceeding five years. Prior to 1999, all costs
associated with internally developed software were expensed as incurred.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents consist of cash and
all highly-liquid investments with maturities of three months or less when
purchased. The fair value of cash and cash equivalents approximates their
carrying amounts.
Securities purchased under agreements to resell are treated as cash
equivalents and are carried at contract value, as specified in the agreements.
The market value of securities purchased under agreements to resell is monitored
by the Exchange and additional collateral is obtained as necessary to protect
against credit exposure. At December 31, 1999 and 1998, U.S. government
securities held in a segregated account by a U.S. money-center bank
collateralized the securities purchased under agreements to resell.
MARKETABLE SECURITIES -- The Exchange invests primarily in high-grade
tax-exempt municipal bonds and direct obligations of the U.S. government and its
agencies. The Exchange has classified all of its investments in debt and
equities as trading. Management determines the appropriate classification of
debt and equity securities at the time of purchase and re-evaluates such
classification at each balance sheet date.
Trading securities are bought and held principally for the purpose of
selling them in the near future and are carried at fair value based on quoted
market prices. The resulting unrealized gains or losses are recognized currently
in the consolidated statement of income and members' equity. Realized gains or
losses from the sales of marketable securities are determined on the specific
identification basis and are included in Investment Income, Net in the
consolidated statement of income and members' equity.
REVENUE RECOGNITION -- The largest source of the Exchange's operating
revenues are clearing and transaction fees. These fees are recognized as revenue
in the same period that trades are effectuated on the Exchange. Clearing and
transaction fees receivable are monies due the Exchange from clearing member
firms. Exposure to losses on receivables is principally dependent on each member
firm's financial condition. Fees owed to the Exchange are collateralized by
members' seats. At the end of December 31, 1999 and 1998, no clearing and
transaction fees receivable balance was greater than the underlying collateral.
Management does not believe that a concentration of credit risk exists from
these receivables. The Exchange retains the right to liquidate a member's seat
in order to satisfy its receivable.
Clearing and transaction fees receivable are carried at amounts that
approximate fair value, net of allowances for member credits which are based
upon expected billing adjustments. An allowance for member credits of $1,500,000
has been established based on historical recording of these subsequent credits
and has been applied as a reduction of clearing and transaction fees receivable
at December 31, 1999 and 1998, respectively. The Exchange believes the
allowances are adequate to cover member credits. The Exchange believes the
likelihood of incurring material losses due to collectibility is remote and
therefore no allowance for doubtful accounts is necessary.
Effective January 1, 1996, the Exchange adopted a fee reduction program,
pursuant to which certain clearing fees of NYMEX members are substantially
reduced. The Exchange adopted a fee reduction program for Futures Commission
Merchants ("FCMs") effective
F-7
<PAGE> 99
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
January 1, 1998 and similar fee reduction programs for Local Owners and Floor
Brokerage Operations effective January 1, 1999. These programs have been
established to reduce various operating costs to these participants such as
telephone, rent and marketing expenses.
The Exchange provides real time information to subscribers regarding prices
of futures contracts traded on the Exchange. As is common business practice in
the industry, fees are remitted to the Exchange by market data vendors on behalf
of subscribers. The Exchange accrues revenue for the current month based on the
last month reported. The Exchange conducts periodic audits of the information
provided. At December 31, 1999, nine vendors each represented receivable
balances greater than 5% of the total balance. An allowance for uncollectible
receivables of $500,000 has been applied as a reduction to the December 31, 1999
market data fees receivable balance.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost, less
allowances for depreciation and amortization. Depreciation and amortization are
provided utilizing the straight-line method over the estimated useful lives of
the assets or lease terms, whichever is shorter. (See Note 3.)
The following table summarizes the years over which significant assets are
generally depreciated or amortized:
<TABLE>
<S> <C>
Building and improvements........................... 20 to 60 years
Information system equipment........................ 4 to 10 years
Furniture, fixtures, office machinery and other..... 3 to 15 years
Leasehold improvements.............................. 15 to 40 years
</TABLE>
Where different depreciation methods or lives are used for tax purposes,
deferred income taxes are recorded.
The Exchange capitalizes purchases of software and amortizes these costs
using the straight-line method over a period of three years.
The carrying value of property and equipment is assessed annually and/or
when factors indicating an impairment may be present. The Exchange determines
such impairment by measuring undiscounted future cash flows. If an impairment is
present, the assets are reported at the lower of carrying value or fair value.
There were no impairments recognized for the years ended December 31, 1999 and
1998. The loss on disposition of assets included in the consolidated statements
of income and members' equity for these years represents the net book value of
property retired from service. For the year ended December 31, 1997, the loss on
disposition included in the consolidated statement of income and members' equity
represents the write down of impaired assets.
Expenditures for repairs and maintenance are charged to expense as
incurred. Expenditures for major renewals and betterments which significantly
extend the useful lives of existing property and equipment are capitalized and
depreciated. Fully depreciated assets are retained in property and accumulated
depreciation accounts until removed from service. Upon retirement or disposition
of property and equipment, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is recognized in
income.
F-8
<PAGE> 100
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
GOODWILL -- Goodwill, representing the excess of the purchase price over
the fair value of the net assets of COMEX (acquired in August 1994), is being
amortized on a straight-line basis over the period of expected benefit of
fifteen years. Periodically, the Exchange reviews the recoverability of
goodwill. The measurement of possible impairment is based on the ability to
recover the balance of the goodwill from expected future operating cash flows on
an undiscounted basis. There were no impairments recognized during any of the
periods presented.
INCOME TAXES -- While the Exchange's corporate structure was organized
under the New York State Not-for-Profit Corporation Law, it is not considered a
tax exempt organization. The Exchange is, therefore, a taxable corporate entity
for tax reporting purposes. The Exchange accounts for income taxes in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting
For Income Taxes. SFAS No. 109 requires that deferred taxes be established based
upon the temporary differences between financial statement and income tax bases
of assets and liabilities using the enacted statutory rates. (See Note 10.)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- The Exchange accounts for
certain postretirement benefits in accordance with SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions. SFAS No. 106
requires the Exchange to accrue the estimated cost of retiree benefit payments
other than pensions during the employees' active service lives. For the
Exchange, such benefits consist principally of health care benefits. (See Note
9.)
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, Employers' Disclosures About Pensions and Other Postretirement Benefits.
SFAS No. 132 does not change the measurement or recognition provisions of
previously issued standards, but revises disclosures about pensions and other
postretirement benefit plans. The Exchange adopted SFAS No. 132 during 1998
retroactive to January 1, 1997.
SEGMENT REPORTING -- The Exchange adopted SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information during 1998 retroactive to
January 1, 1997. Management reports on two segments: the NYMEX Division,
providing futures and options trading of energy product contracts and platinum
group metals contracts, and the COMEX Division, providing for futures and
options trading of precious metals contracts, copper and aluminum contracts, and
FTSE Eurotop 100(R) and FTSE Eurotop 300(R) stock index futures and options
contracts. Management is currently using revenues of these two divisions as a
measurement of operating performance. (See Note 13.)
DEFERRED CREDIT -- GRANT FOR BUILDING CONSTRUCTION -- By agreement dated
May 18, 1995, the Exchange secured a grant from the New York City Economic
Development Corporation ("EDC") and the Empire State Development Corporation
("ESDC", formerly called the New York State Urban Development Corporation) for
approximately $128.7 million for construction of a new facility. The grant is
being recognized in income on the same basis as and matched to the depreciation
of the facility. (See Note 14.) The 1999 and 1998 amortization of the deferred
credit is recorded as a reduction to depreciation and amortization expense.
RECLASSIFICATIONS -- Certain reclassifications have been made to the 1997
and 1998 consolidated financial statements to conform to the 1999 presentation.
F-9
<PAGE> 101
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. AFFILIATED ENTITY
The Commodities Exchange Center, Inc. ("CEC") was jointly formed in
September 1973 under the New York State Not-for-Profit Law, on a cooperative
basis, to provide trading floor and other physical facilities and service
functions relating thereto for the benefit of its members (the Exchange,
including COMEX, the Coffee, Sugar, Cocoa Exchange, and the New York Cotton
Exchange). Operations of CEC were funded by its members based on agreed upon
expense allocations. During 1998, the Exchange entered into a "Global Settlement
and Surrender Agreement" with CEC, under which the Exchange paid CEC $3.1
million in satisfaction of certain operating liabilities and relinquished its
rights to use a portion of the trading floor.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost, less related accumulated
depreciation and amortization of $31,323,000 at December 31, 1999 and
$21,552,000 at December 31, 1998.
PROPERTY AND EQUIPMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------------- -------------------
NET GROSS NET GROSS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Building and improvements.................... $170,420 $178,780 $173,810 $178,700
Information system equipment................. 32,742 50,188 34,762 48,072
Furniture, fixtures, office machinery and
other...................................... 24,937 29,760 13,017 15,300
Leasehold improvements....................... 514 1,208 1,411 2,480
-------- -------- -------- --------
$228,613 $259,936 $223,000 $244,552
======== ======== ======== ========
</TABLE>
Depreciation and amortization expense of property and equipment is
presented net of amortization of the deferred credit. This amortization of
deferred credit was $2.1 million, $1.9 million and $1.3 million in 1999, 1998
and 1997, respectively.
In 1999, the Exchange retired from service leasehold improvements and
computer equipment and their related accumulated amortization and depreciation
totaling $4.6 million and $3.3 million, respectively. The resulting loss
(remaining net book value) of $1.3 million was recognized in current earnings.
In 1998, a similar loss of $2.8 million was recognized and included in the
consolidated statement of income and members' equity. For the year ended
December 31, 1997, a write down of $1.2 million for impaired assets was
recognized in the consolidated statement of income and member's equity.
F-10
<PAGE> 102
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE
Notes payable consisted of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998
-------- --------
<S> <C> <C>
Private Placement Notes:
7.48%, Senior Notes, Series A, due 2011............ $ 31,000 $ 31,000
7.75%, Senior Notes, Series B, due 2021............ 54,000 54,000
7.84%, Senior Notes, Series C, due 2026............ 15,000 15,000
-------- --------
$100,000 $100,000
======== ========
</TABLE>
The Exchange issued a private offering of debt during 1996 and 1997,
totaling $100 million to provide completion financing for the new Exchange
trading facility. This issue contained three series each with different
maturities, interest rates, and required repayment schedules. Series A notes
require annual principal repayments from 2001 to 2010, and a final payment of
principal in 2011. Series B notes require annual principal repayments from 2011
to 2020, and a final payment of principal in 2021. Series C notes require annual
principal repayments from 2022 to 2025, and a final payment of principal in
2026. The notes represent senior unsecured obligations of the Exchange and are
not secured by the facility, the Exchange's interest therein or any other
collateral.
Long term debt that becomes due during the next five years is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
2000................................................ $ -0-
2001................................................ 2,815
2002................................................ 2,815
2003................................................ 2,815
2004................................................ 2,815
</TABLE>
5. MEMBERS' RETENTION PROGRAM
The Exchange maintains a Retention Program under which qualified NYMEX
Division members, based on long-term and continuous membership, as defined, may
receive payments of $25,000 per year for ten years. The program was amended to
increase the scheduled payment by three percent each year, commencing July 1,
1996, and then remain fixed for each recipient at each respective level.
Eligibility is based primarily on years of continuous service, as defined, with
payments commencing for vested participants after attaining age 59 1/2. Payments
are made from the general assets of the Exchange, and program commitments are
currently recognized by a transfer from members' equity to a subordinated
commitment to the membership. For each of the years ended December 31, 1999,
1998 and 1997, $3,600,000 was transferred.
The commitments to members under the NYMEX Retention Program are subject to
the claims of general creditors and may be paid only if they will not render the
Exchange insolvent. Although the Exchange has not expressed any intention to
terminate this program, it may do so at any time based on an affirmative vote of
three-fourths of the Exchange's board of directors. The program was amended in
February 1997 to provide for a payout of benefits to the members in the event of
termination of the plan to the extent
F-11
<PAGE> 103
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
that the assets were placed in a trust. In 1997, the board established a trust
for the purpose of making payments under the NYMEX Retention Program and at
December 31, 1999 all of the assets of the Members' Retention Program were held
in the trust. Assets of the trust are available to general creditors of the
Exchange and are, therefore, recognized as marketable securities on the balance
sheet.
At December 31, 1999 and 1998, based on the membership data on those dates,
a discount rate on benefit commitments of 8.25 percent and 7.5 percent,
respectively, and membership mortality and turnover assumptions, contingent
benefits based on service to date approximated $28 million and $26 million,
respectively.
The Exchange also maintains a Retention Program for members of the COMEX
Division. The program is similar to the NYMEX Division program except that the
annual benefit payments are $12,500 ($2,000 for Option Members) for vested
participants and no new participants were permitted after the date of the
merger. No payments may be made prior to January 1, 2002. In addition, under the
terms of the merger agreement, the COMEX Division program will be funded at a
minimum of $400,000 annually. In any year in which the Exchange funds the NYMEX
Division program or makes a distribution to NYMEX Division members, the funding
shall be $800,000. Such amounts may be reduced if actuarial assumptions indicate
that full funding can be achieved without making the entire funding
contributions indicated above.
All benefits to be paid under the COMEX Division program shall be based
upon reasonable actuarial assumptions which, in turn, are based upon the amounts
that are available and are expected to be available to pay benefits, except that
the benefits paid to any individual will not exceed the amounts stated above.
Subject to the foregoing, the board of directors of the Exchange reserves the
right to amend or terminate the program upon an affirmative vote of a majority
of the board members voting.
6. DEFINED CONTRIBUTION PLAN
The Exchange sponsors a defined contribution plan (the "Plan") for all
eligible domestic employees with at least one year of service. The Plan
qualifies as a deferred salary arrangement under Section 401(k) of the Internal
Revenue Code. Under the Plan, participating employees may defer up to 15 percent
of their pre-tax earnings, subject to the annual Internal Revenue Code
contribution limit. The Exchange matches contributions up to a maximum of 3
percent of salary. In addition, the Exchange makes annual contributions ranging
from 2 to 7 percent based upon tenure for each eligible Plan member. Employees
vest immediately in their contribution and vest in the Exchange's contribution
at a rate of 40 percent after two full years of service, and then 20 percent per
year until fully vested at 100 percent after five years of service. The
Exchange's total contributions to the Plan were $1.6 million, $1.6 million, and
$1.2 million for each of the years ended December 31, 1999, 1998 and 1997,
respectively.
7. DEFERRED COMPENSATION
Effective July 1, 1997, the Exchange instituted a nonqualified deferred
compensation plan (the "Deferred Plan") for key employees to permit them to
defer receipt of current compensation in order to provide retirement benefits on
behalf of such employees. The
F-12
<PAGE> 104
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Exchange may provide a matching and a regular year-end contribution to the
Deferred Plan. Matching contribution percentages and vesting follow the same
guidelines as the Exchange's defined contribution plan. The Deferred Plan is not
intended to be a qualified plan under the provisions of the Internal Revenue
Code. It is intended to be unfunded and, therefore, all compensation deferred
under the Deferred Plan is held by the Exchange and commingled with its general
assets. The participating employees are general creditors of the Exchange with
respect to these benefits. The Exchange has the right to amend, modify or
terminate the Deferred Plan at any time.
8. DEFINED BENEFIT PENSION PLAN
As a result of its merger with COMEX, the Exchange sponsored a
noncontributory defined benefit pension plan (the "Plan") which covered
substantially all COMEX Division employees who were employees through December
31, 1995. Effective December 31, 1996, the Plan was terminated. All remaining
assets of the Plan were fully distributed to the Plan participants by February
1998.
During the 1997 Plan year, all pension plan liabilities were settled
through the purchase of an annuity contract with the Hartford Life Insurance
Company in the amount of $2,330,600 and lump sum payments totaling $5,380,464.
This resulted in a settlement loss of $1,815,750 and a reversion of assets from
the pension trust of $620,055. The settlement loss was included as part of the
salaries and employee benefits expense in 1997.
Net pension benefit of the defined benefit plan includes the following
components for the year ended December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Interest cost on projected benefit obligation............... $(421)
Actual return on plan assets................................ 854
Net amortization and deferral............................... --
-----
Net pension benefit......................................... $ 433
=====
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.00 percent at December 31, 1997. The expected
long-term rate of return on assets was 10 percent in 1997.
9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Exchange provides certain
health care and life insurance benefit plans for qualifying retired employees.
Substantially all of the Exchange's employees may become eligible for these
benefits if they reach specified age and years of service criteria while working
for the Exchange. The benefits are provided through certain insurance companies.
The Exchange expects to fund its share of such benefit costs principally on a
pay-as-you-go basis.
F-13
<PAGE> 105
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the funded status of such plans reconciled
with amounts recognized in the Exchange's consolidated financial statements at
December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Change in accumulated postretirement benefit obligation:
Accumulated postretirement benefit obligation, beginning
of year................................................ $ 4,168 $ 4,658
Service cost.............................................. 446 461
Interest cost............................................. 248 239
Amendments................................................ -- --
Actuarial gain............................................ (942) (1,022)
Benefits paid............................................. (159) (168)
------- -------
Accumulated postretirement benefit obligation, end of
year................................................... $ 3,761 $ 4,168
- -------------------------------------------------------------------------------
Funded status............................................... $(3,761) $(4,168)
Unrecognized transition obligation........................ 1,452 1,549
Unrecognized prior service cost........................... (1,613) (1,732)
Unrecognized net (gain) loss.............................. (1,733) (847)
------- -------
Accrued postretirement benefit cost, end of year.......... $(5,655) $(5,198)
======= =======
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- ------
<S> <C> <C> <C>
Net periodic postretirement benefit cost for the years
ended December 31 (in thousands) consists of the
following components:
Service cost......................................... $ 446 $ 461 $1,328
Interest cost........................................ 248 239 584
Amortization of:
Transition obligation............................. 96 96 219
Prior service cost................................ (118) (118) --
Net (gain) loss................................... (57) (43) 25
----- ----- ------
Net periodic postretirement benefit cost............. $ 615 $ 635 $2,156
===== ===== ======
</TABLE>
The weighted average discount rates used in determining the accumulated
postretirement benefit obligation were 7.75 and 6.75 percent at December 31,
1999 and 1998, respectively.
The weighted average annual assumed rates of increase in the per capita
cost to cover benefits (i.e., health care cost trend rate) is 9.0 percent for
1999 and is assumed to decrease gradually to 5% by 2005 and remain level
thereafter.
The following shows the impact of a 1% change in the trend rate:
<TABLE>
<CAPTION>
1% 1%
POINT POINT
INCREASE DECREASE
-------- ---------
<S> <C> <C>
Effect on total of service and interest cost..... $ 55,544 $ (51,938)
Effect on postretirement benefit obligation...... $274,142 $(254,211)
</TABLE>
F-14
<PAGE> 106
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Effective as of the end of the 1997 fiscal year, the postretirement medical
and life insurance benefits were amended by the Exchange. Changes to such plans
were: retirement eligibility at age 60 (or later) with at least 20 years of
service; future premium costs limited to two times the 1997 premium amount; and
participation in the plan begins on the later of the employee's date of hire or
the date the employee reaches age 40. The first two changes resulted in a
reduction in the accumulated postretirement benefit obligation of $4,186,000 and
the third plan change resulted in a curtailment gain of $259,000.
10. INCOME TAXES
The provision (benefit) for income taxes in the consolidated statements of
income and members' equity for the years ended December 31, 1999, 1998 and 1997,
respectively, consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- ------
<S> <C> <C> <C>
Current:
Federal.................................. $ 4,391 $(2,024) $ (542)
State and local.......................... 1,533 25 (341)
-------- ------- ------
5,924 (1,999) (883)
-------- ------- ------
Deferred:
Federal.................................. 2,844 5,717 2,601
State and local.......................... 135 2,545 1,777
-------- ------- ------
2,979 8,262 4,378
-------- ------- ------
Total...................................... $ 8,903 $ 6,263 $3,495
======== ======= ======
</TABLE>
Reconciliation of the statutory U.S. federal income tax rate to the
effective tax rate on income before tax is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate................ 34.0% 35.0% 35.0%
State and local taxes, net of federal
benefit...................................... 13.6% 0.1% 1.1%
Member benefits................................ -- 12.2% 31.6%
Amortization of goodwill....................... 4.7% 6.1% 16.2%
Deferred credit amortization -- grant for
building construction........................ (4.7%) (5.5%) (15.9%)
Tax-exempt income.............................. (5.1%) (6.4%) (13.1%)
Reversion of pension assets.................... -- -- 13.0%
Nondeductible expenses......................... 1.5% 2.1% 5.6%
Other, net..................................... (1.8%) 7.1% 1.8%
---- ---- -----
Effective tax rate........................ 42.2% 50.7% 75.3%
==== ==== =====
</TABLE>
F-15
<PAGE> 107
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, the components of net deferred tax assets (liabilities)
were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current
Assets:
Unrealized losses on marketable securities.......... $ 304 $ --
Accrued expenses.................................... 89 53
Federal net operating loss.......................... 41 41
Other............................................... 103 497
-------- --------
537 591
-------- --------
Liabilities:
Unrealized gains on marketable securities........... -- (226)
Other............................................... (61) (19)
-------- --------
(61) (245)
-------- --------
Total current net deferred tax assets.................... $ 476 $ 346
======== ========
Noncurrent Long Term
Assets:
Post retirement benefits............................ $ 3,177 $ 2,963
Deferred compensation............................... 237 120
Suspended capital loss.............................. 134 --
Suspended charitable contributions.................. 607 819
Federal net operating loss.......................... 440 482
State and city net operating losses................. -- 490
AMT credit.......................................... 943 353
Other............................................... 98 --
-------- --------
5,636 5,227
-------- --------
Liabilities:
Depreciation & amortization......................... (18,204) (14,686)
-------- --------
(18,204) (14,686)
-------- --------
Total noncurrent long term net deferred tax
liabilities............................................ $(12,568) $ (9,459)
======== ========
</TABLE>
11. SEGREGATED FUNDS
The Exchange is required under the Commodity Exchange Act to segregate cash
and securities that are deposited by clearing members at banks approved by the
Exchange as margin for house and customer accounts; such assets belong to
members and thus are not included in the accompanying consolidated financial
statements. At December 31, 1999 and 1998, $1,872,134 and $17,606 of cash,
$2,832,567,000 and $2,558,480,915 of U.S. Treasury obligations, and $24,200,000
and $7,860,000 of U.S. Treasury bills purchased under agreements to resell,
respectively, were segregated pursuant to such regulations by the NYMEX
Division. In addition, at December 31, 1999 and 1998, the NYMEX Division held
irrevocable letters of credit amounting to $248,089,600 and $102,350,000,
respectively, which are used by members to meet their obligations to the
Exchange for margin requirements on both open futures and options positions, as
well as delivery
F-16
<PAGE> 108
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
obligations in lieu of depositing cash and/or securities. The Exchange invests
cash deposits and earns interest thereon. All income earned on deposits of U.S.
government securities accrue to the member firms depositing such securities.
At December 31, 1999 and 1998, the COMEX Division's segregated funds
consisted of $2,984,384 and $574,802 in cash, $763,650,000 and $474,584,750 in
U.S. Treasury bills, and $4,150,000 and $0 of U.S. Treasury bills purchased
under agreements to resell, respectively. The COMEX Division also holds
irrevocable letters of credit aggregating $89,650,000 and $39,100,000 as of
December 31, 1999 and 1998, respectively.
12. GUARANTY FUND
Each clearing member is required to maintain a security deposit, in the
form of cash or U.S. Treasury securities, ranging from $100,000 to $2,000,000,
depending upon such clearing member's reported regulatory capital, in a fund
known as a "Guaranty Fund" for the respective clearing division (NYMEX and/or
COMEX). Separate and distinct Guaranty Funds, held by NYMEX, are maintained for
the NYMEX and COMEX Divisions. These funds may be used by the Exchange for any
loss sustained by the Exchange as a result of the failure of a clearing member
to discharge their obligations.
At December 31, 1999 and 1998, the total deposits maintained in the NYMEX
Division Guaranty Fund were $83,966,000 and $78,518,950, respectively. At
December 31, 1999 and 1998, the total deposits for the COMEX Division Guaranty
Fund were $76,944,141 and $75,193,900, respectively.
13. SEGMENT REPORTING
The Exchange has two operating segments: the NYMEX Division, providing
futures and options trading of energy product contracts and platinum group
metals contracts, and the COMEX Division, providing for futures and options
trading of precious metals contracts, copper and aluminum contracts, and FTSE
Eurotop 100(R) and FTSE Eurotop 300(R) stock index futures and options
contracts. A summary by business segment follows (in thousands):
<TABLE>
<CAPTION>
NYMEX COMEX TOTAL
-------- ------- --------
<S> <C> <C> <C>
Year Ended December 31, 1999
OPERATING REVENUES:
Clearing and transaction fees
Regular trading hours(1).................... $ 85,512 $24,313 $109,825
NYMEX ACCESS(R)(2).......................... 7,420 1,026 8,446
Market data fees............................... 18,997 15,692 34,689
Other.......................................... 4,327 213 4,540
Member fee rebates............................. (13,065) -- (13,065)
-------- ------- --------
Total operating revenues............... $103,191 $41,244 $144,435
======== ======= ========
</TABLE>
F-17
<PAGE> 109
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NYMEX COMEX TOTAL
-------- ------- --------
<S> <C> <C> <C>
Year Ended December 31, 1998
OPERATING REVENUES:
Clearing and transaction fees
Regular trading hours(1).................... $ 73,199 $22,332 $ 95,531
NYMEX ACCESS(R)(2).......................... 5,668 837 6,505
Market data fees............................... 18,864 15,994 34,858
Other.......................................... 4,196 765 4,961
Member fee rebates............................. (11,272) -- (11,272)
-------- ------- --------
Total operating revenues............... $ 90,655 $39,928 $130,583
======== ======= ========
Year Ended December 31, 1997
OPERATING REVENUES:
Clearing and transaction fees
Regular trading hours(1).................... $ 61,871 $24,397 $ 86,268
NYMEX ACCESS(R)(2).......................... 4,023 494 4,517
Market data fees............................... 17,795 15,662 33,457
Other.......................................... 2,527 1,030 3,557
Member fee rebates............................. (10,012) -- (10,012)
-------- ------- --------
Total operating revenues............... $ 76,204 $41,583 $117,787
======== ======= ========
</TABLE>
- -------------------------
(1) Clearing and transaction fees generated from trading on the open outcry
system during regular business hours.
(2) Clearing and transaction fees generated from trading on the NYMEX ACCESS(R)
system.
14. COMMITMENTS AND CONTINGENCIES
From time to time, the Exchange is involved in legal proceedings and
litigation arising in the ordinary course of business. Set forth below are
descriptions of litigation and legal proceedings to which we are a party as of
December 31, 1999 that could have a material adverse effect on our business,
operating results or financial condition. While the ultimate result of the
proceedings against the Exchange cannot be predicted with certainty, the
management of the Exchange believes that the resolution of these matters will
not have a material adverse effect on its consolidated financial position,
results of operations or cash flows.
The Exchange has been named as a defendant in the following legal
actions:
- Ricky Barnes v. New York Mercantile Exchange, Commodity Exchange, Inc. A.
J. Contracting Company, Inc., and Zwicker Electric Company, Inc. This
action is pending in New York State Supreme Court (New York County). The
Exchange was served with the summons and complaint on or about March 4,
1998. This is a personal injury case that relates to the construction of
One North End. Plaintiff, an employee of Forest Datacom Services, Inc., a
subcontractor of A.J. Construction, alleges that he was injured on
December 17, 1996 while working at the One North End construction site.
Plaintiff seeks $10,000,000 in compensatory damages.
F-18
<PAGE> 110
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NYMEX and COMEX are represented by insurance counsel. The case is
currently in discovery.
- Electronic Trading Systems Corporation v. The Board of Trade of the City
of Chicago, New York Mercantile Exchange, Cantor Fitzgerald, L.P. and the
Chicago Mercantile Exchange. This action is pending in United States
District Court for the Northern District of Texas (Dallas Division). The
Exchange was served with a summons and complaint on or about May 10,
1999. This is a patent infringement case. Plaintiff alleges that it is
the owner of United States Letters Patent No. 4,903,201 entitled
"Automated Futures Trade Exchange" and that defendants are infringing
this patent through use of their respective electronic trading systems.
Plaintiff seeks an unspecified amount of royalties. The Exchange is
providing its own defense to this action. The Exchange has filed motion
to sever and transfer venue to the Southern District of New York. Cantor
Fitzgerald, L.P. has settled this lawsuit and is no longer a party to
this action. This case is in discovery.
- Phillip Petruzzi and Joann Petruzzi v. New York Mercantile Exchange. This
action is pending in New York State Supreme Court (New York County). The
Exchange was served with the summons and complaint on or about October
13, 1998. This is a personal injury claim that relates to plaintiff's
trading activity when the Exchange was located at 4 World Trade Center.
Plaintiff, an Exchange member, alleges that he was injured on July 23,
1993 while trading in the Natural Gas Ring. Plaintiff seeks $10,750,000
in compensatory damages and $10,000,000 in punitive damages. The Exchange
is represented by insurance counsel on the compensatory damages portion
of the claims and has retained counsel to represent it on the punitive
damages claim. The case is still in discovery. The Exchange's motion to
dismiss punitive damages was served on March 17, 2000.
- Enrique Rivera and Edith Rivera v. New York Mercantile Exchange, Mark
Kessloff, Les Faison, Brian Bartichek and John Does "1-10." This action
is pending in New York State Supreme Court (Bronx County). The Exchange
was served with the summons and complaint on or about April 22, 1999.
This is an ethnic discrimination case. Plaintiff alleges that throughout
his employment with the Exchange he was subjected to a hostile work
environment and discrimination regarding his ethnic origin. Plaintiff
seeks an unspecified amount of compensatory and punitive damages. The
Exchange has retained counsel to defend it in this matter. The case is in
discovery.
- George Scivoletti and Maryanne Scivoletti v. New York Mercantile
Exchange, Commodities Exchange Center, Inc., Cushman & Wakefield, Inc.,
Paris Maintenance, Inc., A.J. Construction of New York, Inc. and
Space/Management Programs, Inc. This action is pending in United States
District Court for the Southern District of New York. The summons and
complaint were filed on or about February 2, 1998. This is a personal
injury case that related to plaintiff's trading activity at the
Exchange's One North End trading facility. Plaintiff alleges that on July
10, 1997 he was injured while trading in the Natural Gas Ring. Plaintiffs
seeks a total of $30,000,000 in compensatory damages against defendants.
The Exchange is represented by insurance counsel. The case is in
discovery.
F-19
<PAGE> 111
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- Robert Teofrio and Susan Teofrio v. New York Mercantile Exchange, Turner
Construction and AJ Construction of New York. This action is pending in
New York State Supreme Court (New York County). NYMEX was served with the
summons and complaint on or about July 20, 1998. This is a personal
injury case that relates to plaintiff's involvement in the construction
of One North End. Plaintiff is an ironworker employed by Diamond
Installations, a subcontractor of Turner Construction. Plaintiff alleges
that he was injured on September 11, 1996, while working at the One North
End construction site. Plaintiff seeks a total of $11,000,000 in
compensatory damages. NYMEX is represented by insurance counsel. This
case is in discovery.
- Western Capital Design, LLC v. New York Mercantile Exchange and John Does
"1-50." This action is pending in New York District Court for the
Southern District of New York. NYMEX was served with the summons and
complaint on or about February 17, 1999. This action relates to alleged
wrongful conduct by NYMEX and NYMEX members regarding the execution of
heating oil and natural gas options. Plaintiff alleges that the prices it
was charged for heating oil and natural gas options were improper and
that these improper transactions affected the market price at which
plaintiff transacted its trading. Plaintiff seeks $75,000,000 in
compensatory damages. NYMEX has retained counsel to represent it in this
matter. This action was commenced in State Court in Florida. It was
removed to Federal Court by notice of removal filed March 8, 1999. Venue
was transferred to the Southern District of New York by an order dated
May 11, 1999. NYMEX's motion to dismiss was filed on November 12, 1999
and granted on March 31, 2000. Plaintiff has until April 28, 2000 to
replead.
The Exchange occupies premises under leases with various lessors which
expire in 2000 through 2069. For the years ended December 31, 1999, 1998 and
1997, rental expense for the premises amounted to $1,998,996, $2,242,665 and
$4,253,616, respectively. At December 31, 1999, the Exchange was obligated for
future minimum rental payments required under the noncancelable terms of various
leases as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
2000............................................ $ 1,672
2001............................................ 1,581
2002............................................ 1,506
2003............................................ 1,506
2004............................................ 1,756
2005 and thereafter............................. 15,834
-------
Total................................. $23,855
=======
</TABLE>
The Exchange began sub-leasing space in its headquarters during 1997. Rents
earned from these rentals were $3,159,875, $1,879,656, and $91,076 during 1999,
1998 and 1997, respectively.
In 1994, the Exchange entered into a Letter of Intent with Battery Park
City Authority ("BPCA"), the New York City Economic Development Corporation
("EDC"), and the Empire State Development Corporation ("ESDC," formerly called
the New York State Urban Development Corporation) to construct a new trading
facility and office
F-20
<PAGE> 112
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
building on a site in Battery Park City. By agreement dated May 18, 1995, EDC
and ESDC agreed to provide funding of $128.7 million to construct the facility.
The Exchange is liable for liquidated damages on a declining scale, with an
initial maximum of up to $75 million, if it violates terms of the occupancy
agreement at any time prior to the fifteen years from the date of occupancy.
In May 1995, the Exchange signed a ground lease (expiring June 2069) with
BPCA for the new trading facility. The lease establishes payments in lieu of
taxes ("PILOTs") due to New York City, as follows: for the trading portion of
the facility, PILOTs are entirely abated for the first 20 years after occupancy
and, thereafter, at an amount equal to assessment; for the office portion of the
facility, PILOTs are entirely abated for one year after occupancy, at a
percentage of assessment (ranging from 25% to 92.5%) for the next ten years and,
thereafter, at an amount equal to assessment. Sub-let space is not eligible for
abatements.
The Exchange has provided financial guarantees and pledged collateral
relating to a membership seat financing program with one of its banks. The
member remains primarily liable for the loan which is used to purchase a seat on
the Exchange. The guarantee is limited to the lesser of $500,000 or 60% of the
purchase price of the seat, and the Exchange has the right to liquidate the seat
if the member defaults on the loan. Under the program, the Exchange may issue
guarantees totaling, in the aggregate, up to $11 million.
15. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following are descriptions of material transactions involving the
Exchange and its directors:
- Pioneer Futures, Inc., of which an officer and a board member is Vice
President, currently leases from the Exchange approximately 13,000 square
feet of space at the One North End facility. Pioneer has two leases, one
for 2,840 square feet expiring on December 4, 2002 and one for 10,360
square feet expiring on December 14, 2002. The current aggregate annual
rent for these spaces is $457,320. Pioneer has signed a term sheet to
lease an additional 18,893 square feet of space at the One North End
facility through April, 2005 at an annual rent of $756,000.
- FIMAT USA Inc., of which a board member is a Senior Vice President,
currently leases from the Exchange approximately 1,350 square feet of
space at the One North End facility. The lease expires on July 27, 2001.
The current annual rent for this space is $56,574.
- Sterling Commodities Corp., of which a board member is President,
currently leases from the Exchange approximately 6,253 square feet of
space at the One North End facility. The lease expires on November 23,
2002. The current annual rent for this space is $225,108. Mr. Greenberg's
father, Martin Greenberg, is the Chief Executive Officer and 100% owner
of Sterling Commodities.
- A board member is the founder and Chief Executive Officer of Genesis 10
Corp., a company which, among other things, places executives in the
information technology field. This board member owns 95% of the equity
interest of Genesis 10. Genesis 10 is one of the companies which the
Exchange has consulted with regarding its search for a new Chief
Information Officer. In the event that the
F-21
<PAGE> 113
NEW YORK MERCANTILE EXCHANGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Exchange hires a candidate recommended by Genesis 10, Genesis 10 will
earn a fee of 30% of the annual compensation of the candidate who is
hired. Management believes this is a typical fee for this type of
consulting and recommendation service. In addition, the Exchange has
entered into a written contractual relationship with Genesis 10 under
which Genesis 10 provides the services of one temporary Senior
Developer/Architect to the Exchange. The Exchange pays Genesis 10 $115
per hour for the Senior Developer/Architect. Approximately $104,440 has
been paid by the Exchange to Genesis 10 for services rendered from
October 1999 to the present. Furthermore, if the Senior
Developer/Architect is hired on a permanent basis, the Exchange will be
obligated to pay Genesis 10 a fee of 30% of annual compensation in
accordance with the arrangement described above in this paragraph.
16. SUBSEQUENT EVENT
On January 5, 2000, the Board of Directors approved a plan for
demutualization of the New York Mercantile Exchange whereby the Exchange would
be converted from a New York not-for-profit membership organization into a
Delaware for-profit entity that will be organized as a stock holding company
with a subsidiary membership organization. Under this plan, membership interests
in the Exchange would be converted into shares of common stock in a newly-formed
stock holding company organized under Delaware law (NYMEX Holdings, Inc.) and
Class A memberships in a subsidiary of NYMEX Holdings, Inc. organized as a
non-stock corporation under Delaware law (New York Mercantile Exchange, Inc.).
* * * * *
F-22
<PAGE> 114
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Since the demutualization will be effective as a common control merger and
due to the accounting treatment of the demutualization and the fact that NYMEX
Holdings and NYMEX Exchange have no assets and no operating history, the only
pro forma adjustment consists of the transaction costs relating to the
demutualization. These costs are estimated to be approximately $1.2 million
broken down as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
Legal fees................................................. $ 600
Investment advisory fees................................... 75
Registration, filing and other............................. 175
Printing................................................... 150
Accounting................................................. 200
--------
Total costs associated with demutualization...... 1,200
Less: Income tax effect assuming 42% effective tax rate.... (504)
--------
Net income reduction due to expense of
demutualization..................................... $ 696
========
Pro forma book value at December 31, 1999, after
demutualization is as follows:
Stockholders' equity at December 31, 1999............. $ 93,202
Reduction due to expense of demutualization, net of
taxes............................................... (696)
--------
Pro forma stockholders' equity at December 31, 1999... $ 92,506
========
Pro forma net income at December 31, 1999:
Net income for the year ended December 31, 1999....... $ 12,190
Less: net income reduction due to expense of
demutualization..................................... (696)
--------
Pro forma net income at December 31, 1999........ $ 11,494
========
Pro forma earnings per share(1).................. $ 14,086
========
Pro forma book value per share................... $113,365
========
</TABLE>
- -------------------------
(1) Based on 816 shares issued and outstanding immediately following the
demutualization. Membership seats will be exchanged for common stock on a 1
for 1 basis. The 84 treasury NYMEX memberships will not be exchanged for
common stock and will be cancelled upon consummation of the demutualization.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma consolidated
financial information should be read in conjunction with the consolidated
financial statements and their notes.
F-23
<PAGE> 115
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF , 2000
BY AND BETWEEN
NEW YORK MERCANTILE EXCHANGE, INC.
AND
NEW YORK MERCANTILE EXCHANGE
<PAGE> 116
This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of
, 2000, is by and between NEW YORK MERCANTILE EXCHANGE, INC. (the
"Company"), a nonstock corporation organized and existing under the Delaware
General Corporation Law (the "DGCL"), and NEW YORK MERCANTILE EXCHANGE
("NYMEX"), a corporation organized and existing under the New York
Not-for-Profit Corporation Law (the "NPCL").
RECITALS
The Boards of Directors of the Company and NYMEX each has determined that
it is advisable and in the best interests of their respective companies and
members that upon the terms and subject to the conditions set forth in this
Agreement, NYMEX will merge with and into the Company (the "Merger"), with the
Company being the surviving entity of the merger.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as defined in Section 1.2.), NYMEX shall be
merged with and into the Company in accordance with the DGCL and the NPCL,
whereupon the separate corporate existence of NYMEX shall cease and the Company
shall be the surviving company in the merger (the "Surviving Corporation").
(b) The Merger shall have the effects set forth in the DGCL and the NPCL.
Accordingly, from and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of the Company and
NYMEX.
Section 1.2. Effective Time. The parties shall execute and file a
Certificate of Merger or other appropriate documents in accordance with the DGCL
and the NPCL, and shall make all other filings or recordings required with
respect to the Merger under the DGCL and the NPCL. The Merger shall become
effective at the time of acceptance for filing by the Secretary of State of the
State of Delaware and the Department of State of the State of New York of the
Certificate of Merger (the "Effective Time").
Section 1.3. Charter and Bylaws. The certificate of incorporation (the
"Charter") and bylaws (the "Bylaws") of the Surviving Corporation upon the
Effective Time shall be substantially in the forms set forth in Exhibit A and
Exhibit B hereto, respectively, until further amended in accordance with
applicable Delaware law.
Section 1.4. Directors. The persons who immediately prior to the Effective
Time of the Merger constitute the board of directors of NYMEX shall be the
Directors of the Surviving Corporation from and after the Effective Time and
shall hold office until their
A-1
<PAGE> 117
respective successors are duly elected or appointed and qualified in the manner
provided in the Charter and Bylaws of the Surviving Corporation, or as otherwise
provided by law.
Section 1.5. Officers. The persons who immediately prior to the Effective
Time of the Merger are the officers of NYMEX shall be the officers of the
Surviving Corporation (each to hold the same office or offices) from and after
the Effective Time and shall hold office until their respective successors are
duly elected or appointed and qualified in the manner provided in the Charter
and Bylaws of the Surviving Corporation, or as otherwise provided by law.
Section 1.6. Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation determines that any deeds, bills of sale, assignments,
assurances or any other acts or things are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, its
right, title or interest in, to or under any of the rights, properties or assets
of NYMEX by reason of, or as a result of, the Merger, or (b) otherwise to carry
out the purposes of this Agreement, then the Surviving Corporation and its
proper officers and directors shall be authorized to execute and deliver, in the
name and on behalf of NYMEX, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of NYMEX, all such other acts
and things necessary or desirable to vest, perfect or confirm any and all right,
title or interest in, to or under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
EFFECTS OF THE MERGER
Section 2.1. Effect on Membership.
(a) Memberships of NYMEX Owned by NYMEX. As of the Effective Time, any
memberships of NYMEX that are owned by NYMEX automatically shall be cancelled
and retired and all rights with respect thereto shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Memberships of the Company Owned by NYMEX. As of the Effective Time,
any memberships of the Company that are owned by NYMEX automatically shall be
cancelled and retired and all rights with respect thereto shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of NYMEX Memberships Into Company Memberships. At the
Effective Time, except as provided in Section 2.1(a), each issued and
outstanding membership of NYMEX shall be converted by virtue of the Merger,
automatically and without any action on the part of the holder thereof, into
both one fully paid Class A membership of the Company and one fully paid Class B
membership of the Company.
ARTICLE III
MISCELLANEOUS
Section 3.1. Termination. This Agreement may be terminated and abandoned
by action of the Board of Directors of each of the Company and NYMEX at any time
prior to the Effective Time, whether before or after approval by the members of
the Company and the members of NYMEX.
A-2
<PAGE> 118
Section 3.2. Approval. The respective obligation of each party to effect
the Merger is subject to adoption by the requisite vote of the members of NYMEX
pursuant to Section 908 of the NPCL and the members of the Company pursuant to
Section 256 of the DGCL.
Section 3.3. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) if to the Company:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attn:
Fax: (212)
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: John A. Healy
Fax: (212) 878-8375
(b) if to NYMEX:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attn:
Fax: (212)
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: John A. Healy
Fax: (212) 878-8375
A-3
<PAGE> 119
Section 3.4. Amendments. The Boards of Directors of each of the Company
and NYMEX may amend this Agreement at any time prior to the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
provided that an amendment made subsequent to the adoption of the Agreement by
the members of NYMEX and the members of the Company shall not: (1) alter or
change the amount or kind of memberships, shares, securities, cash, property
and/or rights to be received in exchange for or on conversion of all or any of
the memberships of any class or series thereof of either NYMEX or the Company,
(2) materially alter or change any term of the Charter to be effected by the
Merger or (3) alter or change any of the terms and conditions of this Agreement,
in each case if such alteration or change would adversely affect the holders of
any memberships of either NYMEX or the Company.
Section 3.5. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement.
Section 3.6. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements entered into in connection with the
transactions (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Section 3.1 are not intended to confer upon any person other than
the parties hereto any rights or remedies.
Section 3.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, each of the Company and NYMEX has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the day and year first above written.
NEW YORK MERCANTILE EXCHANGE, INC.
By:
--------------------------------------
Name:
Title:
NEW YORK MERCANTILE EXCHANGE
By:
--------------------------------------
Name:
Title:
A-4
<PAGE> 120
ANNEX B
AGREEMENT AND PLAN OF MERGER
DATED AS OF , 2000
BY AND BETWEEN
NEW YORK MERCANTILE EXCHANGE, INC.,
NYMEX HOLDINGS, INC.
AND
NYMEX MERGER SUB, INC.
<PAGE> 121
This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of ,
2000 is by and between NEW YORK MERCANTILE EXCHANGE, INC. (the "Company"), a
not-for-profit, nonstock corporation organized and existing under the Delaware
General Corporation Law (the "DGCL"), NYMEX HOLDINGS, INC. ("NYMEX Holdings"), a
for-profit, stock corporation organized and existing under the DGCL, and NYMEX
MERGER SUB, INC. ("Merger Sub"), a for-profit, nonstock corporation organized
and existing under the DGCL, which is a wholly-owned subsidiary of NYMEX
Holdings.
RECITALS
A. The Company is a party to an Agreement and Plan of Merger, dated the
same date as this Agreement, by and between the New York Mercantile Exchange
("NYMEX"), a corporation organized under the New York Not-for-Profit Corporation
Law, and the Company, which provides for a merger (the "First Merger") in which
NYMEX will merge with and into NYMEX Exchange.
B. The Boards of Directors of the Company, Merger Sub and NYMEX Holdings
each has determined that it is advisable and in the best interests of their
respective companies, members and stockholders that upon the terms and subject
to the conditions set forth in this Agreement, immediately following the First
Merger, Merger Sub will merge with and into the Company (the "Second Merger"),
with the Company being the surviving entity of the Second Merger.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Second Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as defined in Section 1.2), Merger Sub shall
be merged with and into the Company in accordance with the DGCL, whereupon the
separate corporate existence of Merger Sub shall cease and the Company shall be
the surviving company in the merger (the "Surviving Corporation").
(b) The Second Merger shall have the effects set forth in the DGCL.
Accordingly, from and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of the Company and
Merger Sub.
Section 1.2. Effective Time. The parties shall execute and file a
Certificate of Merger or other appropriate documents in accordance with the
DGCL, and shall make all other filings or recordings required with respect to
the Second Merger under the DGCL. The Second Merger shall become effective at
the time of acceptance for filing by the Secretary of State of the State of
Delaware of the Certificate of Merger, but in no event prior to the First Merger
(the "Effective Time").
B-1
<PAGE> 122
Section 1.3. Charter and Bylaws. The certificate of incorporation (the
"Charter") and bylaws (the "Bylaws") of the Surviving Corporation upon the
Effective Time shall be substantially in the forms set forth in Exhibit A and
Exhibit B hereto, respectively, until further amended in accordance with
applicable Delaware law.
Section 1.4. Directors. The persons who immediately prior to the Effective
Time of the Second Merger are the directors of the Company shall be the
Directors of the Surviving Corporation from and after the Effective Time and
shall hold office until their respective successors are duly elected or
appointed and qualified in the manner provided in the Charter and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
Section 1.5. Officers. The persons who immediately prior to the effective
time of the Merger are the officers of the Company shall be the officers of the
Surviving Corporation (each to hold the same office or offices) from and after
the Effective Time and shall hold office until their respective successors are
duly elected or appointed and qualified in the manner provided in the Charter
and Bylaws of the Surviving Corporation, or as otherwise provided by law.
Section 1.6. Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation determines that any deeds, bills of sale, assignments,
assurances or any other acts or things are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, its
right, title or interest in, to or under any of the rights, properties or assets
of Merger Sub by reason of, or as a result of, the Merger, or (b) otherwise to
carry out the purposes of this Agreement, then the Surviving Corporation and its
proper officers and directors shall be authorized to execute and deliver, in the
name and on behalf of Merger Sub, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of Merger Sub, all such other
acts and things necessary or desirable to vest, perfect or confirm any and all
right, title or interest in, to or under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out the purposes of this
Agreement.
Section 1.7. Amendment to NYMEX Holdings Charter.
(a) It shall be a condition precedent to the consummation of the Second
Merger that prior to the Effective time of the Second Merger the certificate of
incorporation of Holdings (the "Holdings Charter") shall have been duly amended
to conform substantially to the form set forth in Exhibit C hereto. NYMEX
Holdings shall use its best efforts to cause the amendment to be duly authorized
and implemented.
(b) The list of Directors contained in paragraph (a) of Article SIXTH of
the Holdings Charter shall be completed so that: (i) the Chairman and Vice
Chairman of NYMEX immediately prior to the effective time of the First Merger
shall be the initial Chairman and Vice Chairman of the Surviving Corporation;
(ii) the classes and categories of the initial Directors of the Surviving
Corporation (other than the Chairman, the Vice Chairman and the Public
Directors) shall correspond as closely as practicable to the classes and
categories of the directors of NYMEX occupying comparable positions on the board
of directors of NYMEX immediately prior to the effective time of the First
Merger; and (iii) the persons who immediately prior to the effective time of the
First Merger served as "Public Directors" of NYMEX pursuant to NYMEX's By-Laws
as then in effect shall be the initial Public Directors of the Surviving
Corporation, and shall be appointed to such classes as shall have been
designated by the board of directors of NYMEX by vote duly adopted prior to the
effective time of the First Merger.
B-2
<PAGE> 123
ARTICLE II
EFFECTS OF THE MERGER
Section 2.1. Effect on Membership.
(a) Memberships of Merger Sub Owned by Merger Sub. As of the Effective
Time, any memberships of Merger Sub that are owned by Merger Sub automatically
shall be cancelled and retired and all rights with respect thereto shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(b) Memberships of the Company Owned by Merger Sub. As of the Effective
Time, any memberships of the Company that are owned by Merger Sub automatically
shall be cancelled and retired and all rights with respect thereto shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Class B Memberships Into NYMEX Holdings' Common
Stock. At the Effective Time, each issued and outstanding Class B membership of
the Company shall be converted by virtue of the Merger, automatically and
without any action on the part of the holder thereof, into one fully paid and
non-assessable share of NYMEX Holdings' common stock.
(d) Class A Memberships to Remain Outstanding. At the Effective Time, each
issued and outstanding Class A membership of the Company shall remain
outstanding and continue in effect as a Class A membership of the Surviving
Corporation on the terms set forth from time to time in the Charter.
(e) Conversion of NYMEX Holdings' Membership in Merger Sub Into Company
Class B Membership. At the Effective Time, NYMEX Holdings' membership in Merger
Sub shall be converted by virtue of the Merger, automatically and without any
action on the part of the holder thereof, into one Company Class B membership.
ARTICLE III
MISCELLANEOUS
Section 3.1. Termination. This Agreement may be terminated and abandoned
by action of the Board of Directors of each of the Company, Merger Sub and NYMEX
Holdings at any time prior to the Effective Time, whether before or after
approval by the members of the Company, the members of Merger Sub and the
shareholders of NYMEX Holdings.
Section 3.2. Approval. The respective obligation of each party to effect
the Merger is subject to adoption by the requisite vote of the members of Merger
Sub, the members of the Company and the shareholders of NYMEX Holdings pursuant
of Section 255 of the DGCL.
Section 3.3. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy
B-3
<PAGE> 124
numbers (or at such other address or telecopy number for a party as shall be
specified by like notice):
(a) if to the Company:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attn:
Fax: (212)
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: John A. Healy
Fax: (212) 878-8375
(b) if to Merger Sub:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attn:
Fax: (212)
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: John A. Healy
Fax: (212) 878-8375
(c) if to NYMEX Holdings:
New York Mercantile Exchange
One North End Avenue
World Financial Center
New York, New York 10282-1101
Attn:
Fax: (212)
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: John A. Healy
Fax: (212) 878-8375
B-4
<PAGE> 125
Section 3.4. Amendments. The Boards of Directors of each of the Company,
Merger Sub and NYMEX Holdings may amend this Agreement at any time prior to the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of the
Agreement by the members of Merger Sub, the members of the Company and the
shareholders of NYMEX Holdings shall not: (1) alter or change the amount or kind
of memberships, shares, securities, cash, property and/or rights to be received
in exchange for or on conversion of all or any of the memberships of any class
or series thereof of either Merger Sub, the Company or NYMEX Holdings, (2)
materially alter or change any term of the Charter to be effected by the Merger
or (3) alter or change any of the terms and conditions of this Agreement, in
each case if such alteration or change would adversely affect the holders of any
memberships of either Merger Sub or the Company or any shareholder interest in
NYMEX Holdings.
Section 3.5. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement.
Section 3.6. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements entered into in connection with the
transactions (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Section 3.1 are not intended to confer upon any person other than
the parties hereto any rights or remedies.
Section 3.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
B-5
<PAGE> 126
IN WITNESS WHEREOF, each of the Company, Merger Sub and NYMEX Holdings has
executed this Agreement, or has caused this Agreement to be executed on its
behalf by a representative duly authorized, all as of the day and year first
above written.
NEW YORK MERCANTILE EXCHANGE, INC.
By:
-----------------------------------
Name:
Title:
NYMEX HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
NYMEX MERGER SUB, INC.
By:
-----------------------------------
Name:
Title:
B-6
<PAGE> 127
EXHIBIT A
FORM OF CERTIFICATE OF INCORPORATION FOR THE SURVIVING CORPORATION
[See ANNEX E to this proxy statement and prospectus]
i
<PAGE> 128
EXHIBIT B
FORM OF BYLAWS FOR THE SURVIVING CORPORATION
[See Exhibit F to this proxy statement and prospectus]
ii
<PAGE> 129
EXHIBIT C
FORM OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF NYMEX HOLDINGS
[See ANNEX C to this proxy statement and prospectus]
iii
<PAGE> 130
ANNEX C
CERTIFICATE OF INCORPORATION
OF
NYMEX HOLDINGS, INC.
FIRST: The name of the corporation is NYMEX Holdings, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware
19805-1297. The name of the registered agent at such address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DGCL").
FOURTH: The Corporation shall have the authority to issue 816 shares of
common stock, $.01 par value per share.
FIFTH:
(a) Subject to paragraph(b) of this Article FIFTH, upon surrender to the
Corporation or to any transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, the Corporation or its transfer agent shall issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon the Corporation's books.
(b) Until such time as this Certificate of Incorporation is duly amended to
eliminate the restriction on transfer contained in this paragraph (b), the
shares of common stock of the Corporation shall be transferable only together
with Class A memberships (each an "Exchange Membership") issued by New York
Mercantile Exchange, Inc., a Delaware nonstock corporation (the "Exchange").
Accordingly, notwithstanding the provisions of paragraph (a) of this Article
FIFTH, so long as this paragraph (b) remains in effect: (i) the shares of common
stock of the Corporation shall not be transferable, and shall not be transferred
on the books of the Corporation, unless a simultaneous transfer is made by the
same transferor to the same transferee of a number of Exchange Memberships equal
to the number of shares of common stock being transferred; (ii) each certificate
evidencing ownership of shares of common stock of the Corporation shall be
deemed to evidence the same number of Exchange Memberships and shall bear a
legend prominently noting that fact and the restrictions on transfer contained
in this Article FIFTH; and (iii) any attempted or purported transfer in
violation of the provisions of this Article FIFTH shall be void. For purposes of
the restrictions on transfer contained in this Article FIFTH, the term
"transfer" shall be deemed not to include a lease of an Exchange Membership made
in accordance with the bylaws and rules of the Exchange.
SIXTH: Until such time as this Certificate of Incorporation is duly amended
to eliminate the restriction on transfer contained in paragraph (b) of Article
FIFTH:
(a) The Board of Directors shall consist of 22 members. The names and
addresses (and designations as Class I, Class II or Class III directors for
purposes of paragraph (b) of this Article SIXTH, as Chairman or Vice Chairman
for purposes of paragraph (c) of this Article SIXTH, as members of categories
(i) through (v) for purposes of
C-1
<PAGE> 131
paragraph (d) of this ARTICLE SIXTH and as Public Directors for purposes of
paragraph (e) of this Article SIXTH) of the persons who are to serve as
directors until their successors have been elected and qualified are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS CLASS(1) CATEGORY(2)
---- ------- -------- -----------
<S> <C> <C> <C>
</TABLE>
- ---------------
(1) I, II or III.
(2) Chairman/Vice Chairman/Floor Broker/Floor/Trade/Local/At Large/Public.
(b) The directors shall be divided into three classes, designated Class I,
Class II and Class III (the designations of the initial directors at the time
this Certificate of Incorporation takes effect being as specified in paragraph
(a) of this Article SIXTH). Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. The terms of the Class I directors shall first expire at the
annual meeting of stockholders held in 2001; the terms of the Class II directors
shall first expire at the annual meeting of stockholders held in 2002; and the
terms of the Class III directors shall first expire at the annual meeting of
stockholders held in 2003. At each annual meeting of stockholders, the
successors to the class of directors whose term expires shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned so as to maintain the number of directors in each class as
nearly equal as possible and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting of stockholders
for the year in which the director's term expires and until the director's
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
(c) The Board of Directors shall have a Chairman and a Vice Chairman who
shall be designated as Chairman or Vice Chairman by the stockholders of the
Corporation and who shall, when so designated, become members of the At Large
category of Directors as described below. The Chairman shall be a member of
Class I and the Vice Chairman shall be a member of Class II. The term of each of
them shall expire at the expiration of the term of the applicable class.
Successors to each of them shall be elected at the annual meeting of
stockholders at which his or her term expires. In order to be designated as
Chairman or Vice Chairman, a candidate for election to the Board must be
designated in accordance with the procedures determined by the Board of
Directors. The initial designations of the Chairman and Vice Chairman are set
forth in paragraph (a) of this Article SIXTH. The Chairman and the Vice Chairman
each shall have the power, authority and responsibilities provided in the bylaws
of the Corporation.
(d) Each Class of directors shall consist of at least one member from each
of the categories indicated below:
(i) Floor Broker Group, which consists of holders or lessees of
Exchange Memberships whose principal commodity-related business is acting
as a floor broker on the floor of the Exchange;
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(ii) Futures Commission Merchant Group, which consists of holders or
lessees of Exchange Memberships who are either officers, directors or
partners of a corporation, partnership, association or sole proprietorship,
the principal commodity-related business of which is the solicitation or
acceptance of orders for commodity futures and/or options transactions from
customers, and in connection therewith accepts money, securities or other
property to margin or guarantee such transactions and, which is registered
with the Commodity Futures Trading Commission as a Futures Commission
Merchant;
(iii) Trade Group, which consists of holders or lessees of Exchange
Memberships who are either officers, directors or partners of a
corporation, partnership, association or sole proprietorship, the principal
commodity-related business of which is the production, processing or
commercial use of, or is a merchant dealing in, one or more commodities
traded on the Exchange;
(iv) Local Trader Group, which consists of holders or lessees of
Exchange Memberships whose principal commodity-related business is
executing trades in Exchange contracts on the floor of the Exchange for
their personal accounts; and
(v) At Large Group, which consists of holders or lessees of Exchange
Memberships.
In addition, the directors designated as the Chairman and Vice Chairman of the
Board shall become members of the At Large category of directors.
The initial designations to the categories described in clauses (i) through
(v) above are set forth in paragraph (a) of this Article SIXTH. In order to be
elected at a meeting of stockholders held after this provision first becomes
effective to one of the categories described in clauses (i) through (v) above, a
candidate for election to the Board must be nominated in accordance with
procedures determined by the Board of Directors whereupon that candidate will be
eligible for election at the applicable meeting of stockholders only as a member
of the category determined in accordance with the procedures implemented by the
Board of Directors. If, by reason of a change in the business of a Director,
such Director no longer falls within the category set forth in subclauses (i)
through (v) above in which he was elected, the term of such Director shall
automatically expire effective at the next annual meeting of stockholders and a
successor to such Director shall thereupon be elected for the remainder of the
term of the class to which such successor Director succeeds. In the event of a
dispute as to the category of any Director, the Board of Directors shall make a
final determination upon such data as it, in its discretion, determines is
necessary, relevant or material.
(e) The Board of Directors shall also have five Public Directors who shall
be directly elected by the stockholders. Two Public Directors shall be members
of Class I, one Public Director shall be a member of Class II and two Public
Directors shall be members of Class III. The term of each Public Director shall
expire at the expiration of the term of the applicable class. Successors to each
of them shall be elected at the annual meeting of stockholders at which his or
her term expires. In order to qualify as a Public Director, a person must be
knowledgeable of futures trading or financial regulation or otherwise capable of
contributing to the deliberations of the Board of Directors and may not be a
member of the Exchange or affiliated with any member of the Exchange or an
employee of the Exchange. No Public Director who has served as a Public Director
for two consecutive terms shall be eligible for election as a Public Director
until one year has
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elapsed from the date of the expiration of such person's last term. The initial
designations of the Public Directors are set forth in paragraph (a) of Article
SIXTH.
(f) Not more than one partner, officer, director, employee or affiliate of
a member of the Exchange or of any member firm of the Exchange, or of any
affiliate of a member of the Exchange or of a member firm of the Exchange, shall
be eligible to serve as a Director at one time. If, by reason of a change in
affiliation of a Director, election of a Director at any time, or by reason of
merger, sale or consolidation of two or more member firms of the Exchange, more
than one officer, director, employee, partner, or affiliate of a member firm of
the Exchange is a Director, at least one such Director shall resign so that
there shall be only one Director who is an officer, director, employee, partner,
affiliate of such member of the Exchange or member firm of the Exchange or of
its affiliate. If one such Director shall fail to resign the term of all such
Directors shall automatically expire and the vacancy or vacancies shall
thereafter be filled by the Board, provided, however, that if one such Director
is the Chairman or the Vice Chairman, only the term of the other such Director
or Directors shall expire; further provided, that if two of such Directors are
Chairman and Vice Chairman, respectively, the term of the Vice Chairman shall
expire as aforesaid. No person shall be permitted to stand for election to the
Board of Directors if the election and qualification of such person could result
in more than one person who is a partner, officer, director, employee or
affiliate of a member of the Exchange or of any member firm of the Exchange or
any affiliate of a member of the Exchange or of a member firm of the Exchange
serving on the Board of Directors.
The term "affiliate" as used in this clause (f) shall include the power,
whether directly or indirectly, to control a firm or other business entity as
well as the direct or indirect ownership of 10% or more of the voting securities
of a corporation or ownership of a partnership interest in a partnership.
In the event that there is a controversy as to the status of the business
affiliation of a Director, Director elect, or Director nominee, at the written
request of the Chairman or the President, the Executive Committee of the Board
shall make a final determination upon such data as it, in its discretion,
determines is necessary, relevant or material.
(g) No person shall be permitted to stand for election for more than one
position on the Board at a single meeting of stockholders.
SEVENTH: The Board of Directors shall not adopt, amend or delete any bylaw
without the approval of the stockholders of the Corporation in the manner
provided by the bylaws of the Corporation.
EIGHTH: No director will have any personal liability to the Corporation or
its members for monetary damages for any breach of fiduciary duty as a director,
except (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, as amended or (iv) for any transaction from which the
director obtained an improper personal benefit.
NINTH: Pursuant to Section 211(e) of the DGCL, directors shall not be
required to be elected by written ballot.
TENTH: Any or all of the directors may be removed for cause or without
cause by vote of the holders of a majority of the outstanding shares of each
class of voting stock of the Corporation voting as a class.
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ELEVENTH: In the event that a holder of an Exchange membership is expelled
from membership in the Exchange pursuant to the rules of the Exchange, then all
shares of common stock of the Corporation held by such holder shall be
automatically redeemed at a redemption price per share payable in cash equal to
$.01; provided, that immediately following any such redemption, the Corporation
has outstanding one or more shares of common stock.
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ANNEX D
BYLAWS
OF
NYMEX HOLDINGS, INC.
A DELAWARE CORPORATION
ADOPTED , 2000
ARTICLE I
OFFICES
SECTION 1. The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
SECTION 2. The Corporation may also have offices at such other places,
within or outside of the State of Delaware, as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of stockholders shall be held at the registered
office of the Corporation, or at such other place within or outside of the State
of Delaware as may be fixed from time to time by the Board of Directors.
SECTION 2. Commencing with the year 2001, annual meetings of stockholders
shall be held on the third Tuesday in March of each year, or if that day is a
legal holiday, on the next following business day, at the offices of the
Corporation, or at such other date and time as may be fixed by the Board of
Directors. At each annual meeting of stockholders, the stockholders shall elect
directors and transact such other business as may properly be brought before the
meeting.
SECTION 3. Written notice of each annual meeting of stockholders, stating
the place, date and hour of the meeting, shall be given in the manner set forth
in Article VI of these Bylaws. Such notice shall be given not less than 10 nor
more than 50 days before the date of the meeting to each stockholder entitled to
vote at the meeting.
SECTION 4. Special meetings of stockholders may be called at any time for
any purpose or purposes by the Chairman of the Board of Directors or by the
Secretary upon the written request of the majority of the Board of Directors or
upon the written request of the stockholders of at least 10% of all outstanding
shares entitled to vote on the action proposed to be taken. Such written
requests shall state the time, place and purpose or purposes, by or at the
direction of the person or persons calling the special meeting, of the proposed
meeting and the special meeting so called shall be limited to the purpose set
forth in the demand. A special meeting of stockholders called by the Board of
Directors or the Chairman of the Board of Directors, other than one required to
be called by reason of a written request of stockholders, may be canceled by the
Board of Directors at any time not less than 24 hours before the scheduled
commencement of the meeting.
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SECTION 5. Written notice of each special meeting of stockholders shall be
given in the manner set forth in Article VI of these Bylaws. Such notice shall
be given not less than 10 nor more than 50 days before the date of the meeting
to each stockholder entitled to vote at the meeting. Each such notice of a
special meeting of stockholders shall state the place, date and hour of a
meeting and the purpose or purposes for which the meeting is called.
SECTION 6. Except as otherwise required by law or the Certificate of
Incorporation, the presence in person or by proxy of holders of one-third of the
shares entitled to vote at a meeting of stockholders shall be necessary, and
shall constitute a quorum, for the transaction of business at such meeting. If a
quorum is not present or represented by proxy at any meeting of stockholders,
then the holders of a majority of the shares entitled to vote at the meeting who
are present in person or represented by proxy may adjourn the meeting from time
to time until a quorum is present. An adjourned meeting may be held later
without notice other than announcement at the meeting, except that if the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting shall
be given in the manner set forth in Article VI to each stockholder of record
entitled to vote at the adjourned meeting.
SECTION 7. At any meeting of stockholders, each stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or in the Certificate of Incorporation or Bylaws, each
stockholder shall be entitled to one vote for each share of stock entitled to
vote standing in his name on the books of the Corporation. All elections of
Directors shall be determined by plurality votes. Except as otherwise provided
by law or in the Certificate of Incorporation or Bylaws, any other matter shall
be determined by the vote of a majority of the shares that are voted with regard
to it at a meeting where a valid quorum is present.
SECTION 8. Whenever the vote of stockholders at a meeting is required or
permitted in connection with any corporate action, the meeting and vote may be
dispensed with if the action taken has the written consent of the holders of
shares having at least the minimum number of votes required to authorize the
action at a meeting at which all shares entitled to vote were present and voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. The Board of Directors shall manage the business of the
Corporation, except as otherwise provided by law, the Certificate of
Incorporation or Bylaws. The Board of Directors shall consist of twenty-two (22)
persons. Directors of the Exchange shall include: (1) a Chairman of the Board
and a Vice Chairman of the Board, each of whom shall qualify and serve in
accordance with the provisions of the Bylaws; (2) fifteen (15) persons ("Member
Directors") who shall qualify and serve in accordance with the Certificate of
Incorporation; and (3) five (5) persons ("Public Directors") who shall qualify
and serve in accordance with the Certificate of Incorporation. The Board of
Directors is vested with all powers necessary and proper for the government of
the Exchange, the regulation and conduct of members and member firms and for the
promotion of the welfare, objects and purposes of the Exchange. The Board shall
have control over and management of, the property, business and finances of the
Exchange. The Board may also adopt, rescind or interpret the Rules of the
Exchange and impose such
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fees, charges, dues and assessments, all as it deems necessary and appropriate.
Without limiting the generality of the foregoing, the Board shall have the
following powers: (1) the Board may make such expenditures as it deems necessary
for the best interests of the Exchange; (2) the Board may fix, from time to
time, the fees or other compensation to members of the Board and to members of
any committee for services rendered in performing these duties as such. The
compensation for Public Directors may differ from the compensation for other
Directors; (3) the Board shall have the power to take such action as may be
necessary to effectuate any final order or decision of the Commodity Futures
Trading Commission taken under authority of the Commodity Exchange Act and
necessary to comply in all respects with any requirements applicable to the
Corporation under the Act; and (4) the Board shall have the power to adopt
arbitration rules for the settlement of claims, grievances, disputes and
controversies. The Board may designate by resolution, from time to time, such
committees as it may deem necessary or appropriate, and delegate to such
committees the authority of the Board to the extent provided in these Bylaws or
in such resolution, subject to any applicable provision of law.
SECTION 2. Any or all of the Directors may be removed for cause or without
cause by vote of the holders of a majority of the outstanding shares of each
class of voting stock of the Corporation voting as a class.
SECTION 3. Newly-created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board may be filled by vote
of a majority of the directors then in office, even if less than a quorum
exists. A director elected to fill a vacancy, including a vacancy created by a
newly-created directorship, shall serve until the next succeeding annual meeting
of stockholders and until his successor is elected and qualified. In the event
that a director is elected or appointed to fill a vacancy in the office of Vice
Chairman, and provided that such Director's term would not have expired at the
next annual meeting of stockholders, such Director may, if he does not choose to
run for the office of Chairman or Vice Chairman, resume his position as Director
upon the election and qualification of his successor as Vice Chairman. The
decision not to run for Vice Chairman or Chairman, but to resume the position as
Director, must be communicated to the Board of Directors no later than 8 weeks
prior to the date of the annual meeting of stockholders. The failure to make
such notification will be deemed a waiver of the right to resume the term as
Member Director.
SECTION 4. The books of the Corporation, except such as are required by law
to be kept within the State of Delaware, may be kept at such place or places
within or outside of the State of Delaware as the Board of Directors may from
time to time determine.
SECTION 5. The Board of Directors, by the affirmative vote of a majority of
the directors then in office, and irrespective of any personal interest of any
of its members, may establish reasonable compensation of any or all directors
for services to the Corporation as directors or officers or otherwise.
SECTION 6. In connection with each meeting of stockholders, or action by
written consent, involving the election of one or more Directors meeting the
qualifications for Public Directors contained in the Certificate of
Incorporation or Bylaws, the Board of Directors is authorized to nominate
persons meeting such qualifications and to submit such nominees to the
stockholders for their approval at the meeting of stockholders or as part of the
consent solicitation.
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ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1. The first meeting of each newly-elected Board of Directors shall
be held immediately following the annual meeting of stockholders. If the meeting
is held at the place of the meeting of stockholders, then no notice of the
meeting need be given to the newly-elected directors. If the first meeting is
not held at that time and place, then it shall be held at a time and place
specified in a notice given in the manner provided for notice of special
meetings of the Board of Directors as set forth in Article VI.
SECTION 2. Regular meetings of the Board of Directors may be held upon such
notice, or without notice, at such times and at such places within or outside of
the State of Delaware as shall from time to time be determined by the Board of
Directors.
SECTION 3. Special meetings of the Board of Directors may be called by the
Chairman of the Board, or in his absence, the Vice Chairman on at least one
hour's notice to each director and shall be called by the Chairman on like
notice at the written request of any five directors.
SECTION 4. Whenever notice of a meeting of the Board of Directors is
required, the notice shall be given in the manner set forth in Article VI of
these Bylaws and shall state the place, date and hour of the meeting. Except as
provided by law, the Certificate of Incorporation or other provisions of these
Bylaws, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of the meeting.
SECTION 5. Except as otherwise required by law or the Certificate of
Incorporation or other provisions of these Bylaws, one-third of the entire Board
of Directors shall constitute a quorum for the transaction of business, and the
vote of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum is not present
at any meeting of directors, then a majority of the directors present at the
meeting may adjourn the meeting from time to time, without notice of the
adjourned meeting other than announcement at the meeting. One or more Directors
may participate in a meeting of the Board by means of conference telephone or
similar communication device. To the extent permitted by law, a director
participating in a meeting by conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other
will be deemed present in person at the meeting and all acts taken by him during
his participation shall be deemed taken at the meeting.
SECTION 6. Any action of the Board of Directors may be taken without a
meeting if written consent to the action signed by all members of the Board of
Directors is filed with the minutes of the Board of Directors.
SECTION 7. The Board shall have the authority to make rules governing its
own conduct and proceedings. In the absence of such rules, all meetings of the
Board shall be conducted in accordance with the then current edition of Robert's
Rules of Order.
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ARTICLE V
COMMITTEES
SECTION 1. The Board of Directors may designate from among its members an
Executive Committee and other committees, each consisting of two or more
directors, and may also designate one or more of its members to serve as
alternates on these committees. The Chairman of the Board shall be an ex-officio
member of all committees. To the extent permitted by law, the Executive
Committee shall have all the authority of the Board of Directors, except as the
Board of Directors otherwise provides, and the other committees shall have such
authority as the Board of Directors grants them. The Board of Directors shall
have power at any time to change the membership of any committees, to fill
vacancies in their membership and to discharge any committees. All resolutions
establishing or discharging committees, designating or changing members of
committees or granting or limiting authority of committees, may be adopted only
by the affirmative vote of a majority of the entire Board of Directors.
SECTION 2. Each committee shall keep regular minutes of its proceedings and
report to the Board of Directors as and when the Board of Directors shall
require. Unless the Board of Directors otherwise provides, a majority of the
members of any committee may determine its actions and the procedures to be
followed at its meetings (which may include a procedure for participating in
meetings by conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other), and may fix the
time and place of its meetings.
SECTION 3. Any action of a committee may be taken without a meeting if
written consent to the action signed by all the members of the committee is
filed with the minutes of the committee.
ARTICLE VI
NOTICES
SECTION 1. Any notice to a stockholder shall be given personally or by
mail. If mailed, then a notice will be deemed given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of stockholders.
SECTION 2. Any notice to a director may be given personally, by telephone
or by mail, facsimile transmission, telex, telegraph, cable or similar
instrumentality. A notice will be deemed given when actually given in person or
by telephone; when transmitted by a legible transmission, if given by facsimile
transmission; when transmitted, answerback received, if given by telex; on the
day when delivered to a cable or similar communications company; one business
day after delivery to an overnight courier service; or on the third business day
after the day when deposited with the United States mail, postage prepaid,
directed to the director at his business address, facsimile number or telex
number or at such other address, facsimile number or telex number as the
director may have designated to the Secretary in writing as the address or
number to which notices should be sent.
SECTION 3. Any person may waive notice of any meeting by signing a written
waiver, whether before or after the meeting. In addition, attendance at a
meeting will be deemed a waiver of notice unless the person attends for the
purpose, expressed to the
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meeting at its commencement, of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
ARTICLE VII
OFFICERS
SECTION 1. The officers of the Corporation shall be a President, a
Secretary and a Treasurer. In addition, the stockholders shall designate one
Director as Chairman of the Board and one Director as Vice Chairman of the
Board. The Chairman and Vice Chairman of the Board shall be a member of New York
Mercantile Exchange, Inc. and shall have been a member for at least one year
prior to his election. The Board of Directors may elect one or more Vice
Presidents (one or more of whom may be designated an Executive Vice President or
a Senior Vice President), one or more Assistant Secretaries or Assistant
Treasurers, and such other officers as it may from time to time deem advisable.
Any two or more offices may be held by the same person. No officer except the
Chairman of the Board, the Vice Chairman and the Treasurer need be a director of
the Corporation. In the event of the death, resignation or vacancy of the
Chairman, the Vice Chairman shall be the Chairman. In the event of the death,
resignation or vacancy in the office of the Vice Chairman, the Board, by vote of
a majority of the Directors then in office, shall elect a Vice Chairman from
among the other Directors.
SECTION 2. Each officer shall be elected by the Board of Directors and
shall hold office for such term, if any, as the Board of Directors shall
determine. Any officer may be removed at any time, either with or without cause,
by the vote of a majority of the entire Board of Directors.
SECTION 3. Any officer may resign at any time by giving written notice to
the Board of Directors or to the President. Such resignation shall take effect
at the time specified in the notice or, if no time is specified, at the time of
receipt of the notice, and the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 4. The compensation of officers shall be fixed by the Board of
Directors or in such manner as it may provide.
SECTION 5. The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors and shall have such other duties as
from time to time may be assigned to him by the Board of Directors.
SECTION 6. The Chairman of the Board shall be the Chief Executive Officer
of the Corporation and shall have general charge of the management of the
business and affairs of the Corporation. The Vice Chairman shall preside over
any meetings of the stockholders of the Board of Directors at which the Chairman
is not present.
SECTION 7. The officers of the Corporation, other than the Chairman of the
Board, shall have such powers and perform such duties in the management of the
property and affairs of the Corporation, subject to the control of the Board of
Directors and the Chairman of the Board, as customarily pertain to their
respective offices, as well as such powers and duties as from time to time may
be prescribed by the Board of Directors.
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SECTION 8. The Corporation may secure the fidelity of any or all of its
officers or agents by bond or otherwise. In addition, the Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his duties.
ARTICLE VIII
CERTIFICATES FOR SHARES
SECTION 1. The shares of stock of the Corporation shall be represented by
certificates, in such form as the Board of Directors may from time to time
prescribe, signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary and bearing
any legends as may be prescribed by the Certificate of Incorporation.
SECTION 2. Any or all signatures upon a certificate may be a facsimile.
Even if an officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be that
officer, transfer agent or registrar before the certificate is issued, that
certificate may be issued by the Corporation with the same effect as if he or it
were that officer, transfer agent or registrar at the date of issue.
SECTION 3. The Board of Directors may direct that a new certificate be
issued in place of any certificate issued by the Corporation that is alleged to
have been lost, stolen or destroyed. When doing so, the Board of Directors may
prescribe such terms and conditions precedent to the issuance of the new
certificate as it deems expedient, and may require a bond sufficient to
indemnify the Corporation against any claim that may be made against it with
regard to the allegedly lost, stolen or destroyed certificate or the issuance of
the new certificate.
SECTION 4. The Corporation or a transfer agent of the Corporation, upon
surrender to it of a certificate representing shares, duly endorsed and
accompanied by proper evidence of lawful succession, assignment or authority of
transfer, shall issue a new certificate to the person entitled thereto, and
shall cancel the old certificate and record the transaction upon the books of
the Corporation.
SECTION 5. The Board of Directors may fix a date as the record date for
determination of the stockholders entitled (i) to notice of, or to vote at, any
meeting of stockholders, (ii) to express consent to, or dissent from, corporate
action in writing without a meeting, or (iii) to receive payment of any dividend
or other distribution or allotment of any rights or to take or be the subject of
any other action. The record date must be on or after the date on which the
Board of Directors adopts the resolution fixing the record date and in the case
of (i), above, must be not less than 10 nor more than 60 days before the date of
the meeting, in the case of (ii), above, must be not more than 10 days after the
date on which the Board of Directors fixes the record date, and in the case of
(iii), above, must be not more than 60 days prior to the proposed action. If no
record date is fixed, then the record date will be as provided by law. A
determination of stockholders entitled to notice of, or to vote at, any meeting
of stockholders that has been made as provided in this Section will apply to any
adjournment of the meeting, unless the Board of Directors fixes a new record
date for the adjourned meeting.
SECTION 6. The Corporation shall for all purposes be entitled to treat a
person registered on its books, as the owner of shares, as the owner of those
shares, with the exclusive right, among other things, to receive dividends and
to vote with regard to those
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shares, and the Corporation shall be entitled to hold a person registered on its
books as the owner of shares liable for calls and assessments, if any may
legally be made, and shall not be bound to recognize any equitable or other
claim to, or interest in, shares of its stock on the part of any other person,
whether or not the Corporation shall have express or other notice of the claim
or interest of the other person, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
INDEMNIFICATION
SECTION 1. Suits by Third Parties. The Corporation shall indemnify any
person who was or is made a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner that the
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the conduct was unlawful.
SECTION 2. Derivative Suits. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that the person is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses that the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification as of Right. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article, or in defense of any claim, issue or matter
therein, the person shall be indemnified against
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expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection therewith.
SECTION 4. Determination that Indemnification is Proper. Any
indemnification under Sections 1 and 2 of this Article (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination will be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable and a quorum of disinterested
directors so directs, by independent legal counsel (compensated by the
Corporation) in a written opinion or (3) by the stockholders.
SECTION 5. Advance of Funds. Expenses incurred by an director, officer,
employee or agent in defending a civil, criminal, administrative or
investigative action, suit or proceeding, or threat thereof, may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that the person
is not entitled to be indemnified by the Corporation as authorized in this
Article.
SECTION 6. Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office.
SECTION 7. Insurance Premiums. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
the person and incurred by him in any such capacity, or arising out of the
person's status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
SECTION 8. References to "Corporation." References in this Article to "the
Corporation" will include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger that, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, will stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
SECTION 9. References to Certain Terms. For purposes of this Article,
references to "other enterprises" will include employee benefit plans;
references to "fines" will include
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any excise taxes assessed on a person with respect to an employee benefit plan;
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of a subsidiary of the
Corporation and any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan will be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
SECTION 10. Successors and Assigns. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article shall, unless
otherwise provided, when authorized or ratified continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
SECTION 11. Actions Against the Exchange. Except as specifically permitted
by applicable law, no person who is or was a director, officer, employee, agent,
or member of any committee of the Exchange shall be indemnified in any way if
such person has brought the action or proceeding against the Exchange, its
directors, officers, employees, agents, or any committee of the Exchange.
SECTION 12. Retroactive Effect. The provisions of this Article will be
deemed retroactive and will include all acts of the directors, officers,
employee or agent of the Corporation since the date of incorporation.
ARTICLE X
GENERAL PROVISIONS
SECTION 1. The corporate seal shall have inscribed on it the name of the
Corporation, the year of its creation, the words "CORPORATE SEAL DELAWARE," and
such other appropriate legend as the Board of Directors may from time to time
determine. Unless prohibited by the Board of Directors, a facsimile of the
corporate seal may be affixed or reproduced in lieu of the corporate seal
itself.
SECTION 2. The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
ARTICLE XI
AMENDMENTS
SECTION 1. Amendment of Bylaws. Any Bylaw may be amended or deleted by the
Board with the approval of the stockholders. After approval by the Board by a
vote of two-thirds of the entire Board at any regular or special meeting
thereof, a proposed Bylaw, amendment or deletion of the Bylaw shall be voted
upon by the stockholders at any meeting of the stockholders. The proposed Bylaw,
amendment or deletion shall be adopted by the affirmative vote of a majority of
the stockholders. Notice of the proposed Bylaw, amendment or deletion must be
given in accordance with Article VI and shall specifically set forth the entire
Bylaw, amendment, or deletion proposed.
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ANNEX E
CERTIFICATE OF INCORPORATION
OF
NEW YORK MERCANTILE EXCHANGE, INC.
FIRST: The name of the corporation is New York Mercantile Exchange, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the state of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware
19805-1297. The name of the registered agent at such address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DGCL").
FOURTH: The Corporation shall not have the authority to issue capital
stock. The membership interests that the Corporation shall have authority to
issue initially shall consist of Class A memberships and a Class B membership.
The Class B membership initially shall be held by NYMEX Holdings, Inc., a
Delaware stock corporation ("NYMEX Holdings"). The holders of Class A
memberships are sometimes hereinafter referred to as "Class A members" and the
holder of the Class B membership is sometimes hereinafter referred to as the
"Class B member." The Board of Directors of the Corporation shall have the
authority to create additional classes of memberships with such rights and
limitations as the Board determines; provided, however, that no such additional
class of membership, other than the Class B membership, shall have voting or
other rights equal to or greater than the Class A memberships. Except to the
extent provided in this Certificate of Incorporation, the conditions of
membership in the Corporation shall be as set forth in the bylaws of the
Corporation.
FIFTH: Until such time as the certificate of incorporation of NYMEX
Holdings is amended to eliminate the restrictions on transfer contained in
paragraph (b) of Article FIFTH thereof, Class A memberships shall be
transferable only together with shares of common stock of NYMEX Holdings ("NYMEX
Holdings Common Stock"). Accordingly, until that time: (i) the Class A
memberships shall not be transferable, and shall not be transferred on the books
of the Corporation, unless a simultaneous transfer is made by the same
transferor to the same transferee of a number of shares of NYMEX Holdings Common
Stock equal to the number of Class A memberships being transferred; (ii) each
Certificate evidencing ownership of shares of NYMEX Holdings Common Stock shall
be deemed to evidence the same number of Class A memberships; and (iii) any
attempted or purported transfer in violation of the provisions of this Article
FIFTH shall be void. For purposes of the restrictions on transfer contained in
this Article FIFTH, the term "transfer" shall be deemed not to include a lease
of a member's trading privileges made in accordance with the bylaws and rules of
the Corporation.
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SIXTH: The terms, conditions, preferences and rights of the Class A
memberships and the Class B membership shall be as set forth in the bylaws of
the Corporation; provided, however, that:
(a) Except as set forth in Article EIGHTH, the Class A members shall
have no voting rights;
(b) Except as set forth in Article EIGHTH, the Class B member
exclusively shall exercise full voting rights with respect to any matter on
which members are permitted to vote by Delaware law, this Certificate of
Incorporation or the bylaws of the Corporation; and
(c) The Class A members shall have no interest in the profits of the
Corporation. The Class B member exclusively shall be entitled to all
dividends and other distributions of any type (including upon liquidation)
made by the Corporation.
SEVENTH: So long as the provisions of paragraph (a) of Article SIXTH remain
in effect, (i) it shall be a qualification for each director of the Corporation
that such director is also a director of NYMEX Holdings; (ii) the Class B member
shall elect any person who becomes a director of NYMEX Holdings as a director of
the Corporation; (iii) the Class B member shall designate the Chairman and Vice
Chairman of NYMEX Holdings to also serve as the Chairman and Vice Chairman of
the Corporation and (iv) any director of the Corporation who ceases to be a
director of NYMEX Holdings shall immediately cease to be a director of the
Corporation.
EIGHTH: The board of directors shall not adopt, amend or delete any bylaw
without the approval of the memberships of the Corporation in the manner
provided by the bylaws of the Corporation.
NINTH: No director will have any personal liability to the Corporation or
its members for monetary damages for any breach of fiduciary duty as a director,
except (i) for any breach of the director's duty of loyalty to the Corporation
or its members, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, as amended or (iv) for any transaction from which the director
obtained an improper personal benefit.
TENTH: Directors shall not be required to be elected by written ballot.
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ANNEX F
NEW YORK MERCANTILE EXCHANGE, INC.
BYLAWS
ARTICLE 1
MEMBERSHIP
SEC. 100. Classes of Membership; Number of Memberships; Additional Classes
of Memberships
(A) Membership shall consist of the following two classes:
(1) Class A, and
(2) Class B.
(B) The number of Class A Memberships is limited to 816 and the number of
Class B Memberships is limited to one.
(C) The Board may create additional classes of members with such rights and
limitations as the Board determines, provided however, that no such additional
class of Membership, other than the Class B Membership, shall have voting or
other rights equal to or greater than the Class A Memberships.
SEC. 101. Eligibility Criteria and Procedures
(A) The Board may adopt, from time to time, Rules relating to criteria for
eligibility for membership and procedures for becoming a member and any
requirements or procedures for the acquisition or transfer of a membership as it
may determine.
(B) The Board may adopt, from time to time, Rules relating to eligibility
and application procedures for Floor Members as it shall determine.
SEC. 102. Financial Standards
(A) The Board may adopt, from time to time, Rules relating to financial
standards applicable to Class A Members and Member Firms as a condition to
becoming a Class A Member and continuing as a Class A Member. Such financial
standards may differ among different categories of membership as determined by
the Board in its discretion.
(B) Any Class A Member who is registered with the Commission shall comply
with such rules and regulations as the Commission adopts relating to financial
requirements.
SEC. 103. Dues
The annual dues of Class A Members shall be fixed by the Board at any
meeting of the Board and are payable at such time as the Board may determine.
The Board may waive the payment of dues by all Class A Members or by individual
Class A Members as it shall determine. Dues are payable by the Class A Member in
whose name a membership is registered.
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SEC. 104. Assessments
From time to time the Board may levy such assessments as it determines to
be necessary. All assessments are due and payable at such time as the Board may
determine. All assessments are payable by the Member in whose name the
membership is registered.
SEC. 105. Fees
From time to time the Board may establish fees, in such amounts as it
determines, on contracts traded on the Exchange.
SEC. 106. Failure to Pay Dues, Assessments and Fees
(A) If a Class A Member fails to pay any dues, assessments or fees when due
and such failure is not cured within 30 days after written notice to the Class A
Member by the Exchange that such dues, assessments or fees are due, then such
Class A Member shall be suspended automatically from all rights and privileges
of membership. Such suspension shall continue in effect until the failure is
cured. The Executive Committee, upon written application received prior to the
expiration of such period, may extend the 30 day period, in its sole discretion.
(B) If a Class A Member who is suspended under subsection (A) of this
Section 106 fails to pay any dues, assessments or fees within 30 days of the
suspension, then the Class A Member shall be expelled from membership. The Board
or the Executive Committee, upon written application received prior to the
expiration of such 30 day period, and for good cause, may extend the 30 day
period.
(C) Any Class A Member who fails to pay any dues, assessments or fees after
written notice to the Class A Member that such dues, assessments or fees are
payable, shall pay a penalty, in addition to the sanctions imposed by this
Section 106, as fixed from time to time by the Board but not less than 20% of
the amount due.
SEC. 107. Notice of Dues and Assessments
(A) Notice of all dues and assessments shall be published by the Exchange
and shall be given personally by delivery to a postal box located on the
Exchange premises or by first class mail, postage prepaid and addressed to the
Class A Member at the address such Class A Member has filed with the Exchange.
Notice, when mailed in accordance with this Section 107, shall be effective when
mailed.
(B) Non-receipt of the notice shall not operate to relieve the Class A
Member from payment, to extend the time for payment or to relieve any Class A
Member from the imposition of penalties for failing to pay dues and assessments.
SEC. 108. Effect of Suspension or Expulsion of Membership
(A) A Class A Member or Member Firm whose rights and privileges of
membership have been suspended shall continue to be:
(1) subject to the Bylaws and Rules of the Exchange;
(2) liable for all dues, assessments, fees and fines imposed by the
Exchange; and
(3) obligated to the Exchange and to its Members for all contracts,
obligations and liabilities entered into or incurred before, during and
after such suspension.
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(B) A Class A Member or Member Firm who has been expelled from the rights
and privileges of membership shall continue to be:
(1) subject to the disciplinary and arbitration rules of the Exchange;
(2) liable for all dues, assessments, fees and fines imposed by the
Exchange prior to such expulsion; and
(3) obligated to the Exchange and its Members for all contracts,
obligations, liabilities, fines and penalties entered into or incurred
prior to or after such expulsion.
SEC. 109. Transfer of Membership
Membership in the Exchange is a personal privilege, only transferable
pursuant to the terms and conditions established by the Bylaws, Rules and
Charter. No Member may transfer a membership when the Member or the Member Firm
upon which such Member has conferred such membership privileges is the subject
of any disciplinary proceeding or investigation by the Exchange under the Bylaws
or Rules.
A Member who is the subject of any disciplinary proceeding or investigation
by the Exchange may transfer a membership pursuant to the terms and conditions
established by the Bylaws, Rules and Charter notwithstanding that such Member or
the Member Firm upon which such Member conferred such membership privileges is
the subject of any investigation by the Exchange, if the Member or Member Firm
submits a written agreement, acceptable to the Board, by which the Member or
Member Firm submits to the continuing jurisdiction of the Exchange.
SEC. 110. Disclosure of Information
The Exchange shall not disclose to any person any information regarding the
financial condition of a Class A Member or Member Firm or the transactions or
positions of any Class A Member or Member Firm or any person except:
(1) to any committee, officer, director, employee or agent of the
Exchange authorized to receive such information within the scope of its or
such person's duties;
(2) to any duly authorized representative of the Commission requesting
such information or to any duly authorized representative of any other
regulatory or self-regulatory organization with which the Exchange, as
approved by the Board, has entered into an information sharing agreement;
(3) as required by law;
(4) when the Class A Member or Member Firm requests or consents to
such disclosure; or
(5) that the Exchange may release such information in connection with
any litigation involving the Exchange when, in the opinion of the Exchange,
the information is relevant or the release of the information is necessary
and appropriate to the conduct of such litigation.
SEC. 150. Establishment of Associate Membership
There is hereby established a category of associate members known as
"Commercial Associate Members" whose election to membership and whose rights,
privileges and obligations shall be as set forth in Sections 150 through 155.
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SEC. 151. Number of Commercial Associate Memberships
The number of Commercial Associate Members shall be limited to 28.
SEC. 152. Election
Any person who was a member in good standing of International Commercial
Exchange, Inc. may be qualified as a Commercial Associate Member of the Exchange
by complying with the following provisions:
(a) he shall have filed an application for membership as a Commercial
Associate Member in the form prescribed by the Exchange on or before
December 31, 1973; and
(b) the application shall have been accompanied by a statement of the
President or a Vice President of International Commercial Exchange, Inc.
that the applicant was a member in good standing of said Exchange and that
his application was approved.
SEC. 153. Obligations of Commercial Associate Members
A Commercial Associate Member shall be subject to all of the provisions of
the Bylaws and Rules of the Exchange applicable to Members including, without
limitation, the obligations for dues, assessments and fines, except the
following:
(a) those that are not applicable to the nature of his membership such
as the provisions respecting compliance with requirements for election to
membership, provisions for transfer of membership and the like; and
(b) those that are inconsistent with the provisions of Sections 150
through 155.
SEC. 154. Rights and Privileges of Commercial Associate Members
A Commercial Associate Member shall have the following rights and
privileges:
(a) the right to confer the membership privileges on a partnership or
corporation in accordance with such rules as may be established for that
purpose;
(b) the right to act as a floor trader in transactions in all
contracts traded on the Exchange only for his own account; and
(c) the right to act as a floor broker only in transactions in
contracts designated as "Commercial Associate Contracts."
SEC. 155. Limitations of Rights of Commercial Associate Members
Notwithstanding any other provision of Sections 150 through 155 and the
subdivisions thereunder, a Commercial Associate Member shall not have any of the
following rights or privileges:
(a) to transfer his membership voluntarily (nor shall any such
membership be transferred by operation of law);
(b) to vote;
(c) to trade on the floor of the Exchange except as specified in
Section 154;
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(d) to clear contracts or to confer the right to become a Clearing
Member on a partnership or a corporation;
(e) to participate in the distribution of any assets of the Exchange;
and
(f) to become a member of the Board of Governors.
ARTICLE 2
MEETINGS OF MEMBERS
SEC. 200. Time and Place of Meetings of Members
All meetings of Members shall be held at such place within or without the
State of New York and at such time as the Board shall designate.
SEC. 201. Annual Meeting of Members
The Members shall hold an annual meeting at the offices of the Exchange on
the third Tuesday in March of each year to elect directors of the Exchange in
accordance with the Bylaws and to transact such other business as may come
before the meeting. If such day is not a business day, then the annual meeting
shall be held on the next succeeding business day.
SEC. 202. Special Meetings of Members
(A) Special meetings of Members may be called by the Board or by the
Chairman in their discretion.
(B) A special meeting shall be called by the Chairman or by the Secretary
upon receipt by the Chairman or by the Secretary of a written demand of a
majority of the Board or of Members entitled to cast 10% of the total number of
votes entitled to be cast at such meeting. Any such written demand shall specify
the purpose of such special meeting and the special meeting so called shall be
limited to the purpose so set forth. The written demand shall also specify the
date of such special meeting that shall be a business day not less than 60 nor
more than 90 days from the date of such written demands.
SEC. 203. Notice of Meeting
(A) Notice of the annual meeting of Members shall state the place, date and
time of such meeting.
(B) Notice of any special meeting of Members shall state the place, date
and time of such special meeting, the purposes for which such meeting is called
and shall indicate that it is being issued by or at the direction of the person
or persons calling the special meeting.
(C) The Secretary shall issue all notices of meetings of Members.
(D) A copy of Notice of any meeting of Members shall be given personally or
by delivery to a postal box located on the Exchange premises or by first class
mail, postage prepaid and addressed to each Member at his address as it appears
in the records of the Exchange. Notice of a meeting, when mailed in accordance
with this Section 203(D), shall be effective when mailed. Notice of any meeting
of Members shall be given not less than 10 nor more than 50 days prior to the
date of the meeting.
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SEC. 204. Quorum of Members
One hundred fifty Members, whether present in person or by proxy, shall
constitute a quorum for the transaction of any business at any meeting of
Members. A majority of the Members present may adjourn a meeting despite the
absence of a quorum.
SEC. 205. Voting
(A) Each Member shall be entitled to one vote for each Membership owned of
record by such Member on all matters with regard to which Members are entitled
to vote, as set forth in the Charter. On all matters as to which all Members are
entitled to vote, the Members shall vote together as a single class.
Notwithstanding the foregoing, no Member shall be entitled to vote on any matter
while any dues, assessments, fees or fines remain unpaid or during any period of
suspension.
(B) Member Directors, the Chairman and the Vice Chairman shall be elected
by a plurality of votes cast at a meeting of Members. To the extent permitted by
law, any action of the Exchange taken by a vote of the Members requires a vote
of a majority of the votes cast at a meeting of Members by the Members entitled
to vote thereon. Blank ballots or abstentions shall not be counted in the number
of votes cast.
(C) In order that the Exchange may determine the members entitled to notice
of or to vote at any meeting of members or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than fifty nor less than ten
days before the date of such meeting. If no record is fixed by the Board of
Directors, the record date for determining members entitled to notice of or to
vote at a meeting of members shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of members of record entitled to notice of or to vote at a
meeting of members shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SEC. 206. Proxies
(A) A Member entitled to vote at a meeting of Members may authorize another
Member to act for him by proxy.
(B) Every proxy must be in writing and signed by the Member.
(C) The Board may establish, from time to time, such terms and conditions
as it deems appropriate to regulate voting by proxy.
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ARTICLE 3
GOVERNMENT AND ADMINISTRATION
SEC. 300. Composition of Board
(A) The governance of the Exchange shall be vested in a Board of Directors,
which shall consist of 22 persons. Directors of the Exchange shall include:
(1) a Chairman of the Board and a Vice Chairman of the Board;
(2) 15 directors who are Members ("Member Directors"); and
(3) 5 persons ("Public Directors") who are not Members or employees of
the Exchange and who qualify and serve in accordance with the Certificate
of Incorporation of NYMEX Holdings, Inc.
SEC. 301. Powers of the Board
(A) The Exchange shall be managed by a Board of Directors, which is vested
with all powers necessary and proper for the government of the Exchange, the
regulation and conduct of Members and Member Firms, and for the promotion of the
welfare, objects and purposes of the Exchange. The Board shall have control over
and management of, the property, business and finances of the Exchange. The
Board may also adopt, amend, rescind or interpret the Rules of the Exchange and
impose such fees, charges, dues and assessments, all as it deems necessary and
appropriate.
(B) Without limiting the generality of the foregoing, the Board shall have
the following powers:
(1) the Board may make such expenditures as it deems necessary for the
best interests of the Exchange;
(2) the Board may fix, from time to time, the fees or other
compensation to members of the Board and to members of any committee for
services rendered in performing these duties as such. The compensation for
Public Directors may differ from the compensation for other Directors;
(3) the Board shall have the power to take such action as may be
necessary to effectuate any final order or decision of the Commission taken
under authority of the Act and necessary to comply in all respects with any
requirements applicable to the Exchange under such Act; and
(4) the Board shall have the power to adopt arbitration rules for the
settlement of claims, grievances, disputes and controversies.
(C) The Board may designate by resolution, from time to time, such
committees as it may deem necessary or appropriate, and delegate to such
committees the authority of the Board to the extent provided in these Bylaws or
in such resolution, subject to any applicable provision of law.
SEC. 302. Chairman of the Board of Directors
(A) The Chairman shall be designated as Chairman by the Class B Member from
among the elected members of the Board to serve until his successor is elected
and
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qualified. The Chairman shall be a member at the time of his nomination and
shall have been a Member for at least one year prior to his nomination.
(B) The Chairman shall be the chief executive officer of the Exchange and
shall preside at all meetings of the Members and of the Board. He may appoint
such experts and professional advisors as he deems appropriate.
(C) The Chairman shall be an ex-officio member of all Committees.
(D) The Chairman shall have such authority and perform such duties as are
incident to his office. He shall present any reports of the Board at meetings of
Members. Whenever he deems it appropriate, the Chairman may communicate to the
Board or to the Members any ideas and suggestions that tend, in his opinion, to
promote the welfare and usefulness of the Exchange. The Chairman shall have a
vote on all questions at all meetings of the Board or of the Members.
SEC. 303. Vice Chairman of the Board of Directors
(A) The Vice Chairman shall be designated as Vice Chairman by the Class B
Member from among the elected members of the Board to serve until his successor
is elected and qualified. The Vice Chairman shall be a member at the time of his
nomination and shall have been a Member for at least one year prior to his
nomination.
(B) If the Chairman is absent or unable to perform his duties, then the
Vice Chairman shall exercise and shall perform the duties of the Chairman. If
both the Chairman and the Vice Chairman are absent or unable to perform the
duties of Chairman, then the Treasurer shall exercise and perform the duties of
the Chairman. If the Chairman, Vice Chairman and Treasurer are all absent or
unable to perform the duties of Chairman, then a quorum of the Board, by
majority vote, may chose an Acting Chairman from the remaining Directors.
SEC. 304. Resignation and Removal of Directors
(A) Any Director, other than the Chairman of the Board, may resign at any
time by tendering written notice of his resignation to the Chairman of the
Board. The Chairman of the Board may resign at any time by tendering written
notice of his resignation to a quorum of the Board. Any resignation under this
Bylaw, unless conditioned on acceptance, will be effective on the date stated in
the notice or, if no date is stated, on the date given.
(B) In the event of the refusal, failure, neglect or inability of a
Director, other than the Chairman or the Vice Chairman, to discharge his duties,
or for any cause adversely affecting the best interests of the Exchange, or if a
Director, other than the Chairman or Vice Chairman, shall absent himself from
three successive regular or special meetings and fail to justify such absences
to the satisfaction of the Board, then the Class B member shall have the power
to remove such Director.
(C) In the event of the refusal, failure, neglect or inability of the
Chairman or the Vice Chairman to discharge his duties, or for any cause
adversely affecting the best interests of the Exchange, or if the Chairman or
the Vice Chairman shall absent himself from three successive regular or special
meetings and fail to justify such absences to the satisfaction of the Board,
then the Board shall have the power to suspend the powers of such Chairman or
Vice Chairman arising from his designation as such by an affirmative vote of the
Directors provided there is a quorum of not less than a majority present at the
meeting (regular or special) at which such action is taken. If the Board
suspends a
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Chairman or Vice Chairman pursuant to this Section 307(C), then it shall call a
special meeting of Members to be held within 30 days of such suspension, to vote
on the removal or the termination of the suspension of the powers of such
Chairman or Vice Chairman.
SEC. 305. Filling of Vacancies
(A) In the event there is a vacancy among the Directors caused by the
death, removal or resignation of a Director, such vacancy shall be filled by a
vote of the Class B Member.
(B) A Director appointed to fill a vacancy under this Bylaw, shall hold
office until the next annual meeting of Members and until his successor is
elected or appointed and qualified. Such successor, and any person elected to
fill an unfilled vacancy or to replace a Director resigning, shall be elected
for a term of such length as would have remained in the term of the Director
whose death, removal or resignation had caused the vacancy. If no time would
have remained in such term, then such successor shall be elected for a full
term.
(C) In the event of the death, resignation or vacancy of the Chairman, the
Vice Chairman shall be the Chairman.
(D) In the event of the death, resignation or vacancy in the office of the
Vice Chairman, the Board, by vote of a majority of the Directors then in office,
shall elect a Vice Chairman from among the other Directors.
(E) A Chairman or a Vice Chairman appointed or elected pursuant to this
Section 305 shall hold office until the next annual meeting of Members and until
his successor is elected and qualified. Such successor shall be elected for a
term of such length as would have remained in the term of the Chairman or Vice
Chairman whose death, removal or resignation had caused the vacancy. If no time
would have remained in such term, then such successor shall be elected for a
full term.
SEC. 306. Meetings of the Board
(A) Regular meetings of the Board shall be held monthly on such date and at
such time and place as fixed by the Board.
(B) The Chairman may call a special meeting of the Board whenever he deems
necessary. The Chairman shall call a special meeting when a written demand of
not less than five Directors is received.
(C) Notice of a meeting may be given in writing, by telephone or by other
means of communication and shall be effective when so given. No special meeting
may be called on notice of less than one hour. Notice of any meeting may be
waived by a Director in writing or by his attendance at a meeting without
protest of the lack of notice to him either before, or at the commencement of,
the meeting.
(D) Notice of a regular meeting need not specify the purpose of any
meeting.
(E) Notice of a special meeting shall specify the purpose of such meeting.
SEC. 307. Quorum
One-third of the entire Board of Directors shall constitute a quorum. A
majority of Directors present, whether or not a quorum exists, may adjourn any
meeting to another
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time or place. Unless specifically provided otherwise in the Bylaws or any
applicable law, any action taken by a vote of a majority of the Directors
present at a meeting at which there is a quorum shall be the act of the Board.
SEC. 308. Action by Consent
Any action required or permitted to be taken by the Board may be taken
without a meeting if all of the Directors consent in writing to the adoption of
a resolution authorizing such action. The resolution and the written consents of
the Directors shall be filed with the minutes of the proceedings of the Board.
SEC. 309. Telephone Participation
One or more Directors may participate in a meeting of the Board by means of
conference telephone or similar communications devices allowing all persons
participating at the meeting to hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
SEC. 310. Procedure for Election of Directors
In order to be eligible for election as the Chairman, Vice Chairman or a
Member Director, a Member must be nominated by written petition of the
membership in accordance with the Rules of the Exchange.
SEC. 311. Rules of Order
The Board shall have the authority to make rules governing its own conduct
and proceedings. In the absence of such rules, all meetings of the Board shall
be conducted in accordance with the then current edition of Robert's Rules of
Order.
SEC. 350. Officers
The Board shall appoint a President, a Secretary and a Treasurer. The Board
may appoint one or more Vice Presidents, and may classify such Vice Presidents,
and may appoint such other officers as the Board may determine. Any officer
appointed under this Section may be removed by the Board, with or without cause.
Any person may hold two or more offices, except the offices of Chairman of the
Board, Vice Chairman of the Board, President, Secretary and Treasurer.
SEC. 351. President
(A) The President shall be the chief administrative officer of the
Exchange, responsible to the Board for the management and administration of all
Exchange activities. He shall not engage in any other business during his
incumbency, nor shall he trade, directly or indirectly, for his own account or
for the account of anyone else, in any commodity futures or options contract. He
shall, by his acceptance of the office of President, be obliged to uphold the
Charter, Bylaws, Rules and Regulations of the Exchange. He shall attend all
meetings of the Board and may attend, in person or by representative, all
committee meetings. He may be called upon for information or advice at such
Board and committee meetings, but he shall not have the right to vote at any
meeting of the Board or of any committees. He shall engage such employees as he
may determine are required for the efficient management and operation of the
Exchange and shall fix the duties, responsibilities and terms and conditions of
their employment; provided, however, that the President shall not enter into any
contracts of employment on behalf of the Exchange unless authorized to do so by
the Board.
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(B) In addition to all other powers and duties set forth in the Bylaws and
Rules, the President shall perform all functions delegated to him by the Board
or by the Chairman of the Board and shall facilitate the activities of Exchange
committees.
(C) The duties of the President may be performed by a Vice President or by
other persons designated by the Chairman of the Board or by the President.
(D) The President shall make an annual report to the Board that shall
analyze the effectiveness of the Exchange's Compliance and Disciplinary Program.
Such report shall include the following:
(1) Compliance and Disciplinary Program expenditures relative to the
volume of trading in each contract;
(2) description of compliance staff size, organization, duties, and
responsibilities, investigations commenced and completed, disciplinary
actions commenced and completed and other activities;
(3) description of the actions of Exchange Disciplinary Committee;
and,
(4) recommendations for any Bylaw, Rule, procedure, staff or operating
changes. The President's report shall become a permanent part of the
Exchange's compliance records and shall be presented to the Board and any
Exchange committee responsible for the Compliance budget and expenditures.
SEC. 352. Executive Vice President
The Vice President, who is designated Executive Vice President, shall have
such duties and authority as provided in the Bylaws, Rules or by the Board. If
the President is absent or unable to perform his duties, then the Executive Vice
President shall perform the duties of the President. Subject to the approval of
the Board, the Executive Vice President may delegate all or any part of his
authority to others.
SEC. 353. Vice Presidents
Each Vice President shall have the authority and shall perform such duties
as provided in the Bylaws, Rules or by the Board. If the President and Executive
Vice President are absent or unable to perform their duties, then such Vice
President as determined by the President, the Executive Vice President or the
Chairman shall perform the duties of the President. Subject to the approval of
the Board, any Vice President may delegate all or any part of his authority to
others.
SEC. 354. Secretary; Assistant Secretary
The Secretary and any Assistant Secretary shall attend all meetings of the
Board and of Members and keep an official record of the proceedings; give notice
of meetings of Members or of the Board as provided in the Bylaws and Rules or as
required by law; give all other notices required to be given; be the custodian
of the books, records and corporate seal of the Exchange and attest, on behalf
of the Exchange all contracts and other documents requiring authentication; and
shall have such other authority and perform such other duties as provided in the
Bylaws and Rules or by the Board. Subject to the approval of the Board, the
Secretary may delegate to others all or any part of his authority.
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SEC. 355. Treasurer
The Treasurer, who shall be a Member Director, shall be the chief financial
officer of the Exchange and shall be responsible to the Board for proper
accounting and reporting of the funds of the Exchange. The Treasurer shall be
the Chairman of the Finance Committee.
SEC. 356. Assistant Treasurer
Any Assistant Treasurer shall have such authority and perform such duties
as prescribed by the Bylaws and Rules, the Board, the President or the
Treasurer.
SEC. 360. Indemnification of Directors, Officers and Employees
(A) The Exchange shall indemnify to the maximum extent provided by law
including, but not limited to, indemnification for judgments, fines, amounts
paid in settlement, and reasonable expenses, including attorney's fees, any
person made or threatened to be made a party to any action or proceeding,
whether civil, criminal or administrative, by reason of the fact that such
person, such person's testator or intestate is or was an officer, director,
employee, member of any committee of the Exchange or served at the request of
the Exchange in any capacity with any other corporation, any partnership, joint
venture, trust, employee benefit plan, or other enterprise, provided that such
person did not act in bad faith, and provided that in criminal actions or
proceedings, in addition, such person had no reasonable cause to believe that
his conduct was unlawful.
(B) Except as specifically permitted by applicable law, no person who is or
was an officer, director, employee, member of any committee of the Exchange
shall be indemnified in any way if such person has brought the action or
proceeding against the Exchange, its officers, directors, employees or any
committee of the Exchange.
ARTICLE 4
COMMITTEES
SEC. 400. Committee Designation
(A) The Exchange shall have such Standing Committees, Special Committees
and Regular Committees as are provided in the Bylaws or Rules. The Chairman of
the Board may appoint, with the consent of the Board, Regular Committees in
addition to those named in the Bylaws or Rules.
(B) The Chairman of the Board shall appoint, with the approval of the
Board, the following Regular Committees: an Adjudication Committee, an Appeals
Committee, an Arbitration Committee, a Business Conduct Committee, a Bylaws
Committee, a Control Committee, a Finance Committee, a Floor Committee and a
Membership Committee.
SEC. 401. Executive Committee
(A) The Board shall appoint an Executive Committee that shall be a Standing
Committee and shall consist of the Chairman of the Board, the Vice Chairman of
the Board, the Treasurer, if he is a director, and two additional Directors
appointed by the Board at its first meeting after the annual meeting of Members.
The Chairman of the Board shall be the Chairman of the Executive Committee and
the Vice Chairman of the Board shall be the Vice Chairman of the Executive
Committee. If the Treasurer is not a
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Director, he shall be authorized and entitled to attend all meetings and to
provide advice to the Committee.
(B) The Executive Committee shall have and may exercise the authority of
the Board. The Executive Committee shall have the power to perform other duties
as are specified by the Board or as are provided in the Bylaws and Rules.
(C) Any action taken by the Executive Committee shall be submitted to the
Board at its next meeting for ratification. Except to the extent that the rights
of third parties acquired by such action may be impaired, the Board may amend or
rescind any such action.
SEC. 402. Powers of Committees
(A) A Standing Committee shall have the authority of the Board to the
extent provided in the Bylaws, Rules or any resolutions of the Board and subject
to applicable provisions of law.
(B) A Special Committee shall have only the powers specifically delegated
to it by the Board and shall not have any powers that a Standing Committee may
not exercise under applicable provisions of law.
(C) A Regular Committee shall have such powers as may be delegated to it in
the Bylaws or Rules or by the Board; provided, however, that such powers shall
in no case exceed the powers that the Board might delegate lawfully to an
officer of the Exchange.
(D) All Committees shall have all powers necessary incident to the
discharge of their duties.
SEC. 403. Composition of Committees
(A) A Standing Committee shall consist of at least three members, all of
whom shall be Directors. The Board, by resolution adopted by a majority of the
entire Board, may designate Standing Committees from among its members.
(B) A Special Committee shall consist of as many members of the Board as
the Chairman of the Board, with the consent of the Board, shall appoint. All
members of a Special Committee shall be members of the Board.
(C) A Regular Committee shall be composed of such persons as the Chairman
of the Board with the consent of the Board shall appoint or as the Class B
Member may elect as provided in the Bylaws or Rules.
(D) Except as otherwise provided in the Bylaws or Rules, the Chairman of
the Board shall appoint a Chairman of each committee and may appoint such Vice
Chairmen as he deems desirable.
SEC. 404. Term of Committees
Unless otherwise specifically provided in the Bylaws or Rules, members of
any committee shall hold office until the first meeting of the Board following
the annual meeting of Members and until their successors are appointed.
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SEC. 405. Removal, Resignation and Vacancies
(A) Members of Committees hold office subject to the pleasure of the Board.
A member of a Committee elected or appointed by the Board may be removed with or
without cause.
(B) A member of a Committee or of any subcommittee may resign at any time
by tendering written notice of his resignation to the Chairman of the Board.
Unless contingent upon acceptance, such resignation will be effective on the
date specified, or if no date is specified, on the date tendered. A member of a
Standing or Special Committee shall cease to be a committee member upon the
termination of his membership on the Board.
(C) The Chairman of the Board may remove with the consent of the Board,
with or without cause, any Chairman, Vice Chairman or any member of a committee
whom he has appointed.
(D) In the event there is a vacancy on a Standing Committee, the Board may
fill such vacancy. In the event there is a vacancy on a Special Committee or a
Regular Committee, the Chairman of the Board, with the consent of the Board, may
fill such vacancy.
SEC. 406. Meetings of Committees
(A) Unless otherwise specifically provided in the Rules, regular meetings
of committees and subcommittees shall be held on such date and at such time as
the committee or subcommittee shall determine.
(B) The chairman of any committee or any subcommittee shall have the
authority to call a special meeting of such committee or subcommittee to be held
on such date and at such time as the chairman shall determine.
(C) Notice of all meetings of committees and subcommittees may be in
writing, by telephone, or by other means of communication. Such notice shall be
made not less than one hour before such meeting.
(D) Any action required or permitted to be taken by a committee or
subcommittee may be taken without a meeting if all the members of the committee
or subcommittee consent in writing to the adoption of a resolution authorizing
such action.
(E) Any one or more members of a committee or subcommittee may participate
in a meeting by means of a conference telephone or similar communications device
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
SEC. 407. Quorum; Vote
(A) Unless otherwise specifically provided in the Bylaws or Rules,
one-third of the members of a committee or any subcommittee shall constitute a
quorum for the transaction of business.
(B) Unless otherwise specifically provided in the Bylaws or Rules, any
action taken by a majority of members of a committee or subcommittee present at
a meeting at which a quorum is present shall be a valid action of the committee
or subcommittee.
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SEC. 408. Subcommittees Authorized
The Board may designate, at any time, from its members, a subcommittee, or
subcommittees, as it may deem necessary or appropriate. Each subcommittee shall
have all of the authority of the committee to the extent provided in such
designation, in the Bylaws or in the Rules subject to any applicable provision
of Law.
SEC. 409. Alternates
(A) The Board may designate one or more Directors as alternate members of
any standing committee.
(B) The Chairman of the Board may designate one or more Directors as
alternate members of any special committee.
(C) The Chairman, with the consent of the Board, may designate one or more
persons as alternate members of a regular committee.
(D) Any alternate or alternate committee member appointed or elected
pursuant to this Section 409 may replace one or more absent members of any such
committee.
ARTICLE 5
AMENDMENTS TO BYLAWS AND RULES
SEC. 500. Amendment of Bylaws
(A) Any Bylaw may be adopted, amended or deleted by the Board with the
approval of the Memberships. After approval by the Board by a vote of two-thirds
of the entire Board at any regular or special meeting thereof, a proposed Bylaw,
amendment or deletion of the Bylaws shall be voted upon by the Memberships at
any meeting of Members. The proposed Bylaws, amendment or deletion shall be
adopted by the affirmative vote of a majority of the Memberships, voting
together as a single class, at such meeting. Notice of the proposed Bylaw,
amendment or deletion must be given in accordance with Section 203 and shall
specifically set forth the entire Bylaw, amendment or deletion proposed.
SEC. 501. Amendment of Rules
Any Rule may be added, amended or deleted by a vote of a majority of the
entire Board.
SEC. 502. Amendments Affecting Existing Contracts
Unless provided to the contrary in the Bylaws or Rules or in the resolution
adopting an amendment, or deletion of the Bylaws or Rules, any amendment or
deletion of the Bylaws or of the Rules that relates to contracts traded on the
Exchange shall be binding on contracts entered into before and after such
amendment or deletion. Unless provided to the contrary in a resolution adopting
an amendment, or deletion that affects the amount of money to be paid, or grade,
quality or quantity of merchandise to be received, under any contract shall be
effective only with respect to the delivery month immediately following the last
delivery month in which there is an open position on the date such amendment or
deletion becomes effective.
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SEC. 503. Effective Date of Amendments
All Bylaws, Rules and amendments thereto are effective and binding on
Members and shall govern all matters to which they are applicable ten days
following receipt of prior approval from the Commission or following receipt of
notification that such prior approval is unnecessary or at such date as is fixed
by the Board.
SEC. 504. Technical Amendments
The Board, by majority vote at any meeting, may change the numbers and
captions of the Bylaws and Rules or amend the Bylaws and Rules to correct
references to Bylaws, Rules, statutes, regulations or to correct typographical
errors of similar matters. The Board may make such changes effective
immediately.
ARTICLE 6
CLEARING DEPARTMENT
SEC. 600. Purpose
All contracts for the purchase and sale of commodities for future delivery,
and all options contracts, made in accordance with the Bylaws and Rules of the
Exchange, shall be cleared through the Clearing Department of the Exchange or a
Clearing facility designated by the Board.
SEC. 601. Qualifications
The Clearing Department or a facility designated by the Board shall
prescribe the qualifications of its own members. No person shall be eligible to
clear Exchange contracts who is not a Member or Member Firm of the Exchange.
SEC. 602. Principle of Substitution
When a contract in commodities is cleared through the Clearing Department,
the Clearing Department shall be deemed substituted as Seller to the Buyer, and
as Buyer to the Seller, and thereupon shall have all the rights and be subject
to all the liabilities of the Buyer and Seller with respect to such contract.
ARTICLE 7
EMERGENCIES
SEC. 700. Definitions
As used in this Article 7 of the Bylaws:
(A) The term "emergency" shall mean any occurrence, circumstance or event
as defined by the Commission in accordance with the applicable provisions of the
Act that in the opinion of the Board requires immediate action and threatens or
may threaten such things as the fair and orderly trading or liquidation of any
commodity futures or options
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contract traded on the Exchange. Occurrences, circumstances or events that the
Board may deem emergencies are limited to:
(1) any manipulative activity or attempted manipulative activity;
(2) any actual, attempted or threatened corner, squeeze, congestion or
undue concentration of positions;
(3) any circumstance or circumstances that may materially affect the
performance of futures or options contracts traded on the Exchange;
(4) any action taken by or against the government of the United
States, any foreign government, any state or local government, or by any
other Exchange, any board of trade or trade association, whether foreign or
domestic, which action may have a direct impact on trading on the Exchange;
(5) any circumstance that may have a severe, adverse effect on the
physical functions of the Exchange including, for example, fires or other
casualties, bomb threats, substantial inclement weather, power failures,
communication or transportation breakdowns, computer system breakdowns,
screen-based trading system breakdowns and malfunctions of plumbing,
heating, ventilation and air conditioning systems;
(6) the bankruptcy or insolvency of any Class A Member or Member Firm
or the imposition or service of any lien, attachment, execution or other
levy or an injunction or other restraint against a Class A Member or Member
Firm or their assets by any governmental agency, court, arbitrator or
judgment creditor which event may affect the ability of the Class A Member
or Member Firm to perform on its contracts or otherwise to engage in
business;
(7) the occurrence of a "Reportable Emergency Event" or "Financial
Emergency" with respect to a Class A Member or Member Firm, as defined in
Section 850(C) or (D) of the Bylaws;
(8) any circumstance in which it appears, in the judgment of the
Board, that a Class A Member or Member Firm: (i) has failed to perform on
its futures or options contracts, or (ii) is insolvent or is in such
financial or operational condition or is conducting its business in such a
manner that such Class A Member or Member Firm cannot be allowed to
continue its business without jeopardizing the safety of customer funds, of
Class A Members or of the Exchange; or
(9) any other unusual, unforeseeable and adverse circumstance with
respect to which it is not practicable for the Exchange to submit, in
timely fashion, a rule to the Commission for prior review.
(B) The term "two-thirds vote of the Board" shall mean the affirmative vote
of members of the Board constituting two-thirds of the Board, either (i)
physically present and voting at which a quorum of the Board is physically in
attendance or (ii) voting in any manner other than at a meeting at which a
quorum is physically in attendance as permitted by applicable state corporation
law.
(C) The term "physical emergency" shall mean, in addition to those events
that are set forth in this Section 700(A)(5), any computer malfunction, backlog
or delay in clearing trades or in processing any documents relating to clearing
trades, any floor occurrences that threaten an orderly market, or any similar
events.
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(D) The term "temporary emergency rule" shall mean a rule or resolution
adopted, under this Article 7 of the Bylaws, to meet an emergency.
SEC. 701. Emergency Action
(A) In the event of an emergency, the Exchange, by two-thirds vote of the
Board and subject to the applicable provisions of the Act, as it may be amended,
and to the applicable rules and regulations promulgated thereunder, may adopt
and place into immediate effect a temporary emergency rule.
(B) A temporary emergency rule, including any modification thereof, may not
extend beyond the duration of the emergency as determined by the Board. In no
event, however, shall such a temporary emergency rule, or any modification
thereof, extend for more than 90 days after the temporary emergency rule is
placed in effect.
(C) Any temporary emergency rule may provide for, or may authorize the
Exchange, the Board or any Committee of the Exchange to undertake actions that,
in the sole discretion of the Board or of any Committee of the Exchange, are
necessary or appropriate to meet the emergency including, but not limited to,
such actions as:
(1) limiting trading to liquidation only, in whole or in part, or
limiting trading to liquidation only except for new transactions in futures
or options contracts by parties who have the commodity to deliver pursuant
to such sales;
(2) extending or shortening the expiration date for trading in futures
or options contracts;
(3) extending the time of delivery under futures contracts or
expiration of futures or options contracts;
(4) changing delivery points, the manner of delivery or the means of
delivery;
(5) modifying price limits;
(6) modifying circuit breakers;
(7) ordering the liquidation of futures and/or options contracts, the
fixing of a settlement price or the reduction of positions held by or for
any or all Class A Members, Member Firms or customers;
(8) ordering the transfer of futures and/or options contracts and the
money, securities and property securing such contracts held by or on behalf
of customers by a Class A Member or Member Firm to another Class A Member
or Member Firm or to other Class A Members or Member Firms willing or
obligated to assume such contracts;
(9) extending, limiting or changing hours of trading;
(10) suspending trading; and
(11) modifying or suspending any provision of the rules of the
contract market, including any contract market prohibition against dual
trading.
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SEC. 702. Action by Board
(A) In an emergency, or to determine whether an emergency exists, a meeting
of the Board may be convened without notice.
(B) In the event of an emergency where a quorum of the Board is
unavailable, all trading on the Exchange may be suspended by an affirmative vote
of two-thirds of the members of the Board present. In the event of an emergency
in which no other member of the Board is present, the Chairman, or in his
absence, the Vice Chairman, or in their absences any one Director present, or in
their absences, the President, or in all their absences, the Executive Vice
President, or in all their absences, any Vice President, may order suspension of
trading for such period as in their or his judgment is necessary.
(C) Any action taken pursuant to this Section 702 shall be subject to
review and modification by the Board.
SEC. 703. Physical Emergencies
(A) In the event that the physical functioning of the Exchange is, or is
threatened to be, severely and adversely affected by a physical emergency, the
Chairman, or in his absence the Vice Chairman, or in their absences the
President, or in all their absences the Executive Vice President, or in his
absence any Senior Vice President, or in their absences any member of the
Executive Committee, or in their absences any Board member present, or in all
their absences any Vice President, may take any action that in his opinion, is
necessary or appropriate to deal with the physical emergency. Such action may
include, but is not limited to, the suspension of trading in any or all
contracts, a delay in the opening of trading in any or all contracts, the
extension of trading in the time of trading in any or all futures and options
contracts or the extension of trading in the last day of trading in any or all
futures and options contracts.
(B) No action taken under this Section 703 shall continue in effect for
more than five days unless an extension of time has been granted by the
Commission in accordance with the applicable provisions of the Act. Any action
taken under this Section 703 shall be subject to review and to modification by
the Board.
(C) The officials designated in Section 703(A) may order the removal of any
restriction imposed under this Section 703 if, in their judgment, the physical
emergency has abated sufficiently to permit the physical functioning of the
Exchange to continue in an orderly manner absent such restriction.
ARTICLE 8
DISCIPLINARY AND SUMMARY PROCEEDINGS
SEC. 800. Members Subject to Disciplinary Proceedings
(A) The Exchange may impose such fines, penalties and other sanctions on
Class A Members, Member Firms and employees of Class A Members and Member Firms
that violate the Bylaws or Rules of the Exchange or any resolution or order of
the Board or Committee of the Exchange.
(B) In this Article 8 of the Bylaws and in the Rules relating to
Disciplinary Proceedings, the term "Rule" means the Bylaws or rules of the
Exchange or any resolution or order of the Board or Committee of the Exchange.
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(C) A Class A Member is responsible for the acts of his employees and any
Member Firm upon which the Class A Member has conferred privileges. A Member
Firm is responsible for the acts of its partners, its directors, its officers
and its employees.
SEC. 801. Disciplinary Proceedings
The Board shall adopt rules establishing procedures whereby Class A
Members, Member Firms and employees of Class A Members and Member Firms may be
subjected to fines, penalties and other sanctions for violations by the Bylaws
and Rules.
SEC. 802. Failure to Pay Fine
(A) If a Class A Member or Member Firm defaults in the payment of any fine
on the date due, then such Class A Member or Member Firm shall be suspended
automatically without further action of the Exchange, and shall remain suspended
until such fine is paid in full and the Class A Member or Member Firm is
reinstated as provided in Section 862.
(B) If such Class A Member or Member Firm is suspended as provided in
Section 802(A) and continues in default of the payment of any fine for a period
of 30 days, then the Class A Member or Member Firm shall be expelled
automatically and without further notice by the Exchange and the membership of
such Class A Member or by which such Member Firm is conferred privileges shall
be sold and the proceeds for such sale paid and applied as provided in Section
861.
(C) If an employee of a Class A Member or of a Member Firm defaults in the
payment of any fine, then the Class A Member or Member Firm shall be responsible
for its full and complete payment. A failure of the Class A Member or Member
Firm to pay such a fine shall result in the suspension or expulsion of such
Class A Member or Member Firm as set forth in this Section 802.
SEC. 850. Definitions
As used in Sections 850 through 863, the following terms have the meanings
set forth in this Section 850;
(A) the term "Claimant" shall mean a person who has filed a Notice of
Claim;
(B) the term "Notice of Claim" shall mean a notice of claim against the
proceeds of a sale of a membership;
(C) the term "Reportable Emergency Event" shall mean, with respect to any
Class A Member:
(1) the filing of a petition, answer or other document, or the taking
of any other action, by such Class A Member with respect to itself or
against such Class A Member, seeking liquidation, reorganization or other
relief from creditors under the provisions of the Bankruptcy Code of the
United States (11 U.S.C. sec. sec. 101 et seq.), as it may be amended, or
under the provisions of any other state or federal law for the relief of
insolvent debtors;
(2) the dissolution of such Class A Member;
(3) the insolvency (as defined by any applicable state or federal
statute) of such Class A Member;
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(4) the failure of such Class A Member to meet any applicable
financial requirements of the Exchange, any self-regulatory organization or
any state or federal regulatory agency;
(5) the failure of such Class A Member to meet, when due, any margin
call issued by the Clearing Department, any clearing organization of any
other Exchange, or any person;
(6) the failure or inability of such Class A Member to comply with any
of his contracts or the default by such Class A Member under any commodity
contracts on the Exchange; or
(7) the imposition or service of any lien, attachment, execution or
other levy or any injunction or other restraint against such Class A Member
or Member Firm or their assets by any court, government agency, arbitrator
or judgment creditor, which injunction or restraint may affect the ability
of such Class A Member to perform his contracts or otherwise to engage in
business.
(D) the term "Financial Emergency" shall mean, with respect to any Class A
Member, any situation in which, in the sole discretion of the Executive
Committee, the financial condition of such Class A Member is not adequate for
such Class A Member to meet his financial obligations or otherwise to engage in
business; or, is such that it would not be in the best interests of the Exchange
for such Class A Member to continue in business; and
(E) the term "Class A Member" shall include, as applicable, Class A Members
and Member Firms and employees of Class A Members and of Member Firms.
SEC. 851. Duty to Report Emergency Event
If a Reportable Emergency Event occurs with respect to any Class A Member,
then such Class A Member shall advise the Exchange of the occurrence of the
Reportable Emergency Event by the fastest available means of communication and
shall also immediately deliver to the Exchange by the fastest available means, a
written notice. Such notice shall specify:
(1) the nature of the Reportable Emergency Event;
(2) the date and time of occurrence;
(3) whether such Class A Member consents to a summary suspension
pursuant to this Article and, if so, whether such Class A Member waives a
hearing with respect thereto; and
(4) whether such Class A Member consents to a suspension that includes
a prohibition against employment by another Class A Member as a floor
employee.
SEC. 852. Summary Suspension; Action by the President
If a Class A Member consents to a summary suspension as provided in Section
851, either orally or in writing, then the President shall immediately suspend
such Class A Member in accordance with the terms of the consent and notify the
membership of such suspension.
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SEC. 853. Summary Suspension; Action of the Executive Committee
(A) If at any time the Executive Committee determines, in its sole
discretion, that there is a substantial question whether a Financial Emergency
exists with respect to any Class A Member, or, if at any time, the Exchange
receives a notice of a Reportable Emergency Event from a Class A Member, then
the Executive Committee may suspend, or take any other action against, such
Class A Member, any Class A Member upon which such Class A Member has conferred
member privileges, any Class A Member guaranteed by such Class A Member, or any
Class A Member guaranteeing such Class A Member, as it deems appropriate to
protect the Exchange and its Class A Members. The Executive Committee may take
such action regardless of whether the Class A Member has advised the Exchange as
provided in Section 851, whether such Class A Member has consented to a
suspension or whether such Class A Member has waived a hearing.
(B) Any action taken under the authority of this Section 853 may be taken
without notice or a hearing where the Class A Member waives notice or hearing,
or when the Executive Committee determines, in its sole discretion, that the
furnishing of notice, and an opportunity for a hearing before such action is
taken, or both, is not practicable under the circumstances.
(C) In any case where the Executive Committee has taken action against a
Class A Member without prior notice or hearing because of impracticability, the
Exchange shall give promptly to such Class A Member the notice required by
Section 854(B) and an opportunity to be heard.
(D) The powers and duties of the Executive Committee under this Article 8,
including the obligation to hold a hearing, if requested, may be delegated to a
subcommittee of any two or more members of the Executive Committee or to any
other committee of the Exchange as the Chairman of the Executive Committee may
decide in his sole discretion.
SEC. 854. Notice
(A) Any notice to a Class A Member given before action is taken under
Section 853 shall state (1) the Financial Emergency or other situation that is
believed to cause the need for summary action by the Executive Committee and (2)
the date, time and place of the hearing.
(B) Any notice to a Class A Member given after action is taken under
Section 853 shall state (1) the action taken, (2) a brief summary of the reason
for the action, (3) the effective time, date and duration of the action and (4)
that upon written request by a date certain, a hearing will be held.
SEC. 855. Hearing Decision
(A) The Executive Committee, or other Committee, as provided in Section
853(D), shall render a decision as provided in this Bylaw. The decision shall be
final and may not be appealed.
(B) A hearing, if requested, shall be fair and shall be conducted in
accordance with procedures adopted by such committee for any hearing before it;
but, during such hearing,
(1) the formal rules of evidence shall not apply;
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(2) the Compliance Department of the Exchange shall present the case
or the charges and penalties that are the subject of the hearing;
(3) the Class A Member shall be permitted to appear personally and
shall have the right to be represented by counsel or other person of his
choice;
(4) the Class A Member and the Compliance Department shall be entitled
to cross-examine any persons appearing as witnesses at the hearing;
(5) the Class A Member may call witnesses and present such evidence as
may be relevant to the charges;
(6) the committee shall be the sole judge of the relevancy of such
evidence;
(7) the Exchange shall require persons who are within its jurisdiction
and who are called as witnesses to appear and produce evidence or testify
and shall make reasonable efforts to secure the presence of all other
persons called as witnesses whose testimony would be relevant; and
(8) the committee may impose a summary penalty upon any person whose
actions impede the progress of the hearing.
(C) Promptly following the close of hearings, the Executive Committee shall
render a decision in writing, based on the weight of the evidence. The decision
shall include:
(1) a description of, and the reasons for, the summary action;
(2) a brief summary of the evidence produced at the hearing;
(3) findings and conclusions;
(4) where action has already been taken under Section 853, a
determination that such action be affirmed, modified or reversed; and
(5) a description of any final action taken by the Executive
Committee, its effective date and duration.
SEC. 856. Obligations of Insolvent Class A Members
A Class A Member who is insolvent shall provide to the President, within 30
days of his insolvency and in addition to the Notice provided for in Section
851, a statement of his business affairs as they existed at the time of his
insolvency.
SEC. 857. Creditors of Insolvent Class A Members
(A) Unless the Executive Committee shall direct otherwise, all futures and
options contracts traded on the Exchange, made with or carried for a Class A
Member suspended under this Article 8 of the Bylaws shall be liquidated by the
party carrying the contracts. Such liquidation shall take place in the open
market. If such contracts cannot be liquidated due to the closing of the
Exchange for any reason, then such contracts shall be liquidated on the next day
on which the Exchange is open. The period within which such contracts must be
liquidated shall not include any period during which the provisions of the Rules
limiting price fluctuations would prevent such liquidations.
(B) Within 10 days of the announcement of suspension of a Class A Member,
any Class A Member who has a claim against such suspended Class A Member shall
deliver
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to the President a Notice of Claim that details all contracts liquidated under
this Section 857 and the net debit or credit balance resulting therefrom and
that details any other claims that such Class A Member may have against the
suspended Class A Member.
(C) Failure to file a Notice of Claim within such period shall bar such
Class A Member from participating in any proceeds that result from any sale of
the membership of the suspended Class A Member.
SEC. 858. Establishment of Valid Claims
(A) The President shall furnish the suspended Class A Member and all Class
A Members who have filed Notices of Claim as required by Section 857 with copies
of all Notices of Claim filed under Section 857 and the sworn statement of the
suspended Class A Member filed under Section 856. The President shall also
specify a date not more than 10 business days from the date on which such
Notices of Claim are furnished to such Class A Members by which the suspended
Class A Member or any claimant Class A Member may file an objection to any
claim.
(B) If a suspended Class A Member or any claimant Class A Member fails to
file an objection to a claim before the date set by the President, then that
Class A Member shall have waived all rights to object to such claim or claims.
(C) In the event that any claim is disputed, the validity of such claim
shall be determined by arbitration in accordance with Chapter 5 of the Rules.
The arbitration shall proceed as if the objecting Class A Member has filed a
Demand for Arbitration. The objecting Class A Member shall pay the fee
prescribed in Rule sec. 5.37. The arbitrators shall determine whether and to
what extent such claim is valid; and, whether and to what extent a claimant is
entitled to participate in the proceeds of a sale of the membership of such
suspended Class A Member.
SEC. 859. Expelled Class A Member
All memberships held by a Class A Member who is expelled from the Exchange
shall be sold and the proceeds paid and applied as provided in Sections 860 and
861.
SEC. 860. Sale of Membership
(A) If within 10 business days from the date of the decision of the
Arbitration Committee or from the last date established by the President for
filing of objections to Notices of Claim, whichever is later, a Class A Member
suspended under this Article 8 of the Bylaws does not pay all valid claims, then
the membership of the suspended Class A Member shall be sold in accordance with
this Section 860 and the proceeds of the sale of such membership shall be
distributed in accordance with Section 861.
(B) When a membership is sold pursuant to this Section 860, written notice
of such sale stating the date and time of such sale shall be sent to the Class A
Member and the membership 10 days prior to such sale.
(C) All sales should be made by the President or his designee on the floor
of the Exchange to the highest bidder at open outcry but in no event less than
the highest bid then posted at the Exchange for the transfer of a membership.
Any Class A Member may purchase such membership. Any membership so purchased
shall be free from and clear of
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any claims, liens or attachments. Such sale shall be final and binding and not
subject to challenge. Payment for the purchase of such membership shall be made
to the Exchange.
SEC. 861. Disposition of Proceeds
The proceeds of any sale of a membership shall be paid and applied in the
following order of priority:
(1) to the Exchange in full satisfaction of any amounts due to the
Exchange;
(2) the balance, if any, to Class A Members on allowed claims arising
out of transactions in Exchange futures and options contracts and/or any
other Exchange business of such Class A Members, pro rata; provided that no
partner shall share in the proceeds in the sale of a membership of one of
his partners until all claims of other Class A Members have been satisfied
in full;
(3) the remaining balance, if any, to persons who have financed the
purchase of the membership provided that documentation regarding such
purchase was filed with the Membership Committee prior to the financing of
such purchase; and
(4) the balance, if any, to the Class A Member whose membership was
sold or to his legal representative, except that, notwithstanding any other
provision of the Bylaws or Rules, for purposes of this subsection four the
term Class A Member shall not include lessees, but shall mean the
beneficial owner of such membership.
SEC. 862. Reinstatement of Suspended Class A Member
(A) A Class A Member suspended under Sections 852, 853 or 855 may apply for
reinstatement at any time prior to the sale of his membership.
(B) When a Class A Member applies for reinstatement, he shall deliver to
the President a schedule of all of his creditors, a statement of the amounts
owed, the nature of the settlement by which claims of a creditor were paid, and
such other information as the President may request.
(C) Written notice of the time and place of the meeting of the Board at
which the application for reinstatement is to be considered shall be sent to the
suspended Class A Member and to the membership not less than five days prior to
the meeting.
(D) The vote of a majority of the Board present and voting is required to
reinstate the suspended Class A Member. Where a Class A Member has failed,
however, to give timely the notice required by Section 851, a vote of two-thirds
of the entire Board is required to reinstate the suspended Class A Member.
(E) If a Class A Member suspended under this Article 8 of the Bylaws is not
reinstated within one year from the date of his suspension, then such Class A
Member may not be reinstated.
SEC. 863. Death of a Class A Member
Upon receiving due notice of the death of a Class A Member, the President
or his designee shall announce such death to the Members and shall post a notice
of such fact on the floor of the Exchange for five days. Any Class A Member or
Member Firm holding open futures or options contracts for such deceased Class A
Member shall liquidate such open futures or options contracts in accordance with
the provisions of Section 857.
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ARTICLE 9
DEFINITIONS
SEC. 900. Singular Number; Gender
Unless the context otherwise requires, words importing the singular number
include the plural; and words importing the masculine gender include the
feminine and neuter gender as appropriate.
SEC. 901. Act
The term "Act" shall mean the Commodity Exchange Act.
SEC. 902. Association
The term "Association" shall mean the New York Mercantile Exchange, a
corporation organized and existing under the Not-for-Profit Corporation Law of
the State of New York.
SEC. 903. Board
The term "Board" shall mean the Board of Directors of the Exchange.
SEC. 904. Business Day
The term "business day" shall mean any day on which the Exchange is open
for trading.
SEC. 905. Bylaws
The term "Bylaws" shall mean the Bylaws of the Exchange adopted by members
for the regulation and management of the Exchange.
SEC. 906. Charter
The term "Charter" shall mean the Certificate of Incorporation of the
Exchange.
SEC. 907. Class A Member
The term "Class A Member" shall mean those members of the Exchange holding
a Class A membership in the Exchange.
SEC. 908. Class B Member
The term "Class B Member" shall mean "Class B Member" as defined in the
Certificate of Incorporation of the Exchange.
SEC. 909. Clearing Association or Clearing House
The terms "Clearing Association," "Clearing House" or "Clearing Department"
shall mean the department of the Exchange or any corporation, organization or
other entity authorized by the Board to clear commodity futures and options
contracts executed on the Exchange.
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SEC. 910. Commission
The term "Commission" shall mean the Commodity Futures Trading Commission.
SEC. 911. Commodity
The term "commodity" shall mean any or all goods, articles, services,
rights and interests in which contracts for future delivery, or options on such
contracts, are presently or in the future dealt in, or are subject to the Rules.
SEC. 912. Customer
The term "customer" shall mean a person, including another Member, for whom
a Member or Member Firm carries an account.
SEC. 913. Exchange
The term "Exchange" shall mean New York Mercantile Exchange, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware.
SEC. 914. Firm
The term "Firm" shall mean a corporation, partnership, association or sole
proprietorship.
SEC. 915. Floor Broker
The term "Floor Broker" shall mean any Member who has been granted floor
trading privileges pursuant to the Bylaws and Rules and who, pursuant to said
Bylaws and Rules, buys and sells any commodity futures or options contract on
the Exchange for any person other than himself.
SEC. 916. Floor Member
The term "Floor Member" shall mean any Class A Member who is either a Floor
Broker or a Floor Trader.
SEC. 917. Floor Trader
The term "Floor Trader" shall mean any Member who has been granted floor
trading privileges pursuant to the Bylaws and Rules and who, pursuant to said
Bylaws and Rules, buys and sells any commodity futures or options contract on
the Exchange for his own account.
SEC. 918. Futures Contract
The term "futures contract" shall mean any contract for the purchase or
sale of a commodity for future delivery which is traded on or subject to the
Bylaws and Rules of the Exchange.
SEC. 919. Futures Commission Merchant
The term "futures commission merchant" shall mean a person who is or is
required to be registered with the Commission as a futures commission merchant.
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SEC. 920. NYMEX Holdings
The term "NYMEX Holdings" shall mean NYMEX Holdings, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware.
SEC. 921. Holiday
The term "holiday" shall mean any day which the Board may designate as an
Exchange holiday on which day the Exchange shall be closed.
SEC. 922. Member
The term "Member" shall mean Class A Members and Class B Members.
SEC. 923. Member Firm
The term "Member Firm" shall mean any firm upon which membership privileges
on the Exchange have been conferred by a Class A Member.
SEC. 924. Membership
The term "Membership" shall mean a membership of any class of membership of
New York Mercantile Exchange, Inc. created pursuant to the Charter and Bylaws.
SEC. 925. Non-Member
The term "non-member" shall mean any person who is not a Member of the
Exchange.
SEC. 926. Options Contract
The term "Options Contract" shall mean any transaction or agreement in
interstate commerce which is or is held out to be of the character of, or is
commonly known to the trade as, an "option," "privilege," "indemnity," "bid,"
"offer," "put," "advance guaranty," or "decline guaranty," and which is subject
to Regulation under the Act.
SEC. 927. Person
The term "person" shall mean an individual or firm.
SEC. 928. President
The term "President" shall mean the President of the Exchange or his
authorized representative.
SEC. 929. Rule
The term "Rule" shall mean any Rule of the Exchange adopted by the Board.
SEC. 930. Trading Member
The term "Trading Member" shall mean a Floor Member.
SEC. 931. Trade
The term "trade" shall mean any purchase or sale of any contract made in
accordance with Exchange Bylaws or Rules.
SEC. 932. Buyer and Seller
For the purpose of these Bylaws, the terms "Buyer" and "Seller" shall mean
the long Clearing Member and the short Clearing Member, respectively.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents in connection with actions suits or proceedings brought against them
by a third party or in the right of the corporation by reason of the fact that
they were or are such directors, officers, employees or agents, against expenses
incurred in any such action, suit or proceeding. NYMEX Holdings' bylaws provide
for the indemnification of the directors, officers, employees, and agents of
NYMEX Holdings and its subsidiaries to the fullest extent that may be permitted
by Delaware law from time to time, and provide for various procedures relating
thereto. Certain provisions of NYMEX Holdings' certificate of incorporation
protect its directors against personal liability for monetary damages resulting
from breaches of their fiduciary duty of care, except as set forth below. NYMEX
Holdings' directors, however, will remain liable for breaches of their duty of
loyalty to NYMEX Holdings and its stockholders, as well as for acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law and transactions from which a director obtained improper personal
benefit. NYMEX Holdings' certificate of incorporation also will not absolve
directors of liability under Section 174 of the DGCL, which makes directors
personally liable for unlawful dividends or unlawful stock repurchases or
redemptions in certain circumstances and expressly sets forth a negligence
standard with respect to such liability.
Under Delaware law, directors, officers, employees, and other individuals
may be indemnified against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement in connection with specified actions, suits
or proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation - a "derivative action") if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of NYMEX Holdings and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard of cure is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such an action and Delaware law requires court approval before there can be any
indemnification of expenses where the person seeking indemnification has been
found liable to the Company.
In addition, the board of directors of NYMEX Holdings has not entered into
indemnification agreements with the directors or officers.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
The following exhibits are filed as a part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 -- Form of Agreement and Plan of Merger (between New York
Mercantile Exchange and New York Mercantile Exchange, Inc.)
(included as Annex A to the proxy statement and prospectus).
2.2 -- Form of Agreement and Plan of Merger (between New York
Mercantile Exchange, Inc., the Registrant and NYMEX Merger
Sub, Inc.) (included as Annex B to the proxy statement and
prospectus).
3.1 -- Form of Certificate of Incorporation of the Registrant
(included as Annex C to the proxy statement and prospectus).
3.2 -- Bylaws of the Registrant (included as Annex D to the proxy
statement and prospectus).
3.3 -- Certificate of Incorporation of NYMEX Exchange, Inc.
(included as Annex E to the proxy statement and prospectus).
3.4 -- Bylaws of NYMEX Exchange, Inc. (included as Annex F to the
proxy statement and prospectus).
4.1 -- Specimen Stock Certificate representing shares of common
stock.*
5.1 -- Opinion of Clifford Chance Rogers & Wells LLP, counsel to
the Registrant, regarding the legality of the securities to
be issued.
8.1 -- Opinion of Clifford Chance Rogers & Wells LLP, counsel to
the Registrant, relating to certain tax matters.*
10.1 -- NYMEX Amended and Restated Member's Retention and Retirement
Plan effective December 31, 1997.
10.2 -- Trust under the NYMEX Retention and Retirement Plan dated
December 31, 1997.
10.3 -- Ground Lease between Battery Park City Authority and NYMEX
dated May 18, 1995.
10.4 -- Funding Agreement among New York State Urban Development
Corporation, New York City Economic Development Corporation,
Battery Park City Authority and NYMEX dated May 18, 1995.
10.5 -- Note Purchase Agreement among NYMEX and each of the
purchasers listed in Schedule A attached thereto dated
October 15, 1996.
10.6 -- Network License Order Form between Oracle Corporation and
NYMEX and accompanying Payment Plan Agreement and Payment
Schedule between Oracle Credit Corporation and NYMEX.
10.7 -- Network License Order Form between Oracle Corporation and
NYMEX, accompanying Payment Schedule between Oracle Credit
Corporation and NYMEX and Amendment 1 to the Network License
Order Form.
10.8 -- Network License Order Form between Oracle Corporation and
NYMEX and accompanying Payment Schedule between Oracle
Credit Corporation and NYMEX.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.9 -- Smartnet Agreement between Cisco Systems, Inc. and NYMEX
dated May 21, 1996.
10.10 -- Network Supported Account Agreement between Cisco Systems,
Inc. and NYMEX dated May 21, 1996.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Clifford Chance Rogers & Wells LLP (included in
Exhibit 5.1).
24.1 -- Power of Attorney.
24.2 -- Power of Attorney.
27.1 -- Financial Data Schedule.
99.1 -- Form of Proxy and Ballot.
</TABLE>
- ---------------
* To be filed by amendment.
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ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the affective registration
statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bone fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration agreement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrar undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding or (ii) that
purports to meet the requirements of Section 10(a)(3) of the
Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purpose of determining
ant liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bone fide
offering thereof.
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(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
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 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to this request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 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 5th day of April 2000.
By: /s/ DANIEL RAPPAPORT
-----------------------------------
Name: Daniel Rappaport
Title: Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ DANIEL RAPPAPORT Chairman of the Board April 5, 2000
- ------------------------------------ (Principal Executive Officer)
Daniel Rappaport
* Vice Chairman April 5, 2000
- ------------------------------------
Mitchell Steinhause
* Senior Vice President -- Finance April 5, 2000
- ------------------------------------ (Principal Financial and Accounting
Patrick F. Conroy Officer)
* Director April 5, 2000
- ------------------------------------
Stephen Ardizzone
* Director April 5, 2000
- ------------------------------------
Madeline Boyd
* Director, Secretary April 5, 2000
- ------------------------------------
Neil Citrone
* Director April 5, 2000
- ------------------------------------
Robert Coakley
* Director April 5, 2000
- ------------------------------------
Charles Napier Collyns
* Director April 5, 2000
- ------------------------------------
John Conheeney
* Director April 5, 2000
- ------------------------------------
Thomas Costantino
* Director April 5, 2000
- ------------------------------------
Anthony George Gero
/s/ DAVID GREENBERG Director April 5, 2000
- ------------------------------------
David Greenberg
* Director April 5, 2000
- ------------------------------------
E. Bulkeley Griswold
</TABLE>
II-6
<PAGE> 181
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JESSE B. HARTE Director April 5, 2000
- ------------------------------------
Jesse B. Harte
* Director April 5, 2000
- ------------------------------------
Scott Hess
* Director April 5, 2000
- ------------------------------------
Steven Karvellas
* Director April 5, 2000
- ------------------------------------
Harley Lippman
* Director April 5, 2000
- ------------------------------------
Kevin McDonnell
* Director April 5, 2000
- ------------------------------------
Gary Rizzi
* Director April 5, 2000
- ------------------------------------
Richard Saitta
* Director, Treasurer April 5, 2000
- ------------------------------------
Richard Schaeffer
* Director April 5, 2000
- ------------------------------------
Robert Steele
/s/ ROBERT HALPER Director April 5, 2000
- ------------------------------------
Robert Halper
*By: /s/ DANIEL RAPPAPORT
- -------------------------------------
Daniel Rappaport
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 182
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 -- Form of Agreement and Plan of Merger (between New York
Mercantile Exchange and New York Mercantile Exchange, Inc.)
(included as Annex A to the proxy statement and prospectus).
2.2 -- Form of Agreement and Plan of Merger (between New York
Mercantile Exchange, Inc., the Registrant and NYMEX Merger
Sub, Inc.) (included as Annex B to the proxy statement and
prospectus).
3.1 -- Form of Certificate of Incorporation of the Registrant
(included as Annex C to the proxy statement and prospectus).
3.2 -- Bylaws of the Registrant (included as Annex D to the proxy
statement and prospectus).
3.3 -- Certificate of Incorporation of NYMEX Exchange, Inc.
(included as Annex E to the proxy statement and prospectus).
3.4 -- Bylaws of NYMEX Exchange, Inc. (included as Annex F to the
proxy statement and prospectus).
4.1 -- Specimen Stock Certificate representing shares of common
stock.*
5.1 -- Opinion of Clifford Chance Rogers & Wells LLP, counsel to
the Registrant, regarding the legality of the securities to
be issued.
8.1 -- Opinion of Clifford Chance Rogers & Wells LLP, counsel to
the Registrant, relating to certain tax matters.*
10.1 -- NYMEX Amended and Restated Member's Retention and Retirement
Plan effective December 31, 1997.
10.2 -- Trust under the NYMEX Retention and Retirement Plan dated
December 31, 1997.
10.3 -- Ground Lease between Battery Park City Authority and NYMEX
dated May 18, 1995.
10.4 -- Funding Agreement among New York State Urban Development
Corporation, New York City Economic Development Corporation,
Battery Park City Authority and NYMEX dated May 18, 1995.
10.5 -- Note Purchase Agreement among NYMEX and each of the
purchasers listed in Schedule A attached thereto dated
October 15, 1996.
10.6 -- Network License Order Form between Oracle Corporation and
NYMEX and accompanying Payment Plan Agreement and Payment
Schedule between Oracle Credit Corporation and NYMEX.
10.7 -- Network License Order Form between Oracle Corporation and
NYMEX, accompanying Payment Schedule between Oracle Credit
Corporation and NYMEX and Amendment 1 to the Network License
Order Form.
10.8 -- Network License Order Form between Oracle Corporation and
NYMEX and accompanying Payment Schedule between Oracle
Credit Corporation and NYMEX.
</TABLE>
<PAGE> 183
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.9 -- Smartnet Agreement between Cisco Systems, Inc. and NYMEX
dated May 21, 1996.
10.10 -- Network Supported Account Agreement between Cisco Systems,
Inc. and NYMEX dated May 21, 1996.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Clifford Chance Rogers & Wells LLP (included in
Exhibit 5.1).
24.1 -- Power of Attorney.
24.2 -- Power of Attorney.
27.1 -- Financial Data Schedule.
99.1 -- Form of Proxy and Ballot.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF CLIFFORD, CHANCE, ROGERS & WELLS LLP]
April 13, 2000
NYMEX Holdings, Inc.
One North End Avenue
World Financial Center
New York, NY 10282-1101
Dear Sirs:
We have acted as counsel to NYMEX Holdings, Inc. ("NYMEX Holdings") in
connection with the registration under the Securities Act of 1933, as amended,
in a registration statement on Form S-4 of 816 shares (the "Shares") of common
stock, par value $0.01 per share, of NYMEX Holdings to be issued in connection
with a merger of NYMEX Exchange, Inc. with a wholly owned subsidiary of NYMEX
Holdings. In that capacity, we are familiar with the proceedings, corporate and
other, relating to the authorization of the issuance of the Shares.
Based on the foregoing, and such other examination of law and fact as we have
deemed necessary, we are of the opinion that when the Shares are issued in
connection with the merger as described in the registration statement, the
Shares will be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the registration
statement and to the reference to us under the caption "Legal Matters" in the
proxy statement and prospectus which is a part of the registration statement.
Very truly yours,
Clifford Chance Rogers & Wells LLP
<PAGE> 1
Exhibit 10.1
NEW YORK MERCANTILE EXCHANGE
MEMBERS RETENTION AND RETIREMENT PLAN
(Amended and Restated Effective December 31, 1997)
Section 1. Purpose
This Retention and Retirement Plan (the "Plan"), as amended and restated,
is hereby adopted by the New York Mercantile Exchange ("NYMEX"). The purpose of
the Plan is to promote continuity and stability among the membership of NYMEX,
and to thereby increase the economic activity of NYMEX, by rewarding members of
NYMEX for long-term and continuous membership.
Section 2. Participants
a) Any member of record of NYMEX, except a commercial associate member,
whether the member owns, leases or holds pursuant to an ABC financing agreement
his or her Membership, shall be a Participant in the Plan. For purposes hereof a
"Membership" shall mean any one of the authorized and outstanding 816
memberships in NYMEX as of July 1, 1988 and as thereafter may from time to time
have been, or be, transferred.
b) Each Qualified Participant is entitled to only one benefit under the
Plan, regardless of the number of Memberships such Participant owns, leases or
holds pursuant to an ABC financing agreement.
c) Benefits under the Plan shall be payable only to a Qualified
Participant or, in the event of such Participant's death, to his or her
Beneficiary (as defined below).
1
<PAGE> 2
Section 3. Benefits
a) Subject to the limitations provided in Section 5 and 8 hereof,
commencing with the later of:
(1) the first business day of the first calendar quarter after a
Participant attains the age of fifty nine and one-half (59 1/2)
years,
(2) the first business day of the first calendar quarter after a
Participant completes fifteen (15) years of Continuous Service (as
defined below), or
(3) the first business day of the calendar quarter which commences July
1, 1995 and continuing for an additional thirty-nine (39)
consecutive calendar quarters thereafter;
each Qualified Participant (as defined below in subsection(b)) regardless of
whether he or she is then a member, shall be entitled to receive the Benefit (as
defined below) on the first business day of each such calendar quarter (a
"Payment Date"). The Benefit for each Qualified Participant shall be the Indexed
Benefit (as defined below) determined as of the individual's first Payment Date
(as determined under clause (1), (2) or (3) above). The Indexed Benefit shall be
six thousand two hundred fifty dollars ($6,250), increased by 3% annually each
July 1 beginning July 1, 1996; the Indexed Benefit for each Qualified
Participant shall be fixed at the amount as of the first Payment Date.
b) For purposes hereof, a "Qualified Participant" shall mean a Participant
who has completed fifteen (15) or more years of Continuous Service (as defined
below).
c) For purposes hereof, "Continuous Service" with respect to each
Participant shall mean the period commencing on the date such Participant became
or becomes a member of NYMEX and during which such Participant's Membership in
NYMEX was not or is not
2
<PAGE> 3
interrupted by a cumulative total of more than three hundred sixty-five (365)
days, regardless of whether such Membership was owned, leased or held in one or
more of such capacities, or was for or on behalf of the same firm or entity
during such period; provided, however, that (i) interruptions in membership
occurring prior to July 1, 1988 shall not count against the 365-day cumulative
interruption allowance; (ii) any allowable interruption of Membership shall not
count toward Continuous Service; and (iii) any period of time during which a
member is suspended from membership shall be deemed an interruption of
Membership. For purposes of the Plan a maximum of ten (10) years of membership
prior to July 1, 1988 may be credited toward Continuous Service; except that, in
the case of a member who died during the period May 1, 1990 to June 30, 1993, up
to thirteen (13) years and two (2) months of Membership prior to July 1, 1988
may be credited toward Continuous Service.
Section 4. Payment of Benefits in the Event of Death
In the event of a Qualified Participant's death prior to receiving in full
any or all of his or her Benefit as provided in Section 3 hereof, the unpaid
portion thereof shall not lapse, but rather the present value of such unpaid
portion shall be payable in a lump sum to such beneficiary, or beneficiaries
(and in such case in such proportions), as may be designated by such Qualified
Participant in writing to the Board of Directors of NYMEX (the "Board") or if no
beneficiary is designated, to the Qualified Participant's estate (the
"Beneficiary"). Notwithstanding anything to the contrary contained in Section
3(a) hereof, such lump sum payment shall be made on the first business day of
the second calendar quarter (a "Beneficiary Payment Date") after the Board
receives notice of the Participant's death from the Beneficiary or the Qualified
Participant's personal representative. In calculating the aforesaid present
value of the unpaid portion of a benefit, the Board in its sole discretion, and
in good faith, shall determine
3
<PAGE> 4
the applicable interest rate to be used in making its calculation, and such
determination shall be conclusive and binding upon all parties.
Section 5. Limitations upon Payments of Benefits
a) The Plan shall be unfunded for tax purposes. The payment of benefits
under the Plan shall be made, as due and payable, from the general assets of
NYMEX, subject to the following provisions of this Section 5 and Section 8
hereof. NYMEX may, in its sole and absolute discretion, establish one or more
accounts, funds, trusts or reserves to reflect its commitments under the Plan.
NYMEX shall establish a trust (the "Trust") in connection with the Plan, the
Trust agreement for which shall initially be in the form attached hereto as
Exhibit A, subject to changes that may be made by the Board which are consistent
with the purposes of the Plan and the Trust. Upon establishment of the Trust or
other segregated fund, NYMEX may require that benefits under the Plan be payable
from the Trust or other fund established under the Plan to the extent possible
before any claim for payment is made directly to NYMEX. Any assets held in such
accounts, funds, trusts, or reserves (including without limitation, the Trust)
shall be subject to the claims of creditors of NYMEX in the event of NYMEX's
insolvency or upon such other circumstances provided in subsection (b) of this
Section 5 or in an applicable trust or other funding agreement. No Qualified
Participant or Beneficiary shall have any right, title, interest, or claim in or
to any assets of NYMEX other than as an unsecured creditor. The Plan constitutes
only an unsecured commitment by NYMEX to pay benefits to the extent, and subject
to the limitations, provided for herein.
b) No benefits under the Plan may be paid while NYMEX is insolvent or
would thereby be made insolvent or rendered unable to carry on its corporate
purposes, or when the fair value of NYMEX's assets remaining after such payment
would be insufficient to meet its
4
<PAGE> 5
liabilities, within the meaning of sections 515 and 1410 of the New York
Not-for-Profit Corporation Law and as said sections may from time to time be
hereafter amended.
c) If on any Payment Date and/or Beneficiary Payment Date only a portion
of the aggregate benefits due and payable to all Qualified Participants and
Beneficiaries may be paid because of the provisions of subsection (b) above, the
aggregate amount that may be paid on such date shall be apportioned among all
such Qualified Participants and Beneficiaries in proportion to the amounts then
otherwise payable to each of them. In the event that all or part of a benefit
otherwise due and payable is not paid to a Qualified Participant or Beneficiary
for the foregoing reason, the unpaid amount thereof shall cumulate and shall be
added to the amount due and payable to such Qualified Participant or Beneficiary
on the first business day of the next succeeding calendar quarter, subject to
the provisions of subsection (b) above.
Section 6. Administration
The Plan shall be administered by the Board or such other parties as it
may designate. Actions taken by the Board, consistent with the Plan, pursuant to
the powers granted to it shall be conclusive and binding upon NYMEX,
Participants, Qualified Participants, Beneficiaries, and all members and
associate members of NYMEX. Board members shall be indemnified and held harmless
by NYMEX from and against any and all claims, proceedings, actions, damages,
liabilities or expenses incurred by, or asserted against, or arising out of, or
relating to, their actions under the Plan in their capacity as members of the
Board, to the maximum extent provided by law and by the By-laws of NYMEX. In
furtherance of such indemnification, NYMEX may purchase such insurance policies
therefor as may be lawful under, and consistent with, the laws of the State of
New York. The Board shall appoint an independent actuary to conduct an actuarial
valuation each year to determine the funding status of the Plan and to report
thereon to
5
<PAGE> 6
the Board. The actuary will also perform any required net present value
calculations as may be required.
Section 7. Nonassignment of Rights
No member of NYMEX, Participant, Qualified Participant, or Beneficiary may
assign any of his or her rights under the Plan without the prior written consent
thereto of the Board.
Section 8. Amendment and Termination
a) The Board may at any time, amend or terminate this Plan, in whole or in
part, upon the affirmative vote of three-fourths (3/4) of the entire Board,
subject to the limitations provided in subsections (b), (c) and (d) of this
Section 8.
b) If the Board amends the Plan by lengthening the Continuous Service
requirement provided in Section 3(a)(2) hereof, then such amendment shall not
apply to any Participant who at the time of the amendment has achieved the
status of Qualified Participant.
c) Subject to the limitations provided in Section 5 hereof, upon
Termination (as defined below in subsection (d) of this Section 8) of the Plan,
the assets of the Trust, if established, shall immediately by distributed as
follows:
(1) First, all Qualified Participants shall receive a lump sum
payment in an amount equal to the net present value (calculated by
using the applicable interest rate determined by the Board in its
sole discretion, in good faith, and such determination shall be
conclusive and binding upon all parties) of the benefits they would
have received under Section 3 hereof had the Plan not terminated
(and as though any and all actions or amendments resulting in such
Termination
6
<PAGE> 7
under subsection (d) of this Section 8 had not occurred), regardless
of their current age. If the Trust does not contain assets
sufficient for the payment of all such benefits to all Qualified
Participants, then each Qualified Participant shall receive a
pro-rata share of his benefit otherwise payable under this
subsection (c)(1).
(2) Second, if any assets remain in the Trust after distributions
have been made pursuant to subsection (c)(1) of this Section 8, then
all Participants who are members of NYMEX at the time of the
Termination and have completed more than ten (10), but less than
fifteen (15) years of Continuous Service, shall receive a lump sum
payment in an amount equal to (i) the net present value (calculated
as set forth in Section 8(c)(1)) of the benefits they would have
received under Section 3 hereof had the Plan not terminated (and as
though any and all actions or amendments resulting in such
Termination under subsection (d) of this Section 8 had not occurred)
multiplied by (ii) their whole number of years of Continuous Service
divided by fifteen (15), regardless of their current age. If the
Trust does not contain assets sufficient for the payment of such
benefits to all Participants, then each Participant shall receive a
pro-rata share of this benefit otherwise payable under this
subsection (c)(2).
(3) Third, if any assets remain in the Trust after all distributions
have been made pursuant to subsections (c)(1) and (c)(2) of this
Section 8, then all such assets shall revert to NYMEX.
After all the assets of the Trust have been distributed pursuant to subsections
(c)(1) and (c)(2) of this Section 8, all of the obligations of NYMEX under the
Plan shall be extinguished.
d) Termination of the Plan shall include any action of the Board that has
the effect of
7
<PAGE> 8
stopping accumulation of years of service for the Continuous Service
requirement, of reducing or eliminating the amount payable upon meeting the
Continuous Service requirement, or of discontinuing active payments under the
Plan, but shall also include any action or amendment that has the following
effects:
(1) Reduction of the Continuous Service requirement of Section 3(a)(2).
(2) Failure by NYMEX to contribute (taking into account clause (A) and
(B), below) to the Trust for each Plan year the lesser of:
(i) two million dollars ($2,000,000); or
(ii) an amount calculated at the beginning of the year that
would cause the Trust to be fully funded (as described
below) as of that date,
for three years, regardless of whether such Plan years are
consecutive. For this purpose, the following shall also be
considered contributions to the Trust for a Plan year:
(A) benefit payments made during the Plan year by NYMEX
directly to participants; and
(B) contributions made in a subsequent Plan year that exceed
two million dollars ($2,000,000) and are designated by
the Board to cover a previous Plan year's shortfall.
Notwithstanding the above, if at the beginning of any Plan year the Trust is
fully funded (as described below) as of that date, the Plan will not terminate,
under subsection (d)(2), unless NYMEX fails to contribute the minimum
contribution required by this subsection (d)(2) for an additional three years,
regardless of whether such years are consecutive. The Trust is fully
8
<PAGE> 9
funded when the assets of the Trust are sufficient to make the payments
described in (c)(1) and (c)(2) of this section, without having to prorate, based
upon an annual independent actuarial review which NYMEX shall cause to be
conducted.
(3) Amendment by the Board of subsections (b), (c) and (d) of this
section.
Section 9. Compliance with Law
NYMEX will act in accordance with all federal, state and local laws with
respect to the Plan.
Section 10. Governing Law
The Plan shall be governed by and constructed and interpreted under and in
accordance with the laws of the State of New York, without regard to the
conflict of laws provisions thereof.
Section 11. Authorization of The Plan
The Plan shall become effective upon the approval thereof by the
affirmative vote of a majority of the Board of Directors of NYMEX, and
thereafter upon the affirmative vote of a majority of the members of NYMEX
present in person or by proxy at a meeting duly called and held for that
purpose.
9
<PAGE> 10
IN WITNESS WHEREOF, and as evidence of the adoption of this amendment by the
Board of Directors of NYMEX, the undersigned officer being duly authorized has
signed this amendment this 31st day of December, 1997.
NEW YORK MERCANTILE EXCHANGE
By: /s/ R. Patrick Thompson
------------------------------------
ATTEST: R. Patrick Thompson
President
By: /s/ [ILLEGIBLE]
----------------------------------
10
<PAGE> 1
Exhibit 10.2
TRUST UNDER THE
NEW YORK MERCANTILE EXCHANGE MEMBERS
RETENTION AND RETIREMENT PLAN
This Agreement made this 31 day of December, 1997 by and between the New
York Mercantile Exchange ("NYMEX") and the Board of Trustees of the New York
Mercantile Exchange Members Retention and Retirement Plan (the "Plan")
(comprised of the individuals referred to in Exhibit A of this Trust Agreement
as it may be amended from time to time);
WHEREAS, NYMEX has adopted the Plan, a nonqualified deferred compensation
arrangement;
WHEREAS, NYMEX has incurred or expects to incur certain obligations under
the terms of such Plan with respect to the individuals participating in such
Plan;
WHEREAS, NYMEX wishes to establish a trust (the "Trust") and to contribute
to the Trust assets that shall be held therein to cover its obligations under
the Plan, subject to the claims of NYMEX's creditors in the event of NYMEX's
Insolvency, as herein defined, until paid to Plan Participants and their
beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of NYMEX and the Board of Trustees that the
Trust shall constitute an unfunded arrangement; and
WHEREAS, it is the intention of NYMEX to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting of its
obligations under the Plan.
NOW, THEREFORE, NYMEX and the Board of Trustees do hereby establish the
Trust and agree that the Trust shall be comprised, held and disposed of as
follows:
<PAGE> 2
Section 1 - Purpose of Trust
This Trust is being established so that NYMEX can contribute assets to the
Trust that shall be held therein to cover all or a portion of its obligations
under the Plan. All assets are intended to be subject to the claims of NYMEX's
creditors in the event of NYMEX's Insolvency, as herein defined, until paid to
Plan Participants and their beneficiaries in such manner and at such times as
specified in the Plan.
Section 2 - Establishment Of Trust
(a) NYMEX hereby deposits with the Board of Trustees in trust $22,729,877
(comprised of A/C 1332871 and A/C 777-007940 on deposit at Chase Manhattan
Bank), which shall become the principal of the Trust to be held, administered
and disposed of by the Board of Trustees as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which NYMEX is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of NYMEX and shall be used exclusively for
the uses and purposes of Plan Participants and general creditors as herein set
forth. Plan Participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in. any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere
- 2 -
<PAGE> 3
unsecured contractual rights of Plan Participants and their beneficiaries
against NYMEX. Any assets held by the Trust will be subject to the claims of
NYMEX's general creditors under federal and state law in the event of
Insolvency, as defined in Section 4(a) herein.
(e) NYMEX, under the terms of the Plan, may make additional deposits of
cash or other property to the Trust to augment the principal to be held,
administered and disposed of by the Board of Trustees as provided in this Trust
Agreement. Neither the Board of Trustees nor any Plan Participant or beneficiary
shall have any right to compel such additional deposits.
Section 3 - Payments to Plan Participants and Their Beneficiaries
(a) NYMEX shall deliver to the Board of Trustees a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
Participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Board of Trustees for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for payment of such
amounts. The Board of Trustees shall make payments to the Plan Participants and
their beneficiaries in accordance with such Payment Schedule. If NYMEX fails to
contribute to the Trust the minimum amount required by the Plan, then the Board
of Trustees shall distribute all benefits pursuant to Section 8 of the Plan. The
Board of Trustees may make provision for the reporting and withholding of any
federal, state or local income taxes that the Board of Trustees deems
appropriate with respect to the payment of benefits pursuant to the terms of the
Plan. If amounts are withheld, the Board of Trustees shall pay such amounts
withheld to the appropriate
- 3 -
<PAGE> 4
taxing authorities or determine that such amounts have been reported, withheld
and paid by NYMEX.
(b) The entitlement of a Plan Participant or his or her beneficiaries to
benefits under the Plan shall be determined by NYMEX or such party as it shall
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
(c) NYMEX may make payment of benefits directly to Plan Participants or
their beneficiaries as they become due under the terms of the Plan. NYMEX shall
notify the Board of Trustees of its decision to make payment of benefits
directly prior to the time amounts are payable to Participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, NYMEX shall make the balance of each such payment as it falls
due, except as specified in Section 8 of the Plan. The Board of Trustees shall
notify NYMEX where principal and earnings are not sufficient.
Section 4 - The Board of Trustees' Responsibility Regarding
Payments to Trust Beneficiary When NYMEX Is Insolvent
(a) The Board of Trustees shall cease payment of benefits to Plan
Participants and their beneficiaries if NYMEX is Insolvent or would thereby be
made Insolvent. NYMEX shall be considered "Insolvent" for purposes of the Trust
Agreement if, within the meaning of sections 515 and 1410 of the New York
Not-for-Profit Corporation Law and as said sections may from time to time be
hereafter amended. (i) NYMEX is rendered unable to carry on its corporate
purposes. (ii) the fair market value of NYMEX's assets remaining after such
payment would be
- 4 -
<PAGE> 5
insufficient to meet its liabilities, or (iii) NYMEX is insolvent within the
meaning of such law. In addition, NYMEX shall be considered to be "Insolvent"
for purposes of this Trust Agreement if (A) NYMEX is unable to pay its debts as
they become due or (B) NYMEX is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(b) At all times during the continuance of the Trust, as provided in
Section 2(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of NYMEX under federal and state law as set forth
below.
(1) The Board of Directors and the highest ranking officer of NYMEX
shall have the duty to inform the Board of Trustees in writing of NYMEX's
Insolvency. if a person claiming to be a creditor of NYMEX alleges in
writing to the Board of Trustees that NYMEX has become Insolvent, the
Board of Trustees shall determine whether NYMEX is Insolvent and, pending
such determination, the Board of Trustees shall discontinue payment of
benefits to Plan Participants or their beneficiaries.
(2) Unless the Board of Trustees has actual knowledge of NYMEX's
Insolvency, or has received notice from NYMEX or a person claiming to be a
creditor alleging that NYMEX is Insolvent, the Board of Trustees shall
have no duty to inquire whether NYMEX is Insolvent. The Board of Trustees
may in all events rely on such evidence concerning NYMEX's solvency as may
be furnished to the Board of Trustees and that provides the Board of
Trustees with a reasonable basis for making a determination concerning
NYMEX's solvency.
(3) If at any time the Board of Trustees has determined that NYMEX
is Insolvent. the Board of Trustees shall discontinue payments to Plan
Participants or their
- 5 -
<PAGE> 6
beneficiaries and shall hold the assets of the Trust for the benefit of
NYMEX's general creditors. Nothing in the Trust Agreement shall in any way
diminish any rights of Plan Participants or their beneficiaries to pursue
their rights as general creditors of NYMEX with respect to benefits due
under the Plan or otherwise.
(4) The Board of Trustees shall resume the payment of benefits to
Plan Participants or their beneficiaries in accordance with Section 3 of
the Trust Agreement only after the Board of Trustees has determined that
NYMEX is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Board of Trustees
discontinues the payment of benefits from the Trust pursuant to Section 4(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
Participants or their beneficiaries by NYMEX in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 5 - Payments to NYMEX
Except as provided in Section 4 hereof, NYMEX shall have no right or power
to direct the Board of Trustees to return to NYMEX or to divert to others any of
the Trust assets before all payment of benefits have been made to Plan
Participants and their beneficiaries pursuant to the terms of the Plan.
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<PAGE> 7
Section 6 - Investment Authority
(a) NYMEX may direct the investment of the Trust funds. In the absence of
such direction, the Board of Trustees shall invest the Trust funds in a manner
consistent with the purposes of the Trust, as set forth in Section 1.
(b) In no event may the Board of Trustees invest in securities (including
stock or rights to acquire stock) or obligations issued by NYMEX or its
successors, other than a de minimis amount held in common investment vehicles in
which the Board of Trustees invests. All rights associated with assets of the
Trust shall be exercised by the Board of Trustees or the person designated by
the Board of Trustees, and shall in no event be exercisable by or rest with Plan
Participants.
(c) Subject to the terms of the Plan, NYMEX shall have the right, at
anytime, and from time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held by the Trust.
Section 7 - Disposition of Income
During the term of the Trust, all income received by the Trust, net of
expenses and taxes as described in Section 10, shall be accumulated and
reinvested.
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<PAGE> 8
Section 8 - Accounting by the Board of Trustees
(a) The Board of Trustees shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
NYMEX and the Board of Trustees. Within a reasonable period of time following
the close of each calendar year, the Board of Trustees shall deliver to NYMEX a
written account of its administration of the Trust during such year, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year.
Section 9 - Responsibility of the Board of Trustees
(a) The Board of Trustees shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Board of Trustees shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by NYMEX which is
contemplated by, and in conformity with, the terms of the Plan or the Trust and
is given in writing by NYMEX. In the event of a dispute between NYMEX and a
party, the Board of Trustees may apply to a court of competent jurisdiction to
resolve the dispute.
(b) The Board of Trustees shall report to the Board of Directors of NYMEX
or any other party as the Board of Directors of NYMEX deems appropriate.
- 8 -
<PAGE> 9
(c) If the Board of Trustees undertakes or defends any litigation arising
in connection with the Trust, NYMEX agrees to indemnify the Board of Trustees
against the Board of Trustees' costs, expenses and liabilities (including,
without limitation, attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments. If NYMEX does not pay such costs, expenses
and liabilities in a reasonably timely manner, the Board of Trustees may obtain
payment from the Trust.
(d) The Board of Trustees may consult with legal counsel (who may also be
counsel for NYMEX generally) with respect to any of its duties or obligations
hereunder.
(e) The Board of Trustees may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder.
(f) The Board of Trustees shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein, provided, however, that if an insurance policy is held as an asset of
the Trust, the Board of Trustees shall have no power to name a beneficiary of
the policy other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a successor of the
Board of Trustees, or to loan to any person the proceeds of any borrowing
against such policy.
(g) Notwithstanding any powers granted to the Board of Trustees pursuant
to the Trust Agreement or to applicable law, the Board of Trustees shall not
have any power that could give the Trust the objective of carrying on a business
and dividing the gains therefrom, within the meaning of section 301.77011-2 of
the Procedure and Administrative Regulations promulgated pursuant to the
Internal Revenue Code.
- 9 -
<PAGE> 10
Section 10 - Compensation and Expenses of the Board of Trustees
(a) The Trust shall pay all administrative fees and expenses. In addition,
the Trust shall reimburse NYMEX for the actual amount of income taxes, including
but not limited to all federal, state and local taxes, paid by NYMEX which
relate to the income attributable to the Trust. At the sole discretion of NYMEX
such taxes, fees and expenses may be paid by NYMEX and offset against amounts
payable by NYMEX to the Trust under the terms of the Plan.
(b) Compensation, if any, for the individuals who are members of the Board
of Trustees in respect of their services performed in relation to the Trust
shall be determined by the Board of Directors of the NYMEX.
Section 11 - Resignation and Removal of a member of the Board of Trustees
(a) An individual who serves as a member of the Board of Trustees by
virtue of holding an office listed in Exhibit A of this Trust Agreement shall be
considered to have automatically resigned upon termination of his or her
respective duties in that position.
(b) An individual who serves as a member of the Board of Trustees solely
by virtue of having been selected by NYMEX shall be considered to have
automatically resigned after serving on the Board of Trustees for a period of
three years. Of the initial three members serving solely by virtue of having
been selected by NYMEX, one shall be designated at the time of appointment to
serve for a period of only one year and a second shall be designated at the time
of appointment to serve for a period of only two years. Notwithstanding the
above, if an individual who serves as a member of the Board of Trustees is also
a member of NYMEX, then such
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<PAGE> 11
individual shall be considered to have automatically resigned upon the
termination of his membership with NYMEX.
(c) Any individual serving as a member of the Board of Trustees may resign
at any time by written notice to NYMEX, which shall be effective thirty days
after receipt of such notice unless NYMEX and the Board of Trustees agree
otherwise.
(d) Any individual serving as a member of the Board of Trustees, including
any individual who serves as a member of the Board of Trustees by virtue of
holding an office listed in Exhibit A, may be removed by NYMEX without any prior
notice.
(e) Upon resignation or removal of all the individuals serving as members
of the Board of Trustees and appointment of a successor trustee, the Board of
Trustees as constituted immediately prior to such occurrence shall transfer all
assets to the successor trustee. The transfer shall be completed within thirty
days after receipt of notice of resignation, removal or transfer, unless NYMEX
extends the time limit.
(f) Upon resignation or removal of all the individuals serving as members
of the Board of Trustees, a successor shall be appointed, in accordance with
Section 12(b) hereof, by the effective date of resignation or removal. If no
such appointment has been made, the Board of Trustees as constituted immediately
prior to such occurrence (or any member thereof) may apply to a court of
competent jurisdiction for appointment of a successor or for instructions. All
expenses of the Board of Trustees in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
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<PAGE> 12
Section 12 - Appointment of Successor
(a) If an individual serving as a member of the Board of Trustees is
considered to have automatically resigned under Section 11(a), the individual
appointed to carry on his or her respective duties shall be considered to have
been automatically appointed to serve as a member of the Board of Trustees.
(b) If one or more individuals serving as members of the Board of Trustees
are considered to have resigned or are removed in accordance with Section 11(b),
(c) or (d) hereof, NYMEX may appoint any party, including a party that may be
granted corporate trustee powers under state law, as a successor to replace such
individual upon resignation or removal. Such party shall serve as a member of
the Board of Trustees until the term of the former member would have been due to
expire had such member not been removed or resigned. The appointment shall be
effective when accepted in writing by the new member of the Board of Trustees,
who shall have all of the rights and powers of the former member of the Board of
Trustees, including custodial ownership rights in the Trust assets. The former
member of the Board of Trustees shall execute any instrument necessary or
reasonably requested by NYMEX or the successor member of the Board of Trustees
to evidence the transfer.
(c) The successor member of the Board of Trustees need not examine the
records and acts of any prior members of the Board of Trustees and may retain or
dispose of existing Trust assets, subject to Sections 8 and 9 hereof. The
successor member of the Board of Trustees shall not be responsible for and NYMEX
shall indemnify and defend the successor member of the Board of Trustees from
any claim or liability resulting from any action or inaction of any prior
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<PAGE> 13
members of the Board of Trustees or from any other past event, or any condition
existing at the time such individual becomes a successor member of the Board of
Trustees.
Section 13 - Amendment or Termination
(a) This Trust Agreement may be amended by a written instrument executed
by the Board of Trustees and NYMEX. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable.
(b) The Trust shall not terminate until the date on which Plan
Participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan. Upon termination of the Trust any assets remaining in
the Trust shall be returned to NYMEX.
(c) Upon written approval of Participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, NYMEX may terminate the
Trust prior to the time all benefit payments under the Plan have been made. All
assets in the Trust at termination shall be returned to NYMEX.
Section 14 - Miscellaneous
(a) Any provision of the Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan Participants and their beneficiaries under
the Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged,
- 13 -
<PAGE> 14
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process, without the prior written consent of the Board of
Directors.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of laws.
(d) Any action to be taken by NYMEX shall be by a majority vote of the
Board of Directors of NYMEX. Notwithstanding the above, any action taken by
NYMEX with respect to the removal or appointment of a member of the Board of
Trustees shall be by a two-thirds majority vote of the Board of Directors of
NYMEX. Any action required by any other non-natural entity shall be by its Board
of Directors or other board or person charged with the management of the entity,
or its duly authorized delegate.
(e) Any action authorized by the Board of Trustees shall be by a majority
vote of the individuals then serving as members of such Board of Trustees at a
meeting at which a quorum is present. A quorum shall consist of the lesser of
four individuals or the number of members then serving on the Board of Trustees.
Notwithstanding the above, the Board of Trustees shall have the power to
establish additional rules and procedures governing the manner in which it shall
act, including but not limited to the right to vote by proxy. If the sole member
of the Board of Trustees is a corporate trustee, then all references to Board of
Trustees shall refer to such trustee.
(f) The Chairman of the Board of Directors of NYMEX shall also be the
Chairman of the Board of Trustees. The Vice-Chairman of the Board of Directors
of NYMEX shall also be the Vice-Chairman of the Board of Trustees. In the event
there is no Vice-Chairman of the Board of Directors, the Chairman of the Board
of Trustees shall select a member of the Board of
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<PAGE> 15
Trustees to serve as Vice-Chairman. Any other appointments shall be made by the
entire Board of Trustees.
(g) NYMEX indemnifies and saves harmless the Board of Trustees, from and
against any and all losses resulting from the liability to which the Board of
Trustees may be subjected by reason of any act or conduct (except willful
misconduct or gross negligence) in its official capacity as the Board of
Trustees, including all judgments and expenses reasonably incurred in its
defense, in case NYMEX fails to provide such defense.
Section 15 - Effective Date
The effective date of the Trust Agreement shall be December 31, 1997.
NEW YORK MERCANTILE EXCHANGE
Attest: /s/ [ILLEGIBLE] By: /s/ R. Patrick Thompson
----------------------------- -----------------------------------
R. Patrick Thompson
President
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<PAGE> 16
EXHIBIT A
Effective as of the date this Agreement, the Board of Trustees shall consist of
the following group of seven (7) individuals:
(1) The individual appointed to serve as the Chairman of the Board of
Directors of NYMEX;
(2) The individual appointed to serve as the Vice Chairman of the Board of
Directors of NYMEX;
(3) The individual appointed to serve as the Treasurer of NYMEX;
(4) The individual appointed to serve as the Senior Vice President of Finance
and Administration of NYMEX or comparable successor position; and
(5) An additional three individuals selected by the Board of Directors of
NYMEX.
- 16 -
<PAGE> 1
Exhibit 10.3
GROUND LEASE
between
BATTERY PARK CITY AUTHORITY,
Landlord
and
NEW YORK MERCANTILE EXCHANGE,
Tenant
Premises
Site 15
Battery Park City
New York, New York
<PAGE> 2
TABLE OF CONTENTS
Page
----
Article 1 - Definitions ..............................................
Article 2 - Premises and Term of Lease; Purchase Option ..............
Article 3 - Rent .....................................................
Article 4 - Impositions ..............................................
Article 5 - Deposits for Impositions .................................
Article 6 - Late Charges .............................................
Article 7 - Insurance ................................................
Article 8 - Use of Insurance Proceeds ................................
Article 9 - Condemnation .............................................
Article 10 - Assignment, Subletting, Mortgages, Etc. .................
Article 11 - Construction of Buildings ...............................
Article 12 - Repairs .................................................
Article 13 - Changes, Alterations and Additions ......................
Article 14 - Requirements of Public Authorities and
of Insurance Underwriters and Policies;
Compliance with Master Lease ............................
Article 15 - Fixtures ................................................
Article 16 - Discharge of Liens; Bonds ...............................
Article 17 - Representations; Possession .............................
Article 18 - Landlord Not Liable for Injury or Damage, Etc. ..........
Article 19 - Indemnification of Landlord and Others ..................
Article 20 - Right of Inspection, Etc. ...............................
Article 21 - Landlord's Right to Perform Tenant's Covenants ..........
Article 22 - No Abatement of Rental ..................................
<PAGE> 3
Article 23 - Permitted Use; No Unlawful Occupancy ....................
Article 24 - Events of Default, Conditional Limitations,
Remedies, Etc. ..........................................
Article 25 - Notices .................................................
Article 26 - Construction and Maintenance of the Civic
Facilities ..............................................
Article 27 - Streets .................................................
Article 28 - Street Widening .........................................
Article 29 - Subordination, Attornment ...............................
Article 30 - Excavations and Shoring .................................
Article 31 - Certificates by Landlord and Tenant .....................
Article 32 - Consents and Approvals ..................................
Article 33 - Surrender at End of Term ................................
Article 34 - Entire Agreement ........................................
Article 35 - Quiet Enjoyment .........................................
Article 36 - Appraisal and Arbitration ...............................
Article 37 - Invalidity of Certain Provisions ........................
Article 38 - Financial Reports .......................................
Article 39 - Recording of Memorandum .................................
Article 40 - No Discrimination .......................................
Article 41 - Miscellaneous ...........................................
Article 42 - Security Deposit ........................................
Article 43 - Mutual Termination ......................................
Article 44 - Non-Exclusive Easements .................................
<PAGE> 4
EXHIBITS
Exhibit A - Description of Land
Exhibit B - Tide Matters
Exhibit C - Civic Facilities Development Schedule
Exhibit D - Affirmative Action Program
Exhibit E - Design Guidelines
Exhibit F - Sales Tax Letter
Exhibit G - Sales Tax Registry
Exhibit H - Pedestrian Easement Area
<PAGE> 5
AGREEMENT OF LEASE (this "Lease") made as of the 18 day of May, 1995
between BATTERY PARK CITY AUTHORITY ("Landlord"), a body corporate and politic
constituting a public benefit corporation of the State of New York having an
office at One World Financial Center, New York, New York 10281 and NEW YORK
MERCANTILE EXCHANGE ("Tenant"), a corporation organized under the Not-For-Profit
Corporation Law of the State of New York having an office at Four World Trade
Center, New York, New York 10048.
WITNESSETH:
WHEREAS, the New York State Urban Development Corporation ("UDC"),
the City of New York (the "City"), the New York City Economic Development
Corporation ("EDC") and Battery Park City Authority ("BPCA") have agreed to
develop the Project (hereinafter defined) in conjunction with Tenant; and
WHEREAS, UDC and the City have agreed to make available Five Million
and 00/100 ($5,000,000) Dollars and One Hundred and Twenty Three Million Six
Hundred and Eighty Six Thousand and 00/100 ($123,686,000) Dollars, respectively,
and EDC has agreed to disburse such funds, to be used for certain costs of the
Project, and UDC, EDC, BPCA and Tenant have entered into (and the City has
executed for the purposes provided therein) the Funding Agreement (hereinafter
defined) setting forth the terms and conditions of such funding; and
WHEREAS, UDC, the City, EDC and BPCA have entered into the Project
Agreement (hereinafter defined) regulating the relationship between UDC, the
City, EDC and BPCA with respect to the Project.
NOW, THEREFORE, it is hereby mutually covenanted and agreed by and
between the parties hereto that this Lease is made upon the terms, covenants and
conditions hereinafter set forth.
ARTICLE 1
DEFINITIONS
The terms defined in this Article 1 shall, for all purposes of this
Lease, have the following meanings.
"Advisory Opinion" shall have the meaning provided in Section 41.25.
"Affiliate" shall mean (i) (a) any Person (hereinafter defined) that
has, directly or indirectly, an ownership interest in the aggregate of five
percent (5%) or greater in Tenant or (b) any Person in which Tenant or an
Affiliate of Tenant by virtue of clause (a) of this definition, has an ownership
interest in the aggregate of five percent (5%) or
<PAGE> 6
greater, and (ii) any individual who is a member of the immediate family
(whether by birth or marriage) of an individual who is an Affiliate, which
includes for purposes of this definition a spouse; a brother or sister of the
whole or half blood of such individual or his spouse; a lineal descendant or
ancestor (including an individual related by or through legal adoption) of any
of the foregoing or a trust for the benefit of any of the foregoing. During the
period that NYMEX (hereinafter defined) shall be the Tenant, the term
"Affiliate" with respect to NYMEX shall have the meaning provided in the
Occupancy Agreement (hereinafter defined).
"Approved Remedies" shall have the meaning provided in Section
26.03(a).
"Architect" shall mean any architect or members of the design team
retained by Tenant for the Project or components thereof and approved by
Landlord, which approval shall not be unreasonably withheld, provided, however,
the approval of any architect or member of the design team performing work not
relating to the "core and shell" of the Building or affecting any aspect of the
Design Guidelines (hereinafter defined) shall not be withheld provided such
architect or member is not a Prohibited Person (hereinafter defined). Landlord
hereby approves the following Persons: Skidmore, Owings & Merrill, Jaros, Baum &
Belles (MEPS and vertical transportation), Ysrael A. Seinuk (structural
engineer), DVI Communications, Inc. (technology consultant), Space/Management
Programs, Inc. (trading floor architect) and Electronic Systems Associates
(security consultant).
"Base Rent" shall have the meaning provided in Section 3.01(a).
"Benefits Account" shall have the meaning provided in Section
11.05(e).
"BPCA" shall mean Battery Park City Authority.
"Building" shall mean the building, including footings and
foundations, Fixtures (hereinafter defined) and other improvements and
appurtenances of every kind and description hereafter erected, constructed or
placed upon the Land (hereinafter defined) including, without limitation,
Capital Improvements (hereinafter defined) and any and all alterations and
replacements thereof, additions thereto and substitutions therefor.
"Business Days" shall mean any day which is not a Saturday, Sunday
or a day observed as a holiday by either the State of New York or the federal
government.
"Capital Improvement" shall have the meaning provided in Section
13.01.
"Certificate of Occupancy" shall mean a certificate of occupancy
(temporary or permanent) issued by the Department of Buildings of New York City
pursuant to Section 645 of the New York City Charter or other similar
certificate issued by a department or agency of New York City.
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<PAGE> 7
"Certified Public Accountant" or "C.P.A." shall mean any of the
so-called "Big Six" accounting firms or another independent certified public
accountant or accounting firm selected by Tenant and approved by Landlord, such
approval not to be unreasonably withheld.
"Civic Facilities" shall have the meaning provided in Section
26.01(a).
"Civic Facilities Payment" shall have the meaning provided in
Section 26.04.
"Commencement Date" shall mean the date of this Lease.
"Commencement of Construction" shall mean the date upon which
on-site construction of the Building shall commence, including any excavation or
pile driving but not including test borings, test pilings, surveys and similar
pre-construction activities.
"Con Ed Benefits" shall have the meaning provided in Section
11.05(e).
"Construction Agreements" shall mean agreements for construction,
Restoration (hereinafter defined), Capital Improvement, rehabilitation,
alteration, repair or demolition performed pursuant to this Lease.
"Construction Commencement Date" shall mean November 1, 1995.
"Construction Documents" shall have the meaning provided in Section
11.02(c).
"Construction Manager" shall mean any construction manager or
contractor retained by Tenant for the Project or components thereof and approved
by Landlord, which approval shall not be unreasonably withheld. Landlord hereby
approves the following Persons: Lehrer McGovern Bovis, Morse Diesel, Turner
Construction, AJ Contracting, Structure Tone and Herbert Construction.
"Consumer Price Index" or "CPI" shall mean the Consumer Price Index
for All Urban Consumers published by the Bureau of Labor Statistics of the
United States Department of Labor, New York, N.Y. - Northeastern N.J. Area, All
Items (1982-84 =100), or any successor or substitute index thereto,
appropriately adjusted; provided that if there shall be no successor index and
the parties shall fail to agree upon a substitute index within thirty (30) days,
or if the parties shall fail to agree upon the appropriate adjustment of such
successor or substitute index within thirty (30) days, a substitute index or the
appropriate adjustment of such successor or substitute index, as the case may
be, shall be determined by arbitration pursuant to Article 36.
"Declaration of Restrictions" shall mean that certain Declaration of
Restrictions dated as of June 15, 1983 made by Landlord, as amended by Amendment
to Declaration of Restrictions dated as of May 18, 1995 made by Landlord, as the
same may (subject to the provisions of Section 41.18 hereof) hereafter be
amended, modified or supplemented.
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<PAGE> 8
"Default" shall mean any condition or event which constitutes or,
after notice or lapse of time, or both, would constitute an Event of Default
(hereinafter defined).
"Deficiency" shall have the meaning provided in Section 24.04(b).
"Depository" shall mean a savings bank, a savings and loan
association or a commercial bank or trust company which would qualify as an
Institutional Lender (hereinafter defined), designated by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld, to serve as
Depository pursuant to this Lease, provided all funds held by such Depository
pursuant to this Lease shall be held in New York City. In the event Tenant shall
have failed to designate a Depository within ten (10) Business Days after
request of Landlord, Landlord shall have the right to designate such Depository.
"Design Development Plans" shall have the meaning provided in
Section 11.02(b).
"Design Guidelines" shall mean the Design Guidelines annexed hereto
as Exhibit E, as the same may hereafter be amended, modified or supplemented by
Landlord and Tenant.
"Due Date" shall mean, with respect to an Imposition (hereinafter
defined), the last date on which such Imposition can be paid without any fine,
penalty, interest or cost being added thereto or imposed by law for the
non-payment thereof.
"EDC" shall mean New York City Economic Development Corporation, a
local development corporation.
"Environmental Statutes" shall mean all federal, state and local
laws, rules and regulations, whether now existing or hereafter enacted or
promulgated, regulating, relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material or the protection of the environment, including, without limitation (i)
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq. (known as CERCLA or Superfund) as amended by the
Superfund Amendments and Reauthorization Act of 1986 (known as SARA); (ii) Solid
Waste Disposal Act, 42 U.S.C. Section 6901 et seq. (known as SWDA) as amended by
Resource Conservation and Recovery Act (known as RCRA); (iii) National
Environmental Policy Act, 42 U.S.C. Section 4321 et seq. (known as NEPA); (iv)
Toxic Substances Control Act, 15 U.S.C., Section 2601 et seq. (known as TSCA);
(v) Safe Drinking Water Act, 42 U.S.C. Section 300(f) et seq. (known as Public
Health Service Act, PHSA); (vi) Refuse Act, 33 U.S.C. Section 407 et seq.; (vii)
Clean Water Act, 33 U.S.C. Section 1251 et seq. (known as Federal Water
Pollution Control Act, FWPCA); (viii) Clean Air Act, 42 U.S.C. Section 7401 et
seq. (known as CAA); (ix) The Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. Section 1101 et seq. (known as EPCRTKA); (x) the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq. (known as OSHA); and (xi)
the New York Environmental Conservation Law, Section 1-0101 et seq. (known as
ECL).
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<PAGE> 9
"Equipment" shall mean all machinery, equipment, furniture,
furnishings and other items of tangible and intangible personal property (e.g.,
mainframe, peripheral and personal computers, computer software, and
telecommunications and audio-visual equipment) installed for use by Tenant or
Affiliates of Tenant at the Premises or at any other location in the City which
is a part of the Project, as the same may be repaired, replaced, substituted,
upgraded or improved from time to time, provided the foregoing are purchased,
leased, fabricated or maintained by or on behalf of Tenant as agent for Landlord
(as more fully described in Section 11.05 hereof).
"ERS" shall have the meaning provided in Section 26.01(a).
"Esplanade" shall have the meaning provided in Section 26.01(a).
"Event of Default" shall have the meaning provided in Section 24.01.
"Exchanges" shall mean NYMEX and its wholly owned subsidiary,
Commodity Exchange, Inc.
"Expiration Date" shall have the meaning provided in Section 2.02.
"Fair Market Rent" shall have the meaning provided in Section
3.01(a).
"Financing Delay" shall have the meaning provided in Section
43.01(c).
"Financing Letter" shall mean that certain letter dated May 18, 1995
from Tenant to Landlord, agreed to by Landlord, and accepted by EDC and UDC.
"First Appraisal Date" shall have the meaning provided in Section
3.01(a).
"First Period" shall have the meaning provided in Section 3.01(a).
"Fixtures" shall mean all fixtures incorporated in the Building, as
the same may be repaired, replaced, substituted, upgraded or improved from time
to time, including, without limitation, all machinery, dynamos, boilers, heating
and lighting equipment, pumps, tanks, motors, air conditioning compressors,
pipes, conduits, fittings, ventilating and communications apparatus, elevators,
escalators, incinerators, garbage compactors, antennas, computers and sensors.
"Fixtures" shall not mean any fixture or utilities owned by any utility company.
"Funding Agreement" shall mean that certain funding agreement of
even date herewith by and among UDC, EDC, BPCA and Tenant, and executed by the
City for the purposes provided therein, as the same may be hereafter amended,
modified or supplemented.
"Governmental Authority (Authorities)" shall mean the United States
of America, the State of New York, New York City and any agency, department,
commission,
-5-
<PAGE> 10
board, bureau, instrumentality or political subdivision of any of the foregoing,
now existing or hereafter created, having jurisdiction over the Premises or any
portion thereof.
"IDA" shall mean the New York City Industrial Development Agency, a
public benefit corporation of the State of New York.
"Impositions" shall have the meaning provided in Section 4.01.
"Improvement Approvals" shall have the meaning provided in Section
13.01(a).
"Indemnitees" shall have the meaning provided in Section 19.01.
"Initial Balance" shall have the meaning provided in Section
11.05(e).
"Institutional Lender" shall mean a savings bank, a savings and loan
association, a commercial bank or trust company (whether acting individually or
in a fiduciary capacity), an insurance company organized and existing under the
laws of the United States or any state thereof, a real estate investment trust,
a religious, educational or eleemosynary institution, a governmental agency,
body or entity (including, without limitation, BPCA and IDA), an employee,
benefit, pension or retirement plan or fund, a commercial credit corporation, an
investment bank, a commercial bank or trust company acting as trustee or
fiduciary of various pension funds or tax-exempt funds, or as trustee in
connection with the issuance of any bonds by BPCA or IDA or any other debt
financing, or a corporation or other entity which is owned wholly by any other
Institutional Lender or a subtrustee of any such commercial bank or trust
company acting as such trustee, or any combination of the foregoing; provided,
that each of the above entities, or any combination of such entities, shall
qualify as an Institutional Lender for purposes of this Lease only if (a) each
such entity shall be subject to (i) the jurisdiction of the courts of the State
of New York in any actions and (ii) the supervision of (A) the Comptroller of
the Currency or the Department of Labor of the United States or the Federal Home
Loan Bank Board or the Insurance Department or the Banking Department or the
Comptroller of the State of New York, or the Board of Regents of the University
of the State of New York, or the Comptroller of New York City or any successor
to any of the foregoing agencies or officials, or (B) any agency or official
exercising comparable functions on behalf of any other state within the United
States, or (C) in the case of a commercial credit corporation, the laws and
regulations of the state of its incorporation, or (D) any federal, state or
municipal agency or public benefit corporation or public authority advancing or
insuring mortgage loans or making payments which, in any manner, assist in the
financing, development, operation and maintenance of improvements, and (b) each
such entity (other than BPCA or IDA), or combination of such entities, or the
parent or parents of such entity or entities, shall have individual or combined
assets, as the case may be, of not less than Five Hundred Million ($500,000,000)
Dollars.
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"Involuntary Rate" shall mean the Prime Rate (hereinafter defined)
plus two percent (2%) per annum but, in no event, in excess of the maximum
permissible interest rate then in effect in the State of New York.
"Issuing Bank" shall have the meaning provided in Section 42.02(a).
"Land" shall mean the land described in Exhibit A hereto; provided,
however, Landlord and Tenant agree that this Lease will be amended to modify the
description contained in Exhibit A, if necessary, to (i) conform to the exact
curvature of the western wall of the Building as reflected in the "as-built"
plans of the Building delivered by Tenant in accordance with the provisions of
Section 11.04, (ii) conform to the ultimate location and perimeter of the
Building and (iii) reflect the exact size and location of the columns described
in Section 11.12.
"Landlord", on the Commencement Date, shall mean BPCA, but
thereafter "Landlord" shall mean only the landlord at the time in question under
this Lease.
"Landlord's Civic Facilities" shall have the meaning provided in
Section 26.01(d).
"Landlord's Construction Obligations" shall have the meaning
provided in Section 26.03(a).
"Landlord's Project Manager" shall have the meaning provided in
Section 11.02(e).
"Lease" shall mean this Agreement of Lease and all amendments,
modifications and supplements thereof.
"Lease Early Termination Date" shall have the meaning provided in
Section 2.03.
"Lease Restrictions Expiration Date" shall mean the earlier to occur
of (i) the fifteenth anniversary of the Occupancy Date, (ii) if one or more
Public Party Delays shall have occurred, the Public Party Delay Termination
Date, (iii) if the City or State shall impose a commodities contract tax, the
earlier of (A) the date on which such tax is imposed or (B) the date on which
the bill imposing such tax becomes law or (iv) in the event NYMEX shall have
made the election provided in Section 9.6(b)(ii)(B) of the Funding Agreement,
the fifth anniversary of the Occupancy Date.
"Lease Year" shall mean the twelve-month period beginning on the
Commencement Date and each succeeding twelve-month period during the Term
(hereinafter defined), provided, however, if the Occupancy Date (hereinafter
defined) shall not occur on the anniversary of the Commencement Date, Lease Year
shall be redetermined as of the Occupancy Date to mean the twelve-month period
beginning on the Occupancy Date and each succeeding twelve-month period during
the Term.
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"Letter of Credit" shall have the meaning provided in Section
42.02(a).
"Maintenance Obligations" shall have the meaning provided in Section
26.02.
"Mapping Action" shall have the meaning provided in Section 11.12.
"Master Development Plan" shall mean the plan annexed to the Master
Lease (hereinafter defined), as superseded and modified by the Large-Scale
Commercial Development Plan (also annexed to the Master Lease) and amendments
thereto dated as of November 9, 1992 and as of February 28, 1995, as the same
may (subject to the provisions of Section 41.18 hereof) be hereafter amended,
modified or supplemented.
"Master Landlord", on the Commencement Date, shall mean BPCA, but
thereafter, "Master Landlord" shall mean only the lessor at the time in question
under the Master Lease.
"Master Lease" shall mean the Restated Amended Agreement of Lease,
made as of June 10, 1980, between BPC Development Corporation, as landlord, and
BPCA, as tenant, a Memorandum of which was recorded on June 11, 1980 in the
Office of the City Register, New York County in Reel 527 at page 163, as amended
by First Amendment to Restated Amended Lease dated as of June 15, 1983 and
recorded on June 20, 1983 in said Register's Office in Reel 696 at page 424,
Second Amendment to Restated Amended Lease dated June 15, 1983 and recorded on
June 20, 1983 in said Register's Office in Reel 696 at page 432, Third Amendment
to Restated Amended Lease dated as of August 15, 1986 and recorded on October
22, 1986 in said Register's Office in Reel 1133 at page 569 and Fourth Lease
Amendment to Restated Amended Lease dated as of May 25, 1990 and recorded on May
30, 1990 in said Register's Office in Reel 1697 at page 307, as the same may
(subject to the provisions of Section 41.18 hereof) be hereafter amended,
modified or supplemented.
"Memorandum of Understanding" shall mean the Memorandum of
Understanding, dated as of November 8, 1979, among the Governor of the State of
New York, the Mayor of New York City and the President and Chief Executive
Officer of UDC and of BPCA, as supplemented by Letter, dated November 8, 1979,
from the President and Chief Executive Officer of UDC and BPCA to the Mayor of
New York City, and as amended by the 1986 Supplemental Memorandum of
Understanding, dated as of August 15, 1986 among the Governor of the State of
New York, the Mayor of the City of New York and BPCA, and the Amendment to the
Memorandum of Understanding, dated as of January 9, 1995 among the Governor of
the State of New York, the Mayor of the City of New York and BPCA.
"Minimum Requirement" shall have the meaning provided in the
Occupancy Agreement (hereinafter defined).
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"Mortgage" shall mean any mortgage which constitutes a lien on
Tenant's interest in this Lease and the leasehold estate created hereby,
provided such mortgage is held by (i) an Institutional Lender or (ii) a Person
formerly constituting Tenant, or such Persons assignee, if such mortgage is made
to such Person in connection with an assignment by Tenant of its interest in
this Lease (other than an assignment by Tenant of its interest in this Lease to
an Affiliate).
"Mortgagee" shall mean the holder of a Mortgage.
"New York City" or the "City shall mean The City of New York, a
municipal corporation of the State of New York.
"Non-Disturbance and Attornment Agreement" shall have the meaning
provided in Section 10.09.
"Non-Renewal Notice" shall have the meaning provided in Section
42.02(a).
"North Cove Link Park" shall have the meaning provided in Section
26.01(a).
"NYMEX" shall mean The New York Mercantile Exchange, a corporation
organized and existing under the Not-For-Profit Corporation Law of the State of
New York.
"NYMEX Use" shall mean the use of space in the Building for Tenant's
own trading, trading support, office and administrative purposes and uses
accessory thereto for or conducted by Tenant, Affiliates of Tenant and any
Service Providers.
"Occupancy Agreement" shall mean that certain agreement of even date
herewith by and among the City, EDC, UDC, Landlord and Tenant, as the same may
hereafter be amended, modified or supplemented.
"Occupancy Date" shall mean the first date on which floor trading
occurs at the Premises (it being understood and agreed that Tenant's starting
up, testing and "debugging" any computer or communications systems at the
Premises, prior to any floor trading actually commencing at the Premises, or
operating such systems at the Building during a "break-in" period while floor
trading is still being carried on at 4 World Trade Center, shall not constitute
floor trading at the Premises).
"Occupancy Requirements" shall have the meaning provided in the
Occupancy Agreement.
"Office Portion" shall mean that portion of the Building consisting
of approximately 386,375 rentable square feet of office, retail and accessory
space.
"Payment in Lieu of Taxes" or "PILOT" shall have the meaning
provided in Section 3.02(a).
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"Person" shall mean an individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, any Federal, State, County
or municipal government or any bureau, department or agency thereof.
"Premises" shall mean the Land and Building.
"Prime Rate" shall mean the prime or base rate announced as such
from time to time by Citibank, N.A., or its successors, at its principal office.
Any interest payable under this Lease with reference to the Prime Rate shall be
adjusted on a daily basis, based upon the Prime Rate in effect at the time in
question, and shall be calculated on the basis of a three hundred and sixty
(360) day year with twelve (12) months of thirty (30) days each.
"Prohibited Person" shall have the meaning provided in Section
10.01(c).
"Project" shall mean, at any time and from time to time during the
term of this Lease, the construction of the Building and the improving and
equipping of the Premises, and shall include, without limitation (a) the
planning and design of the Building, (b) the acquisition and installation of
materials to be incorporated in (and the construction of) the Building, (c) the
acquisition and installation of Fixtures to be incorporated in the Building, and
(d) the acquisition, leasing, fabrication, design, installation, maintenance,
testing, "breaking-in" and future upgrades of any Equipment for use at the
Premises and for use off-site in support of Tenant's operations at the Premises,
such off-site locations however to be located in the City.
"Project Agreement" shall mean that certain agreement of even date
herewith by and among UDC, the City, EDC and BPCA, as the same may hereafter be
amended, modified or supplemented.
"Project Area" shall mean the premises demised pursuant to the
Master Lease.
"Public Party Delays" shall have the meaning provided in the
Occupancy Agreement.
"Public Party Delay Termination Date" shall have the meaning
provided in the Occupancy Agreement.
"Qualifying Sublease" shall have the meaning provided in Section
10.09.
"Reappraisal Date" shall have the meaning provided in Section
3.01(a).
"Rent Insurance" shall have the meaning provided in Section
7.01(a)(iv).
"Rental" or "Rent" shall have the meaning provided in Section 3.05.
"Requirements" shall have the meaning provided in Section 14.01.
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"Restoration" shall have the meaning provided in Section 8.01.
"Restoration Funds" shall have the meaning provided in Section
8.02(a).
"Restore" shall have the meaning provided in Section 8.01.
"Sales Tax" or "Sales Taxes" shall have the meaning provided in
Section 11.05(b).
"Sales Tax Benefits" shall have the meaning provided in Section
11.05(e).
"Scheduled Completion Date" shall have the meaning provided in
Section 11.04.
"Schematics" shall have the meaning provided in Section 11.02(a).
"Self-Help" shall have the meaning provided in Section 26.03(b).
"Service Provider(s)" shall mean any entity or individual providing
services to, or involved in or supportive of the business operations of, Tenant
or its Affiliates or members or member firms, provided, however, Service
Providers shall not be deemed to include any member firms of the Exchanges.
"Settlement Agreement" shall mean the Settlement Agreement dated as
of June 6, 1980, between the City and UDC, as supplemented by Letter, dated June
9, 1980, from Richard A. Kahan to Edward I. Koch, and amended by Amendment to
Settlement Agreement dated as of August 15, 1986 between New York City and
Landlord, Agreement for Certain Payments dated as of June 28, 1989, between New
York City and Landlord, Agreement and Consent dated as of December 30, 1989,
between New York City and Landlord, Amendment and Agreement and Consent Pursuant
to Settlement Agreement dated as of May 18, 1990 between New York City and
Landlord, Amendment and Agreement and Consent Pursuant to Settlement Agreement
dated as of October 15, 1993 between New York City and Landlord, Amendment and
Agreement and Consent Pursuant to Settlement Agreement dated as of April 10,
1995 between New York City and Landlord, and as the same may (subject to the
provisions of Section 41.18 hereof) be hereafter amended, modified or
supplemented.
"Severance Tenants Agreement" shall mean that certain agreement
dated as of May 18, 1995 by and among WFC Tower A Company, Olympia & York Tower
B Company, WFC Tower D Company, American Express Company, Merrill Lynch/WFC/L,
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and NYMEX, and as the
same may be hereafter amended, modified or supplemented, provided such
amendment, modification or supplement was approved by Landlord in accordance
with Section 23.06.
"Sidewalk Easement" shall have the meaning provided in Section
11.12.
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"Storage and Staging Letter" shall mean the letter agreement of even
date herewith between Landlord and Tenant regarding storage and staging during
construction of the Building.
"Subleases" shall have the meaning provided in Section 10.04.
"Substantial Completion of the Building" or "Substantially
Complete(d)" shall have the meanings provided in Section 11.04.
"Subtenants" shall have the meaning provided in Section 10.04.
"Tax Year" shall mean each tax fiscal year of New York City.
"Taxes" shall mean the real property taxes assessed and levied
against the Premises or any part thereof pursuant to the provisions of Chapter
58 of the Charter of New York City and Chapter 17, Title E, of the
Administrative Code of The City of New York, as the same may now or hereafter be
amended, or any statute or ordinance in lieu thereof in whole or in part and
which would otherwise be payable if the Premises or any part thereof or the
owner thereof were not exempt therefrom (but subject, in any event, to any
abatement, deferral or exemption that would be available, from time to time, if
the Premises were owned by an entity not exempt from the payment of Taxes).
"Tenant" shall mean New York Mercantile Exchange, and, if New York
Mercantile Exchange or any successor to its interest hereunder shall in
accordance with the terms of this Lease assign or transfer its interest
hereunder or any portion thereof, the term "Tenant" shall mean such assignee or
transferee.
"Tenant's Civic Facilities" shall have the meaning provided in
Section 26.01(c).
"Tenant's Early Termination Notice" shall have the meaning provided
in Section 2.03.
"Term" shall have the meaning provided in Section 2.02.
"Title Matters" shall mean those matters affecting title to the Land
set forth in Exhibit B hereto.
"Trading Portion" shall mean that portion of the Building consisting
of approximately 113,625 rentable square feet, consisting of a trading floor and
computer facilities and other special improvements supporting or enhancing the
trading floor and related trading activities and other support space for the
trading floor and such related trading activities.
"Transfer" shall have the meaning provided in Section 10.01(a).
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"UDC" shall mean New York State Urban Development Corporation, a
public benefit corporation of the State of New York.
"Unavoidable Delays" shall mean (i) with respect to Tenant or its
obligations hereunder, delays incurred by Tenant due to strikes, lockouts, work
stoppages due to labor jurisdictional disputes, acts of God, inability to obtain
labor or materials due to governmental restrictions (other than any governmental
restrictions which Tenant is bound to observe pursuant to the terms of Article
40 of this Lease), enemy action, civil commotion, fire, casualty or other causes
beyond the control of Tenant (but not including Tenant's insolvency or financial
condition), Landlord's, UDC's, EDC's or the City's failure to comply with their
obligations under the Funding Agreement in accordance with the provisions
thereof or Landlord's, UDC's, EDC's or the City's failure to fund under the
Funding Agreement in the event such funding is prevented by reason of an
injunction (as more fully described in the Funding Agreement), a Financing
Delay, Landlord's breach of its obligations under this Lease or under any other
agreement between Landlord and Tenant now or hereafter made, including, if
Landlord shall have provided a loan to Tenant as contemplated by the Financing
Letter, a breach by Landlord of its obligations under any document executed in
connection with the loan contemplated by the Financing Letter, Landlord's
failure to complete Landlord's Civic Facilities in accordance with Section
26.02, or any delays or interference caused by Landlord doing construction or
performing development activities on sites other than the Premises or on
projects other than the Project, and (ii) with respect to Landlord or its
obligations hereunder, delays incurred by Landlord due to strikes, lockouts,
work stoppages due to labor jurisdictional disputes, acts of God, inability to
obtain labor or materials due to governmental restrictions (other than any
governmental restrictions which Landlord is bound to observe pursuant to the
terms of this Lease), enemy action, civil commotion, fire, unavoidable casualty
or other similar causes beyond the control of Landlord (but not including
Landlord's insolvency or financial condition); in each case provided such party
shall have notified the other party not later than thirty (30) days after such
party knows of the occurrence of same.
ARTICLE 2
PREMISES AND TERM OF LEASE; PURCHASE OPTION
Section 2.01. Landlord does hereby demise and sublease to Tenant,
and Tenant does hereby hire and take from Landlord, (a) the Premises, together
with all easements, appurtenances and other rights and privileges now or
hereafter belonging or appertaining to the Premises, subject to the Title
Matters, and (b) all Equipment.
Section 2.02. TO HAVE AND TO HOLD unto Tenant, its successors and
assigns, for a term of years (the "Term") commencing on the Commencement Date
and expiring on June 17, 2069 or on such earlier date upon which this Lease may
be terminated as hereinafter provided (the "Expiration Date").
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Section 2.03. Tenant shall have the right to terminate this Lease at
any time after the earlier to occur of (i) the fifteenth anniversary of the
Occupancy Date, (ii) if one or more Public Party Delays shall have occurred, the
Public Party Delay Termination Date, (iii) if the City or State shall impose a
commodities contract tax, the earlier of (A) the date on which such tax is
imposed or (B) the date on which the bill imposing such tax becomes law, (iv)
the termination of the Funding Agreement by Tenant in accordance with the
provisions of Section 9.6(b)(ii)(A) thereof or (v) the termination of this Lease
by Tenant in accordance with the provisions of Section 43.02 hereof (the date on
which this Lease is so terminated being called the "Lease Early Termination
Date") upon not less than one hundred and eighty (180) days prior notice to
Landlord with respect to a termination by reason of clauses (i), (ii) or (iii)
above or upon not less than forty-five (45) days prior notice to Landlord with
respect to a termination by reason of clause (iv) or (v) above ("Tenant's Early
Termination Notice"). In the event Tenant shall have delivered Tenant's Early
Termination Notice, (i) Tenant shall vacate and surrender the Premises on the
date set forth in Tenant's Early Termination Notice in the condition required
pursuant to Article 33, (ii) the Premises shall be delivered free and clear of
any Mortgages and (iii) all Rental payable by Tenant hereunder shall be
equitably apportioned as of such date and the security deposit delivered to
Landlord in accordance with Article 42 hereof shall be promptly returned to
Tenant.
Section 2.04. If any other commercial tenant or subtenant of BPCA is
granted an option to extend its lease beyond June 17, 2069, Tenant shall be
offered an option to extend the Term on comparable terms (reflective of
differences in the circumstances applicable to the particular commercial tenant,
including, but not limited to, the nature of the location, public amenities
offered and use of the site), unless BPCA reasonably determines that no such
comparable terms can be applied to Tenant, in which event, Tenant shall have no
such extension rights.
Section 2.05. If any other commercial tenant or subtenant of BPCA is
granted an option to purchase the fee interest relating to its leased premises,
Tenant shall be offered an option to purchase the Premises on comparable terms
(reflective of differences in the circumstances applicable to the particular
commercial tenant, including, but not limited to, the nature of the location,
public amenities offered and use of the site), unless BPCA reasonably determines
that no such comparable terms can be applied to Tenant, in which event, Tenant
shall have no such purchase option rights.
ARTICLE 3
RENT
Section 3.01.
(a) For the period beginning on the Commencement Date and continuing
thereafter throughout the Term, Tenant shall pay to Landlord, without notice or
demand, the annual sums referred to below (collectively, the "Base Rent"):
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(i) For each Lease Year (or portion thereof) commencing on
the Commencement Date up to but not including the Occupancy
Date, an amount per annum equal to One and 00/100 ($1.00)
Dollar for the Trading Portion and One and 00/100 ($1.00)
Dollar for the Office Portion.
(ii) For each Lease Year commencing on the Occupancy Date and
continuing for a period of twenty (20) Lease Years (the "First
Period") an amount per annum as follows:
(A) For the Trading Portion, One and 00/100 ($1.00) Dollar
for each such Lease Year; and
(B) For the Office Portion, (x) One Million and 00/100
($1,000,000) Dollars for each Lease Year commencing on
the Occupancy Date up to the day immediately preceding
the seventh anniversary of the Occupancy Date, (y) One
Million Five Hundred Thousand and 00/100 ($1,500,000)
Dollars for each Lease Year commencing on the seventh
anniversary of the Occupancy Date and continuing through
the date that is one day prior to the thirteenth
anniversary of the Occupancy Date and (z) Two Million
and 00/100 ($2,000,000) Dollars for each Lease Year
commencing on the thirteenth anniversary of the
Occupancy Date and continuing through the date that is
one day prior to the expiration of the First Period.
(iii) For each Lease Year commencing on the date immediately
following the expiration of the First Period and continuing
until the expiration of the Term, an amount per annum equal to
Four Million and 00/100 ($4,000,000) Dollars, subject,
however, to adjustment on the First Appraisal Date and on each
Reappraisal Date thereafter in the manner hereinafter provided
in the event that the Fair Market Rent, as determined on the
First Appraisal Date or on any such Reappraisal Date, as the
case may be, is other than $4,000,000. The Fair Market Rent
shall be determined as of the first day of the month next
succeeding the twentieth anniversary of the Occupancy Date and
as of each subsequent fifteenth anniversary thereafter (such
twentieth anniversary being referred to herein as the "First
Appraisal Date" and each subsequent fifteenth anniversary
being referred to herein as a "Reappraisal Date"). Such
determination of Fair Market Rent shall be by appraisal in the
manner provided in Article 36, unless at least six (6) months
prior to the First Appraisal Date or on any Reappraisal Date,
as the case may be, Landlord and Tenant shall have agreed upon
such Fair Market Rent. If the Fair Market Rent as so
determined on the First Appraisal Date or on any Reappraisal
Date,
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as the case may be, shall be in excess of $4,000,000, the Base
Rent for each Lease Year for the period commencing on the
First Appraisal Date or such Reappraisal Date, as the case may
be, and continuing for a period of fifteen (15) Lease Years
thereafter, shall be the sum of $4,000,000 plus one-half (1/2)
of the difference between the Fair Market Rent and $4,000,000
(for example, if the Fair Market Rent is determined to be
$6,000,000, the Base Rent shall be equal to (A) $4,000,000
plus (B) $1,000,000 (or one-half of $6,000,000 less
$4,000,000)). If the Fair Market Rent as so determined on the
First Appraisal Date or on any Reappraisal Date, as the case
may be, shall be less than $4,000,000, the Base Rent for each
Lease Year for the period commencing on the First Appraisal
Date or such Reappraisal Date, as the case may be, and
continuing for a period of fifteen (15) Lease Years thereafter
shall be $4,000,000 less one-half (1/2) of the difference
between $4,000,000 and the Fair Market Rent (for example, if
the Fair Market Rent is determined to be $3,000,000, the Base
Rent shall be equal to (A) $4,000,000 minus (B) $500,000 (or
one-half of $4,000,000 less $3,000,000)). As used herein,
"Fair Market Rent" shall mean the fair market rental value of
the Land as of the date in question, considered as
unencumbered by this Lease and the Master Lease and as
unimproved except for Landlord's Civic Facilities and other
site improvements made by Landlord, provided that in
determining such fair market rental value, the appraiser shall
take into account the following assumptions: (i) the
improvements to be constructed on the Land may require unique
design aspects with respect to their use for floor trading
activities (for example, a lack of standard columns or a
typical core); and (ii) any improvement constructed on the
Land is subject to the requirements of the Declaration of
Restrictions, the Severance Tenants Agreement and the Design
Guidelines and must be used in a manner or for a purpose which
is consistent with this Lease, the Master Lease, the Master
Development Plan, the Certificate of Occupancy and the
Severance Tenants Agreement.
(b) The Base Rent shall be payable in equal monthly installments in
advance commencing on the Commencement Date and on the first day of each month
thereafter during the Term. The Base Rent shall be payable in currency which at
the time of payment is legal tender for public and private debts in the United
States of America, and shall be payable to the office of Landlord set forth
above or at such other place in the City as Landlord shall direct by notice to
Tenant. The Base Rent due for any period of less than a full Lease Year, and any
installment of the Base Rent due for any period of less than a full month, shall
be appropriately apportioned.
Section 3.02.
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(a) For each Tax Year or portion thereof within the Term, Tenant
shall pay to Landlord, without notice or demand, an annual sum (each such sum
being hereinafter referred to as a "Payment in Lieu of Taxes" or "PILOT") in the
amounts provided in this Section 3.02, on or before the last date or dates on
which payments of Taxes, or the applicable installments thereof, are payable
without interest or penalty under New York City law for such Tax Year. PILOT due
for any period which is less than a full Tax Year shall be appropriately
apportioned.
(b) PILOT shall be payable as follows:
(i) With respect to the Trading Portion:
(A) Subject to adjustment as provided in Section 10.04,
for each Tax Year (or portion thereof) from the
Commencement Date to and including the last day of the
First Period, PILOT shall be zero; provided, however,
that if Tenant shall cease to use the Trading Portion
for the purposes provided in this Lease and the
Occupancy Agreement, in addition to such other rights
and remedies as may be provided in this Lease or the
Occupancy Agreement, from and after the date that Tenant
shall have ceased to so use the Trading Portion, PILOT
shall be increased to an amount equal to Taxes (subject,
however, to any real property tax abatement, deferral or
exemption as provided in Section 3.02(b)(ii)(B) or which
would be available from time to time if the Premises
were owned by an entity not exempt from the payment of
Taxes); and
(B) For each Tax Year (or portion thereof) commencing on
the day next succeeding the expiration of the First
Period and continuing for the remainder of the Term,
PILOT shall be in an amount equal to Taxes assessed on
such Trading Portion (subject, however, to any real
property tax abatement, deferral or exemption which
would be available from time to time if the Premises
were owned by an entity not exempt from the payment of
Taxes).
(ii) With respect to the Office Portion:
(A) Subject to adjustment as provider in Section 10.04,
for each Tax Year (or portion thereof) commencing on the
Commencement Date and continuing until the date which is
one day prior to the second anniversary of the Occupancy
Date, PILOT shall be zero;
(B) Subject to adjustment as provided in Section 10.04,
for each Tax Year (or portion thereof) commencing on the
day
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next succeeding the expiration of the period referred to
in Section 3.02(b)(ii)(A) and continuing for a period of
ten (10) years thereafter, PILOT shall be in an amount
equal to the following percentage of Taxes:
<TABLE>
<S> <C> <C>
Tax Year 1 25% of Taxes;
Tax Year 2 32.5 % of Taxes;
Tax Year 3 40% of Taxes;
Tax Year 4 47.5% of Taxes;
Tax Year 5 55% of Taxes;
Tax Year 6 62.5% of Taxes;
Tax Year 7 70% of Taxes;
Tax Year 8 77.5% of Taxes;
Tax Year 9 85% of Taxes;
Tax Year 10 92.5% of Taxes; and
</TABLE>
(C) For each Tax Year (or portion thereof) commencing on
the day next succeeding the expiration of the period
referred to in Section 3.02(b)(ii)(B) and continuing for
the remainder of the Term, PILOT shall be in an amount
equal to Taxes on such Office Portion (subject, however,
to any real property tax abatement, deferral or
exemption which would be available from time to time if
the Premises were owned by an entity not exempt from the
payment of Taxes).
(c) In determining PILOT (i) the total assessed value of the Land
shall be allocated on a pro rata basis to the Office Portion and the Trading
Portion based upon the square footage of each and (ii) the total assessed value
of the improvements shall be allocated between the Trading Portion and the
Office Portion as follows: (A) with respect to the Office Portion, the assessed
value shall be determined based upon the number of rentable square feet of
conventional office space in the Building multiplied by the then current, per
square-foot assessed value of comparable, conventional office buildings in the
Project Area and (B) the balance of the total assessed value of the improvements
shall be allocated to the Trading Portion. The parties agree that the four
building complex known as the "World Financial Center" are deemed to be
comparable, conventional office buildings in the Project Area.
Section 3.03. Tenant shall continue to pay the full amount of PILOT
required under Section 3.02, notwithstanding that Tenant may have instituted tax
assessment reduction or other actions or proceedings pursuant to Section 4.06
hereof to reduce the assessed valuation of the Premises or any portion thereof.
If any such tax reduction or other action or proceeding shall result in a final
determination in Tenant's favor (i) Tenant shall be entitled to a credit against
future PILOT to the extent, if any, that the PILOT previously paid for the Tax
Year or Years for which such final determination(s) was (or were) made exceeds
the PILOT as so determined, and (ii) if such final
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determination is made for the then current Tax Year, future payments of PILOT
for said Tax Year shall be based on the PILOT as so determined. If at the time
Tenant is entitled to receive such a credit the City of New York is paying
interest on refunds of Taxes, Tenant's credit shall include interest at the rate
then being paid by the City of New York on such refunds of Taxes. In no event,
however, shall Tenant be entitled to any refund of any such excess from
Landlord.
Section 3.04. Tenant shall pay to Landlord the Civic Facilities
Payment in accordance with the provisions of Section 26.04.
Section 3.05. All amounts required to be paid by Tenant pursuant to
this Lease, including, without limitation, Base Rent, PILOT, Impositions and
Civic Facilities Payments (collectively, "Rental" or "Rent"), shall constitute
rent under this Lease and shall be payable in the same manner as Base Rent.
Rental shall be absolutely net to Landlord without any abatement, deduction,
counterclaim, set-off or offset whatsoever except as specifically set forth in
this Lease, so that this Lease shall yield, net, to Landlord, Rental in each
year during the Term and that Tenant shall pay all costs, expenses and charges
of every kind and nature relating to the Premises (except Taxes, if any, and the
cost of constructing and maintaining Landlord's Civic Facilities) which may
arise or become due or payable during or after (but attributable to a period
falling within) the Term.
Section 3.06. In the event that New York City shall, for any reason,
fail to determine the assessed value of the Premises for any Tax Year during the
Term, such assessed value shall be determined in accordance with the procedures
set forth in Article XVII of the Master Lease, provided that, in making such
determination, the appraisers shall take into consideration the equalization
rates then applicable to comparable properties situated in the Borough of
Manhattan, as well as any limitations on increases in assessed value for such
comparable properties prescribed by applicable law.
ARTICLE 4
IMPOSITIONS
Section 4.01. Except as otherwise specifically provided herein,
Tenant shall pay, as hereinafter provided, all of the following items
(collectively, "Impositions") imposed by any Governmental Authority (other than
a Governmental Authority acting in its capacity as Landlord and not in its
governmental capacity): (a) real property assessments (not including Taxes), (b)
personal property taxes (except as otherwise specifically provided herein), (c)
occupancy and rent taxes (except as otherwise specifically provided herein), (d)
water, water meter and sewer rents, rates and charges, (e) excises, (f) levies,
(g) license and permit fees, (h) service charges with respect to police
protection, fire protection, street and highway construction, maintenance and
lighting, sanitation and water supply, if any, (i) fines, penalties and other
similar or like governmental charges applicable to the foregoing and any
interest or costs with respect thereto and (j) except for Taxes, any and all
other governmental levies, fees, rents, assessments or taxes and charges,
general and special,
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ordinary and extraordinary, foreseen and unforeseen, of any kind and nature
whatsoever, and any interest or costs with respect thereto, which at any time
during the Term are, or, if the Premises or any part thereof or the owner
thereof were not exempt therefrom, would have been (1) assessed, levied,
confirmed, imposed upon or would have become due and payable out of or in
respect of, or would have been charged with respect to, the Premises or any
document to which Tenant is a party creating or transferring an interest or
estate in the Premises (excluding any transfer taxes (unless required by statute
to be paid by the grantee or transferee where the grantor or transferor is
exempt therefrom) or capital gains taxes imposed in connection with the
execution of this Lease), or the use and occupancy thereof by Tenant and (2)
encumbrances or liens on (i) the Premises, or (ii) the sidewalks or streets in
front of or adjoining the Premises, or (iii) any vault (other than a vault in
respect of which a utility company is obligated to pay any charge specified
above or which is exempt from any such charge by reason of use thereof by any
such utility company), passageway or space in, over or under such sidewalk or
street, or (iv) any other appurtenances of the Premises, or (v) any personal
property (except personal property which is not owned by or leased to Tenant and
except as otherwise specifically provided herein), Equipment or other facility
used in the operation thereof, or (vi) except as otherwise specifically provided
herein, the Rental (or any portion thereof) payable by Tenant hereunder, each
such Imposition, or installment thereof, during the Term to be paid not later
than five (5) Business Days prior to the Due Date thereof. However, if, by law,
any Imposition may at the option of the taxpayer be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Tenant may exercise the option to pay the same in such installments and shall be
responsible for the payment of such installments only, together with applicable
interest, if any, provided that all such installment payments together with
applicable interest, if any, relating to periods prior to the date definitely
fixed in Article 2 hereof for the expiration of the Term shall be made prior to
the Expiration Date. Tenant shall promptly notify Landlord if Tenant shall have
elected to pay any such Imposition in installments.
Section 4.02. Tenant, from time to time upon the request of
Landlord, shall promptly furnish to Landlord copies of official receipts of the
appropriate imposing authority, or other evidence reasonably satisfactory to
Landlord, evidencing the payment thereof.
Section 4.03.
(a) If the Premises shall at any time become subject to Taxes,
Landlord shall pay the Taxes on or before the due date thereof In no event shall
Tenant be obligated to pay Taxes. Landlord shall have the right to contest the
imposition of Taxes, at Landlord's expense, and pending such contest, if
permitted by applicable law, Landlord shall not be required to pay the Taxes
being so contested, unless failure to pay same would result in the imminent loss
or forfeiture of the Premises or the termination of Tenant's interest under this
Lease or if Tenant would by reason thereof be subject to any civil or criminal
penalty or liability. If Landlord shall exercise its right to contest the
imposition of Taxes, Landlord shall promptly notify Tenant of such contest, and,
at Tenant's request,
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shall promptly deliver to Tenant copies of all applications, protest and other
documents submitted by Landlord to (or received by Landlord from) any
Governmental Authority. Any such proceeding by Landlord shall be commenced as
soon as is reasonably possible and shall be prosecuted to final adjudication
with reasonable dispatch. Landlord shall not, without Tenant's consent, enter
into a settlement of any such contest if such settlement would increase the
amount of PILOT payable by Tenant under this Lease or would alter the method for
computing or affect the timing for payment of PILOT. If Landlord shall have
failed to pay the Taxes as required hereunder and shall not have timely
commenced a proceeding to contest same, or shall have timely commenced a
proceeding to contest the Taxes but failure to pay the Taxes during the pendency
of such proceeding will result in the imminent loss or forfeiture of the
Premises or the termination of Tenant's interest under this Lease or Tenant
would by reason thereof be subject to any civil or criminal penalty or
liability, then Tenant may pay such unpaid Taxes together with any interest or
penalties thereon and deduct such payment from the next installment of PILOT
(and, to the extent, if any, that such payment shall exceed the next installment
of PILOT, from the next installment(s) of Base Rent) together with interest
thereon at the Involuntary Rate.
(b) Nothing herein contained shall require Tenant to pay municipal,
state or federal income, gross receipts, inheritance, estate, succession,
profit, transfer, capital or transfer gains taxes of Landlord, or any corporate
franchise tax imposed upon Landlord or any transfer or gains tax imposed on
Landlord.
Section 4.04. Any Imposition relating to a period a part of which is
included within the Term and a part of which is included in a period of time
before the Commencement Date or after the date fixed in Article 2 hereof for the
expiration of the Term (whether or not such Imposition shall be assessed,
levied, confirmed, imposed upon or in respect of or become a lien upon the
Premises, or shall become payable, during the Term) shall be apportioned between
Landlord and Tenant as of the Commencement Date or as of the date fixed for the
expiration of the Term, as the case may be, so that Tenant shall pay that
portion of such Imposition which that part of such fiscal period included in the
period of time after the Commencement Date or before such date fixed in Article
2 for the expiration of the Term bears to such fiscal period, and Landlord shall
pay the remainder thereof. Other than in respect of Impositions relating, in
part, to a period of time before the Commencement Date, no such apportionment of
Impositions shall be made if this Lease is terminated prior to the Expiration
Date as the result of an Event of Default.
Section 4.05. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any Imposition by appropriate proceedings
diligently conducted in good faith, in which event, notwithstanding the
provisions of Section 4.01 hereof, payment of such Imposition shall be postponed
if, and only as long as:
(a) neither the Premises nor any part thereof, or interest therein
or any income therefrom (except to the extent covered by security deposited in
accordance with this Section 4.05) or any other assets of or funds appropriated
to Landlord would by reason of such postponement or deferment, be, in the
reasonable judgment of Landlord, in
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imminent danger of being forfeited or lost or subject to any lien, encumbrance
or charge, and neither Landlord nor Tenant would by reason thereof be subject to
any civil or criminal liability; and
(b) With respect to any Imposition in excess of $1,000,000 (as such
amount shall be increased as provided in Section 7.02(a)), Tenant shall have
deposited with Depository, cash or other security satisfactory to Landlord in an
amount equal to the amount by which (i) the amount so contested and unpaid,
together with all interest and penalties in connection therewith and all charges
that may or might be assessed against or become a charge on the Premises or any
part thereof in such proceedings exceeds (ii) $1,000,000 (as such amount shall
be increased as provided in Section 7.02(a)).
Upon the termination of such proceedings, it shall be the obligation
of Tenant to pay the amount of such Imposition or part thereof as finally
determined in such proceedings, the payment of which may have been deferred
during the prosecution of such proceedings, together with any costs, fees
(including attorneys' fees and disbursements), interest, penalties or other
liabilities in connection therewith, and upon such payment, Depository shall
return, with interest, if any, any amount deposited with it as aforesaid,
provided, however, that Depository at Tenant's request or upon Tenant's failure
to do so in a timely manner, at Landlord's request, shall disburse said moneys
on deposit with it directly to the Governmental Authority to whom such
Imposition is payable and any remaining monies, with interest, if any, shall be
returned promptly to Tenant. If, at any time during the continuance of such
proceedings, Landlord shall, in its reasonable opinion, deem insufficient the
amount deposited as aforesaid, Tenant, within fifteen (15) days after demand,
shall make an additional deposit of such additional sums or other acceptable
security as Landlord may request, and upon failure of Tenant to do so, the
amount theretofore deposited may be applied at the request of Landlord to the
payment, removal and discharge of such Imposition and the interest and penalties
in connection therewith and any costs, fees (including attorneys' fees and
disbursements) or other liability accruing in any such proceedings, and the
balance, if any, with any interest earned thereon, shall be returned to Tenant
or the deficiency, if any, shall be paid by Tenant to Landlord within ten (10)
days after demand.
Section 4.06. Tenant shall have the right to seek a reduction in the
valuation of the Premises assessed for Taxes and to prosecute any action or
proceeding in connection therewith, provided that no such action or proceeding
shall postpone Tenant's obligation to pay any Imposition except in accordance
with the provisions of Section 4.05 hereof. Except to the extent provided in
Section 3.03 hereof, no such action or proceeding shall affect Tenants
obligation to pay any installment of PILOT.
Section 4.07. Landlord shall not be required to join in any
proceedings referred to in Sections 4.05 or 4.06 hereof unless the provisions of
any law, rule or regulation at the time in effect shall require that Landlord
join in such proceedings or that such proceedings be brought by or in the name
of Landlord, in which event, Landlord shall join and cooperate in such
proceedings or permit the same to be brought in its name but
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shall not be liable for the payment of any costs or expenses in connection with
any such proceedings and Tenant shall reimburse Landlord for any and all costs
or expenses which Landlord may reasonably sustain or incur in connection with
any such proceedings, including reasonable attorneys' fees and disbursements. If
the provisions of such law, rule or regulation at the time in effect shall
require that Master Landlord join in such proceedings or that such proceedings
be brought by or in the name of Master Landlord, Landlord shall use reasonable
efforts to cause Master Landlord to join and cooperate in such proceedings or
permit the same to be brought in the name of Master Landlord, provided that
Master Landlord shall not be liable for the payment of any costs or expenses in
connection with any such proceedings and Tenant shall reimburse Master Landlord
for any and all costs and expenses which Master Landlord may reasonably sustain
or incur in connection with any such proceedings, including reasonable
attorneys' fees and disbursements. In the event Tenant shall institute a
proceeding referred to in Sections 4.05 or 4.06 hereof and no law, rule or
regulation in effect at the time requires that Landlord join in such proceedings
or that such proceeding be brought by and/or in the name of Landlord, Landlord,
nevertheless, shall, at Tenant's cost and subject to the reimbursement
provisions hereinabove set forth, cooperate with Tenant in such proceeding.
Section 4.08. Any certificate, advice or bill of the appropriate
official designated by law to make or issue the same or to receive payment of
any Imposition asserting non-payment of such Imposition shall be prima facie
evidence that such Imposition is due and unpaid at the time of the making or
issuance of such certificate, advice or bill, at the time or date stated
therein.
ARTICLE 5
DEPOSITS FOR IMPOSITIONS
Section 5.01.
(a) In order to assure the payment of all Impositions, Tenant, upon
the demand of Landlord at any time after the occurrence of an Event of Default
hereunder, shall deposit with Depository on the first day of each month during
the Term, an amount equal to one-twelfth (1/12th) of the annual Impositions then
in effect.
(b) If at any time the monies so deposited by Tenant shall be
insufficient to pay the next installment of Impositions then due, Tenant shall
after demand therefor by Landlord deposit the amount of the insufficiency with
Depository to enable Depository to pay the next installment of Impositions at
least thirty (30) days prior to the Due Date thereof.
(c) Depository shall hold the deposited monies in a segregated,
interest-bearing special account for the purpose of paying the charges for which
such amounts have been deposited as they become due, and Depository shall apply
the deposited monies for such purpose nor later than the Due Date for such
charges.
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(d) If at any time the amount of any Imposition is increased or
Landlord receives information from the entity or entities imposing such
Imposition that an Imposition will be increased, and if the monthly deposits
then being made by Tenant under this Section 5.01 would be insufficient to pay
such Imposition thirty (30) days prior to the Due Date thereof, then upon notice
from Landlord to Tenant of such fact, the monthly deposits shall thereupon be
increased and Tenant shall deposit immediately with Depository sufficient monies
for the payment of the increased Imposition. Thereafter, the monthly payments
shall be adjusted so that Depository shall receive from Tenant sufficient monies
to pay each Imposition at least thirty (30) days prior to the Due Date of such
Imposition.
(e) For the purpose of determining whether Depository has on hand
sufficient monies to pay any particular Imposition at least thirty (30) days
prior to the Due Date thereof, deposits for each category of Imposition shall be
treated separately. Depository shall not be obligated to use monies deposited
for the payment of an Imposition not yet due and payable for the payment of an
Imposition that is due and payable.
(f) Notwithstanding the foregoing, (i) deposited monies may be held
by Depository in a single bank account, provided such account is segregated and
interest-bearing and (ii) Depository shall, at Landlord's option and direction
and if Tenant shall fail to make any payment or perform any obligation required
under this Lease, use any monies deposited pursuant to Articles 4 or 5 for the
payment of any Rental.
(g) If this Lease shall be terminated by reason of any Event of
Default or if dispossession occurs pursuant to Section 24.03(b), all deposited
monies under this Article 5 then held by Depository shall be paid to and applied
by Landlord in payment of any and all sums due under this Lease and Tenant shall
promptly pay the resulting deficiency. All monies deposited under this Article
5, together with interest earned thereon, if any, shall be paid to Tenant
promptly after the Expiration Date or promptly after Tenant terminates this
Lease in accordance with the provisions of Section 2.03 or Article 43 hereof.
(h) Any interest paid on monies deposited pursuant to this Article 5
shall be applied against amounts thereafter becoming due and payable by Tenant
or returned to Tenant, as aforesaid.
(i) Anything in this Article 5 to the contrary notwithstanding, if
the Event of Default which gave rise to Landlord having demanded that Tenant
make deposits under this Section 5.01 shall have been cured by Tenant and for a
period of six (6) consecutive months following such cure no Default shall have
occurred under this Lease, then, at any time after the expiration of such six
(6) month period, promptly upon the demand of Tenant, provided that Tenant is
not then in Default under this Lease, all monies deposited under this Article 5
then held by Depository, with the interest, if any, accrued thereon, shall be
returned to Tenant and Tenant shall not be required to make further deposits
under this Article 5 unless and until there shall occur a subsequent Event of
Default and Landlord shall make demand upon Tenant to make deposits for
Impositions.
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(j) In the event that a Mortgagee (provided such Mortgagee be an
Institutional Lender) shall require Tenant to deposit funds to insure payment of
Impositions, any amount so deposited by Tenant with such Mortgagee shall be
credited against the amount, if any, which Tenant would otherwise be required to
deposit under this Article 5.
Section 5.02. If Landlord ceases to have any interest in the
Premises, and provided that the Person acquiring Landlord's interest in the
Premises agrees (in writing) to assume from and after the date of the transfer
all of Landlord's obligations with respect to the deposits made pursuant to
Section 5.01, Landlord promptly shall transfer to such Person all of Landlord's
rights with respect to such deposits. Upon such transfer and notice thereof to
Tenant, the transferor shall be released from all liability with respect
thereto, the transferee shall assume from and after the date of such transfer
all of Landlord's obligations with respect to such deposits and Tenant shall
look solely to the transferee with respect thereto. The provisions hereof shall
apply to each successive transfer of the deposits.
Section 5.03. Landlord shall have no liability to Tenant arising out
of, or related to, any acts or omissions of Depository.
ARTICLE 6
LATE CHARGES
In the event that any payment of Rental shall become overdue beyond
the due date thereof (or if no such date is set forth in this Lease, then such
due date for purposes of this Article 6 shall be deemed to be the date upon
which demand therefor is made), then, in addition to any costs and expenses
incurred by Landlord in connection therewith (including, without limitation,
reasonable attorneys' fees and disbursements) interest on the sums so overdue
equal to the Involuntary Rate, for the period from the due date to the date of
actual payment, shall become due and payable to Landlord as additional Rental to
be paid under this Lease. Said interest shall be payable by Tenant within ten
(10) days after demand. No failure by Landlord to insist upon the strict
performance by Tenant of its obligations to pay said interest shall constitute a
waiver by Landlord of its right to enforce the provisions of this Article 6 in
any instance thereafter occurring. The provisions of this Article 6 shall not be
construed in any way to extend the grace periods or notice periods provided for
in Article 24.
ARTICLE 7
INSURANCE
Section 7.01.
(a) Tenant shall, at all times after Substantial Completion of the
Building and thereafter throughout the Term:
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(i) keep or cause to be kept the Building insured under an
"All Risk of Physical Loss" form of policy, including, without
limitation, coverage for loss or damage by water, flood,
subsidence and earthquake (excluding, at Tenant's option, from
such coverage normal settling only) and, when and to the
extent obtainable from the United States government or any
agency thereof, war risks; such insurance to be written on an
"Agreed Amount" basis, with full replacement cost, with the
replacement value of the Building to be determined from time
to time, but not less frequently than required by the insurer
and in any event at least once every three (3) years, it being
agreed that no omission on the part of Landlord to request any
such determination shall relieve Tenant of its obligation to
determine the replacement value thereof (in the absence of
such valuation, the FM (Factory Mutual) or IRI (Industrial
Risk Insurers) Indices will be applied);
(ii) provide and keep in force commercial general liability
insurance against liability for bodily injury, death and
property damage, it being agreed that such insurance shall (A)
be in an amount as may from time to time be reasonably
required by Landlord, but not less then Twenty-Five Million
Dollars ($25,000,000) combined single limit inclusive of
primary, umbrella and following form excess policies for
liability for bodily injury, death and property damage, (B)
include the Premises and all streets, alleys and sidewalks
adjoining or appurtenant to the Premises, (C) provide blanket
automatic contractual insurance covering the indemnification
provisions assumed by Tenant hereunder, including bodily
injury to employees or others assumed by Tenant under
contract, which insurance shall cover all costs, expenses
and/or liability (including, without limitation, attorneys'
fees and disbursements) arising out of or based upon any and
all claims, accidents, injuries and damages mentioned in
Article 19 and required to be insured against hereunder, and
(D) include the following protection:
(1) Broad form liability endorsement, including (a) blanket
contractual liability, (b) personal injury and
advertising injury liability, (c) premises medical
payments, (d) host liquor liability, (e) fire legal
liability on real property, (f) broad form property
damage liability, including completed operations, (g)
incidental medical malpractice, (h) non-owned watercraft
liability, (i) limited world-wide coverage, (j)
additional interests insured, (k) extended bodily injury
coverage, and (l) automatic coverage on newly-acquired
organizations;
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(2) Products and completed operations;
(3) Independent contractors;
(4) Blanket automatic contractual liability to include
bodily injury to employees of others assumed by Tenant;
and
(5) Water damage legal liability shall not be excluded.
(iii) provide and keep in force workers' compensation insurance
providing statutory New York State benefits for all persons
employed by Tenant at or in connection with the Premises and
employer's liability insurance in an amount not less than that
required by New York State law;
(iv) provide and keep in force on an "Agreed Amount" basis
rent insurance on an "All Risk of Physical Loss" basis in an
amount not less than one (1) year's current Base Rent, PILOT,
and Civic Facilities Payment ("Rent Insurance");
(v) if a sprinkler system shall be located in any portion of
the Building, provide and keep in force sprinkler leakage
insurance in amounts approved by Landlord, which approval
shall not be unreasonably withheld (the foregoing to be
required only if same is excluded from the insurance required
to be provided and kept in force pursuant to Section
7.01(a)(i));
(vi) provide and keep in force boiler and machinery insurance
in an amount as may from time to time be reasonably determined
by Landlord but not less than Ten Million Dollars
($10,000,000) per accident on a combined basis covering direct
property loss and loss of income and covering all steam,
mechanical and electrical equipment, including without
limitation, all boilers, unfired pressure vessels, air
conditioning equipment, elevators, piping and wiring;
(vii) provide and keep in force automobile liability insurance for
all owned, non-owned, leased, rented and/or hired vehicles
insuring against liability for bodily injury and death and for
property damage in an amount as may from time to time be
reasonably determined by Landlord but not less than Five
Million Dollars ($5,000,000) combined single limit; and
(viii) provide and keep in force such other insurance in such
amounts as may from time to time be reasonably required by
Landlord against
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such other insurable hazards as at the time are commonly
insured against by prudent owners of like buildings and
improvements.
(b) All insurance provided by Tenant as required by Section 7.01(a)
(except the insurance under Section 7.01(A)(iii)) shall name Tenant as named
insured and Landlord, Master Landlord, the City and UDC as additional insureds
to the extent, where applicable, of their respective insurable interests in the
Premises and shall be primary with respect to any other coverage which Landlord
and Master Landlord may obtain. (Landlord and Master Landlord's coverage shall
be in excess of any coverage provided in favor of Landlord or Master Landlord by
Tenant.) The coverage provided by Tenant as required by Sections 7.01(a)(i),
(ii), (v), (vi) and (vii) also shall name each Mortgagee as an insured under a
standard mortgagee clause, provided, however, any loss payable thereunder shall
be payable as provided in this Lease.
(c) Whenever Tenant shall be required to carry insurance under this
Section 7.0, Tenant shall not be required to carry insurance in any greater
amounts or against any additional hazards than at the time are commonly carried
by prudent owners of like buildings and improvements, provided that the types or
amounts of such coverage shall never be different from or less than, as the case
may be, the types or amounts specifically required hereunder unless such types
or amounts are no longer available. Any dispute as to the amounts of additional
insurance to be carried, or the additional kinds of hazards to be insured
against, shall be resolved by arbitration pursuant to Article 36.
Section 7.02.
(a) The loss under all policies required by any provision of this
Lease insuring against damage to the Building by fire or other casualty shall be
payable to Depository, except that amounts of less than One Million Dollars
($1,000,000) shall be payable in trust directly to Tenant for application to the
cost of Restoration in accordance with Article 8 hereof. Such amount shall be
adjusted on the fifth (5th) anniversary of the Commencement Date and on each
fifth (5th) anniversary of the date on which an adjustment is made pursuant to
this Section 7.02(a) by adding to $1,000,000 an amount equal to the product of
(x) $1,000,000 and (y) the percent of increase, if any, in the Consumer Price
Index for the month in which the applicable anniversary date occurs over the
Consumer Price Index for the month in which the Commencement Date occurs. Any
dispute as to the calculation of such adjustment shall be determined by
arbitration pursuant to Article 36. Rent Insurance shall be carried in favor of
Landlord, but the proceeds thereof to the extent required hereunder shall be
paid to Depository and shall be applied to the Rental payable by Tenant under
this Lease until completion of such Restoration by Tenant. All insurance
required by any provision of this Lease shall be in such form and shall be
issued by such responsible companies authorized to do business in the State of
New York as are reasonably acceptable to Landlord. All policies referred to in
this Lease shall be procured, or caused to be procured, by Tenant at no expense
to Landlord. Subject to Section 7.04 hereof, duplicate originals of such
policies or certificates of insurance with respect to such policies together
with copies of such policies shall be delivered to Landlord promptly upon
receipt
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from the insurance company or companies, together with proof satisfactory to
Landlord that the then current installment of the premiums thereon have been
paid, provided, that Landlord shall not, by reason of custody of such policies,
be deemed to have knowledge of the contents thereof. New or renewal policies
replacing any policies expiring during the Term or duplicate originals thereof
or certificates of insurance with respect thereto together with copies of such
policies, shall be delivered as aforesaid at least thirty (30) days before the
date of expiration, together with proof satisfactory to Landlord that the then
current installment of the premiums thereon have been paid. Premiums on policies
shall not be financed in any manner whereby the lender, on default or otherwise,
shall have the right or privilege of surrendering or canceling the policies or
reducing the amount of loss payable thereunder, provided, however, that premiums
may be paid in installments.
(b) Tenant and Landlord shall cooperate in connection with the
collection of any insurance moneys that may be due in the event of loss, and
Tenant and Landlord shall execute and deliver such proofs of loss and other
instruments as may be required for the purpose of obtaining the recovery of any
such insurance moneys. Tenant shall promptly reimburse Landlord for any and all
reasonable costs or expenses which Landlord may sustain or incur in connection
therewith, including, without limitation, reasonable attorneys' fees and
disbursements.
(c) Tenant shall not carry separate insurance (other than personal
injury liability insurance) concurrent in form or contributing in the event of
loss with that required by this Lease to be furnished by Tenant, unless Landlord
and Master Landlord are included therein as named insureds and each Mortgagee as
an additional insured with loss payable as provided in this Lease. Tenant
promptly shall notify Landlord of the carrying of any such separate insurance
and shall cause the policies therefor or duplicate originals thereof or
certificates of insurance with respect thereto together with copies of such
policies to be delivered as required in this Lease.
(d) All property insurance policies as required by this Lease shall
provide in substance that all adjustments for claims with the insurers in excess
of One Million Dollars ($1,000,000) (as such amount shall be increased as
provided in Section 7.02(a)) shall be made with Landlord, Tenant and any
Mortgagee named as additional insured. Any adjustments for claims with the
insurers involving sums of less than One Million Dollars ($1,000,000) (as such
amount shall be increased as provided in Section 7.02(a)) shall be made with
Tenant.
(e) All Rent Insurance shall provide in substance that all
adjustments for claims with the insurers shall be made with Landlord and Tenant.
(f) Tenant shall not violate or permit to be violated any of the
conditions or provisions of any insurance policy required hereunder, and Tenant
shall so perform and satisfy or cause to be performed and satisfied the
requirements of the companies writing such policies so that at all times
companies of good standing, reasonably satisfactory to Landlord, shall be
willing to write and continue such insurance.
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(g) Each policy of insurance required to be obtained by Tenant as
herein provided shall contain to the extent obtainable and whether or not an
additional premium shall be required in connection therewith (i) a provision
that no act or omission or negligence of Tenant or any other named insured or
violation of warranties, declarations or conditions by Tenant or any other named
insured shall affect or limit the obligation of the insurance company to pay the
amount of any loss sustained, (ii) an agreement by the insurer that such policy
shall not be cancelled or modified without at least thirty (30) days prior
written notice to Landlord and each Mortgagee, (iii) an agreement that the
coverage afforded by the insurance policy shall not be affected by the
performance of any work in or about the Building or the occupation or use of the
Premises by Tenant or any Subtenant for purposes more hazardous than those
permitted by the terms of such policy, (iv) a waiver by the insurer of any claim
for insurance premiums against Landlord or any named insured other than Tenant,
and (v) a waiver of subrogation by the insurers of any right to recover the
amount of any loss resulting from the negligence of Tenant, Landlord, their
agents, employees or licensees.
(h) All liability insurance required to be provided and kept in
force by Tenant under this Lease shall be written on an "Occurrence" basis,
provided, however, that if (i) a basis other than such "Occurrence" basis shall
be adapted throughout the insurance industry and (ii) such other basis shall be
accepted by most prudent owners of like buildings and improvements, then Tenant
may provide and keep in force liability insurance written on such other basis
reasonably satisfactory to Landlord.
Section 7.03.
(a) Tenant, on the demand of Landlord after the occurrence of an
Event of Default hereunder, shall deposit with Depository on the first day of
each month during the Term, an amount equal to one-twelfth (1/12th) of the
annual insurance premiums to be paid in respect of any insurance required to be
carried by Tenant hereunder, as reasonably estimated by Landlord, unless such
insurance premiums are deposited with a Mortgagee (provided such Mortgagee is an
Institutional Lender). If at any time the insurance premiums shall be increased
or Landlord receives information that the insurance premiums will be increased,
with the result that the monthly deposits being paid by Tenant under this
Section 7.03(a) would be insufficient to pay such insurance premiums thirty (30)
days prior to the due date, the monthly deposits shall thereupon be increased
and Tenant shall, within thirty (30) days prior to the due date thereof, deposit
immediately with Depository sufficient monies for the payment of the increased
insurance premiums. Thereafter, the monthly deposits shall be adjusted so that
Depository shall receive from Tenant sufficient monies to pay the insurance
premiums at least thirty (30) days before the insurance premiums become due and
payable.
(b) Anything in Section 7.03(a) to the contrary notwithstanding, if
the Event of Default which gave rise to Landlord having demanded that Tenant
make deposits under Section 7.03(a) shall have been cured by Tenant and if for a
period of six (6) consecutive months following such cure no Default shall have
occurred under this Lease, then, at any
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time after the expiration of such six (6) month period, promptly upon the demand
of Tenant, provided that Tenant is not then in Default under this Lease, all
monies deposited under Section 7.03(a) then held by Depository, together with
the interest, if any, accrued thereon, promptly shall be returned to Tenant and
Tenant shall not be required to make further deposits under Section 7.03(a)
unless and until there shall occur a subsequent Event of Default and Landlord
shall make demand upon Tenant to make deposits under Section 7.03(a).
(c) All monies deposited under this Section 7.03, together with
interest earned thereon, if any, shall be paid to Tenant promptly after the
Expiration Date or promptly after Tenant terminates this Lease in accordance
with the provisions of Section 2.03 or Article 43 hereof.
(d) Depository shall hold the monies deposited hereunder in a
segregated, interest-bearing account (the purpose of which is to pay the charges
for which such amounts have been deposited as they become due), and Depository
shall apply the deposited monies for such purpose not later than the Due Date
for such charges.
Section 7.04. The insurance required by this Lease, at the option of
Tenant, may be effected by blanket or umbrella policies issued to Tenant
covering the Premises and other properties owned or leased by Tenant, provided
that the policies otherwise comply with the provisions of this Lease and
specifically allocate to the Premises the coverages required hereby, without
possibility of reduction or coinsurance by reason of any other premises named
therein, and if the insurance required by this Lease shall be effected by any
such blanket or umbrella policies, Tenant shall furnish to Landlord and to each
Mortgagee certified copies or duplicate originals of such policies in place of
the originals, with schedules thereto attached showing the amount of insurance
afforded by such policies applicable to the Premises, and in addition, within
thirty (30) days after the filing thereof with any insurance ratemaking body,
copies of the schedule of all improvements affected by any such blanket or
umbrella policy of insurance.
ARTICLE 8
USE OF INSURANCE PROCEEDS
Section 8.01. If all or any part of the Building shall be destroyed
or damaged in whole or in part by fire or other casualty (including any casualty
for which insurance was not obtained or obtainable) of any kind or nature,
ordinary or extraordinary, foreseen or unforeseen, Tenant shall give to Landlord
immediate notice thereof, except that no notice shall be required if the
estimated cost of repairs, alterations, restorations, replacements and
rebuilding (collectively, "Restoration") shall be less than $250,000 (as such
amount shall be increased as provided in Section 7.02(a)), and Tenant shall,
whether or not such damage or destruction shall have been insured, and whether
or not insurance proceeds, if any, shall be sufficient for the purpose of such
Restoration, with reasonable diligence (subject to Unavoidable Delays) repair,
alter, restore, replace and rebuild
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(collectively, "Restore") the same, at least to the extent of the value and as
nearly as possible to the condition, quality and class of the Building existing
immediately prior to such occurrence, with such changes or alterations as
Tenant, with the consent of Landlord, which consent shall not be unreasonably
withheld, shall elect to make, provided that, after the Restoration, the
Building is in substantial conformity with the Master Development Plan, the
Design Guidelines, the Declaration of Restrictions (if applicable) and, in the
event such Restoration is commenced within ten (10) years after the date the
Building has been Substantially Completed and, insofar as the Restoration
relates to the exterior of the Building, the Construction Documents. Landlord in
no event shall be obligated to Restore the Building or any portion thereof or to
pay any of the costs or expenses thereof. If Tenant shall fail or neglect to
Restore with reasonable diligence (subject to Unavoidable Delays) the Building
or the portion thereof so damaged or destroyed, or having so commenced such
Restoration, shall fail to complete the same with reasonable diligence (subject
to Unavoidable Delays) in accordance with the terms of this Lease, or if prior
to the completion of any such Restoration by Tenant, this Lease shall expire or
be terminated for any reason, Landlord may, but shall not be required to,
complete such Restoration at Tenant's expense. Each such Restoration shall be
done in accordance with the provisions of this Lease. In any case where this
Lease shall expire or be terminated prior to the completion of Restoration,
Tenant shall account to Landlord for all amounts spent in connection with any
Restoration which was undertaken and shall pay over to Landlord, within ten (10)
days after demand, the remainder, if any, of the Restoration Funds previously
received by it. Tenant's obligations under the next to last (penultimate)
sentence of this Section 8.01 shall survive the expiration or termination of
this Lease.
Section 8.02.
(a) Subject to the provisions of Sections 8.03, 8.04 and, if
applicable, 8.05, Depository shall pay over to Tenant from time to time, upon
the following terms, any monies which may be received by Depository from
insurance provided by Tenant (other than Rent Insurance) or cash or the proceeds
of any security deposited with Depository pursuant to Section 8.05
(collectively, the "Restoration Funds") provided, however, that Depository,
before paying such moneys over to Tenant, shall be entitled to reimburse itself
and Landlord therefrom to the extent, if any, of the necessary, reasonable and
proper expenses (including, without limitation, reasonable attorneys' fees) paid
or incurred by Depository and Landlord in the collection of such monies.
Depository shall pay to Tenant, as hereinafter provided, the Restoration Funds,
for the purpose of the Restoration.
(b) Prior to commencing any Restoration, Tenant shall furnish
Landlord with an estimate of the cost of such Restoration, prepared by a
licensed professional engineer or registered architect selected by Tenant and
approved by Landlord, which approval shall not be unreasonably withheld.
Landlord, at Tenant's expense, may engage a licensed professional engineer or
registered architect to prepare its own estimate of the cost of such
Restoration. If there is any dispute as to the estimated cost of the
Restoration, such dispute shall be resolved by arbitration in accordance with
the provisions of Article 36.
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(c) Subject to the provisions of Sections 8.03, 8.04 and, if
applicable, 8.05, the Restoration Funds shall be paid to Tenant in installments
as the Restoration progresses, less retainage equal to ten percent (10%) of such
installment until completion of fifty percent (50%) of the Restoration and five
percent (5%) of each installment thereafter until completion of the Restoration,
upon application to be submitted by Tenant to Depository and Landlord showing
the cost of labor and materials purchased and delivered to the Premises for
incorporation in the Restoration, or incorporated therein since the last
previous application, and due and payable or paid by Tenant. If any vendor's,
mechanic's, laborer's, or materialman's lien is filed against the Premises or
any part thereof, or if any public improvement lien relating to the Restoration
of the Premises is created or permitted to be created by Tenant and is filed
against Landlord, or any assets of, or funds appropriated to, Landlord, Tenant
shall not be entitled to receive any further installment until such lien is
satisfied or discharged (by bonding or otherwise). Notwithstanding the
foregoing, the existence of any such lien shall not preclude Tenant from
receiving any installment of Restoration Funds, provided such lien will be
discharged with funds from such installment or shall have been discharged (by
bonding or otherwise).
(d) Upon completion of and payment for the Restoration by Tenant,
the balance of the Restoration Fund shall be paid over to Tenant promptly.
(e) Notwithstanding the foregoing, if Landlord makes the Restoration
at Tenant's expense, as provided in Section 8.01, then Depository shall pay over
the Restoration Funds to Landlord, upon request, to the extent not previously
paid to Tenant pursuant to this Section 8.02, and Tenant shall pay to Landlord,
within ten (10) days after demand, any sums in excess of the portion of the
Restoration Funds received by Landlord necessary to complete the Restoration.
Upon completion of the Restoration, Landlord shall deliver to Tenant a
certificate, in reasonable detail, setting forth the expenditures made by
Landlord for such Restoration.
Section 8.03. The following shall be conditions precedent to each
payment made to Tenant as provided in Section 8.02 above:
(a) There shall be submitted to Depository and Landlord the
certificate of the aforesaid engineer or architect approved by Landlord pursuant
to Section 8.02(b) stating that (i) the sum then requested to be withdrawn
either has been paid by Tenant or is due and payable to contractors,
subcontractors, materialmen, engineers, architects or other Persons (whose names
and addresses shall be stated) who have rendered or furnished services or
materials for the work and giving a brief description of such services and
materials and the principal subdivisions or categories thereof and the several
amounts so paid or due to each of said Persons in respect thereof, and stating
in reasonable detail the progress of the work up to the date of said
certificate, (ii) no part of such expenditures has been or is being made the
basis, in any previous or then pending requisition, for the withdrawal of the
Restoration Funds or has been made out of the Restoration Funds previously
received by Tenant, and (iii) the engineer or architect believes that the
balance of the Restoration Funds held by
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Depository will be sufficient to pay for the completion of the Restoration in
full, and stating in reasonable detail an estimate of the cost of such
completion;
(b) there shall be furnished to Landlord an official search, or a
certificate of a title insurance company reasonably satisfactory to Landlord, or
other evidence reasonably satisfactory to Landlord, showing that there has not
been filed any vendor's, mechanic's, laborer's or materialman's statutory or
other similar lien affecting the Premises or any part thereof, or any public
improvement lien with respect to the Premises or the Restoration created or
permitted to be created by Tenant affecting Landlord, or the assets of, or funds
appropriated to, Landlord, which has not been discharged of record (by bonding
or otherwise) except such as will be discharged upon payment of the requisite
amount out of the sum then requested to be withdrawn; and
(c) at the time of making such payment, there is no Event of Default
on the part of Tenant.
Section 8.04.
(a) If any loss, damage or destruction occurs, the cost of
Restoration of which equals or exceeds One Million Dollars ($1,000,000) in the
aggregate, determined as provided in Section 8.02(b) (as such amount shall be
increased as provided in Section 7.02(a)), Tenant shall furnish to Landlord the
following:
(i) at least thirty (30) Business Days prior to commencement
of such Restoration, complete plans and specifications for the
Restoration, prepared by a licensed professional engineer or
registered architect selected by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld
(provided, however, if such Restoration does not relate to the
"core and shell" of the Building or affect any aspect of the
Design Guidelines, Landlord's approval shall not be withheld
provided such architect is not a Prohibited Person), together
with the approval thereof and any required permits issued by
any Governmental Authority with respect to the Restoration and
such plans and specifications, and, at the request of
Landlord, any other drawings, information or samples to which
Landlord is entitled under Article 11, all of the foregoing to
be subject to Landlord's review and approval for substantial
conformity with the Master Development Plan, the Design
Guidelines, the Declaration of Restrictions (if applicable),
such review and approval to be conducted by Landlord within
the time periods and otherwise in accordance with the
provisions of Article 11, and, if such Restoration is
commenced within ten (10) years from the date the Building
shall have been Substantially Completed, and insofar as it
relates to the exterior of the Building, the Construction
Documents;
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(ii) at least ten (10) Business Days prior to commencement of
such Restoration, (x) a contract or construction management
agreement reasonably satisfactory to Landlord in form
assignable to Landlord (subject to any prior assignment to any
Mortgagee), made with a reputable and responsible contractor
or construction manager approved by Landlord, which approval
shall not be unreasonably withheld, providing for the
completion of the Restoration in accordance with said plans
and specifications, free and clear of all liens, encumbrances,
security agreements, interests and financing statements
relating thereto, and (y) payment and performance bonds in
forms and by sureties satisfactory to Landlord, naming the
contractor as obligor and Landlord and Tenant and Mortgagee,
if applicable, as obligees, each in a penal sum equal to the
amount by which (A) the difference between the estimated cost
of the Restoration and the amount of the insurance proceeds
available for the Restoration exceeds (B) $1,000,000 (as such
amount shall be increased as provided in Section 7.02(a)) or,
in lieu thereof, such other security, but not more than the
amount of such excess, as shall be reasonably satisfactory to
Landlord;
(iii) at least ten (10) Business Days prior to commencement of such
Restoration, an assignment to Landlord (subject to any prior
assignment to any Mortgagee) of the contract so furnished and
the bonds, if any, provided thereunder, such assignment to be
duly executed and acknowledged by Tenant and by its terms to
be effective only upon any termination of this Lease or upon
Landlord's re-entry upon the Premises following an Event of
Default prior to the complete performance of such contract,
such assignment also to include the benefit of all payments
made on account of said contract including payments made prior
to the effective date of such assignment, and
(iv) At least ten (10) Business Days prior to commencement of
such Restoration, insurance policies issued by responsible
insurers, bearing notations evidencing the payment of premiums
or accompanied by other evidence satisfactory to Landlord of
such payments, for the insurance required by Section 11.03.
(b) Notwithstanding that the cost of Restoration is less than One
Million Dollars ($1,000,000) (as such amount shall be increased as provided in
Section 7.02(a)), such cost to be determined as provided in Section 8.02(b), to
the extent that any portion of the Restoration involves work on the exterior of
the Building or a change in the height, bulk or setback of the Building from the
height, bulk or setback existing immediately prior to the damage or destruction,
or in any other manner affects compliance with the Master Development Plan, the
Design Guidelines or the Declaration of Restrictions (if applicable),
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then Tenant shall furnish to Landlord at least thirty (30) Business Days prior
to commencement of the Restoration a complete set of plans and specifications
for the Restoration, involving such work or such change, prepared by a licensed
professional engineer or registered architect approved by Landlord, which
approval shall not be unreasonably withheld, and, at Landlord's request, such
other items designated in Section 8.04(a)(i), all of the foregoing to be subject
to Landlord's review and approval as provided therein.
(c) In the event Tenant shall desire to modify the plans and
specifications which Landlord theretofore has approved pursuant to Sections
8.04(a)(i) or 8.04(b) with respect to, or which will in any way affect, any
aspect of the exterior of the Building or the height, bulk or setback of the
Building or which will affect compliance with the Design Guidelines, the Master
Development Plan or the Declaration of Restrictions (if applicable), Tenant
shall submit the proposed modifications to Landlord. Tenant shall not be
required to submit to Landlord proposed modifications of the plans and
specifications which affect the interior of the Building. Landlord shall review
the proposed changes (other than changes to the interior of the Building) for
the sole purpose of determining whether or not they (i) conform to the Master
Development Plan, the Design Guidelines and the Declaration of Restrictions (if
applicable) and (ii) in Landlord's judgment reasonably exercised, provide for
design, finishes and materials which are comparable in quality to those provided
for in the approved plans and specifications, and shall approve such proposed
changes if they do so conform and so provide. If Landlord determines that the
proposed changes are not satisfactory in light of the above criteria, it shall
so advise Tenant, specifying in what respect the plans and specifications, as so
modified, do not conform to the Master Development Plan, the Design Guidelines
or the Declaration of Restrictions (if applicable) or do not provide for design,
finishes and materials which are comparable in quality to those provided for in
the approved plans and specifications. Within twenty (20) Business Days after
Landlord shall have so notified Tenant, Tenant shall revise the plans and
specifications so as to meet Landlord's objections and shall deliver same to
Landlord for review. Each initial review by Landlord shall be carried out within
fifteen (15) Business Days of the date of delivery of the initial plans and
specifications by Tenant, and each additional review by Landlord shall be
carried out within ten (10) Business Days of the date of delivery of Tenant's
revisions thereto, and if Landlord shall not have notified Tenant of its
determination within such fifteen (15) or ten (10) Business Day period, as the
case may be, it shall be deemed to have determined that the proposed changes are
satisfactory. Landlord shall not review portions of the approved plans and
specifications which Landlord has previously determined to be satisfactory,
provided same have not been changed by Tenant.
Section 8.05. If the cost of any Restoration, determined as provided
in Section 8.02(b), exceeds both (i) One Million Dollars ($1,000,000) (as such
amount shall be increased as provided in Section 7.02(a)) and (ii) the net
insurance proceeds, then, prior to the commencement of such Restoration, unless
Landlord has given its approval of the payment and performance bonds provided
for in Section 8.04(a)(ii)(y) and the amounts thereof cover such excess, Tenant
shall deposit with Depository, as security for completion
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of the Restoration, a bond, cash or other security satisfactory to Landlord in
the amount by which (A) such excess exceeds (B) $1,000,000 (as such amount shall
be increased as provided in Section 7.02(a)), to be held and applied by
Depository in accordance with the provisions of Section 8.02.
Section 8.06. This Lease shall not terminate or be forfeited or be
affected in any manner, and there shall be no reduction or abatement of the
Rental payable hereunder, by reason of damage to or total, substantial or
partial destruction of the Building or any part thereof or by reason of the
untenantability of the same or any part thereof, for or due to any reason or
cause whatsoever, and Tenant, notwithstanding any law or statute present or
future, waives any and all rights to quit or surrender the Premises or any part
thereof. Tenant expressly agrees that its obligations hereunder, including,
without limitation, the payment of Rental, shall continue as though the Building
had not been damaged or destroyed and without abatement, suspension, diminution
or reduction of any kind. It is the intention of Landlord and Tenant that the
foregoing is an "express agreement to the contrary" as provided in Section 227
of the Real Property Law of the State of New York.
Section 8.07. If for any completed Restoration Tenant has not
theretofore delivered same to Landlord, Tenant shall deliver to Landlord, within
thirty (30) days of the completion of such Restoration, a complete set of "as
built" plans thereof together with a statement in writing from a registered
architect or licensed professional engineer that such plans are complete and
correct.
ARTICLE 9
CONDEMNATION
Section 9.01.
(a) If the whole or substantially all of the Premises shall be taken
(excluding a taking of the fee interest in the Premises, or any leasehold
interest superior to that of the Tenant's, if after such taking, Tenant's rights
and obligations under this Lease are not affected) for any public or
quasi-public purpose by any lawful power or authority by the exercise of the
right of condemnation or eminent domain or by agreement among Landlord, Tenant
and those authorized to exercise such right, this Lease and the Term shall
terminate and expire on the date of such taking and the Rental payable by Tenant
hereunder shall be equitably apportioned as of the date of such taking. Landlord
shall return the security deposit or Letter of Credit to Tenant promptly, and
this Lease, the Occupancy Agreement, the Funding Agreement and any and all
obligations and liabilities of Tenant under any of the foregoing shall terminate
and expire as of the date of such taking.
(b) The term "substantially all of the Premises" shall mean such
portion of the Premises as when so taken would leave remaining a balance of the
Premises which, due either to the area so taken or the location of the part so
taken in relation to the part not so taken, would not under economic conditions,
applicable zoning laws, building
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regulations then existing or prevailing or the Master Development Plan,
Occupancy Agreement, Severance Tenants Agreement or Declaration of Restrictions
and after performance by Tenant of all covenants, agreements, terms and
provisions contained herein or by law required to be observed or performed by
Tenant, permit the Restoration of the Building so as to constitute a complete
building or buildings capable of achieving the NYMEX Use. If there be any
dispute as to whether or not "substantially all of the Premises" has been taken,
such dispute shall be resolved by arbitration in accordance with the provisions
of Article 36.
(c) If the whole or substantially all of the Premises shall be taken
or condemned as provided in Section 9.01(a), the award, awards or damages in
respect thereof shall be apportioned as follows: (i) there shall first be paid
to Landlord so much of the award which is for or attributable to the value of
(A) the Land so taken, considered as unencumbered by this Lease and the Master
Lease and as unimproved except for Landlord's Civic Facilities and other site
improvements made by Landlord, and (B) Landlord's Civic Facilities taken in any
proceeding with respect to such taking; (ii) there shall next be paid to the
Mortgagee which holds a first lien on Tenant's interest in this Lease, so much
of the balance of such award as shall equal the unpaid principal indebtedness
secured by such Mortgage with interest thereon at the rate specified therein to
the date of payment (provided the amount of the Mortgage did not exceed the
amount by which the cost of the Project (including all costs of borrowing,
reserve funds and capitalized interest not to exceed three (3) years) exceeded
the amounts paid to Tenant under the Funding Agreement; (iii) if such taking
shall be by the United States of America or any instrumentality thereof, the
amount funded by EDC under the Funding Agreement shall be amortized over fifteen
(15) years from the date of the last advance by EDC under the Funding Agreement
and there shall next be paid to Landlord, for payment by Landlord under the
Project Agreement to UDC and EDC, respectively, the unamortized portion thereof
unless Tenant shall have elected to remain in New York City, in which event,
such portion of the award shall be paid to Tenant; (iv) there shall next be paid
to Landlord so much of the award which is for or attributable to the value of
Landlord's reversionary interest in that part of the Building taken in such
proceeding (it being agreed between Landlord and Tenant that, notwithstanding
anything herein contained to the contrary, for a period of forty (40) years from
the Scheduled Completion Date, the value of Landlord's reversionary interest in
the Building shall be deemed to be zero); and (v) subject to rights of any
Mortgagees, Tenant shall receive the balance, if any, of the award. If there be
any dispute as to which portion of the award is attributable to the Land and
Landlord's Civic Facilities and which portion is attributable to the Building,
or as to the value of Landlord's reversionary interest in the Building, such
dispute shall be resolved by arbitration in accordance with the provisions of
Article 36.
(d) Each of the parties shall execute any and all documents that may
be reasonably required in order to facilitate collection by them of such awards.
Section 9.02. For purposes of this Article 9, the "date of taking"
shall be deemed to be the earlier of (i) the date on which actual possession of
the whole or
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substantially all of the Premises, or a part thereof, as the case may be, is
acquired by any lawful power or authority pursuant to the provisions of the
applicable federal or New York State law or (ii) the date on which title to the
Premises or the aforesaid portion thereof shall have vested in any lawful power
or authority pursuant to the provisions of the applicable federal or New York
State law.
Section 9.03. If less than substantially all of the Premises shall
be so taken, this Lease and the Term shall continue as to the portion of the
Premises remaining without abatement of the Base Rent or diminution of any of
Tenant's obligations hereunder. Tenant, whether or not the award or awards, if
any, shall be sufficient for the purpose shall (subject to Unavoidable Delays)
proceed diligently to Restore any remaining part of the Building not so taken so
that the latter shall be a complete, operable, self-contained architectural unit
in good condition and repair in conformity with the Master Development Plan, the
Design Guidelines, the Declaration of Restrictions (if applicable) and, to the
extent reasonably practicable, in the event such Restoration is commenced within
ten (10) years from the date the Building is Substantially Completed, the
Construction Documents. In the event of any taking pursuant to this Section
9.03, the entire award for or attributable to the Land taken, considered as
unimproved and unencumbered by this Lease and the Master Lease and the fair
market value of Landlord's Civic Facilities in any proceeding with respect to
such taking, shall be first paid to Landlord, and the balance of the award, if
any, shall be paid to Depository, except that if such balance shall be less than
One Million Dollars ($1,000,000) (as such amount shall be increased as provided
in Section 7.02(a)), such balance shall be payable, in trust, to Tenant
(provided that if the Master Lease requires payment in trust to Landlord or a
Mortgagee, such balance shall be paid as provided therein) for application to
the cost of Restoration of the part of the Building not so taken. Subject to the
provisions and limitations in this Article 9, Depository shall make available to
Tenant as much of that portion of the award actually received and held by
Depository, if any, less all necessary and proper expenses paid or incurred by
Depository, the Mortgagee most senior in lien and Landlord in the condemnation
proceedings, as may be necessary to pay the cost of Restoration of the part of
the Building remaining. Such Restoration shall be done in accordance with and
subject to the provisions of Article 8. Payments to Tenant as aforesaid shall be
disbursed in the manner and subject to the conditions set forth in Article 8.
Any balance of the award held by Depository and any cash and the proceeds of any
security deposited with Depository pursuant to Section 9.04 remaining after
completion of the Restoration shall be paid to Tenant. Each of the parties shall
execute any and all documents that may be reasonably required in order to
facilitate collection by them of such awards.
Section 9.04. With respect to any Restoration required by the terms
of Section 9.03, the cost of which, as determined in the manner set forth in
Section 8.02(b), exceeds both (i) One Million Dollars ($1,000,000) (as such
amount shall be increased as provided in Section 7.02(a)) and (ii) the balance
of the condemnation award after payment of the expenses set forth in Section
9.03, then, prior to the commencement of such Restoration, Tenant shall deposit
with Depository a bond, cash or other security satisfactory to Landlord in the
amount by which (A) such excess exceeds (B) $1,000,000 (as such
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amount shall be increased as provided in Section 7.02(a)), to be held and
applied by Depository in accordance with the provisions of Section 9.03, as
security for the completion of the Restoration.
Section 9.05. If the temporary use of the whole or any part of the
Premises shall be taken for any public or quasi-public purpose by any lawful
power or authority by the exercise of the right of condemnation or eminent
domain or by agreement between Tenant and those authorized to exercise such
right, Tenant shall give prompt notice thereof to Landlord and the Term shall
not be reduced or affected in any way and Tenant shall continue to pay in full
the Rental payable by Tenant hereunder without reduction or abatement, and
Tenant shall be entitled to receive for itself any award or payments for such
use, provided, however, that:
(a) If the taking is for a period not extending beyond the Term and
if such award or payment is made less frequently than in monthly installments,
the same shall be paid to and held by Depository as a fund which Depository
shall apply from time to time to the payment of Rental, except that, if such
taking results in changes or alterations in the Building which would necessitate
an expenditure to Restore the Building to its former condition, then, a portion
of such award or payment considered by Landlord, in its reasonable opinion, as
appropriate to cover the expenses of the Restoration shall be retained by
Depository, without application as aforesaid, and applied and paid over toward
the Restoration of the Building to its former condition, substantially in the
same manner and subject to the same conditions as provided in Section 9.03; and
any portion of such award or payment which shall not be required pursuant to
this Section 9.05(a) to be applied to the Restoration of the Building or to the
payment of Rental until the end of the Term (or, if the taking is for a period
terminating prior to the end of the Term, until the end of such period) shall be
paid to Tenant; or
(b) If the taking is for a period extending beyond the Term, such
award or payment shall be apportioned between Landlord and Tenant as of the
Expiration Date, and Landlord's and Tenant's share thereof, if paid less
frequently than in monthly installments, shall be paid to Depository and applied
in accordance with the provisions of Section 9.05(a), provided, however, that
the amount of any award or payment allowed or retained for the Restoration of
the Building and not previously applied for such purpose shall remain the
property of Landlord if this Lease shall expire prior to such Restoration.
Section 9.06. In case of any governmental action, not resulting in
the taking or condemnation of any portion of the Premises but creating a right
to compensation therefor, such as the changing of the grade of any street upon
which the Premises abut, this Lease shall continue in full force and effect
without reduction or abatement of Rental and the award shall be paid to Landlord
to the extent of the amount, if any, necessary to restore any portion of
Landlord's Civic Facilities to their former condition and any balance remaining
shall be paid to Tenant.
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Section 9.07. In the event of a negotiated sale of all or a portion
of the Premises in lieu of condemnation, the proceeds shall be distributed as
provided in cases of condemnation.
Section 9.08. Landlord, Tenant and any Mortgagee shall be entitled
to file a claim and otherwise participate in any condemnation or similar
proceeding and all hearings, trials and appeals in respect thereof.
Section 9.09. Notwithstanding anything to the contrary contained in
this Article 9, in the event of any permanent or temporary taking of all or any
part of the Premises, Tenant and its Subtenants shall have the exclusive right
to assert claims for any Equipment, trade fixtures and personal property so
taken which were the property of Tenant or its Affiliates or Subtenants (but not
including any Fixtures) and for relocation expenses of Tenant or its Affiliates
or Subtenants, and all awards and damages in respect thereof shall belong to
Tenant, its Affiliates and its Subtenants, and Landlord hereby waives any and
all claims to any part thereof; provided, however, that if there shall be no
separate award or allocation for such Equipment, trade fixtures or personal
property, then such claims of Tenant, its Affiliates and its Subtenants, or
awards and damages, shall be subject and subordinate to Landlord's claims under
this Article 9.
ARTICLE 10
ASSIGNMENT, SUBLETTING, MORTGAGES, ETC.
Section 10.01.
(a) Except as otherwise specifically provided in this Article 10,
prior to the Lease Restrictions Expiration Date, neither this Lease nor any
interest of Tenant in this Lease, shall be sold, assigned, or otherwise
transferred, whether by operation of law or otherwise, nor shall any of the
issued or outstanding capital stock of any corporation which, directly or
indirectly, is Tenant be (voluntarily or involuntarily) sold, assigned,
transferred, pledged or encumbered, whether by operation of law or otherwise, if
such sale, assignment, transfer, pledge or encumbrance will result in a change
of the controlling stock ownership of Tenant as held by the shareholders thereof
as of the Commencement Date, nor shall any voting trust or similar agreement be
entered into with respect to such stock, nor any reclassification or
modification of the terms of such stock take place, nor shall there be any
merger or consolidation of such corporation into or with another corporation nor
shall additional stock (or any warrants, options or debt securities convertible,
directly or indirectly, into such stock) in any such corporation be issued if
the issuance of such additional stock (or such other securities, when exercised
or converted into stock) will result in a change of the controlling stock
ownership of such corporation as held by the shareholders thereof as of the
Commencement Date, nor shall any general partner's interest in a partnership
which is Tenant be (voluntarily or involuntarily) sold, assigned or transferred
(each of the foregoing transactions with respect to stock or other securities of
a corporation or a general partner's interest in a partnership being herein
referred to as a
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"Transfer"), nor shall Tenant sublet the Premises as an entirety or
substantially as an entirety (except for occupancy by the Subtenant thereunder),
without the consent of Landlord in each case and the delivery to Landlord of the
documents and information specified in Section 10.01(d) hereof. Notwithstanding
the foregoing, the buying or selling of seats on an Exchange in the normal
course of business shall not constitute a "Transfer". Notwithstanding the
foregoing, prior to the Lease Restrictions Expiration Date, NYMEX shall have the
right to reorganize, consolidate with or merge into another corporation, or
permit one or more corporations to consolidate with or merge into it, terminate
its corporate existence, or dissolve or sell or assign or otherwise transfer all
or substantially all of its stock, business or assets to another provided:
(i) (A) NYMEX is the surviving, resulting or transferee entity, as
the case may be or (B) in the event that NYMEX is not the surviving, resulting
or transferee entity, as the case may be, provided such successor or assign (1)
is subject to service of process and duly qualified to do business in New York
State, (2) shall have delivered evidence reasonably satisfactory to Landlord
confirming and accepting all of the obligations of NYMEX under the Occupancy
Agreement and (3) is not a Prohibited Person; and
(ii) Landlord shall have received a letter signed by the C.P.A.,
stating that (A) the surviving, resulting or transferee entity (whether NYMEX or
another entity), has a net worth at least equal to the amount of liquidated
damages which would be due under Section 5(a) of the Occupancy Agreement were a
failure to occur on the day of such reorganization, consolidation, merger, sale
or assignment and (B) such reorganization, consolidation, merger, sale or
assignment does not impair the ability of the surviving, resulting or transferee
entity to meet all such entity's obligations and liabilities.
(b) From and after the Lease Restrictions Expiration Date, and
subject to the provisions of this Section 10.01, Tenant may assign this Lease
and any interest of Tenant in this Lease (whether by operation of law or
otherwise), sublet the Premises as an entirety or substantially as an entirety
(whether or not for occupancy by the Subtenant thereunder) or enter into or
effect any Transfer, without first obtaining Landlord's approval, provided no
Default shall have occurred and then be continuing hereunder, unless such
Default is cured simultaneously with such Transfer, assignment or subletting.
(c) Except as otherwise specifically provided herein, in no event,
whether before or after the Lease Restrictions Expiration Date, shall Tenant
make a Transfer, assign this Lease or any portion of its interest hereunder
(whether by operation of law or otherwise) or sublet the Premises as an entirety
or substantially as an entirety (whether or not for occupancy by the Subtenant
thereunder) to any Person (hereinafter, a "Prohibited Person") in which an
ownership interest, in the aggregate, of five percent (5%) or greater is then
held, directly or indirectly, by any individual (i) who has ever been convicted
of a felony, (ii) against whom any action or proceeding is pending to enforce
rights of the State of New York or any agency, department, public authority or
public benefit corporation thereof arising out of a mortgage obligation to the
State of New York or to any such agency, department, public authority or public
benefit corporation or (iii) with respect to
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whom any notice of substantial monetary default which remains uncured has been
given by the State of New York or any agency, department, public authority or
any public benefit corporation thereof arising out of a mortgage obligation to
the State of New York or to any such agency, department, public authority or
public benefit corporation. The determination by Landlord whether or not a
person is a Prohibited Person shall be made within twenty (20) days after
receipt of all requisite information and documentation required for such
determination. If Landlord shall not have notified Tenant of such determination
within such period, it shall be deemed to have determined that such Person is
not a Prohibited Person.
(d) In each instance wherein Tenant desires to effect prior to the
Lease Restrictions Expiration Date an assignment, a sublease of the Premises as
an entirety or substantially as an entirety (except for occupancy by the
Subtenant thereunder) or a Transfer (in which event such assignment, subletting
or Transfer shall be subject to the prior consent of Landlord in accordance with
the provisions of Section 10.01(a) and (c) hereof), then, Tenant shall, prior
to the effective date of such transaction, notify Landlord of the proposed
transaction and submit to Landlord the following documents and information
(which documents may be unexecuted but shall, in all other respects, be in
substantially final form):
(i) in the case of an assignment, (A) a copy of the proposed
instrument(s) of assignment, containing, inter alia, the name,
address and telephone number of the assignee, redacted to
strike or delete confidential business terms, (B) a copy of
the proposed instrument(s) of assumption of Tenant's
obligations under this Lease by said assignee, and (C) an
affidavit of the assignee or an authorized officer or general
partner thereof, setting forth (x) in the case of a
partnership, the names and addresses of all general partners
thereof and all other partners of the assignee having a five
percent (5%) or greater ownership interest in the assignee and
(y) in the case of a corporation (other than a corporation
whose common stock is traded on a recognized exchange or
over-the-counter exchange or is registered under the
Securities Act of 1933, as amended) the names and addresses of
all persons having five percent (5%) or greater record
ownership of stock in, and all directors and officers of, the
assignee;
(ii) in the case of a subletting of the Premises as an
entirety or substantially as an entirety (except for occupancy
by the Subtenant thereunder), (A) a copy of the proposed
sublease, containing, inter alia, the name, address, and
telephone number of the subtenant but redacted to strike or
delete confidential business terms, and (B) an affidavit of
the subtenant or an authorized officer or general partner
thereof, setting forth the same information with respect to
the partners, shareholders, officers and directors of the
subtenant as is required with respect to assignees under
Section 10.01(d)(i);
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(iii) in the case of a Transfer, (A) a copy of each material,
proposed document by which such Transfer is to be
accomplished, redacted to strike or delete confidential
business terms, and (B) an affidavit of an authorized officer
or general partner of Tenant, setting forth the same
information with respect to the partners, shareholders,
officers and directors of Tenant as is required with respect
to assignees under Section 10.01(d)(i); and
(iv) in all such cases, such other documents and information
as Landlord may reasonably request to permit Landlord to
determine whether such assignment, sublease or Transfer is in
accordance with the provisions of this Article 10.
Landlord shall within twenty (20) days after receipt of all
requisite information and documentation, notify Tenant whether it grants its
consent if such consent is required hereunder, specifying, in the event that
Landlord denies its consent to such transaction or determines that any such
documentation or any such information does not establish such compliance, the
reason for such denial or determination. If Landlord shall not have notified
Tenant of such denial or determination within such period, it shall be deemed to
have consented to the proposed transaction if such consent is required and to
have determined that the documents and the information submitted establish
compliance with the provisions of Section 10.0(c) and Section 10.01(d). Tenant
shall promptly deliver to Landlord executed documents substantially the same as
those previously delivered to Landlord for review.
(e) Subject to compliance by a Mortgagee with the provisions of
Section 10.10 and Section 10.11 hereof, the foregoing requirement of consent by
Landlord shall not apply to the acquisition of the Premises by such Mortgagee,
or by any designee or nominee of such Mortgagee through the foreclosure of its
Mortgage or through a deed or instrument of transfer delivered in lieu of such
foreclosure, so long as such Mortgagee (or designee or nominee) shall, in the
instrument transferring to such Mortgagee the interest of Tenant hereunder,
assume and agree to perform all of the terms, covenants and conditions of this
Lease thereafter to be observed or performed by Tenant (excluding compliance
with the Occupancy Requirement and Minimum Requirement). Each reference in this
Section 10.01(e) to "Mortgagee" shall be deemed to include a wholly owned
subsidiary (directly or indirectly) of such Mortgagee or its direct parent,
provided such Mortgagee has delivered to Landlord a written notice advising that
such a subsidiary should be so deemed and certifying (i) that such subsidiary is
wholly owned (direct or indirect) by such Mortgagee or its direct parent and
(ii) that such subsidiary is authorized to act in the place and stead of such
Mortgagee.
(f) Tenant shall not, without the prior consent of Landlord, which
consent may be withheld by Landlord in Landlord's sole discretion, submit
Tenant's leasehold estate in the Premises, or any part thereof, to the
provisions of Article 9-B of the Real Property Law of the State of New York, as
it may be amended.
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Section 10.02. No assignment of this Lease, subletting of the
Premises as an entirety or substantially as an entirety or Transfer shall have
any validity except upon compliance with the provisions of this Article 10.
Section 10.03. Any consent by Landlord under Section 10.01 above
shall apply only to the specific transaction thereby authorized and shall not
relieve Tenant from any requirement hereunder of obtaining the consent of
Landlord to any further sale or assignment of this Lease or Transfer or
subletting of the Premises as an entirety or substantially as an entirety.
Section 10.04. Tenant may, without Landlord's consent, at any time,
and from time to time, but subject to the provisions of the Occupancy Agreement,
including compliance with the Minimum Requirement, and this Section 10.04, enter
into agreements for the rental of space in the Building, or the occupancy of
such space pursuant to licenses or concessions for periods shorter than or equal
to the remainder of the Term at the time of such agreements (all of such
agreements being herein referred to collectively as "Subleases", and the
occupants pursuant to Subleases as "Subtenants"). In the event that Tenant, at
any time prior to the expiration of the fifteenth anniversary of the Occupancy
Date, shall have entered into a Sublease and the Subtenant thereunder shall not
be an Affiliate of Tenant or a Service Provider, then, Tenant shall pay, with
respect to such sublet premises and during the term of such Sublease, an
increase in PILOT equal to Taxes on such sublet premises (subject, however, to
any real property tax abatement, deferral or exemption which would be available
from time to time if the Premises were owned by an entity not exempt from the
payment of Taxes). Each Sublease shall obligate the Subtenant pursuant thereto
to occupy and use the premises included therein for purposes consistent with the
Requirements, the Master Lease, the Certificate of Occupancy and the Master
Development Plan. Tenant shall promptly and diligently enforce all of its rights
as the landlord under all Subleases in accordance with the terms thereof.
Section 10.05. The fact that a violation or breach of any of the
terms, provisions or conditions of this Lease or of the Master Lease results
from or is caused by an act or omission by any Subtenant or any other occupant
of the Building shall not relieve Tenant of Tenant's obligation to cure the
same. Tenant shall take any and all reasonable steps necessary to prevent any
such violation or breach.
Section 10.06. Landlord, after an Event of Default by Tenant, may,
subject to the rights of any Mortgagee (provided such Mortgagee is an
Institutional Lender), collect subrent and all other sums due under Subleases,
and apply the net amount collected to Rental, but no such collection shall be,
or be deemed to be, a waiver of any agreement, term, covenant or condition of
this Lease or the acceptance by Landlord of any Subtenant as tenant hereunder,
or a release of Tenant from performance by Tenant of its obligations under this
Lease.
Section 10.07. To secure the prompt and full payment by Tenant of
the Rental and the faithful performance by Tenant of all the other terms and
conditions herein contained on its part to be kept and performed, Tenant hereby
assigns, transfers and sets
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over unto Landlord, subject to any assignment of Subleases and/or rents made in
connection with any Mortgage (provided the Mortgagee thereunder is an
Institutional Lender), all of Tenant's right, title and interest in and to all
Subleases and hereby confers upon Landlord, its agents and representatives, a
right of entry in, and sufficient possession of, the Premises to permit and
insure the collection by Landlord of the rentals and other sums payable under
the Subleases. The exercise of the right of entry and qualified possession by
Landlord shall not constitute an eviction of Tenant from the Premises or any
portion thereof and, should said right of entry and possession be denied
Landlord, its agent or representative, to the extent permitted by applicable
law, Landlord, in the exercise of such right, may use all requisite force to
gain and enjoy the same without responsibility or liability to Tenant, its
servants, employees, guests or invitees, or any Person whomsoever. The
assignment made herein shall become operative and effective only if (a) an Event
of Default shall occur and remain uncured, or (b) this Lease and the Term shall
be cancelled or terminated pursuant to the terms, covenants and conditions
hereof by reason of an Event of Default, or (c) there occurs repossession under
a dispossess warrant or other re-entry or repossession by Landlord under the
provisions hereof or applicable law, and then only as to such of the Subleases
that Landlord has agreed to take over and assume.
Section 10.08. At any time and from time to time, upon Landlord's
demand, Tenant promptly shall deliver to Landlord a schedule of all Subleases,
setting forth the names of all Subtenants. Upon the reasonable request of
Landlord, Tenant shall permit Landlord and its agents and representatives to
inspect all Subleases and, at Tenant's expense, to make copies thereof.
Section 10.09. All Subleases shall provide that (a) they are subject
to this Lease and to the Master Lease, (b) the Subtenants will not pay rent or
other sums under the Subleases for more than one (1) month in advance (excluding
security and other deposits required under such Sublease), and (c) at Landlord's
option, on the termination of this Lease pursuant to Article 24, the Subtenants
will attorn to, or enter into a direct sublease on identical terms with,
Landlord. With respect to any Sublease of more than 5,000 square feet (a) made
to an unrelated third party (including members and member firms) at a rental not
less than the prevailing market rental, (b) which is in accordance with all of
the requirements of this Lease and (c) which confers no greater rights upon such
Subtenant than are conferred upon Tenant under this Lease nor, except with
respect to provision of basic services customarily provided to commercial
tenants in such circumstances, imposes more onerous obligations upon Landlord,
as successor landlord under the Sublease, than are imposed on Landlord in this
Lease ("Qualifying Sublease"), at the request of Tenant, Landlord and such
Subtenant shall execute an agreement (the "Non-disturbance and Attornment
Agreement") wherein Landlord agrees to recognize such Subtenant as the direct
tenant of Landlord under its Sublease upon the termination of this Lease
pursuant to Article 24, provided that at the time of such termination no default
exists under such Subtenant's Sublease which at such time would permit the
landlord thereunder to terminate the Sublease or to exercise any remedy for
dispossession provided for therein, and such Subtenant agrees to attorn to
Landlord and to recognize Landlord as such Subtenant's landlord under its
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Sublease. The Non-disturbance and Attornment Agreement shall provide that
neither Landlord, nor anyone claiming by, through or under Landlord, shall be:
(a) liable for any act or omission of any prior landlord (including,
without limitation, the then defaulting landlord),
(b) subject to any offsets or defenses that such Subtenant may have
against any prior landlord (including, without limitation, the then defaulting
landlord),
(c) except with respect to a prepayment of the next installment of
PILOT, bound by any payment that such Subtenant might have paid to any prior
landlord (including, without limitation, the then defaulting landlord), or any
other Person of (i) rent, common area charges, or any other charge payable
under such Subtenant's sublease for more than the current month or (ii) any
security deposit which shall not have been delivered to Landlord,
(d) bound by any covenant to undertake or complete any construction
of the Building or any portion thereof demised by the Sublease,
(e) bound by any obligation to make any payment to such Subtenant,
or
(f) bound by any amendment to any such Sublease or modification
thereof which reduces the basic rent, additional rent, supplemental rent or
other charges payable under the Sublease (except to the extent equitably
reflecting a reduction in the space covered by the Sublease), or shortens or
lengthens the term thereof, or otherwise increases the obligations of landlord
thereunder, made without the written consent of Landlord.
Within fifteen (15) days after Tenant submits to Landlord a copy of
a Sublease (which may be unexecuted but which shall, in all other respects be in
final form), Landlord shall notify Tenant whether same is a Qualifying Sublease.
If Landlord shall determine that such Sublease is a Qualifying Sublease, then,
promptly after notice to Tenant of such determination, Landlord and such
Subtenant each shall duly execute, acknowledge and deliver to one another one or
more counterparts of the Non-disturbance and Attornment Agreement. If Landlord
shall determine that same is not a Qualifying Sublease, Landlord shall together
with its notice to Tenant specify the reason for such determination. If there be
any dispute as to whether any Sublease is a Qualifying Sublease, such dispute
shall be resolved by arbitration in accordance with the provisions of Article
36.
Section 10.10.
(a) Tenant shall have the right to mortgage or otherwise encumber
Tenant's interest in this Lease. If Tenant shall so mortgage Tenant's interest
in this Lease to a Mortgagee, Tenant or such Mortgagee shall give Landlord
prompt notice of such Mortgage and furnish Landlord with a complete and correct
copy of each such Mortgage, certified as such by Tenant or such Mortgagee,
together with the name and address of such Mortgagee. After receipt of the
foregoing, Landlord shall give to such Mortgagee, at the address of
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such Mortgagee set forth in such notice, and otherwise in the manner provided by
Article 25, a copy of each notice of Default at the same time as, and whenever,
any such notice of Default shall thereafter be given by Landlord to Tenant, and
no such notice of Default by Landlord shall be deemed to have been duly given to
Tenant unless and until a copy thereof shall have been so given to each
Mortgagee. Each Mortgagee (i) shall thereupon have a period of ten (10) days
more than given Tenant in each instance in the case of a Default in the payment
of Rental and thirty (30) days more than given to Tenant in each instance in the
case of any other Default, for remedying the Default, or causing the same to be
remedied, or causing action to remedy a Default mentioned in Section 24.01(b) or
(c) to be commenced, and (ii) shall, within such periods and otherwise as herein
provided, have the right to remedy such Default, cause the same to be remedied
or cause action to remedy a Default mentioned in Section 24.01(b) or (c) to be
commenced. Landlord shall accept performance by a Mortgagee (or its designee or
nominee) of any covenant, condition or agreement on Tenant's part to be
performed hereunder with the same force and effect as though performed by
Tenant.
(b) Notwithstanding the provisions of Section 10.10(a) hereof, no
Default by Tenant shall be deemed to exist as long as a Mortgagee within (15)
Business Days after the expiration of the time given to Tenant pursuant to the
provisions of this Lease to remedy the event or condition which would otherwise
constitute a Default hereunder, shall have delivered to Landlord its written
agreement to take the action described in clause (i) or (ii) herein and
thereafter, in good faith, shall have commenced promptly either (i) to cure the
Default and to prosecute the same to completion, or (ii) if possession of the
Premises is required in order to cure the Default, to institute foreclosure
proceedings and obtain possession directly or through a receiver, and to
prosecute such proceedings with diligence and continuity and, upon obtaining
such possession, commence promptly to cure the Default and to prosecute the same
to completion with diligence and continuity, provided that during the period in
which such action is being taken (and any foreclosure proceedings are pending),
all of the other obligations of Tenant under this Lease, to the extent they are
reasonably susceptible to being performed by the Mortgagee, are being performed.
However, at any time after the delivery of the aforementioned agreement, the
Mortgagee may notify Landlord, in writing, that it has relinquished possession
of the Premises or that it will not institute foreclosure proceedings or, if
such proceedings have been commenced, that it has discontinued them, and in such
event, the Mortgagee shall have no further liability under such agreement from
and after the date it delivers such notice to Landlord (except for any
obligations accruing prior to the date it delivers such notice), and, thereupon,
Landlord shall have the unrestricted right to terminate this Lease and to take
any other action it deems appropriate by reason of any Default, and upon any
such termination the provisions of Section 10.11 shall apply. Notwithstanding
anything herein contained to the contrary, provided such Mortgagee shall have
otherwise complied with the provisions of this Section 10.10, such Mortgagee
shall have no obligation to cure any Defaults which are not susceptible to being
cured by such Mortgagee. Any default by Tenant under the Occupancy Agreement or
Funding Agreement shall be deemed to be a default which is not susceptible to
being cured by such Mortgagee.
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(c) Except as provided in Section 10.10(b), no Mortgagee shall
become liable under the provisions of this Lease unless and until such time as
it becomes, and then only for as long as it remains, the owner of the leasehold
estate created hereby. In the event that a Mortgagee shall become the owner of
such leasehold estate, such Mortgagee shall not be bound by any modification or
amendment of this Lease made subsequent to the date of the Mortgage and delivery
to Landlord of the notice provided in Section 10.10(a) hereof and prior to its
acquisition of such interest unless the Mortgagee shall have consented to such
modification or amendment at the time it was made or at the time of such
acquisition.
Section 10.11.
(a) In the case of termination of this Lease by reason of any Event
of Default, Landlord shall give prompt notice thereof to each Mortgagee whose
name and address Landlord has received pursuant to notice made in compliance
with the provisions of Section 10.10(a), at the address of such Mortgagee set
forth in such notice, and otherwise in the manner provided by Article 25.
Landlord, on written request of such Mortgagee made any time within thirty (30)
days after the giving of such notice by Landlord, shall promptly execute and
deliver a new lease of the Premises to the Mortgagee, or its designee or
nominee, for the remainder of the Term upon all the covenants, conditions,
limitations and agreements herein contained, provided that such Mortgagee (i)
shall pay to Landlord, simultaneously with the delivery of such new lease, all
unpaid Rental due under this Lease up to and including the, date of the
commencement of the term of such new lease and all expenses, including, without
limitation, reasonable attorneys' fees and disbursements and court costs,
incurred by Landlord in connection with the Default by Tenant, the termination
of this Lease and the preparation of the new lease, and (ii) shall cure all
Defaults existing under this Lease which are susceptible to being cured by such
Mortgagee. Such new lease however shall not contain provisions providing for the
cross-defaulting of such lease with the Funding Agreement or Occupancy Agreement
nor shall such lease require compliance with the Occupancy Requirement or the
Minimum Requirement.
(b) Any such new lease and the leasehold estate thereby created
shall, subject to the same conditions contained in this Lease, continue to
maintain the same priority as this Lease with regard to any mortgage, including
any fee mortgage, on the Premises or any part thereof or any other lien, charge
or encumbrance thereon whether or not the same shall then be in existence.
Concurrently with the execution and delivery of such new lease, Landlord shall
assign to the tenant named therein all of its right, title and interest in and
to moneys (including insurance and condemnation proceeds), if any, then held by
or payable to Landlord or Depository which Tenant would have been entitled to
receive but for termination of this Lease, and any sums then held by or payable
to Depository shall be deemed to be held by or payable to it as Depository under
the new lease.
(c) Upon the execution and delivery of a new lease under this
Section 10.11, all Subleases which theretofore have been assigned to, or made
by, Landlord shall be assigned and transferred, without recourse, by Landlord to
the tenant named in such new
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lease. Between the date of termination of this Lease and the date of execution
of the new lease, if a Mortgagee shall have requested such new lease as provided
in Section 10.11(a), Landlord shall not cancel any Subleases or accept any
cancellation, termination or surrender thereof (unless such termination shall be
effected as a matter of law on the termination of this Lease) or enter into new
Subleases without the consent of the Mortgagee.
(d) If there is more than one Mortgage, Landlord shall only
recognize the Mortgagee whose Mortgage is senior in lien and which has requested
a new lease of the Premises within the time period set forth in Section 10.11(a)
as the Mortgagee entitled to the rights afforded by this Section 10.11, provided
that either Tenant or such Mortgagee shall have given Landlord notice of such
Mortgage in compliance with the provisions of Section 10.10(a).
ARTICLE 11
CONSTRUCTION OF BUILDING
Section 11.01. Tenant, using a Construction Manager, shall promptly
commence (subject to Unavoidable Delays) on or before the Construction
Commencement Date and (subject to Unavoidable Delays) construct the Building in
accordance with the Requirements, Master Development Plan, the Design
Guidelines, the Declaration of Restrictions (if applicable), the Construction
Documents, and the applicable provisions of this Lease. Tenant shall, in
accordance with sound construction practice, obtain from New York City and all
other Governmental Authorities all permits, consents, certificates and approvals
required to commence construction of the Building. At the request of Tenant,
Landlord, at no cost or expense to it, shall within ten (10) days of Tenant's
request, execute and deliver any documents or instruments reasonably required to
obtain such permits, consents, certificates and approvals, provided such
documents or instruments do not impose any liability or obligation on Landlord.
Subject to the provisions of Section 11.02(i), Tenant shall not undertake
Commencement of Construction unless and until (i) Tenant shall have obtained as
aforesaid, and delivered to Landlord copies of, all necessary permits, consents,
certificates and approvals for such construction from all Governmental
Authorities which are required to have been obtained prior to Commencement of
Construction, (ii) Landlord shall have reviewed the Construction Documents in
the manner provided herein and shall have determined that they conform to the
Master Development Plan, the Design Guidelines, the Declaration of Restrictions
(if applicable), the Schematics and the Design Development Plans, and (iii)
Tenant shall have delivered to Landlord the original policies of insurance or
duplicate originals thereof, in accordance with Section 11.03(b). Tenant shall
obtain such other permits, consents, certificates and approvals as may be
required from time to time to continue and complete the construction of the
Building. At the request of either Landlord or Tenant, made at any time after
Commencement of Construction, Landlord and Tenant shall execute a certification
setting forth the date of Commencement of Construction. In the event the parties
shall be unable to agree on such date, such dispute shall be resolved by
arbitration pursuant to Article 36.
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Section 11.02.
(a) Landlord acknowledges that Tenant has submitted to Landlord
scaled schematic drawings (the "Schematics") prepared by the Architect and in
accordance with Landlord's submission requirements for schematics, such
requirements being more particularly described in the Design Guidelines.
Landlord's review of the Schematics shall be limited to determining whether the
Schematics conform to the Master Development Plan, the Design Guidelines and the
Declaration of Restrictions (if applicable). If Landlord determines that the
Schematics do so conform, Landlord shall notify Tenant to that effect. If
Landlord determines that the Schematics do not conform to the Master Development
Plan, the Design Guidelines and the Declaration of Restrictions (if applicable),
Landlord shall so notify Tenant, specifying those respects in which the
Schematics do not so conform, and Tenant shall revise the Schematics to so
conform and shall resubmit the same to Landlord for review within fifteen (15)
Business Days of the date of Tenant's receipt of notice from Landlord that the
Schematics do not so conform. Each initial review by Landlord shall be carried
out within fifteen (15) Business Days of the date of initial submission of the
Schematics and each additional review by Landlord shall be carried out within
ten (10) Business Days of the date of submission of any revised Schematics, as
the case may be, by Tenant (and if Landlord shall not have notified Tenant of
its determination within such fifteen (15) or ten (10) Business Day period, as
the case may be, it shall be deemed to have determined that the Schematics or
revised Schematics, as the case may be, do conform to the Master Development
Plan, the Design Guidelines and the Declaration of Restrictions (if
applicable)).
(b) As soon as practicable, but in no event later than ninety days
(90) after Landlord shall have notified Tenant that the Schematics conform to
the Master Development Plan, the Design Guidelines and the Declaration of
Restrictions (if applicable) (such date being subject to Unavoidable Delays),
Tenant shall submit to Landlord for its review, design development plans and
outline specifications for the Building (the "Design Development Plans"),
prepared by the Architect and in accordance with Landlord's submission
requirements for design development, such requirements being more particularly
described in the Design Guidelines. Any changes in the Design Development Plans
from the Schematics shall be identified in reasonable detail. Landlord's review
of the Design Development Plans shall be limited to determining whether such
plans conform to the Master Development Plan, the Design Guidelines, the
Declaration of Restrictions (if applicable) and the Schematics. If Landlord
determines that the Design Development Plans do so conform, Landlord shall
notify Tenant to that effect. If Landlord determines that the Design Development
Plans do not conform to the Master Development Plan, the Design Guidelines, the
Declaration of Restrictions (if applicable) and the Schematics, Landlord shall
so notify Tenant, specifying those respects in which the Design Development
Plans do not so conform, and Tenant shall revise the same to so conform and
shall resubmit the Design Development Plans to Landlord for review within
fifteen (15) Business Days of the date of Tenant's receipt of notice from
Landlord that the Design Development Plans do not so conform. Each initial
review by Landlord shall be carried out within fifteen (15) Business Days of the
date of initial submission of the Design Development Plans and each
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additional review by Landlord shall be carried out within ten (10) Business Days
of the date of submission of any revised Design Development Plans, as the case
may be, by Tenant (and if Landlord shall not have notified Tenant of its
determination within such fifteen (15) or ten (10) Business Day period, as the
case may be, it shall be deemed to have determined that the Design Development
Plans or revised Design Development Plans, as the case may be, do conform to the
Master Development Plan, the Design Guidelines, the Declaration of Restrictions
(if applicable) and the Schematics).
(c) As soon as practicable, but in no event later than one hundred
and eighty (180) days after Landlord shall have notified Tenant that the Design
Development Plans conform to the Master Development Plan, the Design Guidelines,
the Declaration of Restrictions (if applicable) and the Schematics (such date
being subject to Unavoidable Delays), Tenant shall submit to Landlord final
contract plans and specifications for the Building prepared by the Architect and
in accordance with Landlord's requirements for final contract plans and
specifications, such requirements being more particularly described in the
Design Guidelines. Any changes in such final contract plans and specifications
from the Design Development Plans shall be identified in reasonable detail.
Landlord's review of the final contract plans and specifications shall be
limited to determining whether such plans and specifications conform to the
Master Development Plan, the Design Guidelines, the Declaration of Restrictions
(if applicable) and the Design Development Plans. If Landlord determines that
they do so conform, Landlord shall notify Tenant to that effect. If Landlord
determines that the final contract plans and specifications do not conform to
the Master Development Plan, the Design Guidelines, the Declaration of
Restrictions (if applicable) and the Design Development Plans, Landlord shall so
notify Tenant, specifying those respects in which the final contract plans and
specifications do not so conform, and Tenant shall revise the same to so conform
and shall resubmit the final contract plans and specifications to Landlord for
review within fifteen (15) Business Days of the date of Tenant's receipt of
notice from Landlord that the final contract plans end specifications do not so
conform. Each initial review by Landlord shall be carried out within fifteen
(15) Business Days of the date of initial submission of the final contract plans
and specifications and each additional review by Landlord shall be carried out
within ten (10) Business Days of the date of submission of any revised final
contract plans and specifications, as the case may be, by Tenant (and if
Landlord shall not have notified Tenant of its determination within such fifteen
(15) or ten (10) Business Day period, as the case may be, it shall be deemed to
have determined that the final contract plans and specifications or the revised
final contract plans and specifications, as the case may be, do conform to the
Master Development Plan, the Design Guidelines, the Declaration of Restrictions
(if applicable) and the Design Development Plans). The contract plans and
specifications that have been determined (or are deemed) to conform to the
Master Development Plan, the Design Guidelines, the Declaration of Restrictions
(if applicable) and the Design Development Plans, as the same may be changed
from time to time by Tenant, to the extent such changes are approved (or deemed
approved) by Landlord as hereinafter provided, are hereinafter referred to as
the "Construction Documents".
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(d) In the event that Tenant shall desire to modify the Construction
Documents with respect to, or which will in any way affect, any aspect of the
exterior of the Building or a change in the height, bulk or setback of the
Building or in any other manner which affects compliance with the Master
Development Plan, the Design Guidelines or the Declaration of Restrictions (if
applicable), Tenant shall submit the proposed modifications to Landlord for
approval prior to making or implementing any such modification. All
modifications shall be identified in reasonable detail. Tenant shall not be
required to submit to Landlord proposed modifications of the Construction
Documents which affect solely the interior of the Building or which do not
affect any aspect of the exterior of the Building or a change in the height,
bulk or setback of the Building or do not affect compliance with the Master
Development Plan, the Design Guidelines or the Declaration of Restrictions (if
applicable). Landlord shall review the proposed changes to determine whether or
not they (i) conform to the Master Development Plan, the Design Guidelines and
the Declaration of Restrictions (if applicable), and (ii) in Landlord's
judgment, reasonably exercised, provide for design, finishes and materials with
respect to the exterior of the Building which are comparable in quality to those
provided for in the Construction Documents. If Landlord determines that they do
so conform and provide, Landlord shall notify Tenant to that effect. If Landlord
determines that the Construction Documents, as so revised, do not conform to the
Master Development Plan, the Design Guidelines and the Declaration of
Restrictions (if applicable) or provide for design, finishes and materials which
are not comparable in quality to those provided for in the Construction
Documents, Landlord shall so notify Tenant, specifying those respects in which
they do not so conform or provide, and Tenant shall revise the same to meet
Landlord's objections and shall resubmit them to Landlord for review within
fifteen (15) Business Days of the date of Tenant's receipt of notice from
Landlord that they do not so conform or provide. Each initial review by Landlord
shall be carried out within fifteen (15) Business Days of the date of initial
submission of the Construction Documents, as so revised, by Tenant and each
additional review by Landlord shall be carried out within ten (10) Business Days
of the date of submission of any revisions thereto (and if Landlord shall not
have notified Tenant of its determination within such fifteen (15) or ten (10)
Business Day period, as the case may be, it shall be deemed to have determined
that the proposed changes are satisfactory).
(e) Notwithstanding the provisions of Section 11.02(d), if, after
the Commencement of Construction, Tenant makes a good faith determination that
any proposed modification which requires Landlord's approval under Section
11.02(d) is of a minor or insubstantial nature, Tenant may so advise an employee
designated by Landlord ("Landlord's Project Manager") (delivering to him or her
a written statement setting forth the proposed modification and the basis for
Tenant's determination and simultaneously delivering copies of said statement to
Landlord's President and Chief Executive Officer and Vice President for Planning
and Design). Landlord's Project Manager shall, in writing, before the expiration
of the fifth full Business Day after the receipt of said advice, either (i)
notify Tenant of approval of said proposed modification or (ii) notify Tenant
that Tenant is required to submit the proposed modification to Landlord as
provided in Section 11.02(d). In the event Landlord's Project Manager acts in
accordance with (ii) above, Landlord, after receipt from Tenant of the proposed
modification, shall endeavor to expedite its review
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thereof and notification to Tenant of its determination. Nothing set forth in
this Section 11.02(e) shall require Landlord to notify Tenant of Landlord's
determination earlier than the expiration of the fifteen (15) or ten (10)
Business Day periods set forth in Section 11.02(d) with respect to such
modification, provided, however, that if Landlord's Project Manager shall not
have notified Tenant of either (i) or (ii) above within the five (5) Business
Day period set forth above, Landlord shall be deemed to have approved the
proposed modification.
(f) The Construction Documents shall comply with the Requirements,
including but not limited to the Building Code of New York City. The
responsibility to assure such compliance shall be Tenant's; Landlord's
determination that the Construction Documents conform to the Master Development
Plan, the Design Guidelines and the Declaration of Restrictions (if applicable)
shall not be, nor shall it be construed to be or relied upon as, a determination
that the Construction Documents comply with the Requirements. In the event that
there shall be a conflict between the Requirements and the Master Development
Plan or the Design Guidelines, the Requirements shall prevail.
(g) In addition to the documents referred to in Section 11.01 and
this Section 11.02, Tenant shall, at least fifteen (15) Business Days prior to
ordering the same for incorporation into the Building, submit to Landlord
samples of all materials to be used on the exterior of the Building, including
windows, and the same shall be subject to Landlord's approval for conformity to
the Design Guidelines, the Master Development Plan, the Declaration of
Restrictions (if applicable) and the Construction Documents. If Landlord shall
have failed to object to any of such materials within such fifteen (15) Business
Day period after its receipt of such materials, it shall be deemed to have
approved such materials. Landlord reserves the right to maintain its field
personnel at the Premises to observe Tenant's construction methods and
techniques (provided that such field personnel do not unreasonably interfere
with Tenant's construction activities) and Landlord shall be entitled to have
its field personnel or other designees attend Tenant's job and/or safety
meetings. No such observation or attendance by Landlord's personnel or designees
shall impose upon Landlord any responsibility for any failure by Tenant to
observe applicable Requirements or safety practices in connection with such
construction, or constitute an acceptance of any work which does not comply in
all respects with the Requirements and the provisions of this Lease.
(h) Tenant shall not construct or permit to exist any Building on
the Land unless the Building is in compliance with the Master Development Plan,
Design Guidelines and Declaration of Restrictions (if applicable).
(i) Notwithstanding any other provision of this Article, Landlord
acknowledges and agrees that in order to meet Tenant's construction schedule,
Tenant may be required to "fast track" certain aspects of the plans and
specifications and of the excavation and foundation and other phases of the
construction process. Landlord agrees, within the limitations of sound
construction practice, to take all actions reasonably requested from time to
time by Tenant in relation to the "fast tracking" of the construction
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of the Building. Such cooperation may include (i) shortening the review periods
provided for in this Article 11, (ii) reviewing certain aspects of the
Schematics, Design Development Plans and Construction Documents prior to
completion and submission to Landlord of every aspect thereof and (iii)
permitting Tenant to begin excavation and foundation and other phases of the
work prior to completion and approval by Landlord of the (x) Design Development
Plans (except if Landlord determines, within ten (10) Business Days from
submission of Design Development Plans, that such work could be affected by
Landlord's review of any outstanding issues with respect to the Design
Development Plans) or (y) Construction Documents and (iv) commencing excavation
and foundation and other phases of the work before all Project approvals and all
permits, consents, certificates and approvals from all Governmental Authorities
are obtained except for such of the foregoing which are necessary for the
portion or phase of the Project which is being performed or undertaken.
Section 11.03.
(a) Commencing on the Commencement Date, Tenant shall provide, or
cause to be provided, and thereafter shall keep in full force and effect, until
Commencement of Construction, insurance coverage of the types and in the minimum
limits set forth in subsections (i) and (ii) of this Section 11.03(a). Prior to
the Commencement of Construction, Tenant shall provide, or cause to be provided,
and thereafter shall keep or cause to be kept in full force and effect, until
Substantial Completion of the Building, the following:
(i) commercial general liability insurance, naming
contractor or construction manager as named insured and, as
additional insureds, Tenant, Landlord, Master Landlord, the
City, EDC, UDC and each Mortgagee under a standard mortgagee
clause, such insurance to insure against liability for bodily
injury and death and for property damage in such amount as may
from time to time be reasonably required by Landlord (which
shall be not less than Twenty-Five Million Dollars
($25,000,000) combined single limit (inclusive of primary
coverage and umbrella or excess policy coverage) nor more than
such amount as, at the time in question, is customarily
carried by prudent owners of like buildings and improvements,
but, in no event, less than Twenty-Five Million Dollars
($25,000,000)), such insurance to include operations-premises
liability, contractor's protective liability on the operations
of all subcontractors, completed operations (to be kept in
force for not less than three (3) years after Substantial
Completion of the Building), broad form commercial liability
(designating the indemnity provisions of the Construction
Agreements and this Lease), a broad form comprehensive general
liability endorsement providing blanket automatic contractual
coverage including bodily injury to employees or others
assumed by the insured under contract and, if the contractor
is undertaking foundation,
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excavation or demolition work, an endorsement that such
operations are covered and that the "XCU Exclusions" have been
deleted;
(ii) commercial automobile liability insurance for all owned,
non-owned, leased, rented and/or hired vehicles insuring
against liability for bodily injury and death and for property
damage in an amount not less than Ten Million Dollars
($10,000,000) combined single limit, with such coverage to be
listed in the underlying schedule of any umbrella or following
form excess policy for a total limit of Twenty-Five Million
Dollars ($25,000,000), such insurance to name Tenant
(contractor if carried by contractor) as named insured and, as
additional insureds, Landlord, Master Landlord, EDC, UDC, any
general contractor or construction manager engaged by Tenant
(Tenant, if contractor carries such insurance) and each
Mortgagee under a standard mortgage clause;
(iii) workers' compensation insurance providing statutory New
York State benefits for all persons employed in connection
with the construction at the Premises and employer's liability
insurance in an amount not less than that required by New York
State law, with coverage to be listed in the underlying
schedule of any umbrella or following form excess policy; and
(iv) commercial all-risk builder's risk insurance written on
a one hundred percent (100%) of Completed value
(non-reporting) basis with limits as provided in Section
7.01(a)(i), naming, to the extent of their respective
insurable interests in the Premises, Tenant as named insured,
and, as additional insureds, Landlord, Master Landlord, any
contractor or construction manager engaged by Tenant and each
Mortgagee under a standard mortgagee clause. In addition, such
insurance (A) shall contain an acknowledgment by the insurance
company that its rights of subrogation have been waived with
respect to all of the insureds named in the policy and an
endorsement stating that "permission is granted to complete
and occupy", (B) if any storage location situated off the
Premises is used, shall include coverage for the full
insurable value, all materials and equipment on or about any
such storage location intended for use with respect to the
Premises, and (C) if materials, equipment, machinery or
supplies to be used in connection with construction are
shipped to the job site from places in the contiguous United
States, the District of Columbia or Canada, the all-risk
builders risk insurance will provide transit coverage.
In the event the proceeds received pursuant to the insurance
coverage required under Section 11.03(a)(iv) hereof shall exceed One Million
Dollars ($1,000,000)
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(as such amount shall be increased as provided in Section 7.02(a)), such
proceeds shall be paid to Depository and disbursed in accordance with the
provisions of Sections 8.02 and 8.03 hereof. In the event such proceeds shall be
One Million Dollars ($1,000,000) (as such amount shall be increased as provided
in Section 7.02(a)) or less, such proceeds shall be payable, in trust, to Tenant
for application to the cost of completion of construction of the Building.
(b) No construction shall be commenced until Tenant shall have
delivered to Landlord the original policies of insurance or duplicate originals
or certificates thereof together with copies of such insurance policies, as
required by this Section 11.03.
(c) To the extent applicable, Tenant shall comply with the
provisions of Section 7.02 hereof with respect to the policies required by this
Section 11.03, including the delivery to Landlord of proof of payment of all
premiums and the obtaining of the agreement of each such insurer that such
policy shall not be cancelled or modified without at least thirty (30) days
prior written notice to Landlord, EDC, UDC and each Mortgagee.
(d) To the extent that the insurance coverages required pursuant to
this Section 11.03 duplicate those required by Article 7 hereof, Tenant shall
not be required to maintain such coverages in duplicate, but in each instance
the more extensive coverage shall be maintained.
Section 11.04. Construction of the Building shall be (a) commenced
on or prior to the Construction Commencement Date and prosecuted by Tenant with
all reasonable diligence and without interruption, in each case, however,
subject to Unavoidable Delays, and (b) Substantially Completed by Tenant in a
good and workmanlike manner in accordance with the approved Construction
Documents, the Master Development Plan, the Design Guidelines and the
Declaration of Restrictions (if applicable), no later than forty two (42) months
after the Construction Commencement Date, as such date may be extended for
Unavoidable Delays (the "Scheduled Completion Date"). Upon Substantial
Completion of the Building, Tenant shall furnish Landlord with (i) true copies
of the temporary Certificate(s) of Occupancy for the Building, (ii) a complete
set of "as built" plans for the Building prepared by the Architect and
accompanied by a written statement by the Architect that the "as-built" plans
are complete and correct, and (iii) a survey prepared and sealed by a registered
surveyor showing the Building and all easements and other matters of record
relating to the Premises, certified by such surveyor to Tenant, Landlord and
each Mortgagee, and bearing the certification of such surveyor that the Building
is within the property lines of the Land and does not encroach upon any easement
or violate any restriction of record. "Substantial Completion of the Building"
or "Substantially Completed" shall mean (i) substantial completion of all
construction work on the Building (but shall not include the completion of
construction of interior portions of the Building which Tenant does not intend
to occupy immediately or which Tenant intends shall be made subject to one or
more Subleases), (ii) the delivery to Landlord of true copies of the temporary
Certificate(s) of Occupancy for the portions of the Building to be initially
occupied by Tenant, Affiliates of Tenant and Service Providers, and (iii) the
delivery to
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Landlord of a statement in writing from the Architect that, in such Architect's
opinion, the construction has been completed substantially in accordance with
the approved Construction Documents and the Design Guidelines. Notwithstanding
anything herein contained to the contrary, if Tenant shall have failed to
deliver such temporary Certificate(s) of Occupancy on or before the Scheduled
Completion Date as a result of the failure of the Department of Buildings of New
York City, or successor body of similar function, to issue the same, such
failure shall not constitute a Default hereunder provided the Architect
certifies in writing to Landlord that Tenant has completed all work necessary to
obtain such temporary Certificate(s) of Occupancy. In such event, Tenant shall
deliver a true copy of such temporary Certificate(s) of Occupancy to Landlord
promptly upon their issuance. Within six (6) months after the date of
Substantial Completion of the Building, Tenant shall furnish Landlord with
permanent Certificate(s) of Occupancy for all space in the Building duly issued
by the New York City Department of Buildings, provided, however, Tenant's
failure to obtain such permanent Certificate(s) of Occupancy within such six (6)
month period shall not be a Default hereunder if Tenant shall be diligently and
in good faith attempting to obtain same (which attempt (i) shall include, but
not be limited to, the reasonable expenditure of monies, but (ii) shall not
obligate Tenant to complete construction of any interior portion of the Building
until Tenant intends to occupy such portion or such portion has been made
subject to one or more Subleases). In any event, Tenant shall promptly furnish
Landlord with such permanent or temporary Certificate(s) of Occupancy after same
has been duly issued.
Section 11.05.
(a) The materials to be incorporated in the Building at any time
during the Term, including in connection with Capital Improvements, shall, upon
purchase of same and at all times thereafter, constitute the property of
Landlord, and upon construction of the Building or the incorporation of such
materials therein, title thereto shall vest in Landlord, provided, however, that
(i) Landlord shall not be liable in any manner for payment or otherwise to any
contractor, subcontractor, laborer or supplier of materials or other Person in
connection with the purchase of any such materials (other than as provided in
the Funding Agreement if applicable), (ii) Landlord shall have no obligation to
pay any compensation to Tenant by reason of its acquisition of title to such
materials and Building, (iii) Landlord shall have no obligation with respect to
the storage or care of such materials or the Building, and (iv) all materials to
be incorporated in the Building shall, immediately upon the purchase of same, be
deemed to be leased to Tenant pursuant to this Lease.
(b) Tenant shall, subject to the provisions of this Section 11.05:
(i) purchase materials, systems and Fixtures to be incorporated and installed in
(or affixed to) the Building, including in connection with the fit-out of space
in the Building and Capital Improvements, (ii) purchase, lease and maintain
Equipment for use in the Building and for use off-site (at Tenant's facilities
at 4 World Trade Center and 22 Cortlandt Street) in support of Tenant's
operations at the Premises and (iii) repair, replace, renovate and upgrade any
of the foregoing materials, system, Fixtures and Equipment, during the period
from the Commencement Date to and including the expiration of the First Period,
all
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without paying any sales and compensating use taxes ("Sales Tax" or,
alternatively, "Sale Taxes") in connection therewith. All such materials,
systems, Fixtures and items of Equipment shall be purchased, leased or
maintained by Tenant, acting as agent for and in the name of Landlord. The
exemption provided herein shall not apply to construction tools, supplies or
materials or to other property or equipment which is used or consumed in the
course of construction and which is not incorporated in (or affixed to) the
Building.
(c) In order to effectuate the foregoing, Landlord shall, on the
Commencement Date, furnish to Tenant a "Sales Tax Letter" in substantially the
form annexed hereto as Exhibit F. Landlord and Tenant agree that, from and after
the Commencement Date, and until such time as the balance in the Benefits
Account (as hereinafter defined) is zero, Tenant will utilize the Sales Tax
Letter to effectuate purchases and leases of (and maintain) materials, systems,
Fixtures and Equipment, free from Sales Tax and otherwise as provided in
subparagraph (b) above.
(d) If and only if (and only from and after the date on which) the
balance in the Benefits Account is zero, Tenant shall discontinue its use of the
Sales Tax Letter and thereafter shall pay Sales Tax on materials, systems,
Fixtures or items of Equipment that it purchases, leases or maintains (for use
at the Building and off-site, as aforesaid) directly to vendors or equipment
lessors or maintenance or service contractors, as appropriate.
(e) There shall be established and maintained an accounting (the
"Benefits Account") of Sales Tax Benefits and Con Ed Benefits (as such terms are
hereinafter defined) in accordance with the provisions of this subparagraph (e)
as follows:
(i) The initial balance in the Benefits Account is $15,867,000
(which number is an NPV number, meaning a number which has been discounted
to August 1, 1994 at the rate of 7.5% per annum) (such number, the
"Initial Balance").
(ii) The balance in the Benefits Account shall be adjusted and
fixed on May 31, 1996, and on each May 31 thereafter, by deducting from
the Initial Balance (in the case of the first such adjustment) and from
the balance in the Benefits Account on each May 31 thereafter an amount
equal to (y) the sum of all Sales Tax Benefits and Con Ed Benefits for the
prior year (or period), discounted from each date of adjustment to August
1, 1994 at the rate of 7.5% per annum, and (z) the amount of the Benefits
Deficiency Amount (as defined in, and determined in accordance with the
provisions of, that certain letter of even date herewith between UDC and
Tenant regarding same), if any, requested by Tenant for the prior year (or
period).
For purposes of this Lease, the term "Sales Tax Benefits" shall mean all Sales
Tax benefits actually realized by (or on behalf of) NYMEX during any year or
period relative to which adjustments to the Benefits Account are being made; and
the term "Con Ed Benefits" shall mean savings in energy costs actually realized
by Tenant as a result of Tenant's being a
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Con Edison Business Incentive Rate (Tariff No, 9) customer (at the Premises)
during any year or period relative to which adjustments to the Benefits Account
are being made.
(f) In the event Tenant is compelled by any Governmental Authority
to pay any Sales Tax as to which Tenant has been granted an exemption from the
payment thereof, Tenant shall receive a credit against the next installment(s)
of Base Rent in an amount equal to the amount of such taxes (including interest
and penalties) which Tenant has been compelled to pay, provided that (i) each
maintenance or repair contract relating to, and each contract of sale, purchase
order, invoice, lease, sublease, license or sublicense of, materials, Equipment
or Fixtures (including Equipment used at Tenant's facilities at 22 Cortlandt
Street and at 4 World Trade Center) shall include the language set forth in
subparagraph (h) hereof and Tenant shall have otherwise complied with the
provisions of this Section 11.05, (ii) Tenant has notified Landlord prior to
payment of such taxes and promptly upon receipt of notice of claim that a claim
has been made therefor and (iii) if permitted by applicable law, Landlord has
the opportunity to contest the imposition of same, at Landlord's expense,
provided that neither Tenant's interest in the Premises or in any Fixtures or
Equipment nor any income derived by Tenant therefrom would, by reason of such
contest, be forfeited or lost, or subject to any lien, encumbrance or charge, or
Tenant would not by reason thereof be subject to any civil or criminal
liability.
(g) Purchases and/or leases of (and maintenance and repair contracts
relating to) materials to be installed in the Building, Fixtures and Equipment
shall be exempt from Sales Tax on the conditions that:
(i) any materials and Fixtures shall be installed in and used at the
Building;
(ii) any Equipment purchased or leased or maintained by or on behalf
of Tenant shall be used only at the Premises and/or in facilities of
Tenant located at 22 Cortlandt Street and at 4 World Trade Center,
New York, New York and any such Equipment shall be used only by
Tenant and its Affiliates;
(iii) any materials, Equipment or Fixtures purchased or leased or
maintained as described above shall have a useful life of one (1)
year or more;
(iv) any maintenance and repair contracts shall only be with respect
to: (A) materials, Equipment or Fixtures having a useful life of one
(1) year or more, (B) the replacement of parts (other than parts
that contain materials or substances that are consumed in the
operation of such property [e.g., a toner cartridge] where such
parts must be replaced whenever the substance is consumed), or (C)
the making of
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repairs, but shall not include maintenance of the type as shall
constitute janitorial services; and
(v) in the case of rental arrangements, such arrangements shall
constitute capital leases (meaning leases which would be so
characterized under the Accounting Standards of the Financial
Accounting Standards Board).
(h) In order to be exempt from Sales Tax, each maintenance or repair
contract relating to, and each contract of sale, purchase order, invoice, lease,
sublease, license or sublicense of, materials, Equipment or Fixtures (including
Equipment used at Tenant's facilities at 22 Cortlandt Street and at 4 World
Trade Center) shall include the following language:
"This [maintenance or repair contract, contract of sale, purchase
order, invoice, lease, sublease, license or sublicense] relates to
(i) the purchase or lease of materials and fixtures for installation
in, and/or the construction of and any repairs and renovations made
to, an office building (to include a trading facility) on a parcel
of land referred to as Site 15, located in Battery Park City, New
York, New York, (ii) the purchase or lease of equipment, machinery,
furniture and furnishings for use by the New York Mercantile
Exchange ("NYMEX") and its affiliates in said building and in
certain facilities of NYMEX located at 22 Cortlandt Street and at 4
World Trade Center, New York, New York, and (iii) the maintenance or
repair of any of the foregoing (the foregoing, collectively, the
"NYMEX Project"). The sales tax exemption provided with respect to
this [maintenance or repair contract, contract of sale, purchase
order, invoice, lease, sublease, license or sublicense] shall only
be available for the NYMEX Project.
In no event shall Battery Park City Authority have any liability
(directly, indirectly or otherwise) or performance obligation under
this [maintenance or repair contract, contract of sale, purchase
order, invoice, lease, sublease, license or sublicense].
This [maintenance or repair contract, contract of sale, purchase
order, invoice, lease, sublease, license or sublicense] is being
delivered by NYMEX on the understanding that no amount of sales or
use taxes is included in the contract price."
(i) In no event shall Landlord have any liability or performance
obligations under any maintenance or repair contract, contract of sale, purchase
order,
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invoice, lease, sublease, license or sublicense entered into by or on behalf of
Tenant (as agent for Landlord) hereunder.
(j) On or before May 31 of each year (commencing May 31, 1996) and
until the earlier to occur of (i) the date on which the balance in the Benefits
Account reaches zero, (ii) the end of the First Period, or (iii) the earlier
termination of this Lease, Tenant shall furnish to Landlord, EDC and UDC:
(i) a "Registry" substantially in the form attached
hereto as Exhibit G, which Registry shall list the items of materials,
Equipment and Fixtures that Tenant has purchased or leased (or with
respect to which Tenant has entered into maintenance or repair contracts),
during the prior year (or, for the first report delivered on May 31, 1996,
for the prior period), without paying any Sales Tax thereon (or in
connection therewith);
(ii) a report of the Sales Tax Benefits achieved by
Tenant during the prior year (or, for the first report delivered on May
31, 1996, for the prior period), which report shall set forth for each
such preceding year each Sales Tax exemption availed of by Tenant pursuant
to the Sales Tax Letter, the dollar amount of same, the date availed of
(with respect to each item of leased Equipment, the Sales Tax exemption
shall be deemed availed of on each lease payment date under the related
lease), and the total dollar amount of all Sales Tax exemptions availed of
by Tenant during the preceding year (or period, as applicable);
(iii) a report of the Sales Tax savings that could have
been realized during the prior year (or period) had Tenant (or its
Construction Managers or contractors) used the Sales Tax Letter to the
maximum extent permitted hereunder; and
(iv) if applicable, a report of the Con Ed Benefits
achieved by Tenant during the prior year, which report shall set forth for
each year the amount actually paid by Tenant for energy at the Premises
and the amount that Tenant would have paid, had the Con Ed Business
Improvement Rate not been in effect.
Upon request by Landlord or EDC or UDC of, and reasonable notice to, Tenant,
Tenant shall make available, at reasonable times, to Landlord or EDC or UDC, as
appropriate, all books and records of Tenant as pertain to Sales Tax, Tenant's
use of the Sales Tax Letter, Tenant's electric consumption and Tenant's electric
bills at the Premises. Tenant's obligation to maintain (and make available)
records hereunder shall survive for six (6) years following the earlier to occur
of (i) the date on which the balance in the Benefits Account reaches zero, (ii)
the end of the First Period, or (iii) the earlier termination of this Lease.
Section 11.06. Tenant may furnish and install a project sign,
designed, of a size and with such text as shall be reasonably satisfactory to
Landlord, at a location on the
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exterior of the Premises reasonably satisfactory to Landlord and Tenant. Tenant
also shall extend to Landlord and any of its designee{s) the privilege of being
featured participants in ground-breaking and opening ceremonies to be held at
such time and in such manner as Landlord and Tenant shall agree.
Section 11.07. Tenant shall remove from the Project Area all fill
excavated from the Land and shall dispose of such fill in accordance with all
applicable Requirements.
Section 11.08. Tenant acknowledges that it is aware that
construction activities of other developers and of Landlord are in progress or
contemplated within the Project Area. Landlord agrees that construction of Vesey
Park shall be in accordance with the Storage and Staging Letter. Tenant shall
coordinate its construction activities, as provided in the Storage and Staging
Letter, at the Premises with other construction activities taking place in the
Project Area, and those incident to the construction of Landlord's Civic
Facilities and civic facilities in other portions of the Project Area. Landlord
acknowledges and agrees that any delays in Tenant's construction of the Building
attributable to other construction activity in the Project Area may constitute
an Unavoidable Delay, provided Tenant shall have complied with Tenant's
obligations under this Article 11 but, in no event, shall Landlord or Master
Landlord be liable for any such delays in Tenant's construction of the Building
attributable to other construction activity in the Project Area, if any. In
addition, Tenant shall (i) cause any and all work which Tenant is required to or
does perform on, under or adjacent to any portion of any street situated in
whole or in part in the Project Area to be performed in accordance with all
applicable Requirements and in a manner which does not wrongfully obstruct or
hinder ingress to or egress from any portion of the Project Area, (ii) not
cause, permit or suffer the storage of construction materials or the placement
of vehicles not then being operated in connection with construction activities
on any portion of any such street, except as may be permitted by applicable
Requirements and the Storage and Staging Letter, (iii) undertake its
construction activities in accordance with normal New York City construction
rules and (iv) promptly repair or, if required by Landlord, replace any portion
of Landlord's Civic Facilities damaged by the act or omission of Tenant or any
agent, contractor or employee of Tenant, any such repair or replacement, as the
case may be, to be performed (A) by using materials identical to those used by
Landlord, or, if Tenant, despite its best efforts, is unable to procure such
materials, using materials in quality and appearance similar to those used by
Landlord and reasonably approved by Landlord, and (B) in accordance with the
Civic Facilities Drawings and Specifications. In the event Tenant shall have
failed to promptly repair or replace such portion of Landlord's Civic Facilities
as hereinabove provided, Landlord shall have the right to do so at Tenant's
expense and Tenant shall, within ten (10) days after demand, reimburse Landlord
for such costs and expenses incurred by Landlord. In the event Tenant shall fail
to promptly comply with the provisions of subparagraph (ii) of this Section
11.08, Landlord shall have the right after notice to Tenant to remove such
construction materials or vehicles at Tenant's expense and Tenant shall, within
ten (10) days after demand, reimburse Landlord for such costs and expenses
incurred by Landlord. At the request of Landlord, Tenant shall promptly enclose
the Land, the Storage/Storage Area and the Supplemental Staging Area (as such
terms are defined in the
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Storage and Staging Letter) with an 8-foot high chain-mesh fence so as to
separate the Premises from the remainder of the Project Area. During
construction, Tenant shall maintain Tenant's fence in good condition. Upon
Substantial Completion of the Building or as otherwise provided in the Storage
and Staging Letter, Tenant shall remove Tenant's fence and, if constructed,
Landlord shall remove its fence from around the Premises. Subject to applicable
Requirements, Tenant shall have the right to remove Tenant's fence at an earlier
date.
Section 11.09. Tenant shall use reasonable efforts to cause its
contractors and all other workers at the Premises connected with Tenant's
construction to work harmoniously with each other, and with the other
contractors and workers in the Project Area, and Tenant shall not engage in,
permit or suffer, any conduct which may disrupt such harmonious relationship.
Landlord shall use reasonable efforts to cause its contractors and workers in
the Project Area to work harmoniously with Tenant's contractors and workers.
Tenant shall use its reasonable efforts to cause its contractors to minimize any
interference with the use, occupancy and enjoyment of the Project Area by other
occupants thereof.
Section 11.10. Tenant shall construct the Building in a manner which
does not unreasonably interfere with, delay or impede the activities of
Landlord, its contractors, and other contractors and developers within the
Project Area. Landlord acknowledges and confirms that Tenant has been granted
certain rights pursuant to the Storage and Staging Letter, as more particularly
described therein. If, in Landlord's reasonable judgment, Tenant shall fail to
comply with its obligations under this Section 11.10, Landlord may, in addition
to any other remedies it may have hereunder, order Tenant (and Tenant's
contractors and other Persons connected with Tenant's construction within the
Project Area) to cease those activities which Landlord believes unreasonably
interfere with, delay or impede Landlord or such other contractors or
developers. No delay or other loss or hindrance of Tenant arising from any such
order by Landlord or from the actions or omissions of any other such contractor
or developer shall form the basis for any claim by Tenant against Landlord or
excuse Tenant from the full and timely performance of its obligations under this
Lease except as otherwise expressly set forth in this Lease.
Section 11.11. All persons employed by Tenant with respect to
construction of the Building shall be paid, without subsequent deduction or
rebate unless expressly authorized by law, not less than the minimum hourly rate
required by law.
Section 11.12. Landlord has informed Tenant that Landlord intends to
grant to the City of New York at the completion of the mapping action pending
with respect to North End Avenue (the "Mapping Action"), a sidewalk easement or
otherwise provide a public sidewalk area (the "Sidewalk Easement") within the
area shown on Exhibit A. Landlord hereby grants to Tenant the right to construct
and maintain during the Term of this Lease foundations below grade and
supporting columns for the Building within the area of the Sidewalk Easement
provided that such foundations and supporting columns are constructed in
compliance with the Design Guidelines.
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Section 11.13. Landlord hereby agrees to insert in all leases
entered into by Landlord prior to the Substantial Completion of the Building
provisions substantially similar to Section 11.08, 11.09 and 11.10.
ARTICLE 12
REPAIRS
Section 12.01. Unless Landlord shall be obligated to maintain and
repair any of the foregoing in accordance with the provisions of Article 26,
Tenant shall, at its sole cost and expense, put and keep in good condition and
repair the Premises, including, without limitation, the Building, roofs,
foundations and appurtenances thereto, all sidewalks on Vesey Street and North
End Avenue adjacent to the Premises, vaults (other than vaults which are under
the control of, or are maintained or repaired by, a utility company), sidewalk
hoists, water, sewer and gas connections, pipes and mains which are located on
or service the Premises (unless the City of New York or a public utility company
is obligated to maintain or repair same) and all Fixtures, and shall put, keep
and maintain the Building in good and safe order and condition, and make all
repairs therein and thereon, interior and exterior, structural and
nonstructural, ordinary and extraordinary, foreseen and unforeseen, necessary or
appropriate to keep the same in good and safe order and condition, and whether
or not necessitated by wear, tear, obsolescence or defects, latent or otherwise,
provided, however, that Tenant's obligations with respect to Restoration
resulting from a casualty or condemnation shall be as provided in Article 8 and
9 hereof. Tenant shall not commit or suffer, and shall use all reasonable
precaution to prevent, waste, damage or injury to the Premises. When used in
this Section 12.01, the term "repairs" shall include all necessary replacements,
alterations and additions. All repairs made by Tenant shall be at least equal in
quality and class to the original work and shall be made in compliance with (a)
all Requirements of Governmental Authorities (including, but not limited to,
Local Law No. 5, 1973, as amended, and Local Law 58, 1988, as amended), (b) the
requirements of the New York Board of Fire Underwriters or any successor
thereto, and (c) the Building Code of New York City, as then in force.
Section 12.02. Except as otherwise specifically provided in Article
26, Tenant, at its sole cost and expense, shall keep or cause to be kept clean
and free from dirt, snow, ice, rubbish, obstructions and encumbrances, the
sidewalks on Vesey Street and North End Avenue adjacent to the Premises,
grounds, chutes and sidewalk hoists comprising, in front of, or adjacent to, the
Premises.
Section 12.03. Except as otherwise specifically provided in Article
26, Landlord shall not be required to furnish any services, utilities or
facilities whatsoever to the Premises, nor shall Landlord have any duty or
obligation to make any alteration, change, improvement, replacement, Restoration
or repair to, nor to demolish, the Building. Tenant assumes the full and sole
responsibility for the condition, operation. repair, alteration, improvement,
replacement, maintenance and management of the Premises. Tenant shall not clean
nor require, permit, suffer nor allow any window in the Building to
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be cleaned from the outside in violation of Section 202 of the Labor Law or of
the rules of the Industrial Board or other state, county or municipal department
board or body having jurisdiction.
ARTICLE 13
CHANGES, ALTERATIONS AND ADDITIONS
Section 13.01. From and after Substantial Completion of the
Building, Tenant shall not demolish, replace or materially alter the Building,
or any part thereof (except as provided to the contrary with respect to Fixtures
in Article 15), or make any addition thereto, whether voluntarily or in
connection with repairs required by this Lease (collectively, "Capital
Improvement"), unless Tenant shall comply with the following requirements and,
if applicable, with the additional requirements set forth in Section 13.02:
(a) No Capital Improvement shall be undertaken until Tenant shall
have procured from all Governmental Authorities and paid for all permits,
consents, certificates and approvals for the proposed Capital Improvement which
are required to be obtained prior to the commencement of the proposed Capital
Improvement (collectively, "Improvement Approvals"). Landlord shall join or
otherwise cooperate in the application for any such Improvement Approvals,
provided such application is made without cost, expense or liability (contingent
or otherwise) to Landlord. True copies of all such Improvement Approvals shall
be delivered by Tenant to Landlord prior to commencement of the proposed Capital
Improvement.
(b) All Capital Improvements, when completed, shall be of such a
character as not to materially reduce the value of the Premises below its value
immediately before construction of such Capital Improvement. Landlord
acknowledges and agrees that Capital Improvements which convert some or all of
the Trading Portion to office use or convert some or all of the Office Portion
to trading floor use shall not be deemed to reduce the value of the Premises.
(c) All Capital Improvements shall be made with reasonable diligence
and continuity (subject to Unavoidable Delays) and in a good and workmanlike
manner and in compliance with (i) all Improvement Approvals, (ii) the Master
Development Plan, the Design Guidelines, the Declaration of Restrictions (if
applicable) and, if required pursuant to Section 13.02(a) or (b), the plans and
specifications for such Capital Improvement as approved by Landlord, (iii) the
orders, rules, regulations and requirements of any Board of Fire Underwriters or
any similar body having jurisdiction, and (iv) all other Requirements.
(d) No construction of any Capital Improvements shall be commenced
until Tenant shall have delivered to Landlord original insurance policies, or
certificates of insurance with respect to such policies together with copies of
such policies, issued by responsible insurers authorized to do business in the
State of New York as are reasonably acceptable to Landlord, bearing notations
evidencing the payment of premiums or
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installments thereof then due or accompanied by other evidence satisfactory to
Landlord of such payments, for the insurance required by Section 11.03, unless
Landlord shall reasonably determine that the Capital Improvement does not
warrant the insurance required by Section 11.03 in which case Landlord shall in
its discretion specify such lesser types and levels of insurance appropriate to
such Capital Improvement. If, under the provisions of any casualty, liability or
other insurance policy or policies then covering the Premises or any part
thereof, any consent to such Capital Improvement by the insurance company or
companies issuing such policy or policies shall be required to continue and keep
such policy or policies in full force and effect, Tenant, prior to the
commencement of construction of such Capital Improvement, shall obtain such
consents and pay any additional premiums or charges therefor that may be imposed
by said insurance company or companies.
Section 13.02.
(a) If the estimated cost of any proposed Capital Improvement shall
exceed One Million Dollars ($1,000,000) (as such amount shall be increased as
provided in Section 7.02(a)), either individually or in the aggregate with other
Capital Improvements which are a related portion of a program or project of
Capital Improvements constructed in any twelve (12) month period during the
Term, Tenant shall:
(i) pay to Landlord, within ten (10) days after demand, the
reasonable fees and expenses of any architect or engineer
selected by Landlord to review the plans and specifications
describing the proposed Capital Improvement and inspect the
work on behalf of Landlord (it being understood and agreed
that Landlord shall only hire an architect or engineer to
review plans, and that Tenant shall pay such architect's or
engineer's fees, only if the plans being reviewed involve
structural work or work involving the exterior of the Building
or a change in the height, bulk or setback of the Building
from the height, bulk or setback existing immediately prior to
the Capital Improvement or in any other manner affects
compliance with the Master Development Plan, the Declaration
of Restrictions (if applicable) or the Design Guidelines); and
(ii) furnish to Landlord the following:
(w) at least forty-five (45) Business Days prior to
commencement of the proposed Capital Improvement,
complete plans and specifications for the Capital
Improvement, prepared by a licensed professional
engineer or a registered architect approved by Landlord,
which approval shall not be unreasonably withheld, and,
at the request of Landlord, any other drawings,
information or samples to which Landlord is entitled
under Article 11, all of the foregoing to be subject to
Landlord's review and approval for the sole purpose of
determining conformity with the Master
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Development Plan, the Design Guidelines, the Declaration
of Restrictions (if applicable) and, in the event such
Capital Improvement is commenced within ten (10) years
from the date the Building shall have been Substantially
Completed and, insofar as such Capital Improvement
affects the exterior of the Building, the Construction
Documents;
(x) at least ten (10) Business Days prior to
commencement of the proposed Capital Improvement, (1) a
contract or construction management agreement reasonably
satisfactory to Landlord in form assignable to Landlord
(subject to any prior assignment to any Mortgagee), made
with a reputable and responsible contractor or
construction manager approved by Landlord, which
approval shall not be unreasonably withheld, providing
for the completion of the Capital Improvement in
accordance with the schedule included in the plans and
specifications, free and clear of all liens,
encumbrances, security agreements, interests and
financing statements, and (2) payment and performance
bonds or other security, in each case satisfying the
requirements of Section 8.04(a)(ii) hereof; and
(y) at least ten (10) Business Days prior to
commencement of the proposed Capital Improvement, an
assignment to Landlord (subject to any prior assignment
to any Mortgagee) of the contract so furnished and the
bonds or other security provided thereunder, such
assignment to be duly executed and acknowledged by
Tenant and by its terms to be effective only upon any
termination of this Lease or upon Landlord's reentry
upon the Premises or following any Event of Default
prior to the complete performance of such contract, such
assignment also to include the benefit of all payments
made on account of such contract, including payments
made prior to the effective date of such assignment.
(b) Notwithstanding that the cost of any Capital Improvement is less
than One Million Dollars ($1,000,000) (as such amount shall be increased as
provided in Section 7.02(a)), such cost to be determined as provided in Section
8.02(b), to the extent that any portion of the Capital Improvement involves
structural work or work involving the exterior of the Building or a change in
the height, bulk or setback of the Building from the height, bulk or setback
existing immediately prior to the Capital Improvement or in any other manner
affects compliance with the Master Development Plan, the Declaration of
Restrictions (if applicable) or the Design Guidelines, then Tenant shall furnish
to Landlord at least thirty (30) Business Days prior to commencement of the
Capital Improvement, complete plans and specifications for the Capital
Improvement, prepared by a licensed
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professional engineer or registered architect approved by Landlord, which
approval shall not be unreasonably withheld, and, at Landlord's request, such
other items designated in Section 13.02(a)(ii)(w) hereof, all of the foregoing
to be subject to Landlord's review and approval as provided therein. In
addition, Tenant shall pay to Landlord the reasonable fees and expenses of any
independent architect or engineer selected by Landlord to review the plans and
specifications describing the proposed Capital Improvement and inspect the work
on behalf of Landlord.
(c) Landlord shall notify Tenant of Landlord's determination with
respect to any request for approval required under this Section 13.02 within
fifteen (15) Business Days of the later of (i) Landlord's receipt of such
request from Tenant or (ii) Landlord's receipt of the plans and specifications
and the drawings, information or samples which Landlord shall have requested in
accordance with Section 13.02(a)(ii)(w). Landlord's failure to so notify Tenant
within said time period shall be deemed to constitute approval of the proposed
Capital Improvement by Landlord.
(d) In the event that Tenant shall desire to modify the plans and
specifications which Landlord theretofore has approved pursuant to Section
13.02(a)(ii)(w) or 13.02(b) with respect to, or which will in any way affect,
any aspect of the exterior of the Building or the height, bulk or setback
thereof or which will affect compliance with the Design Guidelines, the
Declaration of Restrictions (if applicable) or the Master Development Plan,
Tenant shall submit the proposed modifications to Landlord. Tenant shall not be
required to submit to Landlord proposed modifications of the plans and
specifications which affect solely the interior of the Building or which do not
affect any aspect of the exterior of the Building or the height, bulk or setback
thereof or which do not affect compliance with the Design Guidelines, the
Declaration of Restrictions (if applicable) or the Master Development Plan.
Landlord shall review the proposed changes for the sole purposes of determining
whether or not they (i) conform to the Master Development Plan, the Design
Guidelines and the Declaration of Restrictions (if applicable) and (ii) in
Landlord's judgment, reasonably exercised, provide for design, finishes and
materials which are comparable in quality to those provided for in the approved
plans and specifications and shall approve such proposed changes if they do so
conform and so provide. If Landlord determines that the proposed changes are not
satisfactory in light of the above criteria, it shall so advise Tenant,
specifying in what respect the plans and specifications, as so modified, do not
conform to the Master Development Plan, the Design Guidelines or the Declaration
of Restrictions (if applicable) or do not provide for design, finishes and
materials which are comparable in quality to those provided for in the approved
plans and specifications. Within fifteen (15) Business Days after Landlord shall
have so advised Tenant, Tenant shall revise the plans and specifications so as
to meet Landlord's objections and shall deliver same to Landlord for review.
Each initial review by Landlord shall be carried out within fifteen (15)
Business Days of the date of initial delivery of the plans and specifications,
as so revised (or one or more portions thereof), by Tenant and such additional
review by Landlord shall be carried out within ten (10) Business Days of the
date of delivery of any revisions thereto, and if Landlord shall not have
notified Tenant of its determination within such periods, it shall be deemed to
have determined that the proposed
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changes are satisfactory. Landlord shall not review portions of the approved
plans and specifications which Landlord has previously determined to be
satisfactory, provided same have not been changed by Tenant.
Section 13.03. All Capital Improvements shall be carried out under
the supervision of an architect selected by Tenant and approved by Landlord,
which approval shall not be unreasonably withheld. Upon completion of any
Capital Improvement, Tenant shall furnish to Landlord a complete set of "as
built" plans for such Capital Improvement and, where applicable, a survey
meeting the requirements of Section 11.04 hereof, together with, once same is
issued, a permanent Certificate of Occupancy therefor issued by the New York
City Department of Buildings, to the extent a modification thereof was required.
Section 13.04. Title to all additions, alterations, improvements and
replacements made to the Building, including, without limitation, the Capital
Improvements, shall forthwith vest in Landlord as provided in Section 11.05,
without any obligation by Landlord to pay any compensation therefor to Tenant.
ARTICLE 14
REQUIREMENTS OF PUBLIC AUTHORITIES AND
OF INSURANCE UNDERWRITERS AND POLICIES;
COMPLIANCE WITH MASTER LEASE
Section 14.01. Except as otherwise specifically provided in Article
26, Tenant promptly shall comply with any and all applicable present and future
laws, rules, orders, ordinances, regulations, statutes, requirements, permits,
consents, certificates, approvals, codes and executive orders, including,
without limitation, Environmental Statutes (collectively, "Requirements")
without regard to the nature or cost of the work required to be done,
extraordinary, as well as ordinary, of all Governmental Authorities now existing
or hereafter created, and of any and all of their departments and bureaus, of
any applicable Fire Rating Bureau or other body exercising similar functions,
affecting the Premises or any street, avenue or sidewalk comprising a part or in
front thereof or any vault in or under the same, or requiring the removal of any
encroachment, or affecting the construction, maintenance, use, operation,
management or occupancy of the Premises, whether or not the same involve or
require any structural changes or additions in or to the Premises, without
regard to whether or not such changes or additions are required on account of
any particular use to which the Premises, or any part thereof, may be put, and
without regard to the fact that Tenant is not the fee owner of the Premises.
Notwithstanding the foregoing, Tenant shall not be required to comply with
Requirements of Landlord except (i) as otherwise expressly provided in this
Lease or (ii) if New York City shall be Landlord, Requirements of New York City
acting solely in its capacity as a Governmental Authority. Tenant also shall
comply with any and all provisions and requirements of any casualty, liability
or other insurance policy required to be carried by Tenant under the provisions
of this Lease. Tenant shall have no obligation to comply with
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Requirements with respect to, or pay for or complete, Landlord's Civic
Facilities to be performed by Landlord as provided in Article 26.
Section 14.02. Tenant shall have the right to contest the validity
of any Requirements or the application thereof. During such contest, compliance
with any such contested Requirements may be deferred by Tenant upon condition
that, if Tenant is not an Institutional Lender, and if the cost of compliance
shall exceed $1,000,000 (subject to increase as provided in Section 7.02(a)),
then, prior to instituting such proceeding, Tenant shall furnish to Landlord a
bond, cash or other security satisfactory to Landlord, in an amount equal to the
amount by which the cost of such compliance exceeds $1,000,000 (subject to
increase as provided in Section 7.02(a)), securing compliance with the contested
Requirements and payment of all interest, penalties, fines, fees and expenses in
connection therewith. Any such proceeding instituted by Tenant shall be
commenced as soon as is reasonably possible after the issuance of any such
contested matters, or after actual notice to Tenant of the applicability of such
matters to the Premises, and shall be prosecuted to final adjudication with
reasonable dispatch. Notwithstanding the foregoing, Tenant promptly shall comply
with any such Requirements and compliance shall not be deferred if such
non-compliance shall result in the imminent loss or forfeiture of the Premises,
or any part thereof, or if Landlord shall be in danger of being subject to civil
or criminal liability or penalty by reason of non-compliance therewith.
Section 14.03. Tenant shall not cause or create or permit to exist
or occur any condition or event relating to the Premises which would, with or
without notice or passage of time, result in an event of default under the
Master Lease (as the same exists on the date hereof). Tenant shall perform all
of Landlord's obligations as tenant under the Master Lease (as the same exists
on the date hereof) relating to the maintenance and operation of the Premises
unless, in accordance with the terms of this Lease, Landlord is specifically
obligated to perform any such obligation.
ARTICLE 15
FIXTURES
Section 15.01. All Fixtures shall be and shall remain the property
of Landlord. Tenant shall not have the right, power or authority to, and shall
not, remove any Fixtures from the Premises without the consent of Landlord,
which consent shall not be unreasonably withheld, provided, however, such
consent shall not be required in connection with repairs, cleaning or other
servicing, or if (subject to Unavoidable Delays) the same is promptly replaced
by Fixtures which are at least equal in utility and value to the Fixtures being
removed. Notwithstanding the foregoing, Tenant shall not be required to replace
any Fixtures which performed a function which has become obsolete or otherwise
is no longer necessary or desirable in connection with the use or operation of
the Premises. Tenant shall keep all Fixtures in good order and repair.
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Section 15.02. Tenant may, at any time and from time to time,
remove, replace, repair and upgrade any Equipment, as appropriate.
ARTICLE 16
DISCHARGE OF LIENS; BONDS
Section 16.01. Subject to the provisions of Section 16.02 hereof,
except as otherwise expressly provided herein, Tenant shall not create or permit
to be created any lien, encumbrance or charge upon the Premises or any part
thereof, or the Project Area or any part thereof, the income therefrom or any
assets of, or funds appropriated to, Landlord, and Tenant shall not suffer any
other matter or thing whereby the estate, right and interest of Landlord in the
Premises or any part thereof might be impaired. Tenant may finance (and enter
into equipment finance leases of) any Equipment.
Section 16.02. If any mechanic's, laborer's or materialman's lien
(other than a lien arising out of any work performed by Landlord) at any time
shall be filed in violation of the obligations of Tenant pursuant to Section
16.01 against the Premises or any part thereof or the Project Area or any part
thereof, or, if any public improvement lien created or permitted to be created
by Tenant shall be filed against any assets of, or funds appropriated to,
Landlord, Tenant, within forty-five (45) days after receipt of notice of the
filing thereof shall cause the same to be discharged of record by payment,
deposit, bond, order of a court of competent jurisdiction or otherwise. If
Tenant shall fail to cause such lien to be discharged of record within the
period aforesaid, and if such lien shall continue for an additional ten (10)
days after notice by Landlord to Tenant, then, in addition to any other right or
remedy, Landlord 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 or by bonding proceedings, and in any such event, Landlord shall
be entitled, if Landlord so elects, 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, costs and allowances. Any amount so paid
by Landlord, including all reasonable costs and expenses incurred by Landlord in
connection therewith including, without limitation, reasonable attorneys' fees
and disbursements, together with interest thereon at the Involuntary Rate, from
the respective dates of Landlord's making of the payment or incurring of the
costs and expenses, shall constitute Rental and shall be paid by Tenant to
Landlord within ten (10) days after demand. Notwithstanding the foregoing
provisions of this Section 16.02, Tenant shall not be required to discharge any
such lien if Tenant is in good faith contesting the same and has furnished a
cash deposit or a security bond or other such security satisfactory to Landlord
in an amount sufficient to pay such lien with interest and penalties.
Section 16.03. Nothing in this Lease contained shall be deemed or
construed in any way as constituting the consent or request of Landlord, express
or implied, by inference or otherwise, to any contractor, subcontractor, laborer
or materialman for the performance of any labor or the furnishing of any
materials for any specific improvement,
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alteration to or repair of the Premises or any part thereof, nor as giving
Tenant any right, power or authority to contract for or permit the rendering of
any services or the furnishing of materials that would give rise to the filing
of any lien against Landlord's interest in the Premises or any part thereof, the
Project Area or any part thereof, or any assets of, or funds appropriated to,
Landlord. Notice is hereby given, and Tenant shall cause all Construction
Agreements to provide, that Landlord shall not be liable for any work performed
or to be performed at the Premises for Tenant or any Subtenant or for any
materials furnished or to be furnished at the Premises for any of the foregoing,
and that no mechanic's or other lien for such work or materials shall attach to
or affect the estate or interest of Landlord in and to the Premises or any part
thereof, the Project Area or any part thereof, or any assets of, or funds
appropriated to, Landlord.
Section 16.04. Tenant shall have no power to do any act or make any
contract which may create or be the foundation for any lien, mortgage or other
encumbrance upon the estate or assets of, or funds appropriated to, Landlord or
of any interest of Landlord in the Premises.
ARTICLE 17
REPRESENTATIONS; POSSESSION
Section 17.01. Tenant acknowledges that Tenant is fully familiar
with the Land, the Project Area, the physical condition thereof (including,
without limitation, the fact that the Land includes substantial portions of
landfill which may present special difficulties in the design, construction and
maintenance of the Building and Tenant's Civic Facilities), the Title Matters,
the Master Lease, the Declaration of Restrictions, the Master Development Plan,
the Memorandum of Understanding, the Settlement Agreement and the Design
Guidelines. Except for Landlord's Civic Facilities to be constructed by Landlord
as provided in Article 26, Tenant accepts the Land in its existing condition and
state of repair, and, except as otherwise expressly set forth in this Lease, no
representations, statements, or warranties, express or implied, have been made
by or on behalf of Landlord in respect of the Land, the Project Area, the status
of title thereof, the physical condition thereof, including, without limitation,
the landfill portions thereof, the zoning or other laws, regulations, rules and
orders applicable thereto, Taxes, or the use that may be made of the Land, that
Tenant has relied on no such representations, statements or warranties, and that
Landlord shall in no event whatsoever be liable for any latent or patent defects
in the Land.
Section 17.02. Notwithstanding anything herein contained to the
contrary, Landlord represents that the Master Lease, the Design Guidelines, the
Declaration of Restrictions, the Master Development Plan, the Memorandum of
Understanding, and the Settlement Agreement have not been amended, modified or
supplemented, except as specifically set forth in the definitions contained in
Article 1 and are in full force and effect.
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Section 17.03. Landlord shall deliver possession of the Land on the
Commencement Date vacant and free of occupants and tenancies, subject to the
Title Matters.
ARTICLE 18
LANDLORD NOT LIABLE FOR INJURY OR DAMAGE, ETC.
Section 18.01. Landlord shall not in any event whatsoever be liable
for any injury or damage to Tenant or to any other Person happening on, in or
about the Premises and its appurtenances, nor for any injury or damage to the
Premises or to any property belonging to Tenant or to any other Person which may
be caused by any fire or breakage, or by the use, misuse or abuse of the
Building (including, but not limited to, any of the common areas within the
Building, Fixtures, Equipment, elevators, hatches, openings, installations,
stairways, hallways, or other common facilities), or the streets or sidewalk
area within the Premises or which may arise from any other cause whatsoever
except to the extent any of the foregoing shall have resulted from the
negligence or wrongful act of Landlord, its officers, agents, employees or
licensees; nor shall Landlord in any event be liable for the acts or failure to
act of any other tenant of any premises within the Project Area other than the
Premises, or of any agent, representative, employee, contractor or servant of
such other tenant.
Section 18.02. Landlord shall not be liable to Tenant or to any
other Person for any failure of water supply, gas or electric current, nor for
any injury or damage to any property of Tenant or of any other Person or to the
Premises caused by or resulting from gasoline, oil, steam, gas, electricity, or
hurricane, tornado, flood, wind or similar storms or disturbances, or water,
rain or snow which may leak or flow from the street, sewer, gas mains or
subsurface area or from any part of the Premises, or leakage of gasoline or oil
from pipes, appliances, sewer or plumbing works therein, or from any other
place, nor for interference with light or other incorporeal hereditaments by
anybody, or caused by any public or quasi-public work, except to the extent any
of the foregoing shall have resulted from the negligence or wrongful act of
Landlord, its officers, agents, employees or licensees.
Section 18.03. In addition to the provisions of Section 18.01 and
18.02, in no event shall Landlord be liable to Tenant or to any other Person for
any injury or damage to any property of Tenant or of any other Person or to the
Premises, arising out of any sinking, shifting, movement, subsidence, failure in
load-bearing capacity of, or other matter or difficulty related to, the soil, or
other surface or subsurface materials, on the Premises or in the Project Area,
it being agreed that Tenant shall assume and bear all risk of loss with respect
thereto.
Section 18.04. In no event shall Tenant be liable to Landlord or to
any other Person for any injury or damage to Landlord or to such other Person
happening on, in or about the Premises and its appurtenances which may be caused
by Landlord's Civic
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Facilities or the existence on the date hereof of any hazardous, toxic or
dangerous waste, substance or material in the soil or subsurface, except to the
extent that the same shall have been caused in whole or in part by the
negligence or wrongful act of Tenant or any employee, agent, servant or
contractor of Tenant or Subtenant.
ARTICLE 19
INDEMNIFICATION OF LANDLORD AND OTHERS
Section 19.01. Tenant shall not do, or knowingly permit any
Subtenant or any employee, agent, servant or contractor of Tenant or of any
Subtenant to do, any act or thing upon the Premises or elsewhere in the Project
Area which may reasonably be likely to subject Landlord to any liability or
responsibility for injury or damage to persons or property, or to any liability
by reason of any violation of law or any other Requirement, and shall use its
best efforts to exercise such control over the Premises so as to fully protect
Landlord against any such liability. Subject in all respects to the provisions
of Section 41.06(b) hereof, Tenant, to the fullest extent permitted by law,
shall indemnify and save Landlord, any former Landlord, the State of New York,
UDC, the City, EDC, and their agents, directors, officers and employees
(collectively, the "Indemnitees"), harmless from and against any and all
liabilities, suits, obligations, fines, damages, penalties, claims, costs,
charges and expenses, including, without limitation, engineers', architects' and
attorneys' fees and disbursements, which may be imposed upon or incurred by or
asserted against any of the Indemnitees by reason of any of the following
occurring during the Term, except to the extent that the same shall have been
caused in whole or in part by the negligence or wrongful act of any of the
Indemnitees:
(a) construction of the Building or any other work or thing done in
or on the Premises or any part thereof, provided that such indemnity relates to
items of construction that Tenant, rather than Landlord, is obligated to perform
(i.e. that such indemnity does not include or relate to Landlord's bringing
utilities and infrastructure to and constructing Landlord's Civic Facilities for
the Building or Landlord's maintaining or repairing the electrical closets in
the basement of the Building);
(b) any use, non-use, possession, occupation, alteration, repair,
condition, operation, maintenance or management of the Premises or any part
thereof or of any street, alley, sidewalk, curb, vault, passageway or space
comprising a part of the Premises or adjacent thereto, provided such indemnity
with regard to streets, alleys, sidewalks, curbs, vaults, passageways and other
space is limited to an alteration, repair, condition, or maintenance of any
street, alley, sidewalk, curb, vault, passageway or other space done or
performed by Tenant or any agent, contractor, servant or employee of Tenant or
which Tenant is obligated to do or perform, provided, however, such indemnity
shall not relate to any pre-existing environmental condition;
(c) any negligent or tortious act or failure to act within the
Project Area on the part of Tenant or any agent, contractor, servant or employee
of Tenant;
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(d) any accident, injury (including death at any time resulting
therefrom) or damage to any Person or property occurring in or on the Premises
or any part thereof or in, or about any sidewalk or vault, unless such sidewalk
or vault is solely within the control of Landlord or a utility company,
provided, however, such indemnity shall not relate to any pre-exising
environmental condition;
(e) any failure on the part of Tenant to perform or comply with any
of the covenants, agreements, terms or conditions contained in this Lease on its
part to be performed or complied with;
(f) any lien or claim which may have arisen out of any act of Tenant
or any agent, contractor, servant or employee of Tenant against or on the
Premises or any other portion of the Project Area, or any lien or claim created
or permitted to be created by Tenant in respect of the Premises against any
assets of, or funds appropriated to any of the Indemnitees under the laws of the
State of New York or of any other Governmental Authority or any liability which
may be asserted against any of the Indemnitees with respect thereto, provided,
however, such indemnity shall not relate to any pre-existing environmental
condition;
(g) any failure on the part of Tenant to keep, observe and perform
any of the terms, covenants, agreements, provisions, conditions or limitations
contained in the Construction Agreements or Subleases, on Tenant's part to be
kept, observed or performed;
(h) any contest by Tenant permitted pursuant to the provisions of
this Lease, including, without limitation, Articles 4, 14 and 28 hereof; or
(i) any action taken by any Person pursuant to any Environmental
Statute or under common law, pertaining to hazardous or toxic waste or other
substances, or in any manner arising out of or related to the presence, use,
generation, storage, disposal or transport of any hazardous materials or
environmental contaminants found in, on or under, affixed to or emanating from
the Premises, provided, however, such indemnity shall not relate to any
pre-existing environmental condition.
Section 19.02. The obligations of Tenant under this Artiucle 19
shall not be affected in any way by the absence in any case of covering
insurance or by the failure or refusal of any insurance carrier to perform any
obligation on its part under insurance policies affecting the Premises.
Section 19.03. If any claim, action or proceeding is made or brought
against any of the Indemnitees by reason of any event for which Tenant has
agreed to indemnify the Indemnitees in Section 19.01, then, Tenant shall resist
or defend such claim, action or proceeding (in such Indemnitee's name, if
necessary) by the attorneys for Tenant's insurance carrier (if such claim,
action or proceeding is covered by insurance maintained by Tenant) or (in all
other instances) by such attorneys as Tenant shall select and Landlord shall
approve, which approval shall not be unreasonably withheld. In such event,
Tenant shall control all decisions in respect of the litigation and settlement
of such claims.
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Notwithstanding the foregoing, Landlord may engage its own attorneys to assist
in its defense. Provided such claim, action or proceeding is not covered by
insurance maintained by Tenant and exceeds Five Hundred Thousand Dollars
($500,000) (as such amount shall be increased as provided in Section 7.02(a))
and the attorneys engaged by Landlord are experienced in matters of the type in
question, Tenant shall pay the reasonable fees and disbursements of such
attorneys. The indemnification obligations imposed upon Tenant under Section
19.01 shall not apply to any settlement agreed to by Landlord without Tenant's
consent, nor if Landlord retains its own attorneys and such retention will
materially impair or materially diminish Tenant's insurance coverage and
Landlord has been so advised in writing by Tenant's insurer.
ARTICLE 20
RIGHT OF INSPECTION, ETC.
Section 20.01. Tenant shall permit Landlord and its agents or
representatives to enter the Premises at all reasonable times and upon
reasonable notice (except in cases of emergency) for the purpose of (a)
inspecting the same, (b) determining whether or not Tenant is in compliance with
its obligations hereunder, (c) constructing, maintaining and inspecting any
Civic Facilities, or maintaining and repairing the meter rooms in the basement
of the Building, and (d) making any necessary repairs to the Premises and
performing any work therein that may be necessary by reason of Tenant's failure
to make any such repairs or perform any such work, provided that, except in any
emergency, Landlord shall have given Tenant notice specifying such repairs or
work and Tenant shall have failed to make such repairs or to do such work within
sixty (60) days after the receipt of such notice (subject to Unavoidable
Delays), or if such repairs or such work cannot reasonably be completed during
such sixty (60) day period, to have commenced and be diligently pursuing the
same (subject to Unavoidable Delays).
Section 20.02. Nothing in this Article 20 or elsewhere in this Lease
shall imply any duty upon the part of Landlord to do any work required to be
performed by Tenant hereunder and performance of any such work by Landlord shall
not constitute a waiver of Tenant's default in failing to perform the same.
Landlord, during the progress of any such work, may keep and store at the
Premises all necessary materials, tools, supplies and equipment. Landlord shall
not be liable for inconvenience, annoyance, disturbance, loss of business or
other damage of Tenant, any Subtenant or other occupant of the Building by
reason of making such repairs or the performance of any such work, or on account
of bringing materials, tools, supplies and equipment into the Premises during
the course thereof, provided Landlord shall use reasonable efforts to minimize
damage resulting from Landlord's exercise of its rights under this Article 20,
and the obligations of Tenant under this Lease shall not be affected thereby. To
the extent that Landlord undertakes such work or repairs, such work or repairs
shall be commenced and completed in a good and workmanlike manner, and with
reasonable diligence, subject to Unavoidable Delays, and in
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such a manner as not to unreasonably interfere with the conduct of business in
or use of such space.
ARTICLE 21
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
Section 21.01. If Tenant at any time shall be in Default, after
notice thereof and after applicable grace periods, if any, provided under this
Lease for Tenant or a Mortgagee, respectively, to cure or commence to cure same,
Landlord, without waiving or releasing Tenant from any obligation of Tenant
contained in this Lease, may (but shall be under no obligation to) perform such
obligation on Tenant's behalf.
Section 21.02. All reasonable sums paid by Landlord and all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, incurred by Landlord in connection with its
performance of any obligation pursuant to Section 21.01, together with interest
thereon at the Involuntary Rate from the respective dates of Landlord's making
of each such payment or incurring of each such sum, cost, expense, charge,
payment or deposit until the date of actual repayment to Landlord, shall be paid
by Tenant to Landlord within ten (10) days after Landlord shall have submitted
to Tenant a statement, in reasonable detail, substantiating the amount demanded
by Landlord. Any payment or performance by Landlord pursuant to Section 21.01
shall not be nor be deemed to be a waiver or release of breach or Default of
Tenant with respect thereto or of the right of Landlord to terminate this Lease,
institute summary proceedings or take such other action as may be permissible
hereunder or otherwise provided at law or in equity if an Event of Default by
Tenant shall have occurred.
ARTICLE 22
NO ABATEMENT OF RENTAL
Except as may be otherwise expressly provided herein, there shall be
no abatement, off-set, diminution or reduction of Rental payable by Tenant
hereunder or of the other obligations of Tenant hereunder under any
circumstances.
ARTICLE 23
PERMITTED USE; NO UNLAWFUL OCCUPANCY
Section 23.01. Subject to the provisions of law and this Lease,
Tenant shall occupy the Premises in accordance with the Certificate or
Certificates of Occupancy for the Premises, the Occupancy Agreement, the Master
Development Plan and the Design Guidelines, and for no other use or purposes.
Notwithstanding the provisions of the
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immediately preceding sentence, in the event Tenant shall have elected to
terminate the Funding Agreement pursuant to the provisions of Section
9.6(b)(ii)(B) thereof, then, for a period of five (5) years commencing on the
Occupancy Date, (i) Tenant shall use and occupy the Premises for its world
headquarters, and (ii) Tenant shall retain its headquarters, executive,
administrative and clearinghouse facilities and offices which relate to floor
trading of futures or options (not including its Host Computer (as such term is
defined in the Occupancy Agreement)) at the Premises, and all other provisions
of the Occupancy Agreement shall be of no further force or effect.
Section 23.02. Tenant shall not use or occupy, nor permit or suffer
the Premises or any part thereof to be used or occupied for any unlawful,
illegal or extra hazardous business, use or purpose, or in such manner as to
constitute a nuisance of any kind (public or private) or that Landlord, in its
reasonable judgment, deems offensive by reason of odors, fumes, dust, smoke,
noise or other pollution, or for any purpose or in any way in violation of the
Certificates of Occupancy or of any governmental laws, ordinances, requirements,
orders, directions, rules or regulations, including, without limitation, the
Design Guidelines, or which may make void or voidable any insurance then in
force on the Premises or, without Landlord's consent, for any use which requires
a variance, waiver or special permit under the Zoning Resolution of New York
City as then in effect. Tenant shall take, immediately upon the discovery of any
such unpermitted, unlawful, illegal or extra hazardous use, all necessary
actions, legal and equitable, to compel the discontinuance of such use. If for
any reason Tenant shall fail to take such actions, and such failure shall
continue for thirty (30) days after Tenant's receipt of notice from Landlord
specifying such failure, Landlord is hereby irrevocably authorized (but not
obligated) to take all such actions in Tenant's name and on Tenant's behalf,
Tenant hereby appointing Landlord as Tenant's attorney-in-fact coupled with an
interest for all such purposes. All reasonable sums paid by Landlord and all
reasonable costs and expenses incurred by Landlord acting pursuant to the
immediately preceding sentence (including, but not limited to, reasonable
attorneys' fees and disbursements), together with interest thereon at the
Involuntary Rate from the respective dates of Landlord's making of each such
payment or incurring of each such cost, expense or charge until the date of
receipt of repayment by Landlord, shall be paid by Tenant to Landlord within ten
(10) days after demand and shall constitute Rental under this Lease.
Section 23.03. Tenant shall not knowingly suffer or permit the
Premises or any portion thereof to be used by the public in such manner as might
reasonably tend to impair title to the Premises or any portion thereof, or in
such manner as might reasonably make possible a claim or claims of adverse usage
or adverse possession by the public, as such, or of implied dedication of the
Premises or any portion thereof.
Section 23.04. Tenant shall take all such actions as Landlord is
required to take in connection with the use and occupancy of the Premises under
the terms of the Master Lease, as the same exists on the date hereof, and Tenant
shall not (to the extent reasonably within Tenant's control) permit any action
or condition in respect of the Premises which constitutes or would, with notice
or lapse of time or both, constitute an
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event of default under the Master Lease (as the same exists on the date hereof).
Landlord shall perform all obligations of tenant under the Master Lease other
than those which are the obligation of Tenant under this Lease, and Landlord
shall not take or fail to take any action which constitutes or would, with
notice or lapse of time or both, constitute an event of default under the Master
Lease.
Section 23.05.
In the event Tenant defaults under the Funding Agreement or the
Occupancy Agreement and such default shall not have been remedied within any
applicable grace or cure period provided therein, such default shall constitute
an Event of Default hereunder permitting Landlord to terminate this Lease.
Except as otherwise provided in Section 42.01 hereof, in such event and
notwithstanding anything contained in this Lease to the contrary, Tenant shall
not be liable for, and Landlord shall not be entitled to receive, any damages by
reason of such default and termination.
Section 23.06.
Tenant shall not amend, modify or enter into a supplement to the
Severance Tenants Agreement without the prior consent of Landlord, which consent
shall not be unreasonably withheld; it being the agreement of Landlord and
Tenant that a breach by Tenant of the provisions of this Section 23.06 shall
constitute an Event of Default hereunder.
ARTICLE 24
EVENTS OF DEFAULT; CONDITIONAL LIMITATIONS,
REMEDIES, ETC.
Section 24.01. Each of the following events shall be an "Event of
Default" hereunder:
(a) if Tenant shall fail to pay any item of Rental, 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 to Tenant;
(b) if (i) Commencement of Construction shall not have occurred on
or before the Construction Commencement Date (subject to Unavoidable Delays) and
such failure shall continue for thirty (30) days after notice from Landlord to
Tenant, (ii) Substantial Completion of the Building shall not have occurred on
or before the Scheduled Completion Date (subject to Unavoidable Delays) and such
failure shall continue for sixty (60) days after notice from Landlord to Tenant
or (iii) the Occupancy Date shall not have occurred within forty eight (48)
months of the Construction Commencement Date (subject to Unavoidable Delays) and
such failure shall continue for thirty (30) days after notice from Landlord to
Tenant;
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(c) if Tenant shall fail to observe or perform one or more of the
other terms, conditions, covenants or agreements contained in this Lease,
including, without limitation, any of Tenant's obligations under the provisions
of Article 11. of this Lease (other than the obligations referred to in the
preceding Section 24.01(b)), and such failure shall continue for a period of
thirty (30) days after notice thereof by Landlord to Tenant specifying such
failure (unless such failure requires work to be performed, acts to be done, or
conditions to be removed which cannot by their nature or because of Unavoidable
Delays reasonably be performed, done or removed, as the case may be, within such
thirty (30) day period, in which case no Event of Default shall be deemed to
exist as long as Tenant shall have commenced curing the same within such thirty
(30) day period and shall, subject to Unavoidable Delays, diligently and
continuously prosecute the same to completion);
(d) to the extent permitted by law, if Tenant shall admit, in
writing, that it is unable to pay its debts as such become due;
(e) to the extent permitted by law, if Tenant shall make an
assignment for the benefit of creditors;
(f) to the extent permitted by law, if Tenant shall file a voluntary
petition under Title 11 of the United States Code or if such petition is filed
against it, and an order for relief is entered, or if Tenant shall file any
petition or answer seeking, consenting to or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation. dissolution or similar
relief under the present or any future federal bankruptcy code or any other
present or future applicable federal, state or other statute or law, or shall
seek or consent to or acquiesce in or suffer the appointment of any trustee,
receiver, custodian, assignee, sequestrator, liquidator or other similar
official of Tenant, or of all or any substantial part of its properties or of
the Premises or any interest therein of Tenant, or if Tenant shall take any
corporate action in furtherance of any action described in Sections 24.01(d),
(e) or (f) hereof;
(g) to the extent permitted by law, if within ninety (90) days after
the commencement of any proceeding against Tenant seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy code or any other
present or future applicable federal, state or other statute or law, such
proceeding shall not have been dismissed; or if, within ninety (90) days after
the appointment, without the consent or acquiescence of Tenant, of any trustee,
receiver, custodian, assignee, sequestrator, liquidator or other similar
official of Tenant or of all or any substantial part of its properties or of the
Premises or any interest therein of Tenant, such appointment shall not have been
vacated or stayed on appeal or otherwise, or if, within thirty (30) days after
the expiration of any such stay, such appointment shall not have been vacated;
(h) if this Lease or the estate of Tenant hereunder shall be
assigned, subleased, transferred, mortgaged or encumbered, or there shall be a
Transfer, without Landlord's approval to the extent required hereunder or
without compliance with the
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provisions of this Lease applicable thereto and such transaction shall not be
made to comply or voided ab initio within thirty (30) days after notice thereof
from Landlord to Tenant;
(i) if a levy under execution or attachment shall be made against
the Premises and such execution or attachment shall not be vacated or removed by
court order, or otherwise or bonded within a period of thirty (30) days from the
date on which Tenant shall have received notice of same;
(j) if Tenant is a corporation, if Tenant shall at any time fail to
maintain its corporate existence in good standing, or to pay any corporate
franchise tax when and as the same shall become due and payable and such failure
shall continue for thirty (30) days after notice thereof from Landlord or any
governmental agency to Tenant;
(k) if Tenant shall have defaulted under the Funding Agreement or
Occupancy Agreement and such default shall not have been remedied within any
applicable grace or cure period provided therein; or
(l) if Tenant shall have amended, modified or entered into a
supplement to the Severance Tenants Agreement without the prior consent of
Landlord.
Section 24.02. If an Event of Default (other than an Event of
Default described in Section 24.01(k) or Section 23.05) shall occur, Landlord
may elect to declare due and payable a sum equal to the amount by which the
Rental reserved in this Lease for the period which otherwise would have
constituted the unexpired portion of the Term exceeds the fair and reasonable
rental value of the Premises for the same period, both discounted to present
worth at the rate of eight percent (8%) per annum, such sum shall be due and
payable ten (10) days after notice by Landlord to Tenant of such election.
However, the aforesaid remedy shall not be applicable to a Mortgagee which
elects to cure the Default of Tenant pursuant to Section 10.10 or receives a new
lease pursuant to Section 10.11. Landlord may also elect to proceed by
appropriate judicial proceedings, either at law or in equity, to enforce
performance or observance by Tenant of the applicable provisions of this Lease
and/or to recover damages for breach thereof.
Section 24.03.
(a) If any Event of Default (i) described in Sections 24.01(d),
(e), (f) or (g) hereof shall occur, or (ii) described in Sections 24.01(b), (c),
(h), (i), (j), (k) or (l) shall occur and Landlord, at any time thereafter, at
its option, gives notice to Tenant stating that this Lease and the Term shall
expire and terminate on the date specified in such notice, which date shall be
not less than ten (10) days after the giving of such notice, and if, on the date
specified in such notice, Tenant shall have failed to cure the Default which was
the basis for the Event of Default, then this Lease and the Term and, except as
provided in Section 24.04(a), all rights of Tenant under this Lease shall expire
and terminate as of the date on which the Event of Default described in clause
(i) above occurred or the date specified in the notice given pursuant to clause
(ii) above, as the case may be, as if such date were the date herein definitely
fixed for the expiration of the Term and Tenant
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immediately Shall quit and surrender the Premises. Anything contained herein to
the contrary notwithstanding, if such termination shall be stayed by order of
any court having jurisdiction over any proceeding described in Section 24.01(f)
or (g) hereof, or by federal or state statute, then. following the expiration of
any such stay, or if the trustee appointed in any such proceeding, Tenant or
Tenant as debtor-in-possession shall fail to assume Tenant's obligations under
this Lease within the period prescribed therefor by law or within one hundred
twenty (120) days after entry of the order for relief or as may be allowed by
the court, or if said trustee, Tenant or Tenant as debtor-in-possession shall
fail to provide adequate protection of Landlord's right, title and interest in
and to the Premises or adequate assurance of the complete and continuous future
performance of Tenant's obligations under this Lease as provided in Section
24.15 hereof, Landlord, to the extent permitted by law or by leave of the court
having jurisdiction over such proceeding, shall have the right, at its election,
to terminate this Lease on ten (10) days notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said ten (10)
day period this Lease shall cease and expire as aforesaid and Tenant, Tenant as
debtor-in-possession and/or trustee shall immediately quit and surrender the
Premises as aforesaid.
(b) If an Event of Default described in Section 24.01 (a) shall
occur, or this Lease shall be terminated as provided in Section 24.03(a),
Landlord, without notice, may re-enter and repossess the Premises using such
force for that purpose as may be necessary without being liable to indictment,
prosecution or damages therefor and may dispossess Tenant by summary proceedings
or otherwise.
Section 24.04.
If this Lease shall be terminated as provided in Section 24.03(a) or
Tenant shall be dispossessed by summary proceedings or otherwise as provided in
Section 24.03(b) hereof:
(a) Tenant shall pay to Landlord all Rental payable by Tenant under
this Lease to the date upon which this Lease and the Term shall have expired and
come to an end or to the date of re-entry upon the Premises by Landlord, as the
case may be;
(b) Landlord may complete all construction required to be performed
by Tenant hereunder and may repair and alter the Premises in such manner as
Landlord may deem necessary or advisable (and may apply to the foregoing all
funds, if any, then held by Depository pursuant to Articles 7, 8 or 9) without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability, and/or let or relet the Premises or any parts thereof for the
whole or any part of the remainder of the Term or for a longer period, in
Landlord's name or as agent of Tenant, and out of any rent and other sums
collected or received as a result of such reletting Landlord shall: (A) first,
pay to itself the reasonable cost and expense of terminating this Lease,
re-entering, retaking, repossessing, completing construction and repairing or
altering the Premises, or any part thereof, and the cost and expense of removing
all persons and property therefrom, including in such costs brokerage
commissions, legal expenses and reasonable attorneys' fees and disbursements,
(B) second, pay to itself the reasonable cost and expense sustained in securing
any new tenants and
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other occupants, including in such costs brokerage commissions, legal expenses
and reasonable attorneys' fees and disbursements and other expenses of preparing
the Premises for reletting, and, if Landlord shall maintain and operate the
Premises, the reasonable cost and expense of operating and maintaining the
Premises and (C) third, pay to itself any balance remaining on account of the
liability of Tenant to Landlord. Landlord in no way shall be responsible or
liable for any failure to relet the Premises or any part thereof, or for any
failure to collect any rent due on any such reletting, and no such failure to
relet or to collect rent shall operate to relieve Tenant of any liability under
this Lease or to otherwise affect any such liability;
(c) if Landlord shall not have declared all Rental due and payable
pursuant to Section 24.02 hereof, Tenant shall be liable for and shall pay to
Landlord, as damages, any deficiency (referred to as "Deficiency") between the
Rental reserved in this Lease for the period which otherwise would have
constituted the unexpired portion of the Term and the net amount, if any, of
rents collected under any reletting effected pursuant to the provisions of
Section 24.04(b) for any part of such period (first deducting from the rents
collected under any such reletting all of the payments to Landlord described in
Section 24.04(b) hereof); any such Deficiency shall be paid in installments by
Tenant on the days specified in this Lease for payment of installments of
Rental, and Landlord shall be entitled to recover from Tenant each Deficiency
installment as the same shall arise, and no suit to collect the amount of the
Deficiency for any installment period shall prejudice Landlord's right to
collect the Deficiency for any subsequent installment period by a similar
proceeding, provided, however, the provisions of this subparagraph (c) shall not
be applicable and Tenant shall not be responsible for the payment of any
Deficiency if the Event of Default that gave rise to the termination of the
Lease or summary proceedings was an Event of Default described in Section
24.01(k) or Section 23.05 hereof; and
(d) if Landlord shall not have declared all Rental due and payable
pursuant to Section 24.02 hereof, and whether or not Landlord shall have
collected any Deficiency installments as aforesaid, Landlord shall be entitled
to recover from Tenant, and Tenant shall pay to Landlord, on demand, in lieu of
any further Deficiencies, as and for liquidated and agreed final damages (it
being agreed that it would be impracticable or extremely difficult to fix the
actual damage), a sum equal to the amount by which the Rental reserved in this
Lease for the period which otherwise would have constituted the unexpired
portion of the Term exceeds the then fair and reasonable rental value of the
Premises for the same period, both discounted to present worth at the rate of
eight percent (8%) per annum less the aggregate amount of Deficiencies
theretofore collected by Landlord pursuant to the provisions of Section 24.04(c)
for the same period; it being agreed that before presentation of proof of such
liquidated damages to any court, commission or tribunal, if the Premises, or any
part thereof, shall have been relet by Landlord for the period which otherwise
would have constituted the unexpired portion of the Term, or any part thereof,
the amount of rent reserved upon such reletting shall be deemed, prima facie, to
be the fair and reasonable rental value for the part or the whole of the
Premises so relet during the term of the reletting, provided, however, the
provisions of this subparagraph (d) shall not be applicable and Tenant shall not
be responsible for the payment of such damages if the
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Event of Default that gave rise to the termination of this Lease or summary
proceedings was an Event of Default described in Section 24.01(k) or Section
23.05 hereof.
Section 24.05. No termination of this Lease pursuant to Section
24.03(a) or taking possession of or reletting the Premises, or any part thereof,
pursuant to Section 24.03(b) and 24.04(b), shall relieve Tenant of its
liabilities and obligations hereunder, all of which shall survive such
expiration, termination, repossession or reletting.
Section 24.06. To the extent not prohibited by law, and except as
provided in this lease, Tenant hereby waives and releases all rights now or
hereafter conferred by statute or otherwise which would have the effect of
limiting or modifying any of the provisions of this Article 24. Tenant shall
execute, acknowledge and deliver any instruments which Landlord may request,
whether before or after the occurrence of an Event of Default, evidencing such
waiver or release.
Section 24.07. Suit or suits for the recovery of damages, or for a
sum equal to any installment or installments of Rental payable hereunder or any
Deficiencies or other sums payable by Tenant to Landlord pursuant to this
Article 24, may be brought by Landlord from time to time at Landlord's election,
and nothing herein contained shall be deemed to require Landlord to await the
date whereon this Lease or the Term would have expired had there been no Event
of Default by Tenant and termination.
Section 24.08. Nothing contained in this Article 24 shall limit or
prejudice the right of Landlord to prove and obtain as liquidated damages in any
bankruptcy, insolvency, receivership, reorganization or dissolution proceeding
an amount equal to the maximum allowed by statute or rule of law governing such
proceeding and in effect at the time when such damages are to be proved, whether
or not such amount shall be greater than, equal to or less than the amount of
the damages referred to in any of the preceding Sections of this Article 24.
Section 24.09. No receipt of moneys by Landlord from Tenant after
the termination of this Lease, or after the giving of any notice of the
termination of this Lease (unless such receipt cures the Event of Default which
was the basis for the notice), shall reinstate, continue or extend the Term or
affect any notice theretofore given to Tenant, or operate as a waiver of the
right of Landlord to enforce the payment of Rental payable by Tenant hereunder
or thereafter falling due, or operate as a waiver of the right of Landlord to
recover possession of the Premises by proper remedy, except as herein otherwise
expressly provided, it being agreed that after the service of notice to
terminate this Lease or the commencement of any suit or summary proceedings, or
after a final order or judgment for the possession of the Premises, Landlord may
demand, receive and collect any moneys due or thereafter falling due without in
any manner affecting such notice, proceeding, order, suit or judgment, all such
moneys collected being deemed payments on account of the use and operation of
the Premises or, at the election of Landlord, on account of Tenant's liability
hereunder.
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Section 24.10. Except as otherwise expressly provided herein or as
prohibited by applicable law, Tenant hereby expressly waives 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 provided by any law or statute now in force or hereafter
enacted or otherwise, or re-entry or repossession 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, and Landlord and Tenant waive
and shall waive trial by jury in any action, proceeding or counterclaim 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 or occupancy of the Premises, or any claim of
injury or damage. The terms "enter", "re-enter" "entry" or "re-entry" as used in
this Lease are not restricted to their technical legal meaning.
Section 24.11. No failure by Landlord or any prior 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 Rental during the continuance of
any such breach, shall constitute a waiver of any such breach or of such
covenant, agreement, term or condition. No covenant, agreement, term or
condition of this Lease to be performed or complied with by Tenant, and no
breach thereof, shall be waived, altered or modified except by a written
instrument executed by Landlord. No waiver of any breach shall affect or alter
this Lease, but each and every covenant, agreement, term and condition of this
Lease still continue in full force and effect with respect to any other then
existing or subsequent breach thereof.
Section 24.12. 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 rights and remedies allowed at law
or in equity or by statute or otherwise as though re-entry, summary proceedings,
and other remedies were not provided for in this Lease. To the extent permitted
by law, Tenant waives any requirement for the posting of bonds or other security
in any such action. The provisions of this Section 24.12 shall not be applicable
with respect to a breach or threatened breach by Tenant of the Occupancy
Requirement or the Minimum Requirement or of Tenant's obligation hereunder to
construct and complete the Building.
Section 24.13. 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, and the exercise or beginning of the exercise
by Landlord of any one or more of the rights or remedies provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by Landlord of
any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise.
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Section 24.14. Tenant shall pay to Landlord all costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
incurred by Landlord in any action or proceeding to which Landlord may be made a
party by reason of any act or omission of Tenant. Tenant also shall pay to
Landlord all costs and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, incurred by Landlord in enforcing any of the
covenants and provisions of this Lease and incurred in any action brought by
Landlord against Tenant on account of the provisions hereof, and all such costs,
expenses, and reasonable attorneys' fees and disbursements may be included in
and form a part of any judgment entered in any proceeding brought by Landlord
against Tenant under this Lease. All of the sums paid or obligations incurred by
Landlord as aforesaid, with interest at the Involuntary Rate, shall be paid by
Tenant to Landlord within fifteen (15) days after demand by Landlord.
Section 24.15. If an order for relief is entered or if a stay of
proceeding or other acts becomes effective in favor of Tenant or Tenant's
interest in this Lease in any proceeding which is commenced by or against Tenant
under the present or any future federal Bankruptcy Code or any other present or
future applicable federal, state or other statute or law, Landlord shall be
entitled to invoke any and all rights and remedies available to it under such
bankruptcy code, statute, law or this Lease, including, without limitation, such
rights and remedies as may be necessary to adequately assure the complete and
continuous future performance of Tenant's obligations under this Lease. Adequate
protection of Landlord's right, title and interest in and to the Premises, and
adequate assurance of the complete and continuous future performance of Tenant's
obligations under this Lease, shall include, without limitation, the following
requirements:
(a) that Tenant shall comply with all of its obligations under this
Lease;
(b) that Tenant shall pay to Landlord, on the first day of each
month occurring subsequent to the entry of such order, or on the effective date
of such stay, a sum equal to the amount by which the Premises diminished in
value during the immediately preceding monthly period, but, in no event, an
amount which is less than the aggregate Rental payable for such monthly period;
(c) that Tenant shall continue to use the Premises in the manner
required by this Lease;
(d) that Landlord shall be permitted to supervise the performance of
Tenant's obligations under this Lease;
(e) that Tenant shall hire, at its sole cost and expense, such
security personnel as may be necessary to insure the adequate protection and
security of the Premises;
(f) that Tenant shall pay to Landlord within thirty (30) days after
entry of such order or the effective date of such stay, as partial adequate
protection against future diminution in value of the Premises and adequate
assurance of the complete and continuous
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future performance of Tenant's obligations under this Lease, a security deposit
as may be required by law or ordered by the court;
(g) that Tenant has and will continue to have unencumbered assets
after the payment of all secured obligations and administrative expenses to
assure Landlord that sufficient funds will be available to fulfill the
obligations of Tenant under this Lease;
(h) that Landlord be granted a security interest acceptable to
Landlord in Tenant's leasehold hereunder;
(i) that 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 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 (i)
the name and address of such Person, (ii) all of the terms and conditions of
such offer, and (iii) the adequate assurance to be provided Landlord to assure
such Person's future performance under the Lease, including, without limitation,
the 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 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.
Section 24.16. Nothing contained in this Article 24 shall be deemed
to modify the provisions of Sections 10.10, 10.11 or 41.06(b) hereof.
ARTICLE 25
NOTICES
Section 25.01. Whenever it is provided in this Lease that a notice,
demand, request, consent, approval or other communication shall or may be given
to or served upon either of the parties by the other, or by Landlord upon any
Mortgagee, and whenever either of the parties shall desire to give or serve upon
the other any notice, demand, request, consent, approval, or other communication
with respect hereto or the Premises, each such notice, demand, request, consent,
approval, or other communication shall be in writing and, any law or statute to
the contrary notwithstanding, shall be effective for any purpose if given or
served as follows:
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(a) if by Landlord, by delivery or by mailing the same to Tenant by
registered or certified mail, postage prepaid, return receipt requested,
addressed to Tenant at Four World Trade Center, New York, New York 10048,
Attention: President with a copy to the General Counsel at the same address with
an additional copy to Winthrop, Stimpson, Putnam & Roberts, One Battery Park
Plaza, New York, New York 10004-1490, Attention: Stephen Lefkowitz, Esq. or to
such other address(es) and attorneys as Tenant may from time to time designate
by notice given to Landlord as aforesaid and, in the case of any notice required
to be given to any Mortgagee pursuant to this Lease, to each such Mortgagee at
the address of such Mortgagee set forth in the notice mentioned in the first
sentence of Section 10.10(a) hereof; and
(b) if by Tenant, by delivering or by mailing the same to Landlord
by registered or certified mail, postage prepaid, return receipt requested,
addressed to Landlord at One World Financial Center, New York, New York 10281,
Att: President, or to such other address as Landlord may from time to time
designate by notice given to Tenant as aforesaid (with a copy, given in the
manner provided above, addressed to the attention of Landlord's General Counsel,
at the address set forth above or at such other address as Landlord may from
time to time designate by notice to Tenant as aforesaid).
Section 25.02. Every notice, demand, request, consent, approval, or
other communication hereunder shall be deemed to have been given or served when
delivered, or if mailed, three (3) Business Days after the date that the same
shall have been deposited in the United States mails, postage prepaid, in the
manner aforesaid (except that a notice designating the name or address of a
person to whom any notice or other communication, or copy thereof, shall be sent
shall be deemed to have been given when same is received).
ARTICLE 26
CONSTRUCTION AND MAINTENANCE OF THE CIVIC FACILITIES
Section 26.01. (a) The term "Civic Facilities" shall include the
following improvements:
(i) Electrical, steam, gas and telephone mains and lines bringing
service from such mains and lines to the Premises (including
electrical transformers, network protectors and second
telephone port of entry);(1)
(ii) Water mains and lines bringing service from such mains and
lines to the Premises;(2)
(iii) Sanitary and storm sewers and lines bringing service from such
mains and lines to the Premises;(2)
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(iv) Fire hydrants and Emergency Response Service ("ERS") conduits
and boxes;(2)
(v) Street lighting (conduit, cable, poles, fixtures and
connections);(2)
(vi) Streets;(2)
(vii) Curbs;(2)
(viii) Temporary concrete sidewalks;
(ix) Permanent sidewalks, including cobble strip and paving;
(x) Landscaped esplanade, including appurtenances located within
the pierhead line of the Project Area ("Esplanade");
(xi) Landscaped park and public open space ("North Cove Link
Park"); and
(xii) Street trees.
(b) Landlord and Tenant acknowledge that those improvements
described in paragraph (a), subparagraphs (i) (other than the steam main, lines
bringing steam, electrical, gas and telephone service from the mains to the
Premises, electrical transformers, network protectors, and a second telephone
port of entry), (ii) (other than lines from mains to the Premises), (iii) (other
than lines from mains to the Premises), (iv), (v), (vi), (vii), (viii), (ix)
(other than the sidewalk in the Sidewalk Easement area), (x) and (xii) have been
completed. Subject to Unavoidable Delays, (i) Landlord shall commence and
diligently complete, or cause to be commenced and substantially completed, in
accordance with the development schedule set forth in Exhibit C, the
construction or installation of Landlord's Civic Facilities and (ii) Tenant
shall commence and diligently complete in accordance with the Schedule set forth
in Exhibit C and, in accordance with the Construction Documents and the
specifications supplied by Landlord as set forth in Exhibit C, the construction
or installation of Tenant's Civic Facilities, in each case, in a good and
workmanlike manner and in compliance with normal New York City construction
rules and all applicable Requirements. Landlord represents that there are no
improvements required to be constructed as environmental mitigation in
connection with the Project, including any improvements to the New York City
subway system required by the Agreement between Landlord and the New York City
Transit Authority dated as of March 9, 1987, as amended.
(c) The term "Tenant's Civic Facilities" shall mean (i) the
permanent sidewalk along the Sidewalk Easement to be provided at the southern
end of North End Avenue, as such permanent sidewalk is more particularly
described, referenced or enumerated in Exhibit C hereto and such further
specifications as Landlord may supply, (ii) only for maintenance and repair
purposes in the manner provided in Section 26.02, the
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public sidewalks on Vesey Place and North End Avenue adjacent to the Premises
and (iii) for construction purposes only, two rooms for electrical meters and
water meters as provided in the Design Guidelines. Any repairs and maintenance
to such electrical closets shall be performed by Landlord, at Landlord's expense
(unless such damage is caused by Tenant) and Tenant hereby grants Landlord
access to the two meter rooms at all reasonable times for such purposes as
provided in Article 20 hereof.
(d) The term "Landlord's Civic Facilities" shall mean all of the
Civic Facilities which are not included within the definition of Tenant's Civic
Facilities.
(e) Landlord (and not Tenant) shall be entitled to receive the
benefits of any discounts in the form of reimbursements or offsets against bills
relating to capital expenditures for the steam mains and lines (but Landlord
shall not be entitled to any benefits, reimbursements or offsets for any
equipment which is not installed by Landlord) offered by any utility company
resulting from Landlord's construction of the steam mains and lines to the
Premises. Tenant shall cooperate with Landlord so that Landlord may recover from
such utility companies Landlord's costs incurred in connection with the
construction of such steam lines and mains, including, but not limited to,
accepting utility service rebilling from Landlord directly without capital cost
recovery discounts and executing appropriate documents with Landlord and such
utility companies evidencing Tenant's consent and agreement to such arrangements
provided such reimbursements to Landlord do not result in an increase in rates
payable by Tenant over that which would be payable by Tenant without accounting
for such reimbursements. If the utility company charges Tenant additional
administrative charges for rebilling, Landlord may receive the reimbursements
provided Landlord pays for such charges.
Section 26.02. Landlord and Tenant shall take good care of and be
responsible for compliance with Requirements in respect of Landlord's Civic
Facilities or Tenant's Civic Facilities, as the case may be, and shall keep and
maintain the same in good and safe order and condition and free of accumulations
of dirt, rubbish, snow and ice, and shall make all repairs (including structural
repairs, restorations and replacements) necessary to maintain the same in
first-class condition (collectively, "Maintenance Obligations"). The obligation
of Landlord to perform Maintenance Obligations is expressly conditioned upon
Tenant's compliance with Tenant's obligations under Section 26.04. The parties
contemplate that, after the completion of construction pursuant to the Section
26.01, Maintenance Obligations for the portion of the Civic Facilities marked(1)
shall be performed by the appropriate utility companies and for those portions
of the Civic Facilities marked(2) shall be performed by New York City.
Notwithstanding the initial sentence of this Section 26.01, Maintenance
Obligations on the part of Landlord in respect of any portion of the Civic
Facilities marked(1) and(2) shall terminate on the date that the appropriate
utility company or New York City, as the case may be, shall commence performance
of Maintenance Obligations in respect of same (and shall resume on the date that
the appropriate utility company or New York City, as the case may be, shall
cease performance of Maintenance Obligations in respect of same). Landlord shall
promptly notify Tenant of any of the foregoing.
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Section 26.03.
(a) Tenant's sole remedies for a failure by Landlord to
substantially complete Landlord's Civic Facilities as provided in Section 26.01
("Landlord's Construction Obligations") shall be (i) an extension of the
Scheduled Completion Date by an amount of time equal to the time, if any, by
which Tenant's construction of the Building has been delayed as a result of such
failure, which delay shall constitute an Unavoidable Delay, and (ii) the right
to engage in Self-Help, as defined in Section 26.03(b) and to receive the offset
against Base Rent and Civic Facilities Payment provided for in Section 26.03(c)
(collectively, the "Approved Remedies"). Landlord's failure to perform
Landlord's Construction Obligations shall not give rise to any right or remedy
except the Approved Remedies, or entitle Tenant to any discount from or offset
against any Rental except as set forth in Section 26.03(c) or to any other
damages, and no delay, non-performance or part performance by Landlord under
Section 26.01 shall release Tenant from or modify any of its obligations under
this Lease except as provided herein. Tenant's sole remedies against Landlord
for a failure by Landlord to perform its Maintenance Obligations in accordance
with Section 26.02 shall be the right to engage in Self-Help and to receive the
offset against Civic Facilities Payments provided for in Section 26.03(c), and
no such failure shall entitle Tenant to any other right, remedy or damages
against Landlord. Notwithstanding the provisions of Section 26.03(b), Tenant
shall not be entitled to exercise any of the Approved Remedies at any time that
a Default exists under this Lease. No delay, non-performance or part performance
by Landlord under Section 26.02 shall release Tenant from any of its obligations
under this Lease. The election by Tenant of any remedy specified in this Section
26.03(a) shall not preclude Tenant from pursuing any other available remedy
specifically set forth herein.
(b) If (subject to Unavoidable Delays) Landlord fails to perform the
Landlord's Construction Obligations or thereafter to substantially complete
Landlord's Civic Facilities as provided in Section 26.01 with reasonable
diligence or if Landlord fails to perform any of Landlord's Maintenance
Obligations, Tenant (in its own name and not as agent of Landlord) shall have
the right (but shall not be obligated) to undertake Landlord's Construction
Obligations or Landlord's Maintenance Obligations, as the case may be
("Self-Help"), in accordance with the provisions of this Section 26.03(b). Prior
to engaging in Self-Help, Tenant shall give Landlord notice specifying the
nature of Landlord's failure and advising of Tenant's intention to engage in
Self-Help. If Landlord shall not have remedied the failure complained of prior
to the thirtieth (30th) day after such notice, Tenant shall be entitled to
engage in Self-Help, provided that, if such failure shall be of a nature that
the same cannot be completely remedied within said thirty (30) day period,
Tenant shall not be entitled to engage in Self-Help if Landlord commences to
remedy such failure within such period and thereafter diligently and
continuously proceeds to remedy same. In furtherance of Tenant's exercise of the
right of Self-Help set forth in this Section 26.03(b), Landlord, upon reasonable
notice, shall permit Tenant and its agents or representatives to inspect
Landlord's Civic Facilities at all reasonable times for the purpose of
determining whether or not Landlord is in compliance with Landlord's
Construction Obligations and Landlord's Maintenance Obligations. Landlord hereby
grants Tenant a right to enter upon Landlord's
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Civic Facilities in order to perform Self-Help in accordance with this Section
26.03(b). Tenant shall not be liable for inconvenience, annoyance, disturbance,
loss of business or other damage to Landlord by reason of Tenant's exercise of
the right of Self-Help hereunder, provided Tenant shall use reasonable efforts
to minimize damage caused by Tenant in the exercise of its right of Self-Help.
(c) In the event Tenant engages in Self-Help as provided in 26.03(b)
with respect to Landlord's Construction Obligations, after submission to
Landlord of a written statement of Tenant's expenses with supporting
documentation, Tenant shall have the right to offset against the next
installment(s) of Base Rent and Civic Facilities Payment an amount equal to the
reasonable expenses thereby incurred and/or theretofore paid by Tenant together
with interest thereon at the Involuntary Rate computed with respect to each
payment made by Tenant under this Section 26.03(c) from the date payment is made
or incurred until the date(s) Tenant effectuates the offset(s). In the event
Tenant engages in Self-Help as provided in Section 26.03(b) with respect to
Landlord's Maintenance Obligations, after submission to Landlord of a written
statement of Tenant's expenses with supporting documentation, Tenant shall have
the right to offset against the next installment(s) of Civic Facilities Payment
an amount equal to the reasonable expenses thereby incurred and/or theretofore
paid by Tenant together with interest thereon at the Involuntary Rate computed
with respect to each payment made by Tenant under this Section 26.03(c) from the
date payment is made or the expense is incurred until the date(s) Tenant
effectuates the offset(s).
(d) In the event Landlord shall fail to perform Landlord's
Construction Obligations or Landlord's Maintenance Obligations, Landlord shall
incur no penalty or liability and Tenant shall have no remedies or rights other
than as expressly provided herein, it being agreed by the parties that
Landlord's failure to perform Landlord's Construction Obligations or Landlord's
Maintenance Obligations shall not be deemed a failure by Landlord to perform a
substantial obligation on Landlord's part to be performed under this Lease.
Section 26.04.
As its allocable share of the cost of operating, maintaining,
repairing, restoring, replacing and upgrading the Civic Facilities, Tenant, for
each Lease Year or portion thereof commencing on the first day of the first
month following the Occupancy Date and ending on the last day of the Term, shall
pay to Landlord an annual sum (the "Civic Facilities Payment") in the amount of
One Hundred and Fifty Thousand and 00/100 ($150,000) Dollars, payable in equal
monthly installments commencing on the first day of the first month following
the Occupancy Date and on the first day of each month thereafter during the
Term. The Civic Facilities Payment shall be increased in each Lease Year to an
amount which is three percent (3%) per annum in excess of the Civic Facilities
Payment for the immediately prior Lease Year. It is understood and agreed by
Tenant that the Civic Facilities Payment, including the three percent (3%)
annual escalation, is an agreed-upon fixed amount which does not necessarily
reflect the actual costs of maintaining the Civic
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Facilities, the actual percentage share thereof of Tenant or the actual annual
increase in such costs, and that the Civic Facilities Payment shall neither
increase nor decrease in proportion to any increases or decreases in the actual
Civic Facilities costs.
Section 26.05. If all or any part of Landlord's Civic Facilities
shall be destroyed or damaged in whole or in part by fire or other casualty of
any kind or nature, ordinary or extraordinary, foreseen or unforeseen, Landlord,
at no cost and expense to Tenant, whether or not such damage or destruction
shall have been insured or insurable, and whether or not insurance proceeds, if
any, shall be sufficient for the purpose shall restore or cause to be restored
with reasonable diligence (subject to Unavoidable Delays) such Civic Facilities
as nearly as practicable to the character and utility existing immediately prior
to such occurrence and using materials of equal or better quality.
Section 26.06. If at any time during the Term there shall be a
taking by any lawful power or authority through the exercise of the right of
condemnation or eminent domain of the whole or a part of Landlord's Civic
Facilities or there shall be an agreement in lieu of a taking between Landlord
and those authorized to exercise such right, Landlord shall receive the award
attributable to the Civic Facilities so taken, as provided in Article 9, and
Landlord, at Landlord's sole cost and expense, whether or not the award or
awards, if any, payable to Landlord are sufficient for the purpose, shall
proceed with reasonable diligence (subject to Unavoidable Delays) to restore to
the extent practicable any remaining portion of the Civic Facilities not so
taken to a complete, self-contained unit. Landlord shall hold the award or
awards received by it with respect to such taking in trust for the sole purpose
of paying the cost of restoring the remaining portion of the Civic Facilities
not so taken, and Landlord shall apply such award or awards first to the payment
in full of the cost of such restoration before using any part of the same for
any other purpose. Anything contained herein to the contrary notwithstanding, in
no event shall Landlord's liability hereunder as trustee exceed the amount of
the award or awards received by Landlord, as reduced by the portion thereof
applied to the restoration. Upon completion of the restoration, Landlord may pay
over to itself the unapplied award or awards and the trust obligations hereunder
with respect to such award or awards shall terminate.
ARTICLE 27
STREETS
Landlord represents and warrants that within the Project Area, the
following streets have been mapped as New York City public streets and are open
for public use: North End Avenue (south of Warren Street) and, between North End
Avenue and West Street, Warren Street, Murray Street and Vesey Street. Subject
to the provisions of the Storage and Staging Letter, generally applicable
policies and procedures for partial closures of public streets, Landlord shall
cause Vesey Street (west of North End Avenue) to be open for public use.
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ARTICLE 28
STREET WIDENING
If at any time during the Term any Proceedings are instituted or
orders made by any Governmental Authority (other than Landlord acting in its
capacity as Landlord and not in its governmental capacity) for the widening or
other enlargement of any street contiguous to the Premises requiring removal of
any projection or encroachment on, under or above any such street, or any
changes or alterations upon the Premises, or in the sidewalks, vaults (other
than vaults which are under the control of, or are maintained or repaired by, a
utility company), gutters, curbs or appurtenances, Tenant, with reasonable
diligence (subject to unavoidable Delays) shall comply with such requirements,
and on Tenant's failure to do so, Landlord may comply with the same in
accordance with the provisions of Article 21. Tenant shall be permitted to
contest in good faith any proceeding or order for street widening instituted or
made by any Governmental Authority, provided that during the pendency of such
contest Tenant deposits with Landlord security in amount and form reasonably
satisfactory to Landlord for the performance of the work required in the event
that Tenant's contest should fail. In no event shall Tenant permit Landlord to
become liable for any civil or criminal liability or penalty as a result of
Tenant's failure to comply with reasonable diligence (subject to Unavoidable
Delays) with any of the foregoing orders. Any widening or other enlargement of
any such street and the award or damages in respect thereto shall be deemed a
partial condemnation and be subject to the provisions of Article 9.
ARTICLE 29
SUBORDINATION; ATTORNMENT
Section 29.01. Landlord's interest in this Lease, as this Lease may
be modified, amended or supplemented, shall not be subject or subordinate to (a)
any mortgage now or hereafter placed upon Tenant's interest in this Lease or (b)
any other liens or encumbrances hereafter affecting Tenant's interest in this
Lease.
Section 29.02. If by reason of (a) a default under the Master Lease
or (b) a termination of the Master Lease pursuant to the terms of the Settlement
Agreement, such Master Lease and the leasehold estate of Landlord in the
Premises demised hereby are terminated, Tenant will attorn to the then holder of
the reversionary interest in the premises demised by this Lease and will
recognize such holder as Tenant's Landlord under this Lease. Tenant shall
execute and deliver, at any time and from time to time, upon the request of the
Landlord or of the Master Landlord any further instrument which may be
reasonably necessary or appropriate to evidence such attornment. Tenant waives
the provision of any statute or rule of law now or hereafter in effect which may
give or purport to give Tenant any right of election to terminate this Lease or
to surrender possession of the Premises in the event any proceeding is brought
by the Master Landlord to terminate the
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same, and agrees that this Lease shall not be affected in any way whatsoever by
any such proceeding.
ARTICLE 30
EXCAVATIONS AND SHORING
If any excavation shall be made or contemplated to be made for
construction or other purposes upon property adjacent to the Premises, Tenant
either:
(a) shall afford to Landlord or, at Landlord's option, to the person
or persons causing or authorized to cause such excavation the right to enter
upon the Premises in a reasonable manner for the purpose of doing such work as
may be necessary, without expense to Tenant, to preserve any of the walls or
structures of the Building from injury or damage and to support the same by
proper foundations, provided that (i) such work shall be done promptly, in a
good and workmanlike manner and subject to all applicable Requirements, (ii)
Tenant shall have an opportunity to have its representatives present during all
such work and (iii) Tenant shall be indemnified by Landlord in the event
Landlord performs such excavation, or such other person performing such
excavation, as the case may be, against any injury or damage to the Building or
persons or property therein which may result from any such work, but shall not
have any claim against Landlord for suspension, diminution, abatement, offset
or reduction of Rental payable by Tenant hereunder; or
(b) shall do or cause to be done all such work, at Landlord's or
such other person's expense, as may be necessary to preserve any of the walls or
structures of the Building from injury or damage and to support the same by
proper foundations, provided that Tenant shall not, by reason of any such
excavation or work, have any claim against Landlord for damages or for indemnity
or for suspension, diminution, abatement, offset or reduction of Rental payable
by Tenant hereunder.
ARTICLE 31
CERTIFICATES BY LANDLORD AND TENANT
Section 31.01. At any time and from time to time upon not less than
ten (10) days notice by Landlord, Tenant shall execute, acknowledge and deliver
to Landlord or any other party specified by Landlord a statement certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications) and the date to which each obligation constituting
Rental has been paid, and stating whether or not to the best knowledge of
Tenant, Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such default of
which Tenant may have knowledge.
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Section 31.02. At any time and from time to time upon not less than
ten (10) days notice by Tenant, Landlord shall execute, acknowledge and deliver
to Tenant or any other party specified by Tenant a statement certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications) and the date to which each obligation constituting
Rental has been paid, and stating whether or not to the best knowledge of
Landlord, Tenant is in Default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such Default of
which Landlord may have knowledge.
Section 31.03. At the request of Tenant, Landlord shall request a
certificate in respect of the Master Lease from Master Landlord, in accordance
with Section 20.01 of the Master Lease. If Master Landlord shall fail to deliver
such a certificate, then, in lieu thereof, Landlord shall execute, acknowledge
and deliver to Tenant a statement certifying that Landlord has not executed and
delivered to Master Landlord any instrument modifying the Master Lease (or if
Landlord has executed such an instrument, stating the modifications) and that,
to the best of Landlord's knowledge, the Master Lease is in full force and
effect and no default exists thereunder.
ARTICLE 32
CONSENTS AND APPROVALS
Section 32.01. Except as otherwise expressly set forth in this
Lease, all consents and approvals which may be given under this Lease shall, as
a condition of their effectiveness, be in writing. The granting of any consent
or approval by a party to perform any act requiring consent or approval under
the terms of this Lease or the failure on the part of a party to object to any
such action taken without the required consent or approval, shall not be deemed
a waiver by the party whose consent was required of its right to require such
consent or approval for any further similar act.
Section 32.02. If, pursuant to the terms of this Lease, any consent
or approval by Landlord or Tenant is required, then unless expressly provided
otherwise in this Lease, if the party who is to give its consent or approval
shall not have notified the other party within fifteen (15) Business Days or
such other period as expressly specified in this Lease after receiving such
other party's request for a consent or approval that such consent or approval is
granted or denied, and if denied, the reasons therefor in reasonable detail,
such consent or approval shall be deemed granted. If, pursuant to the terms of
this Lease, any consent or approval by Landlord or Tenant is not to be
unreasonably withheld or is subject to a specified standard then in the event
there shall be a final determination that the consent or approval was
unreasonably withheld or that such specified standard has been met so that the
consent or approval should have been granted, the consent or approval shall be
deemed granted and such granting of the consent or approval shall be the only
remedy to the party requesting or requiring the consent or approval.
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Section 32.03. If, pursuant to the terms of this Lease, any consent
or approval by Landlord or Tenant is not to be unreasonably withheld, such
consent or approval shall, in addition, not be unreasonably delayed.
Section 32.04. Except as specifically provided herein, no fees or
charges of any kind or amount shall be required by either party hereto as a
condition of the grant of any consent or approval which may be required under
this Lease.
ARTICLE 33
SURRENDER AT END OF TERM
Section 33.01. On the last day of the Term or upon any earlier
termination of this Lease, or upon a re-entry by Landlord upon the Premises
pursuant to Article 24 hereof, Tenant shall remove its personal property and
Equipment and shall well and truly surrender and deliver up to Landlord the
Premises in good order, condition and repair, reasonable wear and tear excepted,
free and clear of all lettings, occupancies, liens and encumbrances, other than
those, if any, existing at the date hereof, created by or consented to by
Landlord or which lettings and occupancies by their express terms and conditions
extend beyond the Expiration Date, and which Landlord shall have consented and
agreed, in writing, may extend beyond the Expiration Date, without any payment
or allowance whatever by Landlord. Tenant hereby waives any notice now or
hereafter required by law with respect to vacating the Premises on any such
termination date.
Section 33.02. On the last day of the Term or upon any earlier
termination of the Lease, or upon a re-entry by Landlord upon the Premises
pursuant to Article 24 hereof, Tenant shall deliver to Landlord Tenant's
executed counterparts of all Subleases and any service and maintenance contracts
then affecting the Premises, true and complete maintenance records for the
Premises, all original licenses and permits then pertaining to the Premises,
permanent or temporary Certificates of Occupancy then in effect for the
Building, and all warranties and guarantees then in effect which Tenant has
received in connection with any work or services performed or Fixtures installed
in the Building, together with a duly executed assignment thereof to Landlord,
all financial reports, books and records required by Article 38 hereof and any
and all other documents of every kind and nature whatsoever relating to the
Premises.
Section 33.03. Any personal property of Tenant or of any Subtenant
which shall remain on the Premises for thirty (30) days after the termination of
this Lease and after the removal of Tenant or such Subtenant from the Premises,
may, at the option of Landlord, be deemed to have been abandoned by Tenant or
such Subtenant and either may be retained by Landlord as its property or be
disposed of, without accountability, in such manner as Landlord may see fit.
Landlord shall not be responsible for any loss or damage occurring to any such
property owned by Tenant or any Subtenant.
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Section 33.04. Notwithstanding the provisions of Section 33.01 and
33.02 hereof, in the event that prior to Substantial Completion of the Building
either Landlord or Tenant shall have terminated this Lease in accordance with
the provisions of Article 43 hereof or Tenant shall have terminated this Lease
in accordance with the provisions of Section 2.03 hereof, Tenant's sole
obligations under this Article 33 shall be to deliver the Premises to Landlord
in a stabilized, safe and secure condition, fenced and with all debris removed
no later than the Lease Early Termination Date.
Section 33.05. The provisions of this Article 33 shall survive any
termination of this Lease.
ARTICLE 34
ENTIRE AGREEMENT
This Lease, together with the Exhibits hereto, contains all the
promises, agreements, conditions, inducements and understandings between
Landlord and Tenant relative to the Premises and there are no promises,
agreements, conditions, understandings inducements, warranties, or
representations, oral or written, expressed or implied, between them other than
as herein or therein set forth and other than as may be expressly contained in
any written agreement between the parties executed simultaneously herewith.
ARTICLE 35
QUIET ENJOYMENT
Landlord covenants that Tenant shall and may (subject, however, to
the exceptions, reservations, terms and conditions of this Lease) peaceably and
quietly have, hold and enjoy the Premises for the term hereby granted without
molestation or disturbance by or from Landlord or any Person claiming through
Landlord and free of any encumbrance created or suffered by Landlord, except
those encumbrances, liens or defects of title, created or suffered by Tenant and
the Title Matters.
ARTICLE 36
APPRAISAL AND ARBITRATION
Section 36.01. In such cases where this Lease expressly provides for
the settlement of a dispute or question by appraisal, and only in such cases,
Landlord and Tenant shall jointly select an appraiser. If within a fifteen (15)
day period the parties have not so agreed, then either party, on behalf of both,
may apply to the Supreme Court of the State of New York, New York County, for
the appointment of such appraiser and the other party shall not raise any
question as to the Court's full power and jurisdiction to entertain
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the application and make the appointment. Any appraiser selected or appointed
pursuant to this Section shall be a member of the American Institute of Real
Estate Appraisers (or a successor organization), shall be an appraiser, and
shall have been doing business as such in the Borough of Manhattan for a period
of at least fifteen (15) years before the date of her/his appointment. All
appraisers chosen or appointed pursuant to this Section shall be sworn to fairly
and impartially perform their duties as appraisers hereunder. In the event of
failure, refusal or inability of any appraiser to act, a successor shall be
appointed within ten (10) days by the parties or in the event the parties shall
fail so to appoint such successor, the successor shall be appointed by the Court
in the manner hereinabove provided. The fees and expenses of all appraisers
shall be shared jointly by the parties. Each party shall be responsible for the
fees and expenses of its own attorneys and other representatives. Photocopies of
the reports of all appraisers shall be provided to all the parties. The decision
of the appraisers shall be binding upon the parties. In rendering its decision,
the appraisers shall have no power to modify or reform any of the provisions of
this Lease. Any appraisal shall be conducted in the City and County of New York.
Section 36.02. In such cases where this Lease expressly provides for
the settlement of a dispute or question by arbitration, and only in such cases,
the party desiring arbitration shall appoint a disinterested person as
arbitrator on its behalf and give notice thereof to the other party who shall,
within fifteen (15) days thereafter, appoint a second disinterested person as
arbitrator on its behalf and give notice thereof to the first party. The two (2)
arbitrators thus appointed shall together appoint a third disinterested person
within fifteen (15) days after the appointment of the second arbitrator, and
said three (3) arbitrators shall, as promptly as possible, determine the matter
which is the subject of the arbitration and the decision of the majority of them
shall be conclusive and binding on all parties and judgment upon the award may
be entered in any court having jurisdiction. If a party who shall have the right
pursuant to the foregoing to appoint an arbitrator fails or neglects to do so,
then and in such event, the other party (or if the two (2) arbitrators appointed
by the parties shall fail to appoint a third arbitrator when required hereunder,
then either party) may apply to the American Arbitration Association (or any
organization successor thereto), or in its absence, refusal, failure or
inability to act, may apply for a court appointment of such arbitrator. The
arbitration shall be conducted in the City and County of New York and, to the
extent applicable and consistent with this Section 36.02, shall be in accordance
with the Commercial Arbitration Rules then obtaining of the American Arbitration
Association or any successor body. The expenses of arbitration shall be shared
equally by Landlord and Tenant, but each party shall be responsible for the fees
and disbursements of its own attorneys and the expenses of its own proof.
Landlord and Tenant shall sign all documents and do all other things necessary
to submit any such matter to arbitration and further shall, and hereby do, waive
any and all rights they or either of them may at any time have to revoke their
agreement hereunder to submit to arbitration and to abide by the decision
rendered thereunder. The arbitrators shall have no power to vary, modify or
reform any of the provisions of this Lease and their jurisdiction is limited
accordingly. If the arbitration takes place pursuant to Article 11 hereof or
concerns any Capital Improvement or Restoration, then each of the arbitrators
shall be a licensed professional engineer or registered architect having at
least ten (10) years' experience in the design of
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commercial buildings, and, to the extent applicable and consistent with this
Section 36.02, such arbitration shall be conducted in accordance with the
Construction Arbitration Rules then obtaining of the American Arbitration
Association or any successor body of similar function.
ARTICLE 37
INVALIDITY OF CERTAIN 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.
ARTICLE 38
FINANCIAL REPORTS
Section 38.01. Tenant, from and after the Occupancy Date, shall
furnish to Landlord as soon as reasonably practicable after the end of each
fiscal year of Tenant, and in any event within one hundred and twenty (120) days
thereafter, Tenant's annual report.
Section 38.02. Upon Landlord's request, if at any time Tenant shall
furnish to any Mortgagee operating statements or financial reports, Tenant
promptly shall furnish to Landlord copies of all such operating statements and
financial reports. At the time at which Tenant furnishes any such operating
statements or reports, Tenant may inform Landlord of its belief that the public
disclosure of information contained therein or any part thereof would cause
substantial injury to the competitive position of Tenant's enterprise and
request that, to the extent permitted by law, Landlord attempt to avoid such
disclosure. In the event Tenant makes such request, Landlord shall use its best
efforts to avoid such disclosure (but shall incur no liability to Tenant if
Landlord reasonably believes it is complying with any provision of applicable
law requiring such disclosure). Landlord shall (i) promptly notify Tenant if it
receives any request for disclosure, (ii) keep Tenant advised of (and promptly
copy Tenant on) any communications that Landlord has with (or receives from) any
party making the request for disclosure, (iii) notify Tenant that it intends to
make any disclosure, immediately after making any such decision and at least
five (5) Business Days prior to the actual disclosure and (iv) copy Tenant on
any such disclosure.
Section 38.03. Tenant shall keep and maintain at all times full and
correct records and books of account of the operations of the Premises in
accordance with generally accepted accounting standards and otherwise in
accordance with any applicable provisions of each Mortgage and accurately shall
record and preserve for a period of six (6) years the
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record of its operations upon the Premises. Within fifteen (15) days after
request by Landlord, Tenant shall make said records and books of account
available from time to time for inspection by Landlord and Landlord's designee
during reasonable business hours at a location designated by Tenant in New York
City. At any time at which Tenant shall make said records and books of account
available for inspection, it may inform Landlord of its belief that the public
disclosure of the information contained therein or any part thereof would cause
substantial injury to the competitive position of Tenant's enterprise and
request that to the extent permitted by law Landlord attempt to avoid such
disclosure. In the event Tenant makes such request, Landlord shall use its best
efforts to avoid such disclosure (but shall incur no liability to Tenant if
Landlord reasonably believes it is complying with any provision of applicable
law requiring such disclosure). Landlord shall (i) promptly notify Tenant if it
receives any request for disclosure, (ii) keep Tenant advised of (and promptly
copy Tenant on) any communications that Landlord has with (or receives from) any
party making the request for disclosure, (iii) notify Tenant that it intends to
make any disclosure, immediately after making any such decision and at least
five (5) Business Days prior to the actual disclosure and (iv) copy Tenant on
any such disclosure.
ARTICLE 39
RECORDING OF MEMORANDUM
Either Landlord or Tenant may record a memorandum of this Lease or
any amendment or modification of this Lease. Each shall, upon the request of the
other, join in the execution of a memorandum of this Lease or a memorandum of
any amendment or modification of this Lease in proper form for recordation.
ARTICLE 40
NO DISCRIMINATION
Section 40.01. Tenant, in connection with the erection, maintenance,
repair, Restoration, alteration or replacement of, or addition to, the Building
shall (a) not discriminate nor permit discrimination against any person by
reason of race, creed, color, religion, national origin, ancestry, sex, age,
disability or marital status and (b) comply with all applicable Federal, State
and local laws, ordinances, rules and regulations from time to time in effect
prohibiting such discrimination.
Section 40.02. Tenant shall be bound by and shall include the
following paragraphs (a) through (e) of this Section 40.02 in all Construction
Agreements, service and management agreements and agreements for the purchase of
goods and services relating to the operation of the Premises in such manner that
these provisions shall be binding upon the parties with whom such agreements are
entered into (any party being bound by such provisions shall be referred to in
this Section as "Contractor"):
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(a) Contractor shall not discriminate against employees or
applicants for employment because of race, creed, color, religion, national
origin, ancestry, sex, age, disability or marital status, shall comply with all
applicable Federal, State and local laws, ordinances, rules and regulations from
time to time in effect prohibiting such discrimination or pertaining to equal
employment opportunities, and shall undertake programs of affirmative action to
ensure that employees and applicants for employment are afforded equal
employment opportunities without discrimination. Such action shall be taken with
reference to, but not limited to, recruitment, employment, job assignment,
promotion, upgrading, demotion, transfer, layoff or termination, rates of pay or
other forms of compensation, and selection for training or retraining, including
apprenticeship and on-the-job training.
(b) Contractor shall request each employment agency, labor union and
authorized representative of workers with which it has a collective bargaining
or other agreement or understanding, to furnish it with a written statement that
such employment agency, labor union or representative will not discriminate
because of race, creed, color, religion, national origin, ancestry, sex, age,
disability or marital status and that such agency, union or representative will
cooperate in the implementation of contractor's obligations hereunder.
(c) Contractor shall state in all solicitations or advertisements
for employees placed by or on behalf of contractor that all qualified applicants
shall be afforded equal employment opportunities without discrimination because
of race, creed, color, religion, national origin, ancestry, sex, age, disability
or marital status.
(d) Contractor shall comply with all of the provisions of the Civil
Rights Law of the State of New York and Sections 291-299 of the Executive Law of
the State of New York, shall upon reasonable notice furnish all information and
reports deemed reasonably necessary by Landlord and shall permit access to its
relevant books, records and accounts for the purpose of monitoring compliance
with the Civil Rights Law and such sections of the Executive Law.
(e) Contractor shall include in all agreements with subcontractors
the foregoing provisions of Sections (a) through (d) in such a manner that said
provisions shall be binding upon the subcontractor and enforceable by
Contractor, Tenant and Landlord. Contractor shall take such action as may be
necessary to enforce the foregoing provisions. Contractor shall promptly notify
Tenant and Landlord of any litigation commenced by or against it arising out of
the application or enforcement of these provisions, and Tenant and Landlord may
intervene in any such litigation.
Section 40.03. Tenant has reviewed and participated in the
development of the Affirmative Action Program, a copy of which is annexed hereto
as Exhibit D. Tenant shall, and shall cause each of its agents, contractors and
subcontractors to, promptly and diligently carry out its obligations under such
Program in accordance with the terms thereof. If Tenant fails to comply with its
obligations under this Section 40.03 or under Exhibit D, Landlord's sole
remedies shall be as provided in Exhibit D, provided that any
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amounts payable by Tenant to Landlord under Section 9 of Exhibit D shall
constitute Rental hereunder.
ARTICLE 41
MISCELLANEOUS
Section 41.01. The captions of this Lease are for convenience of
reference only and in no way define, limit or describe the scope or intent of
this Lease or in any way affect this Lease.
Section 41.02. The Table of Contents is for the purpose of
convenience of reference only and is not to be deemed or construed in any way as
part of this Lease or as supplemental thereto or amendatory thereof.
Section 41.03. The use herein of the neuter pronoun in any reference
to Landlord or Tenant shall be deemed to include any individual Landlord or
Tenant, and the use herein of the words "successors and assigns" or "successors
or assigns" of Landlord or Tenant shall be deemed to include the heirs, legal
representatives and assigns of any individual Landlord or Tenant.
Section 41.04. Depository may pay to itself out of the monies held
by Depository pursuant to this Lease its reasonable charges for services
rendered hereunder. Tenant shall pay Depository any additional charges for such
services.
Section 41.05. If more than one entity is named as or becomes Tenant
hereunder, Landlord may require the signatures of all such entities in
connection with any notice to be given or action to be taken by Tenant hereunder
except to the extent that any such entity shall designate another such entity as
its attorney-in-fact to act on its behalf, which designation shall be effective
until receipt by Landlord of notice of its revocation. Each entity named as
Tenant shall be fully liable for all of Tenant's obligations hereunder. Any
notice by Landlord to any entity named as Tenant shall be sufficient and shall
have the same force and effect as though given to all parties named as Tenant.
If all such parties designate in writing one entity to receive copies of all
notices, Landlord agrees to send copies of all notices to that entity.
Section 41.06(a). The liability of Landlord or of any Person who has
at any time acted as Landlord hereunder for damages or otherwise shall be
limited to Landlord's interest in the Premises, including, without limitation,
the rents and profits therefrom, the proceeds of any insurance policies covering
or relating to the Premises, any awards payable in connection with any
condemnation of the Premises or any part thereof, and any other rights,
privileges, licenses, franchises, claims, causes of action or other interests,
sums or receivables appurtenant to the Premises. Neither Landlord nor any such
Person nor any of the members, directors, officers, employees, agents or
servants of either shall have any liability (personal or otherwise) hereunder
beyond Landlord's interest in the Premises, and
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no other property or assets of Landlord or any such Person or any of the members
directors, officers, employees, agents or servants of either shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Tenant's
remedies hereunder.
(b) The liability of Tenant hereunder for damages or otherwise shall
be limited to Tenant's interest in the Premises, including, without limitation,
any then present or future rents or profits, any funds held by Depository
pursuant to any of the provisions of this Lease, the proceeds of any insurance
policies covering or relating to the Premises, any awards payable in connection
with any condemnation of the Premises or part thereof (it being agreed that, for
purposes of this Section 41.06(b), the interest of Tenant in such insurance
proceeds or condemnation awards shall pertain only to such portion or portions
thereof as are paid to and retained by Tenant rather than any Mortgagee and as
shall not theretofore have been expended by Tenant for Restoration). Neither
Tenant nor any Affiliate of Tenant nor any of the directors, officers, members,
partners, joint venturers, principals, shareholders, employees, agents or
servants of Tenant or any Affiliate of Tenant shall have any liability (personal
or otherwise) hereunder beyond Tenant's interest in the Premises, and no other
property or assets of Tenant or any Affiliate of Tenant or any of the directors,
officers, members, partners, joint venturers, principals, shareholders,
employees, agents or servants of Tenant or any Affiliate of Tenant shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Landlord's remedies hereunder. The exculpation of personal liability set
forth in this Section 41.06(b) is intended to be absolute, unconditional and
without exception of any kind.
Section 41.07. Except as otherwise expressly provided in this Lease,
there shall be no merger of this Lease or the leasehold estate created hereby
with the fee estate in the Premises or any part thereof by reason of the same
Person acquiring or holding, directly or indirectly, this Lease or the leasehold
estate created hereby or any interest in this Lease or in such leasehold estate
as well as the fee estate in the Premises.
Section 41.08. Tenant shall store all refuse from the Premises off
the streets in an enclosed area on the Premises, and in a manner reasonably
satisfactory to Landlord and in accordance with the requirements of municipal
and/or private sanitation services serving the Premises.
Section 41.09. Each of the parties represents to the other that it
has not dealt with any broker, finder or like entity in connection with this
lease transaction. If any claim is made by any Person who shall claim to have
acted or dealt with Tenant or Landlord in connection with this transaction,
Tenant or Landlord as the case may be, will pay the brokerage commission, fee or
other compensation to which such Person is entitled, shall indemnify and hold
harmless the other party hereto against any claim asserted by such Person for
any such brokerage commission, fee or other compensation and shall reimburse
such other party for any costs or expenses including, without limitation,
reasonable attorneys' fees and disbursements, incurred by such other party in
defending itself against claims made against it for any such brokerage
commission, fee or other compensation.
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Section 41.10. This Lease may not be changed, modified, or
terminated orally, but only by a written instrument of change, modification or
termination executed by the party against whom enforcement of any change,
modification, or termination is sought.
Section 41.11. This Lease shall be governed by and construed in
accordance with the laws of the State of New York.
Section 41.12. The agreements, terms, covenants and conditions
herein shall be binding upon, and shall inure to the benefit of, Landlord and
Tenant and their respective successors and (except as otherwise provided herein)
assigns.
Section 41.13. All references in this Lease to "Articles" or
"Sections" shall refer to the designated Article(s) or Section(s), as the case
may be, of this Lease.
Section 41.14. All of Tenant's right, title and interest in all
plans and drawings required to be furnished by Tenant to Landlord under this
Lease, including, without limitation, the Schematics, the Design Development
Plans and the Construction Documents, and in any and all other plans, drawings,
specifications or models prepared in connection with construction at the
Premises, any Restoration or Capital Improvement, shall become the sole and
absolute property of Landlord upon the Expiration Date or any earlier
termination of this Lease, provided, however, Landlord shall have no right to
use such plans, drawings, specifications and models other than in connection
with any repairs, Restorations or Capital Improvements with respect to the
Building. Tenant shall deliver all such documents to Landlord promptly upon the
Expiration Date or any earlier termination of this Lease. Tenant's obligation
under this Section 41.14 shall survive the Expiration Date.
Section 41.15. All references in this Lease to "licensed
professional engineer", "licensed surveyor" or "registered architect" shall mean
a professional engineer, surveyor or architect who is licensed or registered, as
the case may be, by the State of New York. All references in this Lease to
"rentable area" or "rental square feet" shall be determined in accordance with
the Standard Method of Floor Measurement for Office Buildings, as recommended by
the Real Estate Board of New York, Inc., as such recommendation exists on the
date hereof. Any dispute as to such determination shall be resolved by
arbitration pursuant to Article 36.
Section 41.16. If BPCA or any successor to its interest hereunder
ceases to have any interest in the Premises as lessee under the Master Lease or
there is at any time or from time to time any sale or sales or disposition or
dispositions or transfer or transfers of Landlord's interest in the Premises as
lessee under the Master Lease, the seller or transferor shall be and hereby is
entirely freed and relieved of all agreements, covenants and obligations of
Landlord hereunder to be performed on or after the date of such sale or transfer
relative to the interest sold or transferred, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest or between the parties and the Person who acquires or owns the lessee's
interest in the Premises under the Master Lease, including, without limitation,
the purchaser or transferee in any such sale,
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disposition or transfer, and any fee owner of the Premises upon termination of
the Master Lease, that, subject to the provisions of Section 41.06(a), such
Person has assumed and agreed to carry out any and all agreements, covenants and
obligations of Landlord hereunder accruing from and after the date of such
acquisition, sale or transfer.
Section 41.17. Except as otherwise specifically provided herein, if
the Tenant named herein or any successor to its interest hereunder ceases to
have any interest in the Premises or there is at any time or from time to time
any valid sale or sales or disposition or dispositions or transfer or transfers
of the Tenant's or any successor's entire interest in the Premises in accordance
with the provisions of Article 10, the Tenant named herein or any such
successor, as the case may be, shall be and hereby is entirely freed and
relieved of all agreements, covenants and obligations of Tenant hereunder to be
performed on or after the date of such sale or transfer, and it shall be deemed
and construed without further agreement between the parties or their successors
in interest or between the parties and the Person who acquires or owns the
Tenant's interest in the Premises under this Lease, including, without
limitation, the purchaser or transferee in any such sale, disposition or
transfer, that such Person has assumed and agreed to carry out any and all
agreements, covenants and obligations of Tenant hereunder to be performed from
and after the date of such acquisition, sale or transfer.
Section 41.18. Landlord shall not enter into or cause there to be
entered into any amendment or supplement to the Master Lease, Master Development
Plan, Memorandum of Understanding, Settlement Agreement, Declaration of
Restrictions or Design Guidelines which (a) increases, decreases or materially
alters or otherwise materially affects Tenant's rights or obligations under this
Lease, (b) limits the permitted uses of the Premises or the Civic Facilities,
(c) limits Tenant's rights under this Lease to dispose of, or assign its
interest in, the premises or (d) decreases or alters the rights of a Mortgagee
under this Lease, unless the same is consented to by Tenant (or, in the case of
(d), by such Mortgagee) or is made subject and subordinate to this Lease and
such rights of such Mortgagee. In the event Landlord shall enter into or cause
to be entered into an amendment or supplement to the Master Lease, Master
Development Plan, Memorandum of Understanding, Settlement Agreement, Declaration
of Restrictions or Design Guidelines which is not in conformity with this
Section 41.18, Tenant shall not be obligated to comply with the provisions of
such amendment or supplement which do not so conform and the same shall have no
force or effect with respect to Tenant or any Mortgagee. Notwithstanding
anything herein contained to the contrary, neither Tenant nor any Mortgagee
shall have any right to approve any amendment, modification or supplement to the
Master Lease, Master Development Plan, Memorandum of Understanding, Settlement
Agreement, Declaration of Restrictions or Design Guidelines which does not
affect the Premises, including, with respect to the Declaration of Restrictions,
any amendment relating to Site 25/26 of the Project Area.
Section 41.19. Nothing herein is intended nor shall be deemed to
create a joint venture or partnership between Landlord and Tenant, nor to make
Landlord in any way responsible for the debts or losses of Tenant.
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Section 41.20. To the extent permitted by law, Tenant shall have the
right to all depreciation deductions, investment tax credits and other similar
tax benefits attributable to any construction, demolition and Restoration
performed by Tenant or attributable to the ownership of the Building. Landlord,
from time to time, shall execute and deliver such instruments as Tenant shall
reasonably request in order to effect the provisions of this Section 41.20, and
Tenant shall pay Landlord's reasonable costs and expenses thereof. Landlord
makes no representations as to the availability of any such deductions, credits
or tax benefits.
Section 41.21. Whenever Landlord shall have the right to approve the
architect, engineer or lawyer to be employed by Tenant, any architect, engineer
or lawyer so approved by Landlord at any time during the Term shall be deemed to
be acceptable to Landlord for employment by Tenant at any time thereafter,
unless Landlord shall have good cause for refusing to allow the continued
employment of such consultant. Whenever Tenant is required to obtain Landlord's
approval of an architect, engineer or lawyer, Tenant shall notify Landlord if it
intends to employ an architect, engineer or lawyer previously approved. In the
event that Landlord shall refuse to approve the continued employment of such
consultant, it shall so notify Tenant, specifying the reason therefor.
Section 41.22. Tenant shall have the right to use the name "Battery
Park City" in any advertising and promotional materials in connection with the
leasing of the Building.
Section 41.23. Landlord, upon request by Tenant and at no cost or
expense to Landlord, shall cooperate with any effort by Tenant to establish
that, by reason of ownership of the Building and Equipment by Landlord or
involvement of Landlord in the Project, no sales or compensating use tax is
payable in respect of materials incorporated (or to be incorporated) in the
Building, Fixtures, Equipment purchased or leased for use in the Premises and
for use off-site in support of Tenant's operations at the Premises and the
maintenance and upgrade of Equipment. Tenant shall promptly reimburse Landlord
for all reasonable costs or expenses which Landlord may sustain or incur while
acting pursuant to this Section 41.23.
Section 41.24. Tenant promptly shall apply to the appropriate
authorities to obtain a separate tax lot designation for the Premises and the
tax assessment for such tax lot shall be the basis for calculating PILOT under
Section 3.02 hereof and Landlord shall cooperate with Tenant in connection
therewith. If Tenant shall not be able to obtain a separate tax lot designation,
Landlord and Tenant shall cooperate to obtain annually a separate, undivided tax
assessment and such assessment shall be the basis for calculating PILOT under
Section 3.02 hereof.
Section 41.25. Pursuant to a Petition for Advisory Opinion dated
February 28, 1995 submitted by BPCA to the State of New York, Commissioner of
Taxation and Finance, Petition No. M950228A, BPCA received an advisory opinion
dated March 13, 1995 and pursuant to a Request for an Advisory Opinion dated
March 8, 1995 submitted by BPCA to the Department of Finance of the City of New
York, BPCA received an advisory
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opinion dated March 29, 1995 (the "Advisory Opinions"), copies of which have
been delivered to Tenant, with respect to the imposition of mortgage recording
tax under Article 11 of the Tax Law of the State of New York. BPCA agrees that,
at the request of Tenant, it shall cause Mortgages (and any instruments
assigning, supplementing, amending, modifying, consolidating, spreading,
substituting, severing, restating and/or extending any Mortgages) to be recorded
as contemplated by the Advisory Opinions and cooperate with Tenant in
consummating the sublease, sub-sublease structure described in the Advisory
Opinions provided, in all cases, such Mortgages are made in compliance with the
provisions of this Lease and provided further that any such sublease,
sub-sublease structure shall not (x) involve the expenditure of additional
monies by Tenant or (y) impose any additional obligation on Tenant or (z) expose
Tenant to any liability or potential liability. Each party shall be responsible
for the payment of its attorneys fees in connection with such transaction.
ARTICLE 42
SECURITY DEPOSIT
Section 42.01. Tenant shall deposit with Landlord, as security for
the purposes hereinafter provided the following amounts in cash or other
security or marketable instruments or securities reasonably acceptable to
Landlord (provided, if Tenant shall have delivered marketable instruments or
securities to Landlord, such instruments or securities shall be held by a
Depository, pursuant to an escrow agreement reasonably satisfactory to Landlord)
at the time and in the manner hereinafter provided:
(a) Tenant shall deposit from time to time in accordance with the
provisions of the Funding Agreement, amounts up to an aggregate of $10,000,000
at the time and in the manner provided in the Funding Agreement;
(b) For the period from the Occupancy Date to and including the
fifth anniversary thereof, the security deposit shall be in the amount of
$10,000,000;
(c) For the period from the day next succeeding the expiration of
the period referred to in subparagraph (b) above to and including the fifth
anniversary thereof, the security deposit shall be reduced to $7,500,000;
(d) For the period from the day next succeeding the expiration of
the period referred to in subparagraph (c) above to and including the fifth
anniversary thereof, the security deposit shall be reduced to $5,000,000; and
(e) Thereafter and continuing for the remainder of the Term, the
security deposit shall be zero.
Notwithstanding the foregoing, in the event Tenant shall have
terminated the Funding Agreement pursuant to the provisions of Section
9.6(b)(ii)(B) thereof, provided no
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Event of Default shall have occurred and be continuing, the security so
deposited shall, in all events, be promptly returned to Tenant on the date the
Building shall have been Substantially Completed. If Tenant defaults under the
Occupancy Agreement and by reason of such default Tenant is obligated for the
payment of liquidated damages thereunder, Landlord shall apply or retain the
whole or any part of the security so deposited and the interest accrued thereon,
if any, to the payment of liquidated damages required to be paid by Tenant under
the Occupancy Agreement and for no other purpose. Notwithstanding the
immediately preceding sentence, in the event Landlord shall have provided
financing for the Project as contemplated by the Financing Letter, such security
shall be applied first to the payment of any outstanding indebtedness to
Landlord under the loan evidencing such financing or any interest thereon in
accordance with the provisions of the documents evidencing and/or securing such
loan. Unless sooner applied as hereinabove provided or returned to Tenant as
provided in the first sentence of this paragraph, the security or any balance
thereof shall be returned or paid over to Tenant on the Lease Restrictions
Expiration Date. 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
provided that such vendee, transferee a lessee agrees (in writing) to assume
from and after the date of the sale, assignment or transfer all of Landlord's
obligations with respect to the security and the interest thereon, if any and
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 sentence shall
apply to every subsequent sale, transfer or leasing of Landlord's interest in
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. Except in connection with a permitted assignment
of this Lease, Tenant shall not 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 any 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. Landlord shall deposit the security deposit in an interest bearing
account with an institution satisfying the requirements of a Depository under
this Lease and provided no Default shall have occurred and be continuing,
interest shall be paid to Tenant annually.
Section 42.02. (a) In lieu of a cash security deposit, Tenant may
deliver to Landlord a clean, irrevocable and unconditional letter of credit
(such letter of credit, and any replacement thereof as provided herein, is
called a "Letter of Credit") issued and drawn upon any commercial bank which is
a member of the New York Clearinghouse Association reasonably approved by
Landlord with offices for banking purposes in the City of New York ("Issuing
Bank"), which Letter of Credit shall have a term of not less than one year,
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be in form and content satisfactory to Landlord, be for the account of Landlord
and be in the amount, required from time to time pursuant to Section 42.01. The
Letter of Credit shall provide that:
(i) The Issuing Bank shall pay to Landlord or its duly authorized
representative an amount up to the face amount of the Letter
of Credit upon presentation of the Letter of Credit and a
sight draft in the amount to be drawn;
(ii) The Letter of Credit shall be deemed to be automatically
renewed, without amendment, for consecutive periods of one
yeas each during the Term, unless the Issuing Bank sends
written notice (the "Non-Renewal Notice") to Landlord by
certified or registered mail, return receipt requested, at
least thirty (30) days prior to the expiration date of the
Letter of Credit, to the effect that it elects not to have
such Letter of Credit renewed; and
(iii) The Letter of Credit shall be transferable by Landlord in the
event of a sale, transfer or leasing of Landlord's interest in
the Building.
(b) Landlord, after receipt of the Non-Renewal Notice, shall have
the right to draw the entire amount of the Letter of Credit and to hold the
proceeds as a cash security deposit pursuant to the terms of Section 42.01.
Landlord shall release such proceeds to Tenant upon delivery to Landlord of a
replacement Letter of Credit complying with the terms hereof.
ARTICLE 43
MUTUAL TERMINATION
Section 43.01.
(a) Tenant shall work diligently to obtain the financing required to
complete the Project as more particularly described in the Financing Letter, and
Tenant shall keep Landlord, EDC and UDC informed as to the status of its efforts
to obtain such financing. Tenant shall, at the request of Landlord, EDC and UDC,
together with its investment banker or financial advisor, meet with Landlord,
EDC and UDC to review the status of such financing. If Tenant receives a
commitment for such financing from a financing source, it shall make a copy
available to Landlord, EDC and UDC and if Tenant receives a credit rating from a
credit rating agency, it shall make a copy available to the Landlord, EDC and
UDC.
(b) If Tenant believes, by the date which is the earlier of (i) the
date on which $65,000,000 shall have been advanced to Tenant under the Funding
Agreement or (ii) six (6) months prior to the date on which Tenant estimates
that the entire amount to be
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provided for Project construction pursuant to the Funding Agreement is projected
to have been advanced to Tenant, that it will be unable to obtain such
financing, Tenant shall so advise Landlord, EDC and UDC stating the reasons
therefor and shall request that Landlord provide such financing through sale of
its revenue bonds and/or through provision of credit enhancements as described
in the Financing Letter. In such event, Landlord will work diligently to provide
and make available such financing and/or enhancements and Landlord shall keep
Tenant, EDC and UDC informed as to its efforts to do so.
(c) In the event that neither Tenant, Landlord nor any other
governmental entity with the ability to issue bonds is able to provide financing
as described in the Financing Letter, there shall be an Unavoidable Delay for a
period of up to twelve (12) months (concurrently with any other Unavoidable
Delays during such period) from the date that substantially all funds have been
disbursed under the Funding Agreement (such twelve (12) month period being
called the "Financing Delay"). During such twelve (12) month period, Landlord
and Tenant shall continue their efforts to provide and obtain the financing
required to complete the Project.
Section 43.02. At any time after the expiration of such twelve (12)
month period, either Landlord or Tenant shall have the right to terminate this
Lease upon not less than forty-five (45) days notice to the other. In the event
Landlord or Tenant shall have delivered such notice (i) Tenant shall vacate and
surrender the Premises on the date set forth in such notice in the condition
required pursuant to Article 33, (ii) the Premises shall be delivered free and
clear of any Mortgages and (iii) all Rental, if any, payable by Tenant hereunder
shall be equitably apportioned as of such date and the security deposit
delivered to Landlord in accordance with Article 42 hereof shall be promptly
returned to Tenant.
ARTICLE 44
NON-EXCLUSIVE EASEMENTS
Landlord grants to Tenant, its Subtenants, invitees and licensees,
(i) until the streets, avenues, sidewalks and curbs adjacent to the Premises and
providing access to and from the Premises shall have been dedicated to New York
City, a nonexclusive easement and right-of-way for the passage of pedestrian and
vehicular traffic over all such completed streets, avenues, sidewalks and curbs,
including, without limitation, Vesey Street west of North End Avenue and (ii) a
nonexclusive easement and right of way for pedestrian ingress and egress over
the premises more particularly described in Exhibit H hereto, in each case,
subject to such reasonable policies and procedures as may from time to time be
enacted by Landlord and which are generally applicable to all tenants of Battery
Park City and their subtenants, invitees and licensees.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day
and year first above written.
BATTERY PARK CITY AUTHORITY
By: /s/ Philip R. Pitruzello
--------------------------------
Philip R. Pitruzello
President
NEW YORK MERCANTILE EXCHANGE
By: /s/ Daniel Rappaport
--------------------------------
Daniel Rappaport
Chairman
<PAGE> 1
Exhibit 10.4
FUNDING AGREEMENT
among
NEW YORK STATE URBAN DEVELOPMENT CORPORATION,
NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION,
BATTERY PARK CITY AUTHORITY,
and
NEW YORK MERCANTILE EXCHANGE
Dated as of May 18, 1995
Relative to the design, development, construction and equipping
of the New York Mercantile Exchange Headquarters Project,
on the Premises identified as Site 15
in Battery Park City, Borough of Manhattan,
City of New York
<PAGE> 2
TABLE OF CONTENTS
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PREAMBLE.......................................................................................................... 1
DEFINITIONS....................................................................................................... 5
ARTICLE ONE - TERM................................................................................................ 18
ss.1.1 Term...................................................................................... 18
ARTICLE TWO - THE FUNDING......................................................................................... 19
ss.2.1 Agreement to Fund the UDC Funds and the City Funds ....................................... 19
ss.2.1A Agreement to Fund the BPCA Financing...................................................... 20
ss.2.2 Pre-Conditions to the Disbursement of Funds; Litigation................................... 21
ss.2.3 Disbursements............................................................................. 28
ss.2.4 The Public Parties' Right to Cease the Disbursement of the Funds and to
Terminate this Agreement upon Abandonment of Project...................................... 33
ss.2.5 Payment of Construction Monitor........................................................... 33
ARTICLE THREE - THE PROJECT WORK; PERFORMANCE, PROCUREMENT AND CONTRACT REQUIREMENTS.............................. 35
ss.3.1 General Provisions Regarding Design and Construction...................................... 35
ss.3.2 Procurement of Services and Goods......................................................... 37
ss.3.3 Personnel................................................................................. 50
ss.3.4 Liaison to Public Parties................................................................. 51
ss.3.5 UDC Contact Person........................................................................ 51
ss.3.6 EDC Contact Person........................................................................ 52
ss.3.7 BPCA Contact Person....................................................................... 52
ARTICLE FOUR - CONDITIONS FOR DISBURSEMENT........................................................................ 53
ss.4.1 Initial Submissions by NYMEX.............................................................. 53
ss.4.2 Documentation for Disbursements on Account of Eligible Costs.............................. 54
ss.4.3 Project Budget............................................................................ 60
ss.4.4 BPCA's Disbursement of the BPCA Financing/BPCA's Provision of Credit
Enhancement for Alternative Financing..................................................... 61
ARTICLE FIVE - REPRESENTATIONS AND WARRANTIES OF NYMEX............................................................ 63
ss.5.1 Organization; Standing.................................................................... 63
ss.5.2 Due Authorization; Enforceable Obligations................................................ 63
ss.5.3 Conflict under Other Documents............................................................ 64
ss.5.4 No Litigation............................................................................. 64
ss.5.5 No Default................................................................................ 64
ss.5.6 No Burdensome Agreements.................................................................. 65
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ss.5.7 Filing Statements and Reports............................................................. 65
ss.5.8 Project Contracts......................................................................... 65
ARTICLE FIVE-A - REPRESENTATIONS AND WARRANTIES OF THE PUBLIC PARTIES AND THE CITY................................ 66
ss.5A.l Organization; Standing.................................................................... 66
ss.5A.2 Due Authorization; Enforceable Obligation................................................. 66
ss.5A.3 No Litigation............................................................................. 67
ss.5A.4 No Burdensome Agreements.................................................................. 68
ss.5A.5 Representations and Warranties of the City................................................ 68
ARTICLE SIX - COVENANTS........................................................................................... 70
ss.6.1 Intentionally Omitted..................................................................... 70
ss.6.2 Compliance with the Project Documents and Law; Legal Status............................... 70
ss.6.3 Maintenance of and Compliance with Insurance Requirements................................. 70
ss.6.4 Maintenance of Office..................................................................... 71
ss.6.5 Compliance with Applicable Law............................................................ 71
ss.6.6 Assignment................................................................................ 72
ss.6.7 Maintenance of Records.................................................................... 72
ss.6.8 Other Information......................................................................... 73
ss.6.9 Due Application of Funding Proceeds....................................................... 74
ss.6.10 Liens..................................................................................... 75
ss.6.11 Defects: Non-Conforming Work.............................................................. 75
ss.6.12 Satisfaction of Conditions................................................................ 78
ss.6.13 Tropical Hardwoods........................................................................ 78
ss.6.14 MacBride Principles....................................................................... 79
ss.6.15 No Waiver of Compliance................................................................... 79
ss.6.16. Employment Information.................................................................... 79
ARTICLE SEVEN - DEFAULT; TERMINATION.............................................................................. 81
ss.7.1 Events of Default......................................................................... 81
ss.7.2 Default Remedies; Exculpation............................................................. 82
ss.7.3 Termination............................................................................... 84
ARTICLE EIGHT - NOTICES .......................................................................................... 87
ss.8.1 Notices................................................................................... 87
ARTICLE NINE - GENERAL CONDITIONS AND COVENANTS................................................................... 89
ss.9.1 Satisfactory Proceedings.................................................................. 89
ss.9.2 Conflict of Interests..................................................................... 89
ss.9.3 No Liability of Individuals............................................................... 90
ss.9.4 Anti-Boycott Provisions................................................................... 90
ss.9.5 Governing Law............................................................................. 91
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ss.9.6 Limited Liability of the Public Parties; Remedies in the
Event of a Public Party Default........................................................... 91
ss.9.6A Arbitration............................................................................... 94
ss.9.7 Amendments................................................................................ 98
ss.9.8 Successors and Assigns.................................................................... 99
ss.9.9 Assignment of Funds....................................................................... 99
ss.9.10 No Third Party Rights..................................................................... 99
ss.9.11 Interpretation............................................................................ 100
ss.9.12 Captions.................................................................................. 100
ss.9.13 Indemnity................................................................................. 100
ss.9.14 No Agency................................................................................. 103
ss.9.15 Venue..................................................................................... 103
ss.9.16 Investigations; Cooperation............................................................... 104
ss.9.17 Assignment by EDC......................................................................... 109
ss.9.18 Registration of Agreement................................................................. 110
ss.9.19 Counterparts.............................................................................. 110
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Atts: Appendix A - Schedule of Eligible Costs for Project Work
Appendix B - Project Budget
Appendix C - NYMEX's Certificate as to Subsisting Corporation
Appendix D - NYMEX's Legal Opinion
Appendix E - NYMEX's Secretary's Certificate
Appendix F - Litigation
Appendix G - UDC's Legal Opinion
Appendix G-1 - EDC's Legal Opinion
Appendix G-2 - BPCA's Legal Opinion
Appendix G-3 - City's Legal Opinion
Appendix H - UDC's Directors Resolution
Appendix H-1 - EDC's Secretary's Certificate
Appendix H-2 - BPCA's Member's Resolution
Appendix I - MacBride Principles Rider
Exhibit A - Form List of Contractors
Exhibit B - Investigation Forms
Exhibit C-1 - Form Design Contract Rider
Exhibit C-2 - Form Consulting Agreement Addendum Letter
Exhibit C-3 - Form Construction Contract Rider
Exhibit C-4 - Form M&E Contract Rider
Exhibit D - Form Certificate of Specimen Signature
Exhibit E - Form of Collateral Assignment
Exhibit F - Form Certification to be Attached to Requisition
Exhibit G - AIA Forms
Exhibit H - Form Employment Questionnaire (Initial)
Exhibit H-1 - Form Employment Questionnaire (Annual)
Schedule A - Accepted Design Professionals and Consultants
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FUNDING AGREEMENT dated as of May 18, 1995 among NEW YORK STATE URBAN
DEVELOPMENT CORPORATION ("UDC"), a public benefit corporation of the State of
New York, having an address at 1515 Broadway, New York, New York 10036, NEW YORK
CITY ECONOMIC DEVELOPMENT CORPORATION ("EDC"), a local development corporation
formed pursuant to Section 1411 of the Not-for-Profit Corporation Law of the
State of New York, having its principal office at 110 William Street, New York,
New York 10038, BATTERY PARK CITY AUTHORITY ("BPCA"), a public benefit
corporation of the State of New York, having an address at One World Financial
Center, Battery Park City, New York, New York 10281 and the NEW YORK MERCANTILE
EXCHANGE, a corporation organized and existing under the Not-For-Profit
Corporation laws of the State of New York, including its wholly owned
subsidiary, Commodity Exchange, Inc. (collectively, "NYMEX"), having its
principal office at Four World Trade Center, New York, New York 10048.
PREAMBLE:
WTTNESSETH
WHEREAS, BPCA is the owner of a fee interest (subject to a certain option
to purchase held by The City of New York) in certain premises identified as
Block 16, p/o Lot 3, on the Tax Map for the Borough of Manhattan, also
identified as Site 15 in the Battery Park City area, as more particularly
described in the Lease (the "Premises"); and
WHEREAS, BPCA, as landlord, and NYMEX, as tenant, have entered into a
ground lease dated as of the date hereof (the "Lease"), demising BPCA's interest
in the Premises to NYMEX
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for NYMEX's use and occupancy in connection with, and development of, the
Project (as hereinafter defined); and
WHEREAS, under the terms of the Lease, NYMEX is obligated to construct on
the Premises, and operate, a new futures and options exchange trading facility
and office building complex consisting of approximately 500,000 rentable square
feet (of which NYMEX expects that (i) approximately 113,625 rentable square feet
will be used for trading facilities, consisting of a trading floor, and computer
facilities and other special improvements and support space supporting or
enhancing the trading floor and related trading activities, and (ii)
approximately 386,375 rentable square feet will be used for office space); and
WHEREAS, in order to facilitate the Project, The State of New York (the
"State"), through UDC, and The City of New York (the "City'), have agreed to
fund to EDC, and EDC has agreed to fund to NYMEX, a certain portion of the costs
associated with the Project Work (as hereinafter defined); and
WHEREAS, UDC will make available to EDC funds in the amount of $5,000,000
(the "UDC Funds") for use, subject to the terms, conditions and limitations set
forth in this Agreement, in connection with the Project Work; and
WHEREAS, the City and EDC have entered into an Amended and Restated
Contract dated as of June 30, 1994 (the "Consolidated Contract"), pursuant to
which (i) the City will make available to EDC City capital budget funds in the
amount of $123,686,000 (the "City Funds") for use, subject to the terms,
conditions and limitations set forth in this Agreement, in connection with the
Project Work, and (ii) EDC is authorized to contract for the disbursement of
such funds and otherwise as may be necessary for the performance of the Project
Work; and
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WHEREAS, in the event that NYMEX is not able to obtain Private Financing
(as hereinafter defined) for the remainder of the costs of the Project Work not
financed with the UDC Funds and the City Funds, BPCA has agreed, subject to the
terms and conditions set forth in the Financing Letter (as hereinafter defined),
the BPCA Financing Documents (as hereinafter defined) and this Agreement, to
provide NYMEX with the BPCA Financing (as hereinafter defined) or a credit
enhancement for the Alternative Financing (as hereinafter defined) to finance
such other Eligible Costs of the Project Work not financed with the UDC Funds
and the City Funds; and
WHEREAS, pursuant to a Project Agreement dazed as of the date hereof (the
"Project Agreement") among the Public Parties (as hereinafter defined), the
Public Parties have agreed, among other things, that (i) UDC will make available
to EDC the UDC Funds for EDC's disbursement, subject to the terms, conditions
and limitations set forth in this Agreement and the Project Agreement, to NYMEX
in connection with the Project, (ii) in the event that NYMEX is not able to
obtain Private Financing, BPCA will make available to NYMEX, subject to the
terms, conditions and limitations set forth in this Agreement, the Project
Agreement and the BPCA Financing Documents, either the BPCA Financing for BPCA's
disbursement or a credit enhancement for the Alternative Financing in connection
with the Project, (iii) EDC will be responsible for the management and
disbursement of the UDC Funds and the City Funds (the UDC Funds and the City
Funds, constituting an amount equal to $128,686,000 in the aggregate, are
hereinafter collectively referred to as the "Funding"), the monitoring of the
progress of the Project Work, and the administration of this Agreement on a
day-to-day basis until such time as the Funding has been fully disbursed, and
(iv) thereafter, in the event that BPCA Financing is made available, BPCA will
be responsible for the management and disbursement of the BPCA
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Financing, the monitoring of the progress of the Project Work, and the
administration of this Agreement on a day-to-day basis until such time as the
BPCA Financing has been fully disbursed or, in the event that Alternative
Financing is made available and BPCA provides a credit enhancement for such
Alternative Financing, BPCA will be responsible for the monitoring of the
progress of the Project Work and the administration of this Agreement on a
day-to-day basis until such time as the Alternative Financing has been fully
disbursed; and
WHEREAS, except as otherwise expressly provided in Section 11.05 of the
Lease, NYMEX desires to contract independently for the performance of the
Project Work, and not as an agent of the Public Parties; and
WHEREAS, NYMEX has entered into, or has caused to be entered into, or
intends to enter into or cause to be entered into, a contract or contracts
(collectively, the "Design Contracts") for the engagement of (i) one or more
Architects (as hereinafter defined), (ii) one or more Construction Managers (as
hereinafter defined), (iii) the Owner's Representative (as hereinafter defined),
and (iv) certain other Design Professionals (as hereinafter defined), the fees
and expenses of which are to be paid for in whole or in part with the Funding
and, if applicable, the BPCA Financing or the Alternative Financing; and
WHEREAS, NYMEX has entered into, or has caused to be entered into, or
intends to enter into or cause to be entered into, a contract or contracts or
agreements (collectively, the "Consulting Agreements") for the engagement of
certain Consultants (as hereinafter defined), the fees and expenses of which are
to be paid for in whole or in part with the Funding and, if applicable, the BPCA
Financing or the Alternative Financing; and
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WHEREAS, NYMEX intends to enter into, or cause its Construction Managers
to enter into, Construction Contracts (as hereinafter defined) for the
performance of the Construction Work (as hereinafter defined) which is to be
paid for in whole or in part with the Funding and, if applicable, the BPCA
Financing or the Alternative Financing; and
WHEREAS, NYMEX intends to enter into, or cause to be entered into, M&E
Contracts (as hereinafter defined) for the equipping of the Project which is to
be paid for in whole or in part with the Funding and, if applicable, the BPCA
Financing or the Alternative Financing; and
WHEREAS, EDC desires to disburse the Funding to NYMEX for the purpose of
financing the Eligible Costs (as hereinafter defined) of the Project Work in
furtherance of its obligations under the Consolidated Contract and its corporate
purpose of fostering economic development in the City; and
WHEREAS, in the event BPCA Financing is made available, BPCA desires to
disburse the BPCA Financing to NYMEX for the purpose of financing the Eligible
Costs of the Project Work.
NOW, THEREFORE, UDC, EDC, BPCA and NYMEX agree as follows:
DEFINITIONS
As used in this Funding Agreement, the following initially capitalized
terms shall have the respective meanings indicated opposite each of them:
"Accounting
Principles" The then current generally accepted accounting
principles consistently applied.
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"Additional Security
Deposit" As defined in ss.2.2(a)(i)(3).
"Affiliate" Any Person that directly or indirectly through one or
more intermediaries controls, is controlled by or is
under common control with NYMEX. For purposes hereof,
the term "control" (including the terms "controlled by"
and "under common control with") shall mean the
possession, direct or indirect, of a five percent (5%)
or greater interest in NYMEX or any Person in which
NYMEX has a five percent (5%) or greater interest;
provided, however, that in no event shall "control" by
virtue of ownership of memberships on the "Exchange" (as
such term is defined in the hereinafter defined
Occupancy Agreement) mean the possession, direct or
indirect, of less than fifteen percent (15%) of the
authorized and outstanding memberships on the Exchange.
An "Affiliate" of a Person other than NYMEX shall be
determined using the same standard of control set forth
herein with respect to NYMEX. Unless the context
otherwise requires, any reference to an "Affiliate" in
this Agreement shall be deemed to refer to an Affiliate
of NYMEX.
"Agreement" This Funding Agreement.
"Alternative
Financing" Financing which (A) is for the Eligible Costs of the
Project Work that are not financed with the UDC Funds
and the City Funds, in an amount not to exceed
$110,000,000 plus (x) up to three years capitalized
interest, (y) a debt service reserve fund, and (z) the
costs of the issuance of the bonds, (B) is in the form
of either (i) private, conventional financing obtained
by NYMEX, or (ii) bond financing provided by a
governmental entity other than BPCA, and (C) includes
credit enhancement by BPCA in accordance with the terms
and conditions set forth therefor in the Financing
Letter and/or the BPCA Financing Documents.
"Arbiter" As defined in ss.9.6A(a)(i).
"Architect(s)" Skidmore, Owings & Merrill, and/or any other registered
architect, architectural firm, professional engineer,
design professional or combined practice or association
selected by NYMEX (and approved by the Public Parties,
which approval shall not be unreasonably withheld or
delayed, in accordance with the provisions of
ss.3.2(b)(1) hereof) to perform certain architectural,
design, engineering and construction contract
administration services.
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"Article 78
Litigation" Litigation that is pursued under Article 78 of the New
York State Civil Practice Laws and Rules and that seeks
to invalidate or enjoin a governmental action or approval
necessary for the Project, or the litigation in respect
of the Project.
"Associated
Contractor" Any Person with whom NYMEX or any Affiliate has "material
contracts" other than in connection with the Project.
"Material contracts" shall mean any contract or contracts
for the performance of construction work or provision of
services, the value of which is in excess of $100,000.
"BPCA" As defined in the first paragraph of this Agreement.
"BPCA-Financed
Construction
Contract" Any Construction Contract which is to be financed in
whole or in part with the BPCA Financing.
"BPCA-Financed
Design Contract"/
"BPCA-Financed
Consulting
Agreement" Any Design Contract and/or Consulting Agreement, as
applicable, which is to be financed in whole or
in part with the BPCA Financing.
"BPCA-Financed
M&E Contract" Any M&E Contract which is to be financed in whole or in
part with the BPCA Financing.
"BPCA Financing" The funding, if any, to be provided by BPCA in
accordance with the terms of the Financing Letter,
through a bond financing, on such terms and conditions as
are set forth in the Financing Letter and the BPCA
Financing Documents, for those Eligible Costs incurred by
NYMEX in connection with the Project Work which are in
excess of the UDC Funds and the City Funds but not to
exceed an amount equal to $110,000,000 plus (x) up to
three years capitalized interest, (y) a debt service
reserve fund, and (z) the costs of the issuance of the
bonds.
"BPCA Financing
Documents" Those certain agreements (other than the Financing
Letter) and/or indentures and/or other documents, if
any, to be entered into relating to the
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BPCA Financing or the BPCA credit enhancement for the
Alternative Financing.
"Business Day" Any day other than a Saturday, Sunday, or a day observed
as a holiday either the City, the State or the federal
government
"City" As defined in the Preamble.
"City Funds" As defined in the Preamble.
"City Comptroller" As defined in ss.9.18.
"Civic Facilities" As defined in Section 26.01 of the Lease.
"CM Costs" The cost to NYMEX of Construction Management Services
(as hereinafter defined).
"Commencement
Date" As defined in ss.1.1.
"Completed
Cover Sheet" As defined in ss.4.1.
"Consolidated
Contract" As defined in the Preamble.
"Construction
Contracts" Contracts entered into by NYMEX or Construction Managers
with Contractors for the performance of Construction
Work. Construction Contracts shall not include M&E
Contracts.
"Construction
Manager(s)" Lehrer McGovern Bovis, and/or any other construction
manager selected by NYMEX (and approved by the Public
Parties, which approval shall not be unreasonably
withheld or delayed, in accordance with the provisions
of ss.3.2(b)(1) hereof), responsible for the performance
of the Construction Management Services (as hereinafter
defined).
"Construction
Management
Services" The services relative to the Project Work performed by
the Construction Manager, including the performance of
"general condition" items that are required by or
associated with the Construction Work and whether such
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services were or are performed during the
pre-construction phase or the construction phase of
the Project Work.
"Construction
Monitor" The Person employed by the Public Parties (and paid for
as provided in ss.2.5 herein) to review Requisitions (as
hereinafter defined) and monitor progress of the Project
Work, the disbursement of the Funding and disbursement
of the BPCA Financing, if any.
"Construction
Work" Any of the following activities undertaken or services
performed by or behalf of NYMEX in order to construct
the Project on the Premises prepare the building to be
constructed on the Premises for occupancy, make the
trading floor operational: (i) construction activities
(including without limitation, the performance of any
site work on the Premises, construction of any the
foundation-related improvements on the Premises, the
construction and fitting out and making reading for
occupancy of the new building on the Premises); (ii)
purchasing and/or leasing of materials, fixtures and M &
E; and (iii) testing, debugging, commissioning,
fabrication and installation of materials, fixtures and
M&E into the new building the Premises and into the
Support Facilities as such term is hereinafter defined.
"Consultant(s)" Any professional consultant (other than the Design
Professionals) engaged by NYMEX pursuant to Consulting
Agreements (including, without limitation, any real
estate advisor or consultant (e.g. Goldman Sachs); any
development consulting firm (e.g. Bennis & Reissman);
any technology consultant (e.g. a computer or
communications or floor trading consultant or expert);
any electrical consultant; and any attorneys).
"Consulting
Agreements" As defined in the Preamble.
"Contractor(s)" Any contractor engaged by NYMEX pursuant to Construction
Contracts and/or M&E Contracts.
"Corrective Work" As defined in ss.6.11(b).
"Credit-Enhanced
Contract" Any Design Contract and/or Consulting Agreement or
Construction Contract which is to be financed in whole
or in part with Alternative Financing.
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"Defaulting Party" As defined in ss.9.6(b).
"Design
Contracts" As defined in the Preamble.
"Design and/or
Consulting
Services" Any activities undertaken or services performed by the
Design Professionals and/or Consultants on behalf of
NYMEX in connection with the Project, including, without
limitation, the provision of engineering services or
other professional services for the Project, the
coordination of design functions among the various
Design Professionals and/or Consultants for the
development of the Project, and the overall
administration, management and supervision of the
Project, and whether such activities or services were or
are undertaken or performed during the pre-construction
phase or the construction phase of the Project Work.
"Design
Guidelines" As defined in the Lease.
"Design
Professionals" The Architects, the Construction Managers, the Owner's
Representative, and any engineers or any other
professionals engaged by NYMEX to perform professional
design, engineering and/or contract administration and
supervision services relative to the Project Work.
"Dispute Notice" As defined in ss.9.6A(a)(i).
"EDC" As defined in the first paragraph of this Agreement.
"Eligible
Costs" (i) With respect to the City Funds, Eligible Costs
shall mean those costs, fees and expenses
described in Appendix A-1 attached hereto and made
a part hereof and incurred by or on behalf of
NYMEX in connection with the Project, and any
other costs, fees and expenses incurred by or on
behalf of NYMEX in connection with the Project
that may be determined by EDC to be "capital
eligible" (in either case, whether such costs were
incurred before, during or after construction);
(ii) With respect to the UDC Funds, Eligible Costs
shall mean those costs, fees and expenses
described in Appendix A-1 attached hereto and made
a part hereof and incurred by or on behalf of
NYMEX in connection with the Project, and any
other costs, fees and
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expenses incurred by or on behalf of NYMEX in
connection with the Project that may be approved
by UDC (in either case, whether such costs were
incurred before, during or after construction);
and
(iii) With respect to the BPCA Financing or Alternative
Financing, Eligible Costs shall mean those costs,
fees and expenses described in Appendix A-1
attached hereto and made a part hereof and
incurred in connection with the Project, and any
other costs, fees and expenses incurred by or on
behalf of NYMEX in connection with the Project
that may be approved by BPCA (in either case,
whether such costs were incurred before, during or
after construction).
"Events of
Default" Those events set forth in ss.7.1.
"Federal Courts" As defined in ss.9.15.
"Financing
Letter" That certain letter dated as of the date hereof between
NYMEX and BPCA concerning the provision of BPCA
Financing or BPCA credit enhancement for the Alternative
Financing in the event that NYMEX is unable to obtain
Private Financing.
"First Requisition
Amount" As defined in ss.2.2(a)(i)(1).
"Funding" As defined in the Preamble.
"Governmental
Authorities" The United States of America, the State, the City and
any agency, department, legislative body, commission,
board, bureau, instrumentality, political subdivision or
public benefit corporation of any of the foregoing, now
existing or hereafter created, having jurisdiction over
the Premises or any portion thereof.
"Hard Costs" The aggregate of the costs incurred by or on behalf of
NYMEX in connection with the Construction Work.
"Hard Costs
Requisition" As defined in ss.4.2(a)(2)(ii).
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"Indemnified
Parties" The State, the City, UDC, EDC, BPCA and each of their
respective agents, officers, directors, officials,
members and employees.
"Injunction" As defined in ss.2.2(c)(i).
"Late Charge
Rate" The Prime Rate (as such term is defined in the Occupancy
Agreement) plus five percent (5%).
"Lease" As defined in the Preamble.
"Lease Execution
Date" The date on which the Lease has been fully executed and
unconditionally delivered by BPCA and NYMEX.
"M&E" Machinery, equipment, office furniture and other items
of tangible and intangible personal property (e.g.
mainframe, peripheral and personal computers, computer
software, telecommunications equipment, graphics
systems, telephone systems and audio visual equipment),
but excluding ordinary office supplies, purchased and/or
leased by or on behalf of NYMEX and tested and installed
at the Premises or at the Support Facilities, and to be
used in support of NYMEX's operations at the Premises.
"M&E Contracts" Contracts and/or leases entered into by NYMEX with
suppliers, or invoices or purchase orders, for the
purchase, lease, design, fabrication, installation,
testing, debugging and commissioning of M&E.
"M&E Costs" The costs paid by NYMEX under M&E Contracts.
"M&E Requisition" As defined in ss.4.2(a)(3)(i).
"New York State
Courts" As defined in ss.9.15.
"Non-Renewal
Notice" As defined in ss.2.2(a)(ii).
"NYMEX" As defined in the Preamble.
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"NYMEX's
Authorized
Representative" The Person selected by NYMEX that is legally authorized
to sign Requisitions on behalf of NYMEX.
"Occupancy
Agreement" The agreement dated as of the date hereof, among the
City, UDC, EDC, BPCA and NYMEX, regarding the occupancy
of the new building to be constructed by NYMEX on the
Premises.
"Owner's
Representative" Forest City Ratner Companies, or any other Person
selected by NYMEX (and approved by the Public Parties,
which approval shall not be unreasonably withheld or
delayed, in accordance with the provisions of ss.
3.2(b)(1) hereof) to perform certain development
services on behalf of NYMEX during the pre-development
phase and construction phase of the Project Work.
"Owner's
Representative's
Costs" The cost to NYMEX of the Owner's Representative's
Services.
"Owner's
Representative's
Services" The services relative to the Project Work performed by
the Owner's Representative.
"Party" or
"Parties" UDC, EDC, BPCA and/or NYMEX.
"Person" An individual, corporation, partnership, joint venture,
estate, trust, unincorporated association; any federal,
state, county or municipal government or any bureau,
department or agency thereof; and any fiduciary acting
in such capacity on behalf of any of the foregoing.
"Plans and
Specifications" As defined in ss.3.1(a).
"Predevelopment
Work" Any activities undertaken or services performed by or on
behalf of NYMEX prior to the commencement of
construction of the Project (including, without
limitation, the Design and/or Consulting Services, the
Owner's Representative Services, legal services and any
soil tests, land surveys and land appraisals undertaken
in connection with the Project Work).
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"Premises" As defined in the Preamble.
"Private Financing" Financing for the remainder of the costs of the Project
Work that are not financed with the UDC Funds and the
City Funds, that is obtained by NYMEX from private
sources and is secured by the general revenues of NYMEX
and/or by the grant of a first leasehold mortgage and
that is not credit enhanced by BPCA.
"Prohibited
Persons" As defined in ss.3.2(b)(4).
"Project" The planning, design, development, construction,
equipping, financing and operation of a new futures and
options exchange trading facility and office building on
the Premises and ancillary activities supportive of
NYMEX's operations at the Premises within the Support
Facilities.
"Project
Agreement" As defined in the Preamble.
"Project Budget" As defined in ss.4.3.
"Project
Contracts" The M&E Contracts, the Construction Contracts, the
Design Contracts, the Consulting Agreements, and any
other contracts entered into by or on behalf of NYMEX
for the performance of the Project Work.
"Project
Documents" This Agreement, the Lease, the Occupancy Agreement, the
Financing Letter, the BPCA Financing Documents and any
other agreements or indentures between NYMEX and one or
more of the Public Parties and by which NYMEX is bound
relating to the Premises or the Project or the financing
thereof. Project Documents shall not include Project
Contracts.
"Project Work" Collectively, any (i) Predevelopment Work, (ii) Design
and/or Consulting Services, and (iii) Construction Work
(including, without limitation, the purchase, lease,
fabrication, installation, testing, debugging and
commissioning of M&E for use in connection with, or in
support of, the Project and NYMEX's operations at the
Premises including the testing, debugging and
commissioning of such M&E at the Support Facilities),
all in accordance with this Agreement and the Plans and
Specifications and whether or not paid for with the
Funding and/or the BPCA Financing, if available.
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"Public-Funded
Construction
Contract" Any Construction Contract which is to be funded in whole
or in part with the Funding.
"Public-Funded
Design Contract"/
"Public-Funded
Consulting
Agreement" Any Design Contract and/or Consulting Agreement, as
applicable, which is to be funded in whole or in part
with the Funding.
"Public-Funded
M&E Contract" Any M&E Contract which is to be funded in whole or in
part with the Funding.
"Public Parties" UDC, EDC and BPCA collectively.
"Questionnaire
(Annual)" As defined in ss.6.16(b).
"Questionnaire
(Initial") As defined in ss.6.16(a).
"Requisition" Any one, any two or all of a Hard Cost Requisition, a
Soft Cost Requisition (as hereinafter defined) and an
M&E Requisition.
"Retainage" As defined in ss.2.3(a)(4).
"Sales Tax Letter" As defined in Section 11.05 of the Lease.
"Security Deposit" As defined in ss.2.2(a)(i)(1).
"Security Deposit
Increase Date" As defined in ss.2.2(a)(i)(2).
"Soft Costs" The aggregate of the costs incurred by or on behalf of
NYMEX in connection with Design and/or Consulting
Services wad financing costs incurred by NYMEX in
connection with the Project Work.
"Soft Costs
Requisition" As defined in ss.4.2(a)(1)(i).
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"Staging Area" The "Storage/Staging Area" and/or the "Supplemental
Staging Area" (as such terms are defined in that certain
Letter Agreement dated as of the date hereof between
BPCA and NYMEX), provided that, for purposes of this
Agreement, in no event shall a Staging Area be
considered to be "off-site".
"Substantially
Completed" As defined in Section 11.04 of the Lease.
"Support
Facilities" Those facilities owned or leased by NYMEX in New York
City and identified as 22 Cortlandt Street and 4 World
Trade Center, which facilities are ancillary to and in
support of the primary business operations of NYMEX at
the Premises.
"Term" As defined in ss.1.1.
"Total Project
Costs" The estimate, contained in the Project Budget submitted
by NYMEX in accordance with ss.4.3(a) hereof and any
amendments thereto submitted by NYMEX in accordance with
ss.4.3(b) hereof, of all the projected costs necessary
to complete the Project Work; provided, however, that
for purposes of determining the Total Project Costs in
connection with ss.2.2(a)(i)(3) hereof only, such Total
Project Costs shall not include the cost of three years
capitalized interest, a debt service reserve fund or the
costs of issuing bonds (it being understood that the
exclusion described in the foregoing proviso shall not
apply with respect to the requirement that NYMEX set
forth all costs of the Project Work in the Project
Budget).
"UDC" As defined in the first paragraph of this Agreement.
"UDC Funds" As defined in the Preamble.
"Unavoidable
Delays" Delays in connection with the Project Work due to (i)
strikes, (ii) lockouts, (iii) work stoppages, (iv) labor
jurisdictional disputes, (v) acts of God, (vi) inability
to obtain labor or materials due to governmental
preemptions or restrictions (other than governmental
restrictions which NYMEX is bound to observe pursuant to
Article 40 of the Lease), (vii) enemy action, (viii)
riot, (ix) other civil commotion, fire, casualty or
other causes beyond the reasonable control of NYMEX (not
including NYMEX's insolvency or financial condition),
(x) the failure of UDC or the City to make available to
EDC, in accordance with the provisions of this
Agreement, the UDC
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Funds or the City Funds, respectively, or any portion
thereof, (xi) the failure of EDC to disburse the UDC
Funds or the City Funds or any portion thereof in
accordance with the provisions of this Agreement, (xii)
a Financing Delay (as defined in the Lease), (xiii) to
the extent applicable, the failure of BPCA to disburse
the BPCA Financing in accordance with the provisions of
this Agreement and the BPCA Financing Documents, (xiv)
the failure of BPCA to complete any Civic Facilities
work required to be performed by BPCA in accordance with
Article 11 and Article 26 of the Lease, (xv)
interferences with the Project Work caused by BPCA
performing construction work in the vicinity of the
Project, and (xvi) NYMEX's failure to obtain Private
Financing in accordance with the provisions of the
Financing Letter. NYMEX shall use its best efforts to
notify EDC (if EDC is then administering this Agreement)
or BPCA (if BPCA is then administering this Agreement)
in writing of the occurrence of any such Unavoidable
Delay not later than thirty (30) days after NYMEX knows
of the same.
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ARTICLE ONE - TERM
ss.1.1 Term. The term of this Agreement (the "Term") shall commence upon
the date (the "Commencement Date") on which both of the following conditions
shall have been satisfied: (1) the execution of this Agreement by all the
Parties hereto and the unconditional delivery of this Agreement by each Party to
the other Parties, and (2) the execution and unconditional delivery of the Lease
and the Occupancy Agreement. The Term shall expire upon the earlier to occur of
(i) the complete disbursement of the Funding, the BPCA Financing (if applicable)
or the Alternative Financing (if applicable), (ii) the date on which NYMEX
shall, in accordance with the terms of the Occupancy Agreement, have "abandoned"
(as such term is defined and described in Section 2 of the Occupancy Agreement)
the Project, (iii) the termination of the Lease, or (iv) the earlier termination
of this Agreement as hereinafter provided.
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ARTICLE TWO - THE FUNDING
ss.2.1 Agreement to Fund the UDC Funds and the City Funds. (a) Subject to
the terms, conditions, representations and warranties contained in this
Agreement, UDC agrees to make available to EDC, for disbursement by EDC to NYMEX
in accordance with the provisions of this Agreement, the UDC Funds.
(b) The City, by executing this Agreement for purposes of this ss.2.1(b)
and ss.5A.5 hereof only, agrees (i) to make available to EDC, for disbursement
by EDC to NYMEX in accordance with the provisions of this Agreement,
$123,686,000 of City capital budget funds under the Consolidated Contract, and
(ii) that, in the event that it does not make the City Funds available to EDC
pursuant to ss.2.1(b)(i) above, the City nevertheless will transfer or cause to
be transferred the full amount of the City Funds directly to NYMEX in accordance
with the procedures outlined in this Agreement.
(c) Subject to the terms, conditions, representations and warranties
contained in this Agreement and the Project Agreement and in accordance with the
terms and conditions of this Agreement, EDC agrees to disburse the UDC Funds and
the City Funds, on behalf of itself and UDC, to NYMEX, in an amount equal to
$128,686,000. NYMEX agrees to accept the UDC Funds and the City Funds and to
apply the proceeds of the UDC Funds and the City Funds solely to Eligible Costs
incurred by NYMEX in connection with the Project Work.
(d) The full amount of the UDC Funds and the City Funds comprises the
entire amount that EDC shall be required to disburse under this Agreement for
any and all costs, fees or expenses of NYMEX in any way connected with the
Project Work and the Project. (Nothing
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contained in the foregoing sentence shall operate to prevent, impede or
otherwise affect BPCA's obligation, as set forth in this Agreement, the
Financing Letter and the BPCA Financing Documents, to provide NYMEX with the
BPCA Financing or a credit enhancement for the Alternative Financing if such
becomes necessary as a result of NYMEX's inability to obtain Private Financing.)
NYMEX acknowledges that none of the Public Parties has represented or warranted
that the UDC Funds and the City Funds will be sufficient to pay for the entire
cost of the Project Work or the Project. NYMEX agrees that to the extent that
Eligible Costs and all other costs incurred in connection with the Project Work
exceed the aggregate amount of the UDC Funds and the City Funds for any reason,
such costs will not be paid for by UDC, the City or EDC. The Parties acknowledge
that the UDC Funds and the City Funds are not a fee or other compensation earned
by or paid to NYMEX.
ss.2.1A Agreement to Fund the BPCA Financing. (a) If, in accordance with
the terms and conditions of ss.2.2(b) of this Agreement, the Financing Letter
and the BPCA Financing Documents, BPCA Financing shall become available, then,
subject to the terms, conditions, representations and warranties contained in
this Agreement and the BPCA Financing Documents, BPCA agrees to disburse the
BPCA Financing to NYMEX.
(b) The amount of the BPCA Financing comprises the entire amount that BPCA
shall be required to disburse under this Agreement for any and all costs, fees
or expenses of NYMEX in any way connected with the Project Work and the Project.
NYMEX acknowledges that none of the Public Parties has represented or warranted
that the BPCA Financing will be sufficient to
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pay for the remainder of the Eligible Costs of the Project Work not financed
with UDC Funds and City Funds.
ss.2.2 Pre-Conditions to the Disbursement of Funds; Litigation. (a) (i)
EDC shall not be required to:
(1) disburse any of the Funding pursuant to the first Requisition unless,
simultaneously with such disbursement, NYMEX delivers to BPCA, on behalf
of the Public Parties, either (A) an irrevocable letter of credit in form
and substance, and issued by a financial institution, reasonably
acceptable to BPCA and otherwise subject to and in accordance with the
terms of Article 42 of the Lease, or (B) cash or other security or
marketable instruments reasonably acceptable to BPCA, and otherwise
subject to and in accordance with the terms of Article 42 of the Lease
(such letter of credit, cash or other form of security is hereinafter
referred to as the "Security Deposit"), such Security Deposit to be in an
amount (the "First Requisition Amount") equal to the amount disbursed by
EDC to NYMEX pursuant to such first Requisition but in no event to exceed
$10,000,000; or
(2) if the First Requisition Amount is less than $10,000,000, disburse
any additional Funding after the disbursement of the First Requisition
Amount in excess of $500,000 in the first instance or in excess of
aggregate incremental amounts of $500,000 thereafter, unless,
simultaneously with the disbursement of Funding after the disbursement of
the First Requisition Amount in excess of $500,000 and each additional
aggregate incremental amount of $500,000 thereafter, NYMEX increases the
amount of the Security Deposit by $500,000 (each time that NYMEX so
increases the amount of the Security Deposit is
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hereinafter called the "Security Deposit Increase Date") until the total
of such Security Deposit equals $10,000,000, it being understood that if,
pursuant to any Requisition submitted after the disbursement of the First
Requisition Amount or after any Security Deposit Increase Date, the amount
NYMEX is then requesting to disburse is, together with any previous
disbursements made by EDC after the disbursement of the First Requisition
Amount or after any Security Deposit Increase Date (as applicable), less
than $500,000, EDC shall disburse Funding pursuant to such Requisition
without NYMEX having to increase, or further increase, the amount of the
Security Deposit (for example: if the First Requisition Amount was equal
to $2,000,000 and, simultaneously with the disbursement of $2,000,000 of
the Funding, NYMEX, in accordance with (1) above, delivered a Security
Deposit in the amount of $2,000,000 to BPCA; the second Requisition
requested disbursement of $50,000; the third Requisition requested
disbursement of $300,000; the fourth Requisition requested disbursement of
$200,000; and the fifth Requisition requested disbursement of $450,000;
then EDC shall disburse the $50,000 requested pursuant to the second
Requisition and the $300,000 requested pursuant to the third Requisition
without NYMEX having to increase the Security Deposit, but EDC shall not
disburse the amounts requisitioned pursuant to the fourth and fifth
Requisitions unless simultaneously with EDC's disbursement of the $200,000
pursuant to the fourth Requisition, NYMEX increases the amount of the
Security Deposit to $2,500,000 and simultaneously with EDC's disbursement
of the $450,000 pursuant to the fifth Requisition, NYMEX increases the
amount of the Security Deposit to $3,000,000); or
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(3) disburse any of the Funding at any time if any amendment to the
Project Budget, submitted by NYMEX pursuant to ss.4.3(b) hereof, contains
an estimate of Total Project Costs that exceeds $245,500,000, unless,
simultaneously with the submission of such amended Project Budget, NYMEX
delivers to EDC, on behalf of the Public Parties, an additional letter of
credit, cash or other form of security (the "Additional Security Deposit")
in substantially the same form and subject to those conditions set forth
in ss.2.2(b) hereof, or an increase to the Additional Security Deposit if
the Additional Security Deposit has already been delivered, in an amount
equal to $250,000 for each $500,000 of Project costs in excess of
$245,000,000 that is estimated on any such amended Project Budget;
provided, however, that at such time as any amendment to the Project
Budget contains an estimate of Total Project Costs that exceeds
$275,500,000, NYMEX shall deliver the Additional Security Deposit to EDC
(or increase the Additional Security Deposit, if the Additional Security
Deposit has already been delivered), in an amount equal to $250,000 for
each $500,000 of Project costs in excess of $245,000,000 but less than
$275,000,000, and $500,000 for each $500,000 of Project costs in excess of
$275,000,000.
If NYMEX fails to deliver the Security Deposit and/or the Additional
Security Deposit in the amount required, or fails to increase the amount of such
Security Deposit and/or such Additional Security Deposit, all as required
pursuant to this ss.2.2(a)(i), EDC shall have the right to withhold the
disbursement of the Funding until the requirements of this ss.2.2(a)(i) have
been satisfied.
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(ii) The Additional Security Deposit shall be in the form of either (A) an
irrevocable letter of credit issued and drawn upon a commercial bank which is a
member of the New York Clearinghouse Association, reasonably acceptable to EDC,
with offices for banking purposes in New York City (which letter of credit shall
have a term of not less than one year, be in form and content satisfactory to
EDC, and be for the account of EDC), or (B) cash or other security or marketable
instrument reasonably acceptable to EDC.
If the Additional Security Deposit is in the form of a letter of credit,
such letter of credit shall provide that:
(I) The issuing bank shall pay to EDC or its duly authorized
representative an amount up to the face amount of the letter
of credit upon presentation of the letter of credit and a
sight draft in the amount to be drawn; and
(II) The letter of credit shall be deemed to be automatically
renewed, without amendment, for consecutive periods of one
year each, unless the issuing bank sends written notice (the
"Non-Renewal Notice") to EDC by certified or registered mail,
return receipt requested, at least thirty (30) days prior to
the expiration date of the letter of credit, to the effect
that it elects not to have such letter of credit renewed.
EDC, after receipt of the Non-Renewal Notice, shall have the right to draw the
entire amount of the letter of credit and to hold the proceeds as a cash
security deposit pursuant to the terms hereof until such time as NYMEX delivers
to EDC a replacement letter of credit complying with the terms hereof.
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If the Additional Security Deposit is in the form of cash, such cash shall
be placed in a separate, interest bearing account in a bank located in New York
City, reasonably acceptable to EDC, which account shall provide for the right of
EDC to access such account and withdraw funds therefrom in accordance with the
terms of this Agreement. NYMEX shall pay all fees, costs or other charges
imposed by the bank in which such account is located or any other expense
incurred, in connection with the establishment and administration of the
account. Any interest accrued on the cash deposited in such account shall be
payable to NYMEX.
If the Additional Security Deposit is in the form of securities or other
marketable instruments, such securities or other marketable instruments shall be
held by EDC, Chemical Bank or another escrow agent reasonably approved by EDC,
pursuant to an escrow agreement in a form reasonably satisfactory to EDC. NYMEX
shall pay all fees, costs or other charges imposed by Chemical Bank or any other
escrow agent approved in accordance herewith or any other expense incurred in
connection with the establishment and administration of the escrow account.
(iii) The Additional Security Deposit shall remain in place and in full
force and effect until the date that is the earlier to occur of the date on
which either (x) the Project Work is Substantially Completed, (y) the
termination of this Agreement pursuant to ss.2.2(c)(iii) or ss.9.6(b) hereof, or
(z) the termination of this Agreement pursuant to Article 43 of the Lease. EDC
shall have the right to draw on the Additional Security Deposit under the
circumstances and subject to the provisions set forth in ss.7.3 hereof
(b) (i) On the earlier to occur of (x) the date which is six (6) months
prior to the date on which NYMEX estimates (as evidenced by the drawdown
schedule to be furnished by NYMEX to EDC in accordance with ss.4.3 hereof) that
the entire amount of the Funding shall
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have been disbursed to NYMEX pursuant to this Agreement, and (y) the date on
which EDC shall have disbursed $65,000,000 of the Funding to NYMEX, NYMEX shall
have notified the Public Parties, in writing, as to whether it believes it will
be able to obtain Private Financing, and (1) if at believes it will be able to
obtain Private Financing, such notification shall be accompanied by the letter
described in ss.2.2(b)(ii) below, and (2) if it believes it may not be able to
obtain Private Financing, such notification shall be accompanied by a written
request, to BPCA, to provide BPCA Financing or credit enhancement for
Alternative Financing. If NYMEX fails to satisfy the conditions described above,
it will be assumed that NYMEX has requested BPCA to provide BPCA Financing or
credit enhancement for Alternative Financing, and NYMEX shall supply BPCA with
reasonably requested material with which to evaluate such financing request. If
NYMEX fails to deliver to BPCA the requested material within thirty (30) days of
the date NYMEX should have delivered notification to the Public Parties of (1)
or (2) above, BPCA shall notify the Public Parties promptly of such failure and
upon such notification, EDC shall have the right to withhold the disbursement of
the Funding from the date of notification by BPCA until, and if, such material
is actually delivered in full.
(ii) If NYMEX shall, in accordance with ss.2.2(b)(i) above, have notified
the Public Parties that it believes it will be able to obtain Private Financing,
NYMEX will submit to the Public Parties a letter from Morgan Stanley & Co., Inc.
(or other investment bank or financial advisor reasonably acceptable to the
Public Parties) stating the basis for this belief. Thereafter, NYMEX will
furnish to the Public Parties monthly reports on its efforts to arrange Private
Financing and otherwise keep the Public Parties advised of its efforts to
arrange Private Financing. In addition, NYMEX shall, at the request of the
Public Parties, together with its investment banker or financial advisor, meet
with the Public Parties to review the status of the
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Private Financing. If NYMEX receives a commitment for Private Financing from a
financing source, NYMEX shall provide a copy of such commitment to the Public
Parties. If NYMEX receives a credit rating from a credit rating agency, NYMEX
shall provide a copy of the credit rating letter to the Public Parties.
(iii) If NYMEX shall, in accordance with ss.2.2(b)(i) above, have notified
the Public Parties that it believes it will not be able to obtain Private
Financing and shall have requested BPCA to provide BPCA Financing or
credit-enhancement for Alternative Financing, thereafter, NYMEX will cooperate
and work diligently with BPCA to arrange such BPCA Financing or Alternative
Financing, including applying for a credit rating from a credit rating agency.
At such time, NYMEX shall also furnish BPCA with the basic credit documents that
it has developed in connection with its efforts to secure financing; provided,
however, that NYMEX need not furnish such basic credit documents if it provides
reasonably satisfactory evidence that it has arranged to obtain the financing it
requires to advance the Project Work to completion.
(c)(i) EDC shall be obligated to disburse the Funding notwithstanding the
pendency of Article 78 Litigation and notwithstanding the fact that the statute
of limitations relative to the commencement of (or the time within which to
appeal an adjudication of) any Article 78 Litigation has not been tolled.
Notwithstanding the foregoing, in no event shall EDC be obligated to disburse
any portion of the Funding while an injunction prohibiting the State, the City,
UDC, EDC or BPCA from advancing the Funding or prohibiting NYMEX from
constructing the Project (an "Injunction") is in effect.
(ii) If EDC does not disburse, or ceases to disburse the Funding as a
result of the existence of an Injunction as described in ss.2.2(c)(i) above,
then, within twenty (20) days after the removal of such Injunction by a judicial
authority authorized to do so, EDC shall be required
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to commence (or, if EDC has ceased the disbursement of the Funding upon the
procurement of an Injunction, recommence) the disbursement of the Funding in
accordance with ss.2.3 hereof.
(iii) Notwithstanding anything to the contrary contained in ss.2.2(c)(ii)
above, in the event that either (A) a permanent Injunction has been granted and
all appeals seeking to remove such Injunction have been denied or the time
period for bringing such appeals has expired, or (B) a temporary Injunction
remains in effect for a period of twelve (12) months or longer, then each of the
Public Parties and NYMEX shall have the right, in accordance with and as more
fully described in ss.7.3(a) hereof, to terminate this Agreement by written
notice to the other. Upon the termination of this Agreement in accordance with
this ss.2.2(c)(iii), BPCA shall return the Security Deposit to NYMEX in
accordance with the provisions of Section 42.01 of the Lease.
(iv) NYMEX agrees that it will cooperate with the Public Parties in the
defense of any Article 78 Litigation. The Public Parties agree to (A) defend any
Article 78 Litigation at their expense, (B) keep NYMEX advised and current as to
the status of any Article 78 Litigation, and (C) copy NYMEX on correspondence or
court papers they receive or deliver in connection with any Article 78
Litigation.
ss.2.3 Disbursements. (a) Subject to satisfaction of, and/or compliance
with, the terms and conditions of ss.2.2(a) and ss.2.2(b) hereof and the other
applicable terms and conditions of this Agreement and the Project Agreement, and
subject to the right of EDC to not disburse, or cease the disbursement of, the
Funding as a result of the existence of an Injunction as described in
ss.2.2(c)(i) hereof, EDC shall disburse the Funding to NYMEX as follows:
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(1) With respect to Soft Costs, other than CM Costs and Owner's
Representative Costs, after receipt by EDC of all items required by
ss.4.2(a)(1) hereof, (A) in the case of the first disbursement pursuant to
the first Requisition, in an amount equal to the portion of the Soft Costs
actually incurred by NYMEX prior to the date of such Requisition which are
Eligible Costs, and (B) in all other cases, in monthly installments equal
to the amount of the portion of the Soft Costs actually incurred by NYMEX
for the previous month which are Eligible Costs;
(2) With respect to CM Costs, after receipt by EDC of all applicable items
required by ss.4.2(a)(1) hereof (provided, however, that if the
Construction Manager's contact shall not have been executed and delivered
(but shall be the subject of negotiation) at the time of the submission of
a Requisition, then after receipt by EDC of an executed and delivered
letter agreement between NYMEX and the Construction Manager setting forth
the essential terms of the contract, including the scope of work to be
performed by the Construction Manager and a payment or fee schedule, which
letter agreement shall be binding upon NYMEX and the Construction
Manager), (A) in the case of the first disbursement pursuant to the first
Requisition, in an amount equal to the portion of the CM Costs actually
incurred by NYMEX prior to the date of such Requisition which are Eligible
Costs, and (B) in all other cases, in monthly installments equal to the
portion of the CM Costs for the previous month, calculated based on the
Construction Manager's fee schedule attached to the Construction Manager's
contract (or letter agreement), which are Eligible Costs;
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(3) With respect to Owner's Representative Costs, after receipt by EDC of
all applicable items required by ss.4.2(a)(1) hereof (provided, however,
that if the Owner's Representative's contract shall not have been executed
and delivered (but shall be the subject of negotiation) at the time of the
submission of a Requisition, then after receipt by EDC of an executed and
delivered letter agreement between NYMEX and the Owner's Representative
setting forth the essential terms of the contract, including the scope of
work to be performed by the Owner's Representative and a payment or fee
schedule, which letter agreement shall be binding upon NYMEX and the
Owner's Representative), (A) in the case of the first disbursement
pursuant to the first Requisition, in an amount equal to the portion of
the Owner's Representative Costs actually incurred by NYMEX prior to the
date of such Requisition which are Eligible Costs, and (B) in all other
cases, in monthly installments equal to the portion of the Owner's
Representative Costs for the previous month, calculated based on the
Owner's Representative's fee schedule attached to the Owner's
Representative's contract (or letter agreement), which are Eligible Costs;
(4) With respect to Hard Costs, after satisfaction by NYMEX of all the
conditions set forth in ss.3.1 hereof and after receipt by EDC of all
items required by ss.4.2(a)(2) hereof, in installments equal to (i) the
product of (A) the total Eligible Costs of each trade attributable to the
Construction Work and (B) the percentage of such trade's work then
completed (as certified by an Architect and approved by the Construction
Monitor), less (ii) with respect to each trade, the sum of (A) either, at
NYMEX's option, five percent (5%) retainage for all the work performed by
such trade pursuant to its Construction Contract, or ten percent (10%)
retainage for the first fifty percent (50%) of the work
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performed by such trade pursuant to its Construction Contract (any amounts
retained as described in (A) above are hereinafter referred to as the
"Retainage"), the Retainage being subject to disbursement as set forth in
ss.2.3(a)(5) below, (B) the total amount previously disbursed by EDC
hereunder with respect to such trade, and (C) the total amount otherwise
previously disbursed to NYMEX for Construction Work that at the time of
the disbursement request was ineligible for reimbursement with the Funding
pursuant to any provision of this Agreement and as to which EDC has given
NYMEX notice;
(5) With respect to the Retainage, within ten (10) Business Days after the
work to be performed pursuant to such trade's Construction Contract has
been substantially completed (as certified by the Architect and the
Construction Manager and as approved by the Construction Monitor); and
(6) With respect to M&E Costs, after receipt by EDC of all items required
by ss.4.2(a)(3) hereof, in an amount equal to the Eligible Costs stated on
the purchase order or invoice for such M&E and actually incurred by NYMEX;
provided that with respect to M&E not yet delivered to the Premises or any
Staging Area and accepted by NYMEX, such amount shall not exceed the
amount set forth in ss.3.2(e)(iii) hereof.
Notwithstanding any provision to the contrary contained in this Agreement, costs
paid to or incurred by any Design Professional, Consultant and/or Contractor
that is an Associated Contractor or an Affiliate shall be subject to
reimbursement under this Agreement only to the extent that such costs do not
exceed an amount, to be reasonably determined by EDC, that would have been paid
to an unrelated party in an arms-length transaction.
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(c) Except as otherwise set forth in ss.4.4 hereof, all disbursements
shall be made by check at the principal office of EDC, or at such other place
within New York City as EDC may designate. At NYMEX's request, disbursements may
be made by wire transfer to a bank located within New York City, provided that
all costs and fees associated with such wire transfer are paid for by NYMEX.
Disbursement requests shall be submitted within the time periods and in the
manner provided therefor in Article 4.
(d) With respect to Hard Costs and M&E Costs, no portion of the Funding
shall be advanced for materials not incorporated into the Premises or into the
Support Facilities other than materials (i) as to which NYMEX (or, in accordance
with Section 11.05 of the Lease, BPCA) has acquired title, (ii) are properly
stored on the Premises or on any permitted Staging Area or off-site, and secured
and insured against theft and damage to the reasonable satisfaction of EDC, and
(iii) with respect to materials stored off-site, are properly identified as
materials relating to the Project and segregated to the reasonable satisfaction
of EDC.
(e) Disbursements shall be made within ten (10) Business Days after EDC
receives from NYMEX a complete disbursement request in accordance with this
Agreement; provided, however, that in no event shall EDC be obligated to make
disbursements of the Funding more frequently than once every thirty (30) days.
Notwithstanding the foregoing, solely for the initial disbursement, the ten (10)
Business Day time period for disbursement by EDC, provided NYMEX has delivered a
complete disbursement request in accordance with this Agreement, shall not
commence until ten (10) Business Days from the date this Agreement is registered
by the Comptroller as provided in ss.9.18 hereof.
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ss.2.4 The Public Parties' Right to Cease the Disbursement of the Funds
and to Terminate this Agreement upon Abandonment of Project. If NYMEX, pursuant
to Section 2 of the Occupancy Agreement, "abandons" (as such term is defined and
described in Section 2 of the Occupancy Agreement) the Project, then (i) EDC
shall have the right to cease the disbursement of the Funding, (ii) the Public
Parties shall have the right to terminate this Agreement in accordance with
ss.7.2(a) hereof, and (iii) the Public Parties shall have the right to exercise
any other remedy permitted to the Public Parties and each of them in accordance
with this Agreement, the Occupancy Agreement, the Lease, or the BPCA Financing
Documents, if applicable.
ss.2.5 Payment of Construction Monitor. (a) Notwithstanding anything to
the contrary contained in this Article Two or elsewhere in this Agreement,
commencing on the date on which EDC delivers to the Construction Monitor, in
accordance with its contract with the Construction Monitor for the provision of
services with respect to the Project Work, a Notice to Proceed with the
services, and continuing until the date which is sixty (60) days after the date
on which all of the Funding has been disbursed in accordance with this
Agreement, EDC shall be entitled to apply a portion of the Funding in an amount
equal to the fees and expenses of the Construction Monitor but not to exceed in
any event $335,000; provided, however that if there is a delay in the
commencement of the construction of the Project Work, EDC shall be entitled to
apply an additional portion of the Funding in an amount equal to $13,000 for
each month of delay but such additional amount shall not exceed, in any event,
$26,000. Not later than sixty (60) days prior to the date on which NYMEX
anticipates that it will commence construction of the Project
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Work, NYMEX shall deliver to EDC written notice specifying the date on which
NYMEX anticipates that it will so commence construction.
(b) In the event that BPCA Financing shall, in accordance with the
terms of the Financing Letter, become available for disbursement to NYMEX, then,
notwithstanding anything to the contrary contained in this Article Two or
elsewhere in this Agreement, commencing on the date on which BPCA commences the
disbursement of the BPCA Financing and continuing until the daze which is sixty
(60) days after the date on which all of the BPCA Financing has been disbursed
in accordance with this Agreement and the BPCA Financing Documents, BPCA shall
be entitled to apply an amount of the BPCA Financing, to be set forth in the
BPCA Financing Documents, to pay for the services of the Construction Monitor.
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ARTICLE THREE - THE PROJECT WORK; PERFORMANCE, PROCUREMENT AND
CONTRACT REQUIREMENTS
ss.3.1 General Provisions Regarding Design and Construction.
(a) Plans and Specifications. (1) NYMEX shall prepare, or cause the
Architects to prepare, the Schematics, Design Development Plans, Construction
Documents (as such terms are defined in the Lease) and all other drawings,
plans, specifications and other construction documents required in connection
with the Project Work (all such documents are collectively referred to herein as
the "Plans and Specifications") in accordance with the Design Guidelines and
otherwise in accordance with the provisions of Article 11 of the Lease.
(2) Intentionally omitted.
(3) EDC will not be obligated to disburse any of the Funding for the
performance of Construction Work until (i) either (x) BPCA has approved (or is
deemed to have approved) the Plans and Specifications in accordance with the
provisions of the Lease, or (y) if BPCA has, in accordance with Section 11.02(i)
of the Lease, reviewed certain aspects of the Plans and Specifications prior to
completion and submission to BPCA of every aspect thereof so as to accommodate
NYMEX's request to "fast track" the construction of the Project, then BPCA has
approved (or is deemed to have approved) such aspects of the Plans and
Specifications applicable to the portion of the Construction Work which NYMEX is
then requesting to be funded with the Funding in accordance with the provisions
of the Lease, and (ii) all approvals necessary for the construction of any
portion of the Construction Work which NYMEX is then requesting to be funded
under this Agreement have been obtained. Without affecting BPCA's rights under
the Lease, it is agreed that nothing contained herein is intended to either (x)
prohibit or otherwise
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prevent NYMEX from proceeding with the Project Work or any portion thereof which
is not to be funded under this Agreement, or (y) prevent the disbursement of the
Funding for the payment or reimbursement of the Eligible Costs of Design and/or
Consulting Services performed prior to the commencement of the Construction
Work.
(b) Performance of the Project Work. NYMEX covenants and agrees to cause
the Project Work to be performed in accordance with Article 11 of the Lease
(including, without limitation, in accordance with the Plans and Specifications,
the Design Guidelines and all applicable governmental requirements).
(c) Site Inspections. NYMEX shall permit the Construction Monitor to have
access to the Premises at all times when Construction Work is in progress. In
addition, NYMEX shall permit UDC and EDC and each of their respective agents
and/or professional consultants to make inspections of the Premises, during
normal business hours or otherwise when Construction Work is in progress, at
reasonable times and upon reasonable prior notice to NYMEX and in accordance
with applicable safety standards, as they reasonably deem necessary to observe
compliance with this Agreement. Such inspections shall be made at UDC's and
EDC's own risk. UDC and EDC shall use their best efforts to cause such
inspections to be made in a coordinated manner and otherwise in a manner such
that they will not interfere with the progress of the Construction Work or other
Project Work. The omission or failure of the Construction Monitor, UDC, EDC, or
any representative of UDC or EDC, to make such inspections, or to notify NYMEX
of any non-compliance with the terms of this Agreement, the Lease, the Plans and
Specifications or the Design Guidelines, shall in no way relieve NYMEX of its
obligations under this Agreement or the Lease or impose any liability under this
Agreement or impose any liability
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upon the Public Parties, their agents or consultants. Nothing contained herein
is intended to limit or otherwise prevent BPCA's access to the Premises as
provided in the Lease.
ss.3.2 Procurement of Services and Goods
(a)(1) Except as specifically provided in Section 11.05 of the Lease with
respect to the purchase of materials and supplies to be incorporated into the
Project and for which a sales and compensating use tax exemption is to be
sought, NYMEX agrees to enter into, or cause to be entered into, Project
Contracts independently and not as agent of the Public Parties or any one of the
Public Parties.
(2) Any Project Contract entered into by NYMEX (and any bid packages
prepared by NYMEX for the bid of Construction Work) shall instruct the Design
Professionals, the Contractors (or bidders, as appropriate), and any Consultants
which will, in connection with the Project, be purchasing materials of the type
that would qualify for the sales tax exemption described in Section 11.05 of the
Lease, as follows: title to the Premises and the improvements to be constructed
thereon and the equipment to be purchased and installed at the Premises and at
the Support Facilities and to be used in support of NYMEX's operations at the
Premises shall be and vest in BPCA. Materials to be incorporated into the
Premises and the equipment to be purchased and installed at the Premises and at
the Support Facilities and to be used in support of NYMEX's operations at the
Premises shall, effective upon their purchase and at all times thereafter,
constitute the property of BPCA and upon incorporation of such materials into
the Premises or into the Support Facilities title thereto shall be and continue
in BPCA. In accordance therewith, purchases of tangible personal property by, as
the case may be, the Design
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Professionals, the Contractors, and the Consultants (if applicable), arising in
connection with the Project are exempt from the payment of certain sales and
compensating use taxes to the extent that such property (i) is used to alter,
maintain or improve, and becomes an integral component part of, the Premises, or
(ii) remains tangible personal property and is installed on the Premises or
within the Support Facilities. This exemption does not apply to construction
tools, construction machinery, construction equipment or other property to be
purchased or leased by NYMEX or its Design Professionals, Contractors or
Consultants (if applicable) and to be used to facilitate the construction of the
Project, or to supplies, materials or other property which are consumed in the
course of construction or for any other reason not incorporated into the
Premises or into the Support Facilities.
(b)(1) Prior to entering into or letting any Public-Funded Design Contract
and/or Consulting Agreement or any Public-Funded M&E Contract, and, if BPCA
Financing is provided, prior to entering into or letting any BPCA-Financed
Design Contract and/or Consulting Agreement or any BPCA-Financed M&E Contract
NYMEX shall submit a list of the proposed Design Professional(s) and/or
Consultant(s) and/or Contractor(s), together with a copy of the proposed Design
Contract(s), Consulting Agreement(s) and/or M&E Contract(s) applicable to such
Design Professional(s), Consultant(s) or Contractor(s), to EDC. Such list shall
also identify all known principals of such proposed Design Professional(s),
Consultant(s) or Contractor(s). EDC shall advise NYMEX, within fifteen (15)
Business Days after receipt of the list of the proposed Design Professional(s),
Consultant(s) or Contractor(s) and their principals, as to which Design
Professional(s), Consultant(s) or Contractor(s) are acceptable or unacceptable
and, if any Design Professional(s), Consultant(s) or Contractor(s) are
unacceptable, the reasons therefor. If
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EDC fails to so advise NYMEX within such fifteen (15) Business Day period, such
Design Professional(s), Consultant(s) or Contractor(s) shall be and be deemed to
be acceptable. EDC's evaluation of the list of proposed Design Professional(s),
Consultant(s) or Contractor(s) shall be limited to (x) its determination as to
whether or not the proposed Design Professional(s), Consultant(s) or
Contractor(s) are Prohibited Persons, and (y) verification as to whether or not
proposed Architects and proposed Construction Managers are acceptable to BPCA in
accordance with the provisions of the Lease. NYMEX shall not enter into any
Public-Funded Design Contract and/or Consulting Agreement or any Public-Funded
M&E Contract, or, if applicable, any BPCA-Financed Design Contract and/or
Consulting Agreement or any BPCA-Financed M&E Contract, with a Design
Professional, Consultant or Contractor who has been determined to be a
Prohibited Person. EDC understands that NYMEX has entered into Design Contracts
and/or Consulting Agreements with various Design Professionals and Consultants
for the performance of certain Design and Consulting Services, and hereby
acknowledges and agrees that (I) as of the date of this Agreement, the Design
Professionals and Consultants listed in Schedule A attached hereto are not
Prohibited Persons and are therefore acceptable to EDC, and (II) the Architects
and Construction Managers listed in Schedule A attached hereto are acceptable to
BPCA. EDC reserves the right, at any time prior to NYMEX's execution of a Design
Contract, Consulting Agreement and/or M&E Contract, to withdraw its prior
approval of the Design Professional, Consultant or Contractor pursuant to which
such contract applies in the event that EDC shall learn that any of the
principals of such Design Professional, Consultant or Contractor which were not
identified at the time of EDC's initial approval of such Design Professional,
Consultant or Contractor is a Prohibited Person.
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(2) Prior to entering into or letting any Public-Funded Construction
Contract, and, if BPCA Financing is provided, prior to entering into or letting
any BPCA-Financed Construction Contract, NYMEX shall submit a list of proposed
bidders to EDC and identify the known principals of the bidders. EDC shall
advise NYMEX, within fifteen (15) Business Days after receipt of the list of the
proposed bidders and all their known principals, as to which bidders are
unacceptable by reason of such bidders being Prohibited Persons. If EDC fails to
so advise NYMEX within such fifteen (15) Business Day period as to which
bidder(s) are unacceptable, such bidder(s) shall be deemed to be acceptable.
EDC's evaluation of the list of the proposed bidders shall be limited to its
determination as to whether or not the proposed bidders are Prohibited Persons.
NYMEX shall obtain proposals from at least three (3) qualified bidders from the
list of acceptable bidders (except in those instances where three (3) qualified
bidders are unavailable or where, despite NYMEX's best efforts to obtain three
(3) qualified bids, three (3) qualified bids are not obtained, in which case
NYMEX shall submit to EDC a statement explaining why three (3) qualified bidders
are not available or why, despite NYMEX's best efforts, three (3) qualified bids
were not obtained and requesting that EDC waive the requirement for three (3)
qualified bidders, which waiver shall not be unreasonably withheld or delayed).
NYMEX shall not enter into any Public-Funded Construction Contract or, if
applicable, any BPCA-Financed Construction Contract, with a bidder who has been
determined to be a Prohibited Person. At least five (5) Business Days before
awarding any Public-Funded Construction Contract, or, if applicable, any
BPCA-Financed Construction Contract, NYMEX shall submit to EDC a bid summary,
analysis and statement by the Authorized Representative as to which bidder NYMEX
intends to select, which statement shall give specific reasons for NYMEX's
preference.
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NYMEX shall not accept a bid that is not the lowest responsible bid without
EDC's prior written consent, which consent shall not be unreasonably withheld or
delayed. EDC reserves the right, at any time prior to NYMEX's acceptance of a
bid, to withdraw its prior approval of the bidder chosen in the event that EDC
shall learn that the bidder shall have committed (or if there shall be
allegations of the bidder's commission of) any act, or if the bidder shall
become the subject of any investigation or legal proceeding, either or both of
which would have rendered such bidder a Prohibited Person. EDC further reserves
the right, at any time prior to NYMEX's execution of a Public-Funded
Construction Contract or a BPCA-Financed Construction Contract, to withdraw its
prior approval of the Contractor pursuant to which such contract applies in the
event that EDC shall learn that any of the principals of such Contractor which
were not identified at the time of EDC's initial approval of such Contractor is
a Prohibited Person. Nothing contained in this ss.3.2(b)(2) shall limit NYMEX's
right to negotiate with one or more bidders and/or to reject all bids in its
sole discretion.
(3) Prior to entering into or letting any Credit-Enhanced Contract, NYMEX
shall submit a list of the proposed Design Professional(s), Consultant(s),
and/or Contractor(s), together with a copy of the proposed Design Contract
and/or Consulting Agreement or Construction Contract applicable to such Design
Professional(s), Consultant(s) and/or Contractor(s), to BPCA. Such list shall
also identify all known principals of such proposed Design Professional(s),
Consultant(s) and/or Contractor(s). BPCA shall advise NYMEX, within twenty (20)
Business Days after receipt of the list of the proposed Design Professional(s),
Consultant(s) and/or Contractor(s) and all their known principals as to whether
such proposed Design Professional(s), Consultant(s) and/or Contractor(s) is
unacceptable by reason of being a Prohibited Person. If
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BPCA fails to so advise NYMEX within such twenty (20) Business Day period as to
whether such proposed Design Professional(s), Consultant(s) and/or Contractor(s)
is unacceptable, such Design Professional(s), Consultant(s) and/or Contractor(s)
shall be deemed to be acceptable. NYMEX need not obtain the approval of BPCA,
pursuant to this ss.3.2(b)(3), of any Design Professional, Consultant or
Contractor if such Design Professional, Consultant or Contractor shall have
obtained the prior approval of EDC in accordance with ss.3.2(b)(1) or
ss.3.2(b)(2) above. NYMEX shall not enter into any Credit-Enhanced Contract with
a Design Professional, Consultant or Contractor who has been determined to be a
Prohibited Person. BPCA reserves the right, at any time prior to NYMEX's
execution of a Credit-Enhanced Contract, to withdraw its prior approval of the
Design Professional, Consultant or Contractor pursuant to which such contract
applies in the event that BPCA shall learn that any of the principals of such
Design Professional, Consultant or Contractor which were not identified at the
time of BPCA's initial approval of such Design Professional, Consultant or
Contractor is a Prohibited Person.
(4) For purposes hereof, the term "Prohibited Person" shall mean:
(i) Any Person (A) that is in default or in breach, beyond any
applicable notice and/or grace period, of its obligations
under any material written agreement with the City or EDC, or
(B) that directly or indirectly controls, is controlled by, or
is under common control with a Person that is in default or in
breach, beyond any applicable notice and/or grace period, of
its obligations under any material written agreement with the
City or EDC, unless such default or breach has been waived in
writing by the City or EDC, as the case may be.
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(ii) Any Person (A) that has been convicted in a criminal
proceeding for a felony or any crime involving moral turpitude
or that is an organized crime figure or is reputed to have
substantial business or other affiliations with an organized
crime figure, or (B) that directly or indirectly controls, is
controlled by, or is under common control with, a Person that
has been convicted in a criminal proceeding for a felony or
any crime involving moral turpitude or that is an organized
crime figure or is reputed to have substantial business or
other affiliations with an organized crime figure.
(iii) Any government, or any Person that is directly or indirectly
controlled (rather than only regulated) by a government, that
is finally determined to be in violation of (including, but
not limited to, any participant in an international boycott in
violation of) the Export Administration Act of 1979, as
amended, or any successor statute, or the regulations issued
pursuant thereto, or any government that is, or any Person
that, directly or indirectly, is controlled (rather than only
regulated) by a government that is subject to the regulations
or controls thereof.
(iv) Any government, or any Person that, directly or indirectly, is
controlled (rather than only regulated) by a government, the
effects or the activities of which are regulated or controlled
pursuant to regulations of the United States Treasury
Department or executive orders of the President of the United
States of America issued pursuant to the Trading with the
Enemy Act of 1917, as amended.
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(v) Any Person that is in default in the payment to the City of
any real estate taxes, sewer rents or water charges totaling
more than $10,000 (or any person that directly controls, is
controlled by, or is under common control with a Person in
such default), unless such default is then being contested in
good faith in accordance with the law.
(vi) Any Person (A) that has owned at any time during the three (3)
years immediately preceding a determination of whether such
Person is a Prohibited Person any property which, while in the
ownership of such Person, was acquired by the City by in rem
tax foreclosure, other than a property in which the City has
released or is in the process of releasing its interest
pursuant to the Administrative Code of the City or (B) that,
directly or indirectly controls, is controlled by, or is under
common control with, such a Person.
(vii) Any person (A) that is in default or in breach, beyond any
applicable notice and/or grace period, of its obligations
under any material written agreement with the State or BPCA,
or (B) that directly or indirectly controls, is controlled by,
or is under common control with a Person that is in default or
in breach, beyond any applicable notice and/or grace period,
of its obligations under any material written agreement with
the State or BPCA unless such default or breach has been
waived in writing, by the State or BPCA, as the case may be.
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(c) With respect to any (x) Public-Funded Construction Contract, (y) if
BPCA financing is provided, any BPCA-Financed Construction Contract, and (z) if
Alternative Financing is provided, any Credit-Enhanced Contract for Construction
Work, in any case whose contact amount totals more than $100,000, NYMEX shall
provide EDC with a list of all Contractors, other than suppliers, on the form
annexed hereto as Exhibit A. NYMEX will furnish each such Contractor with a
subcontractor questionnaire in the form annexed hereto as Exhibit B and/or such
other qualification and background investigation form(s) as may be used by the
City at such time (collectively, "Investigation Forms") provided by EDC to
NYMEX, and shall use its good faith efforts to cause each such Contractor to
fill out and complete the Investigation Forms in a timely fashion but in no
event later than the completion of the work performed by such Contractor
pursuant to its Construction Contract.
(d) Except as otherwise set forth in this ss.3.2(d), all Project
Contracts, in order to be eligible for disbursement under this Agreement, shall
provide, in substance:
(1) that, except as specifically provided in Section 11.05 of the Lease
with respect to the purchase of certain materials and supplies to be
incorporated into the Project and for which a sales and compensating use
tax exemption is to be sought, neither the Design Professional, Consultant
nor the Contractor, nor any of their employees or subcontractors, is or
shall be deemed to be an agent, servant, employee or contractor of any of
the Public Parties by virtue of this Agreement or by virtue of any
approval, permit, license, grant, right or other authorization given by
any of the Public Parties or any of their respective officers, officials,
directors, members, agents or employees; and that neither the Design
Professional, Consultant, nor the Contractor, shall commence any legal
proceeding against
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any of the Public Parties to recover any compensation that may be payable
under any Project Contract;
(2) that the Design Professional, Consultant, or the Contractor (as the
case may be), is solely responsible for the work, direction and
compensation of its respective employees and subcontractors and that
(except in the case of NYMEX's legal advisers) neither UDC, EDC nor BPCA
will incur any liability by virtue of any act, omission, negligence or
obligation of such Design Professional, Consultant or Contractor (as the
case may be);
(3) with respect to Design Contracts only, that each of the Design
Professionals (other than the Owner's Representative) shall indemnify and
hold harmless each of the Indemnified Parties from any and all claims,
judgments or liabilities to which the Indemnified Parties may be subject
because of any negligent act or omission, fault or default of such Design
Professional, or its respective agents, officers, directors, employees or
subcontractors arising out of or in connection with the pertinent Design
Contract;
(4) with respect to Construction Contracts only, that the Contractor shall
indemnify and hold harmless each of the Indemnified Parties from any and
all claims, judgments or liabilities to which the Indemnified Parties may
be subject because of any act or omission of such Contractor or its
agents, officers, directors, employees or subcontractors arising out of or
in connection with the pertinent Construction Contract or because of any
negligence, fault or default of such Contractor, or its agents, employees,
officers, directors or subcontractors related to the Project;
(5) that the Design Professional, the Consultant, or the Contractor (as
the case may be), shall maintain accurate, readily auditable records and
accounts with supporting
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documentation, in accordance with Accounting Principles, of all Project
Work performed, and receipts and expenditures made, in connection
therewith, and that the Design Professional, the Consultant, or the
Contractor (as the case may be), shall (subject to any professional
privilege permitted by law) make such records and accounts available to
(I) the Public Party mutually designated from time to time by all of the
Public Parties to perform inspections and audits under this Agreement, and
to such designated Public Party's agents and employees, and (II) the
Comptroller of the State and/or the City Comptroller and any other elected
or appointed public official or public agency or entity entitled by law to
inspect records in connection with publicly funded projects and such
person's or entity's agents and employees, for inspection and audit at
reasonable times and upon reasonable prior written notice, for a period of
six (6) years after completion of the pertinent Project Contract;
(6) with respect to the Construction Managers' Contracts and the
Construction Contracts only, provisions incorporating the requirements of
ss.6.5(a) (Compliance with Applicable Law) hereof;
(7) provisions incorporating the requirements of ss.9.2 (Conflict of
Interests) hereof;
(8) with respect to Public-Funded Construction Contracts and BPCA-Financed
Construction Contracts only, provisions incorporating the requirements of
ss.6.13 (Tropical Hardwoods) and ss.6.14 (MacBride Principles) hereof; and
(9) that the Design Professional, the Contractor and any Consultant which
will, in connection with the Project, be purchasing materials of the type
that would qualify for the sales tax exemption described in Section 11.05
of the Lease, represents and warrants, and
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shall cause its subcontractors and material suppliers to represent and
warrant, that, as of the date of this Agreement, state and local sales tax
will be excluded from the contract price, to the extent authorized by the
Sales Tax Letter; provided, however, that the Design Professional, the
Contractor or the Consultant (if applicable), and its subcontractors and
material suppliers, shall be responsible for and pay any and all
applicable taxes, including sales and use taxes, imposed upon construction
tools, construction machinery, construction equipment purchased or leased,
and upon all supplies and materials and other property, that are consumed
in the course of construction or for any other reasons not incorporated
into the Premises or the Support Facilities.
(e) (i) No Public-Funded Design Contract or BPCA-Financed Design Contract
shall be eligible for disbursement under this Agreement unless such contract or
agreement shall contain the provisions required to be included therein pursuant
to ss.3.2(d)(l), ss.3.2(d)(2), ss.3.2(d)(3), ss.3.2(d)(5), ss.3.2(d)(7) and
ss.3.2(d)(9) hereof and no Public-Funded Consulting Agreement or BPCA-Financed
Consulting Agreement shall be eligible for disbursement under this Agreement
unless such contract or agreement shall contain the provisions required to be
included therein pursuant to ss.3.2(d)(l), ss.3.2(d)(2), ss.3.2(d)(5),
ss.3.2(d)(7) and ss.3.2(d)(9) hereof. A form rider, to be attached to Design
Contracts, containing the provisions required pursuant to this Agreement to be
contained in such contact or agreement, has been approved by the Public Parties
and is attached hereto as Exhibit C-1. A form letter, to be executed by NYMEX
and all Consultants and to serve as an addendum to each such Consultant's
Consulting Agreement, providing that such Consultant shall comply with the
provisions required pursuant to this
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Agreement to be complied with by such Consultant, has been approved by the
Public Parties and is attached hereto as Exhibit C-2.
(ii) No Public-Funded Construction Contract or BPCA-Financed Construction
Contract shall be eligible for disbursement under this Agreement unless such
contract shall (w) have been procured in accordance with the bidding
requirements set forth in ss.3.2(b)(2) hereof, (x) comply with the requirements
of ss.3.2(c) hereof, (y) contain the provisions required to be included therein
pursuant to ss.3.2(d)(1), ss.3.2(d)(2), ss.3.2(d)(4), ss.3.2(d)(5),
ss.3.2(d)(6), ss.3.2(d)(7), ss.3.2(d)(8) and ss.3.2(d)(9) hereof, and (z)
provide for the right of NYMEX to keep at least a five percent (5%) Retainage
against all payments (prior to the final payment) to the Contractor, or in the
alternative, a ten percent (10%) Retainage against all payments to the
Contractor (prior to the final payment) until the work to be performed pursuant
to such Contractor's Construction Contract is fifty percent (5 0%) complete. A
form rider, to be attached to Construction Contracts, containing the provisions
required pursuant to this Agreement to be contained in such contract, has been
approved by the Public Parties and is attached hereto as Exhibit C-3.
(iii) No M&E Contract shall be eligible for disbursement under this
Agreement unless such contract shall (x) contain the provisions required to be
included therein pursuant to ss.3.2(d)(1), ss.3.2(d)(2), ss.3.2(d)(5),
ss.3.2(d)(7) and ss.32(d)(9) hereof, and (y) provide for the right of NYMEX to
withhold payment of at least fifty percent (50%) (or upon NYMEX's request and
demonstration that a lesser percentage may be necessary or required, such lesser
percentage as may be approved by EDC) of the total contract amount at all times
prior to the delivery of such M&E to the Premises or any permitted Staging Area
and the acceptance of such M&E by NYMEX. A form rider, to be attached to M&E
Contracts, containing the provisions required
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pursuant to this Agreement to be contained in such contract, has been approved
by the Public Parties and is attached hereto as Exhibit C-4.
(iv) Any document providing for the disbursement to NYMEX of Alternative
Financing shall provide that no Credit-Enhanced Contract shall be eligible for
disbursement under such document providing for Alternative Financing unless such
contract shall (i) comply with the requirements of ss.3.2(b)(3) and ss.3.2(c)
hereof, and (ii) contain the applicable provisions required to be included
therein pursuant to ss.3.2(d) hereof.
(v) NYMEX shall not change or amend a Project Contract if such change or
amendment would effect the applicable provisions to be included in such Project
Contract pursuant to ss.3.2(d) hereof without the prior written approval of EDC
(which approval shall not be unreasonably withheld or delayed). No Funding shall
be disbursed in respect of any Project Work affected by any such change or
amendment unless EDC shall have previously approved such change or amendment.
(f) NYMEX shall cause each of the Design Professionals, Consultants and
Contractors to include, in any subcontracts entered into by any one of them with
respect to the Project, provisions substantially the same as the applicable
provisions set forth in ss.3.2(d) hereof.
ss.3.3 Personnel. (a) NYMEX shall retain and employ the Design
Professionals and Consultants, and NYMEX shall, or shall cause the Construction
Managers to, retain and employ all other personnel required in connection with
the performance of the Project Work. NYMEX or the Construction Managers, as the
case may be, shall be solely responsible for the work, compensation, direction
and conduct of all Design Professionals, Consultants and Contractors
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during the Term of this Agreement All personnel furnished by NYMEX as required
under this Agreement shall be employees of NYMEX and not of the Public Parties.
(b) NYMEX shall cause the Design Professionals and Consultants, and NYMEX
or the Construction Manager(s) shall cause the Contractors and all other
personnel employed in connection with the performance of the Project Work, to
cooperate fully with the Public Parties and the Construction Monitor.
ss.3.4 Liaison to Public Parties. NYMEX identifies Elizabeth Venute as the
member of NYMEX's staff, and James Stuckey as the member of the Owner's
Representative's staff, who will have the authority and primary responsibility
to communicate with each of the Public Parties' respective contact person, as
identified in ss.3.5, ss.3.6 and ss.3.7 hereof (whether to respond to inquiries
or to provide updates regarding the progress of the work or otherwise) regarding
the performance of the Project Work or otherwise in connection with the Project.
NYMEX agrees to notify the Public Parties in writing of any intended
substitution of either of said persons at least fifteen (IS) days prior to the
date such substitution will take effect NYMEX further agrees to cause such
persons to be available to the extent necessary to communicate with the Public
Parties regarding the performance of the Project Work or otherwise in connection
with the Project.
ss.3.5 UDC Contact Person. UDC identifies its Senior Vice President for
Design and Construction and its Senior Vice President Legal as the members of
UDCs staff who will have primary responsibility to communicate the NYMEX's
contact persons. as identified in ss.3.4
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hereof, regarding UDC's obligations under this Agreement. UDC agrees to notify
NYMEX in writing of any intended substitution of either of said persons at least
fifteen (15) days prior to the date such substitution will take effect UDC
further agrees to cause such persons to be available to the extent necessary to
communicate with NYMEX regarding this Agreement.
ss.3.6 EDC Contact Person. EDC identifies Mel Glickman as the member of
EDCs staff who will have primary responsibility to communicate with NYMEX's
contact persons, as identified in ss.3.4 hereof, regarding EDC's obligations
under this Agreement EDC agrees to notify NYMEX in writing of any intended
substitution of said person ax least fifteen (15) days prior to the date such
substitution will take effect. EDC further agrees to cause such person to be
available to the extent necessary to communicate with NYMEX regarding this
Agreement.
ss.3.7 BPCA Contact Person. BPCA identifies Antony Woo as the member of
BPCA's staff who will have the primary responsibility to communicate with
NYMEX's contact persons. as identified in ss.3.4 hereof, regarding BPCA's
obligations under this Agreement BPCA agrees to notify NYMEX in writing of any
intended substitution of said person at least fifteen (15) days prior to the
date such substitution will take effect BPCA further agrees to cause such person
to be available to the extent necessary to communicate with NYMEX regarding this
Agreement
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ARTICLE FOUR - CONDITIONS FOR DISBURSEMENT
ss.4.1 Initial Submissions by NYMEX. In addition to any conditions set
forth in Article Two hereof, EDC shall not be obligated to disburse any of the
Funding to NYMEX unless, at any time prior to the first request for disbursement
of the Funding but not later than ten (10) Business Days prior to the date on
which the first payment to be made pursuant to this Agreement is sought (except
as otherwise specified herein), EDC shall have received the following documents,
together with a cover sheet (a "Completed Cover Sheet") listing the items
submitted:
(a) if not previously submitted by NYMEX, certificates, in form and
substance reasonably satisfactory to EDC, evidencing the insurance
policies to be obtained and maintained by NYMEX as of the
commencement date of the Lease in accordance with Section
11.03(a)(i) and Section 1 1.03(a)(ii) of the Lease; provided,
however, that EDC shall also be given certified copies, signed by an
authorized representative of the insurer, of the policies evidenced
by such certificates, upon request therefor,
(b) changes or amendments to the Project Budget submitted by NYMEX to
EDC in accordance with ss.4.3(a) hereof, if any;
(c) a certificate, in the form annexed hereto as Exhibit D, of an
authorized officer of NYMEX certifying, as of the date of the
signing of such certificate, the specimen signature of each officer,
director or agent of NYMEX authorized to deliver
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Requisitions under this Agreement and, if applicable, the specimen
signature of NYMEX's Authorized Representative;
(d) a collateral assignment, in the form annexed hereto as Exhibit E, by
NYMEX to BPCA of NYMEX's right, title and interest in and to the
Plans and Specifications, and to any Design Contracts and
Construction Contracts that have been entered into by NYMEX as of
the date of such collateral assignment; and
(e) if not previously submitted by NYMEX, a photostatic copy of the
current title report by Ticor Title Guarantee Company relating to
the Premises and judgment and federal tax lien searches against the
Premises.
ss.4.2 Documentation for Disbursements on Account of Eligilble Costs. EDC
shall not be obligated to make the first disbursement of the Funding or any
subsequent disbursement unless, in addition to the conditions contained in
Article Two, ss.3.1 and ss.4.1 hereof, the following conditions shall have been
satisfied:
(a) The following documents, in form and substance reasonably satisfactory
to EDC, together with a Completed Cover Sheet, shall, except to the extent
previously submitted by NYMEX, be delivered to EDC at least ten (10) Business
Days in advance of the date on which each payment is sought (except as otherwise
indicated in this ss.4.2):
(1) With respect to Soft Costs:
(i) a requisition executed and certified by NYMEX or NYMEX's Authorized
Representative (and addressed to EDC) setting forth (x) the amount
of the requested disbursement, (y) an itemization of the Eligible
Costs for which the
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disbursement is sought, and (z) a list of Design Professionals or
Consultants whose work is covered by the requisition, the amount
requested on behalf of each such Design Contract or Consulting
Agreement, and identifying any of such Design Professionals or
Consultants that are Affiliates or Associated Contractors and, if
so, in what respect. accompanied by a completed and executed
certification in the form annexed hereto as Exhibit F and (I) copies
of all Design Contracts and/or Consulting Agreements on account of
which payment is being sought that have not been previously
delivered to EDC, containing all the applicable provisions required
pursuant to ss.3.2(d) hereof (or, for Design Contracts and/or
Consulting Agreements that have been previously delivered, copies of
amendments thereof, if any); (II) a collateral assignment, in the
form annexed hereto as Exhibit E, by NYMEX to BPCA of NYMEX'S right,
title and interesting and to all Design Contracts on account of
which payment is being sought that have not been previously assigned
to BPCA; (III) copies of all insurance certificates, if any,
delivered to NYMEX by the relevant Design Professional or Consultant
in connection with the Design Contract and/or Consulting Agreement
on account of which payment is being sought, that have not been
previously delivered to EDC; and (IV) supporting bills, invoices or
other documentation reflecting such Eligible Costs (the items
described in this ss.4.2(a)(l)(i) are collectively referred to as
the "Soft Costs Requisition); and
(ii) such additional documents, data or information reasonably requested
by EDC with respect to the Design and Consulting Services or in
support of the Soft Costs
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Requisition and without which EDC could not reasonably be expected
to disburse the Funding prior to the receipt thereof.
(2) With respect to Hard Costs:
(i) at least ten (10) Business Days in advance of the date of the
disbursement on account of Construction Work for which a permit,
consent, certificate, license or approval is needed to lawfully
perform such Construction Work, true copies of all such permits,
consents, certificates, licenses and approvals (it being understood
that such permits, consents, certificates, licenses and approvals
only need to be submitted at the time of the first requisition
covering such Construction Work);
(ii) a requisition executed and certified by NYMEX or NYMEX's Authorized
Representative (and addressed to EDC) setting forth (x) the amount
of the requested disbursement, (y) an itemization of the Eligible
Costs for which the disbursement is sought, and (z) a list of
Contractors whose work is covered by the requisition, the amount
requested on behalf of each such Construction Contract, and
identifying any of such Contractors that are Associated Contractors
or Affiliates and, if so, in what respect, accompanied by a
completed and executed certification in the form annexed hereto as
Exhibit F, and (I) certified true copies of all Construction
Contracts on account of which payment is being sought that have not
been previously delivered to EDC, containing all the applicable
provisions required pursuant to ss.3.2(d) hereof (or, for
Construction Contracts that have been previously delivered, copies
of amendments thereof, if any); (II) without limiting BPCA's rights
under the Lease, a collateral assignment, in the form
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annexed hereto as Exhibit E, by NYMEX to BPCA of NYMEX's right,
title and interest in and to all Construction Contracts on account
of which payment is being sought that have not been previously
assigned by BPCA; (III) copies of all insurance certificates, if
any, delivered to NYMEX by the relevant Contractor in connection
with the Construction Contract on account of which payment is being
sought that have not been previously delivered to EDC; (IV) as
applicable, requisitions or applications for payment by a
Construction Manager or an Architect to NYMEX (in the form of an
"Application and Certificate for Payment", substantially in the form
of American Institute of Architects forms G702 and G703 annexed
hereto as Exhibit G, or otherwise), in either case which is
completed and executed by a Construction Manager and an Architect
with respect to all Construction Work performed by the Contractor(s)
and covered by NYMEX's requisition, together with any trade payment
breakdowns in support of all subcontractors' requisitions to the
Architect or the Construction Manager, and, with respect to
"reimbursable" items only, invoices and receipts, reflecting such
Eligible Costs; and (V) partial releases of liens from the
Contractors, subcontractors and suppliers with respect to all
Construction Work completed prior to the period covered by the
requisition then being submitted (the items described in this
ss.4.2(a)(2)(ii) are collectively referred to as the "Hard Costs
Requisition");
(iii) a statement of an Architect addressed to EDC certifying that, in
such Architect's opinion, the Construction Work covered by the Hard
Costs Requisition has been performed substantially in accordance
with the applicable Plans and Specifications;
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(iv) a photostatic copy of a certificate of title continuation indicating
no change in the state of title, and no liens not contemplated by
the development of the Premises pursuant to this Agreement or the
Lease, or not previously approved by BPCA under the Lease or EDC;
and
(v) such additional documents, data or information reasonably requested
by EDC with respect to the Construction Work or in support of the
Hard Costs Requisition and without which EDC could not reasonably be
expected to disburse the Funding prior to the receipt thereof.
(3) With respect to M&E Costs:
(i) a requisition executed and certified by NYMEX or NYMEX's Authorized
Representative (and addressed to EDC) setting forth (x) the amount
of the requested disbursement, (y) an itemization of the Eligible
Costs for which the disbursement is sought, and (z) a list of
suppliers supplying the M&E covered by the requisition, the amount
requested on behalf of each such supplier, and identifying any of
such suppliers that are Affiliates or Associated Contractors and, if
so, in what respect, accompanied by a completed and executed
certification in the form annexed hereto as Exhibit F and copies
of (I) all M&E Contracts on account of which payment is being sought
that have not been previously delivered to EDC, containing all the
applicable provisions required pursuant to ss.3.2(d) hereof (or, for
M&E Contracts that have been previously delivered, copies of
amendments thereof, if any); (II) all insurance certificates
obtained by NYMEX evidencing the insurance required pursuant to
ss.2.3(d) hereof with respect to the
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protection of stored materials against theft and damage; (Ill)
supporting bills, invoices or other documentation reflecting such
Eligible Costs; and (lV) for M&E delivered to the Premises, evidence
of NYMEX's approval and acceptance of the M&E on account of which
payment is being sought (the items described in this ss.4.2(a)(3)(i)
are collectively referred to as the "M&E Requisition");
(ii) copies of any contracts, invoices, bills of sale, statements,
receipted vouchers, equipment leases or other agreements under which
NYMEX (or, in accordance with Section 11.05 of the Lease, BPCA)
claims a fee title to, or a leasehold interest in, any M&E purchased
or leased in connection with the Project and for which payment or
reimbursement is being sought and paid,
(iii) UCC searches against NYMEX with respect to the M&E which is the
subject of the M&E Requisition; and
(iv) such additional documents, data or information reasonably requested
by EDC with respect to the M&E or in support of the M&E Requisition
and without which EDC could not reasonably be expected to disburse
the Funding prior to the receipt thereof.
(b) As of the date of the disbursement, (i) the representations mid
warranties made in Article Five, and in any certification required pursuant to
this Agreement to be delivered to EDC together with the Requisition, shall be
true, correct and complete, (ii) NYMEX shall not be in default, beyond any
applicable notice and/or grace periods, of any material covenant or obligation
of NYMEX under this Agreement, the Lease, the Occupancy Agreement or under any
of the
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other Project Documents, and (ii) NYMEX shall have provided EDC, in accordance
with ss.4.3(b) hereof, with all amendments of the Project Budget not previously
delivered to EDC.
(c) As of the date of the disbursement, NYMEX shall not be in default,
beyond any applicable notice and/or grace periods, of any material covenant or
obligation of NYMEX under a Project Contract which is the subject of the
disbursement; provided however that EDC shall disburse the Funding to NYMEX in
accordance with the terms and conditions of this Agreement with respect to any
portion of the disbursement request which is for payment under Project Contracts
other than the Project Contract(s) that NYMEX has defaulted under.
ss.4.3 Project Budget (a) Attached hereto as Appendix B is a project
budget (the "Project Budget"), approved by EDC, that contains a current estimate
of the Total Project Costs and a drawdown schedule that contains a projection of
the amounts that NYMEX expects to requisition, on a monthly basis, over the Term
of this Agreement
(b) NYMEX shall submit to EDC, for EDC's information, any amended or
updated Project Budget as such Project Budget is amended or updated, but not
less than once every thirty (30) days; provided however, that if there have been
no amendments to the Project Budget since the most recent amended Project Budget
submitted to EDC in accordance with this ss.4.3(b), NYMEX shall either submit to
EDC for such thirty (30) day period a statement, signed by an Authorized
Representative of NYMEX, certifying that there have been no further amendments
to the Project Budget, or, if NYMEX submits a Requisition to EDC for such thirty
(30) day period, certify to EDC in the certification to be submitted to EDC
together with each Requisition,
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that there have been no further amendments to the Project Budget for the period
covered by the Requisition.
ss.4.4 BPCA's Disbursement of the BPCA Financing/BPCA's Provision of
Credit Enhancement for Alternative Financing. (a) At such time as EDC shall have
fully disbursed the UDC Funds and the City Funds under this Agreement, then if,
in accordance with the terms and conditions of ss.2.2(b) of this Agreement, the
Financing Letter and the BPCA Financing Documents, BPCA Financing shall become
available to NYMEX for the purpose of financing the remainder of the Eligible
Costs paid and/or incurred by NYMEX in connection with the Project Work, BPCA
shall disburse the BPCA Financing in accordance with, and subject to, the terms
and provisions of this Agreement (including specifically, but without
limitation, the provisions of ss.2.2(c) hereof) and the terms and provisions of
the BPCA Financing Documents, as if the BPCA Financing was the Funding, and BPCA
shall become the disbursing agent instead of EDC and all references to EDC shall
instead be and be deemed to be references to BPCA. NYMEX and BPCA agree that,
except as otherwise set forth in ss.4.4(b) below, all the conditions for the
disbursement of the Funding set forth in Articles Two, Three and Four herein
shall apply equally to the disbursement of the BPCA Financing.
(b) All disbursements of the BPCA Financing shall be made by check at the
principal office of BPCA, or such other place within New York City as BPCA may
designate. At NYMEX's request, disbursements may be made by wire transfer to a
bank located within New York City, provided that all costs and fees associated
with such wire transfer are paid for by NYMEX
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(c) If BPCA Financing is not available, and if in accordance with the
terms of the Financing Letter and the BPCA Financing Documents, a credit
enhancement from BPCA is available for the Alternative Financing, BPCA and NYMEX
shall jointly determine the extent to which the terms and conditions of this
Agreement related to procurement requirements, the Additional Security Deposit
and other conditions for the disbursement of funds shall apply to the
disbursement of the Alternative Financing, it being understood and agreed that
such terms and conditions shall not duplicate those otherwise performed pursuant
to financing documents governing the disbursement of the Alternative Financing
and shall be reflective of the extent to which BPCA revenues are pledged to the
Alternative Financing. BPCA and NYMEX shall also jointly determine the amount of
the Alternative Financing to be applied towards the payment of the services to
be performed by the Construction Monitor during the disbursement of the
Alternative Financing, it being understood that the services to be performed by
the Construction Monitor shall not duplicate services otherwise performed
pursuant to financing documents governing the disbursement of the Alternative
Financing and shall be reflective of the extent to which BPCA revenues are
pledged to the Alternative Financing.
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ARTICLE FIVE - REPRESENTATIONS AND WARRANTIES OF NYMEX
To induce the Public Parties to enter into this Agreement, NYMEX
represents and warrants as follows:
ss.5.1 Organization: Standing. NYMEX is a corporation duly organized and
validly existing under the Not-For-Profit corporation laws of the State of New
York and has all requisite power, authority and legal right to execute, deliver
and perform its obligations under this Agreement. A copy of a certificate, as to
subsistence of the NYMEX corporation, from the Secretary of the State of New
York is attached hereto as Appendix C, and hereby made a part hereof.
ss.5.2 Due Authorization: Enforceable Obligations. This Agreement has been
duly authorized, executed and delivered by NYMEX and constitutes a legally
binding obligation of NYMEX enforceable in accordance with its terms. A legal
opinion by each of the general counsel of NYMEX and special counsel to NYMEX
(addressed to the Public Parties) has been delivered to the Public Parties upon
the execution of this Agreement by the Parties hereto and is attached hereto as
Appendix D and hereby made a part hereof. A certificate of the Secretary of
NYMEX, certifying as to the adoption of resolutions by the Board of Directors of
NYMEX authorizing the execution and delivery of this Agreement by NYMEX, has
been delivered to the Public Parties upon the execution of this Agreement by the
Parties hereto and is attached hereto as Appendix E and hereby mde a part
hereof.
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ss.5.3 Conflict under Other Documents. The execution, delivery and
performance of this Agreement by NYMEX is not, and the performance of this
Agreement by NYMEX will not (a) be effectively prohibited or prevented by, or in
breach of, (i) the certificate of incorporation or by-laws of NYMEX, (ii) any
law, judgment, order, writ, injunction, decree, rule or regulation of any court
or Governmental Authority applicable to NYMEX, or (iii) except as may be
permitted under the Lease, any loan agreement, indenture, mortgage, deed of
trust, or other financing agreement or instrument to which NYMEX is a party or
by which NYMEX is bound or to which any of its properties or assets is subject,
or (b) except as may be permitted under the Lease, result in or require the
creation or imposition of a mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature upon or with respect to
any of the properties or interests now owned or hereafter acquired by NYMEX.
ss.5.4 No Litigation. Except as set forth in Appendix F attached hereto,
as of the date of this Agreement, there are no suits or proceedings pending or,
to the best of NYMEX's knowledge, threatened against NYMEX or any Affiliate that
would materially affect the development and improvement of the Premises, the
consummation of the transactions contemplated by this Agreement, or the full
performance of the obligations of NYMEX under this Agreement and the Lease.
ss.5.5 No Default. To its knowledge, NYMEX is not in default beyond
applicable grace periods after notice, if any, in any material respect in the
payment or performance of any of its obligations under this Agreement, the
Occupancy Agreement, the Lease or any of the other
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Project Documents. NYMEX is not in default under any order, award or decree of
any court, arbitrator or Governmental Authority binding upon or affecting it or
by which any of its assets may be bound or affected.
ss.5.6 No Burdensome Agreements. NYMEX is not a party to any agreement,
instrument or undertaking, or subject to any other restriction, that materially
adversely affects NYMEX's ability to complete the Project Work and the Project.
ss.5.7 Filing Statements and Reports. NYMEX has filed copies of all
statements and reports that, to its knowledge, are required to be flied by it
with any Governmental Authority and that, if not filed, may affect NYMEX's
ability to consummate the transactions contemplated by this Agreement, construct
the Project in accordance herewith and in accordance with the Lease, or
otherwise fully perform its obligations under this Agreement.
ss.5.8 Project Contracts. As of the date of this Agreement, to its
knowledge, NYMEX is not in default beyond applicable grace periods after notice,
if any, in any material respect in the payment or performance of any of its
obligations under the Project Contracts.
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ARTICLE FIVE-A - REPRESENTATIONS AND WARRANTIES OF THE
PUBLIC PARTIES AND THE CITY
To induce NYMEX to enter into this Agreement, each of the Public Parties,
for and on behalf of itself, represent and warrant with respect to ss.5A 1,
ss.5A.2, ss.5A.3 and ss.5A.4 hereof, and the City represents and warrants with
respect to ss.5A.5 hereof, as follows:
ss.5A. 1 Organization: Standing; (a) UDC is a public benefit corporation
organized under, and existing by virtue of, the laws of the State of New York
and has all the requisite power, authority and legal right to execute, deliver
and perform its obligations under this Agreement.
(b) EDC is a not-for-profit corporation, organized pursuant to ss. 1411 of
the New York State Not-For-Profit Corporation Laws and has all the requisite
power, authority and legal right to execute, deliver and perform its obligations
under this Agreement.
(c) BPCA is a public benefit corporation organized under, and existing by
virtue of, the laws of the State of New York and has all the requisite power,
authority and legal right to execute, deliver and perform its obligations under
this Agreement.
ss.5A2 Due Authorization: Enforceable Obligation. (a) This Agreement has
been duly authorized, executed and delivered by UDC and constitutes a legally
binding obligation of UDC enforceable in accordance with its terms. A legal
opinion by general counsel of UDC (addressed to NYMEX) has been delivered to
NYMEX upon the execution of this Agreement by the Parties hereto and is attached
hereto as Appendix G and hereby made a part hereof. A certified copy
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of the resolution by the Directors of UDC authorizing the execution and delivery
of this Agreement by UDC has been delivered to NYMEX upon the execution of this
Agreement by the Parties hereto and is attached hereto as Appendix H and hereby
made a part hereof.
(b) This Agreement has been duly authorized, executed and delivered by EDC
and constitutes a legally binding obligation of EDC enforceable in accordance
with its terms. A legal opinion by general counsel of EDC (addressed to NYMEX)
has been delivered to NYMEX upon the execution of this Agreement by the Parties
hereto and is attached hereto as Appendix G-2 and hereby made a part hereof. A
certificate of the Secretary of EDC, certifying to the adoption of resolutions
by the Board of Directors of EDC authorizing the execution and delivery of this
Agreement by EDC, has been delivered to NYMEX upon the execution of this
Agreement by the Parties hereto and is attached hereto as Appendix H-I and
hereby made a part hereof.
(c) This Agreement has been duly authorized, executed and delivered by
BPCA and constitutes a legally binding obligation of BPCA enforceable in
accordance with its terms. A legal opinion by general counsel of BPCA (addressed
to NYMEX) has been delivered to NYMEX upon the execution of this Agreement by
the Parties hereto and is attached hereto as Appendix G-2 and hereby made a part
hereof. A certified copy of the resolution by the Members of BPCA, authorizing
the execution and delivery of this Agreement by BPCA, has been delivered to
NYMEX upon the execution of this Agreement by the Parties hereto and is attached
hereto as Appendix H-2 and hereby made a part hereof.
ss.5A.3 No Litigation. As of the date of this Agreement, there are no
suits or proceedings pending or, to the best of each of the Public Parties'
knowledge, threatened against the Public
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Parties, or any one of them, that would materially affect the consummation of
the transactions contemplated by this Agreement, or the full performance of the
obligations of the Public Parties under this Agreement
ss.SA.4 No Burdensome Agreements. (a) As of the date hereof, UDC is not a
party to any agreement, instrument or undertaking or subject to any other
restriction, that materially adversely affects UIC's ability to disburse the
UDC Funds to EDC pursuant to this Agreement and the Project Agreement.
(b) As of the date hereof, EDC is not a party to any agreement, instrument
or undertaking or subject to any other restriction, that materially adversely
affects EDC's ability to disburse the UDC Funds and the City Funds to NYMEX
pursuant to this Agreement and the Project Agreement
(c) As of the date hereof, BPCA is not a party to any agreement,
instrument or undertaking or, assuming that all those terms and conditions for
the provision of BPCA Financing set forth in the Financing Letter and the
Financing Documents have been satisfied, subject to any other restriction, that
materially adversely affects BPCA's ability to disburse the BPCA Financing
to NYMEX pursuant to this Agreement.
ss.5A.5 Representations and Warranties of the City. The City, in
connection with the provisions of ss.2.1(b) hereof only, represents and warrants
that.
(a) The City has been duly authorized to execute this Agreement for the
purpose of agreeing to the provisions of ss.2.1(b) hereof and for the purpose of
making the representations
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contained in this ss.5A.5 and, upon execution hereof, the provisions of
ss.2.1(b) hereof and this ss.5A.5 shall constitute binding obligations of the
City enforceable in accordance with their terms. A legal opinion by the Acting
Corporation Counsel of the City (addressed to NYMEX) has been delivered to NYMEX
upon the execution of this Agreement by the Parties hereto and is attached
hereto as Appendix G-3 and hereby made a part hereof.
(b) As of the date of this Agreement, there are no suits or proceedings pending
or, to the best of the City's knowledge, threatened against the City that would
materially affect the Cites performance of its obligations under ss.2.1(b)
hereof.
(c) As of the date hereof, the City is not a party to any agreement, instrument
or undertaking or subject to any other restriction, that materially adversely
affects the City's ability to disburse the City Funds in accordance with the
provisions of ss.2.1(b) hereof.
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ARTICLE SIX - COVENANTS
ss.6.1 Intentionally Omitted
ss.6.2 Compliance with the Project Documents and Law: Legal Status. During
the Term, NYMEX shall:
(a) faithfully comply with all of the terms, conditions and covenants now
or in the future binding upon or applicable to NYMEX under this Agreement, the
Lease, the Occupancy Agreement, any Project Contracts and any of the other
Project Documents;
(b) do all things necessary to maintain and keep in full force and effect
its existence, franchise, rights and privileges under the laws of the State and
City of New York; and
(c) comply with, and do all things necessary to cause the Project Work to
be performed in compliance with, all applicable laws, rules, regulations and
orders of Governmental Authorities applicable to the Project Work and the
Premises, and with the terms and conditions of the Lease.
ss.6.3 Maintenance of and Compliance with Insurance Requirements. NYMEX
shall maintain or cause to be maintained at NYMEX's expense such insurance, in
the amounts and in accordance with the applicable provisions, as is described in
Article 7 and Section 11.03 of the Lease. NYMEX shall comply with all of the
applicable provisions of such insurance policies. Nothing contained in this
ss.6.3 is intended to confer any rights upon any third party.
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ss.6.4 Maintenance of Office. NYMEX will maintain an office in New York
City where notices with respect to this Agreement may be delivered to it and
inspections and audits in accordance with ss.6.7 hereof may be conducted.
ss.6.5 Compliance with Applicable Law. (a) NYMEX shall include, or cause
to be included, the following requirements, as applicable, in the Construction
Managers' contracts and all Construction Contracts, and require all subcontracts
and material suppliers to include the same requirements, so that the
Construction Manager(s), the Contractor(s), any subcontractors and material
suppliers shall agree, in substance:
(i) to comply with (1) the equal employment requirements set forth
in Article 40 of the Lease, incorporated herein by reference
and made a part hereof as if more fully set forth herein, (2)
New York State Labor Law ss.220-e, and (3) City Administrative
Code ss.6-108;
(ii) to comply with the applicable provisions of the New York City
Noise Control Code (Administrative Code ss.24-216, as amended)
and related regulations;
(iii) to pay no less than prevailing wage rates and supplemental
benefits to State Labor Law in accordance with the currently
scheduled rates, as laborers, workers and mechanics pursuant
to ss.220(3) of the New York State Labor Law in accordance
with the currently scheduled rates, as amended from time to
time; and
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(iv) to comply with the Affirmative Action Program set forth in
Exhibit D attached to the Lease, incorporated herein by
reference and made a part hereof as if more fully set forth
herein.
(b) NYMEX shall promptly, diligently and continuously enforce to the
reasonable satisfaction of EDC (if EDC shall then be administering this
Agreement) or BPCA (if BPCA shall then be administering this Agreement) the full
and faithful compliance by the Persons referred to in ss.6.5(a) hereof with the
provisions of law referred to in such ss.6.5(a).
ss.6.6 Assignment. Without the prior written consent of EDC (if EDC shall
then be administering this Agreement) or BPCA (if BPCA shall then be
administering this Agreement), NYMEX shall not assign this Agreement other than
to wholly owned subsidiaries of NYMEX.
ss.6.7 Maintenance of Records. (a) NYMEX agrees to maintain, or cause to
be maintained, accurate, readily auditable records and accounts with supporting
documentation, in accordance with sound accounting principles, of (i) all of the
costs of developing and improving the Premises, (ii) all of its receipts and
expenditures in connection with the Funding and, if applicable, BPCA Financing
and Alternative Financing, (iii) all expenditures made in connection with the
Project Work (whether such expenditures be paid with the Funding, BPCA
Financing, Alternative Financing or otherwise), and (iv) all financial accounts
and transactions maintained or undertaken in connection with this Agreement.
NYMEX shall make such records available for inspection and audit by the Public
Party mutually designated from time to time by all of the Public Parties to
perform inspections and audits under this Agreement and such Public Party's
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agents and employees, and by the Comptroller of the State and/or the City
Comptroller and any other elected or appointed public official or public agency
or entity entitled by law to inspect records in connection with publicly funded
projects and each of such person's or entity's agents and employees, at NYMEX's
place of business within New York City, at the request of, EDC (if EDC shall
then be administering this Agreement) or BPCA (if BPCA shall then be
administering this Agreement) at reasonable times and upon reasonable notice.
All such records and accounts shall be maintained for a period of six years
after the last disbursement of either the Funding, the BPCA Financing or the
Alternative Financing, as applicable, in connection with the record or account
to be maintenance.
(b) If any records and accounts maintained by NYMEX in accordance with
ss.6.7(a) above shall contain proprietary information regarding NYMEX's
business, or trade secrets of NYMEX, the Public Parties agree to (i) keep such
information or trade secrets confidential to the extent permitted by law, (ii)
notify NYMEX if any one of them receives any request for disclosure in respect
of any such information or trade secrets, (iii) copy NYMEX on any communications
that the Public Parties' have with, or receive from, any party making the
request for disclosure, and (iv) notify NYMEX if any one of them intends to make
any disclosure at least five (5) Business Days prior to the actual disclosure
and copy NYMEX on any such disclosure.
(c) The provisions of this ss.6.7 shall survive termination of this
Agreement for the six-year period specified in ss.6.7(a) hereof.
ss.6.8 Other Information. NYMEX shall furnish and cause to be furnished to
EDC (if EDC shall then be administering this Agreement) or BPCA (if BPCA shall
then be administering
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this Agreement) such other information respecting the Premises and the Project
Work, as EDC (if EDC shall then be administering this Agreement) or BPCA (if
BPCA shall then be administering this Agreement) may from time to time
reasonably request
ss.6.9 Due Application of Funding Proceeds. (a) NYMEX shall receive and
hold the proceeds of the UDC Funds and the City Funds (including any insurance
proceeds arising out of any casualty affecting property purchased with the UDC
Funds and the City Funds) as a trust fund to be applied exclusively for the
payment of Eligible Costs in accordance with the terms of this Agreement and
shall not use any part of the same for any other purpose.
(b) NYMEX shall receive and hold the proceeds of the BPCA Financing, if
any, disbursed in accordance with this Agreement, the Lease (if applicable) and
the BPCA Financing Documents (including any insurance proceeds arising out of
any casualty affecting property purchased with the BPCA Financing) as a trust
fund to be applied exclusively for the payment of Eligible Costs in accordance
with the terms of this Agreement and, if applicable, the Lease and the BPCA
Financing Documents and shall not use any part of the same for any other
purpose.
(c) Any document providing for the disbursement to NYMEX of Alternative
Financing shall provide that NYMEX shall receive and hold the proceeds of such
Alternative Financing (including any insurance proceeds arising out of any
casualty affecting property purchased with the Alternative Financing) as a trust
fund to be applied exclusively for the payment of Eligible Costs incurred in
connection with the Project Work and shall not use any part of the same for any
other purpose.
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ss.6.10 Liens. NYMEX will cause the Project to be constructed free and
clear of liens of mechanics, material persons and suppliers, including public
improvement liens, subject to NYMEX's right to cause any such lien to be removed
or bonded substantially in accordance with the provisions of Article 16 of the
Lease as if such lien were a lien against "Landlord" (as such term is defined in
the Lease). The costs of removing or bonding such liens shall be paid for by
NYMEX and may be paid or reimbursed using the Funding and/or the BPCA Financing,
if any.
ss.6.11 Defects: Non-Conforming Work. (a) The disbursement of any portion
of the Funding, or the BPCA Financing, if applicable, shall not constitute a
waiver by any one of the Public Parties of a default by NYMEX to perform, or
cause to be performed, the Construction Work in accordance with the Plans and
Specifications.
(b) In the event that any of the Design Professionals (including, without
limitation, any of the Construction Managers) or any of the Contractors has
performed work or caused work to be performed that is claimed to be defective or
non-conforming and, in order to proceed with the Project Work without
interruption or delay it is necessary that such work be corrected, the cost of
performing such corrective work (the "Corrective Work") may be paid for with the
Funding, provided, that if at the time all of the City Funds and all of the UDCF
funds to be ddisbursed to NYMEX hereunder have been disbursed, the work that is
claimed to be defective or non-conforming has been determined to be defective or
non-conforming and the fault of a Design -Professional and/or Contractor, then:
(i) NYMEX (or its Construction Manager) shall, to the extent that the
work has been found to be defective or non-conforming, submit to EDC
(y) a
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credit against the Funding in an amount equal to the portion of the
Funding previously disbursed by EDC to NYMEX to pay for, or
reimburse NYMEX for, the Eligible Costs incurred in connection with
the performance of the Corrective Work required as a result of such
defective or non-conforming work, and (z) a new Requisition or
Requisitions, together with any and all supporting documentation
required under this Agreement to be submitted together with a
Requisition, for Eligible Costs incurred in connection with the
performance of the Project Work and not previously funded with
Funding.
(ii) EDC shall re-apply the portion of the Funding previously disbursed
on account of the Corrective Work, in an amount equal to the amount
of the credit, to the work described in the new Requisition; and
(iii) thereafter, NYMEX (or the Construction Manager) shall be solely
responsible for seeking an appropriate recovery against the Design
Professional or Contractor (or from others on its or their behalf)
and shall be entitled to retain any amounts so recovered;
provided, further that if at the time all of the City Funds and all of the UDC
Funds to be disbursed hereunder have been disbursed, there remains an unresolved
dispute as to whether such work is defective or non-conforming or as to whether
such defect or non-conformity is the fault of any Design Professional or
Contractor, or NYMEX elects to settle such dispute without making a
determination as to who caused the defective or non-conforming work to have been
performed, then:
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(i) NYMEX (or its Construction Manager) shall be solely responsible for
disputing or litigating (or settling, as applicable) any claims
arising out of the work that is claimed to be defective or
non-conforming;
(ii) NYMEX shall be entitled to retain any amounts recovered from the
Design Professional or Contractor (or from others on its or their
behalf);
(iii) NYMEX (or its Construction Manager) shall submit to EDC (y) a credit
against the Funding in an amount equal to the portion of the Funding
previously disbursed by EDC to NYMEX to pay for, or reimburse NYMEX
for, the Eligible Costs incurred in connection with the performance
of the Corrective Work required as a result of such work, and (z) a
new Requisition or Requisitions, together with any and all
supporting documentation required under this Agreement to be
submitted together with a Requisition, for Eligible Costs incurred
in connection with the performance of the Project Work and not
previously funded with the Funding; and
(iv) EDC shall re-apply the portion of the Funding previously disbursed
on account of Corrective Work, in an amount equal to the amount of
the credit, to the work described in the new Requisition or
Requisitions.
If EDC has re-applied the Funding as described in this ss.6.11(b), and if a
dispute with a Design Professional or Contractor is thereafter resolved in
favor of the Design Professional or Contractor, NYMEX may seek funding or
reimbursement for (and to the extent of) the Corrective
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Work determined to have been appropriate or conforming from BPCA or from any
other lender or entity making the financing required to complete the Project
Work available.
ss.6.12 Satisfaction of Conditions. The Funding may be expended by EDC for
the purpose of satisfying any default in the covenants and conditions applicable
to NYMEX under this Agreement provided that (a) except in the case of an
emergency in which case EDC shall provide NYMEX with such advance notice as is
practicable under the circumstances, EDC shall have delivered fifteen (15) days
prior written notice to NYMEX of its intention so to apply the funding,
and (b) NYMEX shall have failed, prior to the expiration of any applicable
notice and/or cure period provided for in this Agreement, to have satisfied
any such covenant or condition in a manner that would remedy the default.
Amounts so expended by EDC shall be deemed a disbursement on account of
the Funding. The terms and conditions contained in this ss.6.12 shall apply to
BPCA upon the disbursement of the BPCA Financing, if applicable.
ss.6.13 Tropical Hardwoods. NYMEX hereby agrees that with respect to any
Public-Funded Construction Contract and any BPCA-Financed Construction Contract
entered into for the performance of the Construction Work, NYMEX shall include,
or cause the Construction Manager to include, in such Construction Contract a
prohibition against the use of tropical hardwoods (as defined in Section 167-b
of the New York State Finance Law) in the performance of the Construction Work
except as expressly permitted by Section 167-b of the New York State Finance
Law.
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ss.6.14 MacBride Principles. NYMEX hereby agrees that, with respect to any
Project Contract that is to be funded in whole or in part with the Funding
and/or the BPCA Financing, NYMEX shall (i) include, or cause the Construction
Manager to include, in such Project Contract the requirements of the MacBride
Principles Rider, attached hereto as Appendix I, and (ii) require, or cause the
Construction Manager to require, the Design Professionals, Consultants and
Contractors (A) to comply with applicable covenants and representations set
forth in Appendix I, and (B) to cause its contractors, subcontractors, and
materials suppliers performing the Project Work to also comply with the
requirements of Appendix I. NYMEX (x) shall not enter into, (y) shall cause the
Construction Monitor, Design Professionals and Consultants to not enter into,
and (z) shall cause the Construction Manager to cause the Contractors to not
enter into, any Project Contract that is to be funded in whole or in part with
the Funding and/or the BPCA Financing with any party that does not agree to
comply with the applicable covenants and representations set forth in Appendix
I, unless NYMEX certifies that (1) there is no other actual source that can
provide the services or supply the materials described under such Project
Contract and (2) the services to be performed or the materials to be supplied
under such Project Contract are essential to the construction or operation of
the Project, and there exists no adequate substitution therefor.
ss.6.15 No Waiver of Compliance. The disbursement by EDC of any portion of
the Funding or, if applicable, the disbursement by BPCA of any portion of the
BPCA Financing, to NYMEX shall not constitute a waiver of EDC's or BPCA's, as
applicable, right to require compliance with any of the covenants contained in
this Article Six or otherwise contained in this Agreement.
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ss.6.16. Employment Information. So as to enable EDC to comply with the
requirements of Local Law 69, NYMEX agrees as follows:
(a) Upon execution of this Agreement by NYMEX, NYMEX if it has not already
done so, shall complete and return to EDC (A) a questionnaire (the
"Questionnaire (Initial)") in the form annexed hereto and made a part of this
Agreement as Exhibit H describing, in substance, how many and what types of jobs
NYMEX in good faith estimates that it will create and retain with regard to its
activities in or concerning the Project and its projected timetable for the
creation and retention of jobs for the first seven years after the initial
disbursement of any of the Funding, and (B) the attachments required by the
Questionnaire (Initial). If the information filled in on the Questionnaire
(Initial) changes between the daze of its submittal to EDC and the initial
disbursement of any of the Funding, NYMEX shall promptly submit an amended
Questionnaire (Initial) to EDC.
(b) NYMEX shall, with regard to each July 1 - June 30 period during which
any part of the seven (7) years from the initial disbursement of any of the
Funding falls, (i) report to EDC by October 1, on an annual basis for the twelve
months ending the previous June 30, the number of jobs created and retained by
it at the Premises, such report to be in the form of the questionnaire (the
"Questionnaire (Annual)") annexed hereto and made a part of this Agreement as
Exhibit H-1, and (ii) deliver to EDC any and all forms required to be delivered
by the Questionnaire (Annual). The provisions of this ss.6.16(b) shall survive
termination of this Agreement for the seven (7) year period described herein.
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ARTICLE SEVEN - DEFAULT; TERMINATION
ss.7.1 Events of Default An "Event of Default" shall exist if any of the
following shall have occurred during the term of this Agreement:
(a) NYMEX shall have "abandoned" the Project (as defined and described in
Section 2 of the Occupancy Agreement); or
(b) NYMEX shall have applied the Funding or, if applicable, the BPCA
Financing or the Alternative Financing in violation of the covenant set forth in
ss.6.9 and such misapplication was (i) fraudulent or (ii) not corrected within
five (5) Business Days of receipt of written notice thereof; or
(c) NYMEX shall have failed to duly observe or perform any of the
covenants and agreements contained in this Agreement (other than the covenants
contained in ss.6.9) and such failure continued for twenty (20) Business Days
after receipt of written notice to NYMEX by EDC (if such failure took place
during the disbursement of the UDC Funds or the City Funds) or BPCA (if such
failure took place during the disbursement of the BPCA Financing) specifying
such default and requiring such default to be remedied; provided, however, that
if because of Unavoidable Delays or if the nature of the default is such that
NYMEX cannot reasonably be expected to cure the same within such period, such
default shall not be an Event of Default if, within such period (subject to
Unavoidable Delays), NYMEX commences in good faith to cure such default and
(subject to Unavoidable Delays) diligently prosecutes such cure to completion;
or
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(d) an Event of Default (as defined in the Lease) has occurred under the
Lease, or an event of default has occurred under any of the other Project
Documents that is not cured within any applicable notice and/or grace period; or
(e) any representation or warranty by NYMEX contained in this Agreement
shall have been materially false when made, or shall have subsequently become
materially false and, at the time that NYMEX knew of the same, NYMEX shall have
failed to notify EDC (if EDC shall then be administering this Agreement) or BPCA
(if BPCA shall then be administering this Agreement) of such changes and shall
have failed to cure, or commence to cure, such failure within ten (10) days
after receipt of written notice from EDC or BPCA, as applicable; provided,
however, that if because of Unavoidable Delays or if the nature of the default
is such that NYMEX cannot reasonably be expected to cure the same within such
period, such default shall not be an Event of Default if, within such period
(subject to Unavoidable Delays), NYMEX commences in good faith to cure such
default and (subject to Unavoidable Delays) diligently prosecutes such cure to
completion.
ss.7.2 Default Remedies; Exculpation.
(a) Upon an Event of Default described in ss.7.1 hereof, EDC (if EDC is
then administering this Agreement) or BPCA (if BPCA is then administering this
Agreement) shall have the right to elect to terminate this Agreement (reserving,
however, all remedies provided in this Article Seven or existing otherwise) or
to make no further disbursements (without terminating this Agreement) until such
Event of Default is remedied.
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(b) Any Event of Default under this Agreement shall also be an event of
default under the other Project Documents, and the Public Parties shall have the
right to exercise any rights, powers, or remedies permitted to the Public
Parties and each of them under such other Project Documents upon the occurrence
of an event of default thereunder (including, without limitation, the right set
forth in Article 42 of the Lease to draw upon the Security Deposit and the right
set forth in the Occupancy Agreement to recover liquidated damages in the amount
described in Section 5 of the Occupancy Agreement).
(c) In addition to any other right, power or remedy specified herein or in
the other Project Documents, EDC (if EDC is then administering this Agreement)
or BPCA (if BPCA is then administering this Agreement) may obtain restitution of
any portion of the Funding, or if applicable the BPCA Financing, that is applied
by NYMEX, or NYMEX's employees, agents or contractors in violation of ss.6.9,
with interest from the date of disbursement at the Late Charge Rate.
(d) In no event shall the Public Parties look to the property or assets of
any of the individuals who are the directors, officers, members or member firms,
employees, shareholders, agents or servants of NYMEX or any Affiliate of NYMEX,
and no property or assets of any of the aforesaid Persons shall be subject to
levy, execution or other enforcement procedure for the satisfaction of NYMEX's
obligations under this Agreement, except in the event such individual has
misapplied the Funding, or if applicable the BPCA Financing, as described in
ss.7.2(c) above, in which case the relevant individual shall be personally
liable to the full extent provided by law.
(e) No right, power or remedy conferred upon or reserved to any one of the
Public Parties hereunder is intended to be exclusive of any other right, power
or remedy hereunder.
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Every right, power and remedy hereunder shall, to the extent permitted by law,
be cumulative and in addition to every other right, power and remedy contained
in this Agreement or the other Project Documents, and may be exercised from time
to time and as often and in such order as the Public Parties may deem
appropriate.
(f) No course of dealing on the part of EDC, or BPCA if applicable, or any
failure on the part of EDC, or BPCA if applicable, to exercise any right, power
or remedy shall operate as an election or a waiver of such right or any other
right, power or remedy, or otherwise prejudice the powers and remedies of EDC,
or BPCA, if applicable, hereunder. No delay or omission of the Public Parties in
exercising any right, power or remedy occurring upon an Event of Default shall
impair any such right, power or remedy or constitute a waiver of or acquiescence
in such Event of Default.
(g) The Public Parties agree that upon the occurrence of an Event of
Default described in ss.7.1(a), ss.7.1(c), ss.7.1(d) and ss.7.1(e) hereof,
except as may otherwise be specifically set forth in the Occupancy Agreement or
in any of the other Project Documents, the Public Parties shall not have the
right to seek injunctive relief requiring NYMEX to comply with the requirements
of this Agreement or enjoining NYMEX from failing to comply with a requirement
of this Agreement.
(h) The provisions of this ss.7.2 shall survive the expiration or
termination of the Term.
ss.7.3 Termination. (a) If this Agreement is terminated in accordance with
the provisions of ss.7.2 hereof, or for any other reason provided for in this
Agreement (except in the event of a termination of this Agreement by NYMEX in
accordance with ss.9.6(b) hereof), then
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in the event of such termination, no Party will have any rights against or
liabilities to any other Party and no Party will have any obligation to
reimburse any other Party for any amounts previously disbursed or expended,
except as specifically set forth herein or in the other Project Documents.
(b) If this Agreement is terminated as described in ss.7.3(a) above, the
Public Parties may (but shall be under no obligation) to: (i) enter and protect
the Premises; (ii) assume any Design Contract or Construction Contract made by
or on behalf of NYMEX in any way relating to the Project Work and take over and
use all or any part or parts of the labor, materials, supplies and equipment
contracted for, by or on behalf of NYMEX, whether or not previously incorporated
into the Premises, and complete performance of the Project Work in accordance
with the Plans and Specifications for the Project Work or as otherwise may be
deemed appropriate, all in the discretion of the Public Parties; or (iii) (x)
engage builders, contractors, architects, engineers and others for the purpose
of furnishing labor, materials and equipment, and (y) reasonably pay, settle or
compromise all bills or claims that may become liens against the Premises, or
that have been or may be properly incurred, or for the discharge of liens,
encumbrances or defects in the title of the Premises. To effectuate the
provisions of this ss.7.3(b), (i) NYMEX collaterally assigns to BPCA the Plans
and Specifications and all such Design Contracts and Construction Contracts,
whether presently existing or made in the future, as more particularly set forth
in ss.4.1(d), and (ii) EDC shall (except as otherwise may be provided in the
case of a termination of this Agreement in accordance with ss.2.2(c)(iii) or
ss.9.6(b) hereof) have the right to draw on the Additional Security Deposit and
apply the Additional Security Deposit for the purpose of completing the Project
Work or otherwise retain the Additional Security
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Deposit (which right shall be in addition to any right that BPCA may have under
Article 42 of the Lease or pursuant to any other provision of the Lease or any
provision of any other Project Document, to draw on the Security Deposit and
apply or retain such Security Deposit for the purpose of completing the Project
Work).
(c) The provisions of this ss.7.3 shall survive the expiration or
termination of the Term.
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ARTICLE EIGHT - NOTICES
ss.8.1 Notices. (a) All notices, demands, requests, consents or other
communications under this Agreement shall be in writing and shall be deemed to
have been sufficiently given or served for all purposes as of the date when sent
by hand or by facsimile or by certified or registered mail, return receipt
requested and addressed as follows (or to such other addresses as may from time
to time be designated by UDC, EDC, BPCA or NYMEX by notice delivered to the
other in accordance with this ss.8.1):
(i) if to UDC:
New York State Urban Development Corporation
1515 Broadway, New York, N.Y. 10036
Attention: General Counsel
Fax Number: (212) 930-0196
(ii) if to EDC:
New York City Economic Development Corporation
110 William Street, New York, N.Y. 10038
Attention: President
Fax Number: (212) 312-3913
with a copy to the General Counsel, at the same address
and with copies to;
New York City Law Department
100 Church Street, New York, N.Y. 10007
Attention: Chief, Economic Development Division
Fax Number: (212) 227-5648
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(iii) if to BPCA:
Battery Park City Authority
One World Financial Center, New York, N.Y. 10281
Attention: President
Fax Number: (212) 416-5315
with a copy to the General Counsel, at the same address
(iv) if to NYMEX:
New York Mercantile Exchange
Four World Trade Center
New York, New York 10048
Attention: President
Fax Number: (212) 432-1562
with a copy to the General Counsel at the same address
Fax Number: (212) 775-8638
and with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Stephen Lefkowitz, Esq.
Fax Number: (212) 858-1500
(b) All notices, demands, requests, consents or other communications under
this Agreement shall be deemed to have been delivered and received for all
purposes as of the date sent by hand or by facsimile or, if delivered by mail,
on the date actually received as indicated on the receipt thereof or on the date
delivery thereof is refused by the recipient thereof.
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ARTICLE NINE - GENERAL CONDITIONS AND COVENANTS
The following covenants and conditions shall be applicable throughout the
Term:
ss.9.1 Satisfactory Proceedings. All proceedings taken and documents
required or contemplated in connection with the transactions provided for by
this Agreement shall be reasonably satisfactory in form and substance to EDC (if
EDC shall then be administering this Agreement) or BPCA (if BPCA shall then be
administering this Agreement), and EDC or BPCA, as applicable, shall have
received copies of all such documents.
ss.9.2 Conflict of Interests. No member, officer, director or employee of
EDC or the City, or their designees, consultants or agents, and no member of the
governing body of the City and no public official of the City, who exercises or
exercised any functions or responsibilities with respect to the subject matter
of this Agreement during his/her tenure, if known to NYMEX, shall have any
interest, direct or indirect, in any contract or subcontract, or the proceeds
thereof, for work to be performed in connection with the Project Work or in any
activity or benefit arising out of or in connection with the performance of the
Project Work. Upon receiving notice or knowledge of any of the circumstances
specified in the preceding sentence, NYMEX shall deliver notice to EDC of the
circumstances and immediately shall use its best efforts to cause the Persons
affected to terminate their interest in the prohibited contract or property.
NYMEX shall require its Design Professionals, Consultants, subconsultants,
Contractors, subcontractors and suppliers to make appropriate representations in
writing that they, their employees and principals do not
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have any conflict of interest prohibited under this ss.9.2, and to covenant to
cause the prohibited Persons to terminate their interest in the relevant
contract or property upon demand by NYMEX.
ss.9.3 No Liability of Individuals. No officer, employee, director,
member, agent or other person authorized to act on behalf of the State, the
City, UDC, EDC or BPCA shall have any personal liability in connection with this
Agreement or on account of any default by the State, the City, UDC, EDC or BPCA.
ss.9.4 Anti-Boycott Provisions. (a) NYMEX agrees that neither it nor any
Affiliate is participating or shall participate in an international boycott in
violation of the provisions of the Export Administration Act of 1979, as
amended, or the regulations promulgated thereunder.
(b) Upon the final determination by the United States Department of
Commerce or any other agency of the United States as to conviction of NYMEX or
an Affiliate for participation in an international boycott in violation of the
provisions of the Export Administration Act of 1979, as amended, or the
regulations promulgated thereunder, EDC (if EDC is then administering this
Agreement) or BPCA (if BPCA is then administering this Agreement) may, at its
option, declare a default under this Agreement.
(c) NYMEX shall comply in all respects with the provisions of ss.6-114 of
the Administrative Code of the City and the rules and regulations issued by the
Comptroller of the City thereunder.
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ss.9.5 Governing Law. The provisions of this Agreement shall be governed
and interpreted in accordance with the law of the State of New York.
ss.9.6 Limited Liability of the Public Parties; Remedies in the Event of a
Public Party Default. (a) The Public Parties shall not be liable under this
Agreement to any Person (other than NYMEX) in any matter arising out of the
financing, development, construction and equipping of the Project
(b) Notwithstanding anything to the contrary contained in this Agreement,
in the event that (i) UDC fials to fund the UDC to EDC, (ii) the City fails to
fund the City Funds to EDC, or (iii) EDC fails to disburse the UDC Funds and/or
the City Funds to NYMEX in accordance with this Agreement, then, provided that
NYMEX is not in default under any of the Project Documents and shall have
delivered to the defaulting Public Party, Public Parties, and/or the City (such
defaulting party or parties is hereinafter referred to as the "Defaulting
Party") notice of such failure, which notice shall state with specificity the
nature of the conduct constituting the failure or default and bear the following
legend in capital letters:
"IF THE DEFAULTING PARTY FAILS TO CURE THE FAILURE OR DEFAULT DESCRIBED IN
THIS LETTER WITHIN FORTY-FIVE (45) DAYS AFTER THE RECEIPT OF THIS NOTICE,
NYMEX SHALL HAVE THE RIGHT TO TERMINATE THE FUNDING AGREEMENT, THE LEASE
AND THE OCCUPANCY AGREEMENT, AND/OR PURSUE SUCH OTHER REMEDIES PERMITTED
TO IT IN ACCORDANCE WITH ss.9.6 OF THE FUNDING AGREEMENT",
and such Defaulting Party fails, within a period of forty-five (45) days after
such Defaulting Party's receipt of such notice, to cure such failure, then,
upon the expiration of such forty-five (45) day period:
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(i) NYMEX may elect to bring an action to compel the Defaulting Party to
perform its (or their) respective obligations under this Agreement (during the
pendency of which and until a judgment with respect to such action has been made
by a court of competent jurisdiction and if NYMEX is successful in such action
at all times thereafter, this Agreement, the Lease and the Occupancy Agreement
shall remain in full force and effect); or
(ii) if NYMEX elects not to bring an action to compel the Defaulting Party
to perform or if such action is unsuccessful, NYMEX may elect to:
(A) terminate this Agreement, the Occupancy Agreement, the Lease and all
other Project Documents (including the Financing Letter), in which event,
upon such termination, (x) BPCA shall return the Security Deposit to NYMEX
promptly, and EDC shall return the Additional Security Deposit to NYMEX
promptly, (y) NYMEX shall have no further obligations to the Public
Parties or to the City under or in connection with any of the Project
Documents or the Project, and (z) if NYMEX elects, NYMEX may pursue its
remedies at law; or
(B) terminate this Agreement, the Occupancy Agreement and the Financing
Letter, but not the Lease, in which event, following such termination, (w)
NYMEX shall occupy the building to be constructed on the Premises for the
period and in the manner set forth in Section 23.01 of the Lease, (x) if
the Security Deposit, pursuant to any provision of the Lease, is not
required to remain in effect, BPCA shall return the Security Deposit to
NYMEX promptly, and EDC shall return the Additional Security Deposit to
NYMEX promptly, (y) NYMEX
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shall have no further obligations to the Public Parties and the City under
this Agreement and the Occupancy Agreement, but shall remain bound by the
provisions of the Lease, and (z) if NYMEX elects, NYMEX may pursue its
remedies at law.
Notwithstanding anything to the contrary contained in this ss.9.6(b), in the
event that NYMEX elects, in accordance with ss.9.6(b)(ii)(B) hereof, to sue the
Defaulting Party for damages, then, NYMEX shall remain bound by the provisions
of the Occupancy Agreement unless and until such suit is terminated with
prejudice either by NYMEX irrevocably withdrawing such suit or by a judicial
dismissal or similar termination of such suit which occurs without a judgment on
the merits of whether and how much damages may be due.
(c) Notwithstanding any provision to the contrary in this Agreement, (i)
if the moneys in the aggregate sum of $5,000,000 shall not be made available by
UDC to EDC, or (ii) if the moneys in the aggregate sum of $123,686,000 under the
Consolidated Contract shall not be made available by the City to EDC in whole or
in part for any reason, then EDC shall be under no obligation to make any
disbursement of UDC Funds and/or City Funds unless and to the extent that UDC
and the City remit such moneys to EDC. The failure of EDC to receive such funds
from either UDC or the City shall be deemed to be the failure of an essential
condition for EDC's obligations and NYMEX shall not commence any action or
proceeding against EDC arising out of the failure of this condition; provided,
however, that if it is determined by a court of competent jurisdiction that EDC
is a necessary party to any action or proceeding commenced by NYMEX against UDC
and/or the City, EDC may be joined as a party defendant to such action
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(but in no event shall EDC be liable for the payment of the Funding to the
extent such Funding has not been made available to EDC by UDC and/or the City).
ss.9.6A Arbitration. In the event that there arises a dispute among the
Parties as to whether EDC has defaulted in making disbursements of the Funding
in accordance with, and to the extent specifically provided in, this Agreement,
or whether BPCA has defaulted in making disbursements of the BPCA Financing in
accordance with, and to the extent specifically provided in, this Agreement and
the BPCA Financing Documents, such dispute shall be determined by arbitration in
the manner hereinafter provided:
(a) Procedure for Arbitration.
(i) The party desiring the arbitration shall, by notice to the other
party (the "Dispute Notice"), require that the dispute in question be presented
for resolution to the first available applicable arbiter set forth on the list
set fort in ss.9.6A(b)(iii) below. The party giving the Dispute Notice shall
give a copy of such Dispute Notice to the first applicable arbiter on such
applicable list (unless such first arbiter is known to be unavailable) with a
cover letter requesting such arbiter to serve. In the event the first named
applicable arbiter is not available or is unwilling to serve, the applicable
arbiter next set forth on the applicable list shall be engaged, and so on, until
arriving at a available applicable arbiter. The arbiter serving to resolve any
dispute hereunder is hereinafter referred to as the "Arbiter".
(ii) Arbiter's Decision. Upon selection of an Arbiter in accordance
with ss.9.6A(a)(i) above, the Parties shall make such submissions as they may
wish to the Arbiter within five (5) Business Days after receipt of the Dispute
Notice and selection of an Arbiter.
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Within five (5) Business Days thereafter, the Arbiter shall attempt to cause the
Parties to agree on a resolution to the dispute and, failing that, shall make a
decision in writing by 5:00 PM on the last day of such five (5) Business Day
period. Copies of the Arbiter's decision shall be sent to all the Parties. In
rendering his or her decision, the Arbiter shall have no power to modify any of
the provisions of this Agreement, and the jurisdiction of the Arbiter is
expressly limited accordingly. The decision of the Arbiter shall be final and
conclusive on the Parties, and judgment may be entered on the decision of the
Arbiter rendered in accordance with this ss.9.6A and may be enforced in
accordance with the laws of New York State.
(b) Selection of Arbiter.
(i) Disqualifications. During the month of January of each calendar
year during the Term of this Agreement, each Party may, by written notice to the
other, disqualify one of the listed arbiters for any reason whatsoever. Each
party may also, by written notice to the other at any time (including during the
five (5) Business Day period following the giving of a Dispute Notice), require
any arbiter to be disqualified for cause (including, without limitation,
conflict of interest), the presence of such cause (if disputed) to be determined
by another arbiter under the provisions of this ss.9.6A. The remaining arbiters
shall move up on the list to fill any vacancies so created.
(ii) Replacements. If any of the listed arbiters dies, becomes
disabled, retires, goes out of business, is disqualified by any Party for cause
or otherwise, or elects to withdraw from the list, then the Parties shall agree
on a replacement within twenty (20) days after notice thereof. If the parties
fail to so agree, each, within five(5) days after such twenty (20) day period,
shall designate one of the remaining listed arbiters and the two arbiters so
chosen shall
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appoint a replacement within twenty (20) days thereafter. All newly chosen
arbiters shall be placed at the last position on the applicable list. If more
than one arbiter is chosen at the same time, the arbiters who are so chosen
shall be listed in alphabetical order. In the event that, at any time, there is
no listed applicable arbiter available, the Parties shall endeavor to agree upon
a reputable and experienced arbiter to resolve the dispute in question. In the
event that the Parties are unable to agree on such arbiter, such arbiter shall
be chosen in accordance with the rules of the American Arbitration Association
then prevailing. The Arbiter, however chosen, shall proceed to resolve any
dispute in accordance with the provisions set forth in this ss.9.6A.
(iii) Lists of Arbiters. The following is a list of persons from
which to select an arbiter to determine applicable disputes arising hereunder:
LIST OF ARBITER FOR CONSTRUCTION MANAGEMENT ISSUES:
1. Mr. Arthur Thompsen
Hennigan Construction, Inc.
250 West 30th Street
New York, NY 10001
(212) 947-6441
2. Mr. Jeremiah I. Collins
York/Hunter Inc.
1372 Broadway
New York, NY 10018
(212) 703-3700
3. Mr. Clark Pile, P.E.
O'Brien-Kreitzberg and Associates
1515 Broadway
New York, NY 10036
(212) 921-9898
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4. Mr. Charles Uribe
A.J. Contracting Corporation
470 Park Avenue South
New York, NY 10016
(212) 889-9100
5. Mr. Mitch Solomon
HRH Construction
909 3rd Avenue
New York, NY 10022
(212) 751-3100
6. Mr. Joseph Coppotelli
Structure Tone, Inc.
15 East 26th Street
New York, NY 10010
(212) 481-6100
7. Mr. Nicolas Andreadis
Turner Construction Company
375 Hudson Street
New York, NY 10014
(212) 229-6000
LIST OF ARBITERS FOR ARCHITECTURAL AND ENGINEERING ISSUES:
1. Mr. Richard Dattner
Richard Dattner Architect P.C.
154 West 57th Street
New York, NY 10019
(212) 247-2660
2. Mr. Fred Bland
Beyer Blinder Belle
41 East 11th Street
New York, NY 10003
(212) 777-7800
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3. Mr. Richard K Carlson
Swanke Hayden Connell Architects
4 Columbus Circle
New York, NY 10019
(212) 977-9696
4. Mr. Jerrold Clarke
Schuman Lichteinstein Claman Efron Architects
841 Broadway, 7th Floor
New York, New York 10003
(212) 979-8400
5. Mr. Henry Brennan
Brennan Beer Gorman
515 Madison Avenue
New York, NY 10001
(212) 888-7663
6. Mr. Brad Perkins
Perkins Eastman and Partners
437 Fifth Avenue
New York, NY 10016
(212) 889-1720
7. Mr. Vincent DeSimone
DeSimone Chaplin and Dobryn
20 Waterside Plaza, Level C
New York, New York 10010
(212) 532-2211
8. Mr. Theodore S. Hammer
Haines Lundberg Waehler
115 Fifth Avenue
New York, New York 10003
(212) 353-4600
ss.9.7 Amendments. (a) This Agreement may not be amended, waived or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the amendment, waiver or termination is sought.
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(b) The Public Parties hereby agree not to amend the Project Agreement in
such a way as to materially or adversely affect the rights of NYMEX under this
Agreement, the Lease or the Occupancy Agreement.
ss.9.8 Successors and Assigns. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of UDC, EDC, BPCA, NYMEX and their
respective successors and permitted assigns.
ss.9.9 Assignment of Funds. NYMEX acknowledges that the UDC Funds and the
City Funds are not, and shall not be deemed to be, an assignment of any funds
received by EDC from UDC or the City. NYMEX acknowledges that it has no right to
or interest in such funds under any agreements providing for the administration
of such funds by EDC and confirms that NYMEX's rights to the UDC Funds and the
City Funds arise exclusively under this Agreement.
ss.9.10 No Third Party Rights. The Parties mutually confirm that this
Agreement is not intended to confer any rights upon any person other than the
Parties and their respective successors and permitted assigns. Without limiting
the generality of the foregoing, this Agreement shall not be construed to confer
any rights upon the Architects, the Construction Managers, any other Design
Professionals or Consultants, or the Contractors, as third party beneficiaries
or under any other legal theory.
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ss.9.11 Interpretation. The provisions of the Occupancy Agreement and/or
the Lease that are incorporated by reference into this Agreement are intended to
supplement the other provisions of this Agreement. In the event of any conflict
between the provisions of the Occupancy Agreement and/or the Lease and the other
provisions of this Agreement relating to the performance of the Project Work,
the more restrictive provisions shall control. If any part of this Agreement is
held unenforceable, the remaining provisions shall not be affected and shall be
enforced to the fullest extent permitted by law.
ss.9.12 Captions. Captions are inserted for the convenience of the reader
only and shall not be considered in the construction of this Agreement.
ss.9.13 Indemnity. (a) Notwithstanding anything contained herein to the
contrary, NYMEX shall be solely responsible for all injuries to persons
including death, damage to property, or loss of any other description arising
out of the performance of this Agreement by NYMEX or any Project Work paid for
in whole or in part with the Funding, or the BPCA Financing (if applicable), or
the Alternative Financing (if applicable), including without limitation, any
loss, damage or expense resulting from any negligent act or omission, fault or
default of NYMEX, the Architects, the Construction Managers, any other Design
Professionals or Consultants, any Contractors or its or their respective
employees, agents, servants, independent contractors or subcontractors, in
connection with the Project Work, but specifically excluding any loss, damage or
expense directly resulting from the gross negligence or intentional misconduct
of the Indemnified Parties.
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(b) (i) NYMEX shall defend, indemnify and hold harmless the Indemnified
Parties from and against any and all claims, damages, judgments, liabilities and
causes of action whatsoever to which they may be subject arising out of the
negligent acts or omission, faults or defaults of the Architects, the
Construction Managers any other Design Professionals or the Consultants, or any
subconsultant, agent or employee of the Architects, Construction Managers, any
other Design Professionals or Consultants, in connection with the performance of
the Design and/or Consulting Services, except to the extent that such claims,
damages, judgments, liabilities and causes of action have arisen directly as a
result of the gross negligence or intentional misconduct of the Indemnified
Parties.
(ii) NYMEX shall defend, indemnify and hold harmless the Indemnified
Parties from and against any and all claims, damages, judgments, liabilities and
causes of action whatsoever to which they may be subject arising out of the acts
or omissions of NYMEX, the Contractors, subcontractors, agents, employees or
material suppliers, and any and all Persons, in connection with the performance
of the Construction Work, or because of any negligence, fault or default of
NYMEX, its agents, employees, material suppliers or subcontractors in connection
with the Project, except to the extent that such claims, damages, judgments,
liabilities and causes of action have arisen directly as a result of (i) the
gross negligence or intentional misconduct of the Indemnified Parties, or (ii)
any construction or installation of Civic Facilities being performed by BPCA in
accordance wit Article 26 of the Lease.
(iii) The termination of this Agreement shall not release NYMEX from
any liability to the Indemnified Parties arising out of any act or omission of
NYMEX in connection with, and occurring prior to the termination of, this
Agreement.
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(c) If any claim, action or proceeding is made or brought against any of
the Indemnified Parties that is the subject of NYMEX's indemnification under
ss.9.13(b) hereof, then, NYMEX shall resist or defend such claim, action or
proceeding (in the Indemnified Parties' name, if necessary) by the attorneys for
NYMEX's insurance carrier (if such claim, action or proceeding is covered by
insurance maintained by NYMEX) or (in all other instances) by such attorneys as
NYMEX shall select and EDC (if EDC shall then be administering this Agreement)
or BPCA (if BPCA shall then be administering this Agreement) shall approve,
which approval shall not be unreasonably withheld or delayed, and NYMEX shall
control all decisions in respect of the litigation and settlement of such
claims. The foregoing notwithstanding, the Indemnified Parties may at their own
expense engage their own attorneys to assist such Indemnified Parties in the
defense of such claim, action or proceeding, as the case may be. The
indemnification obligations imposed upon NYMEX under ss.9.13(b) shall not apply
to any settlement agreed to by the Indemnified Parties without NYMEX's prior
written consent.
(d) Notwithstanding any other provision of this Agreement, in the event
that any Indemnified Party fails, within thirty (30) days after such Indemnified
Party has (or have) actual knowledge of the commencement of any action or
proceeding subject to indemnification hereunder, to give NYMEX notice of the
commencement of such action or proceeding, such Indemnified Party shall not be
entitled to indemnification in respect of such action or proceeding; provided,
however, that NYMEX shall be required to indemnify any Indemnified Party named
in any such action or proceeding that names NYMEX, in addition to any
Indemnified Party, as a party litigant regardless of whether the Indemnified
Party has given NYMEX notice of the
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commencement of such action of proceeding in accordance with the provisions
hereof, provided that NYMEX has actual knowledge of such action or proceeding.
ss.9.14 No Agency. Except as specifically provided in Section 11.05 of the
Lease with respect to the purchase of certain materials and supplies to be
incorporated into the Project and for which a sales and compensating use tax
exemption is to be sought, neither NYMEX nor any of its employees, contractors
or subcontractors is, shall be or shall represent that he, she or it is an
agent, servant or employee of the State, the City, UDC, EDC or BPCA by virtue of
this Agreement or by virtue of any approval, permit, license, grant, right or
authorization given by the State, the City, UDC, EDC or BPCA or any of their
officers, agents or employees.
ss.9.15 Venue
(a) Any and all claims asserted by or against the City, UDC, EDC or BPCA
arising under this Agreement or related hereto shall be heard and determined
either in the courts of the United States located in the Southern District of
New York ("Federal Courts") or in the courts of the State of New York located in
the County of New York ("New York State Courts"). To effectuate this agreement
and intent UDC, EDC, BPCA and NYMEX agree and, where appropriate, shall require
each Design Professional, Contractor or Consultant to agree, as follows:
(i) If UDC, EDC or BPCA initiates any action against NYMEX in Federal
Court or in New York State Court, service of process may be made on NYMEX either
in person, wherever NYMEX may be found, or by registered mail (return receipt
requested) addressed to NYMEX
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at its address as set forth in this Agreement, or to such other address as NYMEX
may provide to UDC, EDC and BPCA in writing.
(ii) With respect to any action between UDC, EDC, BPCA, and NYMEX in New
York Stare Court, NYMEX hereby expressly waives and relinquishes any rights it
might otherwise have (A) to move to dismiss on grounds of forum non conveniens,
(B) to remove to a federal court wholly outside New York City, and (C) to move
for a change of venue to a New York State Court outside New York City; provided,
however, that NYMEX may remove to a Federal Court located within New York City.
(iii) With respect to any action between UDC, EDC, BPCA and NYMEX in
Federal Court, NYMEX expressly waives and relinquishes any right it might
otherwise have to transfer the action to another federal court outside New York
City.
(iv) If NYMEX commences any action against the State, the City, UDC, EDC
or BPCA in a court located other than in the City and State of New York, then,
upon request of the Public Parties, NYMEX shall either consent to a transfer of
the action to a court of competent jurisdiction located in the City and State of
New York or, if the court where the action is initially brought will not or
cannot transfer the action, then NYMEX shall consent to dismiss such action
without prejudice and may thereafter reinstitute the action in a court of
competent jurisdiction in New York City.
ss.9.16 Investigations; Cooperation.
(a) NYMEX shall cooperate fully and faithfully with any investigation,
audit or inquiry conducted by any Governmental Authority that is empowered
directly or by designation
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to compel the attendance of witnesses and to examine witnesses under oath, or
conducted by the inspector general of a Governmental Authority that is a party
in interest to this Agreement or the transaction to which it relates, when it is
subject of the investigation, audit or inquiry. In addition, NYMEX shall
promptly report in writing to the Commissioner of Investigation any solicitation
of money, goods, requests for future employment or other benefits or thing of
value, by or on behalf of any employee of the City or other person, firm,
corporation or entity for any purpose relating to the procurement or obtaining
of this Agreement by NYMEX or affecting the performance of this Agreement.
(b) If: (1) any person who has been advised that his or her statement, and
any information from such statement, will not be used against him or her in any
subsequent criminal proceeding refuses to testify before a grand jury or other
Governmental Authority empowered directly or by designation to compel the
attendance of witnesses and to examine witnesses under oath concerning the award
of, or performance under, any transaction, agreement, lease, permit, contract,
or license entered into with the State or any political subdivision or public
authority thereof the Port Authority of New York and New Jersey, UDC or any
other public benefit corporation organized under the laws of the State of New
York, the City, EDC, or any local development corporation (defined collectively
for purposes of this ss.9.16 as "agencies"), or
(2) any person refuses to testify for a reason other than the assertion of
his or her privilege against self-incrimination in an investigation, audit or
inquiry conducted by a Governmental Authority empowered directly or by
designation to compel the attendance of witnesses and to take testimony under
oath, or by the Inspector General of a Governmental that is a party in interest
in, and is seeking testimony concerning the award of, or
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performance under, any transaction agreement, lease, permit, contract, or
license entered into with the City, the State of New York, or any political
subdivision thereof EDC or any local development corporation, or
(3) any person with information concerning any solicitation of money,
goods, requests for future employment or other benefit or thing of value, by or
on behalf of any employee of the City or other person, firm, corporation or
entity for any purpose relating to the procurement or obtaining of this
Agreement by NYMEX or affecting the performance of this Agreement, fails to
report such information to the Commissioner of Investigation of the City, then
the commissioner or. agency head whose agency is a party in interest to the
transaction, submitted bid, submitted proposal, contract, lease, permit or
license shall convene a hearing, upon not less than five (5) days written notice
to the parties involved, to determine if any penalties should attach for the
failure of a person to testify.
(c) If NYMEX or any agent, employee or associate of NYMEX requests an
adjournment, in any proceeding investigating the events surrounding the
negotiation and consummation of this Agreement or the transaction to which it
relates, up to thirty (30) days, such adjournment shall be granted. If a further
adjournment is sought it must be done by a written request to the agency head or
commissioner who convened the hearing, at least three (3) business days prior to
the scheduled hearing date, setting forth the reasons for the request. If the
commissioner or agency head denies the request for an additional adjournment,
then NYMEX, their agent, employee or associate must appear at the scheduled
hearing or commence an action to obtain a court order, pursuant to Article 78 of
the Civil Practice Laws and Rules, substantiating a claim that the denial of the
adjournment was capricious or arbitrary. If NYMEX, their agent,
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employee or associate fails to appear at the rescheduled hearing or to
diligently pursue such judicial relief, as the case may be, then, if in the sole
judgment of the commissioner or agency head the failure to appear would have a
material adverse effect on the investigation, the commissioner or agency head
who convened the hearing may suspend this Agreement pending the final
determination pursuant to ss.9.16(e) below without the City's or agency's
incurring any penalty or damages for delay or otherwise; provided, that the
right to suspend this Agreement shall not be invoked if NYMEX shall have
discharged or disassociated itself from such agent, employee or associate and
said agent, employee or associate is not reemployed either directly or
indirectly or otherwise compensated by NYMEX.
(d) The penalties which may attach after a final determination by the
commissioner or agency head may include but shall not exceed:
(i) the disqualification for a period not to exceed five (5)
years from the date of an adverse determination for any person, or
if the person was an associated person of NYMEX or any successor or
assignee thereof, such entity, as the case may be, of which such
person was an associated person at the time the testimony was
sought, from submitting bids for, or transacting business with, or
entering into or obtaining any contract, lease, permit or license
with or from the EDC or the City or another agency; and
(ii) the cancellation or termination of any and all such
existing contracts, leases, permits or licenses made with EDC or the
City or another agency that the refusal to testify concerns and that
have not been assigned as permitted under this Agreement, nor the
proceeds of which pledged, to an inaffiliated and
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unrelated institutional lender for fair value prior to the issuance
of the notice scheduling the hearing, without EDC, the City or other
agency incurring any penalty or damages on account of such
cancellation or termination.
(e) The commissioner or agency head shall consider and address in reaching
his or her determination and in assessing an appropriate penalty the factors in
subsections (i) and (ii) below. He or she may also consider, if relevant and
appropriate, the criteria established in subsections (iii) and (iv) below in
addition to any other information which may be relevant and appropriate:
(i) The entity's good faith endeavors or lack thereof to cooperate
fully and faithfully with any governmental investigation or audit,
including but not limited to the discipline, discharge or
disassociation of any person failing to testify, the production of
accurate and complete books and records, and the forthcoming
testimony of all other associated persons, agents, assignees or
fiduciaries whose testimony is sought.
(ii) The relationship of the person who refused to testify to any
entity that is a party to the hearing, including, but not limited
to, whether the person whose testimony is sought has an ownership
interest in the entity and/or the degree of authority and
responsibility the person has within the entity.
(iii) The nexus of the testimony sought to the subject entity and
its contracts, leases, permit or licenses with the agency.
(iv) the effect a penalty may have on an unaffiliated and unrelated
party or entity that has a significant interest in an entity subject
to penalties under ss.9.16(d)
-108-
<PAGE> 114
above, provided that the party or entity has given actual notice to
the commissioner or agency head upon the acquisition of the
interest, or at the hearing called for in ss.9.16(b) and ss.9.16(c)
above gives notice and proves that such interest was previously
acquired. Under either circumstance the party or entity must present
evidence at the hearing demonstrating the potential adverse impact a
penalty will have on such person or entity.
(f) As used in this ss.9.16:
(i) The term "license" or "permit" shall mean a license, permit,
franchise or concession not granted as a matter of right
(ii) The term "entity" shall mean any firm, partnership,
corporation, association or person that receives monies, benefits,
licenses, leases or permits from or through the City or otherwise
transacts business with EDC or the City.
(iii) The term "associated person" shall mean any person associated
with another person or entity as a partner, director, officer,
principal or employee (but not any member or member firm of NYMEX).
ss.9.17 Assignment by EDC. EDC shall have the right to assign this
Agreement or EDC's rights under this Agreement to the City, provided that the
City shall assume in writing the obligations of EDC hereunder and EDC or the
City shall have provided NYMEX with a copy of such assignment and assumption
agreement.
-109-
<PAGE> 115
ss.9.18 Registration of Agreement. EDC shall promptly deliver this
Agreement to the Comptroller of the City (the "City Comptroller") and request
that the City Comptroller file and register this Agreement promptly. EDC agrees
to take such other steps as are ordinarily and reasonably necessary to have an
agreement such as this Agreement filed with and registered by the City
Comptroller. EDC shall promptly notify NYMEX as to the filing and registration
of this Agreement upon the occurrence thereof or the City Comptroller's
notification to EDC as to the nonfiling or nonregistration thereof.
ss.9.19 Counterparts. This Agreement may be executed in one or more
counterparts that, when taken together, shall constitute one and the same
document.
-110-
<PAGE> 116
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
NEW YORK STATE URBAN
DEVELOPMENT CORPORATION
By: /s/ Charles A. Gargano
-----------------------------------
Title: Chairman
--------------------------------
NEW YORK CITY ECONOMIC
DEVELOPMENT CORPORATION
By: /s/ Clay B. Lifflander
-----------------------------------
Title: President
--------------------------------
BATTERY PARK CITY AUTHORITY
By: /s/ Phillip Pitruzzello
-----------------------------------
Title: President
--------------------------------
APPROVE AS TO FORM: NEW YORK MERCANTILE EXCHANGE
By: /s/ [ILLEGIBLE] By: /s/ Daniel Rappaport
---------------------------- -----------------------------------
Acting Corporation Counsel Title: Chairman
--------------------------------
THE CITY, BY SIGNING IN
THE SPACE DESIGNATED BELOW,
AGREES TO THE PROVISIONS OF
ss.2.1(b) and ss.5A.5 HEREOF:
THE CITY OF NEW YORK
BY: /s/ John S. Dyson
----------------------------
Title: Deputy Mayor
-------------------------
-111-
<PAGE> 117
STATE OF NEW YORK )
:
COUNTY OF NEW YORK )
On this 12 day of April, 1995, before me personally came Charles A. Gargano, to
me know, who being by me duly sworn, did depose and say that he has an address
at 1515 Broadway, New York, New York 10036; that he is the Chairman of NEW YORK
STATE URBAN DEVELOPMENT CORPORATION, the corporation described in and which
executed the foregoing instrument; and that he signed his name thereon by
authority of the board of directors of such corporation.
/s/ Eileen M. Mildenberger
--------------------------------
Notary Public
EILEEN M. MILDENBERGER
Notary Public, State of New York
No. 02M15021835
Qualified in Suffolk County
Commission Expires December 27, 1995
STATE OF NEW YORK )
:
COUNTY OF NEW YORK )
On this 12 day of April, 1995, before me personally came Clay B.
Lifflander, to me know, who being by me duly sworn, did depose and say that he
has an address at 110 William Street, New York, New York 10038; that he is the
President of NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION, the corporation
described in and which executed the foregoing instrument; and that be signed his
name thereon by authority of the board of directors of such corporation.
/s/ Concetta Miele
--------------------------------
Notary Public
CONCETTA MIELE
Commisioner of Deeds
City of New York - 2-7034
Certificate Filed in Kings County
Commission Expires April 1, 1997
STATE OF NEW YORK )
:
COUNTY OF NEW YORK )
On this 12th day of April, 1995, before me personally came Phillip
Pitruzzello, to me know, who being by me duly sworn, did depose and say that he
has an address at One World Financial Center, New York New York; that he is the
President of the BATTERY PARK CITY AUTHORITY, the corporation described in and
which executed the foregoing instrument; and that he signed his name thereon by
authority of the board of directors of such corporation.
/s/ Frieda L. Dweck
--------------------------------
Notary Public
FRIEDA L. DWECK
Notary Public, State of New York
No. 24-4904179
Qualified in Kings County
Commission Expires August 10, 1995
-112-
<PAGE> 118
STATE OF NEW YORK )
:
COUNTY OF NEW YORK )
On this 11th day of April, 1995, before me personally came Daniel P.
Rappaport, to me know, who being by me duly sworn, did depose and say that he
has an address at 6 Tall Trees Drive Westport, CT 06330; that he is the Chairman
of the NEW YORK MERCANTILE EXCHANGE, the corporation described in and which
executed the foregoing instrument; and that he signed his name thereon by
authority of the board of directors of such corporation.
/s/ [ILLEGIBLE]
--------------------------------
Notary Public
[ILLEGIBLE]
Notary Public, State of New York
[ILLEGIBLE]
Qualified in [ILLEGIBLE] County
Commission Expires Aug. 2, 1998
STATE OF NEW YORK )
:
COUNTY OF NEW YORK )
On the 12th day of April, 1995, before me personally came John S. Dyson,
to me known, who, being by me duly sworn, did depose and say that he has an
address at City Hall, New York, New York; that he is the Deputy Mayor of The
City of New York and the same person who executed the foregoing instrument; and
that he acknowledged that he signed his name thereto on behalf of The City of
New York and pursuant to the authority vested in him.
/s/ Frieda L. Dweck
--------------------------------
Notary Public
FRIEDA L. DWECK
Notary Public, State of New York
No. 24-4904179
Qualified in Kings County
Commission Expires August 10, 1995
-113-
<PAGE> 1
Exhibit 10.5
================================================================================
NEW YORK MERCANTILE EXCHANGE
7.48% Senior Notes, Series A, due 2011
7.75% Senior Notes, Series B, due 2021
7.84% Senior Notes, Series C, due 2026
NOTE PURCHASE AGREEMENT
Dated as of October 15, 1996
================================================================================
<PAGE> 2
Table of Contents
Page
----
1. AUTHORIZATION OF NOTES .............................................. 1
2. SALE AND PURCHASE OF NOTES .......................................... 1
3. CLOSINGS ............................................................ 2
4. CONDITIONS TO CLOSING ............................................... 3
4.1. First Closing ............................................ 3
4.2. Conditions to Each Closing ............................... 4
4.3. Additional Condition to Second and Third Closing ......... 5
5. REPRESENTATIONS AND WARRANTIES OF THE EXCHANGE ...................... 5
5.1. Organization; Power and Authority ........................ 5
5.2. Authorization, etc ....................................... 6
5.3. Disclosure ............................................... 6
5.4. Organization and Ownership of Shares of
Subsidiaries .......................................... 6
5.5. Financial Statements ..................................... 7
5.6. Compliance with Laws, Other Instruments, etc ............. 7
5.7. Governmental Authorizations, etc ......................... 8
5.8. Litigation; Observance, Statutes and Orders .............. 8
5.9. Taxes .................................................... 8
5.10. Title to Property; Leases ................................ 9
5.11. Licenses, Permits, etc ................................... 9
5.12. Compliance with ERISA .................................... 9
5.13. Private Offering by the Exchange ......................... 10
5.14. Use of Proceeds; Margin Regulations ...................... 10
5.15. Existing Debt ............................................ 11
5.16. Foreign Assets Control Regulations, etc .................. 11
5.17. Status under Certain Statutes ............................ 11
5.18. Environmental Matters .................................... 12
6. REPRESENTATIONS OF THE PURCHASER .................................... 12
6.1. Purchase of Notes ........................................ 12
6.2. Source of Funds .......................................... 12
6.3. Not an Exchange Member ................................... 13
7. INFORMATION AS TO EXCHANGE .......................................... 14
7.1. Financial and Business Information ....................... 14
7.2. Officer's Certificate .................................... 16
7.3. Inspection ............................................... 17
8. PREPAYMENT OF THE NOTES ............................................. 18
8.1. Required Prepayments ..................................... 18
8.2. Optional Prepayments ..................................... 19
8.3. Allocation of Partial Prepayments ........................ 20
8.4. Maturity; Surrender; etc ................................. 20
8.5. Purchase of Notes ........................................ 21
8.6. Make-Whole Amount ........................................ 21
9. AFFIRMATIVE COVENANTS ............................................... 23
9.1. Compliance with Law ...................................... 23
9.2. Insurance ................................................ 23
<PAGE> 3
9.3. Maintenance of Properties ................................. 23
9.4. Payment of Taxes .......................................... 24
9.5. Corporate Existence, etc .................................. 24
9.6. Nature of Business ........................................ 24
10. NEGATIVE COVENANTS ................................................. 24
10.1. Subsidiary Debt .......................................... 25
10.2. Liens .................................................... 25
10.3. Sale and Leaseback Transactions .......................... 27
10.4. Merger, Consolidation, etc ............................... 28
10.5. Transactions with Affiliates ............................. 28
11. EVENTS OF DEFAULT .................................................. 29
12. REMEDIES ON DEFAULT, ETC ........................................... 32
12.1. Acceleration ............................................. 32
12.2. Other Remedies ........................................... 33
12.3. Rescission ............................................... 33
12.4. No Waivers or Election of Remedies, Expenses, etc ........ 33
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ...................... 34
13.1. Registration of Notes .................................... 34
13.2. Transfer and Exchange of Notes ........................... 34
13.3. Replacement of Notes ..................................... 34
14. PAYMENTS ON NOTES .................................................. 35
14.1. Place of Payment ......................................... 35
14.2. Home Office Payment ...................................... 35
15. EXPENSES, ETC ...................................................... 36
15.1. Transaction Expenses .................................... 36
15.2. Survival ................................................ 37
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT ..................................................... 37
17. AMENDMENT AND WAIVER ............................................... 37
17.1. Requirements ............................................ 37
17.2. Solicitation of Holders of Notes ........................ 37
17.3. Binding Effect, etc ..................................... 38
17.4. Notes held by Exchange, etc ............................. 38
18. NOTICES ............................................................ 39
19. REPRODUCTION OF DOCUMENTS .......................................... 39
20. CONFIDENTIAL INFORMATION ........................................... 40
21. SUBSTITUTION OF PURCHASER .......................................... 41
22. MISCELLANEOUS ...................................................... 41
22.1. Successors and Assigns ................................... 41
22.2. Construction ............................................. 41
22.3. Payments Due on Non-Business Days ........................ 42
22.4. Severability ............................................. 42
22.5. Accounting Terms ......................................... 42
22.6. Counterparts ............................................. 42
22.7. Governing Law ............................................ 42
23. DEFEASANCE ..................................................... 43
23.1. Exchange's Option to Effect Covenant Defeasance .......... 43
<PAGE> 4
23.2. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions ......... 45
23.3. Reinstatement ............................................ 46
Exhibit 1(a) -- Form of 7.48% Senior Note, Series A, due 2011
Exhibit 1(b) -- Form of 7.75% Senior Note, Series B, due 2021
Exhibit 1(c) -- Form of 7.84% Senior Note, Series C, due 2026
Exhibit 4.1(c)(1) -- Form of First Closing Opinion of Special Counsel for the
Exchange
Exhibit 4.1(c)(2) -- Form of First Closing Opinion of Counsel for the Exchange
Exhibit 4.1(c)(3) -- Form of First Closing Opinion of Special Counsel for the
Purchasers
Exhibit 4.3(a) -- Form of Second and Third Closing Opinion of Special
Counsel for the Exchange
Exhibit 4.3(b) -- Form of Second and Third Closing Opinion of Special
Counsel for the Purchasers
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.3 -- Disclosure Information
Schedule 5.4 -- Subsidiaries
Schedule 5.5 -- Financial Statements
Schedule 5.8 -- Litigation
Schedule 5.11 -- Licenses, etc.
Schedule 5.15 -- Existing Debt and Liens
Schedule 6.2 -- Certain Plans Maintained by the Exchange
<PAGE> 5
NEW YORK MERCANTILE EXCHANGE
Four World Trade Center
New York, NY 10048
7.48% Senior Notes, Series A, due 2011
7.75% Senior Notes, Series B, due 2021
7.84% Senior Notes, Series C, due 2026
As of October 15, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
NEW YORK MERCANTILE EXCHANGE, a New York corporation formed under
the NPCL (the "Exchange"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Exchange has duly authorized the issue and sale of $31,000,000
aggregate principal amount of its 7.48% Senior Notes, Series A, due 2011 (the
"Series A Notes"), $54,000,000 aggregate principal amount of its 7.75% Senior
Notes, Series B, due 2021 (the "Series B Notes") and $15,000,000 aggregate
principal amount of its 7.84% Senior Notes, Series C, due 2026 (the "Series C
Notes" and, together with the Series A Notes and the Series B Notes, the
"Notes"), such notes to be substantially in the respective forms set out in
Exhibits 1(a), 1(b) and 1(c). As used herein, the term "Notes" shall mean all
notes (irrespective of series unless otherwise specified) originally delivered
pursuant to this Agreement and the Other Agreements referred to below and all
notes delivered in substitution or exchange for any such note and, where
applicable, shall include the singular number as well as the plural. The terms
"Note", "Series A Note", "Series B Note" and "Series C Note" mean one of the
Notes, Series A Notes, Series B Notes and Series C Notes, respectively. Certain
capitalized and other terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Exchange
will issue and sell to you and you will purchase from the Exchange, at one or
more of the Closings provided for in Section 3, Notes of the series and in the
principal amount or amounts specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof.
<PAGE> 6
2
Contemporaneously with entering into this Agreement, the Exchange is entering
into separate Note Purchase Agreements (the "Other Agreements") identical with
this Agreement with the other purchasers named in Schedule A (the "Other
Purchasers"), providing for the sale at one or more of such Closings to each of
the Other Purchasers of Notes of the series and in the principal amount or
amounts specified opposite its name in Schedule A. Your obligation hereunder and
the obligations of the Other Purchasers under the Other Agreements are several
and not joint obligations and you shall have no obligation under any Other
Agreement and no liability to any Person for the performance or non-performance
by any Other Purchaser thereunder.
3. CLOSINGS.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Willkie Farr & Gallagher, One
Citicorp Center, 153 East 53rd Street, New York, NY 10022 at 10:00 a.m., New
York time, at three closings (individually a "Closing" and respectively the
"First Closing", the "Second Closing" and the "Third Closing"). The First
Closing shall be on October 18, 1996, or such other Business Day thereafter on
or prior to October 31, 1996 as may be agreed to by the Exchange and you (if you
are purchasing Notes at such Closing) and the Other Purchasers then purchasing
Notes. The Second Closing shall be on December 27, 1996, or such other Business
Day on or prior to December 31, 1996 as may be agreed to by the Exchange and you
(if you are purchasing Notes at such Closing) and the Other Purchasers then
purchasing Notes. The Third Closing shall be on January 27, 1997, or such other
Business Day on or prior to January 31, 1997 as may be agreed to by the Exchange
and you (if you are purchasing Notes at such Closing). At each Closing for your
purchase of Notes the Exchange will deliver to you the Notes to be purchased by
you in the form of a single Note of each series (or such greater number of Notes
of each series in denominations of at least $500,000 as you may request), dated
the date of such Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Exchange or its order of the purchase
price therefor by wire transfer of immediately available funds to account number
09250276 of Brown Brothers Harriman & Co., at Citibank, N.A., ABA number
021000089 for the Exchange's account number 8442519 at Brown Brothers Harriman &
Co. (NYMEX Construction Asset Portfolio; contact: Robert Push).
If the Exchange shall fail to tender the Notes to be purchased by
you at any Closing on or before the last date specified above in this Section 3
for such Closing, or if any of the conditions specified in Section 4 with
respect to such Closing shall not have been fulfilled to your satisfaction on or
before the last date specified above for such Closing, you shall be relieved of
all further obligations to purchase Notes under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such nonfulfillment
(including without limitation pursuant to Section 11(j)).
<PAGE> 7
3
4. CONDITIONS TO CLOSING.
4.1. First Closing.
Your obligation to purchase and pay for the Notes to be sold to you
at the First Closing is subject to the fulfillment to your satisfaction, prior
to or at the First Closing, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Exchange in this Agreement shall be correct when made
and correct in all material respects at the time of such Closing.
(b) Officer's Certificates. The Exchange shall have delivered to you
an Officer's Certificate, dated the date of the First Closing, certifying
that the conditions specified in paragraphs (a), (e) and (f) of this
Section 4.1 and paragraphs (a) and (b) of Section 4.2 have been fulfilled.
The Exchange shall have also delivered to you a certificate of the
Secretary or an Assistant Secretary of the Exchange certifying as to the
resolutions attached thereto and other corporate proceedings relating to
the authorization, execution and delivery of the Notes and this Agreement
and the Other Agreements.
(c) Opinions of Counsel. You shall have received opinions in form
and substance satisfactory to you, dated the date of the First Closing,
(i) from Winthrop, Stimson, Putnam & Roberts, special counsel for the
Exchange, substantially in the form set forth in Exhibit 4.1(c)(1) and
covering such other matters incident to the transactions contemplated
hereby as you or your counsel may reasonably request (and the Exchange
hereby instructs its counsel to deliver such opinion to you), (ii) from
Ronald S. Oppenheimer, Esq., Executive Vice President and General Counsel
of the Exchange, substantially in the form set forth in Exhibit 4.1(c)(2)
and covering such other matters incident to the transactions contemplated
hereby as you or your counsel may reasonably request (and the Exchange
hereby instructs its counsel to deliver such opinion to you) and (iii)
from Willkie Farr & Gallagher, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit 4.1(c)
(3) and covering such other matters incident to such transactions as you
may reasonably request.
(d) Private Placement Numbers. A Private Placement Number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners)
shall have been obtained for the Notes of each series.
<PAGE> 8
4
(e) Changes in Corporate Structure. The Exchange shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part
of the liabilities of any other entity (whether or not the transaction
would be permitted by Section 10.4) at any time following the date of the
most recent financial statements referred to in Schedule 5.5.
(f) Rating. The Notes shall have been rated "AA" or better by
Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.
4.2. Conditions to Each Closing.
Your obligation to purchase and pay for the Notes to be purchased by
you hereunder at any Closing is subject to the fulfillment to your satisfaction,
prior to or at such Closing, of the following additional conditions:
(a) Performance. The Exchange shall have performed all agreements
required on its part to be performed under this Agreement on or prior to
the date of such Closing.
(b) No Default. No Default or Event of Default shall have occurred
and been continuing.
(c) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably request.
(d) Purchase Permitted By Applicable Law, etc. On the date of such
Closing your purchase of Notes shall (i) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405 (a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii)
not violate any applicable law or regulation (including without limitation
Regulation G, T or X of the Board of Governors of the Federal Reserve
System) and (iii) not subject you to any tax (other than income or
franchise taxes), penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date
hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably
specify to enable you to determine whether such purchase is so permitted.
<PAGE> 9
5
(e) Sale of Notes to Other Purchasers. The Exchange shall sell to
the Other Purchasers and the Other Purchasers shall purchase the Notes to
be purchased by them at or before such Closing as specified in Schedule A.
(f) Payment of Special Counsel Fees. Without limiting the provisions
of Section 15.1, the Exchange shall have paid on or before the date of
such Closing the fees, charges and disbursements of your special counsel
referred to in Section 4.1(c) to the extent reflected in a statement of
such counsel rendered to the Exchange at least one Business Day prior to
such Closing.
4.3. Additional Condition to Second and Third Closing.
Your obligation to purchase and pay for the Notes to be purchased by
you hereunder at the Second or Third Closing is subject to the fulfillment to
your satisfaction, prior to or at such Closing, of the following additional
conditions:
(a) Representations and Warranties. The representations and
warranties of the Exchange in Sections 5.1, 5.2, 5.6 and 5.13 shall be
correct in all material respects at the time of such Closing.
(b) Opinions of Counsel. You shall have received opinions in form
and substance satisfactory to you, dated the date of such Closing, (i)
from Winthrop, Stimson, Putnam & Roberts, special counsel for the
Exchange, substantially in the form set forth in Exhibit 4.3(a)(1) and
covering such other matters incident to the transactions contemplated
hereby as you or your counsel may reasonably request (and the Exchange
hereby instructs its counsel to deliver such opinion to you), and (ii)
from Willkie Farr & Gallagher, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit
4.3(a)(2) and covering such other matters incident to such transactions as
you may reasonably request.
(c) Officer's Certificate. The Exchange shall have delivered to you
an Officer's Certificate, dated the date of such Closing, certifying that
the conditions specified in paragraph (a) of this Section 4.3 and
paragraphs (a) and (b) of Section 4.2 have been fulfilled.
5. REPRESENTATIONS AND WARRANTIES OF THE EXCHANGE.
The Exchange represents and warrants to you that:
5.1. Organization; Power and Authority.
The Exchange is a corporation duly organized under the NPCL, validly
existing and in good standing under the laws of the State of New York, and is
duly qualified as a foreign corporation
<PAGE> 10
6
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Exchange has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement and the Other
Agreements and the Notes and to perform the provisions hereof and thereof.
5.2. Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the Exchange, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Exchange
enforceable against the Exchange in accordance with its terms, except as may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3. Disclosure.
The Exchange, through its agent, Morgan Stanley & Co. Incorporated,
has delivered to you a copy of a Private Placement Memorandum dated August 19,
1996 (the "Memorandum"), relating to the transactions contemplated hereby. This
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Exchange in connection with the
transactions contemplated hereby and described in Schedule 5.3, and the
financial statements listed in Schedule 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since December 31, 1995, there has been no
change in the financial condition, operations, business or properties of the
Exchange or any Subsidiary except changes that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.
5.4. Organization and Ownership of Shares of Subsidiaries.
(a) Schedule 5.4 is (except as noted therein) a complete and correct
list of the Exchange's Subsidiaries, showing, as to each Subsidiary, the correct
name thereof, the jurisdiction of its organization, and the percentage of shares
of
<PAGE> 11
7
each class of its capital stock or similar equity interests outstanding owned by
the Exchange and each other Subsidiary.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Exchange and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Exchange or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
5.5. Financial Statements.
The Exchange has delivered to you copies of the consolidated
financial statements of the Exchange and its consolidated Subsidiaries listed in
Schedule 5.5. All of said financial statements (including in each case the
related schedules and notes) fairly present in all material respects the
consolidated financial position of the Exchange and its consolidated
Subsidiaries as of the respective dates specified in such Schedule and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).
5.6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Exchange of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Exchange or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-law or any other Material agreement or instrument to which the Exchange or
any Subsidiary is bound or by which the Exchange or any Subsidiary or any of
their respective properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
<PAGE> 12
8
Authority applicable to the Exchange or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Exchange or any Subsidiary.
5.7. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Exchange of this Agreement or the
Notes.
5.8. Litigation; Observance, Statutes and Orders.
(a) Except as described in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Exchange, threatened against
or affecting the Exchange or any Subsidiary or any property of the Exchange or
any Subsidiary in any court or before any arbitrator of any kind or before or by
any Governmental Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(b) Except as described in Schedule 5.8, neither the Exchange nor
any Subsidiary is in default under any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including without limitation Environmental
Laws) of any Governmental Authority, which default or violation, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
5.9. Taxes.
The Exchange and its Subsidiaries have filed all income tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (a) the amount of which is not individually or in the
aggregate Material or (b) the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Exchange or a Subsidiary, as the case may be, has
established adequate reserves to the extent required by GAAP. The Federal income
tax liabilities of the Exchange and its Subsidiaries (other than COMEX) have
been determined by the Internal Revenue Service and paid for all fiscal years up
to and including the fiscal year ended December 31, 1992 and the Federal income
tax liabilities of COMEX have been determined by the Internal Revenue Service
and paid for all fiscal years up to and including the fiscal year ended November
30, 1992.
<PAGE> 13
9
5.10. Title to Property; Leases.
The Exchange and its Subsidiaries have good and sufficient title to
their respective Material properties, including all such properties reflected in
the most recent audited balance sheet listed in Schedule 5.5 or purported to
have been acquired by the Exchange or a Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens, except for Liens that are permitted to exist under
Section 10.2 without equally and ratably securing the Notes. All Material leases
are valid and subsisting and are in full force and effect in all material
respects.
5.11. Licenses, Permits, etc.
Except as disclosed in Schedule 5.11, the Exchange and its
Subsidiaries own or possess all licenses, permits, franchises, authorizations,
patents, copyrights, proprietary software, service marks, trademarks and trade
names, or rights thereto, that are Material, without known conflict with the
rights of others, except for those conflicts that, individually or in the
aggregate, would not have a Material Adverse Effect.
5.12. Compliance with ERISA.
(a) The Exchange and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and would not reasonably be
expected to result in a Material Adverse Effect. Neither the Exchange nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that would reasonably be expected to result in the
incurrence of any such liability by the Exchange or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Exchange or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) As of December 31, 1995, the projected benefit obligation for
each Plan that is a pension plan within the meaning of Section 3(2) of ERISA did
not exceed the fair market value of the Plan's assets. For this purpose,
"projected benefit obligation" shall have the meaning specified in paragraph 18
of Statement of Financial Accounting Standards No. 87.
(c) The Exchange and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of
<PAGE> 14
10
ERISA in respect of Multiemployer Plans that individually or in the aggregate
are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Exchange's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Exchange and its Subsidiaries is not Material.
(e) With respect to each employee benefit plan, if any, disclosed by
you in writing to the Exchange in accordance with Section 6.2(c), neither the
Exchange nor any "affiliate" of the Exchange (as defined in Section V(c) of the
QPAM Exemption) has at this time, nor has exercised at any time during the
immediately preceding year, the authority to appoint or terminate the "QPAM" (as
defined in Part V of the QPAM Exemption) disclosed by you to the Exchange
pursuant to Section 6.2(c) as manager of any of the assets of any such plan or
to negotiate the terms of any management agreement with such QPAM on behalf of
any such plan, and the Exchange is not an "affiliate" (as so defined) of such
QPAM. The Exchange is not a party in interest with respect to any employee
benefit plan disclosed by you in accordance with Section 6.2(b) or 6.2(e). The
execution and delivery of this Agreement and the issuance and sale of the Notes
at any Closing hereunder will not involve any prohibited transaction (as such
term is defined in section 406(a) of ERISA and section 4975(c)(1)(A)-(D) of
the Code) that could subject the Exchange or any holder of a Note to any tax or
penalty on prohibited transactions imposed under said section 4975 of the Code
or by section 502(i) of ERISA. The representation by the Exchange in the
preceding sentence of this Section 5.12(e) is made in reliance upon and subject
to the accuracy of your representation in Section 6.2 as to the source of the
funds used to pay the purchase price of the Notes to be purchased by you.
5.13. Private Offering by the Exchange.
Neither the Exchange nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you, the Other Purchasers and not more than 65 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Exchange nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
5.14. Use of Proceeds; Margin Regulations.
The Exchange will apply the net proceeds of the sale of the Notes to
complete construction of, and relocate to, its new
<PAGE> 15
11
headquarters facility in New York City (as described in the Memorandum) and any
balance will be applied for general corporate purposes. No part of the proceeds
from the sale of the Notes hereunder will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12 CFR
207), or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Exchange in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not constitute
more than 1% of the value of the consolidated assets of the Exchange and its
Subsidiaries and the Exchange does not have any present intention that margin
stock will constitute more than 5% of the value of such assets. As used in this
Section, the terms "margin stock" and "purpose of buying or carrying" shall have
the meanings assigned to them in said Regulation G.
5.15. Existing Debt.
Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Exchange and its Subsidiaries as of September 30, 1996,
since which date there has been no Material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the Debt of the
Exchange or any Subsidiary. Neither the Exchange nor any Subsidiary is in
default, and no waiver of default is currently in effect, in the payment of any
principal of or interest on any Debt, and no event or condition exists with
respect to any such Debt the outstanding principal amount of which exceeds
$500,000 that would permit (or that with the giving of notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Exchange hereunder nor its use
of the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. Status under Certain Statutes.
Neither the Exchange nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
<PAGE> 16
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5.18. Environmental Matters.
Neither the Exchange nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Exchange or its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as would not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase of Notes.
You represent that you are purchasing the Notes to be purchased by
you at each Closing for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Exchange is not required to register the Notes.
6.2. Source of Funds.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account", as such
term is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued
July 12, 1995), and either (i) there is no "plan" with respect to which
the aggregate amount of such general account's reserves and liabilities
for the contracts held by or on behalf of such "plan" and all other
"plans" maintained by the same employer (and affiliates thereof as defined
in Section V(a)(1) of PTE 95-60) or by the same employee organization (in
each case determined in accordance with PTE 95-60) exceeds or will exceed
10% of the total of all reserves and liabilities of such general account
(determined in accordance with PTE 95-60, exclusive of separate account
liabilities, plus any applicable surplus) as of the date of the Closing
for such purchase, or (ii) if any "plan" described in the preceding clause
(i) exists, such "plan" is not a "plan" maintained by
<PAGE> 17
13
the Exchange or by any such affiliate or employee organization identified
in Schedule 6.2; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Exchange
in writing pursuant to this paragraph (b), no employee benefit plan or
group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption)
of such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Exchange and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Exchange
in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been disclosed to the Exchange in writing pursuant to
this paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan" and "separate account" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
6.3. Not an Exchange Member.
You represent that you are not an Exchange Member.
<PAGE> 18
14
7. INFORMATION AS TO EXCHANGE.
7.1. Financial and Business Information.
The Exchange shall deliver to you (so long as you are obligated to
purchase Notes hereunder and thereafter so long as you shall hold any of the
Notes) and to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements - - promptly upon their becoming available
and in any event within 60 days after the end of each quarterly fiscal
period in each fiscal year of the Exchange (other than the last quarterly
fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Exchange and its
consolidated Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income and members' equity and
cash flows of the Exchange and its consolidated Subsidiaries for
such quarter and (in the case of the second and third quarters) for
the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as
fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash
flows, subject to changes resulting from year-end adjustments;
(b) Annual Statements -- promptly upon their becoming available and
in any event within 105 days after the end of each fiscal year of the
Exchange, duplicate copies of,
(i) a consolidated balance sheet of the Exchange and its
consolidated Subsidiaries as at the end of such year, and
(ii) consolidated statements of income and members' equity and
cash flows of the Exchange and its consolidated Subsidiaries for
such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent public accountants of
recognized national standing, which opinion shall state that such
financial statements
<PAGE> 19
15
present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and
that the examination of such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a
reasonable basis for such opinion in the circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature
and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default
unless such accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing
standards or did not make such an audit);
(c) CFTC and Other Reports - - promptly upon their becoming
available, one copy of (i) each financial statement or Material report
sent by the Exchange or any Subsidiary to public securities holders
generally, (ii) each regular or periodic report, if any, filed by the
Exchange or any Subsidiary with the Securities and Exchange Commission,
and (iii) each Material report relating to the financial condition of the
Exchange filed by the Exchange or any Subsidiary with the Commodity
Futures Trading Commission (excluding reports or other information filed
with said Commission in connection with rule changes or amendments and
applications for designation as a "contract market" with respect to
futures contracts);
(d) Notice of Default or Event of Default - - promptly, and in any
event within five Business Days after a Responsible Officer becomes aware
of the existence of any Default or Event of Default (including without
limitation the acceleration of any Debt referred to in clause (ii) of
Section 11(e) irrespective of whether any rescission or annulment thereof
is at the time being sought), a written notice specifying the nature and
period of existence thereof and what action the Exchange is taking or
proposes to take with respect thereto and the Exchange's estimate of the
period of time that will be required to cure such Default or Event of
Default;
(e) ERISA Matters -- promptly, and in any event within five Business
Days after a Responsible Officer becomes aware
<PAGE> 20
16
of any of the following, a written notice setting forth the nature thereof
and the action, if any, that the Exchange or an ERISA Affiliate proposes
to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for
which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Exchange or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Exchange or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Exchange or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, would reasonably be expected to
have a Material Adverse Effect; and
(f) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Exchange or any of its
Subsidiaries or the ability of the Exchange to perform its obligations
hereunder and under the Notes as from time to time may be reasonably
requested by you or any such holder (subject to the limitations of the
final paragraph of Section 7.3)
The Exchange shall deliver, with reasonable promptness after a
written request thereof or by any holder of a Note or a prospective transferee
of a Note, information satisfying the requirements of subsection (d)(4)(i) of
Rule 144A of the Securities and Exchange Commission under the Securities Act or
any similar rule then in effect.
7.2. Officer's Certificate.
Each set of financial statements delivered to you (so long as you
are obligated to purchase Notes hereunder) or any holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b)
<PAGE> 21
17
shall be accompanied by a certificate of a Senior Financial Officer setting
forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Exchange was in
compliance with the requirements of Sections 10.1 through 10.3, inclusive,
during the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where applicable,
the calculations of the maximum amount permissible under the terms of such
Section, and the calculation of the amount then in existence) ; and
(b) No Default -- a statement that such Senior Financial Officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions
of the Exchange and its Subsidiaries from the beginning of the quarterly
or annual period covered by the statements then being furnished to the
date of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists (including without limitation any such event or condition
resulting from the failure of the Exchange or any Subsidiary to comply
with any Environmental Law or the rules and regulations of the Commodities
Futures Trading Commission), specifying the nature and period of existence
thereof and what action the Exchange shall have taken or proposes to take
with respect thereto and the Exchange's estimate of the period of time
that will be required to cure such Default or Event of Default.
7.3. Inspection.
The Exchange shall permit your representatives (so long as you shall
be obligated to purchase Notes hereunder and thereafter so long as you shall
hold any of the Notes) and the representatives of each holder of Notes that is
an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of you or such holder and upon reasonable prior notice to the
Exchange, to visit the principal executive office of the Exchange and to
discuss the affairs, finances and accounts of the Exchange and its
Subsidiaries with the Exchange's officers, all at such reasonable times
during the Exchange's regular business hours and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Exchange and upon reasonable prior notice to the Exchange,
to visit and inspect any of
<PAGE> 22
18
the offices or properties of the Exchange or any Subsidiary, to examine
all their respective books of account, records, reports and other papers,
to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Exchange
authorizes said accountants to discuss the affairs, finances and accounts
of the Exchange and its Subsidiaries), all at such reasonable times and as
often as may be requested.
Neither the Exchange nor any of its Subsidiaries shall be required
to provide materials or information pursuant to Section 7.1(f) or this Section
7.3 if the disclosure of such materials or information, based upon written
advice of counsel to the Exchange (furnished for information purposes only to
you or any holder of Notes requesting such materials or information at the
Exchange's expense), would be prohibited under applicable law or regulation or
decree of any Governmental Authority or by the terms of any confidentiality
agreement binding on the Exchange or such Subsidiary which is generally
applicable to all holders of securities issued by the Exchange and was not
entered into in contemplation of this Agreement. You agree, and each holder of
a Note by acceptance of such Note agrees, that any materials or information
identified by the Exchange or any Subsidiary as Confidential Information in
connection with your exercise of rights pursuant to Section 7.1(f) or this
Section 7.3 shall be treated in a confidential manner in accordance with the
requirements of Section 20.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal amount of
the Notes of each series at the final maturity thereof, the Exchange will make
required prepayments and may make optional prepayments in respect of the Notes
as hereinafter provided.
8.1. Required Prepayments.
(a) Series A Notes. On October 1, 2001 and on each October 1
thereafter to and including October 1, 2010, the Exchange will prepay in
accordance with Section 14 an aggregate principal amount of the Series A Notes
equal to 9.08064% of the aggregate principal amount (rounded to the nearest
$1,000) of Series A Notes originally issued under this Agreement and the Other
Agreements (or such lesser principal amount as shall then be outstanding), such
prepayment to be made at the principal amount to be prepaid, together with
accrued interest thereon to the date of such prepayment, without premium and
allocated as provided in Section 8.3, provided that upon any partial prepayment
of the Series A Notes pursuant to Section 8.2 or any purchase of less than all
of the Series A Notes pursuant to Section 8.5, the principal amount of each
required prepayment of the Series A Notes becoming due under this Section 8.1(a)
on and
<PAGE> 23
19
after the date of such prepayment or purchase shall be reduced in the same
proportion as the aggregate unpaid principal amount of the Series A Notes is
reduced as a result of such prepayment or purchase.
(b) Series B Notes. On October 1, 2011 and on each October 1
thereafter to and including October 1, 2020, the Exchange will prepay in
accordance with Section 14 an aggregate principal amount of the Series B Notes
equal to 9.09074% of the aggregate principal amount (rounded to the nearest
$1,000) of Series B Notes originally issued under this Agreement and the Other
Agreements (or such lesser principal amount as shall then be outstanding), such
prepayment to be made at the principal amount to be prepaid, together with
accrued interest thereon to the date of such prepayment, without premium and
allocated as provided in Section 8.3, provided that upon any partial prepayment
of the Series B Notes pursuant to Section 8.2 or any purchase of less than all
of the Series B Notes pursuant to Section 8.5, the principal amount of each
required prepayment of the Series B Notes becoming due under this Section 8.1(b)
on and after the date of such prepayment or purchase shall be reduced in the
same proportion as the aggregate unpaid principal amount of the Series B Notes
is reduced as a result of such prepayment or purchase.
(c) Series C Notes. On October 1, 2022 and on each October 1
thereafter to and including October 1, 2025, the Exchange will prepay in
accordance with Section 14 an aggregate principal amount of the Series C Notes
equal to 20% of the aggregate principal amount (rounded to the nearest $1,000)
of Series C Notes originally issued under this Agreement and the Other
Agreements (or such lesser principal amount as shall then be outstanding), such
prepayment to be made at the principal amount to be prepaid, together with
accrued interest thereon to the date of such prepayment, without premium and
allocated as provided in Section 8.3, provided that upon any partial prepayment
of the Series C Notes pursuant to Section 8.2 or any purchase of less than all
of the Series C Notes pursuant to Section 8.5, the principal amount of each
required prepayment of the Series C Notes becoming due under this Section 8.1(c)
on and after the date of such prepayment or purchase shall be reduced in the
same proportion as the aggregate unpaid principal amount of the Series C Notes
is reduced as a result of such prepayment or purchase.
8.2. Optional Prepayments.
The Exchange may, at its option and upon notice as provided below,
prepay in accordance with Section 14 on any Business Day after the Third Closing
all, or from time to time any part of, the Notes of any series (in a minimum
amount of $1,000,000 and otherwise in multiples of $100,000), at the principal
amount so prepaid, together with interest accrued thereon to the date of such
prepayment, plus the Make-Whole
<PAGE> 24
20
Amount for the Notes of such series determined for the prepayment date with
respect to such principal amount.
The Exchange will give each holder of Notes of the series to be
prepaid written notice of each optional prepayment under this Section 8.2 not
less than 30 days and not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify the date fixed for such prepayment
(which shall be a Business Day), the aggregate principal amount of the Notes of
such series to be prepaid on such date, the principal amount of Notes of such
series held by such holder to be prepaid (determined in accordance with Section
8.3), the interest to be paid on the prepayment date with respect to such
principal amount being prepaid and that such prepayment is being made pursuant
to this Section 8.2. Each such notice of prepayment pursuant to this Section 8.2
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount for the Notes of such series due in connection with
such prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment of Notes, the Exchange shall deliver to each holder of
Notes of the series to be prepaid a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount for the Notes of such
series as of the specified prepayment date. All notices and certificates
delivered under this Section 8.2 shall be sent in accordance with Section 18
(including without limitation by telecopy if a number has been provided to the
Exchange).
8.3. Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes or the Notes of
any series, the principal amount of the Notes or the Notes of such series, as
the case may be, to be prepaid shall be allocated among all the Notes, or the
Notes of such series, as the case may be, at the time outstanding in proportion,
as nearly as practicable, to the respective unpaid principal amounts thereof.
8.4. Maturity; Surrender; etc.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Exchange shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Exchange and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
<PAGE> 25
21
8.5. Purchase of Notes.
The Exchange will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except (a) upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes or (b) pursuant to an
offer to purchase made by the Exchange or an Affiliate pro rata to the holders
of all Notes at the time outstanding upon the same terms and conditions (except
for such difference in the offering price that reflects differences in interest
rates and maturities of the Notes of the respective series). Any such offer
shall provide each holder with sufficient information to enable it to make an
informed decision with respect to such offer, and shall remain open for at least
20 Business Days. If the holders of more than 25% of the principal amount of the
Notes of any series then outstanding accept such offer, the Exchange shall
promptly notify the remaining holders of all Notes of such fact and the
expiration date for the acceptance by holders of Notes of such offer shall be
extended by the number of days necessary to give each such remaining holder at
least five Business Days from its receipt of such notice to accept such offer.
The Exchange will promptly cancel all Notes acquired by it or any Affiliate
pursuant to any payment, prepayment or purchase of Notes pursuant to any
provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
8.6. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1, as
the context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
<PAGE> 26
22
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display
designated as "USD" on the Bloomberg Financial Markets Commodities News
Screen (or such other display as may replace USD on the Bloomberg
Financial Markets Commodities News Screen) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of such
time are not ascertainable, the Treasury Constant Maturity Series Yields
reported, for the latest day for which such yields have been so reported
as of the second Business Day preceding the Settlement Date with respect
to such Called Principal, in Federal Reserve Statistical Release H.15
(519)(or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with a maturity closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with a maturity closest to and less than the Remaining
Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a
date on which interest payments are due to be made under the terms of the
Notes, then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such Settlement Date
and required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
<PAGE> 27
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"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Exchange covenants that so long as you shall be obligated to
purchase Notes hereunder and thereafter so long as any of the Notes are
outstanding:
9.1. Compliance with Law.
The Exchange will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws and the rules
and regulations of the Commodity Futures Trading Commission, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
9.2. Insurance.
The Exchange will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. Maintenance of Properties.
The Exchange will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Exchange or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and, in the good faith judgment of the Exchange, such
discontinuance,
<PAGE> 28
24
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
9.4. Payment of Taxes.
The Exchange will and will cause each of its Subsidiaries to file
all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges or levies payable on them or any of
them, to the extent such taxes and assessments have become due and payable and
before they have become delinquent, provided that neither the Exchange nor any
Subsidiary need pay any such tax, assessment, charge or levy if (a) the same can
be paid without any penalty or (b) the amount, applicability or validity thereof
is contested by the Exchange or such Subsidiary on a timely basis in good faith
and in appropriate proceedings, and the Exchange or a Subsidiary has established
adequate reserves therefor in accordance with and to the extent required by GAAP
on the books of the Exchange or such Subsidiary or (c) the nonpayment of all
such taxes, assessments, charges and levies in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
9.5. Corporate Existence, etc.
Subject to Section 10.4, the Exchange will at all times preserve and
keep in full force and effect its corporate existence. The Exchange will at all
times preserve and keep in full force and effect the corporate existence of each
of its Subsidiaries (unless merged into the Exchange or merged into or
consolidated with a Subsidiary) and the Exchange will at all times preserve and
keep in full force and effect, and will cause each Subsidiary at all times to
preserve and keep in full force and effect, all of their respective rights and
franchises unless, in the good faith judgment of the Exchange, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
9.6. Nature of Business.
The Exchange will continue to be primarily engaged in providing or
operating facilities for the buying and selling of commodities for future
delivery, options or similar instruments.
10. NEGATIVE COVENANTS.
The Exchange covenants that so long as you shall be obligated to
purchase Notes hereunder and thereafter so long as any of the Notes are
outstanding:
<PAGE> 29
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10.1. Subsidiary Debt.
The Exchange will not permit any Subsidiary to create, assume,
incur, guarantee or otherwise be or become liable in respect of any Debt except
(a) Debt existing on the date of this Agreement and described in
Schedule 5.15,
(b) Debt owing by any Subsidiary to the Exchange or another
Subsidiary,
(c) in the case of any Person that after the date of this Agreement
becomes a Subsidiary or is consolidated with or merged with or into the
Exchange or a Subsidiary or sells, leases or otherwise disposes of all or
substantially all of its property or assets to the Exchange or a
Subsidiary, Debt existing at the time such Person becomes a Subsidiary or
is so consolidated or merged or effects such sale, lease or other
disposition of property or assets (which Debt is not incurred in
contemplation thereof), and any extension, renewal or refunding of any
such Debt provided in each case that the principal amount of such Debt
does not exceed the principal amount of such Debt being extended, renewed
or refunded, and
(d) other Debt, provided that after giving effect to the incurrence
of such Debt the aggregate amount of Priority Debt does not exceed 15% of
Consolidated Net Tangible Assets.
10.2. Liens.
The Exchange will not and will not permit any Subsidiary to create,
assume, incur or suffer to be created, assumed or incurred or to exist any Lien
upon or with respect to any property or assets of the Exchange or any
Subsidiary, whether now owned or hereafter acquired, without making effective
provision (pursuant to documentation in form and substance reasonably
satisfactory to the Majority Holders) whereby the Notes shall be secured by such
Lien equally and ratably with or prior to any and all Debt and other obligations
to be secured thereby (so long as any such Debt or other obligations shall be
outstanding), provided that nothing in this Section 10.2 shall prohibit:
(a) Liens in respect of property or assets of the Exchange or a
Subsidiary existing on the date of this Agreement and described in
Schedule 5.15;
(b) Liens in respect of property or assets acquired or improved
after the date of this Agreement, which Liens are created at the time of
acquisition or completion of construction of such property or assets or
within 120 days
<PAGE> 30
26
thereafter, to secure Debt assumed or incurred to finance all or any part
of the purchase price or cost of construction of such property or assets,
or in the case of any Person that after the date of this Agreement becomes
a Subsidiary or is consolidated with or merged with or into the Exchange
or a Subsidiary or sells, leases or otherwise disposes of all or
substantially all of its property or assets to the Exchange or a
Subsidiary, Liens existing at the time such Person becomes a Subsidiary or
is so consolidated or merged or effects such sale, lease or other
disposition of property or assets (and not incurred in contemplation
thereof), or in the case of any property or assets acquired by the
Exchange or any Subsidiary after the date of this Agreement, Liens
existing on such property or assets at the time of acquisition thereof
(and not incurred in contemplation thereof), whether or not the Debt
secured thereby is assumed by the exchange or a Subsidiary, provided in
any such case that
(i) no such Lien shall extend to or cover any other property
or assets of the Exchange or such Subsidiary, as the case may be,
and
(ii) the aggregate principal amount of Debt secured by all
such Liens in respect of any such property or assets shall not
exceed the lesser of the cost and the fair market value of such
property or assets at the time of such acquisition (or in the case
of Debt incurred to finance improvements the lesser of the cost and
the fair market value at the time of completion of construction) or,
in the case of a Lien in respect of property or assets existing at
the time such Person becomes a Subsidiary or is so consolidated or
merged or at the time of such sale, lease or other disposition, the
fair market value of such property or assets at such time;
(c) Liens relating to any extension, renewal or refunding of Debt
secured by any such Lien permitted by paragraph (a) or (b), provided that
the principal amount of Debt secured by any such Lien is not increased and
such Lien does not extend to or cover any other property other than the
property covered by such Lien immediately prior to such extension, renewal
or refunding;
(d) Liens on property or assets of a Subsidiary securing Debt or
other obligations owed by a Subsidiary to the Exchange or to another
Subsidiary;
(e) Liens for current taxes, assessments or other governmental
charges or levies in the ordinary course of business, either not yet due
and payable or to the extent that nonpayment thereof shall be permitted by
the proviso to Section 9.4;
<PAGE> 31
27
(f) Liens created by or resulting from any litigation or legal
proceedings that are currently being contested in good faith and by
appropriate proceedings and for which the Exchange or Subsidiary, as
applicable, has established adequate reserves on its books in accordance
with and to the extent required by GAAP;
(g) other Liens incidental to the normal conduct of the business of
the Exchange or any of its Subsidiaries, which are not incurred in
connection with the incurrence of Debt and which do not in the aggregate
materially impair the use of the affected property in the operation of the
business of the Exchange and its Subsidiaries taken as a whole or the
value of such property for the purpose of such business; and
(h) Liens which would otherwise not be permitted by the foregoing
paragraphs of this Section 10.2 without equally and ratably securing the
Notes, securing Debt of the Exchange or a Subsidiary, provided that after
giving effect to the incurrence of such Debt (or, if later, the creation,
incurrence or assumption of any such Lien) the aggregate amount of
Priority Debt does not exceed 15% of Consolidated Net Tangible Assets.
In case any property or assets shall be subject to a Lien in
violation of this Section 10.2, the obligations of the Exchange under this
Agreement and the Notes shall have the benefit, to the full extent that and with
such priority as the holders of Notes may be entitled under applicable law, of
an equitable Lien on such property or assets securing the obligations of the
Exchange under this Agreement and the Notes, provided that such violation will
constitute a Default whether or not such equitable Lien is enforceable under
applicable law.
10.3. Sale and Leaseback Transactions.
The Exchange will not and will not permit any Subsidiary to enter
into any arrangement, directly or indirectly, with any Person whereby the
Exchange or such Subsidiary shall sell, lease or transfer any asset, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee such
asset or any part thereof or any other asset that the Exchange or such
Subsidiary, as the case may be, intends to use for substantially the same
purposes as the asset being sold, leased or transferred (any such sale, lease or
transfer and rent or lease, a "Sale and Leaseback Transaction"), unless:
(a) the Exchange shall make effective provision (pursuant to
documentation in form and substance reasonably satisfactory to the
Required Holders) whereby the Notes shall be secured equally and ratably
with or prior to any other Debt secured by a Lien on the asset subject to
such Sale and Leaseback Transaction;
<PAGE> 32
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(b) such Sale and Leaseback Transaction involves an asset upon which
a Lien would at the time be permitted by Section 10.2(b) without equally
and ratably securing the Notes or such Sale and Leaseback Transaction is
between the Exchange and a Subsidiary as lessee and involves an asset
subject to a Lien permitted by Section 10.2(d);
(c) such lease is for a period not exceeding one year, at the
expiration of which it is intended that the use of such asset by the
lessee will be discontinued;
(d) such Sale and Leaseback Transaction relates to equipment,
fixtures, supplies or materials that, in the reasonable determination of
the Exchange, are outdated or obsolete; or
(e) after giving effect to such Sale and Leaseback Transaction, the
aggregate amount of Priority Debt does not exceed 15% of Consolidated Net
Tangible Assets.
10.4. Merger, Consolidation, etc.
The Exchange will not consolidate with or merge with any other
corporation or convey, transfer or lease all or substantially all of its assets
in a single transaction or series of transactions to any Person unless
(a) the continuing, surviving or acquiring corporation (the
"surviving corporation") shall be a solvent corporation organized under
the laws of the United States of America or any State thereof, and the
surviving corporation (if not the Exchange) shall have executed and
delivered to each holder of a Note its assumption of the due and punctual
performance and observance of all obligations of the Exchange under this
Agreement, the Other Agreements and the Notes,
(b) immediately after giving effect to such transaction no Default
or Event of Default shall have occurred and be continuing, and
(c) the surviving corporation shall have caused to be delivered to
each holder of a Note an opinion of counsel reasonably satisfactory to the
Majority Holders to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with their terms
and comply with the terms hereof.
10.5. Transactions with Affiliates.
The Exchange will not and will not permit any Subsidiary to enter
into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation with respect to the purchase,
lease, sale or exchange of properties of any kind or the rendering of any
<PAGE> 33
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service) with any Affiliate (other than the Exchange or a Subsidiary), except
(a) pursuant to the reasonable requirements of the Exchange's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Exchange or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate, (b) any transaction
entered into with Commodities Exchange Center, Inc. or any member thereof and
(c) any transaction to which this Agreement by its express terms is
inapplicable. For purposes of clarification, this Section 10.5 shall not apply
to any distribution of cash or property to, or the conferring of other benefits
upon, members (including former members) of the Exchange or any transaction
pursuant to which the fees of any members of the Exchange or such Subsidiary are
reduced or in connection with the financing of any membership in the Exchange.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Exchange defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Exchange defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Exchange defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a)
and (b) of this Section 11) and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Exchange receiving written notice
of such default from any holder of a Note (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (c) of Section 11); or
(d) any representation or warranty made in writing by or on behalf
of the Exchange or by any officer of the Exchange in this Agreement or in
any writing furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any material respect on
the date as of which made and, if curable, is not cured within 30 days
after the earlier of (i) a Responsible Officer obtaining actual knowledge
of such default and (ii) the Exchange receiving written notice of such
default from any holder of a Note (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 11); or
<PAGE> 34
30
(e) (i) the Exchange or any Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Debt for money borrowed
that is outstanding beyond any period of grace provided with respect
thereto, or (ii) the Exchange or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any Debt for
money borrowed or of any mortgage, indenture or other agreement relating
thereto or any other condition exists and, as a result thereof, such Debt
shall have become or be due and payable by acceleration or other action
before its stated maturity or before its regularly scheduled dates of
payment and such acceleration or other action shall not have been
rescinded or annulled, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time or
the right of the holder of Debt to convert such Debt into equity interests
or the exercise by the Exchange or any Subsidiary of any option to
purchase or repay Debt before its stated maturity or before its regularly
schedule dates of payment), the Exchange or any Subsidiary has become
obligated to purchase or repay Debt before its stated maturity or before
its regularly scheduled dates of payment, provided that the aggregate
outstanding principal amount of all such Debt (without duplication)
described in clauses (i), (ii) and (iii) above shall exceed $10,000,000;
or
(f) the Exchange or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes a general assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(g) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Exchange or any
Subsidiary, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Exchange or any Subsidiary, or any such petition shall be filed
against the Exchange or any Subsidiary and such
<PAGE> 35
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petition shall remain unstayed for a period of 60 consecutive days; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of $10,000,000 (excluding any amounts covered by
insurance in respect of which the insurer has admitted liability) are
rendered against one or more of the Exchange and its Subsidiaries which
judgments are not, within 60 days after entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(i) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Exchange or any ERISA Affiliate that a
Plan may become a subject of any such proceedings, (iii) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001 (a) (18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $10,000,000, (iv) the Exchange or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the
Exchange or any ERISA Affiliate withdraws from any Multiemployer Plan, or
(vi) the Exchange or any Subsidiary establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a
manner that would increase the liability of the Exchange or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, would reasonably be expected to have a Material Adverse Effect; or
(j) the purchases of Notes contemplated to be made at the Second
Closing shall not be made prior to January 31, 1997 or the purchases of
Notes contemplated to be made at the Third Closing shall not be made prior
to February 28, 1997, in each case other than by reason of the failure to
satisfy the condition precedent to such purchases specified in Section 4.2
(d) or the failure of any of the Other Purchasers to comply with its
obligations under the Other Agreements; provided that the event specified
in this paragraph (j) shall not be deemed to be continuing in respect of
either such Closing for more than 30 days after the Exchange provides
notice of such event pursuant to Section 7.l(d) unless on or before the
last day of such 30-
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day period the Majority Holders shall have declared all the Notes at the
time outstanding to be immediately due and payable as provided in Section
12.1(c).
As used in Section 11(i), the terms "employee benefit plan" and `employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. Acceleration.
(a) If an Event of Default with respect to the Exchange described in
paragraph (f) or (g) of Section 11 has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, the holder or holders of at least 25%
in unpaid principal amount of the Notes of any series at the time outstanding
may at its or their option, by notice or notices to the Exchange, declare all
the Notes of such series at the time outstanding to be immediately due and
payable and any holder or holders of Notes at the time outstanding affected by
such Event of Default may at any time, at its or their option, by notice or
notices to the Exchange, declare all the Notes held by it or them to be
immediately due and payable.
(c) If any other Event of Default has occurred and is continuing,
the Majority Holders may at any time at their option, by notice or notices to
the Exchange, declare all the Notes at the time outstanding to be immediately
due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount for the Notes of each
series determined in respect of such principal amount of the Notes of such
series (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Exchange
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Exchange (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Exchange in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such circumstances.
<PAGE> 37
33
12.2. Other Remedies.
If any Default or Event of Default has occurred and is continuing,
and irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 12.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3. Rescission.
At any time after any Notes of any series have been declared due
and payable pursuant to clause (b) of Section 12.1 or all Notes have been due
and payable pursuant to clause (c) of Section 12.1, the Majority Holders of the
Notes of such series or the Majority Holders of all Notes, as the case may be,
by written notice to the Exchange, may rescind and annul any such declaration
and its consequences if (a) the Exchange has paid all overdue interest on the
Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due
and payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the applicable Default Rate for the Notes of each series, (b) all
Events of Default and Defaults, other than the non-payment of amounts that have
become due solely by reason of such declaration, have been cured or have been
waived pursuant to Section 17, and (c) no judgment or decree has been entered
for the payment of any monies due pursuant hereto or to the Notes. No rescission
and annulment under this Section 12.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Exchange under Section 15,
the Exchange will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all costs and expenses of such holder incurred
in any enforcement or collection under this Section 12, including without
limitation reasonable attorneys' fees, expenses and disbursements.
<PAGE> 38
34
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. Registration of Notes.
The Exchange shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Exchange shall not be
affected by any notice or knowledge to the contrary. The Exchange shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Exchange for exchange or registration of transfer (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or its attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Exchange shall
execute and deliver, at the Exchange's expense (except as provided below), one
or more new Notes (as requested by the holder thereof and in denominations as
provided below) of the same series in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request.
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Exchange may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes of a series, one Note may be in a denomination of less than $500,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Sections 6.2 and 6.3.
13.3. Replacement of Notes.
Upon receipt by the Exchange of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such
<PAGE> 39
35
Institutional Investor of such ownership and such loss, theft, destruction or
mutilation), and
(a) in the case of loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to it (provided that if the holder of
such Note is, or is a nominee for, an original Purchaser or any other
Institutional Investor, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation of
such Note,
the Exchange at its own expense shall execute and deliver, in lieu thereof, a
new Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1. Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount,
if any, and interest becoming due and payable on the Notes shall be made in New
York, New York at the principal office of Citibank, N.A. in such jurisdiction.
The Exchange may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be either
the principal office of the Exchange in such jurisdiction or the principal
office of a bank or trust Exchange in such jurisdiction.
14.2. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Exchange will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Exchange in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Exchange made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Exchange at its principal executive office or at the place of payment most
recently designated by the Exchange pursuant to Section 14.1. Prior to any sale
or other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid
<PAGE> 40
36
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Exchange in exchange for a new Note or Notes pursuant to
Section 13.2. The Exchange will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated,
the Exchange will pay all costs and expenses (including reasonable attorneys'
fees of your special counsel and, if reasonably required, local or other
counsel) incurred by you and the Other Purchasers or any holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, (b) the costs and expenses of a
covenant defeasance pursuant to Section 23 (including all fees of the Defeasance
Trustee), and (c) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Exchange or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Exchange will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses, if any, of brokers and finders (other
than those retained by you)
In furtherance of the foregoing, on the date of each Closing the
Exchange will pay or cause to be paid the reasonable fees and disbursements
(including estimated unposted disbursements as of the date of such Closing) of
your special counsel which are reflected in the statement such counsel submitted
to the Exchange on or prior to the date of such Closing. The Exchange will also
pay, promptly upon receipt of supplemental statements therefor, reasonable
additional fees and disbursements of such special counsel in connection with the
transactions hereby contemplated (including disbursements unposted as of the
date of a Closing to the extent such disbursements exceed estimated
disbursements as of the date of such Closing).
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15.2. Survival.
The obligations of the Exchange under this Section 15 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Exchange pursuant to this Agreement
shall be deemed representations and warranties of the Exchange under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Exchange and
supersede all prior agreements and understandings relating to the subject matter
hereof.
17. AMENDMENT AND WAIVER.
17.1. Requirements.
This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Exchange and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding (and your written consent so long as you
shall be obligated to purchase Notes hereunder), (i) subject to the provisions
of Section 12 relating to acceleration or rescission, change the amount or time
of any prepayment or payment of principal of, or change the rate or the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes, (ii) change the definition of "Majority Holders" or "Required Holders" or
the percentage of the principal amount and series of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Exchange will provide each holder of the Notes
(irrespective of the amount of Notes or
<PAGE> 42
38
series then owned by it) with sufficient information, sufficiently far in
advance of the date a decision is required, to enable such holder to make an
informed and considered decision with respect to any proposed amendment, waiver
or consent in respect of any of the provisions hereof or of the Notes. The
Exchange will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite holders
of Notes.
(b) Payment. The Exchange will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Exchange without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Exchange and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. Notes held by Exchange, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Exchange or any of its
Affiliates or any Exchange Member shall be deemed not to be outstanding.
<PAGE> 43
39
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Exchange in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Exchange in
writing, or
(iii) if to the Exchange, to the Exchange at its address set forth
at the beginning hereof to the attention of the President of the Exchange,
with a copy to its Executive Vice President and General Counsel, at the
Exchange's address set forth at the beginning of this Agreement, or at
such other address as the Exchange shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including without
limitation (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Exchange agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Exchange or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
<PAGE> 44
40
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information"
means information delivered to you by or on behalf of the Exchange or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Exchange or such Subsidiary, provided that
such term does not include information that (a) was publicly known or otherwise
known to you prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Exchange or any Subsidiary or (d) constitutes financial statements delivered to
you under Section 7.1 that are otherwise publicly available. You will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information of
third parties delivered to you, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, trustees, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by your Notes), (ii)
your financial advisors and other professional advisors whose duties require
them to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20, (iii) any other holder of any
Note, (iv) any Institutional Investor to which you sell or offer to sell such
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this Section 20), (v) any Person from which you offer to
purchase any security of the Exchange (if such Institutional Investor has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this Section 20), (vi) any federal or state regulatory
authority having jurisdiction over you, (vii) the National Association of
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about your
investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery or disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed
to have agreed to be bound by and to be entitled to the benefits of this Section
20 as though it were a party to
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this Agreement. On reasonable request by the Exchange in connection with the
delivery to any holder of a Note of information required to be delivered to such
holder under this Agreement or requested by such holder (other than a holder
that is a party to this Agreement or its nominee), such holder will enter into
an agreement with the Exchange embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Exchange, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of its rights and
obligations under this Agreement, including the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall be deemed to refer to such Affiliate in lieu of you. In the
event that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Exchange of notice of such transfer, wherever the
word "you" is used in this Agreement, such word shall no longer be deemed to
refer to such Affiliate, but shall refer to you, and you shall have all the
rights and obligations of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note) whether so expressed or not.
22.2. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
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22.3. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding (but without limiting the requirement in Section 8.2 that notice
of an optional prepayment specify a Business Day as the date fixed for such
prepayment), any payment of principal of or Make-Whole Amount (if any) or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day.
22.4. Severability.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the extent permitted by law) not invalidate or render
unenforceable such provision in any other jurisdiction.
22.5. Accounting Terms.
All accounting terms used herein which are not expressly defined in
this Agreement have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP. Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall be done in
accordance with GAAP; and, if at the time that any such statement or computation
is required to be made the Exchange shall not have any Subsidiary, such terms
shall mean a financial statement or a financial computation, as the case may be,
with respect to the Exchange only.
22.6. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.7. Governing Law.
This Agreement and the Notes shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York excluding choice-of-law principles of the law of such
State that would
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require the application of the laws of a jurisdiction other than such State.
23. DEFEASANCE.
23.1. Exchange's Option to Effect Covenant Defeasance.
(a) Covenant Defeasance. The Exchange may at its option at any time
after the Third Closing elect to have this Section 23 applied to all (but not
less than all) of the outstanding Notes, upon compliance with the conditions set
forth below in this Section 23, whereupon (i) the Exchange shall be released
from its obligations under Sections 7, 9 and 10 and (ii) the occurrence of an
event specified in paragraph (c), (d), (e) (h) or (i) of Section 11 shall not be
deemed to be a Default or an Event of Default on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Notes shall thereafter be deemed to be not "outstanding" for the
purposes of any direction, waiver, consent or declaration of holders (and the
consequences of any thereof) in connection with such obligations, but shall
continue to be deemed "outstanding" for all other purposes thereunder (it being
understood that the Notes may not be deemed "outstanding" for financial
accounting purposes). For this purpose, such covenant defeasance means that the
Exchange may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Sections or paragraphs,
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section or paragraph or by reason of any reference in any such Section
or paragraph, to any other provision herein or in any other document, but the
remainder of this Agreement and the Notes shall be unaffected thereby.
(b) Conditions to Covenant Defeasance. The following shall be the
conditions to application of Section 23.l(a) to the then outstanding Notes:
(i) The Exchange shall have irrevocably deposited or caused to be
deposited with the Defeasance Trustee as trust funds, specifically pledged
as security for, and dedicated solely to, the benefit of the holders of
the Notes, (A) money in an amount, or (B) Government Obligations which
through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than one day before
the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of an internationally recognized firm
of independent public accountants expressed in a written certification
thereof delivered to the holders of the Notes, to pay and discharge, and
which shall be applied by the Defeasance Trustee to pay and discharge, the
required prepayments of the Notes of each series pursuant to Section 8.1,
the principal balance of the Notes of each series payable upon maturity
and each installment of interest on
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the Notes of each series on the respective due date therefor (assuming
such required prepayments pursuant to Section 8.1 and upon maturity) in
accordance with the terms of this Agreement and the Notes.
(ii) The Exchange shall have delivered to the holder of each Note an
opinion of counsel satisfactory to the Required Holders to the effect that
the holders of the outstanding Notes will not recognize gain or loss for
Federal income tax purposes as a result of such deposit and covenant
defeasance and will be subject to Federal income tax on the same amount,
in the same manner and at the same times as would have been the case if
such deposit and covenant defeasance had not occurred.
(iii) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as paragraph (c), (d),
(e), (h) or (i) of Section 11 is concerned, at any time during the period
ending on the 121st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(iv) Such covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which the Exchange is a party or by which it is bound.
(v) Such covenant defeasance shall not result in the trust arising
from such deposit constituting an investment company as defined in the
Investment Company Act of 1940, as amended, or such trust shall be
qualified under such act or exempt from regulation thereunder.
(vi) The Exchange shall have delivered to the holder of each Note an
Officer's Certificate and an opinion of counsel satisfactory to the
Required Holders, each stating that all conditions precedent provided for
relating to such covenant defeasance under this Section 23.1 have been
complied with.
(c) Certain Definitions. As used in this Section 23;
(i) "Defeasance Trustee" means a bank or trust company acting as
trustee under the trust pursuant to paragraph (b) above which is
incorporated under the laws of the United States of America or any State
thereof, which at the time has combined capital, surplus and undivided
profits aggregating at least $250,000,000, and which otherwise shall be
reasonably satisfactory to the Majority Holders; and
(ii) "Government Obligations" means
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(A) direct obligations of the United States of America or any
agency or instrumentality thereof, or obligations of a Person
controlled or supervised by, and acting as an agency or
instrumentality of, the United States of America, in any case having
the benefit of the full faith and credit of the United States of
America, which are not callable or redeemable at the option of the
issuer thereof, and
(B) depository receipts issued by a bank or trust company
incorporated under the laws of the United States of America or any
State thereof which, as of the date of determination, shall have
combined capital, surplus and undivided profits aggregating at least
$50,000,000, as custodian with respect to a Government Obligation or
a specific payment of interest on or principal of a Government
Obligation held by such custodian for the account of the holder of
such depository receipt, provided that, except as may otherwise be
required by law, such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by such custodian in respect of
such Government Obligation or in respect of the specific payment of
interest on or principal of such Government Obligation evidenced by
such depository receipt.
23.2. Deposited Money and Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions.
All money and Government obligations (including the proceeds
thereof) deposited with the Defeasance Trustee pursuant to Section 23.1 in
respect of the Notes shall be held in trust and applied by the Defeasance
Trustee, in accordance with the provisions of the Notes and this Agreement, to
the payment, either directly or through any paying agent (including the Exchange
acting as its own paying agent) as the Defeasance Trustee may determine, to the
holders of the Notes, of all sums due and to become due thereon in respect of
principal and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Exchange shall pay and indemnify the Defeasance Trustee against
any tax, fee or other charge imposed on or assessed against the Government
Obligations deposited pursuant to Section 23.1 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the holders of the Notes.
Anything in this Section 23.2 to the contrary notwithstanding, the
Defeasance Trustee shall deliver or pay to the Exchange from time to time upon
written request therefor any moneys or Government Obligations held by it as
provided in
<PAGE> 50
46
Section 23.1 which, in the opinion of an internationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Defeasance Trustee and the holders of the Notes, are in excess
of the amount thereof which would then be required to be deposited to effect a
covenant defeasance.
23.3. Reinstatement.
If the Defeasance Trustee or any paying agent is unable to apply any
money in accordance with Section 23.2 by reason of any order or judgment of any
court or Governmental Authority enjoining, restraining or otherwise prohibiting
such application, then the Exchange's obligations under this Agreement and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to this Section 23 until such time as the Defeasance Trustee or paying agent is
permitted to apply all such money in accordance with Section 23.2; provided that
if the Exchange makes any payment of principal of or interest on any Note
following the reinstatement of its obligations, the Exchange shall be subrogated
to the rights of the holders of such Note to receive such payment from the money
held by the Defeasance Trustee or the paying agent.
<PAGE> 51
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By /s/ Patrick F. Conroy
----------------------------------------
Title: Sr. Vice President - Finance
The foregoing is hereby agreed
to as of the date thereof.
WOODMEN ACCIDENT AND LIFE COMPANY
By
--------------------------------
Title:
<PAGE> 52
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By
----------------------------------------
Title:
The foregoing is hereby agreed
to as of the date thereof.
ALLSTATE LIFE INSURANCE COMPANY
By /s/ [ILLEGIBLE]
------------------------------
Title:
By /s/ [ILLEGIBLE]
------------------------------
Title:
<PAGE> 53
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By
----------------------------------------
Title:
The foregoing is hereby agreed
to as of the date thereof.
ALLSTATE LIFE INSURANCE COMPANY
OF NEW YORK
By /s/ [ILLEGIBLE]
------------------------------
Title:
By /s/ [ILLEGIBLE]
------------------------------
Title:
<PAGE> 54
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By
----------------------------------------
Title:
The foregoing is hereby agreed
to as of the date thereof.
AMERICAN ECONOMY INSURANCE COMPANY
By LINCOLN INVESTMENT MANAGEMENT, INC.,
Its Attorney-In-Fact
By /s/ David C. Patak
------------------------------
Title: Vice President
<PAGE> 55
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By
----------------------------------------
Title:
The foregoing is hereby agreed
to as of the date thereof.
AMERICAN STATES LIFE INSURANCE COMPANY
By LINCOLN INVESTMENT MANAGEMENT, INC.,
Its Attorney-In-Fact
By /s/ David C. Patak
------------------------------
Title: Vice President
<PAGE> 56
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By
----------------------------------------
Title:
The foregoing is hereby agreed
to as of the date thereof.
ASSURITY LIFE INSURANCE COMPANY
By /s/ [ILLEGIBLE]
------------------------------
Title: Senior Vice President
and Treasurer
<PAGE> 57
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By
----------------------------------------
Title:
The foregoing is hereby agreed
to as of the date thereof.
THE CANADA LIFE ASSURANCE COMPANY
By /s/ Brian J. Lynch
------------------------------
Title: BRIAN J. LYNCH
ASSOCIATE TREASURER
<PAGE> 58
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By__________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
CANADA LIFE INSURANCE COMPANY
OF AMERICA
By /s/ Brian Lynch
------------------------------
Title: BRIAN J. LYNCH
ASSISTANT TREASURER
<PAGE> 59
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By_____________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
CANADA LIFE INSURANCE COMPANY
OF NEW YORK
By /s/ Brian Lynch
------------------------------
Title: BRIAN J. LYNCH
ASSISTANT TREASURER
<PAGE> 60
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By___________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
LINCOLN NATIONAL HEALTH & CASUALTY
INSURANCE COMPANY
By LINCOLN INVESTMENT MANAGEMENT, INC.,
Its Attorney-In-Fact
By: /s/ David C. Patak
------------------------------
Title: Vice President
<PAGE> 61
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By__________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
LINCOLN NATIONAL REASSURANCE COMPANY
By LINCOLN INVESTMENT MANAGEMENT, INC.,
Its Attorney-In-Fact
By: /s/ David C. Patak
------------------------------
Title: Vice President
<PAGE> 62
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By_____________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By LINCOLN INVESTMENT MANAGEMENT, INC.,
Its Attorney-In-Fact
By: /s/ David C. Patak
------------------------------
Title: Vice President
<PAGE> 63
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By______________________________________
Title:
The foregoing is hereby agreed to
as of the date thereof.
MUTUAL OF OMAHA INSURANCE COMPANY
By: /s/ Edwin H. Garrison Jr.
---------------------------------
Title: EDWIN H. GARRISON JR.
FIRST VICE PRESIDENT
<PAGE> 64
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By___________________________________
Title:
The foregoing is hereby agreed to
as of the date thereof.
NATIONAL GUARDIAN LIFE INSURANCE
COMPANY
By /s/ Robert A. Mucci
-----------------------------------
Title: Robert A. Mucci
Assistant Vice President, Investments
<PAGE> 65
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Harry A. Schermer
--------------------------------
Title: Harry A. Schermer
Vice President
Equity Securities
<PAGE> 66
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By__________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
STANDARD INSURANCE
By /s/ Vicki R. Chase
-------------------------------
Title: Vicki R. Chase
Vice President - Securities
<PAGE> 67
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By______________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By /s/ Edwin H. Garrison Jr.
--------------------------------
Title: EDWIN H. GARRISON JR.
FIRST VICE PRESIDENT
<PAGE> 68
47
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Exchange, whereupon the foregoing shall become a binding
agreement between you and the Exchange.
Very truly yours,
NEW YORK MERCANTILE EXCHANGE
By______________________________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
WOODMEN ACCIDENT AND LIFE COMPANY
By /s/ [ILLEGIBLE]
--------------------------------
Title: Senior Vice President
and Treasurer
<PAGE> 1
EXHIBIT 10.6
ORACLE(R) NETWORK LICENSE ORDER FORM
ENABLING THE INFORMATION AGE
CUSTOMER NAME: New York Mercantile Exchange
CUSTOMER LOCATION: One North End Avenue
New York, NY 10282
CONTRACT ADMINISTRATOR: Larry Scheinberg
PHONE: 212-299-2818
FAX: 212-301-4631
PHONE: 212-299-2818
FAX:
TECHNICAL CONTACT: Larry Scheinberg
EMAIL ADDRESS:
ORACLE CONTRACT INFORMATION
AGREEMENT: Software License and Services Agreement
AGREEMENT NAME: SLSA-49438-06-Jan-95
This Network License Order Form and attachment(s)
("Order Form") are placed in accordance with the
agreement specified above ("Agreement").
Customer hereby orders the Program licenses
described herein for use in the United States,
unless otherwise specified. The "Network" is
defined as any number of Computers of the
Designated Systems listed in this Order Form,
except for Computer-based or Processor-based
licenses or other similar licenses as specified
herein.
A. DESIGNATED SYSTEMS/PROGRAMS
Make/Model: DEC Alpha
Operating System: OPENVMS
Media: CD
<PAGE> 2
<TABLE>
<CAPTION>
Description Quantity License Level License Type List License Fee Discount % Net License Fee Net Support Fee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per User Licenses:
- -----------------
FOR USE IN THE U.S.
*Hot Standby Option 802 Full Use Deployment $453,130.00 10% $407,817.00 $50,526.00
</TABLE>
<TABLE>
<S> <C>
User Based Fees: $407,817.00
NET LICENSE FEES: $407,817.00
User Based Support Fees: $50,526.00
TECHNICAL SUPPORT FEE THROUGH JANUARY 31, 1999: $50,526.00
Technical Support Type: Gold
TOTAL FEES: $458,343.00
</TABLE>
*Whenever the RDB Database Option Program specified above are installed on a
specific Computer under this Order Form, the quantity of each applicable License
Type for such Programs needs to match the quantity of each applicable License
Type.
-2-
<PAGE> 3
ORACLE(R)
ENABLING THE INFORMATION AGE
B. GENERAL TERMS
1. Customer Definition. For purposes of this Order Form, customer shall be
defined as the company listed at the head of this Order Form and it's
majority owned subsidiaries located in the U.S. as of the Effective
Date. Before accessing the Programs, each subsidiary must agree in
writing to be bound by the terms of the Agreement and this Order Form.
2. Technical Support. Annual Technical Support services ordered by
Customer will be provided under Oracle's Technical Support policies and
pricing in effect on the date Technical Support is ordered and shall be
effective upon shipment (or upon Order Form Effective Date for products
not requiring shipment); first year Technical Support valid through
January 31, 1999 is quoted above, if ordered. This amount is prorated
and based upon the Annual Gold Technical Support fees for RDB Hot
Standby Option ordered hereunder, which when a full year of Gold
Technical Support is ordered, total $86,616.00. Fees for Technical
Support are due and payable annually in advance.
3. Miscellaneous. Oracle shall deliver to the Customer Location, for use
in the U.S., 1 copy of the software media ("Master Copy") and 1 set of
Documentation (CD-ROM or bound, whichever is generally available) for
each Program currently available in production release as of the
Effective Date below for use on the Network. Customer shall have the
right to make up to 1 copy of the Program(s), including Documentation,
for each license of the Program(s) and the Customer shall be
responsible for installation of the software. All fees under this Order
Form shall be due and payable net 30 days from date of invoice, and
shall be noncancellable and the sums paid nonrefundable. Customer
agrees to pay applicable sales/use tax, and media charges. If Customer
loses or damages the media containing a Program licensed hereunder,
upon Customer's written notice Oracle will provide a replacement copy
thereof, under Oracle's then-current Technical Support policies, for a
media and shipping charge. The following shipping terms shall apply:
FOB Destination, Prepaid and Add. These terms shall also apply to any
options exercised by Customer.
-3-
<PAGE> 4
C. OTHER
1. Additional Designated Systems. For 2 years from the Effective Date,
Customer shall have the option to add 3 additional Designated System(s)
types ("Additional Designated System(s)") to this Order Form at no
charge, if: (i) The Programs licensed herein are available in
production release status on the Additional Designated System at the
time Customer elects to add the Additional Designated System; and (ii)
Customer has continuously maintained Technical Support for such
Programs.
Customer and Oracle agree that the terms and pricing of this Order Form shall
not be disclosed without the prior written consent of the other party. This
quote is valid through April 30, 1998 and shall become binding upon execution by
Customer and acceptance by Oracle.
NEW YORK MERCANTILE EXCHANGE ORACLE CORPORATION
Signature: /s/ Neal Wolkoff Signature: _________________________
Name: Neal Wolkoff Name: _________________________
Title: Exec. V.P. Title: _________________________
Effective Date: ____________________
-4-
<PAGE> 5
SHIPMENT SUMMARY:
<TABLE>
<CAPTION>
PROGRAMS DESIGNATED SYSTEMS MEDIA TYPE CSI NUMBER
<S> <C> <C> <C>
RDB Hot Standby Options DEC Alpha/Open VMS CD ROM
</TABLE>
-5-
<PAGE> 6
ORACLE(R)
ENABLING THE INFORMATION AGE
JANUARY 1, 1998 PRICE LIST DEFINITIONS
"CONCURRENT DEVICES" (OR "CONCUR DEV"): is the maximum number of input devices
accessing the Programs at any given point in time. If multiplexing software or
hardware (e.g. a TP monitor, webserver product) is used, this number must be
measured at the multiplexing front-end.
"NAMED USER OR DEVELOPER": is defined as an individual who is authorized by
Customer to use the Oracle Programs, regardless of whether the individual is
actively using Programs at any given time.
"MAILBOX" is defined as a point from which to send or receive electronic mail.
It is created when a user account or application is created in Oracle Office.
"COMPUTER": licensed for use on a single specified computer.
"PROCESSOR": shall be defined as the actual number of processors installed in
the licensed Computer and running the Oracle Programs, regardless of the number
of processors which the Computer is capable of running.
"CLIENT": a computer which (1) is used by only one person at a time, and (2)
executes Oracle software in local memory or stores the software on a local
storage device.
"FULL USE PROGRAMS" are unaltered versions of the Programs with all functions
intact.
"DEPLOYMENT PROGRAMS" may be used only to execute existing applications or
reports. They may not be used to build or modify reports or applications.
Deployment Programs are to be generated by Customer from Full Use Programs.
"APPLICATION SPECIFIC PROGRAMS" (OR "APP SPECIFIC"): shall mean Programs which
are limited to use solely for Customer's application software defined on the
Order Form. Application Specific Programs are to be generated by Customer from
Full Use programs.
"WEB SPECIFIC PROGRAM(S)" (OR "WEB SPECIFIC"): shall mean Program licenses which
may only be accessed by Clients via Internet networking protocols.
Notwithstanding any use restrictions in the Agreement or Oracle Program License
Terms. Customer's applications may only allow third party web access to a
licensed Web Specific Program for viewing, querying, or adding data only, so
long as such use is in accordance with the other terms of the Agreement.
For Oracle Human Resources, Oracle Payroll and Oracle Time Management, the
number of "EMPLOYEES" is the number of active Customer employee records.
For Oracle Personal Time and Expense, the number of "EMPLOYEES" is the total
number of people authorized to enter time and expense records.
For Oracle Sales Compensation, the number of "EMPLOYEES" is the total number of
Customer's employees or agents whose compensation, in whatever form, is
calculated or monitored using Oracle Sales Compensation.
For Oracle Training Administration, the number of "EMPLOYEES" is the total
number of students receiving the training courses supplied by the Customer.
"FOUNDATION SERVICES": This is limited support, and any license for which it is
purchased is not a Supported Program License.
An "EDUCATION UNIT" entitles Customer to acquire instruction for Customer
employees at any Oracle Education Center worldwide, as provided by in the Oracle
Education catalogue, exclusive of expenses. Education Units may also be used to
acquire instruction at Customer's facilities at the rates described in the
applicable standard Oracle Education catalogue in effect at the time of such
order. Education Units are valid for 12 months from the Effective Date of the
Order Form on which they are ordered or as specifically stated in the applicable
order.
"ORGANIZATIONAL CHANGE MANAGEMENT SERVICES" are services for assisting Customers
in managing change in their organizations. Customer's discounts for consulting
or training do not apply to such Organizational Change Management Services.
A "SUITE" consists of all the functional software components described in the
Documentation.
-6-
<PAGE> 7
<TABLE>
<CAPTION>
ORACLE(R) CREDIT CORPORATION PAYMENT PLAN AGREEMENT
<S> <C>
EXECUTED BY CUSTOMER (authorized signature):
Customer: NEW YORK MERCANTILE EXCHANGE INC By: /s/ Neal Wolkoff
-------------------------------------
Address: ONE NORTH END AVE 14TH FLR Name: Neal Wolkoff
NEW YORK NY 10282 -------------------------------------
Title: Exec V.P.
------------------------------------
EXECUTED BY ORACLE CREDIT CORPORATION:
Phone: 212 299-2000
PPA No.: Effective Date By: ____________________________________
Name: ____________________________________
Title:____________________________________
</TABLE>
This Payment Plan Agreement is entered into by Customer and Oracle Credit
Corporation ("OCC") to provide for the payment of the System Price specified in
a Payment Schedule on an installment basis. Each Payment Schedule shall specify
the Software and other incidental products and services (which items, together
with any upgrade, transfer or substitution of the foregoing, collectively are
the "System"), the System Price, and the Order and Agreement covered by the
Payment Schedule. Each Payment Schedule shall incorporate the terms and
conditions of this Payment Plan Agreement (together referred to as a "PPA"). The
System shall be licensed or provided by Oracle directly pursuant to the terms of
the Order and Agreement. Except as otherwise provided under this PPA, Customer's
rights and remedies under the Order and Agreement, including Oracle's warranty
and refund provisions, shall not be affected.
1. PAYMENT SCHEDULE: Customer agrees to pay OCC the Payment Amounts in
accordance with this PPA, with each payment due and payable on the applicable
Due Date. IF full payment of each Payment Amount and other amounts payable is
not received by OCC within 10 days of each Due Date, Customer agrees to pay to
OCC interest on the overdue amount at the rate equal to the lesser of one and
one-half percent (1.5%) per month, or the maximum amount allowed by law. Unless
stated otherwise, Payment Amounts exclude any applicable sales, use, property or
any other tax allocable to the System, Agreement or any PPA ("Taxes"). Any
amounts or any Taxes payable under the Agreement which are not added to the
Payment Amounts due under this PPA are due and payable by Customer, and Customer
shall remain liable for any filing obligations. Customer's obligation to remit
Payment Amounts to OCC or its assignee in accordance with this PPA is absolute,
unconditional, noncancellable, independent, and shall not be subject to any
abatement, set-off, claim, counterclaim, adjustment, reduction, or defense for
any reason, including but not limited to, any termination of any Agreement, or
performance of the System.
2. ASSIGNMENT: Customer hereby consents to OCC's assignment of all or a portion
of its rights and interests in and to this PPA to third-parties ("Assignee").
OCC shall provide Customer notice thereof. Customer and OCC agree that Assignee
shall not, because of such assignment, assume any of OCC's or Oracle's
obligations to Customer. Customer shall not assert against Assignee any claim,
defense, counterclaim or setoff that Customer may have against OCC or Oracle.
Customer waives all rights to make any claim against Assignee for any loss or
damage of the System or breach of any warranty, express or implied, as to any
matter whatsoever, including but not limited to the System and service
performance, functionality, features, merchantability or fitness for a
particular purpose, or any indirect, incidental or consequential damages or loss
of business. Customer shall pay Assignee all amounts due and payable under this
PPA, but shall pursue any claims under any Agreement against Oracle. Except as
provided for a Customer default below, neither OCC nor its Assignees will
interfere with Customer's quiet enjoyment or use of the System in accordance
with the Agreement's terms and conditions.
3. DEFAULT; REMEDIES: Any of the following shall constitute a Default under this
PPA: (i) Customer fails to pay when due any sums due under this PPA; (ii)
Customer breaches any representation or fails to perform any obligation in any
PPA; (iii) Customer materially breaches or terminates the license relating to
the Software; (iv) Customer defaults under a material agreement with Assignee;
or (v) Customer becomes insolvent or makes an assignment for the benefit of
creditors, or a trustee or receiver is appointed for Customer or for a
substantial part of its assets, or bankruptcy, reorganization or insolvency
proceedings shall be instituted by or against Customer.
In the event of a Default that is not cured within thirty (30) days of its
occurrence, OCC may: (i) require all outstanding Payment Amounts and other sums
due and scheduled to become due (discounted at the lesser of the rate in this
PPA or five percent (5%) per annum simple interest) to become immediately due
and payable by Customer; (ii) pursue any rights provided under any Agreement,
including terminating all of Customer's rights to use the System and related
services; and (iii) pursue any other rights or remedies available at law or in
equity. In the event OCC institutes any action for the enforcement of the
collection of Payment Amounts, there shall be due from Customer, in addition to
the amounts due above, all costs and expenses of such action, including
reasonable attorneys' fees. No failure or delay on the part of OCC to exercise
any right or remedy hereunder shall operate as a waiver thereof, or as a waiver
of any subsequent breach. All remedies are cumulative and not exclusive.
Customer acknowledges that upon a default under this PPA, no party shall be
required to license, lease, transfer or use any Software in mitigation of any
damages resulting from Customer's default.
4. CUSTOMER'S REPRESENTATIONS AND COVENANTS: Customer represents that,
throughout the term of this PPA, this PPA has been duly authorized and
constitutes legal, valid, binding and enforceable agreement of Customer. Any
transfer or assignment of Customer's right or obligations in the System, or
under the Agreements or this PPA shall require Oracle's and Assignee's prior
written consent. A transfer shall include a change in majority ownership of
Customer. Customer agrees to promptly execute any ancillary documents and take
further actions as OCC or Assignee may reasonably request, including, but not
limited to, assignment notifications, acceptance certificates, certificates of
authorization, registrations, and filings. Customer agrees to provide OCC or
Assignee copies of Customer's balance sheet, income statement, and other
financial reports as OCC or Assignee may reasonably request.
5. MISCELLANEOUS: This PPA shall constitute the entire agreement between
Customer and OCC regarding the subject matter herein and shall supersede any
inconsistent terms set forth in the Order, Agreement or any related agreements,
Customer purchase orders and all prior oral and written understandings. If any
provision of this PPA is invalid, such invalidity shall not affect the
enforceability of the remaining terms of this PPA. Customer's obligations under
this PPA shall commence on the Effective Date specified therein. Except for
payment terms specified in this PPA. Customer remains responsible for all the
obligations under each Agreement. Each Payment Schedule, and any changes to a
PPA or any related document, shall take effect when executed by OCC. This PPA
shall be governed by the laws of the State of California and shall be deemed
executed in Redwood Shores, CA as of the PPA Effective Date.
-7-
<PAGE> 8
<TABLE>
<CAPTION>
ORACLE(R) CREDIT CORPORATION PAYMENT SCHEDULE
<S> <C>
Page _______ of __________ (ORACLE PRODUCT) NO. ____
Customer: NEW YORK MERCANTILE EXCHANGE INC EXECUTED BY CUSTOMER (authorized signature):
By: /s/ Neal Wolkoff
Address: ONE NORTH END AVE 14TH FLR --------------------------------------------------
NEW YORK NY 10282 Name: /s/ Neal Wolkoff
------------------------------------------------
Title: Exec V.P.
-----------------------------------------------
Contact: __________________________________________________________
Phone: ____________________________________________________________ EXECUTED BY ORACLE CREDIT CORPORATION:
Order: _____________________________________ dated _______________ By: ________________________________________________
Agreement: _________________________________ dated _______________ Name: ______________________________________________
PPA No.: ___________________________________ dated _______________ Title: _____________________________________________
__________________________________________________________
Payment Schedule Effective Date: __________________
</TABLE>
<TABLE>
<CAPTION>
SYSTEM: PAYMENT SCHEDULE:
------- -----------------
<S> <C> <C>
Payment Amount Due Date
Software: $407,817.00 $458,343 1-Jan-99
Support: $ 50,526.00 Seven Months
Education: ___________
Consulting: ___________
Other: ___________
System Price: $458,343.00 One (1) payment due and payable as set
forth above.
</TABLE>
Optional (if this box is checked):
[ ] The System was ordered from an alliance member/agent of Oracle Corporation,
whose name and address is specified below, by executing an Order. Customer has
directly licensed the Software from Oracle Corporation as Supplier pursuant to
the Agreement. For this Payment Schedule, the alliance member/agent is also a
Supplier, and the Order and Agreement shall each be considered a separate
Agreement hereunder. OCC shall be provided with an Order executed by Customer.
Alliance members/agents are not authorized to waive or alter any term or
condition of this PPA. Neither OCC nor Assignee shall be responsible to Customer
for any claim or liability pertaining to the actions or statements of any
alliance member/agent.
Taxes shall be added to Payment Amounts only if OCC is provided with invoices
between Customer and alliance member/agent for the System (specifying applicable
Taxes) within ten days of the Payment Schedule Effective Date.
Alliance Member/Agent: ________________________________________________________
Address: ______________________________________________________________________
Contact: __________________________________ Phone: ____________________________
This Oracle Payment Schedule constitutes a separate agreement, and incorporates
by reference the terms and conditions of the above Payment Plan Agreement
("PPA") between Oracle Credit Corporation ("OCC") and Customer, and adds the
following additional terms:
PAYMENTS: This PPA shall replace Customer's payment obligation under the
Agreement to Supplier and any alliance member/agent, to the extent of the System
Price listed above, upon Customer's delivery of a fully executed Agreement, PPA,
and any other documentation required by OCC, and execution of the PPA by OCC.
Customer agrees that OCC or its Assignee may treat documents faxed to OCC as
original documents; nevertheless, Customer agrees to deliver original signed
documents if requested. Customer agrees that OCC may add the amount of
applicable Taxes to each Payment Amount, and OCC may adjust subsequent Payment
Amounts to reflect any change or correction in Taxes due. If Support is included
in the System Price, the applicable support fees together with the then relevant
Taxes will be paid to Supplier and any alliance member/agent in the applicable
support period from the Payment Amounts received in that period. The balance of
each Payment Amount, unless otherwise stated, includes a proportional amount of
the remaining components of the System Price. Software shall be accepted, and
the services shall be deemed ordered pursuant to the terms of the Agreement.
-8-
<PAGE> 1
EXHIBIT 10.7
<TABLE>
<CAPTION>
ORACLE(R) NETWORK LICENSE ORDER FORM
<S> <C>
CUSTOMER NAME: New York Mercantile Exchange Inc. CONTRACT ADMINISTRATOR: Debra Bibsugbire
CUSTOMER LOCATION: One North End Avenue PHONE: 212-299-2818
New York, NY 10282 FAX: 212-301-4631
</TABLE>
TECHNICAL CONTACT: Larry Scheinberg
ORACLE CONTRACT INFORMATION
AGREEMENT: Software License and Services Agreement
AGREEMENT NAME: SLSA-49438-06-JAN-95
This Network License Order Form and attachment(s) ("Order
Form") are placed in accordance with the agreement
specified above ("Agreement") Customer hereby orders the
Program licenses described herein for use in the United
States, unless other wise specified. The "Network" is
defined as any number of Computers of the Designated Systems
listed in this Order Form, except for Computer-based or
Processor-based licenses or other similar licenses as
specified herein.
A. DESIGNATED SYSTEMS/PROGRAMS
Make/Model: DEC ALPHA Make/Model: DEC VAX
Operating System: UNIX Operating System: OPENVMS
Media: CD Media: CD
2
<PAGE> 2
<TABLE>
<CAPTION>
List Net
Description Quantity License Level License Type License Fee Discount % License Fee
- ----------- -------- ------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per User Licenses:
For use in the U.S.
Oracle8 Personal Edition 16 Full Use Named $6,320 60% $2,528
Oracle8 Enterprise Edition 64 Full Use Concurrent $119,680 60% $47,872
* Diagnostic Pack 32 Full Use Concurrent $3,840 60% $1,536
* Tuning Pack 32 Full Use Concurrent $3,840 60% $1,536
Programmer/2000 16 Full Use Developer $15,920 60% $6,368
# Oracle Rdb Server 802 Full Use Named $749,870 60% $299,948
# Oracle TRACE/Expert Option 802 Full Use Named $48,120 60% $19,248
# Oracle Programmer for RDB 2 Full Use Developer $1,990 60% $796
# CDD/Repository 2 Full Use Developer $6,000 60% $2,400
</TABLE>
<TABLE>
<S> <C>
NET LICENSE FEES: $ 382,232
INITIAL YEAR ANNUAL TECHNICAL SILVER AND GOLD SUPPORT FEE: $166,309.00
TOTAL FEES: $ 548,541
-----------
</TABLE>
* Whenever the Oracle8 option Programs specified above are installed on a
specific Computer under this Order Form, the quantity of each applicable License
Type for such Programs needs to match the quantity of each applicable License
Type of the Oreacle8 on that same computer.
Programs marked with a # above shall receive annual Oracle Gold Technical
Support pursuant to the Technical Support Policies in effect as of the Effective
Date of this Order Form. All Programs not marked with a # shall receive annual
Oracle Silver Technical Support and shall not be entitled to receive any of the
benefits associated with annual Gold Technical Support Services.
3
<PAGE> 3
ORACLE(R)
B. GENERAL TERMS
1. Customer Definition. For purposes of this Order Form, Customer shall be
defined as the company listed at the head of this Order Form and its
majority owned subsidiaries located in the U.S. as of the Effective
Date. Before accessing the Programs, each subsidiary must agree in
writing to be bound by the terms of the Agreement and this Order Form.
2. Technical Support. Annual Gold and Silver Technical Support services
ordered by Customer will be provided under Oracle's Technical Support
policies and pricing in effect on the date Technical Support is ordered
and shall be effective upon shipment (or upon Order Form Effective Date
for products not requiring shipment); first year Technical Support is
quoted above, if ordered. All Program licensed marked with a # in
Section A above shall receive annual Gold Support. Oracle 8 Personal
Edition, Oracle8 Enterprise Edition, Diagnostics Pack, Tuning Pack, and
Oracle Programmer shall receive annual Silver Technical Support. These
Program licenses shall not be entitled to receive any of the benefits
associated with the annual Gold Technical Support services provided to
all other Program licenses on this Order Form. Fees for Gold and Silver
Technical Support are due and payable annually in advance.
3. Technical Support Cap. For up to 6 years from the end of the Technical
Support period specified in Section B3 above, Customer may acquire Gold
Technical Support services for all the Programs licensed in the U.S.
under this Order Form marked with a # in Section A above, and Silver
Technical Support services for Oracle8 Personal Edition, Oracle8
Enterprise Edition, Diagnostics Pack, Tuning Pack, and Oracle
Programmer (except for licenses that are modified or are added to this
Order Form after the Effective Date), for an annual fee not to increase
each year by more than 8% of the Technical Support fee paid by Customer
for similar Technical Support services in the preceding year (excluding
any Support fee credit issued for terminated licenses), provided
Customer continuously maintains Technical Support services during such
period. Thereafter, Customer may obtain annual Technical Support
services from Oracle under Oracle's Technical Support fees and policies
in effect when such services are ordered.
4. Miscellaneous. Oracle shall deliver to the Customer Location, for use
in the U.S., 1 copy of the software media ("Master Copy") and 1 set of
Documentation (in the form generally available) for each Program
currently available in production release as of the Effective Date
below for use on the Network. Customer shall have the right to make up
to 1 copy of the Program(s), including Documentation, for each license
of the Program(s) and the Customer shall be responsible for
installation of the software. All fees under this Order Form shall be
due and payable net 30 days from date of invoice, and shall be
non-cancellable and the sums paid nonrefundable. Customer agrees to pay
applicable sales/use tax, and media charges. If Customer loses or
damages the media containing a Program licensed hereunder, upon
Customer's written notice Oracle will provide a replacement copy
thereof, under Oracle's then-current Technical Support policies, for a
media and shipping charge. The following shipping terms shall apply:
FOB Destination, Prepaid and Add. These terms shall also apply to any
options exercised by Customer. Oracle may refer to Customer as a
customer in sales presentations, marketing vehicles and activities.
4
<PAGE> 4
C. OTHER
1. Additional Designated Systems. Until 3 year(s) from the Effective Date,
Customer shall have the option to add 3 additional Designated System
types to this Order Form for a fee, per Additional Designated System,
of 10% of the net license fees paid to date under this Order Form at
the time Customer elects to exercise this option, if: (i) the Programs
licensed herein are available in production release status on the
Additional Designated System at the time Customer elects to add the
Additional Designated System; and (ii) Customer has continuously
maintained Technical Support for such Programs. Payment for the option
shall be due and payable on the date Customer exercises this option,
and this payment obligation shall be non_cancelable and the sum paid
nonrefundable on the date of exercise.
Oracle shall ship to the Customer Location a single Master Copy of the
Program licensed herein for the Additional Designated System added.
These Programs may only be copied and installed in accordance with the
terms of this Order Form; Oracle has no further shipment obligation
other than as specified above. Programs licensed herein for use on
Additional designated System(s) may not be currently available.
Customer has not relied on potential availability in entering into the
payment obligations in this Order Form. Oracle is under no obligation
to change current availability.
2. Customer is licensed to use each Program only on the Designated
System(s) specified in Section A of this Order Form and for which such
Program is available on the Effective Date. The Shipment Summary
included with this Order Form specifies the Programs on the particular
Designated Systems requested by Customer, which have been shipped or
currently are being shipped to Customer.
Customer and Oracle agree that the terms and pricing of this Order Form shall
not be disclosed without the prior written consent of the other party. This
quote is valid through April 30, 1999 and shall become binding upon execution by
Customer and acceptance by Oracle.
NEW YORK MERCANTILE EXCHANGE ORACLE CORPORATION
Signature: /s/ Debbie Bonsignora Signature:
______________________________ ___________________________
Name: Debbie Bonsignora Name:
___________________________________ ________________________________
Title: SVP Information Services Title:
__________________________________ _______________________________
Effective Date:
_________________________
5
<PAGE> 5
SHIPMENT SUMMARY
<TABLE>
<CAPTION>
PROGRAMS DESIGNATED SYSTEMS MEDIA TYPE
-------- ------------------ ----------
<S> <C> <C>
Oracle RBD Server DEC VAX/OPEMVMS CD
Oracle TRACE/Expert Option
Oracle Programmer for RDB
CDD/Repository
Oracle Server Enterprise Edition V7.3
Oracle8 Enterprise Edition DEC APHA/UNIX CD
Diagnostics Pack
Tuning Pack
Oracle Programmer
Oracle RDB Server
Oracle Programmer for RDB
Oracle8 Personal Edition MS Windows NT` CD
</TABLE>
6
<PAGE> 6
ORACLE(R)
JANUARY 1999 PRICE LIST DEFINITIONS
"CONCURRENT DEVICES" (OR "CONCUR DEV"): is the maximum number of input devices
accessing the Programs at any given point in time. If multiplexing software or
hardware (e.g., a TP monitor, webserver product) is used, this number must be
measured at the multiplexing front-end.
"NAMED USER" (OR "NAMED") OR "DEVELOPER": is defined as an individual who is
authorized by Customer to use the Oracle Programs, regardless of whether the
individual is actively using Programs at any given time.
"CASUAL USER": is defined as an individual authorized by the Customer to only
run queries or reports against Oracle Applications Programs. Casual Users are
licensed to use any of the above Oracle Applications Program for which Customer
has acquired Named User licenses.
"PRIMARY USAGE": is defined as each licensed user being counted only once as a
designated Named or Casual User of the Oracle Application he will use most.
However, a licensed Named or Casual User may access all Oracle Applications
licensed under the Agreement which have been licensed under the same licensing
methodology, regardless of the designated Oracle Application of primary use.
"MAILBOX": is defined as a point from which to send or receive electronic mail.
It is created when a user account of application is created in Oracle Office.
"COMPUTER": licensed for use on a single specified computer.
"PROCESSOR": shall be defined as the actual number of processors installed in
the licensed Computer and running the Oracle Programs, regardless of the number
of processors which the Computer is capable of running.
"CLIENT": a computer which (1) is used by only one person at a time, and (2)
executes Oracle software in local memory or stores the software on a local
storage device.
"FULL USE PROGRAMS": are unaltered versions of the Program with all functions
intact.
"DEPLOYMENT PROGRAMS": may be used only to execute existing applications or
reports. They may not be used to build or modify reports or applications.
Deployment Programs are to be generated by Customer from Full Use Programs.
APPLICATION SPECIFIC PROGRAMS" (OR "APP SPECIFIC"): shall mean Programs which
are limited to use solely for Customer's application software defined on the
Order Form. Application Specific Programs are to be generated by Customer from
Full Use programs.
"WEB SPECIFIC PROGRAM(S) (OR "WEB SPECIFIC"): shall mean Program licenses
which may only be accessed by Clients via Internet networking protocols.
Notwithstanding any use restrictions in the Agreement or Oracle Program license
Terms, Customer's applications may only allow third party web access to a
licensed Web Specific Program for viewing, querying, or adding data only, so
long as such use is in accordance with the other terms of the Agreement.
For Oracle Human Resources and Oracle Training Administration. "EMPLOYEE" is
defined as an individual who is actively managed by the Programs. The term
"Employee" includes, without limitation, Customer employees, contractors,
retirees, and COBRA dependents.
For Oracle Payroll, "EMPLOYEE" is defined as an individual whose payment, or
payment calculations, are generated by the Programs. The term "Employee"
includes, without limitation, Customer employees, contractors, retirees, and
employees covered by workers compensation laws or regulations.
For Oracle Time Management, "EMPLOYEE" is defined as an individual who submits
timecards or other time records for payroll processing.
For Oracle Self-Service Human Resources, Oracle Self-Service Purchasing, Oracle
Self-Service Expenses, and Business Intelligence System (BIS) Applications,
"EMPLOYEE" is defined as an active employee of Customer.
"FOUNDATION SERVICES": This is limited support, and any license for which it is
purchased is not a Supported Program License.
An "EDUCATION UNIT" entitles Customer to acquire education products and services
as specified in the Oracle Education catalogue in effect at the time an
Education Unit is utilized. Education Units are only valid for 12 months from
the Effective Date of the Order or as specifically stated in the applicable
Order. Education Units may only be used in the country where the Education Units
were acquired or within the Territory defined in the applicable Order. Customer
may be required to execute standard Oracle ordering materials in conjunction
with utilizing Education Units.
"ORGANIZATIONAL CHANGE MANAGEMENT SERVICES": are services for assisting
Customers in managing change in their organizations. Customer's discounts for
consulting or training do not apply to such Organization Change Management
Services.
A "SUITE" consists of all the functional software components described in the
Documentation.
"MODULE": shall mean a functional software component of a Suite or bundle.
7
<PAGE> 7
ORACLE(R) CREDIT CORPORATION PAYMENT SCHEDULE
Page 1 of 1 (ORACLE PRODUCT) NO.
- -----------
<TABLE>
<S> <C> <C>
Customer: New York Mercantile EXECUTED BY CUSTOMER (authorized signature):
-------------------------
Exchange Inc By: /s/ Debbie Bonsignore
------------------------- ------------------------------------------------------------
Address: One North End Ave. Name: Debbie Bonsignore
------------------------- ------------------------------------------------------------
New York, NY 10282 Title: SVP Information Services
------------------------- ------------------------------------------------------------
Contact: EXECUTED BY ORACLE CREDIT CORPORATION:
-------------------------
Phone: By:
------------------------- ------------------------------------------------------------
Order: dated Name:
------------------------- ------------------------------------------------------------
Agreement: dated Title:
------------------------- ------------------------------------------------------------
PPA No.: dated
------------------------- Payment Schedule Effective Date:
------------------------- -----------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SYSTEM PAYMENT SCHEDULE:
- ------ ----------------
Payment Amount Due Date:
Software: $382,232 $261,867 1-Jun-99
-------------------------
Support: $665,236 Year 1,2,3,&4 $261,867 1-May-00
-------------------------
Education: $261,867 1-May-01
-------------------------
Consulting: $261,867 1-May-02
-------------------------
Other: Four (4) annual payments due and payable
-------------------------
System Price: $1,047,468 as set forth above.
-------------------------
</TABLE>
Optional (if this box is checked):
[ ] The System was ordered from an alliance member/agent of Oracle Corporation,
whose name and address is specified below, by executing an Order, Customer has
directly licensed the Software from Oracle Corporation as Supplier pursuant to
the Agreement. For this Payment Schedule, the alliance member/agent is also a
Supplier, and the Order and Agreement shall each be considered a separate
Agreement hereunder. OCC shall be provided with an Order executed by Customer.
Alliance members/agents are not authorized to waive or alter any term or
condition of this PPA. Neither OCC nor Assignee shall be responsible to Customer
for any claim or liability pertaining to the actions or statements of any
alliance member/agent.
OCC may add the applicable Taxes due on the System Price to each Payment Amount,
based on the applicable tax rate invoiced by Supplier at shipment, but only if
OCC is provided with invoices between Customer and alliance member/agent for the
System (specifying applicable Taxes) within ten days of the Payment Schedule
Effective Date.
Alliance Member/Agent:
------------------------------------------------------
Address:
------------------------------------------------------
Contact: Phone:
------------------------------------------------------
This Oracle Payment Schedule constitutes a separate agreement, and incorporates
by reference the terms and conditions of the above Payment Plan Agreement
("PPA") between Oracle Credit Corporation ("OCC") and Customer for the
acquisition of the System from Oracle Corporation or any other party providing
any portion of the System, including an alliance member/agent of Oracle
Corporation ("Supplier"), and adds the following additional terms.
A. PAYMENTS: This PPA shall replace customer's payment obligation under the
Order and Agreement to Supplier, to the extent of the System Price listed above,
upon Customer's delivery of a fully executed Order, Agreement, PPA, and any
other documentation required by OCC, and execution of the PPA by OCC. Customer
agrees that OCC may add the applicable Taxes due on the System Price to each
Payment Amount based on the applicable tax rate invoiced by Supplier at
shipment. OCC may adjust subsequent Payment Amounts to reflect any change or
correction in Taxes due. If the System Price includes support fees for a support
period that begins after the first support period, such fees and the then
relevant Taxes will be paid to Supplier in the applicable support period as
invoiced from the Payment Amounts received in that period. The balance of each
Payment Amount, unless otherwise stated, includes a proportional amount of the
remaining components of the System Price.
B. SYSTEM: Software shall be accepted, and the services shall be deemed ordered
pursuant to the terms of the Agreement. Customer agrees that any software
acquired from Supplier to replace any part of the System shall be subject to the
terms of the PPA.
C. ADMINISTRATIVE: Customer agrees that OCC or its Assignee may treat faxes or
photocopies delivered to OCC as original documents; however, Customer agrees to
deliver signed documents if requested, Customer agrees that OCC may insert the
appropriate administrative information to complete the above form. OCC will
provide a copy of the final PPA upon request.
<PAGE> 8
AMENDMENT 1
TO THE
NETWORK LICENSE ORDER FORM
BETWEEN
NEW YORK MERCANTILE EXCHANGE
AND
ORACLE CORPORATION
This document ("Amendment One") amends the Network License Order Form, dated
April 14, 1999 (the "Agreement"), between New York Mercantile Exchange
("Customer") and Oracle Corporation ("Oracle"). The parties hereby agree to
amend the Agreement as follows:
1. The following shall be added to Section B.2 "Technical Support" of the
Agreement:
For 4 years from the Effective Date of this Order Form Customer may receive
annual Gold Technical Support for all the Programs licensed in the U.S. under
this Order Form marked with a # in Section A above, and Silver Technical Support
services for Oracle8 Personal Edition, Oracle8 Enterprise Edition, Diagnostics
Pack, Tuning Pack, and Oracle Programmer (except for licenses that are modified
or are added to this Order From after the Effective Date). Technical Support
consists of Updates for such licenses as well as support services, pursuant to
the Technical Support Policies in effect as of the Effective Date.
<TABLE>
<CAPTION>
Support Year Technical Support Fee
------------ ---------------------
<S> <C>
First Year $ 166,309
Second Year $ 166,309
Third Year $ 166,309
Fourth Year $ 166,309
</TABLE>
2. The first sentence of Section B.2 shall be deleted and replaced with the
following:
Technical Support Cap. For up to 2 years from the end of the Technical Support
period specified in Section B.2 above, Customer may acquire Gold Technical
Support services for all the Programs licensed in the U.S. under this Order From
marked with a # in Section A above, and Silver Technical Support services for
Oracle8 Personal Edition, Oracle8 Enterprise Edition, Diagnostics Pack, Tuning
Pack, and Oracle Programmer (except for licenses that are modified or are added
to this Order Form after the Effective Date), for an annual fee not to increase
each year by more than 8% of the Technical Support fee paid by Customer for
similar Technical Support services in the preceding year (excluding any Support
fee credit issued for terminated licenses), provided Customer continuously
maintains Technical Support services during such period.
The Effective Date of this Agreement One is April ____, 1999.
NEW YORK MERCANTILE ORACLE CORPORATION
EXCHANGE
By: /s/ Neal Wolkoff By:
_________________________________ _________________________________
Name: Neal Wolkoff Name:
_______________________________ _______________________________
Title: Exec. V.P. Title:
______________________________ ______________________________
9
<PAGE> 1
EXHIBIT 10.8
ORACLE(R) NETWORK LICENSE ORDER FORM
CUSTOMER NAME: New York Mercantile Exchange
CUSTOMER LOCATION: One North End Avenue
New York, NY 10282
CONTRACT ADMINISTRATOR: Debra Bonsignore
PHONE: 212-299-2840
FAX: 212-301-4631
TECHNICAL CONTACT: Larry Scheinberg PHONE: 212-299-2313
ORACLE CONTRACT INFORMATION
AGREEMENT: Software License and Services Agreement
AGREEMENT NAME: SLSA-49438-06-JAN-95
This Network License Order Form and attachment(s)
("Order Form") are placed in accordance with the
agreement specified above ("Agreement"). Customer
hereby orders the Program licenses described herein for
use in the Territory, unless otherwise specified. The
"Network" is defined as any number of Computers of the
Designated Systems listed in this Order Form, except
for Computer-based or Processor-based licenses or other
similar licenses as specified herein.
A. DESIGNATED SYSTEMS/PROGRAMS
Make/Model: DEC ALPHA
Operating System: OPENVMS
Media: CD
<PAGE> 2
<TABLE>
<CAPTION>
Description Quantity License Level License Type
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per User Licenses:
- -----------------
FOR USE IN THE U.S.
Rdb Server 750 Deployment Named
TRACE/Expert Option 750 Deployment Named
Hot Standby Option 750 Deployment Named
CDD/Repository 2 Full Use Developer
Oracle Programmer for Rdb 2 Full Use Developer
</TABLE>
<TABLE>
<S> <C>
NET LICENSE FEES: $919,591
INITIAL YEAR ANNUAL TECHNICAL SUPPORT FEE: $280,500
Technical Support Type: Gold
TOTAL FEES: $1,200,091
</TABLE>
-2-
<PAGE> 3
ORACLE(R)
B. GENERAL TERMS
1. Customer Definition. For purposes of this Order Form, Customer shall be
defined as the company listed at the head of this Order Form and its
majority owned subsidiaries located in the U.S. as of the Effective
Date. Before accessing the Programs, each subsidiary must agree in
writing to be bound by the terms of the Agreement and this Order Form.
2. Technical Support. Annual Technical Support services ordered by
Customer will be provided under Oracle's Technical Support policies and
pricing in effect on the date Technical Support is ordered and shall be
effective upon shipment (or upon Order Form Effective Date for products
not requiring shipment); first year Gold Technical Support is quoted
above, if ordered. Fees for Technical Support are due and payable
annually in advance.
For 4 years from the Effective Date of this Order Form Customer may
receive annual Gold Technical Support Services for all Program licenses
ordered hereunder (except for license grants modified or added hereto
after the Effective Date, or for which Technical Support is not
available). Technical Support consists of Updates for such licenses as
well as support services, pursuant to the Technical Support Policies in
effect, as such licenses are deployed. Technical Support fees shall be
paid annually in advance. After the Support Years below, Customer may
obtain Technical Support under Oracle's Technical Support fees in
effect at the time of the order.
<TABLE>
<CAPTION>
Support Year Technical Support Fee
------------ ---------------------
<S> <C>
First Year $280,500
Second Year $280,500
Third Year $280,500
Fourth Year $280,500
</TABLE>
3. Technical Support Cap. For up to 2 years from the end of the Technical
Support period specified under this Order Form, Customer may acquire
Gold Technical Support services for all the Program licenses in the
Territory under this Order Form (except for licenses that are modified
or are added to this Order Form after the Effective Date), for an
annual fee not to increase each year by more than 8% of the Technical
Support fee paid by Customer for similar Technical Support services in
the preceding year (excluding any Support fee credit issued for
terminated licenses), provided Customer continuously maintains
Technical Support services during such period. Thereafter, Customer may
obtain annual Technical Support services from Oracle under Oracle's
Technical Support fees and policies in effect when such services are
ordered.
-3-
<PAGE> 4
4. Miscellaneous. Customer is licensed to use each Program only on the
Designated System(s) specified in Section A of this Order Form and for
which such Program is available on the Effective Date. The Product
Summary included with this Order Form specifies the Programs on the
particular Designated Systems requested by Customer, which are being
shipped to Customer. Oracle shall deliver to the Customer Location, for
use in the U.S., 1 copy of the software media ("Master Copy") and 1 set
of Documentation (in the form generally available) for each Program
currently available in production release as of the Effective Date
below for use on the Network. Customer shall have the right to make up
to 1 copy of the Program(s), including Documentation, for each license
of the Program(s) and the Customer shall be responsible for
installation of the software. All fees under this Order Form shall be
due and payable net 30 days from date of invoice, and shall be
non-cancelable and the sums paid nonrefundable. Customer agrees to pay
applicable sales/use tax and media charges. If Customer loses or
damages the media containing a Program licensed hereunder, upon
Customer's written notice Oracle will provide a replacement copy
thereof, under Oracle's then-current Technical Support policies, for a
media and shipping charge. The following shipping terms shall apply:
FOB Destination, Prepaid, and Add. These terms shall also apply to any
options exercised by Customer. Oracle may refer to Customer as a
customer in sales presentations, marketing vehicles and activities.
C. OTHER
1. Additional Designated Systems. Until 3 Years(s) from the Effective
Date, Customer shall have the option to add 4 additional Designated
System type(s) ("Additional Designated System") to this Order Form at
no charge, if: (i) the Programs licensed herein are available in
production release status on the Additional Designated System at the
time Customer elects to add the Additional Designated System; and (ii)
Customer has continuously maintained Technical Support for such
Programs.
Oracle shall ship to the Customer Location a single Master Copy of the
Programs licensed herein for the Additional Designated System added.
These Programs may only be copied and installed in accordance with the
terms of this Order Form; Oracle has no further shipment obligation
other than as specified above. Programs licensed herein for use on
Additional Designated System(s) may not be currently available.
Customer has not relied on potential availability in entering into the
payment obligations in this Order Form. Oracle is under no obligation
to change current availability.
2. Additional License Increments. For 1 year from the Effective Date,
provided Customer has continuously maintained Technical Support,
Customer may increase the quantity of each applicable License Type
accessing the Programs on this Order Form ("Additional License
Increment") by paying Oracle the additional license fee as specified
below:
<TABLE>
<CAPTION>
License Fee per each
Additional License
Program License Type License Level License Increment Increment
------- ------------ ------------- ----------------- --------------------
<S> <C> <C> <C> <C>
RDB Server Named User Deployment 100 $88,825.00
TRACE/Expert Option Named User Deployment 100 $5,700.00
Hot Standby Option Named User Deployment 100 $28,500.00
</TABLE>
-4-
<PAGE> 5
Each order placed for Additional License Increments must be at least
$10,000 in net license fees; applicable sales tax will be added to the fee.
All applicable fees shall be due and payable on the date that Customer
notifies Oracle in writing of its exercise of this option; Oracle has no
shipment obligation. Upon election, this payment obligation is
non-cancelable, and the sum paid is nonrefundable. At the time of election,
Customer may obtain Technical Support services from Oracle for Additional
License Increment at Oracle's applicable Technical Support fees and
policies in effect when such services are ordered.
Customer and Oracle agree that the terms and pricing of this Order Form shall
not be disclosed without the prior written consent of the other party. This
quote is valid through May 31, 1999 and shall become binding upon execution by
Customer and acceptance by Oracle.
NEW YORK MERCANTILE EXCHANGE ORACLE CORPORATION
Signature: /s/ Neal Wolkoff Signature:
----------------------- ----------------------
Name: Neal Wolkoff Name:
---------------------------- ---------------------------
Title: Exec. V.P. Title:
--------------------------- -------------------------
Effective Date: 5-24-99
------------------
-5-
<PAGE> 6
ORACLE(R)
JANUARY 1999 PRICE LIST DEFINITIONS
"CONCURRENT DEVICES" (OR "CONCUR DEV"): is the maximum number of input devices
accessing the Programs at any given point in time. If multiplexing software or
hardware (e.g. a TP monitor, webserver product) is used, this number must be
measured at the multiplexing front-end.
"NAMED USER" (OR "NAMED") OR "DEVELOPER": is defined as an individual who is
authorized by Customer to use the Oracle Programs, regardless of whether the
individual is actively using Programs at any given time.
"CASUAL USER": is defined as an individual authorized by the Customer to only
run queries or reports against Oracle Applications Programs. Casual Users are
licensed to use any of the above Oracle Applications Programs for which Customer
has acquired Named User licenses.
"PRIMARY USAGE": is defined as each licensed user being counted only once as a
designated Named or Casual User of the Oracle Application he will use most.
However, a licensed Named or Casual User may access all Oracle Applications
licensed under the Agreement which have been licensed under the same licensing
methodology, regardless of the designated Oracle Application of primary use.
"MAILBOX": is defined as a point from which to send or receive electronic mail.
It is created when a user account or application is created in Oracle Office.
"COMPUTER": licensed for use on a single specified computer.
"PROCESSOR": shall be defined as the actual number of processors installed in
the licensed Computer and running the Oracle Programs, regardless of the number
of processors which the Computer is capable of running.
"CLIENT": a computer which (1) is used by only one person at a time, and (2)
executes Oracle software in local memory or stores the software on a local
storage service.
"FULL USE PROGRAMS": are unaltered versions of the Programs with all functions
intact.
"DEPLOYMENT PROGRAMS": may be used only to execute existing applications or
reports. They may not be used to build or modify reports or applications.
Deployment Programs are to be generated by Customer from Full Use Programs.
"APPLICATION SPECIFIC PROGRAMS" (OR "APP SPECIFIC"): shall mean Programs which
are limited to use solely for Customer's application software defined on the
Order Form. Application Specific Programs are to be generated by Customer from
Full Use programs.
"WEB SPECIFIC PROGRAM(S)" (OR "WEB SPECIFIC"): shall mean Program licenses which
may only be accessed by Clients via Internet networking protocols.
Notwithstanding any use restrictions in the Agreement or Oracle Program License
Terms, Customer's applications many only allow third party web access to a
licensed Web Specific Program for viewing, querying, or adding data only, so
long as such use is in accordance with the other terms of the Agreement.
For Oracle Human Resources and Oracle Training Administration, "EMPLOYEE" is
defined as an individual who is actively managed by the Programs. The term
"Employee" includes, without limitation, Customer employees, contractors,
retirees, and COBRA dependents.
For Oracle Payroll, "EMPLOYEE" is defined as an individual whose payment, or
payment calculations, are generated by the Programs. The term "Employee"
includes, without limitation, Customer employees, contractors, retirees, and
employees covered by workers compensation laws or regulations.
For Oracle Time Management, "EMPLOYEE" is defined as an individual who submits
timecards or other time records for payroll processing.
For Oracle Self-Service Human Resources, Oracle Self-Service Purchasing, Oracle
Self-Service Expenses, and Business Intelligence System (BIS) Applications,
"EMPLOYEE" is defined as an active employee of Customer.
"FOUNDATION SERVICES": This is limited support, and any license for which it is
purchased is not a Supported Program License.
An "EDUCATION UNIT" entitles Customer to acquire education products and services
as specified in the Oracle Education catalogue in effect at the time an
Education Unit is utilized. Education Units are only valid for 12 months from
the Effective Date of the Order or as specifically stated in the applicable
Order. Education Unites may only be used in the country where the Education
Units were acquired or within the Territory defined in the applicable Order.
Customer may be required to execute standard Oracle ordering materials in
conjunction with utilizing Education Units.
"ORGANIZATIONAL CHANGE MANAGEMENT SERVICES": are services for assisting
Customers in managing change in their organizations. Customer's discounts for
consulting or training do not apply to such Organizational Change Management
Services.
A "SUITE" consist of all the functional software components described in the
Documentation.
"MODULE": shall mean a functional software component of a Suite or bundle.
-6-
<PAGE> 7
ORACLE(R)CREDIT CORPORATION PAYMENT SCHEDULE
Page 1 of 1 (ORACLE PRODUCT) NO.
- -----------
<TABLE>
<S> <C> <C>
Customer: New York Mercantile EXECUTED BY CUSTOMER (authorized signature):
-------------------------
Exchange Inc. By: Neal Wolkoff
------------------------- ------------------------------------------------------------
Address: One North End Ave. Name: Neal Wolkoff
------------------------- ------------------------------------------------------------
New York, NY 10282 Title: Executive Vice President
------------------------- ------------------------------------------------------------
Contact: EXECUTED BY ORACLE CREDIT CORPORATION:
-------------------------
Phone: By:
------------------------- ------------------------------------------------------------
Order: dated Name:
------------------------- ------------------------------------------------------------
Agreement dated Title:
------------------------- ------------------------------------------------------------
PPA No.:
Payment Schedule Effective Date:
dated
------------------------- ------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SYSTEM PAYMENT SCHEDULE:
- ------ ----------------
Payment Amount Due Date:
Software: $919,591 $368,000 1-Oct-99
-------------------------
Support: $841,500 Year 1, 2, & 3 $587,045 1-May-00
-------------------------
Education: $587,046 1-May-01
-------------------------
Consulting: $219,000 1-May-02
-------------------------
Other: Four (4) payments due and payable as set
------------------------- forth above.
System Price: $1,761,091
-------------------------
</TABLE>
Optional (if this box is checked):
[ ] The System was ordered from an alliance member/agent of Oracle Corporation,
whose name and address is specified below, by executing an Order, Customer has
directly licensed the Software from Oracle Corporation as Supplier pursuant to
the Agreement. For this Payment Schedule, the alliance member/agent is also a
Supplier, and the Order and Agreement shall each be considered a separate
Agreement hereunder. OCC shall be provided with an Order executed by Customer.
Alliance members/agents are not authorized to waive or alter any term or
condition of this PPA. Neither OCC nor Assignee shall be responsible to Customer
for any claim or liability pertaining to the actions or statements of any
alliance member/agent.
OCC may add the applicable Taxes due on the System Price to each Payment Amount,
based on the applicable tax rate invoiced by Supplier at shipment, but only if
OCC is provided with invoices between Customer and alliance member/agent for the
System (specifying applicable Taxes) within ten days of the Payment Schedule
Effective Date.
Alliance Member/Agent:
------------------------------------------------------
Address:
------------------------------------------------------
Contact: Phone:
------------------------------------------------------
This Oracle Payment Schedule constitutes a separate agreement, and incorporates
by reference the terms and conditions of the above Payment Plan Agreement
("PPA") between Oracle Credit Corporation ("OCC") and Customer for the
acquisition of the System from Oracle Corporation or any other party providing
any portion of the System, including an alliance member/agent of Oracle
Corporation ("Supplier"), and adds the following additional terms.
A. PAYMENTS: This PPA shall replace customer's payment obligation under the
Order and Agreement to Supplier, to the extent of the System Price listed above,
upon Customer's delivery of a fully executed Order, Agreement, PPA, and any
other documentation required by OCC, and execution of the PPA by OCC. Customer
agrees that OCC may add the applicable Taxes due on the System Price to each
Payment Amount based on the applicable tax rate invoiced by Supplier at
shipment. OCC may adjust subsequent Payment Amounts to reflect any change or
correction in Taxes due. If the System Price includes support fees for a support
period that begins after the first support period, such fees and the then
relevant Taxes will be paid to Supplier in the applicable support period as
invoiced from the Payment Amounts received in that period. The balance of each
Payment Amount, unless otherwise stated, includes a proportional amount of the
remaining components of the System Price.
B. SYSTEM: Software shall be accepted, and the services shall be deemed ordered
pursuant to the terms of the Agreement. Customer agrees that any software
acquired from Supplier to replace any part of the System shall be subject to the
terms of the PPA.
C. ADMINISTRATIVE: Customer agrees that OCC or its Assignee may treat faxes or
photocopies delivered to OCC as original documents; however, Customer agrees to
deliver signed documents if requested, Customer agrees that OCC may insert the
appropriate administrative information to complete the above form. OCC will
provide a copy of the final PPA upon request.
-7-
<PAGE> 1
EXHIBIT 10.9
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
New York Mercantile
Exchange
Cisco Systems Inc. SMARTnet Agreement
This SMARTnet Agreement ("Agreement") is made and entered into this 21 day of
5, 1996 ("Effective Date"), between Cisco Systems, Inc., a California
Corporation, with offices at 170 West Tasman Drive, San Jose, California 95134
("Cisco") and New York Mercantile Exchange, a New York corporation, with offices
at 4 World Trade Center, New York, NY 10048 ("Customer").
All notices intended for the parties shall be effective if sent to their
respective addresses above; if to Cisco, attention Customer Service Manager, if
to Customer, attention: General Counsel, Chief Information Officer ("Notice").
Cisco agrees to furnish, either directly or through a Cisco-approved service
provider ("Cisco Partner"), support services on Product listed in the attached
Equipment Schedule upon issuance of a Customer Purchase Order.
IN WITNESS WHEREOF, the duly authorized representatives of the parties hereto
have caused this Agreement to be duly executed.
CISCO SYSTEMS, INC. NYMEX (New York Mercantile Exchange)
By: /s/ William Conlon By: /s/ Allen J. Feryus
-------------------------------- ---------------------------------
Name: William Conlon Name: Allen J. Feryus
------------------------------ -------------------------------
Title: Vice President Worldwide Title: Sr. Vice President
Sales Finance
----------------------------- ------------------------------
Date: 10/4/96 Date: 9/30/96
------------------------------ -------------------------------
<PAGE> 2
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
GENERAL TERMS AND CONDITIONS
I. DEFINITIONS.
A. "Advance Replacement" means a Cisco process to ship
replacement product in advance of failed/defective product
receipt.
B. "Equipment Schedule" means the list of Customer Product
attached hereto as Attachment A.
C. "Hardware" means tangible Cisco product delivered to Customer.
D. "Maintenance Release" means an incremental release of Cisco
software that provides maintenance fixes and may provide
additional software features. Maintenance releases are
designated by Cisco as a change in the digit(s) to the right
of the tenths digit of the software product version number
[x.x.(x)].
E. "Product" means both Hardware and Software.
F. "Product Release" means a release of a Cisco software product
that is designated by Cisco as a change in the ones digit of
the product version number [(x).x.x].
G. "Software Update Service" means that service requested by
Customer for shipment of software Version Release and
Maintenance Releases.
H. "Software" means software programs licensed to Customer by
Cisco.
I. "Version Release" means an incremental release of Cisco
software that provides maintenance fixes and additional
software features. Version releases are designated by Cisco as
a change in the tenths digit(s) of the software product
version number [x.(x.).x].
J. "Releases" shall mean the Maintenance Releases, the Product
Releases and the Version Releases.
K. "Volume Purchase Agreement" shall mean the Volume Purchase
Agreement, dated as of even date herewith, by and between
Customer and Cisco.
II. TERM. This Agreement will commence, with respect to the Pilot Phase
Products (as defined in the Volume Purchase Agreement), on October 1,
1996 and, with respect to the O.N.E. Phase Products (as defined in the
Volume Purchase Agreement), on January 1, 1997 (unless Customer places
any such Products into live service earlier, in accordance the Volume
Purchase Agreement) and will continue in full force and effect until 15
months from such respective dates unless earlier terminated pursuant to
the terms and conditions contained herein. Maintenance services under
this Agreement shall be provided by Cisco to Customer free of charge
for the first three months of each such 15 month period. Cisco will
provide notice to Customer ninety (90) days prior to the end of the
then-current term indicating whether Cisco intends to renew this
Agreement. In the event Cisco desires to renew this Agreement, Customer
will respond to Cisco's notice within thirty (30) days of Customer's
receipt of such notice indicating whether Customer desires to renew
this Agreement. In the event either party hereto decides not to renew
this Agreement, this Agreement will terminate at the end of the
then-current term, unless earlier
2
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Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
terminated pursuant to the terms and conditions contained herein. Any
termination of this Agreement shall be entirely without liability to
either party except as set forth below.
III. SERVICE RESPONSIBILITIES OF CISCO. In consideration of the maintenance
charges paid to Cisco by Customer hereunder, Cisco shall provide the
following support services in accordance with the provisions of this
Agreement.
A. Cisco Support Services:
1. Cisco will assist Customer, by telephone or
electronic mail with information related to equipment
system use and configuration and with
troubleshooting. Further, Cisco will provide Customer
with the Software Update Service described in Section
III(A)(4) below. Cisco will use commercially
reasonable efforts to generate work-around solutions
to reported Software problems or will implement a
Cisco-installed patch to the Software, at its
discretion. For a software patch, Cisco will ship new
firmware (Maintenance Release) to the Customer for
the Product experiencing the problem, or provide a
network-bootable software image, as Customer and
Cisco agree. Customer will provide Cisco with a
priority level for all calls placed with Cisco in
accordance with the Problem Prioritization and
Escalation Guide set forth in Appendix B attached
hereto and made a part hereof and Cisco will provide
all support services hereunder in accordance with
such Guide.
2. 24-hour 7-day a week Priority 1 and 2 telephone
support to Customer as defined in APPENDIX B. North
American telephone support outside of Cisco business
hours includes one (1) hour callback for technical
assistance. Outside of North America, the Cisco
Partner will provide all telephone support to
Customer during normal business hours; however,
outside of normal business hours priority one and
priority two telephone support requests will be
handled directly by Cisco. Cisco will use best
efforts to provide general information, configuration
assistance or installation assistance outside of
normal business hours. Response times for Priority 3
and Priority 4 telephone support to Customer as
defined in APPENDIX B outside of normal business
hours shall be no later than the next business day.
3. During the term of this Agreement, Cisco shall
support the release(s) of the Software that is in use
by Customer at the time of such support, provided
such release(s) is not more than one (1) Product
Release prior to the then-current Product Release
which is available from Cisco. In the event the
release(s) that is in use by Customer at the time of
Cisco's provision of support hereunder is more than
one (1) Product Release prior to the then-current
Product Release which is available from Cisco, Cisco
may require Customer to upgrade to a more current
Product Release if such upgrade is necessary for
Cisco to meet its support obligations hereunder.
4. Cisco shall provide Customer with unencumbered access
to any and all new Releases or work-arounds via the
Cisco Connection.
5. Cisco will bear the cost for shipment to Customer of
all remedial materials and any and all other
materials shipped by Cisco to Customer in connection
with
3
<PAGE> 4
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
Cisco's support obligations hereunder. Shipments are
made via express transportation. Request for
alternative carriers will be at Customer's expense.
6. Cisco will provide to Customer access to the Cisco
Connection. This system provides the Customer with
technical and general information on Cisco products,
and access to Cisco's on-line software library.
7. Cisco shall provide, at no charge, one paper copy of
documentation for each Product Release; Cisco shall
also provide, at no charge, electronic access to
documentation on CD ROM, and if available, via Cisco
Connection. Additional paper copies of documentation
may be purchased from Cisco.
8. Cisco will use commercially reasonable efforts to
maintain an adequate supply of spare parts and
equipment necessary to meet its service obligations
hereunder.
B. Advance Replacement Services.
1. Customers will report failed Hardware to Cisco's
Technical Assistance Center (TAC). In North America,
the TAC is maintained by Cisco. Outside of North
America, the TAC is maintained by the Cisco Partner.
If failed Hardware is reported to the TAC before 3:00
p.m., Pacific Standard Time Monday through Friday
(excluding scheduled local holidays), the appropriate
TAC will ship a replacement part to arrive the next
business day. For calls after 3:00 p.m., Pacific
Standard Time, the replacement part will be shipped
the following business day, provided, however, that
Customer may report failed Hardware related to a
Priority 1 or Priority 2 problem at any time to the
TAC and the appropriate TAC shall use its
commercially reasonable efforts to ship a replacement
part to Customer as soon as possible.
2. Cisco will supply all necessary advance replacement
Hardware for Customer. Replacement parts will be
either now or equivalent to new at Cisco's
discretion. All replacement parts will be shipped by
Cisco at Cisco's expense, and such expense will
include insurance against risk of loss until received
by Customer at such destination designated by
Customer in writing.
IV. SERVICE RESPONSIBILITIES OF CUSTOMER.
A. Customer will provide Cisco with a priority level for all
calls placed with Cisco (see APPENDIX B.).
B. Customer is responsible for testing all replacement Product to
verify any damage in transit. Failures and/or mis-shipments
must be reported to Cisco within two (2) business days of
receipt. For purposes of this Agreement, "business day" shall
mean any day which is not a Saturday, Sunday or a day on which
Customer is closed for business.
C. Customer shall provide full and unrestricted access to the
Product via Telnet through the Internet or via modem such that
problems may be diagnosed and corrected remotely.
D. Customer is required to notify Cisco of Customer's acceptance
of updated firmware not more than ten (10) business days after
Customer's receipt of such firmware.
4
<PAGE> 5
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
E. Deleted.
F. Customer agrees to stay reasonably current with Product
Releases so as to be at least within one release of the latest
Product Release.
G. All reasonable travel expense, if Cisco is requested to
perform on-site service. Engineering time will be billed at
the then-current applicable "Time and Materials" rates. The
"Time and Materials" rates in effect on the date hereof are
set forth in Appendix A attached hereto and made a part
hereof.
H. Return of Hardware to Cisco. For Hardware returned to Cisco,
Customer is responsible for:
1. Proper packing of parts being shipped to Cisco,
Including description of failure and written
specification of any other changes or alteration of
the Product, such as Hardware or firmware updates.
2. Insurance of all packages sent to Cisco. Parts should
be insured for replacement cost, and shipped FOB
Cisco's Repair Center.
3. Defective Hardware must be returned to Cisco within
10 business days of Customer's receipt from Cisco of
the replacement Hardware; otherwise, the list price
of the Hardware will be charged.
4. Complying with Cisco's RMA procedure for all
shipments to Cisco, as follows:
a. Each request to Cisco for an RMA number must
specify the number, type, and serial number
for each part to be replaced.
b. Product sent back to Cisco must agree
exactly in the number, type, and serial
numbers associated with the RMA transaction.
c. Return of parts is handled as follows:
If shipped by Cisco: If shipped by the
Cisco Systems, Inc. Cisco Partner, the
c/o Sequel parts are returned
2300 Central Expressway to the Cisco Partner.
Building 10 South Dock 3-6
Attn.: RMA Dept.
Santa Clara, CA 95054
V. SERVICES NOT COVERED UNDER THIS AGREEMENT.
A. Any customization of Software.
B. Any labor to install firmware.
C. Any reasonable expenses incurred to visit Customer's location,
except as required during escalation of problems by Cisco.
5
<PAGE> 6
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
D. Support or replacement of Product that is altered, modified,
mishandled. destroyed or damaged by natural causes or damaged
due to a negligent or willful act or omission by Customer or
use by Customer other than as specified in the applicable
Cisco-supplied documentation.
E. Services to resolve software or hardware problems resulting
from third party products or causes beyond Cisco's control.
F. Services for non-Cisco software installed on any Cisco
equipment.
G. Any Hardware upgrade required to run new or updated Software.
In the event a Hardware upgrade is necessary; Cisco will
provide Customer with as much advance notice as possible.
VI. EQUIPMENT SCHEDULE AND CHARGE.
A. Product covered under this Agreement is listed in ATTACHMENT A
which may be revised to add, delete or upgrade Product by
Customer's purchase order requesting such revisions and
Cisco's acceptance thereof.
B. Fees are specified in APPENDICES C-1, C-2, and C-3, and may be
changed upon ninety (90) days Notice. Fees for out-of-scope
services are specified in Attachment B, and may be changed by
Cisco upon ninety (90) days written notice to Customer on an
annual basis; provided, however, that the percentage of any
price increase shall not exceed the Consumer All-Urban Price
Index inflation rate as published by the U.S. Government for
the calendar year immediately preceding the calendar year in
which such price increase will be effective. In the event of
any price increase whatsoever, Customer may terminate this
Agreement, or the provision of services for the particular
Products for which the service price has increased, upon
thirty (30) days' prior written notice to Cisco. All prices
are exclusive of any taxes and duties which, if applicable,
shall be paid by Customer unless Customer has provided to
Cisco an exemption certificate. Applicable taxes are billed as
a separate item.
C. Cisco acknowledges and agrees that:
1. Battery Park City Authority ("BPCA") is making
available to Customer certain sales and use tax
benefits in connection with Cisco's provision of the
Services to Customer hereunder (the "Work") and, more
specifically, that materials purchased in connection
with the Work, and equipment and items of personal
property purchased for incorporation into and as part
of the Work, are exempt from sales and use tax
provided that:
(i) such materials, equipment or items of
personal property have a useful life of one
(1) year or more, and are not consumables;
and
(ii) such materials, equipment or items of
personal property are installed and used in
that certain building to be constructed and
improved by or on behalf of Customer on Site
15 in Battery Park City, New York, New York
(the "NYMEX Building"), 15 Maiden Lane, New
York, New York and Four Word Trade Center,
New York, New York.
6
<PAGE> 7
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
Cisco further acknowledges and agrees that, in order
for Customer to enjoy the sales tax exemption, all
materials, equipment and items of personal property
must be purchased by Cisco, in each case as agent (or
sub-agent) for BPCA. The agency, and the resulting
sales tax exemption, are evidenced in a Sales Tax
Letter heretofore delivered by BPCA to Customer, and
attached to the Volume Purchase Agreement as Exhibit
E. Cisco understands that the exemption described
herein is an exemption from the sales or use tax that
is payable in connection with the acquisition of
certain materials to be installed in the NYMEX
Building -- and that labor (including installation
labor) and services, and the resale of items
originally subject to tax, are and shall remain
exempt from sales tax;
2. This Agreement relates to (i) the purchase or lease
of materials and fixtures for installation in, and/or
the construction of and any repairs and renovations
made to, the NYMEX Building, (ii) the purchase or
lease of equipment, machinery furniture and
furnishings for use by Customer and its members and
affiliates in the NYMEX Building and in certain
facilities of Customer located at 22 Cortlandt Street
and at 4 World Trade Center, New York, New York, and
(iii) the maintenance or repair of any of the
foregoing (the foregoing, collectively, the "NYMEX
Project"). The sales tax exemption provided with
respect to this Agreement shall only be available for
the NYMEX Project;
3. In no event shall BPCA have any liability (directly,
indirectly or otherwise) or performance obligation
under this Agreement;
4. This Agreement is being delivered by Customer on the
understanding that no amount of sales or use taxes is
included in the contract price and that all charges
under this Agreement shall exclude all taxes, duties
or charges of any kind (including, without
limitation, withholding or value added taxes) imposed
by any federal, state or local governmental entity
for products or services provided under this
Agreement. Cisco's authorized representative shall
promptly provide Customer with a certificate in the
form of Exhibit G attached to the Volume Purchase
Agreement, which shall identify with specificity and
certify the sales tax for any products or services
provided under this Agreement. Notwithstanding the
foregoing, all products and services provided
hereunder are exempt from sales tax, as evidenced by
the Sales Tax Letter attached to the Volume Purchase
Exhibit as Exhibit E; and
5. Cisco shall not acquire any equipment, materials or
services from any third party vendors in fulfilling
its obligations hereunder. Cisco will perform all of
the services described herein itself.
VII. PAYMENT TERMS. All Services are invoiced annually in advance, in U.S.
Dollars. Cisco shall use commercially reasonable efforts to submit
invoices between the first and fifth of the month for any equipment
received by Customer during the previous month. Upon credit approval by
Cisco, payment terms shall be net thirty (30) days from Customer's
receipt of an undisputed invoice from Cisco (the "Payment Period");
provided, however, that if an undisputed invoice is received between
the fifth and 15th day of such month, the Payment Period shall be 60
days and if an undisputed invoice is received between the 16th and last
day of such month, the Payment Period shall be 45 days. Any sum not
paid by Customer when due shall bear interest at the maximum rate
permitted by law until paid. Notwithstanding the foregoing, Customer
shall not be obligated to pay interest to Cisco on an overdue balance
unless Cisco provides Customer with
7
<PAGE> 8
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
prior written notice of such overdue balance (via mail or facsimile, in
accordance with section XIV(D) below), and Customer has not made
payment to Cisco for such overdue balance within five business days
after Customer's receipt of such notice.
VIII. REPRESENTATIONS AND WARRANTIES
Cisco represents, warrants and covenants to Customer that:
A. It is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation
and has all requisite power and authority to enter into and
perform its obligations under this Agreement;
B. This Agreement when executed will become the legal, valid and
binding obligation of it enforceable against it in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws
relating to the rights of creditors generally;
C. There are no material actions, suits, proceedings or
investigations commenced nor, to the best of its knowledge and
belief, contemplated or threatened against Cisco or its third
party licensors, if any, which could in any way affect the
Product, Advance Replacements, Releases or Cisco's provision
of its services hereunder nor, to the best of its knowledge
and belief, are there any existing facts or conditions which
may reasonably be expected to be a proper basis for any such
actions, suits, proceedings or investigations;
D. Neither the Software nor any Releases does or will contain any
codes, programs or commands intentionally written that will
cause a Customer's system to malfunction or self-destruct in
any manner. Cisco has or will use an anti-virus program on any
magnetic media in which any software is loaded and imbedded as
part of the Products delivered to Customer under this
Agreement or the Volume Purchase Agreement, before the
delivery of any such Products to Customer. Cisco shall
promptly provide to the Customer, at Customer's request and at
no additional cost to Customer, the means by which Customer
can check that there are no viruses in and that there has been
no tampering with such Products;
E. The Software and the Releases do not and will not infringe
upon any United States copyrights or patents, misappropriate
any trade secrets or infringe any servicemark, trademark or
any other proprietary or intellectual property rights of any
other person, firm or corporation. Cisco's sole and exclusive
obligation and Customer's sole remedy with respect to this
warranty and to the Software and Releases's infringement upon
any United States copyrights or patents, misappropriation of
any trade secrets or infringement upon any servicemark,
trademark or any other proprietary or intellectual property
rights of any other person, firm or corporation is termination
of this Agreement and those remedies stated in Section XII
(Intellectual Property Indemnity) herein;
F. While providing services to Customer hereunder, Cisco will
comply with (i) the requirements of the State Urban
Development Corp., the New York City Economic Development
Corp. and the Battery Park City Authority, as set forth in
Exhibits A, D and F to the Volume Purchase Agreement; (ii)
placarded standards for safety, emissions and network
compliance purposes and; (iii) all applicable laws,
regulations and rules to the extent necessary to ensure that
noncompliance with such laws, regulations and rules would not
reasonably be expected, individually or in the aggregate, to
have any
8
<PAGE> 9
Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
materially adverse effect on the business, operations,
affairs, financial condition, properties or assets of
Customer, its members and its affiliates taken as a whole or
on the ability of Customer to perform its obligations under
this Agreement; provided, however, that in the event Customer
determines that Cisco is not in compliance with such
aforementioned laws, regulations and rules, Customer shall
provide Cisco with a written notification which states the
exact nature of noncompliance. Cisco shall have thirty (30)
days from the earlier of (i) the date that Cisco became aware
of the noncompliance and (ii) receipt of the notification to
cure the non-compliance. Such cure period may be extended on a
day-to-day basis upon mutual consent.
G. Cisco has filed a Vendex Form, substantially in the form of
Exhibit B to the Volume Purchase Agreement and made a part
thereof, with the Economic Development Corporation and if such
application is denied, Cisco will forfeit all of its rights to
payment under this Agreement and will remain liable to Buyer
for all damages suffered by Buyer by reason of such denial;
H. While providing services to Customer hereunder, Cisco shall
procure and maintain for itself and its agents and employees
all insurance coverages as required by applicable law,
including without limitation, such insurance as is set forth
in Exhibit C to the Volume Purchase Agreement, each with an
insurer reasonably acceptable to Customer and naming Customer
as an additional insured. The certificates of insurance will
include a provision pursuant to which 30 days' notice must be
afforded Customer prior to the cancellation by either Cisco or
its insurer. Cisco will promptly replace any cancelled policy
with a substantially similar policy from an insurer with an
A.M. Best Reports rating which is at least A-VIII that is
licensed to do business in the State of New York and will
provide evidence of the same to Customer. If Cisco desires to
satisfy its insurance obligations under this Agreement through
self-insurance, it will first contact Customer and the terms
and conditions of such self-insurance shall be subject to
approval in writing of Customer and the Public Parties (as
defined in Exhibit A hereto), which approval will not be
unreasonably withheld;
I. The account team which will provide coverage and support to
Customer hereunder will consist of highly skilled and
experienced personnel. The members of the account team that
will be supporting Customer as of the date hereof are set
forth in Exhibit I to the Volume Purchase Agreement. In the
event Cisco desires to replace any such member, such
replacement shall possess a reasonable level of skill and
experience as the member being replaced and shall be subject
to the prior approval of Customer; and
J. Cisco will provide the services hereunder in a good and
workmanlike manner.
IX. REMEDIES AND LIMITATION OF DAMAGES.
A. This Agreement may be terminated immediately by Customer upon
Notice of Cisco's uncured material breach which persists for
greater than thirty (30) days; provided that Notice includes a
detailed description of the breach.
B. This Agreement may be terminated by Cisco and/or Cisco may
suspend its performance immediately upon Notice if: (a)
Customer fails to pay for the Services when due and fails to
make such payment within fifteen (15) business days after
Notice from Cisco of such past due payment; or (b) there
exists an uncured material breach by Customer which
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Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
persists for greater than thirty (30) business days, following
Notice; provided that Notice includes a detailed description
of the breach.
C. Subject to Section XIV(K) below, in the event this Agreement
is terminated by either party, neither party shall have any
further obligations to the other party under this Agreement.
Notwithstanding the foregoing, Cisco shall refund the price
paid for Services to be performed after the effective date of
termination, less any amounts then due Cisco. Termination of
this Agreement by Cisco shall not constitute a waiver by Cisco
for any amounts due Cisco.
D. SUBJECT TO SECTION XII(A) AND XIV(I) BELOW, IN NO EVENT SHALL
CISCO OR ITS SUPPLIERS OR CUSTOMER BE LIABLE FOR (A) ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS, OR LOST
DATA, OR ANY OTHER INDIRECT DAMAGES EVEN IF CISCO OR ITS
SUPPLIERS OR CUSTOMER HAS BEEN INFORMED OF THE POSSIBILITY
THEREOF, OR (B) ANY COSTS OR EXPENSES FOR THE PROCUREMENT OF
SUBSTITUTE EQUIPMENT OR SERVICES. NOTWITHSTANDING THE ABOVE,
THIS LIMITATION OF DAMAGES WILL NOT APPLY (1) IN RESPECT OF
ANY BREACH BY CUSTOMER OF THE PROVISIONS OF THE LAST SENTENCE
OF SECTION X OF THIS AGREEMENT IN ANY MATERIAL RESPECT, SOLELY
WITH RESPECT TO SOFTWARE WHICH HAS NOT BEEN PUBLICLY MADE
AVAILABLE WITHOUT RESTRICTION BY CISCO VIA THE INTERNET OR
OTHERWISE OR (2) WITH RESPECT TO ANY ACTS OF FRAUD OR
INTENTIONAL MISCONDUCT BY CUSTOMER OR CISCO.
X. SOFTWARE LICENSE. Customer acknowledges that it may receive Software as
a result of services provided under this Agreement. Customer agrees
that it is licensed to use such Software only on Hardware covered under
this Agreement and subject to the terms and conditions of the software
license set forth with the original Product. Customer shall not: copy,
in whole or in part, Software or documentation provided, however, that
Customer may make one copy of the Software and any Releases provided
hereunder for back-up and archival purposes only; modify the Software,
reverse compile or reverse assemble all or any portion of the Software;
or rent, lease, distribute, sell, or create derivative works of the
Software.
XI. CONFIDENTIAL INFORMATION. Each party hereto shall hold information of
any nature which is obtained by such party from the other party,
including, without limitation, the terms and conditions of this
Agreement, in strict confidence and shall not use or disclose, or
permit others to use or disclose, such confidential information except
in connection with the performance of its obligations to the disclosing
party hereunder. The obligations of confidentiality shall not apply to
information which (i) has entered the public domain except where such
entry is the result of the receiving party's breach of this Agreement;
(ii) prior to disclosure hereunder was already in the receiving party's
possession; (iii) subsequent to disclosure hereunder is obtained by the
receiving party on a confidential basis from a third party who has the
right to disclose such information to the receiving party; (iv) is
developed by or for the receiving party without access to the
confidential information and such independent development can be shown
by documentary evidence; (v) is ordered to be disclosed by a court,
administrative agency, or other governmental body with jurisdiction
over the parties hereto, provided that the ordered party will first
have provided the disclosing party with prompt written notice of such
required disclosure and will take reasonable steps to allow the
disclosing party to seek a protective order with respect to the
confidentiality of the information required to be disclosed. The
ordered party will promptly cooperate with and assist the disclosing
party, at the disclosing party's expense, in connection
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Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
with obtaining such protective order; or (vi) relates solely to the
design of the NYMEX local area network. The obligations of the
receiving party concerning confidentiality shall terminate five (5)
years following receipt of the confidential information.
XII. INTELLECTUAL PROPERTY INDEMNITY.
A. Cisco hereby indemnifies and holds Customer, its affiliates
and members, and their respective officers directors and
employees harmless from and against any and all penalties,
damages, costs, judgments, settlements, attorneys' fees and
disbursements actually paid in connection with claims by any
third person (1) that the Product or Release, any component
thereof or any services provided by Cisco under this Agreement
infringes a copyright, trademark, servicemark or any other
proprietary right of any third party or any United States
patent (for patents existing as of the date of the "first
customer shipment" (as defined below) of any Product or
Release), (2) that there has been a misappropriation of a
trade secret by Cisco, (3) arising from or relating to any
breach by Cisco of any representation or warranty contained in
Section VIII(E) above, or (4) in connection with or arising
out of any death, personal injury or damage to tangible
property to the extent caused by Cisco's employees' negligence
or willful misconduct relating to or arising from any services
performed pursuant to this Agreement. As a condition of this
indemnity, Customer will provide Cisco with prompt notice of
any claim and Cisco will control the defense and settlement of
such claims; provided, however, that Cisco will not settle any
claim, other than for monetary damages only, without
Customer's prior written consent which consent will not be
unreasonably withheld. Cisco will permit Customer to
participate in any such defense at Customer's expense to the
extent such participation is reasonable. Promptly upon Cisco's
request, Customer will provide all reasonable assistance in
the defense of such claims. If a temporary restraining order,
preliminary injunction or a final injunction is sought or
obtained against the use of the Product or Release or any
component thereof due to an infringement of a patent,
copyright, trademark or other proprietary right, or if the
Product or Release or any component thereof constitutes a
misappropriation of a trade secret or other proprietary right,
Cisco will, at its option and sole expense, either (a) procure
for Customer the right to continue using the Product or
Release or such component thereof or (b) replace or modify the
Product or Release or such component thereof so that the
Product or Release and all components thereof no longer
infringe such patent, copyright or trademark or constitute a
misappropriation of a trade secret; provided, however, that
such replaced or modified product or component thereof will
substantially conform to published specifications; or (c) if
Cisco is unable to perform (1) or (2) above within a
commercially reasonable time period, Cisco will refund to
Customer the monies paid for the affected Product or Release
or service as of the effective date of such termination, which
fees shall be depreciated on a five-year straight line
depreciation basis. For the purposes of this Section XII(A)
"first customer shipment" shall mean the date of first
shipment by Cisco to any commercial customer of any Product or
Release.
B. Cisco has no liability for any claim to the extent such claim
is based upon the combination, operation or use of any Product
supplied hereunder with equipment, devices or software not
supplied by Cisco; provided, however, that such combination,
operation or use is performed without Cisco's consent.
Further, Cisco has no liability for any claim to the extent
such claim is based upon the alteration or modification of any
Product supplied hereunder without Cisco's consent.
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Cisco Systems, Inc. Agreement No.: _________
CONFIDENTIAL
C. Notwithstanding any other provisions hereof, Cisco shall not
be liable for any claim based on Customer's use of the Product
as shipped after Cisco has informed the Customer of
modifications or changes in the Product required to avoid such
claims and offered to implement those modifications or
changes, if such claim would have been avoided by
implementation of Cisco's suggestions; provided, however, that
Customer did not provide Cisco with a reasonable opportunity
to implement Cisco's suggestions.
D. THE FOREGOING STATES THE ENTIRE OBLIGATION OF CISCO WITH
RESPECT TO INFRINGEMENT. THE FOREGOING IS GIVEN TO CUSTOMERS
SOLELY FOR THEIR BENEFIT. SUBJECT TO THE EXPRESS WARRANTIES
CONTAINED HEREIN, THE FOREGOING ALSO IS IN LIEU OF, AND CISCO
DISCLAIMS, ALL WARRANTIES OF NONINFRINGEMENT WITH RESPECT TO
THE PRODUCT.
XIII. LIMITATION OF LIABILITY. SUBJECT TO SECTIONS XII(A) AND IX(D) ABOVE AND
XIV(I) BELOW AND NOTWITHSTANDING ANYTHING ELSE HEREIN, ALL LIABILITY OF
CISCO AND ITS SUPPLIERS AND CUSTOMER UNDER THIS AGREEMENT OR OTHERWISE
SHALL BE LIMITED TO MONEY PAID TO CISCO UNDER THIS AGREEMENT DURING THE
TWELVE (12) MONTH PERIOD PRECEDING THE EVENT OR CIRCUMSTANCES GIVING
RISE TO SUCH LIABILITY, OR FIFTY THOUSAND DOLLARS ($50,000), WHICHEVER
IS GREATER. FURTHER, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, CISCO AGREES THAT RECOURSE BY CISCO FOR SATISFACTION OF
CLAIMS OF ANY NATURE AGAINST CUSTOMER, ITS MEMBERS, ITS AFFILIATES, OR
ANY OF ITS AND THEIR RESPECTIVE OFFICERS, DIRECTORS OR EMPLOYEES
ARISING IN CONNECTION WITH THE PERFORMANCE OF THIS AGREEMENT SHALL BE
LIMITED SOLELY TO RECOURSE AGAINST CUSTOMER.
XIV. GENERAL.
A. Force Majeure. Neither party hereto shall be liable for any
delay or failure in performance whatsoever due to any
occurrence which is beyond such party's reasonable control and
without its fault or negligence, including but not limited to,
Acts of God, earthquakes, shortages of supplies,
transportation difficulties, labor disputes, riots, war, fire,
epidemics, and similar occurrences; provided, however, that
any such force majeure event shall not excuse Buyer from its
obligation to pay to Cisco any money due and owing pursuant to
this Agreement prior to such force majeure event.
B. Choice of Law. This Agreement shall be interpreted and
construed and legal relations created shall be determined in
accordance with the laws of the State of California, without
regard to any conflict of law principles.
C. Amendments. Any changes or amendments to this Agreement may
only be effected by a written instrument signed by the parties
hereto.
D. Notices. Notices given by a party under this Agreement must be
in writing and must be either delivered in person; U.S.
mailed, first class, postage prepaid; air courier; or sent via
facsimile to the other party at the address set forth on the
signature page of this Agreement, and are deemed received
three (3) days after posting.
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Cisco Systems, Inc. Agreement No.: _________
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E. No Waiver. No waiver of rights under this Agreement by either
party shall constitute a subsequent waiver of this or any
other right under this Agreement.
F. Assignment. Neither party shall assign or otherwise transfer
this Agreement nor any rights under this Agreement without the
prior written consent of the other. Notwithstanding the
foregoing, this Agreement may be transferred or otherwise
assigned to any company or other entity which acquires all or
substantially all of the assets of such party. This Agreement
shall bind and inure to the benefit of the successors and
permitted assigns of the parties.
G. Export Restrictions. Customer shall obtain all licenses,
permits and approvals required by any government and shall
comply with all applicable laws, rules, policies and
procedures of the U.S. Government. Customer will indemnify and
hold harmless Cisco for any violation or alleged violation by
Customer of such laws, rules, policies and procedures.
Customer will control the defense and settlement of such
claims in accordance with Section XIV(I) below. Customer shall
not transmit, directly or indirectly, the Products or any
technical data (including processes and services) received
from Cisco, nor the direct product thereof, outside of the
United States without prior authorization of the U. S.
Government where such authorization is required.
H. Severability. In the event any of the terms of this Agreement
become or are declared illegal by any court of competent
jurisdiction, such term(s) shall be null and void and shall be
replaced by a mutually acceptable provision of like economic
intent and effect. All remaining terms of this Agreement shall
remain in full force and effect. Notwithstanding the
foregoing, if this paragraph becomes applicable and, as a
result; the value of this Agreement is substantially impaired
for either party, then the affected party may terminate this
Agreement by Notice to the other.
I. Personal Injury; Tangible Personal Property Indemnification.
Each party shall defend any proceedings or actions brought by
a third party against the other party to the extent based on a
claim that the negligence of the indemnifying party's
employees or agents directly caused bodily injury or damage to
tangible personal property. The indemnifying party agrees to
indemnify the indemnified party for direct damages including
court costs and reasonable attorneys' fees) awarded to third
parties as a result of such claims. The indemnifying party's
obligation to defend and indemnify hereunder is subject to the
indemnifying party being notified promptly in writing of the
third party proceeding. The indemnifying party will control
the defense and settlement of such claims; provided, however,
that the indemnifying party will not settle any claim, other
than for monetary damages only, without the other party's
prior written consent, which consent will not be unreasonably
Withheld. The indemnifying party will permit the other party
to participate in any such defense at such other party's
expense to the extent such participation is reasonable.
Promptly upon the indemnifying party's request, the other
party will provide all reasonable assistance in the defense of
such claims at the indemnifying party's expense.
J. Service Agreement. This Agreement constitutes a service
agreement and not a product warranty. Except for the express
warranties made hereunder with respect to the Product and the
Releases provided hereunder, Cisco makes no warranty to
Customer, either express or implied, with respect to any
products purchased by customer, except for the Cisco standard
limited warranty as set forth in the information which
accompanies the equipment. CISCO SPECIFICALLY DISCLAIMS THE
IMPLIED WARRANTIES OF
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Cisco Systems, Inc. Agreement No.: _________
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MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR
ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE.
K. Survival. Sections VIII, IX(D), X, XI, XII and XIII and XIV
shall survive termination of this Agreement.
L. Nothing in this Agreement will be construed to constitute or
appoint either party hereto as the agent, partner, joint
venturer, representative, employer or employee of the other
party for any purpose whatsoever, or to grant to either party
any right or authority to assume or create any obligation or
responsibility, express or implied, for or on behalf of or in
the name of the other, or to bind the other in any way or
manner whatsoever.
M. This Agreement together with all appendices, exhibits,
schedules, attachments and addenda attached hereto or thereto
contains the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes any prior
agreement understanding, proposal or communication, oral or
written, between the parties with respect to such subject
matter and will not be varied, amended, or supplemented except
in a writing signed by both of the parties hereto. In the
event of a conflict between the terms and conditions of this
Agreement and the requirements of the State Urban Development
Corp., the New York City Economic Development Corp. and the
Battery Park City Authority, as set forth in Exhibits A, D and
F to the Volume Purchase Agreement, such requirements shall
control. Exhibits A through G and Exhibit I of the Volume
Purchase Agreement are hereby incorporated by reference and
made a part hereof.
N. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, and all of which, when
taken together, shall constitute one and the same instrument.
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Exhibit 10.10
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
CISCO SYSTEMS, INC.
NETWORK SUPPORTED ACCOUNT AGREEMENT
This Network Supported Account Agreement ("Agreement") is made and entered into
this 21 day of May 1996 ("Effective Date"), by and between Cisco Systems, Inc.,
a California corporation, with offices at 170 West Tasman Drive, San Jose,
California 95134 ("Cisco"), and New York Mercantile Exchange, a New York
corporation, with offices at 4 World Trade Center, New York, NY 10048 ("Buyer").
Cisco agrees to furnish NSA (Network Supported Account) services ("NSA
Services") identified below, subject to the terms and conditions of this
Agreement.
All notices intended for the parties shall be effective if sent to their
respective address above; if to Cisco, attention Customer Service Manager, if to
Customer, attention: General Counsel, Chief Information Officer ("Notice").
The NSA program is intended to supplement an existing hardware and/or software
maintenance Agreement. No hardware nor software support of any kind is offered
under this NSA agreement.
IN WITNESS WHEREOF, the duly authorized representatives of the parties hereto
have caused this Agreement to be duly executed as of the Effective Date.
CISCO SYSTEMS, INC. NEW YORK MERCANTILE EXCHANGE
By: /s/ William Conlon By: /s/ Allen J. Feryus
______________________________________ ______________________________
Name: William Conlon Name: Allen J. Feryus
____________________________________ ____________________________
Title: V.P. Worldwide Sales Finance Title: Sr. Vice President
___________________________________ ___________________________
Date: 10/4/96 Date: 9/30/96
____________________________________ ____________________________
GENERAL TERMS AND CONDITIONS
1. TERM. This Agreement will commence, with respect to the O.N.E. Phase
Products (as defined in the Volume Purchase Agreement dated as of even
date herewith, by and between Buyer and Cisco ("Volume Purchase
Agreement"), on January 1, 1997 (unless Buyer places any such Products
into live service earlier, in accordance with the Volume Purchase
Agreement) and will continue in full force and effect until 15 months
from such date unless earlier terminated pursuant to the terms and
conditions contained herein. Cisco will provide notice to Buyer ninety
(90) days prior to the end of the then-current term indicating whether
Cisco intends to renew this Agreement. In the event Cisco desires to
renew this Agreement, Buyer will respond to Cisco's notice within
thirty (30) days of Buyer's receipt of such notice indicating whether
Buyer desires to renew this Agreement. In the event either party hereto
decides not to renew this Agreement, this Agreement will terminate at
the end of the then-current term.
2. SERVICE RESPONSIBILITIES OF SELLER. For the yearly maintenance charge
stated herein (see Section 5), Cisco shall provide the NSA Services
described below:
A. Cisco agrees to designate an expert team of support personnel
("NSA Support Team") to act as the primary interface with
Buyer. Each member of the NSA Support Team will be
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Cisco Systems, Inc. Agreement No.:________________
CONFIDENTIAL
a Cisco Certified Internetworking Expert ("CCIE") in a
specific area: at least one each in local-area networking,
wide-area networking, and IBM networking. One NSA Support Team
member will be the primary point of contact for all of the
Buyer's technical support needs, both proactive and reactive.
The other members of the NSA Support Team will function both
as additional resources and as backups for the primary
contact. Each member of the NSA Support Team will carry pagers
and cellular phones and will be available from 5:00 A.M. to
6:00 P.M. Pacific Time, Monday through Friday, excluding
Cisco's holidays as set forth In APPENDIX A. Each member of
the NSA Support Team will be familiar with the Buyer's staff,
operations, on-line topology and network. The NSA Support Team
will keep diagrams and updated configurations of Buyer's
internetworks on file at the Cisco Technical Assistance Center
(TAC).
B. Upon execution of this Agreement, Cisco shall schedule with
Buyer, as mutually agreed, one three-day visit to Buyer's site
to review Buyer's network and operations. Additional visits
will be as mutually agreed. During the initial visit, the NSA
Support Team will develop an understanding of Buyer's
business, network, and procedures and familiarize itself with
the support staff. Further, the NSA Support Team will work
with Buyer to ensure that the latest configuration files and
topology maps of Buyer's networks, including software release
information, are on file with Cisco. The NSA Support Team will
also develop, together with Buyer's staff, a set of mutually
agreed upon procedures and contacts for placing support calls
and resolving problems under this Agreement.
C. The NSA team will provide support for the escalation of
critical problems impacting the Buyer's network. For normal,
non-critical problem resolution involving hardware failure or
software problems, the Buyer should contact the technical
assistance center of their service provider.
D. The NSA Support Team will preview any new configuration or
configuration changes to Buyer's network before installing
them in the network to help prevent the possibility of
installing a faulty configuration. Further, the NSA Support
Team will use commercially reasonable efforts to periodically
monitor Cisco's list of bugs and check the relevance of such
list to Buyer's network. In the event the NSA Support Team
finds any relevant bugs, it will disclose such bug information
to Buyer, which disclosure shall include any known conditions
of the occurrence of such bugs, the symptoms, and possible
workarounds or applicable software fixes.
E. Upon Buyer's prior written request, the NSA Support Team shall
use commercially reasonable efforts to review Buyer's network
design and configuration. The NSA Support Team will provide
written report summary of Buyer's information, change impact
analysis and alternative recommendations, including, without
limitation, information regarding the impact that fixes to
known bugs, software maintenance releases, or new software
releases can have on Buyer's network. In the event Buyer
decides to make any changes to its network, the NSA Support
Team will assist Buyer's staff in developing a plan to
minimize the risk to Buyer's network operations.
F. Cisco will schedule weekly conference calls, at a time
mutually agreed, to review the status of the Agreement and the
NSA Services being provided, including, without limitation,
discussing the status of all existing trouble tickets,
evaluating the priority and escalation requirements of
critical issues and informing Buyer's staff of any new bugs
that may impact their networks and any new tools that may be
available to enhance Buyer's network performance.
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Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
G. Upon written request of Buyer, Cisco agrees to make available
a designated support contact on a 24-hour 7-day a week standby
basis to remotely assist Buyer in major network service
changes (e.g. major hardware or software upgrade, major site
installation). Buyer agrees to submit a detailed request and
schedule to Cisco prior to any such activity. Such requests
shall be limited to two (2) events per month with total
standby time not to exceed forty eight (48) hours in any one
month period. In the event Buyer requires additional NSA
Services, the parties agree to negotiate in good faith the
terms, conditions and maintenance fee for such additional NSA
Services.
H. Cisco will make NSA Services available in accordance with the
Problem Prioritization and Escalation Guideline described in
Appendix B.
3. SERVICE RESPONSIBILITIES OF BUYER
A. Buyer shall provide Cisco reasonable electronic access to
Buyer's network to assist the NSA Support Team in providing
NSA Services.
B. Buyer shall designate at least two (2) but not more than five
(5) technical representatives, who must be Buyer's employees
in a centralized network support center (Buyer's Technical
Assistance Center [TAC]), to act as the primary technical
interface to the NSA Support Team. Buyer agrees to maintain
not less than two (2) Cisco Certified Internetworking Expert
trained employees within one (1) year from the start of this
contract as designated contacts. Buyer's TAC shall maintain
centralized network management for all networks supported
under this Agreement.
C. Buyer's TAC shall provide Level 1 support to their end users.
Level 1 support is defined as having the necessary technical
staff with the appropriate skills to perform installations,
remedial hardware maintenance and basic hardware and software
configurations on Cisco products.
D. Buyer's TAC shall provide Level 2 support to their end users
for equipment. Level 2 support is defined as having the
necessary technical staff with the appropriate skills to
perform isolation, replication and diagnosis of
internetworking based problems on Cisco equipment. Buyer shall
not report software bugs to Cisco prior to attempting to
identify the source of such bugs and testing in Buyer's
network where appropriate. If the Buyer cannot duplicate the
bug in Buyer's network, Buyer and Cisco will cooperate in
attempting to replicate and resolve related software bugs in
either Buyer's or Cisco's test facility as mutually agreed. In
all cases Buyer will address software bugs on a best effort
basis to replicate same in Buyer's network and document
activity to Cisco before seeking further resolve with Cisco's
participation.
E. BUYER EXPRESSLY ACKNOWLEDGES AND AGREES THAT IT IS SOLELY
RESPONSIBLE FOR DETERMINATION AND IMPLEMENTATION OF ITS
NETWORK DESIGN REQUIREMENTS. IN NO EVENT SHALL SELLER BE
LIABLE FOR THE ACCURACY OR COMPLETENESS OF THE INFORMATION
CONTAINED IN ANY DESIGN REPORT, NOR FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE FURNISHING,
PERFORMANCE, OR USE OF SUCH INFORMATION.
F. Buyer shall bear the cost of all reasonable travel expenses of
Cisco if Cisco is requested to perform on-site visits other
than the initial setup visit described in Section 2.E. In
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Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
such case, engineering time will be billed at the travel and
labor rates referred to in Appendix A.
G. Deleted.
H. Buyer will provide Cisco with a priority level for all calls
placed with Cisco (see Appendix B.).
I. Buyer will provide Cisco a network topology map and topology
updates as required to support Buyer's network.
4. SERVICES NOT COVERED BY THIS AGREEMENT
A. Customization of existing software for non-standard
applications.
B. Labor to install firmware at Buyer's location.
C. Travel and other associated expenses required to visit Buyer's
location, except as required herein.
D. Support or replacement of software that is altered, modified,
mishandled, destroyed or damaged by natural causes or damaged
due to negligence of Buyer.
E. Software problems resulting from third party products used by
Buyer without Cisco's consent or causes beyond Cisco's
control.
F. Software support that has been superseded by a maintenance
release by twelve (12) months or two (2) Software releases.
G. Any hardware upgrade of equipment required to accept a new
software release.
5. NSA CHARGES
A. The charges for NSA Services shall be based on the pricing
schedules set forth in Appendix A and Appendix C, attached
hereto, and are payable in US Dollars.
B. Cisco will notify Buyer of any changes to the pricing schedule
for any Renewal Term upon sixty (60) days' Notice prior to the
beginning of such term; provided, however, that the percentage
of any price increase shall not exceed the Consumer All-Urban
Price Index inflation rate as published by the U.S. Government
for the calendar year immediately preceding the calendar year
in which such price increase will be effective. In the event
of any price increase, Buyer may exercise its option not to
renew this Agreement without liability to either party hereto
by giving written notice to Cisco thirty (30) days prior to
the end of the then-current term.
C. Cisco acknowledges and agrees that:
1. Battery Park City Authority ("BPCA") is making
available to Buyer certain sales and use tax benefits
in connection with Cisco's provision of the Services
to Buyer hereunder (the "Work") and, more
specifically, that materials purchased in connection
with the Work, and equipment and items of personal
property
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Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
purchased for incorporation into and as part of the
Work, are exempt from sales and use tax provided
that:
(i) such materials, equipment or items of
personal property have a useful life of one
(1) year or more, and are not consumables;
and
(ii) such materials, equipment or items of
personal property are installed and used in
that certain building to be constructed and
improved by or on behalf of Buyer on Site 15
in Battery Park City (the "NYMEX Building"),
New York, New York (the "NYMEX Building"),
15 Maiden Lane, New York, New York, 22
Cortlandt Street, New York, New York and
Four World Trade Center, New York, New York.
Cisco further acknowledges and agrees that, in order
for Buyer to enjoy the sales tax exemption, all
materials, equipment and items of personal property
must be purchased by Cisco, in each case as agent (or
subagent) for BPCA. The agency, and the resulting
sales tax exemption, are evidenced in a Sales Tax
Letter heretofore delivered by BPCA to Buyer, and
attached to the Volume Purchase Agreement as Exhibit
E. Cisco understands that the exemption described
herein is an exemption from the sales or use tax that
is payable in connection with the acquisition of
certain materials to be installed in the NYMEX
Building - and that labor (including installation
labor) and services, and the resale of items
originally subject to tax, are and shall remain
exempt from sales tax;
2. This Agreement relates to (i) the purchase or lease
of materials and fixtures for installation in, and/or
the construction of and any repairs and renovations
made to, the NYMEX Building, (ii) the purchase or
lease of equipment, machinery, furniture and
furnishings for use by Buyer and its members and
affiliates in the NYMEX Building and in certain
facilities of Buyer located at 22 Cortlandt Street
and at 4 World Trade Center, New York, New York and
(iii) the maintenance or repair of any of the
foregoing (the foregoing, collectively, the "NYMEX
Project"). The sales tax exemption provided with
respect to this Agreement shall only be available for
the NYMEX Project;
3. In no event shall BPCA have any liability (directly,
indirectly or otherwise) or performance obligation
under this Agreement;
4. This Agreement is being delivered by Buyer on the
understanding that no amount of sales or use taxes is
included in the contract price and that all charges
under this Agreement shall exclude all taxes, duties
or charges of any kind (including, without
limitation, withholding or value added taxes) imposed
by any federal, state or local governmental entity
for products or services provided under this
Agreement. Cisco's authorized representative shall
promptly provide Buyer with a certificate in the form
of Exhibit G to the Volume Purchase Agreement which
shall identify with specificity and certify the sales
tax for any products or services provided under this
Agreement. Notwithstanding the foregoing, all
products and services provided hereunder are exempt
from sales tax, as evidenced by the Sales Tax Letter
attached to the Volume Purchase Agreement as Exhibit
E; and
5
<PAGE> 6
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
5. Cisco shall not acquire any equipment or materials
from or use the services of any third party vendors
in fulfilling its obligations hereunder. Cisco will
perform all of the services described herein itself."
6. PAYMENT TERMS
A. All NSA Services are invoiced yearly in advance. All other
charges for additional services (Appendix A) or materials
requested under this Agreement will be invoiced in the month
following the services rendered. Any other schedule of payment
will be subject to a surcharge.
B. Payment is due thirty (30) days from Buyer's receipt of
invoice.
7. FORCE MAJEURE
If either party's performance under this Agreement, or of any
obligation hereunder, is interfered with by reason of any circumstance
beyond either party's reasonable control and without its fault or
negligence, including without limitation: 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 any representative of any such
government or legal body; labor unrest, including without limitation,
strikes, slowdowns, picketing or boycotts; then either party shall be
excused from its performance on a day-to-day basis to the extent of
such interference; provided, however, that such interference shall not
excuse Buyer from its obligation to pay to Cisco any money due and
owing pursuant to this Agreement prior to such force majeure event.
8. REPRESENTATIONS AND WARRANTIES
A. Cisco represents, warrants and covenants to Buyer that:
(a) It is a corporation duly organized, validly existing
and in good standing under the laws of the state of
its incorporation and has all requisite power and
authority to enter into and perform its obligations
under this Agreement;
(b) This Agreement when executed will become the legal,
valid and binding obligation of it enforceable
against it in accordance with its terms, except as
enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws
relating to the rights of creditors generally;
(c) There are no material actions, suits, proceedings or
investigations commenced nor, to the best of its
knowledge and belief, contemplated or threatened
against Cisco or its third party licensors, if any,
which could in any way affect the Software or Cisco's
provision of its services hereunder nor, to the best
of its knowledge and belief, are there any existing
facts or conditions which may reasonably be expected
to be a proper basis for any such actions, suits,
proceedings or investigations;
(d) While providing services to Buyer hereunder, Cisco
will comply with (i) the requirements of the State
Urban Development Corp., the New York City Economic
Development Corp. and the Battery Park City Authority
as set forth in Exhibits A, D and F to the Volume
Purchase Agreement; (ii) placarded standards for
safety, emissions and network compliance purposes;
and (iii) all applicable
6
<PAGE> 7
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
laws, regulations and rules to the extent necessary
to ensure that non-compliance with such laws,
regulations and rules would not reasonably be
expected, individually or in the aggregate, to have
any materially adverse effect on the business,
operations, affairs, financial condition, properties
or assets of Customer, its members and its affiliates
taken as a whole or on the ability of Customer to
perform its obligations under this Agreement;
provided, however, that in the event Customer
determines that Cisco is not in compliance with such
aforementioned laws, regulations and rules, Customer
shall provide Cisco with a written notification which
states the exact nature of noncompliance. Cisco shall
have thirty (30) days from the earlier of (i) the
date that Cisco became aware of the non-compliance
and (ii) receipt of the notification to cure the
non-compliance. Such cure period may be extended on a
day-to-day basis upon mutual consent.
(e) Cisco has filed a Vendex Form, substantially in the
form of Exhibit B to the Volume Purchase Agreement,
with the Economic Development Corporation and if such
application is denied, Cisco will forfeit all of its
rights to payment under this Agreement and will
remain liable to Buyer for all damages suffered by
Buyer by reason of such denial;
(f) While providing services to Buyer hereunder, Cisco
shall procure and maintain for itself and its agents
and employees all insurance coverages as required by
applicable law, including without limitation, such
insurance as is set forth in Exhibit C to the Volume
Purchase Agreement, each with an insurer reasonably
acceptable to Buyer and naming Buyer as an additional
insured. The certificates of insurance will include a
provision pursuant to which 30 days' notice must be
afforded Buyer prior to the cancellation by either
Cisco or its insurer. Cisco will promptly replace any
cancelled policy with a substantially similar policy
from an insurer with an A.M. Best Reports rating
which is at least A-VIII that is licensed to do
business in the State of New York and will provide
evidence of the same to Buyer. If Cisco desires to
satisfy its insurance obligations under this
Agreement through self-insurance, it will first
contact Buyer and the terms and conditions of such
self-insurance shall be subject to approval in
writing of Buyer and the Public Parties (as defined
in Exhibit A to the Volume Purchase Agreement) which
approval will not be unreasonably withheld;
(g) The NSA Support Team which will provide coverage and
support to Buyer hereunder will consist of highly
skilled and experienced personnel. The members of the
account team that will be supporting Buyer as of the
date hereof are set forth in Exhibit I to the Volume
Purchase Agreement. In the event Cisco desires to
replace any such member, such replacement shall
possess the same level of skill and experience as the
member being replaced and shall be subject to the
prior approval of Buyer; and
(h) Cisco will provide the NSA Services in a good and
workmanlike manner.
9. TERMINATION
A. In the event of any material breach of this Agreement by Cisco
which shall continue for thirty (30) or more days after
written notice of such breach (which notice shall include a
reasonably detailed statement of the nature of such breach)
shall have been given to Cisco
7
<PAGE> 8
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
by Buyer, Buyer shall have the right to terminate this
Agreement by providing written notice within ten (10) days
thereof to Cisco.
B. In the event Buyer falls to pay the charges for the NSA
Services or additional services when due, or is in material
breach of any term of this Agreement, Cisco shall have the
right to suspend its performance under this Agreement and/or
terminate this Agreement if Buyer falls to make such payments
or cure any such breach, as the case may be, within ten (10)
days of Buyer's receipt from Cisco of a written notice
specifying such failure to pay or such breach, as the case may
be.
C. Subject to Section 11.G below, in the event this Agreement is
terminated by either party, neither party shall have any
further obligations to the other party except that Cisco shall
refund to Buyer on a pro rata basis any portion of the yearly
maintenance charge paid for NSA service for the period
subsequent to the effective date of termination, less any
amounts then due Cisco for NSA services and/or additional
services performed prior to such termination. Termination of
this Agreement by Cisco shall not constitute a waiver by Cisco
for any amounts due Cisco for any NSA service or additional
services or material.
10. INTELLECTUAL PROPERTY INDEMNITY
A. Cisco hereby indemnifies and holds Buyer, its members, its
affiliates, and its and their respective officers, directors,
and employees, harmless from and against any and all damages,
costs, judgments, settlements, attorneys' fees and
disbursements actually paid by Buyer, its members, its
affiliates, and its and their respective officers, directors,
and employees in connection with claims by any third person
(1) that any Software release, any maintenance release or any
component thereof or any services provided by Cisco under this
Agreement infringes a copyright, trademark, servicemark or any
other proprietary right of any third party or any United
States patent (for patents existing as of the date of the
"first customer shipment" (as defined below) of any such
releases), (2) that there has been a misappropriation of a
trade secret by Cisco, (3) arising from or relating to any
breach by Cisco of any representation or warranty contained in
Section 8 above, or (4) in connection with or arising out of
any death, personal injury or damage to tangible property to
the extent caused by Cisco's employees' negligence or willful
misconduct relating to or arising from any services performed
pursuant to this Agreement. As a condition of this Indemnity,
Buyer will provide Cisco with prompt notice of any claim and
Cisco will control the defense and settlement of such claims;
provided, however, that Cisco will not settle any claim, other
than for monetary damages only, without Buyer's prior written
consent which consent will not be unreasonably withheld. Cisco
will permit Buyer to participate in any such defense at
Buyer's expense to the extent such participation is
reasonable. Promptly upon Cisco's request Buyer will provide
all reasonable assistance in the defense of such claims. If a
temporary restraining order, preliminary injunction or a final
injunction is sought or obtained against the use of any new
Software release, any maintenance release or any component
thereof due to an infringement of a patent, copyright,
trademark or other proprietary right, or if Software release,
maintenance release or any component thereof constitutes a
misappropriation of a trade secret or other proprietary right,
Cisco will, at its option and sole expense, either (a) procure
for Buyer the right to continue using the new Software
release, maintenance release or any component thereof or (b)
replace or modify the new Software release, maintenance
release or component thereof so that all new Software
releases, maintenance releases and components thereof no
longer infringe such patent, copyright or trademark
8
<PAGE> 9
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
or constitute a misappropriation of a trade secret; provided,
however, that such replaced or modified Software release,
maintenance release or component thereof will substantially
conform to published specifications; or (c) if Cisco is unable
to perform (a) or (b) above within a commercially reasonable
time period, Cisco will refund to Buyer the monies paid for
the affected new Software release, maintenance release or
component thereof as of the effective date of such
termination, which fees shall be depreciated on a five-year
straight line depreciation basis. For the purposes of this
Section 10(A), "first customer shipment" shall mean the date
of first shipment by Cisco to any commercial customer of any
new Software release, any maintenance release or any component
thereof.
B. Cisco has no liability for any claim to the extent such claim
is based upon the combination, operation or use of any Product
supplied hereunder with equipment, devices or software not
supplied by Cisco; provided, however, that such combination,
operation or use is performed without Cisco's consent.
Further, Cisco has no liability for any claim to the extent
such claim is based upon the alteration or modification of any
Product supplied hereunder without Cisco's consent.
C. Notwithstanding any other provisions hereof, Cisco shall not
be liable for any claim based on Buyer's use of the Product as
shipped after Cisco has informed the Buyer of modifications or
changes in the Product required to avoid such claims and
offered to implement those modifications or changes, if such
Claim would have been avoided by implementation of Cisco's
suggestions; provided, however, that Buyer did not provide
Cisco with a reasonable opportunity to implement Cisco's
suggestions.
D. THE FOREGOING STATES THE ENTIRE OBLIGATION OF CISCO WITH
RESPECT TO INFRINGEMENT. THE FOREGOING IS GIVEN TO BUYERS
SOLELY FOR THEIR BENEFIT. SUBJECT TO THE EXPRESS WARRANTIES
CONTAINED HEREIN, THE FOREGOING ALSO IS IN LIEU OF, AND CISCO
DISCLAIMS, ALL WARRANTIES OF NONINFRINGEMENT WITH RESPECT TO
THE PRODUCT.
11. LIMITATION OF LIABILITY
A. Notwithstanding Section 11.B below, each party shall be liable
for direct losses incurred by the other party due to bodily
injury or damage to tangible property, including covered
equipment, to the extent resulting from the negligence of each
party's employees or agents; provided, however, that nothing
in this paragraph shall affect or in any way increase Cisco's
obligation under this Agreement with respect to the
performance of the covered equipment.
B. SUBJECT TO 10.A ABOVE, NEITHER PARTY SHALL BE LIABLE FOR ANY
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY
NATURE WHATSOEVER INCLUDING, BUT NOT LIMITED TO, LOST PROFITS
OR LOST DATA, OR ANY COSTS OF OBTAINING SUBSTITUTE GOODS OR
SERVICES, FOR ANY BREACH OF THIS AGREEMENT OR FOR ANY ACTION
ARISING OUT OF ITS PERFORMANCE UNDER THIS AGREEMENT EVEN IF
SUCH PARTY HAS BEEN INFORMED OF THE POSSIBILITY THEREOF. THE
FOREGOING LIMITATION SHALL APPLY NOTWITHSTANDING ANY FAILURE
OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
9
<PAGE> 10
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
C. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
CISCO AGREES THAT RECOURSE BY CISCO FOR SATISFACTION OF CLAIMS
OF ANY NATURE AGAINST BUYER, ITS MEMBERS, ITS AFFILIATES, OR
ANY OF ITS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES
OR AGENTS ARISING IN CONNECTION WITH THE PERFORMANCE OF THIS
AGREEMENT SHALL BE LIMITED SOLELY TO RECOURSE AGAINST BUYER.
12. GENERAL
A. Neither party may assign or transfer this Agreement or any
rights or obligations hereunder without the prior written
consent of the other party. This Agreement constitutes the
entire agreement between Cisco and Buyer with respect to the
subject matter hereof and supersedes all previous
negotiations, proposals, commitments, writings, and
understandings of any nature whatsoever. In the event of a
conflict between the terms and conditions of this Agreement
and the requirements of the State Urban Development Corp., the
New York City Economic Development Corp. and the Battery Park
City Authority, as set forth in Exhibits A, D and F to the
Volume Purchase Agreement, such requirements shall control.
B. Any changes or amendments to this Agreement requested either
by Buyer or Cisco may only be effected if mutually agreed upon
by a written instrument signed by duly authorized
representatives of the parties hereto.
C. The rights and obligations of the parties and all
interpretations and performance of this Agreement shall be
governed in all respects by the laws of the State of
California except for its rules with respect to the conflict
of laws.
<TABLE>
<CAPTION>
IF TO CISCO, TO: IF TO BUYER, TO:
<S> <C> <C>
Cisco Systems, Inc. Before relocation: 4 World Trade Center
170 West Tasman Drive New York, NY
San Jose, California 95134 After relocation: One North End Avenue
ATTN: V.P. Customer Advocacy New York, NY
</TABLE>
D. Each party hereto shall hold information of any nature which
is obtained by such party from the other party, including,
without limitation, the terms and conditions of this Agreement
in strict confidence and shall not use or disclose, or permit
others to use or disclose, such confidential information
except in connection with the performance of its obligations
to the disclosing party hereunder. The obligations of
confidentiality shall not apply to information which: (i) has
entered the public domain except where such entry is the
result of the recipient party's breach of this Agreement; (ii)
prior to disclosure hereunder was already in recipient party's
possession; (iii) subsequent to disclosure hereunder is
obtained by the recipient party on a nonconfidential basis
from a third party who has the right to disclose such
information to the recipient party; (iv) is developed by or
for the receiving party without access to the confidential
information and such independent development can be shown by
documentary evidence; (v) is ordered to be disclosed by a
court, administrative agency, or other governmental body with
jurisdiction over the parties hereto, provided that the
ordered party will first have provided the disclosing party
with prompt written notice of such required disclosure and
will take reasonable steps to allow the disclosing party to
seek a protective order with respect to the confidentiality of
the information required to be disclosed. The ordered party
will
10
<PAGE> 11
Cisco Systems, Inc. Agreement No.: ____________
CONFIDENTIAL
promptly cooperate with and assist the disclosing party, at
the disclosing party's expense, in connection with obtaining
such protective order, or (vi) relates solely to the design of
the NYMEX local area network.
E. Section headings are inserted for convenience only and shall
not be used in any way to construe the terms of this
Agreement.
F. All references herein to "$" or "Dollars" are to US Dollars.
G. Notwithstanding the expiration or earlier termination of this
Agreement for any reason whatsoever, the parties' obligations
under Section 10 (Intellectual Property Indemnity), Section 11
(Limitation of Liability) and Section 12 (General) shall
survive such expiration or earlier termination and shall
remain in full force and effect.
H. In the event any one or more of the provisions of this
Agreement shall for any reason be held to be invalid, illegal
or unenforceable, the remaining provisions of this Agreement
shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable provision
of like economic intent and effect. No failure or delay by
either Party in exercising any right, power or privilege
hereunder will operate as a waiver or preclude further
exercise thereof.
I. Nothing in this Agreement will be construed to constitute or
appoint either party hereto as the agent, partner, joint
venturer, or representative of the other party for any purpose
whatsoever, or to grant to either party any right or authority
to assume or create any obligation or responsibility, express
or implied, for or on behalf of or in the name of the other,
or to bind the other in any way or manner whatsoever.
J. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, and all of which, when
taken together, shall constitute one and the same instrument.
K. Exhibits A through G and Exhibit I of the Volume Purchase
Agreement are hereby incorporated by reference and made a part
hereof.
11
<PAGE> 1
Exhibit 21.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation or
Name Organization
---- ----------------
<S> <C>
Commodity Exchange, Inc. New York
COMEX Clearing Association, Inc. New York
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 & Registration Statement No.
333-30332 of NYMEX Holdings, Inc. on Form S-4 of our report dated March 31,
2000, appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
April 12, 2000
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Daniel Rappaport and R. Patrick Thompson
and each of them (with full power to each of them to act alone), his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each of such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection with such matters, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that each of such attorneys-in-fact and agents or his substitute or his
substitutes may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES NAME AND TITLE DATE
---------- -------------- ----
<C> <S> <C>
/s/ DANIEL RAPPAPORT Chairman of the Board February 14, 2000
- ------------------------------------ (Principal Executive Officer)
Daniel Rappaport
/s/ PATRICK F. CONROY Senior Vice President -- Finance February 10, 2000
- ------------------------------------ (Principal Financial and
Patrick F. Conroy Accounting Officer)
/s/ STEPHEN ARDIZZONE Director February 10, 2000
- ------------------------------------
Stephen Ardizzone
/s/ MADELINE BOYD Director February 10, 2000
- ------------------------------------
Madeline Boyd
/s/ NEIL CITRONE Director, Secretary February 10, 2000
- ------------------------------------
Neil Citrone
/s/ ROBERT COAKLEY Director February 10, 2000
- ------------------------------------
Robert Coakley
/s/ CHARLES NAPIER COLLYNS Director February 10, 2000
- ------------------------------------
Charles Napier Collyns
/s/ JOHN CONHEENEY Director February 10, 2000
- ------------------------------------
John Conheeney
/s/ THOMAS COSTANTINO Director February 10, 2000
- ------------------------------------
Thomas Costantino
/s/ ANTHONY GEORGE GERO Director February 10, 2000
- ------------------------------------
Anthony George Gero
/s/ E. BULKELEY GRISWOLD Director February 8, 2000
- ------------------------------------
E. Bulkeley Griswold
/s/ SCOTT HESS Director February 10, 2000
- ------------------------------------
Scott Hess
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURES NAME AND TITLE DATE
---------- -------------- ----
<C> <S> <C>
/s/ STEVEN KARVELLAS Director February 10, 2000
- ------------------------------------
Steven Karvellas
/s/ HARLEY LIPPMAN Director February 10, 2000
- ------------------------------------
Harley Lippman
/s/ KEVIN MCDONNELL Director February 14, 2000
- ------------------------------------
Kevin McDonnell
/s/ GARY RIZZI Director February 10, 2000
- ------------------------------------
Gary Rizzi
/s/ RICHARD SAITTA Director February 10, 2000
- ------------------------------------
Richard Saitta
/s/ RICHARD SCHAEFFER Director, Treasurer February 10, 2000
- ------------------------------------
Richard Schaeffer
/s/ ROBERT STEELE Director February 7, 2000
- ------------------------------------
Robert Steele
/s/ MITCHELL STEINHAUSE Director February 10, 2000
- ------------------------------------
Mitchell Steinhause
</TABLE>
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Daniel Rappaport and R. Patrick Thompson
and each of them (with full power to each of them to act alone), his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement of NYMEX Holdings, Inc. on Form S-4, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
with such matters, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or his substitutes may lawfully
do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ DAVID GREENBERG Director April 5, 2000
- ------------------------------------
David Greenberg
/s/ JESSE B. HARTE Director April 5, 2000
- ------------------------------------
Jesse B. Harte
/s/ ROBERT HALPER Director April 5, 2000
- ------------------------------------
Name: Robert Halper
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE AMOUNTS DISCLOSED IN THE FINANCIAL DATA SUMMARY SHOULD BE READ IN
CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 36,592 14,353<F1>
<SECURITIES> 76,992 92,259
<RECEIVABLES> 19,068 9,715
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 141,509 128,700
<PP&E> 259,936 244,552
<DEPRECIATION> 31,323 21,552
<TOTAL-ASSETS> 392,494 375,282
<CURRENT-LIABILITIES> 20,840 15,861
<BONDS> 100,000 100,000
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 93,202 86,233
<TOTAL-LIABILITY-AND-EQUITY> 392,494 375,282
<SALES> 0 0
<TOTAL-REVENUES> 144,435 130,583
<CGS> 0 0
<TOTAL-COSTS> 114,579 111,679
<OTHER-EXPENSES> 4,984 5,344
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,721 7,958
<INCOME-PRETAX> 21,093 12,341
<INCOME-TAX> 8,903 6,263
<INCOME-CONTINUING> 12,190 6,078
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,190 6,078
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>INCLUDES CASH AND CASH EQUIVALENTS
</FN>
</TABLE>
<PAGE> 1
Exhibit 99.1
[proxy]
NEW YORK MERCANTILE EXCHANGE
SPECIAL MEETING OF MEMBERS OF THE
NYMEX DIVISION - , 2000
PROXY
I hereby constitute and appoint with full power of
substitution, as my proxy or proxies, to appear for me in my name, place and
stead, to cast my ballot with regard to the demutualization of the New York
Mercantile Exchange at the Special Meeting of Members of the NYMEX Division of
the New York Mercantile Exchange to be held on , 2000 and at any
adjournment thereof, all as more fully described in the proxy statement and
prospectus accompanying this proxy. My ballot is enclosed.
------------------------------
Signature of Member
----------------------- ------------------------------
Date Print Name of Member
If no direction is given on the ballot or if no ballot is enclosed, and if this
proxy is signed and returned, your vote will be cast in favor of the
demutualization.
<PAGE> 2
[ballot]
NEW YORK MERCANTILE EXCHANGE
SPECIAL MEETING OF MEMBERS
OF THE NYMEX DIVISION - , 2000
The Undersigned hereby votes as indicated below on the following matter:
Approval and adoption of the demutualization of the New York Mercantile Exchange
("NYMEX"), as more fully described in the proxy statement and prospectus
accompanying this ballot, in which:
1. NYMEX will merge with and into New York Mercantile Exchange,
Inc., a Delaware nonstock corporation, which will survive this
merger.
AND
2. Immediately thereafter, New York Mercantile Exchange, Inc.
will merge with NYMEX Merger Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of NYMEX Holdings, Inc. New York
Mercantile Exchange, Inc. will survive this merger as a
wholly-owned subsidiary of NYMEX Holdings, Inc.
/ / FOR / / AGAINST
THE BOARD OF DIRECTORS OF NYMEX RECOMMENDS
THAT YOU VOTE "FOR" THE PROPOSED DEMUTUALIZATION
