<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1933 for the fiscal year ended March 31, 1996, or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1933 for the period from ______________ to ______________.
Commission file number: 0-12378
-------
APERTUS TECHNOLOGIES INCORPORATED
---------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1349953
------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7275 Flying Cloud Drive
Eden Prairie, Minnesota 55344
-------------------------- --------------
(Address of principal executive (ZIP Code)
offices)
Registrant's telephone number, including area code: (612) 828-0300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.05 per share
Common Stock
purchase rights
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ----
The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 3, 1996 was approximately $55,950,000 (based on the last
sale price of such stock as reported by The Nasdaq Stock Market National Market
System).
As of June 3, 1996, 14,047,455 shares of the registrant's Common Stock, par
value $.05 per share, were issued and outstanding.
Documents Incorporated by Reference: Part II of this Form 10-K
-----------------------------------
incorporates by reference information from the Annual Report to Shareholders for
the fiscal year ended March 31, 1996 (the "Annual Report to Shareholders").
Part III of this Form 10-K incorporates by reference information from the Proxy
Statement dated June 12, 1996 for the 1996 Annual Meeting of Shareholders (the
"Proxy Statement").
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE>
Part I
Item 1. Business
Apertus Technologies Incorporated develops, manufactures, and markets
communication products that enable customers to integrate diverse networks,
data, and applications. The Company provides network gateway products that
facilitate interoperability between local area networks ("LANs") and
traditional, large-scale mainframe (legacy) systems, server-based software tools
that integrate data contained in legacy systems with client/server data, and
system management products that provide centralized management of distributed
networks.
The Company currently has three product groups. The Company's Network
Integration Products link open systems networks with IBM mainframe computing
systems. The Company's Data Integration Products integrate and cleanse data
from diverse sources for new business applications, such as data warehousing and
systems migration. The Company's Systems Management Products permit centralized
management of distributed networks.
On June 30, 1995, the Company acquired all of the capital stock of
BlueLine Software, Inc. ("BlueLine"). The total purchase price for BlueLine was
$8.75 million, of which approximately 50% was paid in cash and approximately 50%
was paid in common stock of Apertus. The Company paid the cash portion of the
purchase price from its cash on hand. BlueLine markets a number of software
tools that permit the centralized management of enterprise computer networks.
The purpose of the BlueLine acquisition was to expand the Company's product
offerings and sales and distribution channels in the distributed computer
systems management market.
The Company, a Minnesota corporation, was incorporated in March 1979. As
used herein, the "Company" and "Apertus" refer to Apertus Technologies
Incorporated together with its wholly owned subsidiaries.
Market
Background
The computer industry has undergone dramatic changes over the past
decade, and these changes have centered largely on bringing more computing power
to the desktop. However, desktop systems, which were designed to provide open
(non-proprietary) computing, were originally isolated from information contained
in larger legacy systems. This lack of integration resulted in costly and
inefficient computing enterprises. Over the past few years, connectivity between
desktop, client/server, midrange and mainframe systems has become an
increasingly high priority for most large corporations and organizations. Today,
desktop systems are often required to share data with larger legacy systems
maintained at the department, branch, or corporate level. These legacy systems
may be located in another part of the same office or across the world.
As corporations and other organizations make the transition from
traditional mainframe-oriented environments to new distributed computing
environments characterized by the use of client/server technology, they need
products to integrate the two computing systems. In addition, with the
explosion of the World Wide Web, new opportunities are emerging for integrating
Web sites with legacy applications. Apertus provides products that address
requirements for bridging legacy and open systems environments.
Target Market
Apertus's product lines are horizontal in nature. As a result, its
products are marketed to a broad spectrum of industries, including the
telecommunications, retailing, manufacturing, finance and
2
<PAGE>
banking and healthcare industries. Apertus's target customer base consists of
Fortune 1000 corporations in the commercial marketplace, government agencies,
original equipment manufacturers ("OEMs"), value added resellers ("VARs") and
systems integrators. The Company's products are sold in the United States and
internationally.
Historically, the Company has been successful in marketing its products
to the Regional Bell Operating Companies, which require significant
communication capabilities for sharing data across large, complex databases
contained in multiple mainframes. In the last several years, Apertus has
broadened its target market to include commercial customers outside the
telecommunications industry. In part because of the Company's acquisition of
Systems Strategies, Inc. ("SSI") in 1993, the Company has been able to broaden
its market to include a large number of Fortune 1000 corporations. During the
fiscal year ended March 31, 1996 ("fiscal 1996"), the Company opened new offices
in Germany and Canada, and has expanded its distribution network in Canada,
Europe, and the Pacific Rim. Currently, the Company has agreements with a number
of prominent OEMs that market the Company's products internationally.
Products
Network Integration Products
IBM computing environments continue to dominate most large corporations.
In recent years, many of these corporations have begun migrating from IBM's
proprietary computing systems and investing in open systems computing networks.
The challenge for these corporations is to find a way to integrate the IBM
legacy environments with open systems environments. Apertus addresses this need
for integration with its DataStar product line, sold directly to end user
organizations, and its EXPRESS product line, marketed primarily to OEMs,
systems integrators and VARs.
DataStar. The DataStar product line, consisting of a number of gateway
products, provides communications links between open systems network
environments and IBM mainframe and midrange host computers. The DataStar server
is a high-performance, channel-attached gateway system that assists corporations
in solving a variety of problems relating to the integration of IBM large-scale
systems technology with open systems, multi-protocol LANs. The DataStar is
available in three sizes, which enable it to meet a range of network needs. The
product features a modular architecture and switch-based backplane. As a
result, end-user customers are able to customize the DataStar to meet their
unique networking requirements.
The DataStar products provide a variety of gateway configurations:
Offload TCP/IP Gateway allows users of TCP/IP networks to transparently access
IBM SNA and BiSync hosts, TCP/IP Interconnect Controller provides users with a
high performance connection between TCP/IP networks and IBM hosts using TCP/IP
communications topologies, NetWare for SAA Gateway allows users of Novell's
NetWare to access channel-attached IBM host resources, SNA DSPU Gateway allows
users of Ethernet and Token-Ring SNA-based LANs to access IBM host resources,
and Universal Access provides users with a "virtual" gateway complex across
multiple DataStar or TCP/IP Hosts. During fiscal 1996, the Company's DataStar
products were enhanced to provide increased capacity and improved performance
with new Pentium modules and an optional datastreaming channel interface.
The Company also markets terminal server products under the name
DataStar/3270 Access Hub, which allow corporations to connect their large
installed base of IBM 3270 terminals to bridge and router internetworks. By
providing access to both IBM SNA resources and UNIX resources across LAN
environments (Ethernet and Token Ring), the DataStar/3270 Access Hub allows
users to continue to use their IBM 3270 terminals and participate in open
computing networks.
3
<PAGE>
The Company supplements its DataStar and terminal server product line
with a series of complementary software products marketed under licenses with
third parties. These products primarily include networking software and terminal
emulation software.
EXPRESS(TM). The Company's EXPRESS products are a suite of
communications software products that link computers using the UNIX operating
system with various IBM platforms. EXPRESS software provides users with advanced
SNA capabilities, resulting in high speed, flexible network integration
solutions. EXPRESS software provides terminal emulation, file transfer, and
Telnet-to-SNA gateway solutions. It also provides programmers with the tools
they need to develop applications for UNIX systems that can communicate with
applications on IBM mainframes.
Data Integration Products
New applications are being increasingly designed for use in a
distributed computing environments in which systems are spread throughout
different corporate locations. Typically, a database resides on a high-
performance client/server, and user interaction is driven by a graphical user
interface. Users of these new applications often need to obtain and update
information contained in legacy computing systems. The Company's
Enterprise/Access(TM) and Enterprise/Integrator(TM) are designed to address
these needs.
Enterprise/Access. Enterprise/Access is a software tool for
reengineering the user interface to existing applications and data in a variety
of environments without requiring any changes whatsoever to the applications,
data, or environment. In fiscal 1997, an internet/intranet Web version of the
product (Enterprise/Access: Web Edition) was introduced to capitalize on the
cross-industry demand to open up existing applications to new users anytime,
anywhere.
Enterprise/Integrator. Enterprise/Integrator is a comprehensive object-
oriented software framework for creating high-quality data for better business
decisions. It is targeted at the high-growth data warehouse/system migration
markets. Via a graphical user interface, rules are specified for integrating,
transforming, cleansing, matching, synchronizing, and replicating data from
multiple heterogeneous data sources.
Systems Management Products
With the growth in distributed systems, organizations are increasingly
concerned about the management of these new systems. Apertus targets this market
with MQView, its centralized management solution for new MQ messaging networks,
and the VisionNet enterprise performance monitor.
MQView. The Company's MQView product is a system management application
that provides centralized configuration, monitoring, operations and exception
reporting (Alerts) for MQSeries(TM) products, IBM's commercial messaging
middleware product. The Company intends to expand its MQView products through
the addition of other system management products that complement MQSeries
software.
VisionNet. The Company's VisionNet products, originally developed by
BlueLine, provide a means of monitoring the performance of SNA, TCP/IP, and IPX
networks. These products are important tools for the centralized management of
enterprise computer networks.
Marketing and Customers
Domestically, Apertus uses a direct sales force, located throughout the
United States, to market to its end user customers. For small orders, the
Company uses an in-house telesales group that completes sales without
involvement from the direct sales force. The Company is organized around
4
<PAGE>
three business units, each of which is responsible for implementing its own
strategy based on the Company's mission. During fiscal 1996, the Company
expanded its sales coverage and consolidated its multiple sales forces into a
single multi-product sales organization, supported by a new telesales initiative
and an expanded lead generation program. The primary marketing vehicles used to
generate leads include advertising, direct mail, press relations, vendor
relations, seminars, and trade shows.
The Company's European operations have expanded from their base outside
of London, England by opening an office in Stuttgart, Germany in April 1995 and
acquiring a presence in Holland. Apertus Europe sells directly to end users and
indirectly through OEMs, distributors and VARs. The Company is also expanding
outside of Europe. In fiscal 1996, the Company opened an office in Toronto,
Canada and established a significant presence in the Pacific Rim. The Company
continues to use strategic distribution partners as well as manufacturers'
representatives and distributors on a selective basis.
Backlog
The Company attempts to ship orders to end-user customers within 30
days. Because of this short delivery cycle, the Company does not believe backlog
is a meaningful indicator of future revenues.
Customer Service
The Company works with customers on a direct service basis out of
Minneapolis, New York, and London to provide prompt and reliable support for
products installed at end-user facilities. Company employees provide software
product maintenance worldwide. Generally, hardware maintenance is provided
through third-party vendors providing first-line services. Customers may choose
either self-maintenance programs (where the customers' personnel provide first-
line repair) or direct service programs (where the Company or third-party
vendors provide first-line repair). In either case, more advanced technical
support is provided by the Company's field specialists and technical support
groups located in Minneapolis, New York, and London.
Product Development
Because of rapidly changing technology in the communications software
market, the Company is committed to ongoing research development. The Company
spent approximately $9.5 million (19.3% of revenues), $6.0 million (10.9% of
revenues) and $4.2 million (16.0% of revenues) during fiscal years 1996, 1995
and 1994, respectively, on research and development, all of which was sponsored
by the Company. Due to the expanding range of products and features available
in the communications software marketplace, management recognizes the increasing
significance of the capability to interface the Company's products with other
available or installed products.
During fiscal 1996, the Company continued to develop enhancements to the
DataStar architecture and to the EXPRESS product line, including UNIX-to-IBM
connectivity software. Software research and development for Enterprise/Access,
Enterprise/Integrator, and MQView include enhancements to existing products as
well as new product development.
The company believes that copyright protection is important to its
business. Accordingly, the Company copyrights software source code modules. The
Company also relies on trade secrets, proprietary know-how and continuing
product innovation to maintain its competitive position.
Competition
The Company's product lines each have their own distinct significant
competitors:
5
<PAGE>
DataStar: The DataStar products primarily compete with mainframe-
dependant products manufactured by IBM, Cicso, and Interlink and off-load
products manufactured by OpenConnect, Novell, Microsoft, and CNT/Brixton.
EXPRESS: Primary competition for the EXPRESS products arises from OEMs,
including Sun, Hewlett Packard, and IBM. While most of these manufacturers
offer an IBM communications solution, they typically are platform-specific (as
opposed to multi-platform). EXPRESS products also compete with products
manufactured by companies, such as OpenConnect and Brixton.
Enterprise/Access: Web Edition competes with less scaleable, less
manageable products available on operating systems other than Unix. These
include Edify on IB's OS2 and Attachmate's Emissary Host Publishing System on
Microsoft's NT. When the existing data can be accessed directly via an
available interface (e.g., SQL), Enterprise/Access competes with a large number
of vendors and public-domain products.
Enterprise/Integrator: Enterprise/Integrator competes with several
vendors specifically targeted at data cleansing (e.g., Vality Corporation) and
vendors who perform some cleansing and transformation coupled with data
extraction (e.g., Prism and Evolutionary Technologies, Inc.).
MQView: Competition for the MQView product line comes from traditional
mainframe systems management companies, Candle and Boole & Babbage, which
announced products that compete directly with MQView, offering configuration,
operation, and alert functions.
Service and Maintenance
The Company's service and maintenance programs compete with comparable
programs offered by AT&T, Memorex-Telex, IBM and other competitors that have
substantially more locations and personnel than the Company. The Company's
products support industry network management standards (SNMP, NetView) and have
extensive remote diagnostic capabilities. As hardware has become more reliable,
the Company has relied on third-party vendors for hardware support and on its
own regional service organization for software support.
Manufacturing and Supply
For its communications software products, the Company has a central
production facility (at its headquarters in Minneapolis) that adheres to uniform
manufacturing policies and procedures. For the DataStar communications product,
the Company performs final assembly and final test, with the majority of
components (including the printed circuit boards) purchased from suppliers.
Emphasis is placed on ensuring a quality product through such mean as
Statistical Process Control, Cellular Management, Just In Time concepts and a
suppliers' certification program. A computerized system is used to manage
purchasing, production scheduling, order entry, and inventory management
functions.
Most of the components used in the Company's products are available from
a number of suppliers. However, a number of parts, including certain integrated
circuits and monitors, are generally available only from single sources of
supply. In some cases, if the Company were to be deprived of those single-source
items, the Company would be required to obtain an alternative supplier,
manufacture the items itself or redesign certain products, any of which could
cause delays in product shipments. The Company, however, has never experienced
significant production delays because of the failure of a supplier to provide
component parts.
6
<PAGE>
Employees
As of June 1, 1996, the Company employed 310 persons, including 109 in
product development, 38 in manufacturing, 90 in marketing, 45 in customer
service and 28 in finance and administration. None of the Company's employees
is covered by a collective bargaining agreement, and the Company believes that
it maintains good relations with its employees.
Executive Officers of the Registrant
The following sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Robert D. Gordon........... 47 Chairman of the Board, Chief Executive
Officer and President
Julie Cummins Brady........ 37 Corporate Vice President, Secretary and
General Counsel
Sue A. Hogue............... 40 Corporate Vice President and Chief Financial
Officer
Martin G. Hahn............. 38 Corporate Vice President, DataStar and Express
Lizabeth Converse Wilson... 37 Corporate Vice President, Sales
Lloyd Hagemo............... 44 Corporate Vice President, MQView and Vision
Steve Gimnicher............ 41 Corporate Vice President, Enterprise Group
</TABLE>
Robert D. Gordon has been Chairman of the Board and Chief Executive
Officer of the Company since April 1990 and president of the Company since
December 1988. Mr. Gordon was first employed by the Company as Senior Vice
President in July 1987 and subsequently served as Chief Financial Officer from
August 1987 to May 1988, Secretary from January 1988 to September 1988, and
Group Vice President, Sales and Marketing from April 1988 to December 1988. From
April 1984 to July 1987, Mr. Gordon was Executive Vice President of First Bank
System, Inc. Mr. Gordon has been a director of the Company since August 1987.
Julie Cummins Brady has held the position of Corporate Vice President,
Secretary and General Counsel since April 1990. Prior to joining the Company,
Ms. Brady held legal positions with various divisions of Control Data
Corporation, most recently as Corporate Counsel for Imprimus Technology
Incorporated.
Sue A. Hogue has held the position of Corporate Vice President and Chief
Financial Officer of the Company since August 1993. Prior to her current
position, Ms. Hogue served as Corporate Controller of the Company for three
years. Ms. Hogue has been employed by the Company since August 1989.
Martin G. Hahn has served as the Company's Corporate Vice President,
DataStar and EXPRESS since January 1996. Prior to his current position, Mr.
Hahn held the positions of General Manger, Network Integration Group from
January 1994 to 1996 and Vice President of Marketing for the Internetworking
Solutions Group from 1991 to 1993. Mr. Hahn has been employed by the Company
since July 1987.
Lizabeth Converse Wilson has served as the Company's Corporate Vice
President, Sales since January 1996. Prior to her current position, Ms. Wilson
held the position of General Manager, Data Integration Group since May 1993.
Ms. Wilson has also previously served as the Company's Director of Sales and
Marketing for the Enterprise Systems Group and as a Regional Account Manager.
Ms. Wilson has been employed by the Company for 11 years.
Lloyd Hagemo has served as the Company's Corporate Vice President,
MQView and Vision since January 1996. Prior to his current position, Mr. Hagemo
held the position of Vice President of Development and Support within BlueLine
for ten years.
7
<PAGE>
Steve Gimnicher has served as the Company's Corporate Vice President,
Enterprise Group, since January 1996. Prior to his current position, Mr.
Gimnicher held the positions of Vice President, Marketing since January 1995 and
Vice President of Development since August 1992. Prior to joining Apertus, Mr.
Gimnicher served as Vice President of Engineering for Interlink Computer
Sciences.
Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties that may cause
the Company's actual results to differ materially from the results discussed in
the forward-looking statements. Factors that might cause such differences
include, but are not limited to, the following: decreased demand for the
Company's products; heightened competition; market acceptance risk; risk of
lengthening sales cycles with key customers; risk of technological obsolescence
of the Company's products; inability to manage the Company's cost structure;
risks associated with sales of products outside the United States; increased
expenses; failure to obtain new customers or retain existing customers;
inability to carry out marketing and sales plans; loss or retirement of key
executives; risks associated with the company's dependence on proprietary
technology, including those related to adequacy of copyright, trademark and
trade secret protection; risks associated with single sources of supply for
certain components used in the Company's products; and changes in interest
rates. The forward-looking statements herein are qualified in their entirety by
the cautions and risk factors set forth under "Cautionary Statement" filed as
Exhibit 99.1 to this Annual Report on Form 10-K.
Item 2. Properties
In July 1990, the Company moved its principal office and manufacturing
facility to 60,000 square feet of leased space in a building located in Eden
Prairie, Minnesota. In February 1996, Apertus signed a Second Amendment to the
Lease for the Eden Prairie office which extends the terms of the original lease
an additional six years commencing on August 1, 1996 and requires total lease
payments of approximately $3.7 million over the term of the lease. Apertus
assumed the remaining space in the Eden Prairie facility, expanding from 60,000
square feet to 76,492 square feet.
The Company also maintains its offices in New York, New York. On
November 1, 1995, Apertus entered into an eight year lease from September 1995
to January 2003 for 21,095 square feet of office space on the sixth floor of Two
Penn Plaza. The One Penn Plaza and 225 West 34th Street offices in Manhattan
were consolidated into this new space. Total required base rental on the Two
Penn Plaza location is approximately $3.3 million for the term of the lease.
Apertus/SSI continues to sublet half of the 11,729 square feet of leased space
at the One Penn location and is actively seeking another tenant to sublet the
remaining space. The lease on the One Penn property expires October 2001, with
annual lease payments of approximately $348,000 (excluding sublease rental
payments).
On June 12, 1996, Apertus received the final balloon payment from the
purchaser of its previous 262,000 square foot headquarters facility in Eden
Prairie and retired the debt to Prudential.
Item 3. Legal Proceedings
The Company has no pending legal proceedings which the Company believes
are material.
Item 4. Submissions of Matters to a Vote of Security Holders
None.
8
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information contained under the heading "Dividend Policy and Price
Range of Common Stock" on page 16 of the portions of the Annual Report to
Shareholders is incorporated herein by reference.
Item 6. Selected Financial Data
The information contained under the heading "Selected Historical
Financial Data" on page 15 of the portions of the Annual Report to Shareholders
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information contained under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 2 and 3 of
the portions of the Annual Report to Shareholders is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The independent auditors' report, consolidated financial statements and
notes to consolidated financial statements on pages 4 through 13 of the portions
of the Annual Report to Shareholders is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The information contained under the heading "Election of Directors" on
pages 2 and 3 of the Proxy Statement is incorporated herein by reference. The
information contained under the heading "Executive Officers of the Registrant"
in Part I hereof is also incorporated herein by reference.
Item 11. Executive Compensation
The information contained under the heading "Executive Compensation" on
pages 4 through 13 of the Proxy Statement is incorporated herein by reference,
except that the information set forth under the captions "Report of Compensation
Committee on Annual Compensation" and the "Comparative Stock Performance" graph
are not incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the heading "Security Ownership of
Certain Beneficial Owners and Management" on page 14 of the Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
9
<PAGE>
Part IV
Item 14. Exhibits, Financial Statements, Financial Statement Schedules, and
Reports on Form 8-K
(a) Exhibits, Financial Statements, Financial Statement Schedules
<TABLE>
<CAPTION>
1. Financial Statements Page Reference in
-------------------- Exhibit 13 to this
Form 10-K
Annual Report
-----------------
<S> <C>
Consolidated Statements of Operations for the Fiscal Years
Ended March 31, 1996, April 2, 1995 and April 3, 1994....... 4
Consolidated Balance Sheets as at March 31, 1996 and April
2, 1995..................................................... 5
Consolidated Statements of Cash Flows for the Fiscal Years
Ended March 31, 1996 and April 2, 1995 and April 3, 1994.... 6
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended March 31, 1996, April 2, 1995 and
April 3, 1994............................................... 7
Notes to Consolidated Financial Statements................... 7 - 12
Report of Independent Auditors............................... 13
</TABLE>
The financial statements listed above are included in Exhibit 13 and are
hereby incorporated by reference.
<TABLE>
<CAPTION>
2. Financial Statement Schedules Page Number in This
----------------------------- Annual Report
-------------
<S> <C>
Independent Auditor's Report on
Supplemental Financial Schedule............................ 16
Schedule II Valuation and Qualifying Accounts and
Reserve for the Years Ended March 31, 1996,
April 2, 1995 and April 3, 1994............................ 17
</TABLE>
All other schedules are omitted since the required information is not
represented or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
10
<PAGE>
3. Exhibits
--------
Exhibit
Number Description
- ------ -----------
2 Acquisition Agreement, dated June 26, 1995, among the Company, BlueLine
Acquisition Co. and BlueLine Software, Inc., including exhibits thereto
(12)
3.1 Restated Articles of Incorporation, as amended (5)
3.2 Bylaws, as amended (5)
4 Shareholders Rights Plan (4)
10.1 * Amended 1990 Long Term Incentive Plan (9)
10.2(a) Office Warehouse Lease, dated May 10, 1990, between the Company and
Real Estate Income Partners III, a Limited Partnership (2)
10.2(b) Second Amendment to Lease, dated February 18, 1996, between the
Company and Real Estate Income Partners III, Limited Partnership
10.3(a) Purchase Agreement, dated April 23, 1986, between Byte Investment
Partnership 1 and the Company (4)
10.3(b) Promissory Note, dated June 12, 1986, from the Company to The
Prudential Insurance Company of American ("Prudential") (4)
10.3(c) Assignment of Leases and Rents, dated June 12, 1986, between the
Company and Prudential (4)
10.3(d) Combination Mortgage, Security Agreement and Fixture Financing
Statement, dated June 12, 1986, between the Company and Prudential (4)
10.4(a) Contract for Deed, dated as of October 1, 1993, between the Company
and Best Buy Co., Inc. (6)
10.4(b) Collection and Disbursement Agreement, dated as of October 1, 1993,
among the Company, Prudential and First Trust National Association (6)
10.4(c) Lease Payment Agreement, dated as of October 1, 1993, between the
Company and Best Buy Co., Inc. (6)
10.6(a) * 1994 Management Bonus Plan description (5)
10.6(b) * 1995 Management Bonus Plan description (8)
10.6(c) * 1996 Management Bonus Plan description (11)
10.6(d) * 1997 Management Bonus Plan description
10.7 Stock Purchase Agreement, dated December 31, 1993, between the Company
and NYNEX Worldwide Services Group, Inc. (7)
10.8(a) * Stock Acquisition Loan Assistance Program (5)
10.8(b) * 1993 Stock Acquisition Loan Assistance Program (9)
10.9(a) Office Lease Agreement, dated June 1991, between Systems Strategies,
Inc. and Mid City Associated (8)
11
<PAGE>
10.9(b) Agreement of Lease, dated November 1, 1995 between the Company and
Two Penn Plaza Associates
10.10 * 1995 Employee Stock Purchase Plan
10.11 * Form of Deferred Compensation Agreement
13 Portions of Annual Report to Shareholders for the fiscal year ended
March 31, 1996
21 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
24 Powers of Attorney
27 Financial Data Schedule
99.1 Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
___________________
* Denotes management contracts and compensatory plans, contracts, and
arrangements.
(1) Incorporated by reference to the Company's Report on Form 8-K filed April
16, 1990 (SEC file number 0-12378).
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended April 1, 1990 (SEC file number 0-12378).
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1991 (SEC file number 0-12378).
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 29, 1992 (SEC file number 0-12378).
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 28, 1993 (SEC file number 0-12378).
(6) Incorporated by reference to the Company's Report on Form 8-K filed
November 5, 1993 (SEC file number 0-12378).
(7) Incorporated by reference to the Company's Report on Form 8-K/A filed March
15, 1994 (SEC file number 0-12378).
(8) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended April 3, 1994 (SEC file number 0-12378).
(9) Incorporated by reference to the Company's Registration Statement on Form
S-8 filed March 31, 1994 (SEC file number 33-77176).
(10) Incorporated by reference to the Company's Registration Statement on Form
S-8 filed January 27, 1995 (SEC file number 33-88884).
(11) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended April 2, 1995 (SEC file number 0-12378).
(12) Incorporated by reference to the Company's Report on Form 8-K filed July
17, 1995 (SEC file number 0-12378).
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed by the Company during the fourth quarter
of its fiscal year ended March 31, 1996.
12
<PAGE>
Signature
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: July 1, 1996 APERTUS TECHNOLOGIES INCORPORATED
By: /s/ Robert D. Gordon
------------------------------
Robert D. Gordon
Chairman of the Board,
Chief Executive Officer
and President
<TABLE>
<S> <C> <C>
Robert D. Gordon* Chairman of the Board, )
Chief Executive Officer, )
President and Director )
(principal executive officer) )
)
)
Sue A. Hogue* Chief Financial Officer )
(principal financial )
officer and principal ) By: /s/ Robert D. Gordon
accounting officer) ) ---------------------------
) Robert D. Gordon
) Pro Se and Attorney-in-Fact
Nicholas J. Covatta, Jr.* Director )
) Date: July 1, 1996
)
Robert W. Fischer* Director )
)
George E. Hubman* Director )
)
Arch J. McGill* Director )
)
Clarence W. Spangle* Director )
</TABLE>
________________________
* Executed on behalf of the indicated persons by Robert D. Gordon pursuant to
the Power of Attorney included as Exhibit 24 to this annual report.
13
<PAGE>
Apertus Technologies Incorporated
Schedule II -- Valuation and Qualifying Accounts and Reserve
for the Years Ended March 31, 1996, April 2, 1995 and April 3, 1994
(Dollars in Thousands)
Allowance for Doubtful Accounts: (A)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Charged to Balance at
Description Beginning of Period Costs and Expenses Deductions (B) End of Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1996 $865 $1,137(C) $163 $1,839(D)
April 2, 1995 $931 $1,288(E) $1,354(F) $865
April 3, 1994 $365 $1,004(G) $438 $931
</TABLE>
_________________
(A) The allowance has been netted against accounts receivable as of the
respective balance sheet dates.
(B) Write-offs net of recoveries.
(C) Includes approximately $150 of allowance for doubtful accounts acquired in
the BlueLine Software, Inc. acquisition.
(D) Includes $300 of allowance allocated to installment receivables at March
31, 1996.
(E) Includes approximately $1.1 million of NYNEX settlement. This settlement
released NYNEX of any liability connected with the collection of
outstanding receivables guaranteed by NYNEX under the original contract.
(F) Includes approximately $1.3 million of receivables written off against the
NYNEX settlement discussed in footnote (D) as well as the $511 noted in
footnote (C).
(G) Includes $511 of allowances for doubtful accounts acquired in the Systems
Strategies, Inc. acquisition.
14
<PAGE>
Apertus Technologies Incorporated
Index of Exhibits
Annual Report on Form 10-K
For the Year Ended March 31, 1996
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C> <C>
10.2(b) Second Amendment to Lease, dated February 18, 1996, between the
Company and Real Estate Income Partners III, Limited Partnership
10.6(d) * 1997 Management Bonus Plan description
10.9(b) Agreement of Lease, dated November 1, 1995, between the Company
and Two Penn Plaza Associates
10.10 * 1995 Employee Stock Purchase Plan
10.11 * Form of Deferred Compensation Agreement
13 Portions of Annual Report to Shareholders for the fiscal year ended
March 31, 1996
21 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP
24 Powers of Attorney
27 Financial Data Schedule
99.1 Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995
</TABLE>
<PAGE>
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease ("Amendment") is made and entered into
as of the 18th day of February, 1996, by and between Real Estate Income Partners
III, Limited Partnership ("Lessor"), through its authorized agent, Birtcher
Investments and Apertus Technologies, Inc., a Minnesota corporation ("Lessee"),
formerly known as Lee Data Corporation, with reference and respect to the
following facts and circumstances:
A. On or about May 10, 1990, Lessor and Lessee entered into that
certain Office/Warehouse Lease (the "Lease") of a portion of the building
located at 7275-7279 Flying Cloud Drive, Eden Prairie, Minnesota (the "Demised
Premises").
B. On or about July 23, 1990, Lessor and Lessee entered into that
certain Amendment # 1 to Lease (the "First Amendment"), pursuant to which Lessor
and Lessee agreed to modify the terms of the Lease.
C. Lessor and Lessee desire to further amend, modify and change the
Lease as set forth herein.
NOW, THEREFORE, in consideration of the rents reserved, the foregoing
premises, the promises, covenants and agreements herein set forth and other good
and valuable consideration, the receipt and sufficiency of which is acknowledged
by each of the parties, the parties do hereby agree to amend the Lease as
follows:
1. As used hereinafter, the term "Lease" shall mean and include the
Lease as amended by the First Amendment.
2. Defined terms herein are indicated by initial capital letters.
Except as otherwise provided herein, defined terms shall have the same meaning
in this Amendment as they do in the Lease.
3. The term of the Lease is hereby extended to be for a total period
of 144 months, such that the Expiration Date shall occur on the last day of
July, 2002, unless sooner terminated as provided in the Lease.
4. Base Rent is modified such that commencing on August 1, 1996, and
continuing (on the first day of each month) thereafter for the balance of the
term of the Lease, it shall be as set forth in Exhibit 1 attached hereto and
incorporated herein by this reference.
5. Commencing on August 1, 1996, and thereafter for the balance of
the term of the Lease, Lessee's share of Real Estate Taxes as set forth in
Article 3 of the lease are increased from 78.79% to 100 %. Similarly,
commencing on August 1, 1996, and thereafter for the balance of the term of the
Lease, Lessee's share of Operating Expenses as set forth in Article 3 of the
Lease are increased from 78.79% to 100%. Lessee's share of Real Estate Taxes
and Operating Expenses for that portion of the Lease term prior to August 1,
1996, shall be as set forth in the Lease prior to this Amendment. In addition
to the foregoing, the management fees which comprise a portion of the Operating
Expenses pursuant to Article 3 of the Lease shall, commencing August 1, 1996,
and thereafter for the balance of the term of the Lease, be capped each year at
3% of the gross collections of Lessor from the operation of the Premises for
that year. Gross collections shall mean and include Base Rent, Real Estate
Taxes, Operating Expenses, Additional Rent and all other sums collected or
received (or to be or which should be collected or received) by or on behalf of
Lessor in connection with operation or ownership of the Premises.
6. Commencing on August 1, 1996, (i) Article 15 of the Lease,
relating to casualty insurance, is hereby supplemented by, and (ii) Article 16
of the Lease, relating to public liability insurance, is hereby replaced by the
following provisions:
Insurance Policies.
(a) Liability Insurance. During the term of the Lease, Lessee shall
maintain a policy of commercial general liability insurance (sometimes
known as broad form comprehensive general liability insurance)
insuring Lessee against liability for bodily injury, property damage
(including loss of use of property) and personal injury arising out of
the operation, use or occupancy of the Demised Premises. Lessee shall
name Lessor, Lessor's property manager, Lessor's asset manager and
such other persons and entities as Lessor shall designate as an
additional insured under such policy. The initial amount of such
insurance shall be Two Million Dollars ($2,000,000) per occurrence and
shall be subject to periodic increase based upon inflation, increased
liability awards, recommendation of Lessor's professional insurance
advisors and other relevant factors. The liability insurance obtained
by Lessee under this paragraph 6(a) shall (i) be primary and non-
contributing, and (ii) insure Lessor against Lessee's performance
under Article 18 of the Lease. The amount and coverage of such
insurance shall not limit Lessee's liability nor relieve Lessee of any
other obligation under the Lease. Lessor may also obtain commercial
general liability insurance in an amount and with coverage determined
by Lessor insuring Lessor against liability arising out of ownership,
operation, use or occupancy of the Demised Premises. Any such policy
obtained by Lessor shall not be contributory and shall not provide
primary insurance.
(b) Property and Rental Income Insurance. During the Term of the
Lease, Lessor shall maintain policies of insurance covering loss of or
damage to the Demised Premises, but not Lessee's personal property, in
an amount not to exceed the full replacement value thereof, as the
same may exist from time to time. Such policy shall contain an agreed
amount endorsement and shall provide replacement cost valuation for
all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, special extended perils (all
risk), sprinkler leakage and any other perils which Lessor deems
reasonably necessary. Lessor shall have the right to
<PAGE>
obtain flood and earthquake insurance if required by any lender
holding a security interest in the Demised Premises. Lessor shall not
obtain insurance for Lessee's fixtures or equipment or building
improvements installed by or for Lessee on, in or about the Demised
Premises. During the term of the Lease, Lessor shall also maintain a
rental income insurance policy, with loss payable to Lessor, in an
amount equal to one year's Base Rent, plus estimated Real Estate
Taxes, insurance premiums, and if Lessor so elects, other Operating
Expenses. Lessee shall be liable for the payment of any deductible
amount under Lessor's or Lessee s insurance policies maintained
pursuant to this paragraph 6, in an amount not to exceed Ten Thousand
Dollars ($10,000). Lessee shall not do or permit anything to be done
which invalidates any such insurance policies. Lessor may, in its sole
discretion, require Lessee to maintain in the manner described herein,
the policies of insurance set forth in this paragraph 6(b).
(c) Payment of Premiums. Lessee shall pay all premiums for the
insurance policies described in Paragraph 6(a) and (b) (whether
obtained by Lessor or Lessee) in accordance with Article 3 of the
Lease (as modified by paragraph 5 of this Amendment), except Lessor
shall pay all premiums for non-primary commercial general liability
insurance which Lessor elects to obtain as provided in paragraph 6(a).
For insurance policies maintained by Lessor which cover improvements
on the entire Premises or Building, Lessee shall pay Lessee's prorated
share of the premiums, in accordance with Article 3 of the Lease (as
modified by paragraph 5 of this Amendment). If insurance policies
maintained by Lessor cover improvements on real property other than
the Premises or Building, Lessor shall deliver to Lessee a statement
of the premium applicable to the Demised Premises showing in
reasonable detail how Lessee's share of the premium was computed. If
the term of the Lease expires before the expiration of an insurance
policy maintained by Lessor, Lessee shall be liable for Lessee's
prorated share of the insurance premiums. Before August 1, 1996,
Lessee shall deliver to Lessor a copy of any policy of any and all
insurance which Lessee is required to maintain under this paragraph 6.
At least thirty (30) days prior to the expiration of any such policy,
Lessee shall deliver to Lessor a renewal of such policy. As an
alternative to providing a policy of insurance, Lessee shall have the
right to provide Lessor a certificate of insurance, executed by an
authorized officer of the insurance company, showing that the
insurance which Lessee is required to maintain under this paragraph 6
is in full force and effect and containing such other information as
Lessor shall reasonably require.
(d) General Insurance Provisions.
(i) Any insurance which Lessee is required to maintain under
the Lease shall include a provision which requires the insurance
carrier to give Lessor not less than thirty (30) days written notice
prior to any cancellation or modification of such coverage.
(ii) If Lessee fails to deliver any policy, certificate or
renewal to Lessor required under this Lease within the prescribed time
period or if any such policy is canceled or modified during the term
of the Lease without Lessor's consent, Lessor may obtain such
insurance, in which case Lessee shall reimburse Lessor for the cost of
such insurance within fifteen (15) days after receipt of a statement
that indicates the cost of such insurance.
(iii) Lessee shall maintain all insurance required under the
Lease with companies holding a "General Policy Rating" of A X or
better, as set forth in the most current issue of the "Best Key Rating
Guide." Lessor and Lessee acknowledge that insurance markets are
rapidly changing and that insurance in the form and amounts described
in this paragraph 6 may not be available in the future. Lessee
acknowledges that the insurance described in this paragraph 6 is for
the primary benefit of Lessor. Lessor makes no representation as to
the adequacy of such insurance to protect Lessor's or Lessee's
interest. Therefore, Lessee shall obtain any such additional property
or liability insurance which Lessee deems necessary to protect Lessor
and Lessee.
(iv) The parties release each other, and their respective
authorized representatives, from any claims for damage to any person
or to the Demised Premises (and the Building and other improvements in
which the Demised Premises are located) and to the fixtures, personal
property, Lessee's improvements, and alterations of either Lessor or
Lessee in or on the Demised Premises (and the Building and other
improvements in which the Demised Premises are located) that are
caused by or result from risks insured against under any insurance
policies carried by the parties and in force at the time of any such
damage. Additionally, neither party shall be liable to the other for
any damage caused by fire or any of the risks insured against under
any insurance policy required by this Lease, whether or not the policy
is actually obtained. Unless prohibited under any applicable insurance
policies maintained, each party shall cause each insurance policy
obtained by it to provide that the insurance company waives all right
of recovery by way of subrogation against either party in connection
with any damage covered by any policy.
7. The last sentence of Article 19 of the Lease is hereby modified
to read as follows:
All property of Lessee kept or stored on, in or about the Demised
Premises shall be so kept or stored at the risk of Lessee only and
Lessee shall hold Lessor harmless from any claims arising out of
damage to the same, including subrogation claims by Lessee" insurance
carrier; provided, however, that this sentence shall not apply to
claims arising solely as a result of Lessor's gross negligence to the
extent such claims are not covered by insurance which Lessee carries
or should carry pursuant to the terms of this Lease.
-2-
<PAGE>
8. The terms and provisions of Article 23 of the Lease, entitled
"Novation in the Event of Sale," are hereby supplemented as follows:
Estoppel Certificates.
(a) Upon Lessor's written request, Lessee shall execute, acknowledge
and deliver to Lessor a written statement certifying the following:
(i) that none of the terms or provisions of the Lease have been
changed (or if they have been changed, stating how they have been
changed); (ii) that this Lease has not been canceled or terminated;
(iii) the last date of payment of the Base Rent, Additional Rent and
other charges and the time period covered by such payment; (iv) that
Lessor is not in default under the Lease (or, if Lessor is claimed to
be in default, stating why); and (v) such other representations or
information with respect to Lessee or the Lease as Lessor may
reasonably request or which any prospective purchaser or encumbrancer
of the Premises, Building or Demised Premises may require. Lessee
shall deliver such statement to Lessor (or such other person or entity
as Lessor shall direct) within ten (10) days after Lessor's request.
Lessor may give any such statement by Lessee to any prospective
purchaser or encumbrancer of the Premises, Building or Demised
Premises. Such purchaser or encumbrancer may rely conclusively upon
such statement as true and correct.
(b) If Lessee does not deliver such statement to Lessor within such
ten (10) day period, the failure to deliver such statement within such
time shall be a material default of this Lease by Lessee, without any
further notice to Lessee, or Lessor, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following
facts: (i) that the terms and provisions of this Lease have not been
changed except as otherwise represented by Lessor; (ii) that this
Lease has not been canceled or terminated except as otherwise
represented by Lessor- (iii) that not more than one month's Base Rent,
Additional Rent or other charges have been paid in advance; and (iv)
that Lessor is not in default under the Lease. In such event, Lessee
shall be estopped from denying the truth of such facts.
9. Article 28 of the Lease, relating to overdue payments, is hereby
modified to read as follows:
28. All monies due under this Lease from Lessee to Lessor shall be due
on demand, unless otherwise specified. Any amount owed by Lessee to
Lessor which is not paid when due shall bear interest at the lesser of
the maximum rate permitted by law or fourteen percent (14%) per annum
from the date due of such amount. The payment of interest on any
amount shall not excuse or cure any default by Lessee under this
Lease.
10. Article 34 of the Lease, relating to the rules and regulations,
is hereby supplemented as follows:
Lessee shall observe and comply with the rules and regulations set
forth in Exhibit 2 attached hereto and incorporated herein by this
reference and with such further reasonable rules and regulations as
Lessor may prescribe, by written notice to Lessee, for safety, care
and cleanliness of the Building.
11. The first two lines of Article 35 of the Lease, entitled "Intent
of Parties," is hereby modified to read as follows:
Except as otherwise provided herein, Lessee covenants and agrees that
if it shall at any time fail to pay any cost or expense required to be
paid hereunder, or fail . . . .
12. Article 42 of the Lease, as set forth in the Rider thereto, and
which provided to Lessee a first opportunity to lease additional space, is
hereby terminated and deleted such that its terms and provisions shall have no
force or effect.
13. Article 43 of the Lease, as set forth in the Rider thereto, and
which may have provided to Lessee early occupancy, is hereby terminated and
deleted such that its terms and provisions shall have no force or effect.
14. Article 45 of the Lease, as set forth in the Rider thereto, and
which provided recovery of certain Lessor's cost, is hereby terminated and
deleted such that its terms and provisions shall have no force or effect.
15. Lessee acknowledges and agrees that it has received the
improvement allowance described in Article 47 of the Lease, as set forth in the
Rider thereto, and that Lessor has no further obligation or liability therefor
or thereunder. Additionally, Lessee acknowledges and agrees that, except for
Lessor's tenant improvement obligations, if any, as set forth in paragraph 22,
below and the Work Letter (as defined in said paragraph 22), Lessor shall have
no obligation or liability with respect to tenant improvements at, in or to the
Demised Premises (or the Building) and, subject to paragraph 22, Lessee accepts
the Demised Premises in their "as is" existing condition as of the date of this
Amendment.
16. Lessee acknowledges and agrees that it has received, in full, the
moving allowance provided for in Article 48 of the Lease, as set forth in the
Rider thereto.
17. Article 49 of the Lease, as set forth in the Rider thereto, and
which provided to Lessee the possibility of additional parking, is hereby
terminated and deleted such that its terms and provisions shall have no force or
effect.
18. Article 51 of the Lease, as set forth in the Rider thereto, and
which provided for the possibility of a penalty, is hereby terminated and
deleted such that its terms and provisions shall have no force or effect.
-3-
<PAGE>
19. Article 50 of the Lease, as set forth in the Rider thereto, and
which provides certain provisions relating to hazardous materials, is hereby
supplemented as follows:
Hazardous Substances.
(a) Defined Terms.
(i) "Claim" shall mean and include any demand, cause of action,
proceeding or suit for any one or more of the following: (i) actual or
punitive damages, losses, injuries to person or property, damages to
natural resources, fines, penalties, interest, contribution or
settlement, (ii) the costs of site investigations, feasibility
studies, information requests health or risk assessments, or Response
(as herein defined) actions, and (iii) enforcing insurance,
contribution or indemnification agreements.
(ii) "Environmental Laws" shall mean and include all federal, state
and local statutes, ordinances, regulations and rules relating to
environmental quality, health, safety, contamination and clean-up,
including, without limitation, the Clean Air Act, 42 U.S.C. (S) 7401
et seq.; the Clean Water Act, 33 U.S.C. (S)1251 et seq.; and the water
Quality Act of 1987; the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA"), 7 U.S.C. (S) 136 et seq.; the Marine
Protection, Research and Sanctuaries Act, 33 U.S.C. (S) 1401 et seq.;
the National Environmental Policy Act, 42 U.S.C. (S) 4321 et seq.; the
Noise Control Act, 42 U.S.C. (S) 4901 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. (S) 651 et seq.; the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., as amended by
the Hazardous and Solid Waste Amendments of 1984; the Safe Drinking
Water Act, 42 U.S.C. (S) 300f et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. (S)
9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act, the Emergency Planning and Community Right-to-
Know Act, and Radon Gas and Indoor Air Quality Research Act; the Toxic
Substances Control Act ("TSCA"), 15 U.S.C. (S) 2601 et seq.; the
Atomic Energy Act, 42 U.S.C. (S) 2011 et seq., and the Nuclear Waste
Policy Act of 1982, 42 U.S.C. (S) 10101 et seq.; the Minnesota
Environmental Response and Liability Act, MN. Stat. ch. 115B; and
state superlien and environmental clean-up statutes, including any
implementing regulations and guidelines, as amended from time to time.
Environmental Laws shall also include all state, regional, county,
municipal and other local laws, regulations, and ordinances insofar as
they are equivalent or similar to the federal or state law recited
above or purported to regulate Hazardous Materials (as hereinafter
defined).
(iii) "Hazardous Materials" shall mean and include the following,
including mixtures thereof: any hazardous substance, pollutant,
contaminant, waste, by-product or constituent regulated under CERCLA;
oil and petroleum products and natural gas, natural gas liquids,
liquefied natural gas and synthetic gas usable for fuel; pesticides
regulated under the FIFRA, asbestos and asbestos-containing materials,
PCBs, and other substances regulated under the TSCA; source material,
special nuclear material, by-product material and any other
radioactive materials or radioactive wastes, however produced,
regulated under the Atomic Energy Act or the Nuclear Waste Policy Act;
chemicals subject to the OSHA Hazard Communication Standard, 29 C.F.R.
(S) 1910.1200 et seq., and industrial process and pollution control
wastes, whether or not hazardous within the meaning of RCRA; any
substance whose nature and/or quality of existence, use, manufacture,
disposal or effect render it subject to federal, state or local
regulation, investigation, remediation, or removal as potentially
injurious to public health or welfare.
(iv) "Use" means to manage, generate, manufacture, process, treat,
store, use, re-use, refine, recycle, reclaim, blend or burn for energy
recovery, incinerate, accumulate speculatively, transport, transfer,
dispose of, or abandon Hazardous Materials.
(v) "Release" or "Released" shall mean any actual or threatened
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing of Hazardous
Materials into the environment, as "environment" is defined in CERCLA.
(vi) "Response" or "Respond" shall mean action taken in compliance
with Environmental Laws to correct, remove, remediate, cleanup,
prevent, mitigate, monitor, evaluate, investigate, assess or abate the
Release of a Hazardous Material.
(b) Lessee's Obligations with Respect to Environmental Matters.
During the term of this Lease, (a) Lessee shall comply at its own cost
with all Environmental Laws; (b) Lessee shall not Use, or authorize
the Use of, any Hazardous Materials on the Premises, including
installation of any underground storage tanks, without prior written
disclosure to and approval by Lessor, except for small quantities
ordinarily used by office Lessees in ordinary office equipment, such
as copying machines, typewriters and personal computers; (c) Lessee
shall not take any action that would subject the Premises, Building or
Demised Premises to permit requirements under RCRA for storage,
treatment or disposal of Hazardous Materials; (d) Lessee shall not
dispose of Hazardous Materials in dumpsters provided by Lessor for
Lessee use; (e) Lessee shall not discharge Hazardous Materials into
drains or sewers; (f) Lessee shall not cause or allow the Release of
any Hazardous Materials on, to, or from the Premises, Building or
Demised Premises; and (g) Lessee shall arrange at its own cost for the
lawful transportation and off-site disposal of all Hazardous Materials
that it generates.
(c) Copies of Notices. During the term of this Lease, Lessee shall
provide Lessor promptly with copies of all summons, citations,
directives, information inquires or requests, notices of potential
responsibility, notices of violation or deficiency, orders or decrees,
Claims, complaints, investigations, judgments, letters, notices or
environmental liens or
-4-
<PAGE>
Response actions in progress, and other communications, written or
oral, actual or threatened, from the United States Environmental
Protection Agency, Occupational Safety and Health Administration,
Minnesota Pollution Control Agency or other federal, state or local
agency or authority, or any other entity or individual, concerning (a)
any Release of a Hazardous Material on, to or from the Premises,
Building or Demised Premises; (b) the imposition of any lien on the
Premises, Building or Demised Premises, or (c) any alleged violation
of or responsibility under Environmental Laws. Lessor and Lessor's
beneficiaries, agents and employees shall have the right to enter the
Demised Premises and conduct appropriate inspections or tests in order
to determine Lessee's compliance with Environmental Law.
(d) Tests and Reports. Upon written request by Lessor, Lessee shall
provide Lessor with the results of appropriate reports and tests, with
transportation and disposal contracts for Hazardous Materials, with
any permits issued under Environmental laws, and with any other
application documents to demonstrate that Lessee complies with all
Environmental Laws relating to the Premises Building or Demised
Premises.
(e) Lessee's Obligation to Respond. If Lessee's Use of Hazardous
Materials at the Premises (a) gives rise to liability or to a Claim
under any Environmental Law, (b) causes a significant public health
effect, or (c) creates a nuisance, Lessee shall promptly take all
applicable action in Response.
(f) Indemnity. Lessee shall indemnify Lessor against and hold Lessor
harmless from any and all costs, claims or liability arising from the
conduct of Lessee's business or anything else done or permitted by
Lessee to be done in or about the Premises, Building or Demised
Premises, including any contamination of the Premises, Building or
Demised Premises or any other property resulting from the presence or
use of Hazardous Material caused or permitted by Lessee, its
employees, agents, contractors and invitees. Lessee shall defend
Lessor against any such cost, claim or liability at Lessee's expense
with counsel reasonably acceptable to Lessor or, at Lessor's election,
Lessee shall reimburse Lessor for any legal fees or costs incurred by
Lessor in connection with any such claim. Lessee's obligations with
respect to Hazardous Materials shall survive the termination or
expiration of this Lease. As used in this paragraph 19, the term
"Lessee" shall include Lessee's employees, agents, contractors and
invitees, if applicable.
(g) Non-responsibility. Notwithstanding anything contained herein to
the contrary, Lessee shall have no responsibility for any cost,
expense or indemnification for any Hazardous Substance or
environmental condition caused, created or knowingly permitted by
Lessor or determined to have been in existence at the Demised Premises
prior to the Commencement Date of this Lease to the extent Lessee has
not exacerbated or contributed to any such condition.
(h) Office Supplies. Notwithstanding anything contained herein to
the contrary, Lessee shall be permitted to keep small quantities of
normal office supplies which may be included as Hazardous Materials,
such as cleaning supplies and copier supplies, at the Demised
Premises, provided the same are properly stored, handled and disposed
of in full compliance with all applicable laws, rules and regulations,
including without limitation Environmental Laws.
20. The Demised Premises shall be improved in accordance with the
terms of the Work Letter attached hereto as Exhibit 3 and incorporated herein by
this reference (the "Work Letter"). Additionally, notwithstanding anything
contained in the Lease, including this Amendment, to the contrary, Lessee
acknowledges and agrees that during the term of the Lease, Lessor shall perform
or arrange for the performance of certain improvements in accordance with the
terms of the Work Letter and such work may cause certain problems, delays,
inconveniences or the like which impact Lessee, including without limitation
Lessee's occupancy and use of the Demised Premises. Lessee further acknowledges
and agrees that Lessee shall have no claim against Lessor therefor, and there
shall be no default under the Lease as a result thereof, so long as Lessor is
using good faith reasonable efforts to complete or arrange for the completion of
the work in a timely manner. Lessee also acknowledges and agrees that Lessee
may be precluded from occupancy and/or use of certain portions of the Demised
Premises from time to time during the performance of the work and, again, Lessor
shall have no obligation or liability therefor and there shall be no default
under the Lease as a result thereof. Lessee specifically acknowledges and agree
that, so long as Lessor is in compliance with the obligation to use good faith
reasonable efforts to complete or arrange for the completion of the work in a
timely manner, Lessee shall have no rights or remedies as a result of loss of
occupancy, use or other problems, delays, interruptions and the like, including
without limitation no right to terminate, claim damages, rent abatement,
adjustment or reduction or any other right or remedy based upon a default by
Lessee under the Lease or otherwise.
21. If Lessor cannot perform any of its obligations due to events
beyond Lessor's control, the time provided for performing such obligations shall
be extended by a period of time equal to the duration of such events. Events
beyond Lessor's control include, but are not limited to, acts of God, war, civil
commotion, labor disputes, strikes, fire, flood or other casualty, shortages of
labor or material, government regulation or restriction and weather conditions.
22. Effective August 1, 1996, the term "Demised Premises" shall mean
and include all of that certain building located at 7247-7281 Flying Cloud Drive
consisting of approximately 76,297 square feet, as shown on the site plan set
forth in Exhibit 4 attached hereto and incorporated herein by this reference.
The Demised Premises for that portion of the Lease term prior to August 1, 1996,
shall be as set forth in the Lease prior to this Amendment. However, as an
accommodation to Lessee, Lessee shall have the right to use and occupy those
portions of the Premises which do not become a part of the Demised Premises
until August 1, 1996 during the period from and after the date of this Amendment
to and including August 1, 1996, subject, however, to the following: Any such
occupancy and/or use of that part of the Premises which are not part of the
Demised
-5-
<PAGE>
Premises shall be in compliance with law and the terms of the Lease, including
this Amendment, other than the payment of rent, in general, and such occupancy
and/or use shall be in accordance with the terms of paragraph 20 of this
Amendment, in particular.
23. To the extent that the terms of this Amendment are inconsistent
with the terms of the Lease other than this Amendment, the terms of this
Amendment shall prevail.
24. Lessee hereby acknowledges, agrees and certifies that the Lease,
which consists of the Lease, including the Rider thereto, the First Amendment
and this Amendment that the Lease is unmodified except as provided in such rider
and amendments, is in full force and effect as modified by such rider and
amendments and that neither Base Rent nor any other charges, including without
limitation, Real Estate Taxes, Operating Expenses or other Additional Rent have
been paid in advance.
25. Except as otherwise provided herein, the Lease shall remain
unchanged, valid, binding and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date and year first above written.
LESSEE: LESSOR:
APERTUS TECHNOLOGIES, INC., REAL ESTATE INCOME PARTNERS III,
A MINNESOTA CORPORATION LIMITED PARTNERSHIP,
BY BIRTCHER INVESTMENTS,
By: /s/ Robert D. Gordon ITS AUTHORIZED
-----------------------
Robert D. Gordon,
Chief Executive Officer By: /s/ Michael S. Buzar
---------------------------------
Michael S. Buzar
Senior Vice President
Date: February 18, 1996 Date: 8/6/96
------------------- -------------------------------
-6-
<PAGE>
EXHIBIT "1"
to Second Amendment to Lease dated February 18, 1996
by and between
Real Estate Income Partners III, Limited Partnership, as Landlord,
and
Apertus Technologies, Inc., a Minnesota corporation, formerly known as Lee
Data Corporation, as Tenant
During the period from August 1, 1996 through and including July 31, 2002,
Lessor reserves and Lessee shall pay Lessor, a total Base Rent of Three Million
Six Hundred Sixty-Two Thousand Two Hundred Fifty-Six and 24/100 Dollars
($3,662,256.24), payable in advance, according to the following schedule:
<TABLE>
<CAPTION>
Monthly Total Period
Period Base Rent Base Rent
- ------------------------ ------------ -------------
<S> <C> <C>
August l, 1996 through
and including
July 31, 1999 $47,685.63 $1,716,682.68
August 1, 1999 through
and including
July 31, 2002 $54,043.71 $1,945,573.56
</TABLE>
For that portion of the term of the Lease prior to August 1, 1996, Base Rent
shall be as set forth in the Lease, exclusive of the Amendment of which this
Exhibit 1 is a party.
<PAGE>
EXHIBIT "2"
to Second Amendment to Lease dated February 18, 1996
by and between
Real Estate Income Partners III, Limited Partnership, as Landlord,
and
Apertus Technologies, Inc., a Minnesota corporation, formerly known as Lee
Data Corporation, as Tenant
RULES AND REGULATIONS
---------------------
1. The parking areas, sidewalks, entrances, passages, concourses, ramps,
courts, or vestibules, shall not be obstructed or used by Lessee or the
employees, agents, servants, visitors or business of Lessee for any purpose
other than ingress and egress to and from the Demised Premises and for
delivery of merchandise and equipment in prompt and efficient manner.
2. No awnings, air conditioning units, fans or other projections shall be
attached to the Building. No curtains, blinds, shades or screens shall be
attached to or hung in or used in connection with, any window or door of
the Demised Premises or Building, without the prior written consent of
Lessee. All electrical fixtures hung in offices or spaces along the
perimeter of the Demised Premises must be fluorescent, of a quality type,
design and bulb color approved by Lessee unless the prior consent of Lessee
has been obtained for other lamping.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Lessee on any part of the outside of
the Demised Premises, Building or Project or inside of the Demised Premises
if the same can be seen from the outside of the Demised Premises without
the prior written consent of Lessee. In the event of the violation of the
foregoing by Lessee, Lessee may remove same without any liability, and may
charge the expense incurred by such removal to Lessee or Lessees violating
this rule.
4. The exterior windows and doors that reflect or admit light and air into the
Demised Premises shall not be covered or obstructed by any Lessee, nor
shall any articles be placed on the window sills. No showcases or other
articles shall be put in front or affixed to any part of the exterior of
the Building.
5. Lessee shall not mark, paint, drill into, or in any way deface any part of
the Demised Premises or the Building. No boring, drilling of nails or
screws, cutting or stringing of wires shall be permitted, except with the
prior written consent of Lessee, and as Lessee may direct. Lessee shall
not lay floor tile or other similar floor covering in the Demised Premises,
except with the prior approval of Lessee.
6. No portion of the Premises, the Building or the Demised Premises shall be
used or occupied at any time for the sale of merchandise, goods or property
of any kind at auction or otherwise without the express consent of
Landlord, or as sleeping or lodging quarters.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows, nor shall any changes or alterations be made in existing
locks or the mechanism thereof. Lessee shall furnish two keys for each
lock on exterior doors to the Demised Premises. Each Lessee must, upon the
termination of its tenancy, return to Lessee all keys to storerooms,
offices and toilet rooms, either furnished to, or otherwise procured by
such Lessee, and in the event of the loss of any keys, so furnished, such
Lessee shall pay to Lessee the cost thereof. Lessee may at all times keep
a pass key to the Demised Premises. All entrance doors to the Demised
Premises shall be left closed at all times, and left locked when the
Demised Premises are not ln use.
8. No vehicles, or animals of any kind (other than a seeing eye dog for a
blind person), shall be brought into or kept by any Lessee in the Demised
Premises.
9. Lessee shall not use or occupy or permit any portion of the Demised
Premises to be used or occupied as an office for offset printing or for the
possession, storage, manufacture, sale of liquor or narcotics, or as a
barber or manicure shop, a labor office, a doctor's or dentist's office, a
dance or music studio, any type of school, or for any use other than those
specifically granted in the Lease with the express consent of the Lessee.
Lessee shall not engage or pay any employees on the Demised Premises,
except those actually working for such Lessee on said Demised Premises.
10. Lessee shall have the right to prohibit any advertising by any Lessee which
in Lessee's opinion tends to impair the reputation of the Building or
Project or its desirability as a building for office/warehouse use, and
upon written notice from Lessee, Lessee shall refrain from or discontinue
such advertising. In no event shall Lessee, without the prior written
consent of Lessee, use the name of the Building or Project or use pictures
<PAGE>
or illustrations of the Building or Project.
11. Lessee shall keep doors to unattended areas locked and shall otherwise
exercise reasonable precautions to protect property from theft, loss or
damage. Lessee, shall not be responsible for the theft, loss or damage of
any property.
12. Lessee shall give immediate notice to Lessee in case of theft, unauthorized
solicitation or accident in the Demised Premises, Building or Project or of
defects therein, or of any known emergency in the Demised Premises,
Building or Project.
13. Lessee shall not use the Demised Premises or permit the Demised Premises to
be used for photographic, multilith or multigraph reproductions, except in
connection with its own business and not as a service for others, without
Lessee's prior permission.
14. Lessees, or the employees, agents, servants, visitors, or licensees of
Lessee shall not at any time place, leave or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Demised Premises.
15. Lessee shall not make excessive noises, cause disturbances or vibrations or
use or operate any electrical or mechanical devises that emit excessive
sound or other waves or disturbances or create obnoxious odors, any of
which may be offensive to the other Lessees and occupants of the Building,
or that would interfere with the operation of any device, equipment, radio,
television broadcasting or reception from or within the Building or
elsewhere and shall not place or install any projections, antennas, aerials
or similar devices inside or outside of the Demised Premises or on the
Building without Lessee's prior written approval.
16. Lessee shall comply with all applicable federal, state and municipal laws,
ordinances and regulations, and building rules and shall not directly or
indirectly make any use of the Demised Premises which may be prohibited by
any of the foregoing or which may be dangerous to persons or property or
may increase the cost of insurance or require additional insurance
coverage.
17. Lessee, its servants, employees, customers, invitees and guests shall, when
using the parking facilities around the Building or Project observe and
obey all signs regarding fire lanes, no parking zones, and handicapped
zones, and when parking, always park between designated lines. Lessee
reserves the right to tow away, at the expense of the owners, any vehicle
which is improperly parked or parked in a "No Parking" zone. All vehicles
shall be parked at the sole risk of the owners, and Lessee assumes no
responsibilities for any damage or loss of vehicles. There shall not be
any overnight parking at the Project and there shall be no parking of
boats, boat trailers, camping trailers or recreational vehicles of any type
at the Project.
18. Lessee shall not serve, nor permit the serving of alcoholic beverages in
the Demised Premises unless Lessee shall have procured Host Liquor
Liability Insurance, issued by companies and in amounts reasonably
satisfactory to Lessee, naming Lessee as an additional party insured.
19. The requirements of Lessee will be attended to only upon written
application at the office of Lessee. Employees shall not perform any work
or do anything outside of the regular duties unless under special
instructions from the office of Lessee.
20. Canvassing, soliciting and peddling in the Project is prohibited and Lessee
shall cooperate to prevent the same.
21. Except as otherwise explicitly permitted in its lease, Lessee shall not do
any cooking, conduct any restaurant, luncheonette or cafeteria for the sale
or service of food or beverages to its employees or to others, install or
permit the installation or use of any food, beverage, cigarette, cigar or
stamp dispensing machine or permit the delivery of any food or beverage to
the Demised Premises, except by such persons delivering the same as shall
be approved by Lessee.
22. Lessee shall at all times keep the Demised Premises neat and orderly.
23. Lessee reserves the right by written notice to Lessee to add to, rescind,
alter or waive these rules and regulations at any time prescribed for the
Project when, in Lessee's reasonable judgement, it is necessary, desirable
or proper for the best interest of the Project and its Lessees.
<PAGE>
EXHIBIT 3
to Second Amendment to Lease dated February 18, 1996
by and between
Real Estate Income Partners III, Limited Partnership, as Landlord,
and
Apertus Technologies, Inc., a Minnesota corporation, formerly known as Lee
Data Corporation, as Tenant
WORK LETTER
-----------
1. APPLICATION OF WORK LETTER
Capitalized terms used and not otherwise defined herein shall have the same
definitions as set forth in the Lease. The provisions of this Work Letter shall
apply to the planning and completion of leasehold improvements requested by
Lessee (the "Improvements") for the fitting out of the Demised Premises, as more
fully set forth herein.
2. LESSOR AND LESSEE PRE-CONSTRUCTION OBLIGATIONS
a) Preliminary Space Plans. Attached to this Work Letter as Schedule "1"
-----------------------
are preliminary space plans for the Improvements (the "Preliminary Space
Plans"), which include without limitation, sketches, notes and/or drawings
showing locations of doors, partitioning, electrical fixtures, outlets and
switches, plumbing fixtures and other requirements, mutually agreed upon by
Lessor and Lessee and determined by Lessee as required for its use of the
Demised Premises. Lessee acknowledges that the Preliminary Space Plans have
been prepared by Lessor's Architect after consultation and cooperation between
Lessee and Lessor's Architect regarding the proposed improvements and Lessee's
requirements and that the Preliminary Space Plans are complete with respect
thereto. Lessor and Lessor's Architect shall be entitled, in all respects, to
rely upon all information supplied by Lessee regarding the Improvements.
b) Working Drawings. Within thirty (30) days following full execution of
----------------
the Amendment, of which this Work Letter is a part, by both Lessor and Lessee,
Lessor's Architect shall prepare working drawings (the "Working Drawings") for
the Improvements based upon the approved Preliminary Space Plans. The Working
Drawings shall include architectural, mechanical and electrical drawings for the
Improvements based on the Preliminary Space Plans. Notwithstanding the
Preliminary Space Plans, in all cases the Working Drawings (i) shall be subject
to Lessor's final approval, which approval shall not be unreasonably withheld,
(ii) shall not be in conflict with building codes for the city or county in
which the Demised Premised are located or with insurance requirements for a fire
resistive Class A building, and (iii) shall be in a form satisfactory to
appropriate governmental authorities responsible for issuing permits and
licenses required for construction. The costs associated with preparation of
the Working Drawings shall be borne by Lessee but paid as set forth in Sections
5 and 6 (i.e., the Improvement Allowance shall be available for the payment of
such costs; however, Lessee shall be responsible and liable for overages) of
this Work Letter.
c) Approval of Working Drawings. Lessor or Lessor's Architect shall
----------------------------
submit the Working Drawings to Lessee for Lessee's review and Lessee shall
notify Lessor and Lessor's Architect within five (5) days after delivery thereof
of any requested revisions. Within five (5) days after receipt of Lessee's
notice, Lessor's Architect shall make all approved revisions to the Working
Drawings and submit two (2) copies thereof to Lessee for its final review and
approval, which approval shall be given within three (3) days thereafter.
Concurrently with the above review and approval process, Lessor may submit all
plans and specifications to city and/or other applicable governmental agencies
in an attempt to expedite city approval and issuance of all necessary permits
and Licenses to construct the Improvements as shown on the Working Drawings.
Any changes which are required by city or other governmental agencies shall be
immediately submitted to Lessor for Lessor's review and reasonable approval, and
Lessor shall promptly notify Lessee of such changes.
d) Schedule of Critical Dates. Set forth below is a schedule of certain
--------------------------
critical dates relating to Lessor's and Lessee's respective obligations for the
design and construction of the Improvements. Such dates and the respective
obligations of Lessor and Lessee are more fully described elsewhere in this Work
Letter. The purpose of the following schedule is to provide a reference for
Lessor and Lessee and to make certain the Final Approval Date occurs as set
forth herein. Following the Final Approval Date, Lessee shall be deemed to have
released Lessor to commence construction of the Improvements as set forth in
Section 4 below.
Reference Date Due Responsible Party
--------- -------- -----------------
A. "Preliminary Space Contemporaneously with full Lessee & Lessor
Plan Approval" execution of the Amendment
10
<PAGE>
B. "Working Drawings Thirty (30) days after full Lessor
Completion" execution of the Amendment
C. "Working Drawings Five (5) days after Lessor Lessee
Review" submits the Working Drawings to
Lessee
D. "Working Drawings "Five (5) days after Lessee Lessor
Revisions returns the Working Drawings to
Lessor
E. "Final Approval Date" Three (3) days after Lessor Lessee
submits the revised Working
Drawings to Lessee
3. BUILDING PERMIT
After the Final Approval Date has occurred, Lessor shall, if Lessor has not
already done so, submit the Working Drawings to the appropriate governmental
body or bodies for final plan checking and a building permit. Lessor, with
Lessee's cooperation, shall cause to be made any change in the Working Drawings
necessary to obtain the building permit; provided, however, after the Final
Approval Date, no changes shall be made to the Working Drawings without the
prior written approval of both Lessor and Lessee, and then only after agreement
by Lessee to pay any excess costs resulting from such changes.
4. CONSTRUCTION OF LESSEE IMPROVEMENTS
After the Final Approval Date has occurred and a building permit for the
work has been issued, Lessor shall, through a guaranteed maximum cost or fixed
price (at Lessor's sole option) construction contract ("Construction Contract")
with a reputable, licensed contractor selected by Lessor ("Contractor"), cause
the construction of the Improvements to be carried out in substantial
conformance with the Working Drawings in a good and workmanlike manner using
first-class materials. The costs associated with the construction of the
Improvements shall be paid as set forth in Section 5 and 6 of this Work Letter.
Lessor shall see that the construction complies with all applicable building,
fire, health, and sanitary codes and regulations, the satisfaction of which
shall be evidenced by a certificate of occupancy for the Demised Premises.
Notwithstanding anything to the contrary in the foregoing, Lessor shall cause
the Construction Contract to be competitively bid by at least three (3)
contractors selected by Lessor.
5. IMPROVEMENT ALLOWANCE
Lessor shall provide Lessee with an Improvement Allowance in the amount of
Seven Hundred Sixty-Two Thousand Nine Hundred Seventy and no/ 100 Dollars
($762,970.00) towards the cost of the design, purchase and construction of the
Improvements, including without limitation design, engineering and consulting
fees (collectively, the "Improvement Costs"). The Improvement Allowance shall
be used for payment of the following Improvement Costs:
(i) Preparation of the Preliminary Space Plans and the Working Drawings
as provided in Section 2 of this Work Letter, including without limitation all
fees charged by the City or other governmental agencies (including without
limitation fees for building permits and plan checks) in connection with the
Improvements work in the Demised Premises;
(ii) Construction work for completion of the Improvements as reflected in
the Construction Contract;
(iii) All contractors charges, general conditions, performance bond
premiums and construction management fees; and
(iv) Improvements as shown on the approved Preliminary Space Plans dated
November 28, 1995, attached hereto as Schedule "1".
In the event that Lessee does request modifications, changes or alterations of
the Improvements from what is shown on the approved Working Drawings, or causes
any Lessee Delays as defined in Section 7 of this Work Letter, then, to the
extent that the remaining balance of the Improvement Allowance, if any, is
insufficient to fund such costs, the costs shall be borne by Lessee as provided
in Section 6 below. If Lessee does seek to modify, change or alter the
Improvements from the approved Preliminary Space Plans, or does cause a Lessee
Delay, Lessee shall pay to Lessor any excess costs resulting therefrom in
accordance with Section 6 of this Work Letter.
11
<PAGE>
6. COSTS IN EXCESS OF IMPROVEMENT ALLOWANCE AT LESSEE'S EXPENSE
a) Cost Approval. Lessee shall pay the excess of the Improvement Costs
-------------
over the amount of the Improvement Allowance available to defray such costs.
Within twenty-one (21) days of the Final Approval Date, Lessor shall submit to
Lessee a written estimate of the amount of the Lessee Improvement Costs and the
amount of the Improvement Allowance still available to defray such costs (after
preparation of the Working Drawings). Lessee shall approve or disapprove any
such estimate by written notice to Lessor within three (3) days after receipt
thereof. If Lessee fails to notify Lessor of its disapproval within such three
(3) day period, Lessee shall be deemed to have approved such estimate. If such
estimate exceeds the Improvement Allowance then still available and Lessee
approves such estimate, Lessee's notice of approval shall include payment to
Lessor for the full amount of such excess. If Lessee disapproves such estimate
within the three (3) day period, Lessee shall be required to direct Lessor and
Lessor's Architect to amend the Working Drawings in a manner satisfactory to
Lessor so as to reduce the estimated costs described in the preceding sentence.
Lessee shall additionally pay any costs resulting from such amendment and Lessee
shall be liable for the delay in completing the Improvements and the increased
costs, if any, resulting from such delay. If Lessee is unwilling or unable to
amend the Working Drawings in a manner acceptable to Lessor, then Lessee shall
be deemed to have approved of the estimate for the Working Drawings as prepared,
And shall pay in full the amount of any excess estimated costs together with any
costs arising from delay as a result of Lessee's actions hereunder, in the
manner hereinabove provided.
b) Final Costs. Within sixty (60) days after completion by Lessor of the
-----------
Improvements, Lessor shall determine the actual final Improvement Costs and
shall submit a written statement of such amount to Lessee. If any estimate
previously paid by Lessee exceeds the amount due hereunder from Lessee for such
work, such excess shall be refunded to Lessee. If any amount is still due from
Lessee for such work, then Lessee shall pay such amount in full within ten (10)
days of receipt of Lessor's statement. If the actual final Improvement Costs
are less than the Improvement Allowance, then Lessor shall pay Lessee an amount
equal to fifty percent (50%) of the difference between the actual final
Improvement Costs, and the Improvement Allowance.
7. CHANGE ORDERS
Lessee may from time to time request and obtain change orders during the
course of construction provided that: (i) each such request shall be
reasonable, shall be in writing and signed by or on behalf of Lessee, and shall
not result in any structural change in the Building, as reasonably determined by
Lessor, (ii) all additional charges and costs, including without limitation
architectural and engineering costs, construction and material costs, and
processing costs of any governmental entity shall be the exclusive obligation of
Lessee (i.e., the Improvement Allowance, if any, shall be available for the
payment of such costs; however, Lessee shall be responsible and liable for
overages), and (iii) any resulting delay in the completion of the Improvements
shall be deemed a Lessee Delay and in no event shall extend the date on which
Base Rent and Additional Rent increase as provided in paragraph 4 and 5 of the
Amendment (the "Expansion Date"). Upon Lessee's request for a change order,
Lessor shall as soon as reasonably possible submit to Lessee a written estimate
of the increased or decreased cost and anticipated delay, if any, attributable
to such requested change. Within three (3) days of the date of such estimated
cost adjustment and delay are delivered to Lessee, Lessee shall advise Lessor
whether it wishes to proceed with the change order, and if Lessee elects to
proceed with the change order, Lessee shall remit, concurrently with Lessee's
notice to proceed, the amount of the increased cost, if any, attributable to
such change order. Unless Lessee includes in its initial change order request
that the work in process at the time such request is made be halted pending
approval and execution of a change order, Lessor shall not be obligated to stop
construction of the Improvements, whether or not the change order relates to the
work then in process or about to be started.
8. LESSEE DELAYS
In no event shall the Expansion Date be extended or delayed due or
attributable to delays due to the fault of Lessee ("Lessee Delays"). Lessee
Delays shall include, but are not limited to, delays caused by or resulting from
any one or more of the following:
a) Lessee's failure to timely review and reasonably approve the Working
Drawings or to promptly cooperate with Lessor's Architect and furnish
information to Lessor for the preparation of the Preliminary Space Plans and
Working Drawings;
b) Lessee's request for or use of special materials, finishes or
installations which are not readily available, provided that Lessor shall notify
Lessee that the particular material, finish, or installation is not readily
available promptly upon Lessor's discovery of same;
12
<PAGE>
c) Change orders requested by Lessee;
d) Interference by Lessee or by Lessee's agents with Lessor's
construction activities, including, without limitation, failure to make any
portion of the Demised Premises available;
e) Lessee's failure to approve any other item or perform any other
obligation in accordance with and by the dates specified herein or in the
Construction Contract;
f) Lessee's requested changes in the Preliminary Space Plans, Working
Drawings or any other plans and specifications after the approval thereof by
Lessee or submission thereof by Lessee to Lessor;
g) Lessee's failure to approve written estimates of costs in accordance
with this Work Letter; and
h) Lessee's obtaining or failure to obtain any necessary governmental
approvals or permits for Lessee's intended use of the Demised Premises.
9. TRADE FIXTURES AND EQUIPMENT
Lessee acknowledges and agrees that Lessee is solely responsible for
obtaining, delivering and installing in the Demised Premises all necessary and
desired furniture, trade fixtures, equipment and other similar items, and that
Lessor shall have no responsibility whatsoever with regard thereto. Lessee
further acknowledges and agrees that neither the Expansion Date nor the payment
of Base Rent or Additional Rent shall be delayed for any period of time
whatsoever due to any delay in the furnishing of the Demised Premises with such
items.
10. FAILURE OF LESSEE TO COMPLY
Any failure of Lessee to comply with any of the provisions contained in
this Work Letter within the times for compliance herein set forth shall be
deemed a default under the Lease. In addition to the remedies provided to
Lessor in this Work Letter upon the occurrence of such a default by Lessee,
Lessor shall have all remedies available at law or equity to a landlord against
a defaulting tenant pursuant to a written lease, including but not limited to
those set forth in the Lease.
13
<PAGE>
EXHIBIT "4"
to Second Amendment to Lease dated February 18, 1996
by and between
Real Estate Income Partners III, Limited Partnership, as Landlord,
and
Apertus Technologies, Inc., a Minnesota corporation, formerly known as Lee
Data Corporation, as Tenant
SITE PLAN
---------
--------------------------
CREEK EDGE BUSINESS CENTER
--------------------------
[DRAWING OF SITE PLAN APPEARS HERE]
<PAGE>
SCHEDULE 1
(Attached)
15
<PAGE>
[ARCHITECT DRAWING OF MAIN FLOOR APPEARS HERE]
<PAGE>
[ARCHITECT DRAWING OF UPPER FLOOR PLAN APPEARS HERE]
<PAGE>
Exhibit 10.6(d)
---------------
1997 Management Bonus Plan
Under the 1997 Management Bonus Plan, key employees of the Company (including
executive officers of the Company) may be entitled to receive amounts ranging
from 5% to 100% of their base pay, in the form of cash bonuses. Payment of
bonuses will depend upon achievement of annual incentive plan operating targets.
<PAGE>
Exhibit 10.9(b)
---------------
================================================================================
AGREEMENT OF LEASE
between
TWO PENN PLAZA ASSOCIATES,
Landlord
and
APERTUS TECHNOLOGIES INCORPORATED
Tenant
2 Penn Plaza
New York, New York
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
DEFINITIONS................................................................ 1
ARTICLE 1 - DEMISE, PREMISES, TERM, RENT.............................. 9
ARTICLE 2 - USE AND OCCUPANCY......................................... 10
ARTICLE 3 - ALTERATIONS............................................... 11
ARTICLE 4 - REPAIRS-FLOOR LOAD........................................ 17
ARTICLE 5 - WINDOW CLEANING........................................... 19
ARTICLE 6 - REQUIREMENTS OF LAW....................................... 19
ARTICLE 7 - SUBORDINATION............................................. 21
ARTICLE 8 - RULES AND REGULATIONS..................................... 25
ARTICLE 9 - INSURANCE, PROPERTY LOSS OR DAMAGE;
REIMBURSEMENT............................................. 25
ARTICLE 10 - DESTRUCTION-FIRE OR OTHER CAUSE........................... 28
ARTICLE 11 - EMINENT DOMAIN............................................ 32
ARTICLE 12 - ASSIGNMENT, SUBLETTING, MORTGAGE, ETC..................... 34
ARTICLE 13 - ELECTRICITY............................................... 46
ARTICLE 14 - ACCESS TO PREMISES........................................ 51
ARTICLE 15 - CERTIFICATE OF OCCUPANCY.................................. 53
ARTICLE 16 - DEFAULT................................................... 53
ARTICLE 17 - REMEDIES AND DAMAGES...................................... 56
ARTICLE 18 - LANDLORD FEES AND EXPENSES................................ 59
ARTICLE 19 - NO REPRESENTATIONS BY LANDLORD............................ 59
ARTICLE 20 - END OF TERM............................................... 61
ARTICLE 21 - QUIET ENJOYMENT........................................... 62
ARTICLE 22 - FAILURE TO GIVE POSSESSION................................ 62
ARTICLE 23 - NO WAIVER................................................. 62
ARTICLE 24 - WAIVER OF TRIAL BY JURY................................... 63
ARTICLE 25 - INABILITY TO PERFORM...................................... 64
ARTICLE 26 - BILLS AND NOTICES......................................... 64
ARTICLE 27 - ESCALATION................................................ 65
ARTICLE 28 - SERVICES.................................................. 74
ARTICLE 29 - PARTNERSHIP TENANT........................................ 77
ARTICLE 30 - VAULT SPACE............................................... 77
ARTICLE 31 - SECURITY.................................................. 78
ARTICLE 32 - CAPTIONS.................................................. 79
ARTICLE 33 - PARTIES BOUND............................................. 80
ARTICLE 34 - BROKER.................................................... 80
ARTICLE 35 - INDEMNITY................................................. 80
ARTICLE 36 - ADJACENT EXCAVATION-SHORING............................... 81
ARTICLE 37 - MISCELLANEOUS............................................. 81
ARTICLE 38 - RENT CONTROL.............................................. 84
ARTICLE 39 - RENEWAL TERM.............................................. 85
<PAGE>
Schedule A - Rules and Regulations
Schedule B - Cleaning Specifications
EXHIBIT "A" - Floor Plan
EXHIBIT "B" - Approved Contractors in connection with the Initial
Alterations
EXHIBIT "C" - Location of Demising Wall
<PAGE>
AGREEMENT OF LEASE, made as of the 1st day of November, 1995, between
Landlord and Tenant.
WITNESSETH:
----------
The parties hereto, for themselves, their legal representatives, successors
and assigns, hereby covenant as follows.
DEFINITIONS
-----------
"ACM" shall have the meaning set forth in Section 19.2 hereof.
---
"Affiliate" shall mean a Person which shall (1) Control, (2) be under the
---------
Control of, or (3) be under common Control with the Person in question.
"Alteration Fee" shall have the meaning set forth in Section 3.2 hereof.
--------------
"Alterations" shall mean alterations, installations, improvements,
-----------
additions or other physical changes (other than decorations) in or about the
Premises.
"Applicable Rate" shall mean the lesser of (x) two (2) percentage points
---------------
above the then current Base Rate, and (y) the maximum rate permitted by
applicable law.
"Appraiser" shall have the meaning set forth in Section 39.3 hereof.
---------
"Assessed Valuation" shall have the meaning set forth in Section 27.1
------------------
hereof.
"Assignment Proceeds" shall have the meaning set forth in Section 12.8
-------------------
hereof.
"Assignment Statement" shall have the meaning set forth in Section 12.8
--------------------
hereof.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., or any statute
---------- ---- -------
of similar nature and purpose.
"Base Electric Rate" shall mean the Cost per Kilowatt Hour as of the date
------------------
hereof.
"Base Operating Expenses" shall have the meaning set forth in Section 27.1
-----------------------
hereof.
"Base Operating Year" shall have the meaning set forth in Section 27.1
-------------- ----
hereof.
1
<PAGE>
"Base Rate" shall mean the rate of interest publicly announced from time to
---------
time by The Chase Manhattan Bank, N.A., or its successor, as its "prime lending
rate" (or such other term as may be used by The Chase Manhattan Bank, N.A., from
time to time, for the rate presently referred to as its "prime lending rate"),
which rate was 9% on May 24, 1995.
"Base Taxes" shall have the meaning set forth in Section 27.1 hereof.
----------
"Broker" shall have the meaning set forth in Article 34 hereof.
------
"Building" shall mean all the buildings, equipment and other improvements
--------
and appurtenances of every kind and description now located or hereafter
erected, constructed or placed upon the land and any and all alterations, and
replacements thereof, additions thereto and substitutions therefor, known by the
address of 2 Penn Plaza, New York, New York.
"Building Systems" shall mean the mechanical, gas, electrical, sanitary,
----------------
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service systems of the Building.
"Business Days" shall mean all days, excluding Saturdays, Sundays and all
-------------
days observed by either the State of New York or the Federal Government and by
the labor unions servicing the Building as legal holidays.
"Commencement Date" shall have the meaning set forth in Section 1.1 hereof.
-----------------
"Common Building Facilities" shall have the meaning set forth in Section
--------------------------
1.1 hereof.
"Consumer Price Index" 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 index thereto, appropriately adjusted. In the event
that the Consumer Price Index is converted to a different standard reference
base or otherwise revised, the determination of adjustments provided for herein
shall be made with the use of such conversion factor, formula or table for
converting the Consumer Price Index as may be published by the Bureau of Labor
Statistics or, if said Bureau shall not publish the same, then with the use of
such conversion factor, formula or table as may be published by Prentice-Hall,
Inc., or any other nationally recognized publisher of similar statistical
information. If the Consumer Price Index ceases to be published, and there is
no successor thereto, such other index as Landlord and Tenant shall agree upon
in writing shall be substituted for the Consumer Price Index. If Landlord and
Tenant are unable to agree as to such substituted index, such matter shall be
submitted to the American Arbitration Association or any successor organization
for determination in accordance with the regulations and procedures thereof then
obtaining for commercial arbitration.
2
<PAGE>
"Control" or "control" shall mean ownership of more than fifty percent
------- -------
(50%) of the outstanding voting stock of a corporation or other majority equity
and control interest if not a corporation and the possession of power to direct
or cause the direction of the management and policy of such corporation or other
entity, whether through the ownership of voting securities, by statute or
according to the provisions of a contract.
"Current Year" shall have the meaning set forth in Section 27.4 hereof.
------------
"Deficiency" shall have the meaning set forth in Section 17.2 hereof.
----------
"Electric Rate" shall have the meaning set forth in Section 13.2 hereof.
-------------
"Electricity Additional Rent" shall have the meaning set forth in Section
---------------------------
13.3 hereof.
"Electricity Inclusion Factor" shall have the meaning set forth in Section
----------------------------
13.2 hereof.
"Electricity Statement" shall have the meaning set forth in Section 13.2
---------------------
hereof.
"Escalation Rent" shall mean, individually or collectively, the Tax Payment
---------------
and the Operating Payment.
"Event of Default" shall have the meaning set forth in Section 16.1 hereof.
----------------
"Expiration Date" shall mean the Fixed Expiration Date or such earlier or
---------------
later date on which the Term shall sooner or later end pursuant to any of the
terms, conditions or covenants of this Lease or pursuant to law.
"Fair Market Rent" shall have the meaning set forth in Section 39.3 hereof.
----------------
"Fixed Expiration Date" shall have the meaning set forth in Section 1.1
---------------------
hereof.
"Fixed Rent" shall have the meaning set forth in Section 1.1 hereof.
----------
"Full Value" shall have the meaning set forth in Section 13.3 hereof.
----------
"Governmental Authority (Authorities)" shall mean the United States of
------------------------------------
America, the State of New York, the City of New York, any political subdivision
thereof and any agency, department, commission, board, bureau or instrumentality
of any of the foregoing, or any quasi-governmental authority, now existing or
hereafter created, having jurisdiction over the Real Property or any portion
thereof.
"HVAC" shall mean heat, ventilation and air conditioning.
----
"HVAC Systems" shall mean the Building Systems providing HVAC.
------------
3
<PAGE>
"Increase" shall have the meaning set forth in Section 27.7 hereof.
--------
"Indemnitees" shall mean Landlord, the partners comprising Landlord and its
-----------
and their partners, shareholders, officers, directors, employees, agents and
contractors, Lessors and Mortgagees.
"Initial Alterations" shall mean the Alterations to be made by Tenant to
-------------------
initially prepare the Premises for Tenant's occupancy.
"Landlord", on the date as of which this Lease is made, shall mean Two Penn
--------
Plaza Associates, a New York limited partnership having an office c/o Mendik
Realty Company, Inc. at 330 Madison Avenue, New York, New York 10017, but
thereafter, "Landlord" shall mean only the fee owner of the Real Property or if
there shall exist a Superior Lease, the tenant thereunder.
"Landlord's Determination" shall have the meaning set forth in Section 39.3
------------------------
hereof.
"Landlord's Engineer" shall have the meaning set forth in Section 13.2
-------------------
hereof.
"Landlord's Work" shall have the meaning set forth in Section 19.1 hereof.
---------------
"Lessor(s)" shall mean a lessor under a Superior Lease.
---------
"Letter of Credit" shall have the meaning set forth in Article 31 hereof.
----------------
"Listing Rate" shall have the meaning set forth in Section 12.6 hereof.
------------
"Long Lead Work" shall mean any item which is not a stock item and must be
--------------
specially manufactured, fabricated or installed or is of such an unusual,
delicate or fragile nature that there is a substantial risk that
(i) there will be a delay in its manufacture, fabrication, delivery or
installation, or
(ii) after delivery, such item will need to be reshipped or
redelivered or repaired
so that in Landlord's reasonable judgment the item in question cannot be
completed when the standard items are completed even though the item of Long
Lead Work in question is (1) ordered together with the other items required and
(2) installed or performed (after the manufacture or fabrication thereof) in the
order and sequence that such Long Lead Work and other items are normally
installed or performed in accordance with good construction practice. In
addition, "Long Lead Work" shall include any standard item which in accordance
with
4
<PAGE>
good construction practice should be completed after the completion of any item
of work in the nature of the items described in the immediately preceding
sentence.
"Mortgage(s)" shall mean any trust indenture or mortgage which may now or
-----------
hereafter affect the Real Property, the Building or any Superior Lease and the
leasehold interest created thereby, and all renewals, extensions, supplements,
amendments, modifications, consolidations and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"Mortgagee(s)" shall mean any trustee, mortgagee or holder of a Mortgage.
------------
"Mutual Determination" shall have the meaning set forth in Section 39.3
--------------------
hereof.
"Nondisturbance Agreement" shall have the meaning set forth in Section 7.7
------------------------
hereof.
"Operating Expenses" shall have the meaning set forth in Section 27.1
------------------
hereof.
"Operating Payment" shall have the meaning set forth in Section 27.4
-----------------
hereof.
"Operating Statement" shall have the meaning set forth in Section 27.1
-------------------
hereof.
"Operating Year" shall have the meaning set forth in Section 27.1 hereof.
--------------
"Operation of the Property" shall mean the maintenance, repair and
-------------------------
management of the Real Property and the curbs, sidewalks and areas adjacent
thereto.
"Overtime Periods" shall have the meaning set forth in Section 28.3 hereof.
----------------
"Parties" shall have the meaning set forth in Section 37.2 hereof.
-------
"Partnership Tenant" shall have the meaning set forth in Article 29 hereof.
------------------
"Person(s) or person(s)" shall mean any natural person or persons, a
----------------------
partnership, a corporation and any other form of business or legal association
or entity.
"Possession Date" shall mean the date which is the first (1st) Business Day
---------------
after Landlord's Work has been Substantially Completed; provided, however, if
Landlord shall be delayed in Substantially Completing Landlord's Work by reason
of a delay due to Tenant, Tenant's contractors, licensees, agents, servants,
employees, invitees or visitors, the Possession Date shall mean the date which
is the first (1st) Business Day after Landlord's Work would have been
Substantially Completed but for such delay.
"Premises" shall mean, subject to the provisions of Section 14.5 hereof,
--------
the portion of the sixth (6th) floor of the Building as set forth on the floor
plans attached hereto and made a part hereof as Exhibit "A".
5
<PAGE>
"Prevailing Rate" shall have the meaning set forth in Section 12.6 hereof.
---------------
"Real Property" shall mean the Building, together with the plot of land
-------------
upon which it stands.
"Recapture Space" shall have the meaning set forth in Section 12.6 hereof.
---------------
"Recapture Sublease" shall have the meaning set forth in Section 12.6
------------------
hereof.
"Related Entity" shall have the meaning set forth in Section 12.4 hereof.
--------------
"Rental" shall mean and be deemed to include Fixed Rent, Escalation Rent,
------
all additional rent and any other sums payable by Tenant hereunder.
"Rental Value" shall have the meaning set forth in Section 39.3 hereof.
------------
"Rent Commencement Date" shall mean the date which is one hundred twenty
----------------------
(120) days after the Possession Date; provided, however, the Rent Commencement
Date shall be subject to extension to the extent Tenant shall be actually
delayed in completing the Initial Alterations by reason of strikes or labor
troubles or by accident or by reason of failure of the HVAC, electrical,
plumbing or other Building Systems in the Building in each case not caused by
the acts, omissions or negligence of Tenant, Tenant's contractors, licensees,
agents, servants, employees, invitees or visitors or by any cause whatsoever
beyond Tenant's control, including, but not limited to laws, governmental
preemption in connection with a national emergency or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency.
"Rent Notice" shall have the meaning set forth in Section 39.3 hereof.
-----------
"Rent Per Square Foot" shall have the meaning set forth in Section 12.7
--------------------
hereof.
"Requirements" shall mean all present and future laws, rules, orders,
------------
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, of all Governmental Authorities now existing
or hereafter created, and of any and all of their departments and bureaus, and
of any applicable fire rating bureau, or other body exercising similar
functions, affecting the Real Property or any portion thereof, or any street,
avenue or sidewalk comprising a part of or in front thereof or any vault in or
under the same, or requiring removal of any encroachment, or affecting the
maintenance, use or occupation of the Real Property or any portion thereof.
"Rules and Regulations" shall mean the rules and regulations annexed hereto
---------------------
and made a part hereof as Schedule A, and such other and further rules and
----------
regulations as Landlord or Landlord's agents may from time to time adopt on such
notice to be given as Landlord may
6
<PAGE>
elect, subject to Tenant's right to dispute the reasonableness thereof as
provided in Article 8 hereof.
"Space Factor" shall mean Twenty-One Thousand Ninety-Five (21,095) as the
------------
same may be increased or decreased pursuant to the terms hereof.
"Specialty Alterations" shall mean Alterations consisting of kitchens,
---------------------
executive bathrooms, raised computer floors, computer installations, vaults,
libraries, internal staircases, dumbwaiters, pneumatic tubes, vertical and
horizontal transportation systems, Antenna and other Alterations of a similar
character.
"Sublease Expenses" shall have the meaning set forth in Section 12.7
-----------------
hereof.
"Sublease Profit" shall have the meaning set forth in Section 12.7 hereof.
---------------
"Sublease Rent" shall have the meaning set forth in Section 12.7 hereof.
-------------
"Sublease Rent Per Square Foot" shall have the meaning set forth in Section
-----------------------------
12.7 hereof.
"Substantial Completion" or "Substantially Completed" or words of similar
---------------------- -----------------------
import shall mean that Landlord's Work has been substantially completed, it
being agreed that Landlord's Work shall be deemed substantially complete
notwithstanding the fact that minor or insubstantial details of construction or
demolition and/or mechanical adjustment and/or decorative items remain to be
performed.
"Superior Lease(s)" shall mean all ground or underlying leases of the Real
-----------------
Property or the Building and all renewals, extensions, supplements, amendments
and modifications thereof.
"Taxes" shall have the meaning set forth in Section 27.1 hereof.
-----
"Tax Payment" shall have the meaning set forth in Section 27.2 hereof.
-----------
"Tax Statement" shall have the meaning set forth in Section 27.1 hereof.
-------------
"Tax Year" shall have the meaning set forth in Section 27.1 hereof.
--------
"Tenant" on the date as of which this Lease is made, shall mean Apertus
------
Technologies Incorporated, a Minnesota corporation, having an office at 7275
Flying Cloud Drive, Eden, Prairie, MN 55344, but thereafter "Tenant" shall mean
only the tenant under this Lease at the time in question; provided, however,
that the originally named tenant and any assignee of this Lease shall not be
released from liability hereunder in the event of any assignment of this Lease.
7
<PAGE>
"Tenant Fund" shall have the meaning set forth in Section 3.5 hereof.
-----------
"Tenant Statement" shall have the meaning set forth in Section 12.6 hereof.
----------------
"Tenant's Engineer" shall have the meaning set forth in Section 13.2
-----------------
hereof.
"Tenant's Property" shall mean Tenant's movable fixtures and movable
-----------------
partitions, telephone and other equipment, furniture, furnishings, decorations
and other items of personal property.
"Tenant's Share" shall mean One and Four Thousand Five Hundred Forty-Eight
--------------
ten thousandths percent (1.4548%) as the same may be increased or decreased
pursuant to the terms hereof. Landlord has advised Tenant and Tenant has agreed
that solely for purposes of calculating Tenant's Share, the rentable area of the
Building is conclusively deemed to be One Million four Hundred Fifty Thousand
(1,450,000) rentable square feet and the rentable area of the Premises is
conclusively deemed to be Twenty-One Thousand Ninety-Five (21,095) rentable
square feet.
"Tentative Monthly Escalation Charge" shall have the meaning set forth in
-----------------------------------
Section 27.4 hereof.
"Term" shall mean a term which shall commence on the Commencement Date and
----
shall expire on the Expiration Date.
"Third Engineer" shall have the meaning set forth in Section 13.2 hereof.
--------------
"Unavoidable Delays" shall have the meaning set forth in Article 25 hereof.
------------------
8
<PAGE>
ARTICLE 1
DEMISE, PREMISES, TERM, RENT
----------------------------
Section 1.1. (A) Landlord hereby leases to Tenant and Tenant hereby hires
-----------
from Landlord the Premises for the Term to commence as of September 1, 1995 (the
"Commencement Date") and to end on January 31, 2003 (the "Fixed Expiration
Date"), at an annual rent (the "Fixed Rent") of:
(1) Four Hundred Sixteen Thousand Six Hundred Twenty-Six
and 25/100 Dollars ($416,626.25) for the period commencing on the Rent
Commencement Date and ending on January 31, 1998 ($34,718.85 per month), and
(2) Five Hundred Twenty-Two Thousand One Hundred One and
25/100 Dollars ($522,101.25) for the period commencing on February 1, 1998 and
ending on the Fixed Expiration Date ($43,508.44 per month) which Tenant agrees
to pay in lawful money of the United States which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment, in
equal monthly installments in advance, on the first (1st) day of each calendar
month during the Term commencing on the Rent Commencement Date, at the office of
Landlord or such other place as Landlord may designate, without any set-off,
offset, abatement or deduction whatsoever.
(B) This Lease includes the right of Tenant to use the Common Building
Facilities in common with other tenants in the Building. The term "Common
------
Building Facilities" shall mean all of the common facilities in or around the
- -------------------
Building designed and intended for use by all tenants in the Building in common
with Landlord and each other, including but not limited to hallways on floors
not occupied exclusively by any tenant or occupant, elevators and fire stairs
which are not allocated exclusively to Tenant or any other tenant, aisles, walk-
ways, truck docks, plazas, courts, restrooms on floors not occupied exclusively
by any tenant or occupant, service areas, lobbies, landscaped areas, and all
other common and service areas of the Building intended for such use.
Section 1.2. (A) If the Rent Commencement Date shall occur on a date other
-----------
than the first (1st) day of any calendar month, then, on the Rent Commencement
Date Tenant shall pay to Landlord a sum equal to One Thousand One Hundred Fifty-
Seven and 30/100 Dollars ($1,157.30), multiplied by the number of calendar days
in the period from the Rent Commencement Date to the last day of the month in
which the Rent Commencement Date shall occur, both dates inclusive. The first
monthly installment of Fixed Rent paid to Landlord on execution hereof shall be
applied to the first full calendar month after the month in which the Rent
Commencement Date occurs.
9
<PAGE>
(B) During the period commencing on the Possession Date and ending on
the day immediately preceding the Rent Commencement Date, Tenant shall pay to
Landlord, as additional rent, on account of electricity consumed at the Premises
the sum of Four Thousand Eight Hundred Thirty-Four and 27/100 Dollars
($4,834.27) per month. If such period shall commence or end on a date other
than the first (1st) or last day of a calendar month, as the case may be, such
monthly amount on account of electricity shall be appropriately adjusted.
(C) (i) Tenant shall be entitled to a credit against Fixed Rent in
an amount equal to Thirty-Eight Thousand Six Hundred Seventy-Four and 17/100
Dollars ($38,674.17) to be applied against the monthly installment of Fixed Rent
due on February 1, 1998, provided that no Event of Default shall have occurred
and be continuing on such date.
(ii) Tenant shall be entitled to a credit against Fixed Rent in
an amount equal to Thirty-Eight Thousand Six Hundred Seventy-Four and 17/100
Dollars ($38,674.17) to be applied against the monthly installment of Fixed Rent
due on March 1, 1998, provided no Event of Default shall have occurred and be
continuing on such date.
(iii) Tenant shall be entitled to a credit against Fixed Rent in
an amount equal to Thirty-Eight Thousand Six Hundred Seventy-Four and 17/100
Dollars ($38,674.17) to be applied against the monthly installment of Fixed Rent
due on February 1, 1999, provided no Event of Default shall have occurred and be
continuing on such date.
(iv) Tenant shall be entitled to a credit against Fixed Rent in
an amount equal to Thirty-Eight Thousand Six Hundred Seventy-Four and 17/100
Dollars ($38,674.17) to be applied against the monthly installment of Fixed Rent
due on March 1, 1999, provided no Event of Default shall have occurred and
continuing on such date.
Section 1.3. It is understood and agreed that Tenant shall have the right
-----------
to enter the Premises during the period commencing on the Commencement Date and
ending on the day immediately preceding the Possession Date, solely for the
purposes of performing its Initial Alterations, on all of the terms, covenants
and conditions of this Lease.
ARTICLE 2
USE AND OCCUPANCY
-----------------
Section 2.1. Tenant shall use and occupy the Premises as general and
-----------
executive offices, uses incidental thereto and for no other purpose.
Section 2.2. (A) Tenant shall not use the Premises or any part thereof, or
-----------
permit the Premises or any part thereof to be used, (1) for the business of
photographic, multilith or multigraph reproductions or offset printing, except
in connection with, either directly or indirectly, Tenant's own business and/or
activities, (2) for a banking, trust company,
10
<PAGE>
depository, guarantee or safe deposit business, (3) as a savings bank, a savings
and loan association, or as a loan company, (4) for the sale of travelers
checks, money orders, drafts, foreign exchange or letters of credit or for the
receipt of money for transmission, (5) as a stockbroker's or dealer's office or
for the underwriting or sale of securities, (6) by the United States government,
the City or State of New York, any foreign government, the United Nations or any
agency or department of any of the foregoing or any other Person having
sovereign or diplomatic immunity, (7) as a restaurant or bar or for the sale of
confectionery, soda or other beverages, sandwiches, ice cream or baked goods or
for the preparation, dispensing or consumption of food or beverages in any
manner whatsoever, except for consumption by Tenant's officers, employees and
business guests, (8) as an employment agency, executive search firm or similar
enterprise, labor union, school, or vocational training center (except for the
training of employees of Tenant intended to be employed at the Premises and the
occasional (i.e. no more than two (2) times per month) training of Tenant's
customers or clients (provided such training is for no more than ten (10)
individuals at a time)), or (9) as a barber shop or beauty salon.
(B) In connection with, and incidental to, Tenant's use of the
Premises for general and executive offices as provided in this Article 2,
Tenant, at its sole cost and expense and upon compliance with all applicable
Requirements, may install a "dwyer" or similar unit in the Premises for the
purpose of warming food for the officers, employees and business guests of
Tenant (but not for use as a public restaurant), provided that Tenant shall
obtain all permits required by any Governmental Authorities for the operation
thereof and such installation shall comply with the provisions of this Lease,
including, without limitation, Article 3 hereof. Tenant may also install, at
its sole cost and expense and subject to and in compliance with the provisions
of Articles 3 and 4 hereof, vending machines for the exclusive use of the
officers, employees and business guests of Tenant, each of which vending
machines (if it dispenses any beverages or other liquids or refrigerates) shall
have a waterproof pan located thereunder, connected to a drain to the extent
required by Requirements.
ARTICLE 3
ALTERATIONS
-----------
Section 3.1. (A) Except as provided in Section 3.4 hereof, Tenant shall
-----------
not make any Alterations without Landlord's prior consent. Landlord shall not
unreasonably withhold or delay its consent to any proposed nonstructural
Alterations, provided that such Alterations (i) are not visible from the outside
of the Building, (ii) do not affect any part of the Building other than the
Premises or require any alterations, installations, improvements, additions or
other physical changes to be performed in or made to any portion of the Building
or the Real Property other than the Premises, (iii) do not affect any service
required to be furnished by Landlord to Tenant or to any other tenant or
occupant of the Building, (iv) do not affect the proper functioning of any
Building System, (v) do not reduce the value or utility of the Building, and
(vi) do not affect the certificate of occupancy for the Building or the
Premises. Landlord shall not be deemed to be unreasonable with respect to
withholding its consent to
11
<PAGE>
any proposed nonstructural Alteration which meets the criteria set forth in this
Section 3.1(A) if the Lessor or Mortgagee, as the case may be, shall withhold
its consent.
(B) (1) Prior to making any Alterations, including, without
limitation, the Initial Alterations, Tenant shall (i) submit to Landlord
detailed plans and specifications (including layout, architectural, mechanical
and structural drawings) for each proposed Alteration and shall not commence any
such Alteration without first obtaining Landlord's approval of such plans and
specifications (except with respect to any nonstructural Alteration referred to
in Section 3.4 hereof for which Landlord's approval is not required), which, in
the case of nonstructural Alterations which meet the criteria set forth in
Section 3.1(A) above, shall not be unreasonably withheld or delayed, (ii) at
Tenant's expense, obtain all permits, approvals and certificates required by any
Governmental Authorities, it being agreed that all filings with Governmental
Authorities to obtain such permits, approvals and certificates shall be made, at
Tenant's expense, by a Person designated by Landlord, and (iii) furnish to
Landlord duplicate original policies or certificates thereof of worker's
compensation (covering all persons to be employed by Tenant, and Tenant's
contractors and subcontractors in connection with such Alteration) and
comprehensive public liability (including property damage coverage) insurance in
such form, with such companies, for such periods and in such amounts as Landlord
may reasonably approve, naming Landlord and its agents, any Lessor and any
Mortgagee, as additional insureds. Upon completion of such Alteration, Tenant,
at Tenant's expense, shall obtain certificates of final approval of such
Alteration required by any Governmental Authority and shall furnish Landlord
with copies thereof, together with the "as-built" plans and specifications for
such Alterations, it being agreed that all filings with Governmental Authorities
to obtain such permits, approvals and certificates shall be made, at Tenant's
expense, by a Person designated by Landlord. All Alterations shall be made and
performed substantially in accordance with the plans and specifications therefor
as approved by Landlord, all Requirements, the Rules and Regulations, and all
rules and regulations relating to Alterations promulgated by Landlord in its
reasonable judgment. All materials and equipment to be incorporated in the
Premises as a result of any Alterations or a part thereof shall be first quality
and no such materials or equipment (other than Tenant's Property) shall be
subject to any lien, encumbrance, chattel mortgage or title retention or
security agreement. In addition, no Alteration at a cost for labor and
materials (as reasonably estimated by Landlord's architect, engineer or
contractor) in excess of Two Hundred Thousand Dollars ($200,000) (which amount
shall be increased on the third (3rd) anniversary of the Commencement Date and
annually thereafter by the annual percentage increase, if any, in the Consumer
Price Index from that in effect on the Commencement Date), either individually
or in the aggregate with any other Alteration constructed in any twelve (12)
month period, shall be undertaken prior to Tenant's delivering to Landlord
either (i) a performance bond and labor and materials payment bond (issued by a
surety company and in form reasonably satisfactory to Landlord), each in an
amount equal to one hundred twenty percent (120%) of such estimated cost, or
(ii) such other security as shall be reasonably satisfactory to Landlord or
required by any Mortgagee or Lessor. If, as a result of any Alterations
performed by Tenant, including, without limitation, the Initial Alterations, any
alterations, installations, improvements, additions or other physical changes
are required to be performed or made to
12
<PAGE>
any portion of the Building or the Real Property other than the Premises in
order to comply with any Requirement(s), which alterations, installations,
improvements, additions or other physical changes would not otherwise have had
to be performed or made pursuant to applicable Requirement(s) at such time,
Landlord, at Tenant's sole cost and expense, may perform or make such
alterations, installations, improvements, additions or other physical changes
and take such actions as Landlord shall deem reasonably necessary and Tenant,
within five (5) days after demand therefor by Landlord, shall provide Landlord
with such security as Landlord shall reasonably require, in an amount equal to
one hundred twenty percent (120%) of the cost of such alterations,
installations, improvements, additions or other physical changes, as reasonably
estimated by Landlord's architect, engineer or contractor. If Landlord shall be
aware that any alterations, installations, improvements, additions or other
physical changes are required to be so performed as a result of any Alterations
performed by Tenant, including, without limitation, the Initial Alterations,
which alterations, installations, improvements, additions or other physical
changes would not otherwise have had to be performed or made, Landlord shall
endeavor to advise Tenant thereof at the time Landlord approves (or comments
upon) Tenant's final plans and specifications. All Alteration(s) requiring the
consent of Landlord shall be performed only under the supervision of an
independent licensed architect approved by Landlord, which approval shall not be
unreasonably withheld.
(2) If Landlord shall fail to disapprove Tenant's final plans and
specifications for any Alteration within ten (10) Business Days, or within five
(5) Business Days (with respect to any resubmission of disapproved plans), after
Landlord's receipt thereof (provided in each instance the same shall be of a
scope and scale reasonably susceptible of review in such periods), Landlord
shall be deemed to have approved such plans and specifications. Any disapproval
given by Landlord shall be accompanied by a statement of the reasons for such
disapproval. Landlord reserves the right to disapprove any plans and
specifications in part, to reserve approval of items shown thereon pending its
review and approval of other plans and specifications, and to condition its
approval upon Tenant making revisions to the plans and specifications or
supplying additional information. Any review or approval by Landlord of any
plans and/or specifications or any preparation or design of any plans by
Landlord's architect or engineer (or any architect or engineer designated by
Landlord) with respect to any Alteration is solely for Landlord's benefit, and
without any representation or warranty whatsoever to Tenant or any other Person
with respect to the compliance thereof with any Requirements, the adequacy,
correctness or efficiency thereof or otherwise.
(C) Tenant shall be permitted to perform Alterations at such times and
in such manner in accordance with the rules and regulations relating to
Alterations promulgated by Landlord in its reasonable judgment. All Tenant's
Property installed by Tenant and all Alterations in and to the Premises which
may be made by Tenant at its own cost and expense prior to and during the Term,
shall remain the property of Tenant. Upon the Expiration Date, Tenant shall
remove Tenant's Property from the Premises and, at Tenant's option, Tenant also
may remove, at Tenant's cost and expense, all Alterations made by Tenant to the
Premises, provided, however, in any case, that Tenant shall repair and restore
in a good and workerlike
13
<PAGE>
manner to good condition any damage to the Premises or the Building caused by
such removal. Notwithstanding the foregoing, however, Landlord, upon notice
given at least thirty (30) days prior to the Fixed Expiration Date or the last
day of the Renewal Term, as the case may be or upon such shorter notice as is
reasonable under the circumstances upon the earlier expiration of the Term, may
require Tenant to remove any Specialty Alterations, and to repair and restore in
a good and workerlike manner to good condition any damage to the Premises or the
Building caused by such removal. Landlord and Tenant each hereby further agree
that Tenant shall not be obligated to remove on the Expiration Date the
supplemental air conditioning units serving the Premises on the date hereof.
(D) (1) All Alterations shall be performed, at Tenant's sole cost
and expense, by Landlord's contractor(s) or by contractors, subcontractors or
mechanics approved by Landlord. Prior to making an Alteration, at Tenant's
request, Landlord shall furnish Tenant with a list of contractors who may
perform Alterations to the Premises on behalf of Tenant (it being agreed that
the list of contractors approved by Landlord with respect to the performance of
the Initial Alterations is attached hereto and made a part hereof as Exhibit
-------
"B"). If Tenant engages any contractor set forth on the list, Tenant shall not
be required to obtain Landlord's consent for such contractor unless, prior to
the earlier of (a) entering into a contract with such contractor, and (b) the
commencement of work by such contractor, Landlord shall notify Tenant that such
contractor has been removed from the list.
(2) Notwithstanding the foregoing, with respect to any Alteration
affecting any Building System, (i) Tenant shall select a contractor from a list
of approved contractors furnished by Landlord to Tenant (containing at least
three (3) contractors) and (ii) the Alteration shall, at Tenant's cost and
expense, be designed by Landlord's engineer for the relevant Building System.
(E) Any mechanic's lien filed against the Premises or the Real
Property for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant shall be discharged by Tenant within thirty (30) days
after Tenant shall have received notice thereof (or such shorter period if
required by the terms of any Superior Lease or Mortgage), at Tenant's expense,
by payment or filing the bond required by law. Tenant shall not, at any time
prior to or during the Term, directly or indirectly employ, or permit the
employment of, any contractor, mechanic or laborer in the Premises, whether in
connection with any Alteration or otherwise, if such employment would interfere
or cause any conflict with other contractors, mechanics or laborers engaged in
the construction, maintenance or operation of the Building by Landlord, Tenant
or others, or of any adjacent property owned by Landlord. In the event of any
such interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Building immediately.
Section 3.2. Tenant shall pay to Landlord or Landlord's agent, as
-----------
additional rent, all actual commercially reasonable out-of-pocket costs and
expenses incurred by Landlord or Landlord's agent in connection with any
Alterations (including the Initial Alterations) (the
14
<PAGE>
"Alteration Fee"). The Alteration Fee shall be paid by Tenant within ten (10)
Business Days after demand therefor. Tenant also shall pay any commercially
reasonable and uniform fee charged by any Lessor or Mortgagee in reviewing the
plans and specifications for such Alterations or inspecting the progress of
completion of the same.
Section 3.3. Upon the request of Tenant, Landlord, at Tenant's cost and
-----------
expense, shall join in any applications for any permits, approvals or
certificates required to be obtained by Tenant in connection with any permitted
Alteration (provided that the provisions of the applicable Requirement shall
require that Landlord join in such application) and shall otherwise cooperate
with Tenant in connection therewith, provided that Landlord shall not be
obligated to incur any cost or expense, including, without limitation,
attorneys' fees and disbursements, or suffer any liability in connection
therewith.
Section 3.4. Anything contained in this Lease to the contrary
-----------
notwithstanding, Landlord's consent shall not be required with respect to any
nonstructural Alteration, provided that (a) consent for such Alteration is not
required under the terms of any Superior Lease or Mortgage, and (b) such
Alteration (i) is not visible from the outside of the Building, (ii) does not
affect any part of the Building other than the Premises or require any
alterations, installations, improvements, additions or other physical changes to
be performed in or made to any portion of the Building or the Real Property
other than the Premises, (iii) does not affect any service required to be
furnished by Landlord to any other tenant or occupant of the Building, (iv) does
not affect the proper functioning of any Building System, (v) does not impair or
diminish the value or utility of the Building, (vi) does not affect or violate
the provisions of the certificate of occupancy for the Building or the Premises,
and (vii) the estimated cost of the labor and materials for which shall not
exceed One Hundred Thousand Dollars ($100,000), which amount shall be increased
on the third (3rd) anniversary of the Commencement Date and annually thereafter
by the annual percentage increase, if any, in the Consumer Price Index from that
in effect on the date immediately preceding the Commencement Date, either
individually or in the aggregate with other nonstructural Alterations
constructed within any twelve (12) month period; provided, however, that at
least ten (10) days prior to making any such nonstructural Alteration, Tenant
shall submit to Landlord for informational purposes only the detailed plans and
specifications for such Alteration, as required by Section 3.1(B)(l)(i) hereof,
and any such Alteration shall otherwise be performed in compliance with the
provisions of this Article 3.
Section 3.5. (A) Landlord shall contribute an amount equal to Two Hundred
-----------
Ten Thousand Nine Hundred Fifty Dollars ($210,950) (the "Tenant Fund") toward
(i) the "hard" cost of the Initial Alterations, and (ii) architect's and
engineering fees, expediter's fees, filing fees, permit fees and designers' fees
in connection with the Initial Alterations (such "soft costs" and related costs
referred to in this clause (ii) incurred by Tenant in connection with the
Initial Alterations being collectively referred to herein as "Related Costs").
(B) Landlord shall disburse a portion of the Tenant Fund to Tenant
from time to time, within thirty (30) days after receipt of the items set forth
in Section 3.5(C) hereof,
15
<PAGE>
provided that on the date of a request and on the date of disbursement from the
Tenant Fund no Event of Default shall have occurred and be continuing.
Disbursements from the Tenant Fund shall not be made more frequently than
monthly, and shall be in an amount equal to the aggregate amounts theretofore
paid or payable (as certified by the Chief Financial Officer of Tenant and
Tenant's independent, licensed architect) to Tenant's contractors,
subcontractors and materialmen which have not been the subject of a previous
disbursement from the Tenant Fund multiplied by a fraction, the numerator of
which is Two Hundred Ten Thousand Nine Hundred Fifty Dollars ($210,950) and the
denominator of which is the total cost of the Initial Alterations as estimated
by Tenant's independent licensed architect and as approved by Landlord (which
approval shall not be unreasonably withheld), which fraction shall be subject to
readjustment as provided by Section 3.5(C) hereof (but in no event shall such
fraction be greater than one (1)); provided, however, that (i) in no event shall
Tenant be entitled to a disbursement from the Tenant Fund on account of Related
Costs unless and until Tenant shall have received its first disbursement of the
Tenant Fund for the cost of the Initial Alterations (other than Related Costs),
and (ii) in no event shall disbursements of the Tenant Fund on account of
Related Costs exceed Forty-Two Thousand One Hundred Ninety Dollars ($42,190).
(C) Landlord's obligation to make disbursements from the Tenant Fund
shall be subject to Landlord's verification of the total cost of the Initial
Alterations as estimated by Tenant's independent licensed architect and receipt
of: (a) a request for such disbursement from Tenant signed by the Chief
Financial Officer of Tenant, together with the certification required by Section
3.5(B) hereof, (b) copies of all receipts, invoices and bills for the work
completed and materials furnished in connection with the Initial Alterations and
incorporated in the Premises which are to be paid from the requested
disbursement or which have been paid by Tenant and for which Tenant is seeking
reimbursement, (c) copies of all contracts, work orders, change orders and other
materials relating to the work or materials which are the subject of the
requested disbursement or reimbursement, (d) if requested by Landlord, waivers
of lien from all contractors, subcontractors and materialmen involved in the
performance of the Initial Alterations relating to the portion of the Initial
Alterations theretofore performed and materials theretofore provided and for
which previous disbursements and/or the requested disbursement has been or is to
be made (except to the extent such waivers of lien were previously furnished to
Landlord upon a prior request), and (e) a certificate of Tenant's independent
licensed architect stating (i) that, in his opinion, the portion of the Initial
Alterations theretofore completed and for which the disbursement is requested
was performed in a good and workerlike manner and substantially in accordance
with the final detailed plans and specifications for such Initial Alterations,
as approved by Landlord, (ii) the percentage of completion of the Initial
Alterations as of the date of such certificate, and (iii) the revised estimated
total cost to complete the Initial Alterations and (f) the amount of the
Alteration Fee then payable pursuant to Section 3.2 hereof. If the revised
estimated total cost of the Initial Alterations increases above the original
estimated total cost of the Initial Alterations by more than five percent (5%),
then the denominator of the fraction referred to in Section 3.5(B) hereof shall
be adjusted appropriately.
16
<PAGE>
(D) In no event shall the aggregate amount paid by Landlord to Tenant
under this Section 3.5 exceed the amount of the Tenant Fund. Upon the
completion of the Initial Alterations and satisfaction of the conditions set
forth in Section 3.5(E) hereof, any amount of the Tenant Fund which has not been
previously disbursed shall be credited against the next ensuing installments of
Fixed Rent due hereunder. Upon the disbursement or crediting of the entire
Tenant Fund, Landlord shall have no further obligation or liability whatsoever
to Tenant for further disbursement of any portion of the Tenant Fund to Tenant.
It is expressly understood and agreed that Tenant shall complete, at its sole
cost and expense, the Initial Alterations, whether or not the Tenant Fund is
sufficient to fund such completion. Any costs to complete the Initial
Alterations in excess of the Tenant Fund shall be the sole responsibility and
obligation of Tenant.
(E) Within thirty (30) days after completion of the Initial
Alterations, Tenant shall deliver to Landlord general releases and waivers of
lien from all contractors, subcontractors and materialmen involved in the
performance of the Initial Alterations and the materials furnished in connection
therewith (unless same previously were furnished pursuant to Section 3.5(C)
hereof), and a certificate from Tenant's independent licensed architect
certifying that (i) in his opinion the Initial Alterations have been performed
in a good and workerlike manner and completed in accordance with the final
detailed plans and specifications for such Initial Alterations as approved by
Landlord and (ii) all contractors, subcontractors and materialmen have been paid
for the Initial Alterations and materials furnished through such date.
(F) Tenant warrants and covenants that it shall incur costs and
expenses (subject to application of the Tenant Fund in accordance with this
Section 3.5) in excess of One Hundred Sixty-Eight Thousand Seven Hundred Sixty
Dollars ($168,760) in connection with its performance of the Initial
Alterations.
ARTICLE 4
REPAIRS-FLOOR LOAD
------------------
Section 4.1. Landlord shall operate, maintain and make all necessary
-----------
repairs (both structural and nonstructural) to the part of Building Systems
which provide service to the Premises (but not to the distribution portions of
such Building Systems located within the Premises) and the public portions of
the Building, both exterior and interior, in conformance with standards
applicable to non-institutional first class office buildings in Manhattan.
Tenant, at Tenant's sole cost and expense, shall take good care of the Premises
and the fixtures, equipment and appurtenances therein and the distribution
systems and shall make all nonstructural repairs thereto as and when needed to
preserve them in good working order and condition, except for reasonable wear
and tear, obsolescence and damage for which Tenant is not responsible pursuant
to the provisions of Article 10 hereof. Notwithstanding the foregoing, all
damage or injury to the Premises or to any other part of the Building and
Building Systems, or to its fixtures, equipment and appurtenances, whether
requiring structural or
17
<PAGE>
nonstructural repairs, caused by or resulting from carelessness, omission,
neglect or improper conduct of, or Alterations made by, Tenant, Tenant's agents,
employees, invitees or licensees, shall be repaired at Tenant's sole cost and
expense, by Tenant to the reasonable satisfaction of Landlord (if the required
repairs are nonstructural in nature and do not affect any Building System), or
by Landlord (if the required repairs are structural in nature or affect any
Building System). All of the aforesaid repairs shall be of first quality and of
a class consistent with non-institutional first class office building work or
construction and shall be made in accordance with the provisions of Article 3
hereof. If Tenant fails after ten (10) days' notice (or such shorter period as
Landlord may be permitted pursuant to any Superior Lease or Mortgage or such
shorter period as may be required due to an emergency) to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be forthwith paid
to Landlord as additional rent after rendition of a bill or statement therefor.
Tenant shall give Landlord prompt notice of any defective condition in the
Building or in any Building System, located in, servicing or passing through the
Premises.
Section 4.2. Tenant shall not place a load upon any floor of the Premises
-----------
exceeding fifty (50) pounds per square foot "live load". Tenant shall not move
any safe, heavy machinery, heavy equipment, business machines, freight, bulky
matter or fixtures into or out of the Building without Landlord's prior consent,
which consent shall not be unreasonably withheld, and shall make payment to
Landlord of Landlord's commercially reasonable actual out-of-pocket costs in
connection therewith. If such safe, machinery, equipment, freight, bulky matter
or fixtures requires special handling, Tenant shall employ only persons holding
a Master Rigger's license to do said work. All work in connection therewith
shall comply with all Requirements and the Rules and Regulations, and shall be
done during such hours as Landlord may reasonably designate. Business machines
and mechanical equipment shall be placed and maintained by Tenant at Tenant's
expense in settings sufficient in Landlord's reasonable judgment to absorb and
prevent vibration, noise and annoyance. Except as expressly provided in this
Lease, there shall be no allowance to Tenant for a diminution of rental value
and no liability on the part of Landlord by reason of inconvenience, annoyance
or injury to business arising from Landlord, Tenant or others making, or failing
to make, any repairs, alterations, additions or improvements in or to any
portion of the Building or the Premises, or in or to fixtures, appurtenances or
equipment thereof.
Section 4.3. Landlord shall use its reasonable efforts to minimize
-----------
interference with Tenant's use and occupancy of the Premises in making any
repairs, alterations, additions or improvements; provided, however, that
Landlord shall have no obligation to employ contractors or labor at so-called
overtime or other premium pay rates or to incur any other overtime costs or
expenses whatsoever, except that Landlord, at its expense but subject to
recoupment pursuant to Article 27 hereof, shall employ contractors or labor at
so-called overtime or other premium pay rates if necessary to make any repair
required to be made by it hereunder to remedy any condition that either (i)
results in a denial of access to the Premises, (ii) threatens the health or
safety of any occupant of the Premises, or (iii) except in
18
<PAGE>
the case of a fire or other casualty, materially interferes with Tenant's
ability to conduct its business in the Premises. In all other cases, at Tenant's
request, Landlord shall employ contractors or labor at so-called overtime or
other premium pay rates and incur any other overtime costs or expenses in making
any repairs, alterations, additions or improvements, and Tenant shall pay to
Landlord, as additional rent, within ten (10) Business Days after demand, an
amount equal to the difference between the overtime or other premium pay rates
and the regular pay rates for such labor and any other overtime costs or
expenses so incurred.
ARTICLE 5
WINDOW CLEANING
---------------
Tenant shall not clean, nor require, permit, suffer or allow any window in
the Premises to be cleaned from the outside in violation of Section 202 of the
Labor Law, or any other Requirement, or of the rules of the Board of Standards
and Appeals, or of any other board or body having or asserting jurisdiction.
ARTICLE 6
REQUIREMENTS OF LAW
-------------------
Section 6.1. (A) Tenant, at its sole cost and expense, shall comply with
-----------
all Requirements applicable to the use and occupancy of the Premises, including,
without limitation, those applicable to the making of any Alterations therein or
the result of the making thereof and those applicable by reason of the nature or
type of business operated by Tenant in the Premises except that (other than with
respect to the making of Alterations or the result of the making thereof) Tenant
shall not be under any obligation to make any Alteration in order to comply with
any Requirement applicable to the mere general "office" use (as opposed to the
manner of use) of the Premises, unless otherwise expressly required herein.
Tenant shall not do or permit to be done any act or thing upon the Premises
which will invalidate or be in conflict with a standard "all-risk" insurance
policy; and shall not do, or permit anything to be done in or upon the Premises,
or bring or keep anything therein, except as now or hereafter permitted by the
New York City Fire Department, New York Board of Fire Underwriters, the
Insurance Services Office or other authority having jurisdiction and then only
in such quantity and manner of storage as not to increase the rate for fire
insurance applicable to the Building, or use the Premises in a manner (as
opposed to mere use as general "offices") which shall increase the rate of fire
insurance on the Building or on property located therein, over that in similar
type buildings or in effect on the Commencement Date. If by reason of Tenant's
failure to comply with the provisions of this Article, the fire insurance rate
shall be higher than it otherwise would be, then Tenant shall desist from doing
or permitting to be done any such act or thing and shall reimburse Landlord, as
additional rent hereunder, for that part of all fire insurance premiums
thereafter paid by Landlord which shall have been charged because of such
failure by Tenant, and shall make such reimbursement upon demand by Landlord.
In any action or proceeding wherein Landlord and Tenant are
19
<PAGE>
parties, a schedule or "make up" of rates for the Building or the Premises
issued by the Insurance Services Office, or other body fixing such fire
insurance rates, shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to the
Building.
(B) Landlord, at its sole cost and expense (but subject to recoupment
as provided in Article 27 hereof), shall comply with all Requirements applicable
to the Premises and the Building which affect Tenant's use or occupancy of the
Premises other than those Requirements with respect to which Tenant or other
tenants or occupants of the Building shall be required to comply, subject to
Landlord's right to contest the applicability or legality thereof.
Section 6.2. Tenant, at its sole cost and expense and after notice to
-----------
Landlord, may contest by appropriate proceedings prosecuted diligently and in
good faith, the legality or applicability of any Requirement affecting the
Premises, provided that (a) Landlord (or any Indemnitee) shall not be subject to
imprisonment or to prosecution for a crime, nor shall the Real Property or any
part thereof be subject to being condemned or vacated, nor shall the certificate
of occupancy for the Premises or the Building be suspended or threatened to be
suspended by reason of non-compliance or by reason of such contest; (b) before
the commencement of such contest, if Landlord or any Indemnitee may be subject
to any civil fines or penalties or other criminal penalties or if Landlord may
be liable to any independent third party as a result of such noncompliance,
Tenant shall furnish to Landlord either (i) a bond of a surety company
satisfactory to Landlord, in form and substance reasonably satisfactory to
Landlord, and in an amount equal to one hundred twenty percent (120%) of the sum
of (A) the cost of such compliance, (B) the criminal or civil penalties or fines
that may accrue by reason of such non-compliance (as reasonably estimated by
Landlord), and (C) the amount of such liability to independent third parties (as
reasonably estimated by Landlord), and shall indemnify Landlord (and any
Indemnitee) against the cost of such compliance and liability resulting from or
incurred in connection with such contest or non-compliance (except that Tenant
shall not be required to furnish such bond to Landlord if it has otherwise
furnished any similar bond required by law to the appropriate Governmental
Authority and has named Landlord as a beneficiary thereunder) or (ii) other
security reasonably satisfactory in all respects to Landlord; (c) such non-
compliance or contest shall not constitute or result in a violation (either with
the giving of notice or the passage of time or both) of the terms of any
Mortgage or Superior Lease, or if such Superior Lease or Mortgage shall
condition such non-compliance or contest upon the taking of action or furnishing
of security by Landlord, such action shall be taken or such security shall be
furnished at the expense of Tenant, and (d) Tenant shall keep Landlord regularly
advised as to the status of such proceedings. Without limiting the
applicability of the foregoing, Landlord (or any Indemnitee) shall be deemed
subject to prosecution for a crime if Landlord (or any Indemnitee), a Lessor, a
Mortgagee or any of their officers, directors, partners, shareholders, agents or
employees is charged with a crime of any kind whatsoever, unless such charges
are withdrawn ten (10) days before Landlord (or any Indemnitee), such Lessor or
such Mortgagee or such officer,
20
<PAGE>
director, partner, shareholder, agent or employee, as the case may be, is
required to plead or answer thereto.
ARTICLE 7
SUBORDINATION
-------------
Section 7.1. This Lease shall be subject and subordinate to each and every
-----------
Superior Lease and to each and every Mortgage. This clause shall be self-
operative and no further instrument of subordination shall be required from
Tenant to make the interest of any Lessor or Mortgagee superior to the interest
of Tenant hereunder; however, Tenant shall execute and deliver promptly any
commercially reasonable instrument, in recordable form, that Landlord, any
Mortgagee or Lessor may request to evidence and confirm such subordination. If
the date of expiration of any Superior Lease shall be the same day as the
Expiration Date, the Term shall end and expire twelve (12) hours prior to the
expiration of the Superior Lease. Tenant shall not do anything that would
constitute a default under any Superior Lease or Mortgage, or omit to do
anything that Tenant is obligated to do under the terms of this Lease so as to
cause Landlord to be in default thereunder. If, in connection with the
financing of the Real Property, the Building or the interest of the lessee under
any Superior Lease, or if in connection with the entering into of a Superior
Lease, any lending institution or Lessor shall request reasonable modifications
of this Lease that do not increase Tenant's monetary obligations under this
Lease, or materially adversely affect or diminish the rights, or materially
increase the other obligations of Tenant under this Lease, Tenant shall make
such modifications.
Section 7.2. If at any time prior to the expiration of the Term, any
-----------
Superior Lease shall terminate or be terminated for any reason or any Mortgagee
comes into possession of the Real Property or the Building or the estate created
by any Superior Lease by receiver or otherwise, Tenant agrees, at the election
and upon demand of any owner of the Real Property or the Building, or of the
Lessor, or of any Mortgagee in possession of the Real Property or the Building,
to attorn, from time to time, to any such owner, Lessor or Mortgagee or any
person acquiring the interest of Landlord as a result of any such termination,
or as a result of a foreclosure of the Mortgage or the granting of a deed in
lieu of foreclosure, upon the then executory terms and conditions of this Lease,
subject to the provisions of Section 7.1 hereof and this Section 7.2, for the
remainder of the Term, provided that such owner, Lessor or Mortgagee, or
receiver caused to be appointed by any of the foregoing, as the case may be,
shall then be entitled to possession of the Premises and provided further that
such owner, Lessor or Mortgagee, as the case may be, or anyone claiming by,
through or under such owner, Lessor or Mortgagee, as the case may be, including
a purchaser at a foreclosure sale, shall not be:
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord), or
21
<PAGE>
(2) subject to any defense or offsets which Tenant may have
against any prior landlord (including, without limitation, the then defaulting
landlord), or
(3) bound by any payment of Rental which Tenant may have made
to any prior landlord (including, without limitation, the then defaulting
landlord) more than thirty (30) days in advance of the date upon which such
payment was due, or
(4) bound by any obligation to make any payment to or on
behalf of Tenant, other than payments on account of any Tenant Fund, or
(5) bound by any obligation to perform any work or to make
improvements to the Premises, except for (i) repairs and maintenance pursuant to
the provisions of Article 4, the need for which repairs and maintenance first
arises after the date upon which such owner, Lessor, or Mortgagee shall be
entitled to possession of the Premises, (ii) repairs to the Premises or any part
thereof as a result of damage by fire or other casualty pursuant to Article 10
hereof, but only to the extent that such repairs can be reasonably made from the
net proceeds of any insurance actually made available to such owner, Lessor or
Mortgagee, and (iii) repairs to the Premises as a result of a partial
condemnation pursuant to Article 11 hereof, but only to the extent that such
repairs can be reasonably made from the net proceeds of any award made available
to such owner, Lessor or Mortgagee, or
(6) bound by any amendment or modification of this Lease made
without its consent, or
(7) bound to return Tenant's security deposit, if any, until
such deposit has come into its actual possession and Tenant would be entitled to
such security deposit pursuant to the terms of this Lease.
The provisions of this Section 7.2 shall enure to the benefit of any such owner,
Lessor or Mortgagee, shall apply notwithstanding that, as a matter of law, this
Lease may terminate upon the termination of any Superior Lease, shall be self-
operative upon any such demand, and no further instrument shall be required to
give effect to said provisions. Tenant, however, upon demand of any such owner,
Lessor or Mortgagee, shall execute, at Tenant's expense, from time to time,
instruments, in recordable form, in confirmation of the foregoing provisions of
this Section 7.2, satisfactory to any such owner, Lessor or Mortgagee,
acknowledging such attornment and setting forth the terms and conditions of its
tenancy. Nothing contained in this Section 7.2 shall be construed to impair any
right otherwise exercisable by any such owner, Lessor or Mortgagee.
Notwithstanding the provisions of this Section 7.2, this Lease shall not
terminate by reason of the termination of any Superior Lease without the prior
written consent of the Mortgagee of the Mortgage which is a first mortgage on
Landlord's interest in the Real Property or the leasehold estate created by such
Superior Lease.
22
<PAGE>
Section 7.3. From time to time, within ten (10) Business Days next
-----------
following request by Landlord, any Mortgagee or any Lessor, Tenant shall deliver
to Landlord, such Mortgagee or such Lessor a written statement executed by
Tenant, in form satisfactory to Landlord, such Mortgagee or such Lessor, (1)
stating that this Lease is then in full force and effect and has not been
modified (or if modified, setting forth all modifications), (2) setting forth
the date to which the Fixed Rent, Escalation Rent and other items of Rental have
been paid, (3) stating whether or not, to the best knowledge of Tenant, Landlord
is in default under this Lease, and, if Landlord is in default, setting forth
the specific nature of all such defaults, and (4) as to any other matters
reasonably requested by Landlord, such Mortgagee or such Lessor. Tenant
acknowledges that any statement delivered pursuant to this Section 7.3 may be
relied upon by any purchaser or owner of the Real Property or the Building, or
Landlord's interest in the Real Property or the Building or any Superior Lease,
or by any Mortgagee, or by an assignee of any Mortgagee, or by any Lessor.
Section 7.4. From time to time, within ten (10) Business Days next
-----------
following request by Tenant but not more frequently than twice in any twelve
(12) month period, Landlord shall deliver to Tenant a written statement executed
by Landlord (i) stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all modifications), (ii)
setting forth the date to which the Fixed Rent, Escalation Rent and any other
items of Rental have been paid, (iii) stating whether or not, to the best
knowledge of Landlord (but without having made any investigation), Tenant is in
default under this Lease, and, if Tenant is in default, setting forth the
specific nature of all such defaults, and (iv) as to any other matters
reasonably requested by Tenant and related to this Lease. Landlord acknowledges
that any statement delivered pursuant to this Section 7.4 may be relied upon by
any subtenant or assignee of Tenant or by any party to a transaction entered
into with Tenant.
Section 7.5. As long as any Superior Lease or Mortgage shall exist, Tenant
-----------
shall not seek to terminate this Lease by reason of any act or omission of
Landlord until Tenant shall have given written notice of such act or omission to
all Lessors and Mortgagees at such addresses as shall have been furnished to
Tenant by such Lessors and Mortgagees and, if any such Lessor or Mortgagee, as
the case may be, shall have notified Tenant within ten (10) Business Days
following receipt of such notice of its intention to remedy such act or
omission, until a reasonable period of time shall have elapsed following the
giving of such notice, during which period such Lessors and Mortgagees shall
have the right, but not the obligation, to remedy such act or omission.
Section 7.6. Tenant hereby irrevocably waives any and all right(s) it may
-----------
have in connection with any zoning lot merger or transfer of development rights
with respect to the Real Property including, without limitation, any rights it
may have to be a party to, to contest, or to execute, any Declaration of
Restrictions (as such term is defined in Section 12-10 of the Zoning Resolution
of The City of New York effective December 15, 1961, as amended) with respect to
the Real Property, which would cause the Premises to be merged with or unmerged
from any other zoning lot pursuant to such Zoning Resolution or to any document
of a similar nature and purpose, and Tenant agrees that this Lease shall be
subject and subordinate to any
23
<PAGE>
Declaration of Restrictions or any other document of similar nature and purpose
now or hereafter affecting the Real Property provided that the execution and
delivery thereof does not interfere with Tenant's possession of the Premises as
provided in this Lease and does not diminish Tenant's rights hereunder or
increase any of Tenant's obligations hereunder. In confirmation of such
subordination and waiver, Tenant shall execute and deliver promptly any
certificate or instrument that Landlord reasonably may request.
Section 7.7. (A) Landlord shall use its reasonable efforts to obtain from
-----------
each Mortgagee, an agreement in form and substance satisfactory to such
Mortgagee to the effect that, if there shall be a foreclosure of its Mortgage,
such Mortgagee will not make Tenant a party defendant to such foreclosure, evict
Tenant, disturb Tenant's possession under this Lease, or terminate or disturb
Tenant's leasehold estate or rights hereunder, and will recognize Tenant as the
direct tenant of such Mortgagee on the same terms and conditions as are
contained in this Lease (subject to the provisions of Section 7.2 hereof)
provided no Event of Default shall have occurred and be continuing hereunder
(any such agreement,or any agreement of similar import, from a Mortgagee being
hereinafter referred to as a "Nondisturbance Agreement").
------------------------
(B) Landlord shall have no liability to Tenant for its failure to
obtain any Nondisturbance Agreement. Landlord's agreement to use reasonable
efforts hereunder shall not impose any obligation upon Landlord (i) to incur any
cost or expense (other than reasonable attorneys' fees and disbursements) or
(ii) to institute any legal or other proceeding in connection with obtaining
such Nondisturbance Agreement.
(C) If required by the Mortgagee, within seven (7) days after notice
thereof, Tenant shall join in any Nondisturbance Agreement to indicate its
concurrence with the provisions thereof to attorn to such Mortgagee as Tenant's
landlord hereunder on the terms and conditions set forth in such Nondisturbance
Agreement.
Section 7.8. Landlord hereby represents, that, as of the date hereof:
-----------
(a) Landlord is the owner of the fee estate above a plane of
the plot of land on which the Building stands and as fee owner is the lessor
under that certain Agreement of Lease dated as of October 18, 1963 between The
Pennsylvania Railroad Company ("PRC"), as lessor, and Madison Square Garden
Center, Inc. ("MSG"), as lessee, a memorandum of which was recorded in the
Office of the City Register, New York County, on March 16, 1965 in Liber 5271 of
Conveyances at page 1, as amended by Deferment and Waiver Agreement between PRC
and MSG dated September 9, 1965 and recorded on September 10, 1965 in Liber 5342
cp 210 (as amended, the "Ground Lease"),
(b) Landlord is lessee under the Ground Lease and is the
lessor under certain lease by and between MSG as lessor, and Landlord's
predecessor-in-interest, the Penn Plaza Venture, as lessee, dated as of
September 9, 1965, a memorandum of which is recorded on September 10, 1965 in
the Office of the City Register, New York County in Reel
24
<PAGE>
5342, Cp 260, as amended by that certain unrecorded amendment of lease dated
August 17, 1977, between MSG and the Penn Plaza Venture (the "MSG Lease"),
(c) Landlord is the lessee under the MSG Lease, and
(d) The holder of the Mortgages affecting the Building and
the Land is the National Bank of Kuwait, S.A.K., Grand Cayman Island Branch.
ARTICLE 8
RULES AND REGULATIONS
---------------------
Tenant and Tenant's contractors, employees, agents, visitors, invitees and
licensees shall comply with the Rules and Regulations. Tenant shall have the
right to dispute the reasonableness of any additional Rule or Regulation
hereafter adopted by Landlord. If Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter adopted by Landlord, the dispute shall
be determined by arbitration in the City of New York in accordance with the
rules and regulations then obtaining of the American Arbitration Association or
its successor. Any such determination shall be final and conclusive upon the
parties hereto. The right to dispute the reasonableness of any additional Rule
or Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice upon Landlord within thirty (30) days after
receipt by Tenant of notice of the adoption of any such additional Rule or
Regulation. Landlord agrees to enforce Rules or Regulations against other
office tenants (other than Landlord or its affiliates) in the Building.
Landlord shall not enforce any Rule or Regulation against Tenant which Landlord
shall not then be enforcing against all other office tenants in the Building
(other than Landlord or its Affiliates).
ARTICLE 9
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
-------------------------------------------------
Section 9.1. (A) Any Building employee to whom any property shall be
-----------
entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's
agent with respect to such property and neither Landlord nor its agents shall be
liable for any damage to property of Tenant or of others entrusted to employees
of the Building, nor for the loss of or damage to any property of Tenant by
theft or otherwise. Neither Landlord nor its agents shall be liable for any
injury (or death) to persons or damage to property, or interruption of Tenant's
business, resulting from fire or other casualty, nor shall Landlord or its
agents be liable for any such injury (or death) to persons or damage caused by
other tenants or persons in the Building or caused by construction of any
private, public or quasi-public work; nor shall Landlord be liable for any
injury (or death) to persons or damage to property or improvements, or
interruption of Tenant's business, resulting from any latent defect in the
Premises or in the Building (provided that the foregoing shall not relieve
Landlord from its
25
<PAGE>
obligations, if any, to repair such latent defect pursuant to the provisions of
Article 4 hereof or affect Tenant's right, if any, regarding an abatement of the
Fixed Rent and Escalation Rent as set forth in Section 14.2 hereof). Anything in
this Article 9 to the contrary notwithstanding, except as set forth in Articles
4, 10, 13, 28 and 35 of this Lease and otherwise as expressly provided herein,
Landlord shall not be relieved from responsibility directly to Tenant for any
loss or damage caused directly to Tenant wholly or in part by the negligent acts
or omissions of Landlord. Nothing in the foregoing sentence shall affect any
right of Landlord to the indemnity from Tenant to which Landlord may be entitled
under Article 35 hereof in order to recoup for payments made to compensate for
losses of third parties.
(B) If at any time any windows of the Premises are temporarily closed,
darkened or bricked-up due to any Requirement or by reason of repairs,
maintenance, alterations, or improvements to the Building, or any of such
windows are permanently closed, darkened or bricked-up due to any Requirement,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor, nor abatement or
diminution of Fixed Rent or any other item of Rental, nor shall the same release
Tenant from its obligations hereunder, nor constitute an actual or constructive
eviction, in whole or in part, by reason of inconvenience or annoyance to
Tenant, or injury to or interruption of Tenant's business, or otherwise, nor
impose any liability upon Landlord or its agents. If at any time the windows of
the Premises are temporarily closed, darkened or bricked-up, as aforesaid, then,
unless Tenant is required pursuant to the Lease to perform the repairs,
maintenance, alterations, or improvements, or to comply with the Requirements,
which resulted in such windows being closed, darkened or bricked-up, Landlord
shall perform such repairs, maintenance, alterations or improvements and comply
with the applicable Requirements with reasonable diligence and otherwise take
such action as may be reasonably necessary to minimize the period during which
such windows are temporarily closed, darkened, or bricked-up.
(C) Tenant shall immediately notify Landlord of any fire or accident
in the Premises.
Section 9.2. Tenant shall obtain and keep in full force and effect (i) an
-----------
"all risk" insurance policy for Tenant's Specialty Alterations and Tenant's
Property at the Premises in an amount equal to one hundred percent (100%) of the
replacement value thereof, and (ii) a policy of commercial general liability and
property damage insurance on an occurrence basis, with a broad form contractual
liability endorsement. Such policies shall provide that Tenant is named as the
insured. Landlord, Landlord's managing agent, Landlord's agents and any Lessors
and any Mortgagees (whose names shall have been furnished to Tenant) shall be
added as additional insureds, as their respective interests may appear, with
respect to the insurance required to be carried pursuant to clauses (i) and (ii)
above. Such policy with respect to clause (ii) above shall include a provision
under which the insurer agrees to indemnify, defend and hold Landlord,
Landlord's managing agent, Landlord's agents and such Lessors and Mortgagees
harmless from and against, subject to the limits of liability set forth in this
Section 9.2, all cost, expense and liability arising out of, or based upon, any
and all
26
<PAGE>
claims, accidents, injuries and damages mentioned in Article 35. In addition,
the policy required to be carried pursuant to clause (ii) above shall contain a
provision that (a) no act or omission of Tenant shall affect or limit the
obligation of the insurer to pay the amount of any loss sustained and (b) the
policy shall be non-cancelable with respect to Landlord, Landlord's managing
agent, Landlord's agents and such Lessors and Mortgagees (whose names and
addresses shall have been furnished to Tenant) unless thirty (30) days' prior
written notice shall have been given to Landlord by certified mail, return
receipt requested, which notice shall contain the policy number and the names of
the insured and additional insureds. In addition, upon receipt by Tenant of any
notice of cancellation or any other notice from the insurance carrier which may
adversely affect the coverage of the insureds under such policy of insurance,
Tenant shall immediately deliver to Landlord and any other additional insured
hereunder a copy of such notice. The minimum amounts of liability under the
policy of insurance required to be carried pursuant to clause (ii) above shall
be a combined single limit with respect to each occurrence in an amount of
$5,000,000 for injury (or death) to persons and damage to property, which amount
shall be increased from time to time to that amount of insurance which in
Landlord's reasonable judgment is then being customarily required by prudent
landlords of non-institutional first class buildings in New York City. All
insurance required to be carried by Tenant pursuant to the terms of this Lease
shall be effected under valid and enforceable policies issued by reputable and
independent insurers permitted to do business in the State of New York, and
rated in Best's Insurance Guide, or any successor thereto (or if there be none,
an organization having a national reputation) as having a general policyholder
rating of "A" and a financial rating of at least "XIII".
- ----
Section 9.3. Landlord shall obtain and keep in full force and effect
-----------
insurance against loss or damage by fire and other casualty to the Building,
including Tenant's Alterations (exclusive of Specialty Alterations), as may be
insurable under then available standard forms of "all-risk" insurance policies,
in an amount equal to one hundred percent (100%) of the replacement value
thereof or in such lesser amount as will avoid co-insurance (including an
"agreed amount" endorsement). Notwithstanding the foregoing, Landlord shall not
be liable to Tenant for any failure to insure, replace or restore any
Alterations unless Tenant shall have notified Landlord of the completion of such
Alterations and of the cost thereof, and shall have maintained adequate records
with respect to such Alterations to facilitate the adjustment of any insurance
claims with respect thereto. Tenant shall cooperate with Landlord and
Landlord's insurance companies in the adjustment of any claims for any damage to
the Building or such Alterations.
Section 9.4. On or prior to the Commencement Date, each party shall
-----------
deliver to the other appropriate certificates of insurance, including evidence
of waivers of subrogation required pursuant to Section 10.5 hereof, required to
be carried by each party pursuant to this Article 9. Evidence of each renewal
or replacement of a policy shall be delivered by each party to the other at
least twenty (20) days prior to the expiration of such policy.
Section 9.5. Tenant acknowledges that Landlord shall not carry insurance
-----------
on, and shall not be responsible for damage to, Tenant's Property or Specialty
Alterations, and that
27
<PAGE>
Landlord shall not carry insurance against, or be responsible for any loss
suffered by Tenant due to, interruption of Tenant's business; it being expressly
understood and agreed that the foregoing shall not affect Tenant's right, if
any, regarding an abatement of the Fixed Rent and Escalation Rent pursuant to
Section 14.2 hereof.
Section 9.6. If notwithstanding the recovery of insurance proceeds by
-----------
Tenant for loss, damage or destruction of its property (or rental value or
business interruptions) Landlord is liable to Tenant with respect thereto or is
obligated under this Lease to make replacement, repair or restoration, then, at
Landlord's option, either (i) the amount of the net proceeds of Tenant's
insurance against such loss, damage or destruction shall be offset against
Landlord's liability to Tenant therefor, or (ii) shall be made available to
Landlord to pay for replacement, repair or restoration.
ARTICLE 10
DESTRUCTION-FIRE OR OTHER CAUSE
-------------------------------
Section 10.1. (A) If the Premises (including Alterations other than
------------
Specialty Alterations) or access thereto shall be damaged by fire or other
casualty, the damage, with such modifications as shall be required in order to
comply with Requirements, shall be diligently repaired by and at the expense of
Landlord to substantially the condition prior to the damage, and until such
repairs which are required to be performed by Landlord (excluding Long Lead Work
the absence of which does not in and of itself materially impair Tenant's
ability to conduct its business in the Premises in substantially the same manner
as prior to such casualty) shall be substantially completed (of which
substantial completion Landlord shall promptly notify Tenant) the Fixed Rent,
Escalation Rent and Space Factor shall be reduced in the proportion which the
area of the part of the Premises which is not usable by Tenant, as determined by
Landlord in its reasonable discretion, bears to the total area of the Premises
immediately prior to such casualty. Upon the substantial completion of such
repairs (excluding Long Lead Work the absence of which does not in and of itself
materially impair Tenant's ability to conduct its business in the Premises in
substantially the same manner as prior to such casualty), Landlord shall
diligently prosecute to completion any items of Long Lead Work remaining to be
completed. Landlord shall have no obligation to repair any damage to, or to
replace, any Specialty Alterations or Tenant's Property, which Tenant shall
complete promptly after substantial completion of Landlord's repair obligations
under this Article 10. In addition, Landlord shall not be obligated to repair
any damage to, or to replace, any Alterations unless Tenant shall have notified
Landlord of the completion of such Alterations and the cost thereof, and shall
have maintained adequate records with respect to such Alterations. Tenant shall
make all necessary repairs to the Specialty Alterations and same shall be
completed promptly after substantial completion of Landlord's repair obligations
under this Article 10. Landlord shall use its reasonable efforts to minimize
interference with Tenant's use and occupancy in making any repairs pursuant to
this Section. Anything contained herein to the contrary notwithstanding, if the
Premises (including any Alterations) are damaged by fire or other casualty at
any time prior to the completion of the
28
<PAGE>
Initial Alterations, Landlord's obligation to repair the Premises (and any
Alterations) shall be limited to repair of the part of the Building Systems
serving the Premises on the Commencement Date (but not the distribution portions
of such Building Systems located within the Premises), the floor and ceiling
slabs of the Premises and the exterior walls of the Premises, all to
substantially the same condition which existed on the Commencement Date, with
such modifications as shall be required in order to comply with Requirements.
(B) Prior to the substantial completion of Landlord's repair
obligations set forth in Section 10.1 (A) hereof, Landlord shall provide Tenant
and Tenant's contractor, subcontractors and materialmen access to the Premises
to perform Specialty Alterations (or Alterations, if Landlord is not obligated
to repair same pursuant to the provisions hereof), on the following terms and
conditions (but not to occupy the same for the conduct of business):
(1) Tenant shall not commence work in any portion of the Premises
until the date specified in a notice from Landlord to Tenant stating that the
repairs required to be made by Landlord have been or will be completed to the
extent reasonably necessary, in Landlord's discretion, to permit the
commencement of the Specialty Alterations (or Alterations, if Landlord is not
obligated to repair same pursuant to the provisions hereof) then prudent to be
performed in accordance with good construction practice in the portion of the
Premises in question without interference with, and consistent with the
performance of, the repairs remaining to be performed.
(2) Such access by Tenant shall be deemed to be subject to all of
the applicable provisions of this Lease, including, without limitation, Tenant's
obligation to pay to Landlord an amount equal to the Electricity Inclusion
Factor except that there shall be no obligation on the part of Tenant solely
because of such access to pay any Fixed Rent or Escalation Rent with respect to
the affected portion of the Premises for any period prior to substantial
completion of the repairs.
(3) It is expressly understood that if Landlord shall be delayed
from substantially completing the repairs due to any acts of Tenant, its agents,
servants, employees or contractors, including, without limitation, by reason of
the performance of any Specialty Alteration (or Alteration, if Landlord is not
obligated to repair same pursuant to the provisions hereof), by reason of
Tenant's failure or refusal to comply or to cause its architects, engineers,
designers and contractors to comply with any of Tenant's obligations described
or referred to in this Lease, or if such repairs are not completed because under
good construction scheduling practice such repairs should be performed after
completion of any Specialty Alteration (or Alteration, if Landlord is not
obligated to repair same pursuant to the provisions hereof), then such repairs
shall be deemed substantially complete on the date when the repairs would have
been substantially complete but for such delay and the expiration of the
abatement of the Tenant's obligations hereunder shall not be postponed by reason
of such delay. Any additional costs to Landlord to complete any repairs
occasioned by such delay shall be paid by Tenant to Landlord within ten (10)
days after demand, as additional rent.
29
<PAGE>
Section 10.2. Anything contained in Section 10.1 hereof to the contrary
------------
notwithstanding, if the Building shall be so damaged by fire or other casualty
that, in Landlord's reasonable opinion, substantial alteration, demolition, or
reconstruction of the Building shall be required (whether or not the Premises
shall have been damaged or rendered untenantable), then Landlord, at Landlord's
option, may, not later than ninety (90) days following the damage, give Tenant a
notice in writing terminating this Lease, provided that if the Premises are not
substantially damaged or rendered substantially untenantable, Landlord may not
terminate this Lease unless it shall elect to terminate leases (including this
Lease), affecting at least fifty percent (50%) of the rentable area of the
Building (excluding any rentable area occupied by Landlord or its Affiliates).
If Landlord elects to terminate this Lease, the Term shall expire upon a date
set by Landlord, but not sooner than the tenth (lOth) day after such notice is
given, and Tenant shall vacate the Premises and surrender the same to Landlord
in accordance with the provisions of Article 20 hereof. Upon the termination of
this Lease under the conditions provided for in this Section 10.2, the Fixed
Rent and Escalation Rent shall be apportioned and any prepaid portion of Fixed
Rent and Escalation Rent for any period after such date shall be refunded by
Landlord to Tenant.
Section 10.3. (A) (i) Within forty-five (45) days after any damage
------------
described in Section 10.1 hereof, Landlord shall deliver to Tenant a statement
prepared by a reputable contractor setting forth such contractor's estimate as
to the time required to repair such damage, exclusive of time required to repair
any Specialty Alterations (which are Tenant's obligation to repair) or to
perform Long Lead Work the absence of which does not in and of itself materially
impair Tenant's ability to conduct its business in the Premises in substantially
the same manner as prior to such casualty. If the estimated time period exceeds
twelve (12) months from the date of such statement, Tenant may elect to
terminate this Lease by notice to Landlord not later than thirty (30) days
following receipt of such statement. If Tenant makes such election, the Term
shall expire upon the thirtieth (30th) day after notice of such election is
given by Tenant, and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof. If Tenant
shall not have elected to terminate this Lease pursuant to this Article 10 (or
is not entitled to terminate this Lease pursuant to this Article 10), the
damages shall be diligently repaired by and at the expense of Landlord as set
forth in Section 10.1 hereof.
(ii) Notwithstanding anything to contrary contained herein,
if (a) either Tenant shall not have elected to terminate this Lease pursuant to
the provisions of Section 10.3(A)(i) hereof or Tenant shall not have had the
right to terminate this Lease pursuant to the provisions of Section 10.3(A)(i)
hereof because the estimated time period set forth in the Estimate did not
exceed twelve (12) months, and (b) Landlord shall have failed to make such
repairs on or before the date which is the later to occur of (x) three (3)
months after the estimated time period set forth in the Estimate, and (y)
fifteen (15) months after the date of such Estimate for any reason other than
Unavoidable Delay, then Tenant may elect to terminate this Lease by notice given
to Landlord within ten (10) days after the expiration of such three (3) month or
fifteen (15) month period (as the case may be), time being of the essence with
respect to Tenant's giving of such notice. If Tenant makes such election
30
<PAGE>
pursuant to this subsection 10.3(A)(ii), the Term shall expire on the tenth
(10th) day after notice of such election is given by Tenant, and Tenant shall
vacate the Premises and surrender the same to Landlord in accordance with the
provisions of Article 20 hereof.
(B) Notwithstanding the foregoing, if the Premises shall be
substantially damaged during the last year of the Term (as the same may be
renewed or extended pursuant to Article 39 hereof), Landlord or Tenant may elect
by notice, given within thirty (30) days after the occurrence of such damage, to
terminate this Lease and if either party makes such election, the Term shall
expire upon the thirtieth (30th) day after notice of such election is given by
such party and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof.
(C) Except as expressly set forth in this Section 10.3, Tenant shall
have no other options to cancel this Lease under this Article 10.
Section 10.4. This Article 10 constitutes an express agreement governing
------------
any case of damage or destruction of the Premises or the Building by fire or
other casualty, and Section 227 of the Real Property Law of the State of New
York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.
Section 10.5. The parties hereto shall procure an appropriate clause in,
------------
or endorsement on, any fire or extended coverage insurance covering the
Premises, the Building and personal property, fixtures and equipment located
thereon or therein, pursuant to which the insurance companies waive subrogation
or consent to a waiver of right of recovery and having obtained such clauses or
endorsements of waiver of subrogation or consent to a waiver of right of
recovery, will not make any claim against or seek to recover from the other for
any loss or damage to its property or the property of others resulting from fire
or other hazards covered by such fire and extended coverage insurance, provided,
however, that the release, discharge, exoneration and covenant not to sue herein
contained shall be limited by and be coextensive with the terms and provisions
of the waiver of subrogation clause or endorsements or clauses or endorsements
consenting to a waiver of right of recovery. If the payment of an additional
premium is required for the inclusion of such waiver of subrogation provision,
each party shall advise the other of the amount of any such additional premiums
and the other party at its own election may, but shall not be obligated to, pay
the same. If such other party shall not elect to pay such additional premium,
the first party shall not be required to obtain such waiver of subrogation
provision. If either party shall be unable to obtain the inclusion of such
clause even with the payment of an additional premium, then such party shall
attempt to name the other party as an additional insured (but not a loss payee)
under the policy. If the payment of an additional premium is required for
naming the other party as an additional insured (but not a loss payee), each
party shall advise the other of the amount of any such additional premium and
the other party at its own election may, but shall not be obligated to, pay the
same. If such other party shall not elect to pay such additional premium or if
it shall not be possible to have the other party named as an additional insured
(but not loss payee), even with
31
<PAGE>
the payment of an additional premium, then (in either event) such party shall so
notify the first party and the first party shall not have the obligation to name
the other party as an additional insured.
ARTICLE 11
EMINENT DOMAIN
--------------
Section 11.1. If the whole of the Real Property, the Building or the
------------
Premises shall be acquired or condemned for any public or quasi-public use or
purpose, this Lease and the Term shall end as of the date of the vesting of
title with the same effect as if said date were the Expiration Date. If only a
part of the Real Property and not the entire Premises shall be so acquired or
condemned then, (1) except as hereinafter provided in this Section 11.1, this
Lease and the Term shall continue in force and effect, but, if a part of the
Premises is included in the part of the Real Property so acquired or condemned,
from and after the date of the vesting of title, the Fixed Rent and the Space
Factor shall be reduced in the proportion which the area of the part of the
Premises so acquired or condemned bears to the total area of the Premises
immediately prior to such acquisition or condemnation and Tenant's Share shall
be redetermined based upon the proportion in which the ratio between the
rentable area of the Premises remaining after such acquisition or condemnation
bears to the rentable area of the Building remaining after such acquisition or
condemnation; (2) whether or not the Premises shall be affected thereby,
Landlord, at Landlord's option, may give to Tenant, within sixty (60) days next
following the date upon which Landlord shall have received notice of vesting of
title, a thirty (30) days' notice of termination of this Lease if Landlord shall
elect to terminate leases (including this Lease), affecting at least fifty
percent (50%) of the rentable area of the Building (excluding any rentable area
leased by Landlord or its Affiliates), and (3) if the part of the Real Property
so acquired or condemned shall contain more than fifteen percent (15%) of the
total area of the Premises immediately prior to such acquisition or
condemnation, or if, by reason of such acquisition or condemnation, Tenant no
longer has reasonable means of access to the Premises, Tenant, at Tenant's
option, may give to Landlord, within sixty (60) days next following the date
upon which Tenant shall have received notice of vesting of title, a thirty (30)
days' notice of termination of this Lease. If any such thirty (30) days' notice
of termination is given by Landlord or Tenant, this Lease and the Term shall
come to an end and expire upon the expiration of said thirty (30) days with the
same effect as if the date of expiration of said thirty (30) days were the
Expiration Date. If a part of the Premises shall be so acquired or condemned
and this Lease and the Term shall not be terminated pursuant to the foregoing
provisions of this Section 11.1, Landlord, at Landlord's expense, shall restore
that part of the Premises not so acquired or condemned to a self-contained
rental unit inclusive of Tenant's Alterations (other than Specialty
Alterations), except that if such acquisition or condemnation occurs prior to
completion of the Initial Alterations, Landlord shall only be required to
restore that part of the Premises not so acquired or condemned to a self-
contained rental unit exclusive of Tenant's Alterations. Upon the termination
of this Lease and the Term pursuant to the provisions of this Section 11.1, the
32
<PAGE>
Fixed Rent and Escalation Rent shall be apportioned and any prepaid portion of
Fixed Rent and Escalation Rent for any period after such date shall be refunded
by Landlord to Tenant.
Section 11.2. In the event of any such acquisition or condemnation of all
------------
or any part of the Real Property, Landlord shall be entitled to receive the
entire award for any such acquisition or condemnation, Tenant shall have no
claim against Landlord or the condemning authority for the value of any
unexpired portion of the Term and Tenant hereby expressly assigns to Landlord
all of its right in and to any such award. Nothing contained in this Section
11.2 shall be deemed to prevent Tenant from making a separate claim in any
condemnation proceedings for the then value of any Tenant's Property included in
such taking, and for any moving expenses.
Section 11.3. If the whole or any part of the Premises shall be acquired
------------
or condemned temporarily during the Term for any public or quasi-public use or
purpose, 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
all items of 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:
(i) if the acquisition or condemnation 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
Landlord as a fund which Landlord shall apply from time to time to the
Rental payable by Tenant hereunder, except that, if by reason of such
acquisition or condemnation changes or alterations are required to be
made to the Premises which would necessitate an expenditure to restore
the Premises, then a portion of such award or payment considered by
Landlord as appropriate to cover the expenses of the restoration shall
be retained by Landlord, without application as aforesaid, and applied
toward the restoration of the Premises as provided in Section 11.1
hereof; or
(ii) if the acquisition or condemnation is for a period extending
beyond the Term, such award or payment shall be apportioned between
Landlord and Tenant as of the Expiration Date; Tenant's share thereof,
if paid less frequently than in monthly installments, shall be paid to
Landlord and applied in accordance with the provisions of clause (i)
above, provided, however, that the amount of any award or payment
allowed or retained for restoration of the Premises shall remain the
property of Landlord if this Lease shall expire prior to the
restoration of the Premises.
33
<PAGE>
ARTICLE 12
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC.
--------------------------------------
Section 12.1. (A) Except as expressly permitted herein, Tenant, without
------------
the prior consent of Landlord in each instance, shall not (a) assign its rights
or delegate its duties under this Lease (whether by operation of law, transfers
of interests in Tenant or otherwise), mortgage or encumber its interest in this
Lease, in whole or in part, (b) sublet, or permit the subletting of, the
Premises or any part thereof, or (c) permit the Premises or any part thereof to
be occupied or used for desk space, mailing privileges or otherwise, by any
Person other than Tenant.
(B) If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other consideration
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all monies or other
consideration constituting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the benefit of Landlord
and shall be promptly paid to or turned over to Landlord.
Section 12.2. (A) If Tenant's interest in this Lease is assigned in
------------
violation of the provisions of this Article 12, such assignment shall be void
and of no force and effect against Landlord, provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy, and shall apply the net
amount collected to the Fixed Rent and other items of Rental reserved in this
Lease. If the Premises or any part thereof are sublet to, or occupied by, or
used by, any Person other than Tenant, whether or not in violation of this
Article 12, Landlord, after default by Tenant under this Lease, including,
without limitation, a subletting or occupancy in violation of this Article 12,
may collect any item of Rental or other sums paid by the subtenant, user or
occupant as a fee for its use and occupancy, and shall apply the net amount
collected to the Fixed Rent and other items of Rental reserved in this Lease.
No such assignment, subletting, occupancy or use, whether with or without
Landlord's prior consent, nor any such collection or application of Rental or
fee for use and occupancy, shall be deemed a waiver by Landlord of any term,
covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as tenant hereunder. The consent by
Landlord to any assignment, subletting, occupancy or use shall not relieve
Tenant from its obligation to obtain the express prior consent of Landlord to
any further assignment, subletting, occupancy or use.
(B) Tenant shall reimburse Landlord on demand for any actual out-of-
pocket costs that may be incurred by Landlord in connection with any proposed
assignment of Tenant's interest in this Lease or any proposed subletting of the
Premises or any part thereof, including, without limitation, reasonable
attorneys' fees and disbursements and the reasonable costs of making
investigations as to the acceptability of the proposed subtenant or the
34
<PAGE>
proposed assignee. Tenant shall engage, with respect to any proposed subletting
of the Premises or any part thereof or any proposed assignment of Tenant's
interest in this Lease, such broker as Landlord shall approve (which approval
shall not be unreasonably withheld or delayed).
(C) Neither any assignment of Tenant's interest in this Lease nor any
subletting, occupancy or use of the Premises or any part thereof by any Person
other than Tenant, nor any collection of Rental by Landlord from any Person
other than Tenant as provided in this Section 12.2, nor any application of any
such Rental as provided in this Section 12.2 shall, in any circumstances,
relieve Tenant of its obligations under this Lease on Tenant's part to be
observed and performed.
(D) Any Person to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall execute and deliver to
Landlord upon demand an instrument confirming such assumption. No assignment of
this Lease shall relieve Tenant of its obligations hereunder and, subsequent to
any assignment, Tenant's liability hereunder shall continue to the extent of the
obligations contained in this Lease (as the same may have been amended or
modified prior to any such assignment) notwithstanding the release of any
subsequent tenant hereunder from any liability, to all of which Tenant hereby
consents in advance.
Section 12.3. (A) If Tenant assumes this Lease and proposes to assign the
------------
same pursuant to the provisions of the Bankruptcy Code to any Person who shall
have made a bona fide offer to accept an assignment of this Lease on terms
---------
acceptable to Tenant, then notice of such proposed assignment shall be given to
Landlord by Tenant no later than twenty (20) days after receipt by Tenant, but
in any event no later than ten (10) days prior to the date that Tenant shall
make application to a court of competent jurisdiction for authority and approval
to enter into such assignment and assumption. Such notice shall set forth (a)
the name and address of such Person, (b) all of the terms and conditions of such
offer, and (c) adequate assurance of future performance by such Person under the
Lease as set forth in Paragraph (B) below, including, without limitation, the
assurance referred to in Section 365(b)(3) of the Bankruptcy Code. Landlord
shall have the prior right and option, to be exercised by notice to Tenant given
at any time prior to the effective date of such proposed assignment, to accept
an assignment of this Lease upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such Person, less any
---------
brokerage commissions which would otherwise be payable by Tenant out of the
consideration to be paid by such Person in connection with the assignment of
this Lease.
(B) The term "adequate assurance of future performance" as used in
this Lease shall mean that any proposed assignee shall, among other things, (a)
deposit with Landlord on the assumption of this Lease the sum of the then Fixed
Rent as security for the faithful performance and observance by such assignee of
the terms and obligations of this Lease, which sum shall be held by Landlord in
accordance with the provisions of Article 31 hereof,
35
<PAGE>
(b) furnish Landlord with financial statements of such assignee for the prior
three (3) fiscal years, as finally determined after an audit and certified as
correct by a certified public accountant, which financial statements shall show
a net worth of at least six (6) times the then Fixed Rent for each of such three
(3) years, (c) grant to Landlord a security interest in such property of the
proposed assignee as Landlord shall deem necessary to secure such assignee's
future performance under this Lease, and (d) provide such other information or
take such action as Landlord, in its reasonable judgment shall determine is
necessary to provide adequate assurance of the performance by such assignee of
its obligations under the Lease.
Section 12.4. (A) As long as Apertus Technologies, Inc. or any Person
------------
which is an immediate or remote successor or assign of Apertus Technologies,
Inc. pursuant to this Section 12.4 is Tenant, Tenant shall have the privilege,
subject to the terms and conditions hereinafter set forth, without the consent
of Landlord but subject to Tenant's satisfaction of conditions set forth in
clauses (1), (4) and (5) of Section 12.8(A) hereof, and without Landlord having
the right granted in Section 12.8(B) hereof to recapture, to assign its interest
in this Lease (i) to any corporation which is a successor to Tenant either by
merger or consolidation, (ii) to a purchaser of all or substantially all of
Tenant's assets (provided such purchaser shall have also assumed substantially
all of Tenant's liabilities) or (iii) to a Person which shall (1) Control, (2)
be under the Control of, or (3) be under common Control with Tenant (any such
Person referred to in this clause (iii) being a "Related Entity"). As long as
Apertus Technologies, Inc. or any Person which is an immediate or remote
successor or assign of Apertus Technologies, Inc. pursuant to this Section 12.4
is Tenant, Tenant also shall have the privilege, subject to the terms and
conditions hereinafter set forth, without the consent of Landlord but subject to
Tenant's satisfaction of conditions set forth in clauses (3), (6) through (8)
and (10) of Section 12.6(A) and without Landlord having the right granted in
Section 12.6(B) hereof to recapture, to sublease all or any portion of the
Premises to a Related Entity. Any assignment or subletting described above may
only be made upon the condition that (a) any such assignee or subtenant shall
continue to use the Premises for the conduct of the same business as Tenant was
conducting prior to such assignment or sublease, (b) the principal purpose of
such assignment or sublease is not the acquisition of Tenant's interest in this
Lease or to circumvent the provisions of Section 12.1 of this Article (except if
such assignment or sublease is made to a Related Entity and is made for a valid
intracorporate business purpose and is not made to circumvent the provisions of
Section 12.1 of this Article), and (c) in the case of an assignment, any such
assignee shall have a net worth and annual income and cash flow, determined in
accordance with generally accepted accounting principles, consistently applied,
after giving effect to such assignment, equal to the greater of Tenant's net
worth and annual income and cash flow, as so determined, on (i) the date
immediately preceding the date of such assignment, and (ii) the Commencement
Date. Tenant shall, within ten (10) Business Days after execution thereof,
deliver to Landlord either (x) a duplicate original instrument of assignment in
form and substance reasonably satisfactory to Landlord, duly executed by Tenant,
together with an instrument in form and substance reasonably satisfactory to
Landlord, duly executed by the assignee, in which such assignee shall assume
observance and performance of, and agree to be personally bound by, all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed,
36
<PAGE>
or (y) a duplicate original sublease in form and substance reasonably
satisfactory to Landlord, duly executed by Tenant and the subtenant.
(B) If Tenant is a partnership, the admission of new Partners, the
withdrawal, retirement, death, incompetency or bankruptcy of any Partner, or the
reallocation of partnership interests among the Partners shall not constitute an
assignment of this Lease, provided the principal purpose of any of the foregoing
is not to circumvent the restrictions on assignment set forth in the provisions
of this Article 12. The reorganization of Tenant from a professional
corporation into a partnership or the reorganization of a Tenant from a
partnership into a professional corporation, shall not constitute an assignment
of this Lease, provided that immediately following such reorganization the
Partners of Tenant shall be the same as the shareholders of Tenant existing
immediately prior to such reorganization, or the shareholders of Tenant shall be
the same as the Partners of Tenant existing immediately prior to such
reorganization, as the case may be.
(C) Except as set forth above, either a transfer (including the
issuance of treasury stock or the creation and issuance of new stock or a new
class of stock) of a controlling interest in the shares of Tenant (if Tenant is
a corporation or trust) or a transfer of a majority of the total interest in
Tenant (if Tenant is a partnership or other entity) at any one time or over a
period of time through a series of transfers, shall be deemed an assignment of
this Lease and shall be subject to all of the provisions of this Article 12,
including, without limitation, the requirement that Tenant obtain Landlord's
prior consent thereto. The transfer of shares of Tenant (if Tenant is a
corporation or trust) for purposes of this Section 12.4 shall not include the
sale of shares by persons other than those deemed "insiders" within the meaning
of the Securities Exchange Act of 1934, as amended, which sale is effected
through the "over-the-counter market" or through any recognized stock exchange.
Section 12.5. If, at any time after the originally named Tenant herein may
------------
have assigned Tenant's interest in this Lease, this Lease shall be disaffirmed
or rejected in any proceeding of the types described in paragraph (E) of Section
16.1 hereof, or in any similar proceeding, or in the event of termination of
this Lease by reason of any such proceeding or by reason of lapse of time
following notice of termination given pursuant to said Article 16 based upon any
of the Events of Default set forth in such paragraph, any prior Tenant,
including, without limitation, the originally named Tenant, upon request of
Landlord given within thirty (30) days next following any such disaffirmance,
rejection or termination (and actual notice thereof to Landlord in the event of
a disaffirmance or rejection or in the event of termination other than by act of
Landlord), shall (1) pay to Landlord all Fixed Rent, Escalation Rent and other
items of Rental due and owing by the assignee to Landlord under this Lease to
and including the date of such disaffirmance, rejection or termination, and (2)
as "tenant", enter into a new lease with Landlord of the Premises for a term
commencing on the effective date of such disaffirmance, rejection or termination
and ending on the Expiration Date, unless sooner terminated as in such lease
provided, at the same Fixed Rent and upon the then executory terms, covenants
and conditions as are contained in this Lease, except that (a) Tenant's rights
under the new lease shall be subject to the possessory rights of the assignee
37
<PAGE>
under this Lease and the possessory rights of any person claiming through or
under such assignee or by virtue of any statute or of any order of any court,
(b) such new lease shall require all defaults existing under this Lease to be
cured by Tenant with due diligence, and (c) such new lease shall require Tenant
to pay all Escalation Rent reserved in this Lease which, had this Lease not been
so disaffirmed, rejected or terminated, would have accrued under the provisions
of Article 27 hereof after the date of such disaffirmance, rejection or
termination with respect to any period prior thereto. If any such prior Tenant
shall default in its obligation to enter into said new lease for a period of ten
(10) days next following Landlord's request therefor, then, in addition to all
other rights and remedies by reason of such default, either at law or in equity,
Landlord shall have the same rights and remedies against such Tenant as if such
Tenant had entered into such new lease and such new lease had thereafter been
terminated as of the commencement date thereof by reason of such Tenant's
default thereunder.
Section 12.6. (A) Notwithstanding the provisions of Section 12.1 hereof,
------------
if Landlord shall not exercise its rights pursuant to paragraph (B) of this
Section 12.6, Landlord shall not unreasonably withhold its consent to any
subletting of the Premises, provided that:
(1) the Premises shall not, without Landlord's prior
consent, have been listed or otherwise publicly advertised for subletting at a
rental rate less than the greater of (i) the Rent Per Square Foot with respect
to the portion of the Premises proposed to be sublet hereunder and (ii) the
prevailing rental rate set by Landlord for comparable space in the Building or
if there is no comparable space the prevailing rental rate reasonably determined
by Landlord (the "Prevailing Rate") (the greater of the amounts set forth in
---------------
clauses (i) and (ii) above is referred to as the "Listing Rate"), nor shall
------------
Tenant advise any broker, agent or finder that Tenant intends to sublet the
Premises at a rate less than the Listing Rate;
(2) Intentionally Omitted Prior to Execution.
(3) no Event of Default shall have occurred and be
continuing;
(4) upon the date Tenant delivers the Tenant Statement to
Landlord and upon the date immediately preceding the commencement date of any
sublease approved by Landlord, the proposed subtenant shall have a financial
standing (taking into consideration the obligations of the proposed subtenant
under the sublease) satisfactory to Landlord in Landlord's reasonable
discretion, be of a character, be engaged in a business, and propose to use the
Premises in a manner in keeping with the standards in such respects of the other
tenancies in the Building;
(5) the proposed subtenant (or any Person who directly or
indirectly, Controls, is Controlled by or is under common Control with the
proposed subtenant) shall not be a tenant or subtenant of any space in the
Building, nor shall the proposed subtenant (or any Person who directly or
indirectly, Controls, is Controlled by or is under common Control with the
proposed subtenant) be a Person with whom Landlord is negotiating or discussing
to lease
38
<PAGE>
space in the Building; if Tenant shall propose to sublease space and is
about to commence negotiations with a tenant, subtenant or prospective
subtenant, Tenant shall advise Landlord of the identity of such prospective
subtenant, and Landlord shall notify Tenant if the execution of a sublease with
such tenant, subtenant or prospective subtenant would violate the provisions of
this clause (5);
(6) the character of the business to be conducted or the
proposed use of the Premises by the proposed subtenant shall not (a) be likely
to increase Landlord's operating expenses beyond that which would be incurred
for use by Tenant or for use in accordance with the standards of use of other
tenancies in the Building; (b) increase the burden on existing cleaning services
or elevators over the burden prior to such proposed subletting; (c) violate any
provision or restrictions herein relating to the use or occupancy of the
Premises; (d) require any alterations, installations, improvements, additions or
other physical changes to be performed in or made to any portion of the Building
or the Real Property other than the Premises; or (e) violate any provision or
restrictions in any other lease for space in the Building or in any Superior
Lease or Mortgage; if Landlord shall have consented to a sublease and, as a
result of the use and occupancy of the subleased portion of the Premises by the
subtenant, operating expenses are increased, then Tenant shall pay to Landlord,
within ten (10) days after demand, as additional rent, all resulting increases
in operating expenses;
(7) the subletting shall be expressly subject to all of the
terms, covenants, conditions and obligations on Tenant's part to be observed and
performed under this Lease and the further condition and restriction that the
sublease shall not be modified without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, or assigned (by operation of
law or otherwise; for purposes of this clause (7), the transfer of a majority of
the issued and outstanding capital stock of any corporate subtenant or the
transfer of a majority of the total interest in a subtenant (if a partnership or
other entity), however accomplished, whether in a single transaction or in a
series of related or unrelated transactions, shall be deemed an assignment of
the sublease, except that the transfer of the outstanding capital stock of a
corporate subtenant shall be deemed not to include the sale of such stock by
persons other than those deemed "insiders" within the meaning of the Securities
Exchange Act of 1934, as amended, which sale is effected through the "over-the-
counter market" or through any recognized stock exchange) encumbered or
otherwise transferred or the subleased premises further sublet by the subtenant
in whole or in part, or any part thereof suffered or permitted by the subtenant
to be used or occupied by others, without the prior written consent of Landlord
in each instance;
(8) the subletting shall end no later than one (1) day
before the Expiration Date and shall not be for a term of less than two (2)
years unless it commences less than two (2) years before the Expiration Date;
(9) no subletting shall be for less than Two Thousand
(2,000) contiguous rentable square feet and at no time shall there be more than
three (3) occupants, including Tenant, in the Premises; and
39
<PAGE>
(10) such sublease shall expressly provide that in the event
of termination, reentry or dispossess of Tenant by Landlord under this Lease,
Landlord may, at its option, take over all of the right, title and interest of
Tenant, as sublessor under such sublease, and such subtenant, at Landlord's
option, shall attorn to Landlord pursuant to the then executory provisions of
such sublease, except that Landlord shall not be:
(i) liable for any act or omission of Tenant under such
sublease, or
(ii) subject to any defense or offsets which such subtenant
may have against Tenant, or
(iii) bound by any previous payment which such
subtenant may have made to Tenant more than thirty (30) days in advance of the
date upon which such payment was due, unless previously approved by Landlord, or
(iv) bound by any obligation to make any payment to or on
behalf of such subtenant, or
(v) bound by any obligation to perform any work or to make
improvements to the Premises, or portion thereof demised by such sublease, or
(vi) bound by any amendment or modification of such sublease
made without its consent, or
(vii) bound to return such subtenant's security deposit, if
any, until such deposit has come into its actual possession and such subtenant
would be entitled to such security deposit pursuant to the terms of such
sublease.
If Tenant proposes to sublet a portion of the Premises then, unless the context
otherwise requires, references in this Section 12.6 to the Premises shall be
deemed to refer to the portion of the Premises proposed to be sublet by Tenant.
(B) At least fifteen (15) Business Days prior to any proposed
subletting of all or any portion of the Premises, Tenant shall submit a
statement to Landlord (a "Tenant Statement") containing the following
----------------
information: (a) the name and address of the proposed subtenant, (b) a
description of the portion of the Premises to be sublet, (c) the terms and
conditions of the proposed subletting, including, without limitation, the rent
payable and the value (including cost, overhead and supervision) of any
improvements (including any demolition to be performed) to the Premises for
occupancy by such subtenant, (d) the nature and character of the business of the
proposed subtenant, and (e) any other information that Landlord may reasonably
request, together with a statement specifically directing Landlord's attention
to the provisions of this Section 12.6(B) requiring Landlord to respond to
Tenant's request within fifteen (15) Business Days after Landlord's receipt of
the Tenant Statement. Landlord shall have the right, exercisable within fifteen
(15) Business Days after Landlord's
40
<PAGE>
receipt of the Tenant Statement, to sublet (in its own name or that of its
designee) such portion of the Premises ("Recapture Space") from Tenant on the
---------------
terms and conditions set forth in the Tenant Statement, subject to the further
provisions of paragraph (C) of this Section 12.6. If Landlord shall fail to
notify Tenant within said fifteen (15) Business Day period of Landlord's
intention to exercise its rights pursuant to this Section 12.6(B) or of
Landlord's consent to or disapproval of the proposed subletting pursuant to the
Tenant Statement as contemplated by Section 12.6(A) hereof, or if Landlord shall
have consented to such subletting as provided in Section 12.6(A) hereof, Tenant
shall have the right to sublease that portion of the Premises to such proposed
subtenant on the same terms and conditions set forth in the Tenant Statement,
subject to the terms and conditions of this Lease, including paragraph (A) of
this Section 12.6. If Tenant shall not enter into such sublease within sixty
(60) days after the delivery of the Tenant Statement to Landlord, then the
provisions of Section 12.1 hereof and this Section 12.6 shall again be
applicable to any other proposed subletting. If Tenant shall enter into such
sublease within sixty (60) days as aforesaid, Tenant shall deliver a true,
complete and fully executed counterpart of such sublease to Landlord within five
(5) days after execution thereof.
(C) If Landlord exercises its option to sublet the Recapture Space,
such sublease to Landlord or its designee as subtenant (each, a "Recapture
---------
Sublease") shall:
- --------
(1) be at a rental equal to the lesser of (x) the Rent Per
Square Foot multiplied by the number of rentable square feet of the Recapture
Space and (y) the sublease rent set forth in the Tenant Statement and otherwise
be upon the same terms and conditions as those contained in this Lease (as
modified by the Tenant Statement, except such as are irrelevant or inapplicable
and except as otherwise expressly set forth to the contrary in this paragraph
(C);
(2) give the subtenant the unqualified and unrestricted right,
without Tenant's permission, to assign such sublease and to further sublet the
Recapture Space or any part thereof and to make any and all changes,
alterations, and improvements in the Recapture Space;
(3) provide in substance that any such changes, alterations,
and improvements made in the Recapture Space may be removed, in whole or in
part, prior to or upon the expiration or other termination of the Recapture
Sublease provided that any material damage and injury caused thereby shall be
repaired,
(4) provide that (i) the parties to such Sublease expressly
negate any intention that any estate created under such Sublease be merged with
any other estate held by either of said parties, (ii) prior to the commencement
of the term of the Recapture Sublease, Tenant, at its sole cost and expense
(unless the Tenant Statement provides otherwise), shall make such alterations as
may be required or reasonably deemed necessary by the subtenant to physically
separate the Recapture Space, if such Space constitutes a portion of the
Premises, from the balance of the Premises and to provide appropriate means of
ingress
41
<PAGE>
to and egress thereto and to the public portions of the balance of the floor
such as toilets, janitor's closets, telephone and electrical closets, fire
stairs, elevator lobbies, etc., (iii) at the expiration of the term of such
Sublease, Tenant shall accept the Recapture Space in its then existing
condition, broom clean; and
(5) provide that the subtenant or occupant may use and occupy
the Recapture Space for any lawful purpose (without regard to any limitation set
forth in the Tenant Statement).
(D) Performance by Landlord, or its designee, under a Recapture
Sublease shall be deemed performance by Tenant of any similar obligation under
this Lease and Tenant shall not be liable for any default under this Lease or
deemed to be in default hereunder if such default is occasioned by or arises
from any act or omission of the subtenant under the Recapture Sublease or is
occasioned by or arises from any act or omission of any occupant under the
Recapture Sublease.
(E) If Landlord is unable to give Tenant possession of the Recapture
Space at the expiration of the term of the Recapture Sublease by reason of the
holding over or retention of possession of any tenant or other occupant, then
(w) Landlord shall continue to pay all charges previously payable, and comply
with all other obligations, under the Recapture Sublease until the date upon
which Landlord shall give Tenant possession of the Recapture Space free of
occupancies, (x) neither the Expiration Date nor the validity of this Lease
shall be affected, (y) Tenant waives any rights under Section 223-a of the Real
Property Law of New York, or any successor statute of similar import, to rescind
this Lease and further waives the right to recover any damages from Landlord
which may result from the failure of Landlord to deliver possession of the
Recapture Space at the end of the term of the Recapture Sublease, and (z)
Landlord, at Landlord's expense, shall use its reasonable efforts to deliver
possession of the Recapture Space to Tenant and in connection therewith, if
necessary, shall institute and diligently and in good faith prosecute holdover
and any other appropriate proceedings against the occupant of such Space; if
Landlord fails to prosecute such proceedings in such manner and such failure
continues after reasonable notice thereof by Tenant, Tenant may prosecute such
proceedings in Landlord's name and at Landlord's expense.
(F) The failure by Landlord to exercise its option under Section
12.6(B) with respect to any subletting shall not be deemed a waiver of such
option with respect to any extension of such subletting or any subsequent
subletting of the Premises affected thereby.
Section 12.7. (A) In connection with any subletting of all or any portion
------------
of the Premises, Tenant shall pay to Landlord an amount equal to fifty percent
(50%) of any Sublease Profit derived therefrom. Anything contained herein to
the contrary notwithstanding Tenant shall not be entitled to any proceeds
derived from or relating to (directly or indirectly) any subletting of the
Recapture Space by Landlord or its designee to a subtenant. All sums
42
<PAGE>
payable hereunder by Tenant shall be calculated on an annualized basis, but
shall be paid to Landlord, as additional rent, within ten (10) days after
receipt thereof by Tenant.
(B) For purposes of this Lease:
(1) "Rent Per Square Foot" shall mean the sum of the then
--------------------
Fixed Rent, Escalation Rent and, if applicable, Electricity Additional Rent
divided by the Space Factor.
(2) "Sublease Profit" shall mean the product of (x) the
---------------
Sublease Rent Per Square Foot less the Rent Per Square Foot, and (y) the number
of rentable square feet constituting the portion of the Premises sublet by
Tenant.
(3) "Sublease Rent" shall mean any rent or other consideration
-------------
paid to Tenant directly or indirectly by any subtenant or any other amount
received by Tenant from or in connection with any subletting (including, but not
limited to, sums paid for the sale or rental, or consideration received on
account of any contribution, of Tenant's Property or sums paid in connection
with the supply of electricity or HVAC) less the Sublease Expenses.
(4) "Sublease Expenses" shall mean: (i) in the event of a sale
-----------------
of Tenant's Property, the then unamortized or undepreciated cost thereof
determined on the basis of Tenant's federal income tax returns, (ii) the
reasonable out-of-pocket costs and expenses of Tenant in making such sublease,
such as brokers' fees, attorneys' fees, and advertising fees paid to unrelated
third parties, (iii) any sums paid to Landlord pursuant to Section 12.2(B)
hereof, (iv) the cost of improvements or alterations made by Tenant expressly
and solely for the purpose of preparing that portion of the Premises for such
subtenancy if not used by Tenant subsequent to the expiration of the term of the
sublease, and (v) the unamortized or undepreciated cost of any Tenant's Property
leased to and used by such subtenant. In determining Sublease Rent, the costs
set forth in clauses (ii), (iii) and (iv) shall be amortized on a straight-line
basis over the term of such sublease and the costs set forth in clause (v) shall
be amortized on a straight line basis over the greater of the longest useful
life of such improvements, alterations or Property (as permitted pursuant to the
Internal Revenue Code of 1986, as amended) and the term of such sublease.
(5) "Sublease Rent Per Square Foot" shall mean the Sublease
-----------------------------
Rent divided by the rentable square feet of the space demised under the sublease
in question.
(6) Sublease Profit shall be recalculated from time to time to
reflect any corrections in the prior calculation thereof due to (i) subsequent
payments received or made by Tenant, (ii) the final adjustment of payments to be
made by or to Tenant, and (iii) mistake. Promptly after receipt or final
adjustment of any such payments or discovery of any such mistake, Tenant shall
submit to Landlord a recalculation of the Sublease Profit, and an adjustment
shall be made between Landlord and Tenant, on account of prior payments made or
credits received pursuant to this Section 12.7.
43
<PAGE>
Section 12.8. (A) Notwithstanding the provisions of Section 12.1 hereof,
------------
if Landlord shall not exercise its rights pursuant to paragraph (B)(2) of this
Section 12.8, Landlord shall not unreasonably withhold its consent to an
assignment of this Lease in its entirety provided that:
(1) no Event of Default shall have occurred and be
continuing,
(2) upon the date Tenant delivers the Assignment Statement
to Landlord and upon the date immediately preceding the date of any assignment
approved by Landlord, the proposed assignee shall have a financial standing
(taking into consideration the obligations of the proposed assignee under this
Lease) satisfactory to Landlord, be of a character, be engaged in a business,
and propose to use the Premises in a manner in keeping with the standards in
such respects of the other tenancies in the Building;
(3) the proposed assignee (or any Person who directly or
indirectly, Controls, is Controlled by or is under common Control with the
proposed assignee) shall not be a person or entity with whom Landlord is
negotiating to lease space in the Building at the time of receipt of an
Assignment Statement;
(4) the character of the business to be conducted or the
proposed use of the Premises by the proposed assignee shall not (a) be likely to
increase Landlord's operating expenses beyond that which would be incurred for
use by Tenant or for use in accordance with the standards of use of other
tenancies in the Building; (b) increase the burden on existing cleaning services
or elevators over the burden prior to such proposed assignment; (c) violate any
provision or restrictions herein relating to the use or occupancy of the
Premises; (d) require any alterations, installations, improvements, additions or
other physical changes to be performed in or made to any portion of the Building
or the Real Property other than the Premises; or (e) violate any provision or
restrictions in any other lease for space in the Building or in any Superior
Lease or Mortgage; if Landlord shall have consented to an assignment and, as a
result of the use and occupancy of the Premises by Tenant/assignee, operating
expenses are increased, then Tenant shall pay to Landlord, within ten (10) days
after demand, as additional rent, all resulting increases in operating expenses;
and
(5) the assignee shall agree to assume all of the
obligations of Tenant under this Lease from and after the date of the
assignment.
(B) (1) At least fifteen (15) Business Days prior to any proposed
assignment, Tenant shall submit a statement to Landlord (the "Assignment
----------
Statement") containing the following information: (i) the name and address of
- ---------
the proposed assignee, (ii) the essential terms and conditions of the proposed
assignment, including, without limitation, the consideration payable for such
assignment and the value (including cost, overhead and supervision) of any
improvements (including any demolition to be performed) to the Premises proposed
to be made by Tenant to prepare the Premises for occupancy by such assignee,
(iii) the nature and character of the business of the proposed assignee, and
(iv) any other
44
<PAGE>
information that Landlord may reasonably request, together with a statement
specifically directing Landlord's attention to the provisions of this Section
12.8(B) requiring Landlord to respond to Tenant's request within fifteen (15)
Business Days after Landlord's receipt of the Assignment Statement. The
Assignment Statement shall be executed by Tenant and the proposed assignee and
shall indicate both parties' intent (but not necessarily binding obligation) to
enter into an assignment agreement conforming to the terms and conditions of the
Assignment Statement and on such other terms and conditions to which the parties
may agree which are not inconsistent with the essential terms set forth in the
Assignment Statement.
(2) Landlord shall have the right, exercisable within fifteen (15)
Business Days after Landlord's receipt of the Assignment Statement, to take an
assignment of this Lease (in its own name or that of its designee) for the same
consideration payable to Tenant pursuant to the terms of the Assignment
Statement (less the amount of any brokerage commission which would have been
payable on account of the assignment pursuant to the Assignment Statement),
provided Landlord shall take possession of the Premises "as is" in its condition
as of the date of such assignment and shall be entitled to a credit against the
consideration otherwise payable in the amount, if any, of the value of any
improvements, work or demolition proposed to be provided or performed by Tenant
pursuant to the Assignment Statement.
(3) If Landlord shall fail to notify Tenant within said fifteen
(15) Business Day period of Landlord's intention to exercise its rights pursuant
to paragraph (B)(2) of this Section 12.8 or of Landlord's consent to or
disapproval of the proposed assignment pursuant to the Assignment Statement, or
if Landlord shall have consented to such assignment as provided in Section
12.8(A) hereof, Tenant shall be free to assign the Premises to such proposed
assignee on the same terms and conditions set forth in the Assignment Statement.
If Tenant shall not enter into such assignment within sixty (60) days after the
delivery of the Assignment Statement to Landlord, then the provisions of this
Section 12.8 shall again be applicable in their entirety to any proposed
assignment.
(4) If Tenant shall propose to assign this Lease and is about to
commence negotiations with a prospective assignee, Tenant shall advise Landlord
of the identity of such prospective assignee and Landlord shall, promptly advise
Tenant if the execution of an assignment agreement with such prospective
assignee would violate the provisions of paragraph (A)(3) of this Section 12.8.
(C) If Tenant shall assign this Lease, Tenant shall deliver to
Landlord, within five (5) days after execution thereof, (x) a duplicate original
instrument of assignment in form and substance reasonably satisfactory to
Landlord, duly executed by Tenant, and (y) an instrument in form and substance
reasonably satisfactory to Landlord, duly executed by the assignee, in which
such assignee shall assume observance and performance of, and agree to be
personally bound by, all of the terms, covenants and conditions of this Lease on
Tenant's part to be observed and performed.
45
<PAGE>
(D) Tenant shall pay to Landlord, upon receipt thereof, an amount
equal to fifty percent (50%) of all Assignment Proceeds. For purposes of this
paragraph (D), "Assignment Proceeds" shall mean all consideration payable to
-------------------
Tenant, directly or indirectly, by any assignee, including Landlord pursuant to
paragraph (B) of this Section 12.8, or any other amount received by Tenant from
or in connection with any assignment (including, but not limited to, sums paid
for the sale or rental, or consideration received on account of any
contribution, of Tenant's Property) after deducting therefrom: (i) in the event
of a sale (or contribution) of Tenant's Property, the then unamortized or
undepreciated cost thereof determined on the basis of Tenant's federal income
tax returns, (ii) the reasonable out-of-pocket costs and expenses of Tenant in
making such assignment, such as brokers' fees, attorneys' fees, and advertising
fees paid to unrelated third parties, (iii) any payments required to be made by
Tenant in connection with the assignment of its interest in this Lease pursuant
to Article 31-B of the Tax law of the State of New York or any real property
transfer tax of the United States or the City or State of New York (other than
any income tax), (iv) any sums paid by Tenant to Landlord pursuant to Section
12.2(B) hereof, (v) the cost of improvements or alterations made by Tenant
expressly and solely for the purpose of preparing the Premises for such
assignment, as determined by Tenant's federal income tax returns, (vi) the
unamortized or undepreciated cost of any Tenant's Property leased to and used by
such assignee, and (vii) the then unamortized or undepreciated cost of the
Alterations determined on the basis of Tenant's federal income tax returns less
the Tenant Fund. If the consideration paid to Tenant for any assignment shall
be paid in installments, then the expenses specified in this paragraph (D) shall
be amortized over the period during which such installments shall be payable.
If Landlord exercises its right to take an assignment of this Lease pursuant to
the provisions of Section 12.8(B) hereof, in no event shall Tenant be entitled
to any proceeds derived from or relating to (directly or indirectly) any lease
or sublease of the Premises by Landlord or further assignment of the Lease.
ARTICLE 13
ELECTRICITY
-----------
Section 13.1. Tenant shall at all times comply with the rules,
------------
regulations, terms and conditions applicable to service, equipment, wiring and
requirements of the public utility supplying electricity to the Building. The
risers serving the Premises shall be capable of supplying six (6) watts of
electricity per rentable square foot of the Premises and Tenant shall not use
any electrical equipment which, in Landlord's reasonable judgment, would exceed
such capacity or interfere with the electrical service to other tenants of the
Building. In the event that, in Landlord's sole judgment, Tenant's electrical
requirements necessitate installation of an additional riser, risers or other
proper and necessary equipment, Landlord shall so notify Tenant of same. Within
five (5) Business Days after receipt of such notice, Tenant shall either cease
such use of such additional electricity or shall request that additional
electrical capacity (specifying the amount requested) be made available to
Tenant. Landlord, in Landlord's sole judgment shall determine whether to make
available such additional electrical capacity to Tenant and the amount of such
additional electrical capacity to be made
46
<PAGE>
available. If Landlord shall agree to make available additional electrical
capacity and the same necessitates installation of an additional riser, risers
or other proper and necessary equipment, including, without limitation, any
switchgear, the same shall be installed by Landlord. Any such installation shall
be made at Tenant's sole cost and expense, and shall be chargeable and
collectible as additional rent and paid within ten (10) days after the rendition
of a bill to Tenant therefor. Landlord shall not be liable in any way to Tenant
for any failure or defect in the supply or character of electric service
furnished to the Premises by reason of any requirement, act or omission of the
utility serving the Building or for any other reason not attributable to the
gross negligence of Landlord, whether electricity is provided by public or
private utility or by any electricity generation system owned and operated by
Landlord.
Section 13.2. (A) Unless Landlord elects to supply electricity to the
------------
Premises pursuant to Section 13.3 or Landlord is required to have Tenant obtain
electricity from the public utility furnishing electricity to the Building
pursuant to the provisions of Section 13.4 hereof, Landlord shall furnish
electric current to the Premises for the use of Tenant for the operation of the
lighting fixtures and the electrical receptacles for ordinary office equipment
in the Premises on a "rent inclusion" basis, that is, there shall be no separate
charge to Tenant for such electric current by way of measuring such electricity
service on any meter. The Fixed Rent set forth in this Lease includes an annual
charge for electricity service of Fifty-Eight Thousand Eleven and 25/100 Dollars
($58,011.25) (such amount, as it may be increased pursuant to the provisions of
this Lease, being referred to as the "Electricity Inclusion Factor"). The
----------------------------
parties agree that although the charge for furnishing electrical energy is
included in the Fixed Rent on a so-called "rent inclusion" basis, the value to
Tenant of such service may not be fully reflected in the Fixed Rent.
Accordingly, Tenant agrees that Landlord, at Landlord's option, may cause a
reputable and independent electrical engineer or electrical consulting firm,
selected by Landlord (such engineer or consulting firm being hereinafter
referred to as "Landlord's Engineer"), to make a determination, following the
-------------------
commencement of Tenant's normal business activities in the Premises, of the Full
Value of such service to Tenant. As used herein, the "Full Value" to Tenant of
----------
such service shall mean the product obtained by multiplying the demand and
consumption of electric energy at the Premises by the Electric Rate. Landlord's
Engineer shall certify such determination in writing to Landlord and Tenant. If
the Full Value to Tenant is in excess of the Electricity Inclusion Factor, the
Electricity Inclusion Factor and the Fixed Rent shall be increased by such
excess. However, if it shall be so determined that the Full Value to Tenant of
such service does not exceed the Electricity Inclusion Factor, there shall
nevertheless be no decrease in the Electricity Inclusion Factor or in the Fixed
Rent.
(B) If during the Term the Electric Rate shall increase over the Base
Electric Rate, the Electricity Inclusion Factor (and therefore the Fixed Rent)
shall be proportionately increased.
(C) (i) Landlord, from time to time during the Term, may cause
Landlord's Engineer to survey the demand and consumption of electrical energy at
the Premises. If the then Full Value shall exceed the then Electricity
Inclusion Factor, the
47
<PAGE>
Electricity Inclusion Factor (and therefore the Fixed Rent), shall be
proportionately increased, based on the increased demand and consumption and the
then prevailing Electric Rate.
(ii) Landlord shall furnish to Tenant a written statement (a
"Electricity Statement") setting forth Landlord's determination of any increase
- ----------------------
which has occurred in the Full Value and the Electricity Inclusion Factor (and
therefore the Fixed Rent) pursuant to the provisions of either Sections 13.2(A),
(B), or (C)(i). Any such increase in the Electricity Inclusion Factor and the
Fixed Rent shall be effective as of the date of such increase in the Electric
Rate (to the extent such increase was effective not more than one (1) year prior
to the date of the Electricity Statement) or the consumption and demand of
electric energy by Tenant and shall be retroactive to such dates if necessary.
Any retroactive increase shall be paid by Tenant within ten (10) days after
demand and such amount shall be collectible by Landlord as Fixed Rent hereunder.
(iii) Each such Electricity Statement given by Landlord pursuant
to Section 13.2(C)(ii) above, shall be conclusive and binding upon Tenant,
unless within thirty (30) days after the receipt of such Electricity Statement,
Tenant shall notify Landlord that it disputes the correctness of the Electricity
Statement. If such dispute is based on Tenant's demand and consumption of
electric current, Tenant shall submit a survey and determination of such
adjustment, made at its sole cost and expense, by a reputable and independent
electrical engineer or electrical consulting firm ("Tenant's Engineer"), within
-----------------
ninety (90) days after receipt of such Electricity Statement. If Landlord and
Tenant are unable to resolve the dispute differences between them within thirty
(30) days after receipt by Landlord of a copy of the determination of Tenant's
Engineer, the dispute shall be decided by a third reputable and independent
electrical engineer or electrical consulting firm ("Third Engineer"). If the
--------------
parties shall fail to agree upon the designation of the Third Engineer within
forty (40) days after the receipt by Landlord of the determination of Tenant's
Engineer, then either party may apply to the American Arbitration Association or
any successor thereto for the designation of the Third Engineer. The Third
Engineer shall conduct such hearings as he deems appropriate. The Third
Engineer, within thirty (30) days after his designation, shall select the
determination of either Landlord's Engineer or Tenant's Engineer and such
determination shall be conclusive and binding upon the parties whether or not a
judgment shall be entered in any court. The fees of the Third Engineer and the
costs of arbitration shall be paid equally by the parties, except that each
party shall pay its own counsel fees and expenses, if any, in connection with
the arbitration. Pending the resolution of such dispute by agreement or
arbitration as aforesaid, Tenant shall pay the increase in the Electricity
Inclusion Factor in accordance with the Electricity Statement, without prejudice
to Tenant's position, as herein provided. If the dispute shall be resolved in
Tenant's favor, Landlord, at its option, shall either credit the amount of such
overpayment against subsequent monthly installments of Fixed Rent hereunder or
pay to Tenant the amount of such overpayment.
(D) Subject to the provisions of Section 13.2(C)(ii) hereof,
Landlord's failure during the Term to prepare and deliver any Electricity
Statement, or bills, or Landlord's failure to make a demand, under this Article
or any other provisions of this Lease,
48
<PAGE>
shall not in any way be deemed to be a waiver of, or cause Landlord to forfeit
or surrender, its rights to collect any portion of the increase in the
Electricity Inclusion Factor (and therefore the Fixed Rent) which may have
become due pursuant to this Article 13 during the Term. Tenant's liability for
the amounts due under this Article 13 shall survive the expiration or sooner
termination of this Lease and Landlord's obligation, if any, to refund any
payments by Tenant in excess of the amounts required to be paid by Tenant to
Landlord pursuant to this Article 13 shall survive the expiration or sooner
termination of this Lease. The preceding sentence shall not, however, be
construed as limiting or restricting, in any manner whatsoever, Landlord's right
pursuant to this Lease or pursuant to law to offset any such overpayments by
Tenant against any amounts which may be due and payable as provided in this
Lease.
(E) In no event shall any adjustment of the payments made or to be
made hereunder result in a decrease in Fixed Rent or additional rent payable
pursuant to any other provision of this Lease, or in the amount paid for
electricity for the prior year.
(F) The Electricity Inclusion Factor shall be collectible by Landlord
in the same manner as Fixed Rent.
(G) For the purposes of this Section 13.2, Landlord and Tenant agree
that:
(a) "Electric Rate" (including all applicable surcharges, demand
-------------
charges, energy charges, fuel adjustment charges, time of day charges, taxes and
other sums payable in respect thereof) shall mean the lesser of:
(i) the service classification pursuant to which Landlord
purchases electricity from the utility company servicing the Building, and
(ii) the service classification pursuant to which Tenant
would purchase electricity directly from the utility company servicing the
Building.
(H) If Landlord discontinues furnishing electricity to Tenant pursuant
to this Section 13.2, the Fixed Rent shall be decreased by the Electricity
Inclusion Factor effective as of the date Landlord discontinues the provision of
electricity in such manner.
Section 13.3. (A) If Landlord shall no longer elect to have electricity
------------
furnished to the Premises pursuant to Section 13.2 hereof then, unless Landlord
is required to have Tenant obtain electricity from the public utility company
furnishing electricity to the Building pursuant to the provisions of Section
13.4 hereof, electricity shall be furnished by Landlord to the Premises and
Tenant shall pay to Landlord, as additional rent for such service, during the
Term, an amount (the "Electricity Additional Rent") equal to (i) the amount
Landlord actually pays to the utility company to provide electricity to the
Premises, including all applicable surcharges, demand charges, time-of-day
charges, energy charges, fuel adjustment charges, rate adjustment charges, taxes
and other sums payable in respect thereof, based on Tenant's demand and/or
consumption of electricity (and/or any other method of quantifying Tenant's
49
<PAGE>
use of or demand for electricity as set forth in the utility company's tariff)
as registered on a meter or submeter (installed by Landlord at Landlord's sole
cost and expense) for purposes of measuring such demand, consumption and/or
other method of quantifying Tenant's use of or demand for electricity (it being
agreed that such meter or submeter shall measure demand and consumption, and
off-peak and on-peak use, in either case to the extent such factors are
relevant in making the determination of Landlord's cost) plus (ii) the actual
outof-pocket costs and expenses incurred by Landlord in connection with reading
such meters and preparing bills therefor. Tenant, from time to time, shall have
the right to review Landlord's meter readings, and Landlord's calculation of the
Electricity Additional Rent, at reasonable times and on reasonable prior notice,
by giving notice thereof to Landlord on or prior to the ninetieth (90th) day
after the date when Landlord gives Tenant a bill or statement for the for the
Electricity Additional Rent.
(B) Where more than one meter measures the electricity supplied to
Tenant, the electricity rendered through each meter may be computed and billed
separately in accordance with the provisions hereinabove set forth. Bills for
the Electricity Additional Rent shall be rendered to Tenant at such time as
Landlord may elect, and Tenant shall pay the amount shown thereon to Landlord
within ten (10) days after receipt of such bill. Tenant expressly acknowledges
that in connection with the installation of the meters or submeters, the
electricity being supplied to the Premises shall be temporarily interrupted.
Landlord shall use reasonable efforts to minimize interference with the conduct
of Tenant's business in connection with such installation (including, without
limitation, cooperation with Tenant with respect to the timing of any such
installation of meters or submeters); provided, however, that Landlord shall
have no obligation to employ contractors or labor at so-called overtime or other
premium pay rates or to incur any other overtime costs or expenses whatsoever.
Section 13.4. If Landlord shall be required by Requirements or the public
------------
utility serving the Premises to discontinue furnishing electricity to Tenant
this Lease shall continue in full force and effect and shall be unaffected
thereby, except only that from and after the effective date of such
discontinuance, Landlord shall not be obligated to furnish electricity to Tenant
and either Tenant shall not be obligated to pay the Electricity Additional Rent
or the Fixed Rent shall be appropriately reduced by the Electricity Inclusion
Factor, as the case may be. If Landlord so discontinues furnishing electricity
to Tenant, Tenant shall use diligent efforts to obtain electric energy directly
from the public utility furnishing electric service to the Building. The costs
of such service shall be paid by Tenant directly to such public utility. Such
electricity may be furnished to Tenant by means of the existing electrical
facilities serving the Premises, at no charge, to the extent the same are
available, suitable and safe for such purposes as determined by Landlord. All
meters and all additional panel boards, feeders, risers, wiring and other
conductors and equipment which may be required to obtain electricity shall be
installed by Landlord at Tenant's expense. Provided Tenant shall use and
continue to use diligent efforts to obtain electric energy directly from the
public utility, Landlord, to the extent permitted by applicable Requirements,
shall not discontinue furnishing electricity to the Premises until such
installations have been made and Tenant shall be able to obtain electricity
directly from the public utility.
50
<PAGE>
ARTICLE 14
ACCESS TO PREMISES
------------------
Section 14.1. (A) Tenant shall permit Landlord, Landlord's agents,
------------
representatives, contractors and employees and public utilities servicing the
Building to erect, use and maintain, concealed ducts, pipes and conduits in and
through the Premises. Landlord, Landlord's agents, representatives,
contractors, and employees and the agents, representatives, contractors, and
employees of public utilities servicing the Building shall have the right to
enter the Premises at all reasonable times upon reasonable prior notice (except
in the case of an emergency in which event Landlord and Landlord's agents,
representatives, contractors, and employees may enter without prior notice to
Tenant), which notice may be oral, to examine the same, to show them to
prospective purchasers, or prospective or existing Mortgagees or Lessors, and to
make such repairs, alterations, improvements, additions or restorations (i) as
Landlord may deem necessary or desirable to the Premises or to any other portion
of the Building, or (ii) which Landlord may elect to perform following ten (10)
days after notice, except in the case of an emergency (in which event Landlord
and Landlord's agents, representatives, contractors, and employees may enter
without prior notice to Tenant), following Tenant's failure to make repairs or
perform any work which Tenant is obligated to make or perform under this Lease,
or (iii) for the purpose of complying with any Requirements, a Superior Lease or
a Mortgage, and Landlord shall be allowed to take all material into and upon the
Premises that may be required therefor without the same constituting an eviction
or constructive eviction of Tenant in whole or in part and the Fixed Rent (and
any other item of Rental) shall in no wise abate (except to the extent expressly
set forth in Section 14.2 hereof) while said repairs, alterations, improvements,
additions or restorations are being made, by reason of loss or interruption of
business of Tenant, or otherwise.
(B) Any work performed or installations made pursuant to this Article
14 shall be made with reasonable diligence and otherwise pursuant to the
provisions of Section 4.3 hereof.
(C) Except as hereinafter provided, any pipes, ducts, or conduits
installed in or through the Premises pursuant to this Article 14 shall be
concealed behind, beneath or within then existing partitioning, columns,
ceilings or floors located or to be located in the Premises. Notwithstanding
the foregoing, any such pipes, ducts, or conduits may be furred at points
immediately adjacent to then existing partitioning columns or ceilings located
or to be located in the Premises, provided that the same are completely furred
and that the installation of such pipes, ducts, or conduits, when completed,
shall not reduce the usable area of the Premises beyond a de minimis amount.
----------
Section 14.2. If due to any work or installation performed by Landlord
------------
pursuant to the terms of this Lease or failure by Landlord to perform its
obligations under this Lease (including by reason of Unavoidable Delays), (i)
Tenant shall be unable for at least ten (10) consecutive Business Days to
operate its business in the Premises in substantially the same
51
<PAGE>
manner as such business was operated prior to the performance of such work or
installation or such failure, (ii) such interruption shall occur during business
hours, and (iii) Tenant shall have been unable, after using reasonable efforts,
to relocate its employees and property located in that portion of the Premises
which is the subject of such work or installation or such failure so as to have
been able to have continued so to operate its business, the Fixed Rent and the
Escalation Rent shall be reduced on a per diem basis in the proportion in which
the area of the portion of the Premises which is unusable bears to the total
area of the Premises for each day subsequent to the aforesaid ten (10) Business
Day period that such portion of the Premises remains unusable.
Section 14.3. During the twelve (12) month period prior to the Expiration
------------
Date or the expiration of any renewal or extended term, Landlord may exhibit the
Premises to prospective tenants thereof.
Section 14.4. If Tenant shall not be present when for any reason entry
------------
into the Premises shall be necessary or permissible, Landlord or Landlord's
agents, representatives, contractors or employees may enter the same without
rendering Landlord or such agents liable therefor if during such entry Landlord
or Landlord's agents shall accord reasonable care under the circumstances to
Tenant's Property, and without in any manner affecting this Lease. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever, for the care,
supervision or repair of the Building or any part thereof, other than as herein
provided.
Section 14.5. Landlord also shall have the right at any time, without the
------------
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor (except to the extent expressly provided in Section
14.2 hereof), to change the arrangement or location of entrances or passageways,
doors and doorways, and corridors, elevators, stairs, toilets, or other public
parts of the Building and to change the name, number or designation by which the
Building is commonly known, provided any such change does not (a) unreasonably
reduce, interfere with or deprive Tenant of access to the Building or the
Premises or (b) reduce the rentable area (except by a de minimis amount) of the
----------
Premises or (c) materially reduce or diminish the common areas, public areas and
amenities provided to Tenant and all other tenants in the Building. All parts
(except surfaces facing the interior of the Premises) of all walls, windows and
doors bounding the Premises (including exterior Building walls, exterior core
corridor walls, exterior doors and entrances), all balconies, terraces and roofs
adjacent to the Premises, all space in or adjacent to the Premises used for
shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, heating,
air cooling, plumbing and other mechanical facilities, service closets and other
Building facilities are not part of the Premises, and Landlord shall have the
use thereof, as well as access thereto through the Premises for the purposes of
operation, maintenance, alteration and repair.
52
<PAGE>
ARTICLE 15
CERTIFICATE OF OCCUPANCY
------------------------
Tenant shall not at any time use or occupy the Premises in violation of the
certificate of occupancy at such time issued for the Premises or for the
Building and in the event that any department of the City or State of New York
shall hereafter contend or declare by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose which is a violation
of such certificate of occupancy, Tenant, upon written notice from Landlord or
any Governmental Authority, shall immediately discontinue such use of the
Premises. On the Commencement Date a temporary or permanent certificate of
occupancy covering the Premises will be in force permitting the Premises to be
used as offices, provided, however, neither such certificate, nor any provision
of this Lease, nor any act or omission of Landlord, shall be deemed to
constitute a representation or warranty that the Premises, or any part thereof,
lawfully may be used or occupied for any particular purpose or in any particular
manner, in contradistinction to mere "office" use.
ARTICLE 16
DEFAULT
-------
Section 16.1. Each of the following events shall be an "Event of Default"
------------ ----------------
hereunder:
(A) If Tenant shall default in the payment when due of any installment
of Fixed Rent and such default shall continue for three (3) Business Days after
notice of such default is given to Tenant, or in the payment when due of any
other item of Rental and such default shall continue for three (3) Business Days
after notice of such default is given to Tenant, except that if Landlord shall
have given two (2) such notices in any twelve (12) month period, Tenant shall
not be entitled to any further notice of its delinquency in the payment of
Rental until such time as twelve (12) consecutive months shall have elapsed
without Tenant having defaulted in any such payment; or
(B) Intentionally Omitted Prior to Execution;
(C) if the Premises shall become abandoned (for purposes of this
Article 16, the term "abandoned" shall mean that Tenant shall (i) have vacated
the Premises with no intention to return, (ii) not be actively seeking a
prospective subtenant of the Premises or assignee of the Lease, and (iii) not be
maintaining the Premises in accordance with good business practice) or if Tenant
shall fail to commence the performance of the Initial Alterations within thirty
(30) days after the Commencement Date (subject to strikes or labor troubles or
by accident or by any cause whatsoever beyond Tenant's control) or if Tenant
shall fail to diligently pursue the performance of the Initial Alterations, or
if Tenant shall fail to occupy the Premises for the conduct of its business on
or before the date that shall be six (6) months after the Commencement Date
(subject to strikes or labor troubles or by accident or by any cause whatsoever
beyond Tenant's reasonable control; or
53
<PAGE>
(D) if Tenant's interest or any portion thereof in this Lease shall
devolve upon or pass to any person, whether by operation of law or otherwise,
except as expressly permitted under Article 12 hereof; or
(E) (1) if Tenant shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (A) seeking relief on its behalf as debtor, or to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
property; or
(3) if Tenant shall make a general assignment for the benefit of
creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (A) seeking to have an order for relief entered
against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts under any existing
or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property, which in either of such cases (i) results in
any such entry of an order for relief, adjudication of bankruptcy or insolvency
or such an appointment or the issuance or entry of any other order having a
similar effect or (ii) remains undismissed for a period of sixty (60) days; or
(5) if any case, proceeding or other action shall be commenced or
instituted against Tenant seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its property which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within sixty (60) days from the entry thereof; or
(6) if Tenant shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clauses (2), (3), (4) or (5) above; or
(7) if a trustee, receiver or other custodian is appointed for
any substantial part of the assets of Tenant which appointment is not vacated or
stayed within seven (7) Business Days; or
54
<PAGE>
(F) if Tenant shall fail more than five (5) times during any twelve
(12) month period to pay any installment of Fixed Rent or any item of Rental
when due, after receipt of the notice and the expiration of the applicable grace
period pursuant to the provisions of paragraph (A) above, if such notice and
grace period are then required; or
(G) if Tenant shall fail to pay any installments of Fixed Rent or
items of Rental when due after receipt of the notice and the expiration of the
applicable grace period pursuant to the provisions of paragraph (A) above, if
such notice and grace period are then required, and Landlord shall bring more
than two (2) summary dispossess proceeding during any twelve (12) month period;
or
(H) if this Lease is assigned (or all or a portion of the Premises are
subleased) to a Related Entity and such Related Entity shall no longer (i)
Control, (ii) be under common Control with, or (iii) be under the Control of
Tenant (or any permitted successor by merger, consolidation or purchase as
provided herein); or
(I) if Landlord shall present the Letter of Credit to the bank which
issued the same in accordance with the provisions of Article 31 hereof, and the
bank shall fail to honor the Letter of Credit and pay the proceeds thereof to
Landlord for any reason whatsoever; or
(J) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed and Tenant shall fail to remedy such default within twenty (20)
days after notice by Landlord to Tenant of such default, or if such default is
of such a nature that it cannot with due diligence be completely remedied within
said period of twenty (20) days and Tenant shall not commence within said period
of twenty (20) days, or shall not thereafter diligently prosecute to completion,
all steps necessary to remedy such default.
Section 16.2. (A) If an Event of Default (i) described in Section 16.1(E)
------------
hereof shall occur, or (ii) described in Sections 16.1(A), (B), (C), (D), (F),
(G), (H), (I) or (J) shall occur and Landlord, at any time thereafter, at its
option gives written notice to Tenant stating that this Lease and the Term shall
expire and terminate on the date Landlord shall give Tenant such notice, then
this Lease and the Term and all rights of Tenant under this Lease shall expire
and terminate as if the date on which the Event of Default described in clause
(i) above occurred or the date of such notice, pursuant to clause (ii) above, as
the case may be, were the Fixed Expiration Date or the last day of the Renewal
Term, as the case may be, and Tenant immediately shall quit and surrender the
Premises, but Tenant shall nonetheless be liable for all of its obligations
hereunder, as provided for in Articles 17 and 18 hereof. 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
16.1(E) 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
55
<PAGE>
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 12.3(B), 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 five (5) days' notice to
Tenant, Tenant as debtor-in-possession or said trustee and upon the expiration
of said five (5) day period this Lease shall cease and expire as aforesaid and
Tenant, Tenant as debtor-in-possession or said trustee shall immediately quit
and surrender the Premises as aforesaid.
(B) If an Event of Default described in Section 16.1(A) hereof shall
occur, or this Lease shall be terminated as provided in Section 16.2(A) hereof,
Landlord, without notice, may reenter 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 16.3. If at any time, (i) Tenant shall be comprised of two (2) or
------------
more persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any person other than Tenant, or (iii) Tenant's interest in this
Lease shall have been assigned, the word "Tenant", as used in Section 16.1(E),
shall be deemed to mean any one or more of the persons primarily or secondarily
liable for Tenant's obligations under this Lease. Any monies received by
Landlord from or on behalf of Tenant during the pendency of any proceeding of
the types referred to in Section 16.1(E) shall be deemed paid as compensation
for the use and occupation of the Premises and the acceptance of any such
compensation by Landlord shall not be deemed an acceptance of Rental or a waiver
on the part of Landlord of any rights under Section 16.2.
ARTICLE 17
REMEDIES AND DAMAGES
--------------------
Section 17.1. (A) If there shall occur any Event of Default, and this
------------
Lease and the Term shall expire and come to an end as provided in Article 16
hereof:
(1) Tenant shall quit and peacefully surrender the Premises
to Landlord, and Landlord and its agents may immediately, or at any time after
such default or after the date upon which this Lease and the Term shall expire
and come to an end, re-enter the Premises or any part thereof, without notice,
either by summary proceedings, or by any other applicable action or proceeding,
or by force or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises and remove any and all of their property and
effects from the Premises; and
56
<PAGE>
(2) Landlord, at Landlord's option, may relet the whole or
any portion or portions of the Premises from time to time, either in the name of
Landlord or otherwise, to such tenant or tenants, for such term or terms ending
before, on or after the Expiration Date, at such rental or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in its sole discretion, may determine, provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
repairs, replacements, alterations, additions, improvements, decorations and
other physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with any such
reletting or proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to re-
enter or to institute legal proceedings to that end which may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors, does further hereby waive any and all rights which Tenant and all
such persons might otherwise have under any present or future law to redeem the
Premises, or to re-enter or repossess the Premises, or to restore the operation
of this Lease, after (a) Tenant shall have been dispossessed by a judgment or by
warrant of any court or judge, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination shall be by operation of law or pursuant to
the provisions of this Lease. The words "re-enter," "re-entry" and "re-entered"
as used in this Lease shall not be deemed to be restricted to their technical
legal meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
Section 17.2. (A) If this Lease and the Term shall expire and come to an
------------
end as provided in Article 16 hereof, or by or under any summary proceeding or
any other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 17.1, or by or under any summary proceeding or any other
action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent, Escalation
Rent and other items of Rental payable under this Lease by Tenant to Landlord 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;
57
<PAGE>
(2) Tenant also shall be liable for and shall pay to
Landlord, as damages, any deficiency (referred to as "Deficiency") between the
----------
Rental 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 clause (2) of Section 17.1 (A)
for any part of such period (first deducting from the rents collected under any
such reletting all of Landlord's expenses in connection with the termination of
this Lease, Landlord's re-entry upon the Premises and with such reletting,
including, but not limited to, all repossession costs, brokerage commissions,
legal expenses, attorneys' fees and disbursements, alteration costs,
contribution to work and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any monthly
Deficiency as aforesaid, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, on demand, in lieu of any further Deficiency as
and for liquidated and agreed final damages, a sum equal to the amount by which
the Rental for the period which otherwise would have constituted the unexpired
portion of the Term (commencing on the date immediately succeeding the last date
with respect to which a Deficiency, if any, was collected) exceeds the then fair
and reasonable rental value of the Premises for the same period, both discounted
to present worth at the Base Rate; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, shall have been relet by Landlord for the period which otherwise
would have constituted the unexpired portion of the Term, or any part thereof,
the amount of rent reserved upon such reletting shall be deemed, prima facie, to
------------
be the fair and reasonable rental value for the part or the whole of the
Premises so relet during the term of the reletting.
(B) If the Premises, or any part thereof, shall be relet together with
other space in the Building, the rents collected or reserved under any such
reletting and the expenses of any such reletting shall be equitably apportioned
for the purposes of this Section 17.2. Tenant shall in no event be entitled to
any rents collected or payable under any reletting, whether or not such rents
shall exceed the Fixed Rent reserved in this Lease. Solely for the purposes of
this Article 17, the term "Escalation Rent" as used in Section 17.2(A) shall
mean the Escalation Rent in effect immediately prior to the Expiration Date, or
the date of re-entry upon the Premises by Landlord, as the case may be, adjusted
to reflect any increase pursuant to the provisions of Article 27 hereof for the
Operating Year immediately preceding such event. Nothing contained in Article
16 hereof or this Article 17 shall be deemed to limit or preclude the recovery
by Landlord from Tenant of the maximum amount allowed to be obtained as damages
by any statute or rule of law, or of any sums or damages to which Landlord may
be entitled in addition to the damages set forth in this Section 17.2.
58
<PAGE>
ARTICLE 18
LANDLORD FEES AND EXPENSES
--------------------------
Section 18.1. If Tenant shall be in default under this Lease or if Tenant
------------
shall do or permit to be done any act or thing upon the Premises which would
cause Landlord to be in default under any Superior Lease or Mortgage, Landlord
may (l) as provided in Section 14.1 hereof, perform the same for the account of
Tenant, or (2) make any expenditure or incur any obligation for the payment of
money, including, without limitation, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and the cost thereof, with interest thereon at the Applicable Rate, shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Landlord
within ten (10) days of rendition of any bill or statement to Tenant therefor
and if the term of this Lease shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Landlord as damages.
Section 18.2. If Tenant shall fail to pay any installment of Fixed Rent,
------------
Escalation Rent or any other item of Rental when due, Tenant shall pay to
Landlord, in addition to such installment of Fixed Rent, Escalation Rent or
other item of Rental, as the case may be, as a late charge and as additional
rent, a sum equal to interest at the Applicable Rate on the amount unpaid,
computed from the date such payment was due to and including the date of
payment.
ARTICLE 19
NO REPRESENTATIONS BY LANDLORD
------------------------------
Section 19.1. (A) Landlord and Landlord's agents and representatives have
------------
made no representations or promises with respect to the Building, the Real
Property or the Premises except as herein expressly set forth, and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth herein. Tenant shall accept possession of the Premises
in the condition which shall exist on the Commencement Date "as is" (subject to
the provisions of Section 4.1 hereof), and Landlord shall have no obligation to
perform any work or make any installations in order to prepare the Premises for
Tenant's occupancy except that Landlord shall erect a demising wall in the
location as shown on the floor plan annexed hereto and made a part hereof as
Exhibit "C" ("Landlord's Work").
(B) Landlord has made and makes no representation as to the date on
which it will complete Landlord's Work. No delay in completing Landlord's Work
shall in any way affect the validity of this Lease or the obligations of Tenant
hereunder or give rise to a claim for damages by Tenant or a claim for
rescission of this Lease, nor shall the same be construed in any wise to extend
the Term hereof. Landlord agrees that, subject to Unavoidable Delay, each item
of Landlord's Work shall be prosecuted promptly and with due diligence and that
Landlord shall cause Landlord's Work to be Substantially Completed on or before
the date which is fifteen (15) Business Days after Landlord shall have received
and approved Tenant's
59
<PAGE>
final plans and specifications for the Initial Alterations which include
specifications with respect to Landlord's Work; provided, however, that nothing
contained in this Article 19 shall be deemed to impose upon Landlord any
obligations to employ contractors or labor at so-called overtime or other
premium pay rates or to incur any other overtime costs or expenses whatsoever.
Landlord shall have the right to enter the Premises subsequent to the
Commencement Date to complete Landlord's Work and the payment of Fixed Rent and
Escalation Rent shall not be affected thereby. Landlord and Tenant agree to
cooperate with each other in accordance with good construction practice and
scheduling to permit Landlord's Work to be performed simultaneously with the
Initial Alterations.
Section 19.2. (A) If Tenant, during the performance of the Initial
------------
Alterations or any other Alterations or otherwise, shall uncover or discover any
asbestos or asbestos-containing materials (collectively, "ACM") in the Premises
which are required by Requirements to be abated by removal, enclosure or
encapsulation then Landlord, at its cost and expense, shall promptly commence
and diligently proceed to abate the same in accordance with all applicable
Requirements, except that in no event shall Landlord be required to remove,
encapsulate or otherwise abate (except to the extent required by Requirements)
any ACM which is contained in column enclosures. Upon the uncovering or
discovery of any such ACM, Tenant shall immediately vacate the Premises (or the
affected portion, if in the judgment of Landlord and Landlord's certified
asbestos removal contractor, it is possible for persons to safely remain in any
other portion of the Premises) and shall cause all of its contractors,
subcontractors, mechanics, materialmen, laborers and all other parties to do the
same. Tenant shall have no right to re-enter the Premises (or such affected
portion) until all of such ACM shall have been abated as aforesaid by Landlord
in accordance with all applicable Requirements.
(B) If Tenant shall discover ACM in the performance of its Initial
Alterations and Tenant shall actually be delayed in the performance and
completion of the Initial Alterations in the entire Premises by reason of its
discovery of ACM in the Premises, Tenant's vacating the entire Premises, and
Landlord's removing of such ACM as aforesaid, then the Rent Commencement Date
shall be postponed one day for each day Tenant is so delayed in the completion
of the Initial Alterations. If Tenant shall not be required to vacate the
entire Premises, but only a portion of the Premises and Tenant shall actually be
delayed in the performance and completion of the Initial Alterations with
respect to such portion of the Premises which Tenant is required to vacate, then
the Rent Commencement Date shall not be postponed, but rather, the Fixed Rent
and Escalation Rent appropriately prorated for such portion of the Premises
which Tenant is required to vacate shall be abated for a period equal to the
number of days for which Tenant is delayed in the performance and completion of
the Initial Alterations in such portion of the Premises. If Tenant shall
discover ACM during the performance of Alterations or otherwise (other than the
Initial Alterations) and Tenant shall vacate all or any portion of the Premises
during the abatement of such ACM as aforesaid by Landlord, the Fixed Rent and
Escalation Rent appropriately prorated for such portion of the Premises which
Tenant is required to vacate shall be abated for a period equal to the number
60
<PAGE>
of days Tenant shall be required to vacate and shall actually vacate, such
portion of the Premises.
ARTICLE 20
END OF TERM
-----------
Upon the expiration or other termination of this Lease, Tenant shall quit
and surrender to Landlord the Premises, vacant, broom clean, in good order and
condition, ordinary wear and tear and damage for which Tenant is not responsible
under the terms of this Lease excepted, and otherwise in compliance with the
provisions of Article 3 hereof. If the last day of the Term or any renewal
thereof falls on Saturday or Sunday, this Lease shall expire on the Business Day
immediately preceding. Tenant expressly waives, for itself and for any person
claiming through or under Tenant, any rights which Tenant or any such person may
have under the provisions of Section 2201 of the New York Civil Practice Law and
Rules and of any successor law of like import then in force in connection with
any holdover summary proceedings which Landlord may institute to enforce the
foregoing provisions of this Article 20. Tenant acknowledges that possession of
the Premises must be surrendered to Landlord on the Expiration Date. Tenant
agrees to indemnify and save Landlord harmless from and against all claims,
losses, damages, liabilities, costs and expenses (including, without limitation,
attorneys' fees and disbursements) resulting from delay by Tenant in so
surrendering the Premises, including, without limitation, any claims made by any
succeeding tenant founded on such delay. The parties recognize and agree that
the damage to Landlord resulting from any failure by Tenant to timely surrender
possession of the Premises as aforesaid will be extremely substantial, will
exceed the amount of the monthly installments of the Fixed Rent and Rental
theretofore payable hereunder, and will be impossible to accurately measure.
Tenant therefore agrees that if possession of the Premises is not surrendered to
Landlord within twenty-four (24) hours after the Expiration Date, in addition to
any other rights or remedies Landlord may have hereunder or at law, and without
in any manner limiting Landlord's right to demonstrate and collect any damages
suffered by Landlord and arising from Tenant's failure to surrender the Premises
as provided herein, Tenant shall pay to Landlord on account of use and occupancy
of the Premises for each month and for each portion of any month during which
Tenant holds over in the Premises after the Expiration Date, a sum equal to the
greater of (i) one and one-half (1/12) times the aggregate of that portion of
the Fixed Rent, Escalation Rent and Rental which was payable under this Lease
during the last month of the Term, and (ii) the then fair market rental value
for the Premises. Nothing herein contained shall be deemed to permit Tenant to
retain possession of the Premises after the Expiration Date or to limit in any
manner Landlord's right to regain possession of the Premises through summary
proceedings, or otherwise, and no acceptance by Landlord of payments from Tenant
after the Expiration Date shall be deemed to be other than on account of the
amount to be paid by Tenant in accordance with the provisions of this Article
20. The provisions of this Article 20 shall survive the Expiration Date.
61
<PAGE>
ARTICLE 21
QUIET ENJOYMENT
---------------
Provided no Event of Default has occurred and is continuing, Tenant may
peaceably and quietly enjoy the Premises subject, nevertheless, to the terms and
conditions of this Lease.
ARTICLE 22
FAILURE TO GIVE POSSESSION
--------------------------
Tenant waives any right to rescind this Lease under Section 223-a of the
New York Real Property Law or any successor statute of similar nature and
purpose then in force and further waives the right to recover any damages which
may result from Landlord's failure for any reason to deliver possession of the
Premises on the date set forth in Section 1.1 hereof for the commencement of the
Term. The provisions of this Article are intended to constitute an "express
provision to the contrary" within the meaning of Section 223-a of the New York
Real Property Law. No such failure to give possession on the date set forth in
Section 1.1 hereof for the commencement of the Term shall in any wise affect the
validity of this Lease or the obligations of Tenant hereunder or give rise to
any claim for damages by Tenant or claim for rescission of this Lease, nor shall
the same be construed in any wise to extend the Term. In such event, Landlord
at Landlord's expense, shall use its commercially reasonable efforts to deliver
possession of the Premises or applicable portion thereof to Tenant and in
connection therewith, if necessary, shall promptly institute and diligently and
in good faith prosecute holdover and any other appropriate proceedings against
the occupant of the Premises or applicable portion thereof.
ARTICLE 23
NO WAIVER
---------
Section 23.1. No act or thing done by Landlord or Landlord's agents during
------------
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys of the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises. In the
event Tenant at any time desires to have Landlord sublet the Premises for
Tenant's account, Landlord or Landlord's agents are authorized to receive said
keys for such purpose without releasing Tenant from any of the obligations under
this Lease, and Tenant hereby relieves Landlord of any liability for loss of or
damage to any of Tenant's effects in connection with such subletting.
Section 23.2. The failure of Landlord to seek redress for violation of, or
------------
to insist upon the strict performance of, any covenant or condition of this
Lease, or any of the Rules and Regulations set forth or hereafter adopted by
Landlord, shall not prevent a subsequent act,
62
<PAGE>
which would have originally constituted a violation of the provisions of this
Lease, from having all of the force and effect of an original violation of the
provisions of this Lease. The receipt by Landlord of Fixed Rent, Escalation Rent
or any other item of Rental with knowledge of the breach of any covenant of this
Lease shall not be deemed a waiver of such breach. The failure of Landlord to
enforce any of the Rules and Regulations set forth, or hereafter adopted,
against Tenant or any other tenant in the Building shall not be deemed a waiver
of any such Rules and Regulations. No provision of this Lease shall be deemed to
have been waived by Landlord, unless such waiver be in writing signed by
Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly Fixed Rent or other item of Rental herein stipulated shall be deemed
to be other than on account of the earliest stipulated Fixed Rent or other item
of Rental, or as Landlord may elect to apply same, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as Fixed
Rent or other item of Rental be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such Fixed Rent or other item of Rental or to pursue any
other remedy provided in this Lease. This Lease contains the entire agreement
between the parties and all prior negotiations and agreements are merged herein.
Any executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
Section 23.3. The failure of Tenant to seek redress for violation of, or
------------
to insist upon the strict performance of, any covenant or condition of this
Lease on Landlord's part to be performed, shall not be deemed a waiver of such
breach or prevent a subsequent act which would have originally constituted a
violation of the provisions of this Lease from having all of the force and
effect of an original violation of the provisions of this Lease. The payment by
Tenant of Fixed Rent, Escalation Rent or any other item of Rental or performance
of any obligation of Tenant hereunder with knowledge of any breach of any
covenant of this Lease shall not be deemed a waiver of such breach, and payment
of the same by Tenant shall be without prejudice to Tenant's right to pursue any
remedy against Landlord in this Lease provided.
ARTICLE 24
WAIVER OF TRIAL BY JURY
-----------------------
The respective parties hereto shall and they hereby do waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
or for the enforcement of any remedy under any statute, emergency or otherwise.
If Landlord commences any summary proceeding against Tenant, Tenant will not
interpose any counterclaim of whatever nature or description in any such
proceeding (unless failure to impose such counterclaim would preclude Tenant
from asserting
63
<PAGE>
in a separate action the claim which is the subject of such counterclaim), and
will not seek to consolidate such proceeding with any other action which may
have been or will be brought in any other court by Tenant.
ARTICLE 25
INABILITY TO PERFORM
--------------------
Except to the extent expressly provided herein, this Lease and the
obligation of Tenant to pay Rental hereunder and perform all of the other
covenants and agreements hereunder on the part of Tenant to be performed shall
in no wise be affected, impaired or excused because Landlord is unable to
fulfill any of its obligations under this Lease expressly or impliedly to be
performed by Landlord or because Landlord is unable to make, or is delayed in
making any repairs, additions, alterations, improvements or decorations or is
unable to supply or is delayed in supplying any equipment or fixtures, if
Landlord is prevented or delayed from so doing by reason of strikes or labor
troubles or by accident, or by any cause whatsoever beyond Landlord's control,
including, but not limited to, laws, governmental preemption in connection with
a national emergency or by reason of any Requirements of any Governmental
Authority or by reason of failure of the HVAC, electrical, plumbing, or other
Building Systems in the Building, or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency ("Unavoidable
-----------
Delays").
- ------
ARTICLE 26
BILLS AND NOTICES
-----------------
Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease shall be in writing and shall be deemed
sufficiently given or rendered if delivered by hand (against a signed receipt)
or if sent by registered or certified mail (return receipt requested) addressed
if to Tenant (a) at Tenant's address set forth in this Lease, Attn.:
General Counsel, if mailed prior to Tenant's taking possession of the
Premises, and (b) at the Premises, Attn.: Office Manager, if mailed
subsequent to Tenant's taking possession of the Premises, or (c) at
any place where Tenant or any agent or employee of Tenant may be found
if mailed subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises, in each case with copies to 7275 Flying
Cloud Drive, Eden Prairie, MN 55344, Attn: General Counsel and to
Dorsey & Whitney, 220 South 6th Street, Minneapolis, MN 55402, Attn:
Ken Tyra, Esq., and in the case of "default" notices with respect to
monetary obligations of Tenant with respect to the period commencing
on
64
<PAGE>
the Commencement Date and ending on January 31, 1998, with a copy
to Digital Equipment Corporation, 11 Powdermill Road MS02, Maynard, MA
01754; Attn.: Manager, Real Estate Acquisitions and Dispositions (it
being understood and agreed that Landlord's failure to so give a copy
of such notice(s) to Digital Equipment Corporation shall not affect
the validity of the notice to Tenant or the time period within which
Tenant shall have the right to cure such default in any manner
whatsoever, or
if to Landlord at Landlord's address set forth in this Lease,
Attn.: Mr. Kevin R. Wang, and with copies to (y) Proskauer Rose Goetz
& Mendelsohn LLP, 1585 Broadway, New York, New York 10036, Attn.:
Lawrence J. Lipson, Esq., and (z) each Mortgagee and Lessor which
shall have requested same, by notice given in accordance with the
provisions of this Article 26 at the address designated by such
Mortgagee or Lessor, or
to such other address(es) as Landlord, Tenant or any Mortgagee or Lessor may
designate as its new address(es) for such purpose by notice given to the other
in accordance with the provisions of this Article 26. Any such bill, statement,
consent, notice, demand, request or other communication shall be deemed to have
been rendered or given on the date when it shall have been hand delivered or
three (3) Business Days from when it shall have been mailed as provided in this
Article 26. Anything contained herein to the contrary notwithstanding, any
Operating Statement, Tax Statement or any other bill, statement, consent,
notice, demand, request or other communication from Landlord to Tenant with
respect to any item of Rental (other than any "default notice" if required
hereunder) may be sent to Tenant by regular United States mail.
ARTICLE 27
ESCALATION
----------
Section 27.1. For the purposes of this Article 27, the following terms
------------
shall have the meanings set forth below.
(A) "Assessed Valuation" shall mean the amount for which the Real
------------------
Property is assessed pursuant to applicable provisions of the New York City
Charter and of the Administrative Code of the City of New York for the purpose
of calculating all or any portion of the Taxes payable with respect to the Real
Property.
(B) "Base Operating Expenses" shall mean the Operating Expenses for
-----------------------
the Base Operating Year.
65
<PAGE>
(C) "Base Operating Year" shall mean the calendar year ending December
-------------------
31, 1995.
(D) "Base Taxes" shall mean the Taxes payable for the Tax Year
----------
commencing July 1, 1995 and ending June 30, 1996.
(E) (1) "Operating Expenses" shall mean the aggregate of those costs
--------
and expenses (and taxes, if any, thereon, including without limitation, sales
and value added taxes) paid or incurred by or on behalf of Landlord (whether
directly or through independent contractors) in respect of the Operation of the
Property which, are properly chargeable to the Operation of the Property
together with and including (without limitation) the costs of gas, oil, steam,
water, sewer rental, electricity (for the portions of the Real Property not
leased to and occupied by tenants or available for occupancy), HVAC and other
utilities furnished to the Building and utility taxes, and the expenses incurred
in connection with the Operation of the Property such as insurance premiums,
attorneys' fees and disbursements (exclusive of any such fees and disbursements
incurred in applying for any reduction of Taxes) and auditing and other
professional fees and expenses, but specifically excluding:
(i) Taxes,
(ii) franchise or income taxes imposed upon Landlord,
(iii) debt service on Mortgages,
(iv) leasing commissions,
(v) capital improvements (except as otherwise provided
herein),
(vi) the cost of electrical energy furnished directly to
Tenant and other tenants of the Building,
(vii) the cost of tenant installations, alterations, changes
and decorations incurred by Landlord (whether as a result of work performed by
Landlord or pursuant to a lease requiring Landlord to pay or reimburse a tenant
for any such costs incurred by such tenant) incurred in connection with
preparing space for a new tenant,
(viii) salaries of personnel above the grade of building
manager and such building manager's supervisor,
(ix) rent paid under Superior Leases (other than in the
nature of Rent consisting of Taxes or Operating Expenses),
(x) any expense for which Landlord is otherwise compensated
through the proceeds of insurance or is otherwise compensated by any tenant
(including Tenant) of the
66
<PAGE>
Building for services in excess of the services Landlord is obligated to furnish
to Tenant hereunder,
(xi) legal fees incurred in connection with any negotiation
of, or disputes arising out of, any space lease in the Building,
(xii) depreciation, except as provided herein,
(xiii) Landlord's advertising and promotional costs
for the Building,
(xiv) any fee or expenditure paid (a) to any Person which
shall Control, be under the Control of, or be under common Control with
Landlord, or in which Landlord directly or indirectly owns not less than a fifty
(50%) percent interest or (b) to any shareholder owning at least fifty (50%)
percent of the common stock, any general partner, any officer above the rank of
vice president, or member of any Board of Directors of Landlord or of any Person
described in this clause (xiv) or (c) to any person who is a relative by blood
(to the first degree of consanguinity, lineal or lateral) or marriage of any
such persons, in each case in excess of the amount which would be paid in the
absence of such relationship,
(xv) lease takeover costs incurred by Landlord in connection
with the entering into of leases in the Building and costs incurred by Landlord
to relocate tenants in the Building in order to consummate a specific lease or
to accommodate a specific tenant's request, and
(xvi) any costs incurred in the removal, remediation,
enclosure, encapsulation or disposal of substances which are designated
"hazardous or toxic" by applicable Requirements and which are required to be so
removed, remediated, enclosed, encapsulated or disposed of by applicable
Requirements, except to the extent the same shall be brought to the Real
Property by Tenant, Tenant's agents, employees, contractors, invitees or
licensees, except, however, that if Landlord is not furnishing any particular
work or service (the cost of which if performed by Landlord would constitute an
Operating Expense) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses shall
be deemed to be increased by an amount equal to the additional Operating
Expenses which reasonably would have been incurred during such period by
Landlord if it had at its own expense furnished such work or services to such
tenant. Any insurance proceeds received with respect to any item previously
included as an Operating Expense shall be deducted from Operating Expenses for
the Operating Year in which such proceeds are received; provided, however, to
the extent any insurance proceeds are received by Landlord in any Operating Year
with respect to any item which was included in Operating Expenses during the
Base Operating Year, the amount of insurance proceeds so received shall be
deducted from Base Operating Expenses and (x) the Base Operating Expenses shall
be
67
<PAGE>
retroactively adjusted to reflect such deduction and (y) all retroactive
Operating Payments resulting from such retroactive adjustment shall be due and
payable when billed by Landlord. Until such time as the electricity supplied to
each floor of the Building and the common and public areas of the Building
(including, without limitation, the Building Systems) shall be separately
metered or submetered, Operating Expenses shall include an amount equal to (x)
(i) Landlord's cost (utilizing the electrical rates applicable to the Building
including energy charges, demand charges, time-of-day charges, fuel adjustment
charges, rate adjustment charges, sales tax and any other factors used by the
public utility in computing its charges to Landlord) of furnishing electric
current to the entire Building, multiplied by (ii) the number of kilowatt hours
of electric current furnished to the public and common areas of the Building
(including, without limitation, the Building Systems) and other areas not
available for occupancy as determined by a survey prepared by an independent,
reputable electrical engineer selected by Landlord, plus (y) an amount equal
Landlord's out-of-pocket costs in connection with the same.
(2) In determining the amount of Operating Expenses for any Operating
Year, if less than all of the Building rentable area shall have been occupied by
tenant(s) at any time during any such Operating Year, Operating Expenses shall
be determined for such Operating Year to be an amount equal to the like expenses
which would normally be expected to be incurred had all such areas been occupied
throughout such Operating Year.
(3) (a) If any capital improvement is made during any Operating
Year in compliance with a Requirement, whether or not such Requirement is valid
or mandatory, or in lieu of a repair, then the cost of such improvement shall be
included in Operating Expenses for the Operating Year in which such improvement
was made; provided, however, to the extent the cost of such improvement is
required to be capitalized for federal income tax purposes, such cost shall be
amortized over the useful economic life of such improvement as reasonably
estimated by Landlord, and the annual amortization, together with interest
thereon at the then Base Rate, of such improvement shall be deemed an Operating
Expense in each of the Operating Years during which such cost of the improvement
is amortized.
(b) If any capital improvement is made during any Operating Year
either for the purpose of saving or reducing Operating Expenses (as, for
example, a labor-saving improvement), then the cost of such improvement shall be
included in Operating Expenses for the Operating Year in which such improvement
was made, provided, however, such cost shall be amortized over such period of
time as Landlord reasonably estimates such savings or reduction in Operating
Expenses will equal the cost of such improvement and the annual amortization,
together with interest thereon at the then Base Rate, of such improvement shall
be deemed an Operating Expense in each of the Operating Years during which such
cost of the improvement is amortized.
(F) "Operating Statement" shall mean a statement in reasonable detail
-------------------
setting forth a comparison of the Operating Expenses for an Operating Year with
the Base Operating
68
<PAGE>
Expenses and the Escalation Rent for the preceding Operating Year pursuant to
the provisions of this Article 27.
(G) "Operating Year" shall mean the calendar year within which the
--------------
Commencement Date occurs and each subsequent calendar year for any part or all
of which Escalation Rent shall be payable pursuant to this Article 27.
(H) "Taxes" shall mean the aggregate amount of real estate taxes and
-----
any general or special assessments (exclusive of penalties and interest thereon)
imposed upon the Real Property (including, without limitation, (i) assessments
made upon or with respect to any "air" and "development" rights now or hereafter
appurtenant to or affecting the Real Property, (ii) any fee, tax or charge
imposed by any Governmental Authority for any vaults, vault space or other space
within or outside the boundaries of the Real Property, and (iii) any taxes or
assessments levied after the date of this Lease in whole or in part for public
benefits to the Real Property or the Building, including, without limitation,
any Business Improvement District taxes and assessments) without taking into
account any discount that Landlord may receive by virtue of any early payment of
Taxes, provided, that if because of any change in the taxation of real estate,
any other tax or assessment, however denominated (including, without limitation,
any franchise, income, profit, sales, use, occupancy, gross receipts or rental
tax) is imposed upon Landlord or the owner of the Real Property or the Building,
or the occupancy, rents or income therefrom, in substitution for any of the
foregoing Taxes, such other tax or assessment shall be deemed part of Taxes
computed as if Landlord's sole asset were the Real Property. With respect to
any Tax Year, all expenses, including attorneys' fees and disbursements,
experts' and other witnesses' fees, incurred in contesting the validity or
amount of any Taxes or in obtaining a refund of Taxes shall be considered as
part of the Taxes for such Tax Year. Anything contained herein to the contrary
notwithstanding, Taxes shall not be deemed to include (w) any taxes on
Landlord's income, (x) franchise taxes, (y) estate or inheritance taxes or (z)
any similar taxes imposed on Landlord, unless such taxes are levied, assessed or
imposed in lieu of or as a substitute for the whole or any part of the taxes,
assessments, levies, impositions which now constitute Taxes.
(I) "Tax Statement" shall mean a statement in reasonable detail
-------------
setting forth a comparison of the Taxes for a Tax Year with the Base Taxes.
(J) "Tax Year" shall mean the period July 1 through June 30 (or such
--------
other period as hereinafter may be duly adopted by the Governmental Authority
then imposing taxes as its fiscal year for real estate tax purposes), any
portion of which occurs during the Term.
Section 27.2. (A) If the Taxes payable for any Tax Year (any part or all
------------
of which falls within the Term) shall represent an increase above the Base
Taxes, then Tenant shall pay as additional rent for such Tax Year and continuing
thereafter until a new Tax Statement is rendered to Tenant, Tenant's Share of
such increase (the "Tax Payment") as shown on the Tax Statement with respect to
-------------
such Tax Year. Tenant shall be obliged to pay the Tax Payment regardless of
whether Tenant is exempt in whole or part, from the payment of any
69
<PAGE>
Taxes by reason of Tenant's diplomatic status or for any other reason
whatsoever. The Taxes shall be computed initially on the basis of the Assessed
Valuation in effect at the time the Tax Statement is rendered (as the Taxes may
have been settled or finally adjudicated prior to such time) regardless of any
then pending application, proceeding or appeal respecting the reduction of any
such Assessed Valuation, but shall be subject to subsequent adjustment as
provided in Section 27.3 hereof.
(B) At any time during or after the Term, Landlord may render to
Tenant a Tax Statement or Statements showing (i) a comparison of the Taxes for
the Tax Year with the Base Taxes and (ii) the amount of the Tax Payment
resulting from such comparison. On the first day of the month following the
furnishing to Tenant of a Tax Statement, Tenant shall pay to Landlord a sum
equal to 1/12th of the Tax Payment shown thereon to be due for such Tax Year
multiplied by the number of months of the Term then elapsed since the
commencement of such Tax Year. Tenant shall continue to pay to Landlord a sum
equal to one-twelfth (l/12th) of the Tax Payment shown on such Tax Statement on
the first day of each succeeding month until the first day of the month
following the month in which Landlord shall deliver to Tenant a new Tax
Statement. If Landlord furnishes a Tax Statement for a new Tax Year subsequent
to the commencement thereof, promptly after the new Tax Statement is furnished
to Tenant, Landlord shall give notice to Tenant stating whether the amount
previously paid by Tenant to Landlord for the current Tax Year was greater or
less than the installments of the Tax Payment for the current tax year in
accordance with the Tax Statement, and (a) if there shall be a deficiency,
Tenant shall pay the amount thereof within ten (10) days after demand therefor,
or (b) if there shall have been an overpayment, Landlord shall either (x) credit
the amount thereof against the next monthly installments of the Fixed Rent
payable under this Lease, or (y) if the term of this Lease shall have expired or
been terminated, promptly refund to Tenant the amount of such overpayment. Tax
Payments shall be collectible by Landlord in the same manner as Fixed Rent.
Landlord's failure to render a Tax Statement shall not prejudice Landlord's
right to render a Tax Statement during or with respect to any subsequent Tax
Year, and shall not eliminate or reduce Tenant's obligation to make Tax Payments
for such Tax Year.
Section 27.3. (A) Only Landlord shall be eligible to institute tax
------------
reduction or other proceedings to reduce the Assessed Valuation. In the event
that, after a Tax Statement has been sent to Tenant, an Assessed Valuation which
had been utilized in computing the Taxes for a Tax Year is reduced (as a result
of settlement, final determination of legal proceedings or otherwise), and as a
result thereof a refund of Taxes is actually received by or on behalf of
Landlord, then, promptly after receipt of such refund, Landlord shall send
Tenant a Tax Statement adjusting the Taxes for such Tax Year (taking into
account the expenses mentioned in Section 27.1(H) hereof) and setting forth
Tenant's Share of such refund and Tenant shall be entitled to receive such
Share, at Landlord's option, either by way of a credit against the Fixed Rent
next becoming due after the sending of such Tax Statement or by a refund to the
extent no further Fixed Rent is due; provided, however, that Tenant's Share of
such refund shall be limited to the portion of the Tax Payment, if any, which
Tenant had theretofore paid
70
<PAGE>
to Landlord attributable to increases in Taxes for the Tax Year to which the
refund is applicable on the basis of the Assessed Valuation before it had been
reduced.
(B) In the event that, after a Tax Statement has been sent to Tenant,
the Assessed Valuation which had been utilized in computing the Base Taxes is
reduced (as a result of settlement, final determination of legal proceedings or
otherwise) then, and in such event: (i) the Base Taxes shall be retroactively
adjusted to reflect such reduction, and (ii) all retroactive Tax Payments
resulting from such retroactive adjustment shall be due and payable when billed
by Landlord. Landlord promptly shall send to Tenant a statement setting forth
the basis for such retroactive adjustment and Tax Payments.
Section 27.4. (A) If the Operating Expenses for any Operating Year (any
------------
part or all of which falls within the Term after the Rent Commencement Date)
shall be greater than the Base Operating Expenses, then Tenant shall pay as
additional rent for such Operating Year and continuing thereafter until a new
Operating Statement is rendered to Tenant, Tenant's Share of such increase (the
"Operating Payment") as hereinafter provided.
-------
(B) At any time during or after the Term Landlord may render to Tenant
an Operating Statement or Statements showing (i) a comparison of the Operating
Expenses for the Operating Year in question with the Base Operating Expenses,
and (ii) the amount of the Operating Payment resulting from such comparison.
Landlord's failure to render an Operating Statement during or with respect to
any Operating Year in question shall not prejudice Landlord's right to render an
Operating Statement during or with respect to any subsequent Operating Year, and
shall not eliminate or reduce Tenant's obligation to make payments of the
Operating Payment pursuant to this Article 27 for such Operating Year.
(C) On the first day of the month following the furnishing to Tenant
of an Operating Statement, Tenant shall pay to Landlord a sum equal to 1/12th of
the Operating Payment shown thereon to be due for the preceding Operating Year
multiplied by the number of months (and any fraction thereof) of the Term then
elapsed since the commencement of such Operating Year in which such Operating
Statement is delivered, less Operating Payments theretofore made by Tenant for
such Operating Year and thereafter, commencing with the then current monthly
installment of Fixed Rent and continuing monthly thereafter until rendition of
the next succeeding Operating Statement, Tenant shall pay on account of the
Operating Payment for such Year an amount equal to 1/12th of the Operating
Payment shown thereon to be due for the preceding Operating Year. Any Operating
Payment shall be collectible by Landlord in the same manner as Fixed Rent.
(D) (1) As used in this Section 27.4, (i) "Tentative Monthly
-----------------
Escalation Charge" shall mean a sum equal to l/12th of the product of (a)
- ---------- ------
Tenant's Share, and (b) the difference between (x) the Base Operating Expenses
and (y) Landlord's estimate of Operating Expenses for the Current Year, and (ii)
"Current Year" shall mean the Operating Year in which a demand is made upon
------------
Tenant for payment of a Tentative Monthly Escalation Charge.
71
<PAGE>
(2) At any time in any Operating Year, Landlord, at its option,
in lieu of the payments required under Section 27.4(C) hereof, may demand and
collect from Tenant, as additional rent, a sum equal to the Tentative Monthly
Escalation Charge multiplied by the number of months in said Operating Year
preceding the demand and reduced by the sum of all payments theretofore made
under Section 27.4(C) with respect to said Operating Year, and thereafter,
commencing with the month in which the demand is made and continuing thereafter
for each month remaining in said Operating Year, the monthly installments of
Fixed Rent shall be deemed increased by the Tentative Monthly Escalation Charge.
Any amount due to Landlord under this Section 27.4(D) may be included by
Landlord in any Operating Statement rendered to Tenant as provided in Section
27.4(B) hereof.
(E) (1) After the end of the Current Year and at any time that
Landlord renders an Operating Statement or Statements to Tenant as provided in
Section 27.4(B) hereof with respect to the comparison of the Operating Expenses
for said Operating Year or Current Year, with the Base Operating Expenses, as
the case may be, the amounts, if any, collected by Landlord from Tenant under
Section 27.4(C) or (D) on account of the Operating Payment or the Tentative
Monthly Escalation Charge, as the case may be, shall be adjusted, and, if the
amount so collected is less than or exceeds the amount actually due under said
Operating Statement for the Operating Year, a reconciliation shall be made as
follows: Tenant shall be debited with any Operating Payment shown on such
Operating Statement and credited with the amounts, if any, paid by Tenant on
account in accordance with the provisions of subsection (C) and subsection
(D)(2) of this Section 27.4 for the Operating Year in question. Tenant shall
pay any net debit balance to Landlord within fifteen (15) days next following
rendition by Landlord of an invoice for such net debit balance; any net credit
balance shall either (x) be applied against the next accruing monthly
installments of Fixed Rent, or (y) if the term of this Lease shall have expired
or been terminated, promptly refund to Tenant the amount of such overpayment.
(2) If the sum of the Tentative Monthly Escalation Charges and
payments made by Tenant in accordance with subsection (C) of this Section 27.4
for any Operating Year shall have exceeded the Operating Payment for such
Operating Year by more than ten percent (10%), interest at the Applicable Rate
on the portion of the overpayment that exceeds the applicable Operating Payment
by more than ten percent (10%) determined as of the respective dates of such
payments by Tenant and calculated from such respective dates to the dates on
which such amounts are credited against the monthly installments of Fixed Rent,
shall be so credited. Any amount owing to Tenant subsequent to the Term shall
be paid to Tenant within ten (10) Business Days after a final determination has
been made of the amount due to Tenant.
Section 27.5. Any Operating Statement sent to Tenant shall be conclusively
------------
binding upon Tenant unless, within ninety (90) days after such Statement is
sent, Tenant shall send a written notice to Landlord objecting to such Statement
and specifying the respects in which such Statement is disputed. If such notice
is sent, Tenant (together with its independent certified public accountants,
provided they are one of the so-called "big-six" accounting firms
72
<PAGE>
or if at such time there is no group of accounting firms commonly referred to as
"big-six", then a nationally recognized firm of at least one hundred fifty (150)
partners or principals who are certified public accountants) may examine
Landlord's books and records relating to the Operation of the Property to
determine the accuracy of the Operating Statement. Tenant recognizes the
confidential nature of such books and records and agrees to maintain the
information obtained from such examination in strict confidence. If after such
examination, Tenant still disputes such Operating Statement, either party may
refer the decision of the issues raised to a reputable independent firm of
certified public accountants, selected by Landlord and approved by Tenant, which
approval shall not be unreasonably withheld or delayed as long as such firm of
certified public accountants is one of the so-called "big-six" public accounting
firms or if at such time there is no group of accounting firms commonly referred
to as "big-six", then a nationally recognized firm of at least one hundred fifty
(150) partners or principals who are certified public accountants, and the
decision of such accountants shall be conclusively binding upon the parties. The
fees and expenses involved in such decision shall be borne by the unsuccessful
party (and if both parties are partially successful, such fees and expenses
shall be apportioned between Landlord and Tenant in inverse proportion to the
amount by which such decision is favorable to each party). Notwithstanding the
giving of such notice by Tenant, and pending the resolution of any such dispute,
Tenant shall pay to Landlord when due the amount shown on any such Operating
Statement, as provided in Section 27.4 hereof.
Section 27.6. The expiration or termination of this Lease during any
------------
Operating Year or Tax Year shall not affect the rights or obligations of the
parties hereto respecting any payments of, or refunds on account of, Operating
Payments for such Operating Year and any payments of Tax Payments for such Tax
Year, and any Operating Statement relating to such Operating Payment and any Tax
Statement relating to such Tax Payment, may be sent to Tenant subsequent to, and
all such rights and obligations shall survive, any such expiration or
termination. Notwithstanding anything to the contrary contained in this Section
27.6, (i) Landlord shall be deemed to have waived its right to collect the Tax
Payment for the Tax Year in which the Term shall expire if Landlord shall have
failed to deliver or revise the Tax Statement with respect to such Tax Year by
the date which is one (1) year after the later to occur of (x) the date on which
Landlord shall have received the appropriate bill from the Governmental
Authority, and (y) the date which is the last day of the Tax Year in which the
Term shall expire, and (ii) Landlord shall be deemed to have waived its right to
collect the Operating Payment for the Operating Year in which the Term shall
expire if Landlord shall have failed to deliver or revise the Operating
Statement with respect to such Operating Year by the date which is one (1) year
after the last day of the Operating Year in which the Term shall expire. In
determining the amount of the Operating Payment for the Operating Year or the
Tax Payment for the Tax Year in which the Term shall expire, the payment of the
Operating Payment for such Operating Year or the Tax Payment for the Tax Year
shall be prorated based on the number of days of the Term which fall within such
Operating Year or Tax Year, as the case may be. Any payments due under such
Operating Statement or Tax Statement shall be payable within twenty (20) days
after such Statement is sent to Tenant.
73
<PAGE>
ARTICLE 28
SERVICES
--------
Section 28.1. (A) Landlord shall provide passenger elevator service to
------------
the Premises on Business Days from 8:00 A.M. to 6:00 P.M. and have an elevator
subject to call at all other times.
(B) There shall be one (1) freight elevator serving the Premises and
the entire Building on call on a "first come, first served" basis on Business
Days from 8:00 A.M. to 5:30 P.M., and on a reservation, "first come, first
served" basis from 5:30 P.M. to 8:00 A.M. on Business Days and at any time on
days other than Business Days. If Tenant shall use the freight elevators
serving the Premises between 5:30 P.M. and 8:00 A.M. on Business Days or at any
time on any other days, Tenant shall pay Landlord, as additional rent for such
use, the standard rates then fixed by Landlord for the Building, or if no such
rates are then fixed, at reasonable rates.
(C) Landlord shall not be required to furnish any freight elevator
services during the hours from 5:30 P.M. to 8:00 A.M. on Business Days and at
any time on days other than Business Days unless Landlord has received advance
notice from Tenant requesting such services prior to 2:00 P.M. of the day upon
which such service is requested or by 2:00 P.M. of the last preceding Business
Day if such periods are to occur on a day other than a Business Day.
Section 28.2. Landlord, at Landlord's expense (but subject to recoupment
------------
pursuant to Article 27 hereof), shall furnish to the perimeter of the Premises
(for distribution by Tenant within the Premises) through the HVAC System, when
required for the comfortable occupancy of the Premises, HVAC on a year round
basis from 8:00 A.M. to 6:00 P.M. on Business Days. Landlord, throughout the
Term, shall have free access to any and all mechanical installations of
Landlord, including, but not limited to, air-cooling, fan, ventilating and
machine rooms and electrical closets; Tenant shall not construct partitions or
other obstructions which may interfere with Landlord's free access thereto, or
interfere with the moving of Landlord's equipment to and from the enclosures
containing said installations. Neither Tenant, nor its agents, employees or
contractors shall at any time enter the said enclosures or tamper with, adjust
or touch or otherwise in any manner affect said mechanical installations.
Tenant shall draw and close the draperies or blinds for the windows of the
Premises whenever the HVAC System is in operation and the position of the sun so
requires and shall at all times cooperate fully with Landlord and abide by all
of the regulations and requirements which Landlord may prescribe for the proper
functioning and protection of the HVAC System.
Section 28.3. The Fixed Rent does not reflect or include any charge
------------
to Tenant for the furnishing of any necessary HVAC to the Premises during
periods other than the hours and days set forth above ("Overtime Periods").
----------------
Accordingly, if Landlord shall furnish such HVAC to the Premises at the request
of Tenant during Overtime Periods, Tenant shall pay
74
<PAGE>
Landlord additional rent for such services at the standard commercially
reasonable rates then fixed by Landlord for the Building, or if no such rates
are then fixed, at reasonable rates. Landlord shall not be required to furnish
any such services during any Overtime Periods unless Landlord has received
advance notice from Tenant requesting such services prior to 2:00 P.M. of the
day upon which such services are requested or by 2:00 P.M. of the last preceding
Business Day if such Overtime Periods are to occur on a day other than a
Business Day. If Tenant fails to give Landlord such advance notice, then,
failure by Landlord to furnish or distribute any such services during such
Overtime Periods shall not constitute an actual or constructive eviction, in
whole or in part, or entitle Tenant to any abatement or diminution of Rental, or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord or its agents by reason of inconvenience or annoyance to
Tenant, or injury to or interruption of Tenant's business or otherwise. If more
than one tenant utilizing the same system as Tenant requests the same Overtime
Periods for the same services as Tenant, the charge to Tenant shall be adjusted
pro rata.
Section 28.4. Provided Tenant shall keep the Premises in order, Landlord,
------------
at Landlord's expense, subject to recoupment pursuant to Article 27 hereof,
shall cause the Premises, excluding any portions thereof used for the storage,
preparation, service or consumption of food or beverages, to be cleaned,
substantially in accordance with the standards set forth in Schedule B annexed
----------
hereto and made a part hereof. Tenant shall pay to Landlord the cost of removal
of any of Tenant's refuse and rubbish from the Premises and the Building to the
extent that the same exceeds the refuse and rubbish usually attendant upon the
use of such Premises as offices. Bills for the same shall be rendered by
Landlord to Tenant at such time as Landlord may elect and shall be due and
payable when rendered as additional rent. Tenant, at Tenant's sole cost and
expense, shall cause all portions of the Premises used for the storage,
preparation, service or consumption of food or beverages to be cleaned daily in
a manner satisfactory to Landlord, and to be exterminated against infestation by
vermin, rodents or roaches regularly and, in addition, whenever there shall be
evidence of any infestation. Any such exterminating shall be done at Tenant's
sole cost and expense, in a manner satisfactory to Landlord, and by Persons
approved by Landlord. If Tenant shall perform any cleaning services in addition
to the services provided by Landlord as aforesaid, Tenant shall employ the
cleaning contractor providing cleaning services to the Building on behalf of
Landlord or such other cleaning contractor as shall be approved by Landlord.
Tenant shall comply with any recycling program and/or refuse disposal program
(including, without limitation, any program related to the recycling, separation
or other disposal of paper, glass or metals) which Landlord shall impose or
which shall be required pursuant to any Requirements.
Section 28.5. If the New York Board of Fire Underwriters or the Insurance
------------
Services Office or any Governmental Authority, department or official of the
state or city government shall require or recommend that any changes,
modifications, alterations or additional sprinkler heads or other equipment be
made or supplied by reason of Tenant's business, or the location of the
partitions, trade fixtures, or other contents of the Premises, Landlord, at
Tenant's cost
75
<PAGE>
and expense, shall promptly make and supply such changes, modifications,
alterations, additional sprinkler heads or other equipment.
Section 28.6. Landlord shall provide to the Premises hot and cold water
------------
for ordinary drinking, cleaning and lavatory purposes. If Tenant requires, uses
or consumes water for any purpose in addition to ordinary drinking, cleaning or
lavatory purposes, Landlord may install a water meter and thereby measure
Tenant's water consumption. In such event (1) Tenant shall pay Landlord for the
cost of the meter and the cost of the installation thereof and through the
duration of Tenant's occupancy Tenant shall keep said meter and equipment in
good working order and repair at Tenant's own cost and expense; (2) Tenant shall
pay for water consumed as shown on said meter, as additional rent, and on
default in making such payment Landlord may pay such charges and collect the
same from Tenant; and (3) Tenant shall pay the sewer rent, charge or any other
tax, rent, levy or charge which now or hereafter is assessed, imposed or shall
become a lien upon the Premises or the Real Property of which they are a part
pursuant to any Requirement made or issued in connection with any such metered
use, consumption, maintenance or supply of water, water system, or sewage or
sewage connection or system. The bill rendered by Landlord for the above shall
be based upon Tenant's consumption and shall be payable by Tenant as additional
rent within ten (10) days after rendition.
Section 28.7. Landlord reserves the right to stop service of the HVAC
------------
System or the elevator, electrical, plumbing or other Building Systems when
necessary, by reason of accident or emergency, or for repairs, additions,
alterations, replacements or improvements in the judgment of Landlord desirable
or necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed (which repairs, additions, alterations,
replacements and improvements shall be performed in accordance with Section 4.3
hereof). Landlord shall have no responsibility or liability for interruption,
curtailment or failure to supply HVAC, elevator, electrical, plumbing or other
Building Systems when prevented by Unavoidable Delays or by any Requirement of
any Governmental Authority or due to the exercise of its right to stop service
as provided in this Article 28 and the exercise of such right or such failure by
Landlord shall not constitute an actual or constructive eviction, in whole or in
part, or entitle Tenant to any compensation or to any abatement or diminution of
Rental (except to the extent expressly set forth in Section 14.2 hereof), or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord or its agents by reason of inconvenience or annoyance to
Tenant, or injury to or interruption of Tenant's business, or otherwise.
Section 28.8. Landlord shall make available to Tenant the computerized
------------
directory in the lobby of the Building for up to twelve (12) listings. The
initial programming shall be without charge to Tenant. From time to time, but
not more frequently than once every three (3) months, Landlord shall reprogram
the computerized directory to reflect such changes in the listings therein as
Tenant shall request, and Tenant promptly after request shall pay to Landlord a
reasonable reprogramming charge for each reprogramming Tenant requests. If
76
<PAGE>
Landlord replaces the computerized directory with a standard directory in the
lobby of the Building, Tenant shall be entitled to Tenant's Share of such
listings on such directory.
ARTICLE 29
PARTNERSHIP TENANT
------------------
If Tenant is a partnership or a professional corporation (or is comprised
of two (2) or more Persons, individually or as co-partners of a partnership or
shareholders of a professional corporation) or if Tenant's interest in this
Lease shall be assigned to a partnership or a professional corporation (or to
two (2) or more Persons, individually or as co-partners of a partnership or
shareholders of a professional corporation) pursuant to Article 12 hereof (any
such partnership, professional corporation and such Persons are referred to in
this Article 29 as "Partnership Tenant"), the following provisions shall apply
------------------
to such Partnership Tenant: (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several; (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by (x) any written instrument which may hereafter be executed by
Partnership Tenant or any successor entity, changing, modifying, extending or
discharging this Lease, in whole or in part, or surrendering all or any part of
the Premises to Landlord, and (y) any notices, demands, requests or other
communications which may hereafter be given by Partnership Tenant or by any of
the parties comprising Partnership Tenant; (c) any bills, statements, notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of such parties shall be binding upon Partnership Tenant and
all such parties; (d) if Partnership Tenant shall admit new partners or
shareholders, as the case may be, all of such new partners or shareholders, as
the case may be, shall, by their admission to Partnership Tenant, be deemed to
have assumed joint and several liability for the performance of all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed; and (e) Partnership Tenant shall give prompt notice to Landlord
of the admission of any such new partners or shareholders, as the case may be,
and upon demand of Landlord, shall cause each such new partner or shareholder,
as the case may be, to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner or shareholder, as the
case may be, shall assume joint and several liability for the observance and
performance of all the terms, covenants and conditions of this Lease on Tenant's
part to be observed and performed (but neither Landlord's failure to request any
such agreement nor the failure of any such new partner or shareholder, as the
case may be, to execute or deliver any such agreement to Landlord shall vitiate
the provisions of clause (d) of this Article 29).
ARTICLE 30
VAULT SPACE
-----------
Notwithstanding anything contained in this Lease or indicated on any
sketch, blueprint or plan, any vaults, vault space or other space outside the
boundaries of the Real Property are not included in the Premises. Landlord
makes no representation as to the location of the
77
<PAGE>
boundaries of the Real Property. All vaults and vault space and all other space
outside the boundaries of the Real Property which Tenant may be permitted to use
or occupy are to be used or occupied under a revocable license, and if any such
license shall be revoked, or if the amount of such space shall be diminished or
required by any Governmental Authority or by any public utility company, such
revocation, diminution or requisition shall not constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of Rental, or relieve Tenant from any of its obligations under
this Lease, or impose any liability upon Landlord. Any fee, tax or charge
imposed by any Governmental Authority for any such vaults, vault space or other
space occupied by Tenant shall be paid by Tenant.
ARTICLE 31
SECURITY
--------
Section 31.1. Tenant shall deposit with Landlord on the signing of this
------------
Lease the sum of Ninety Thousand Dollars ($90,000), or at Tenant's option, a
"clean," unconditional, irrevocable and transferable letter of credit (the
"Letter of Credit") in the same amount, satisfactory to Landlord, issued by and
- -----------------
drawn on a bank satisfactory to Landlord and which is a member of the New York
Clearing House Association, for the account of Landlord, for a term of not less
than one (1) year, as security for the faithful performance and observance by
Tenant of the terms, covenants, conditions and provisions of this Lease,
including, without limitation, the surrender of possession of the Premises to
Landlord as herein provided. If an Event of Default shall occur and be
continuing, Landlord may apply the whole or any part of the security so
deposited, or present the Letter of Credit for payment and apply the whole or
any part of the proceeds thereof, as the case may be, (i) toward the payment of
any Fixed Rent, Escalation Rent or any other item of Rental as to which Tenant
is in default, (ii) toward any sum which Landlord may expend or be required to
expend by reason of Tenant's default in respect of any of the terms, covenants
and conditions of this Lease, including, without limitation, any damage,
liability or expense (including, without limitation, reasonable attorneys' fees
and disbursements) incurred or suffered by Landlord, and (iii) toward any damage
or deficiency incurred or suffered by Landlord in the reletting of the Premises,
whether such damages or deficiency accrue or accrues before or after summary
proceedings or other re-entry by Landlord. If Landlord applies or retains any
part of the proceeds of the Letter of Credit or the security so deposited, as
the case may be, Tenant, upon demand, shall deposit with Landlord the amount so
applied or retained so that Landlord shall have the full deposit on hand at all
times during the Term. If Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this Lease, the Letter of
Credit or the security, as the case may be, shall be returned to Tenant on or
before the date which is thirty (30) days after the Expiration Date and after
delivery of possession of the Premises to Landlord. In the event of a sale or
leasing of the Real Property or the Building, Landlord shall have the right to
transfer the Letter of Credit or security, as the case may be, to the vendee or
lessee and Landlord shall thereupon be released by Tenant from all liability for
the return of such security or the Letter of Credit, as the case may be, and
Tenant shall cause the
78
<PAGE>
bank which issued the Letter of Credit to issue an amendment to the Letter of
Credit or issue a new Letter of Credit naming the vendee or lessee as the
beneficiary thereunder. Tenant shall look solely to the new landlord for the
return of the Letter of Credit or the security, as the case may be. The
provisions hereof shall apply to every transfer or assignment of the Letter of
Credit or security made to a new landlord. Tenant shall not assign or encumber
or attempt to assign or encumber the monies deposited herein as security and
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance. Tenant
shall renew any Letter of Credit from time to time, at least thirty (30) days
prior to the expiration thereof, and deliver to Landlord a new Letter of Credit
or an endorsement to the Letter of Credit, and any other evidence required by
Landlord that the Letter of Credit has been renewed for a period of at least one
(1) year. If Tenant shall fail to renew the Letter of Credit as aforesaid,
Landlord may present the Letter of Credit for payment and retain the proceeds
thereof as security in lieu of the Letter of Credit. In the event Tenant
deposits with Landlord the security in cash or in the event Landlord shall draw
upon the Letter of Credit and hold the proceeds thereof, Landlord agrees such
security or proceeds shall be deposited in an interest-bearing account. The
interest earned on such deposited sums shall be for the benefit of Tenant except
that Landlord shall be entitled to an administrative fee equal to 1% per annum
of such security amount. Provided no Event of Default shall have occurred and be
continuing, Landlord shall pay the interest accrued on such amount (less
Landlord's administrative fee) to Tenant not less often than once per year.
Section 31.2. Notwithstanding anything to the contrary contained in
------------
Section 31.1 hereof, provided no Event of Default shall have occurred at any
time during the period commencing on the Commencement Date and ending on January
31, 1998, the security required to be maintained by Tenant under this Lease
commencing on February 1, 1998 and continuing throughout the Term shall be
Seventy-Four Thousand Two Hundred Fifty Dollars ($74,250) and provided that
Tenant shall have fully and faithfully complied with all of the terms,
provisions, covenants and conditions of this Lease, (a) if the Letter of Credit
is on deposit, Tenant shall be entitled to replace the Letter of Credit on
deposit with Landlord a Letter of Credit in such amount, or (b) if Tenant shall
have deposited with Landlord cash security in lieu of a Letter of Credit,
Landlord shall refund to Tenant an amount equal to the amount by which the
security then on deposit exceeds Seventy-Four Thousand Two Hundred Fifty Dollars
($74,250).
ARTICLE 32
CAPTIONS
--------
The captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this Lease nor the intent
of any provision thereof.
79
<PAGE>
ARTICLE 33
PARTIES BOUND
-------------
The covenants, conditions and agreements contained in this Lease shall bind
and inure to the benefit of Landlord and Tenant and their respective legal
representatives, successors, and, except as otherwise provided in this Lease,
their assigns.
ARTICLE 34
BROKER
------
Each party represents and warrants to the other that it has not dealt with
any broker or Person in connection with this Lease other than Colliers ABR Real
Estate, Inc. and Williams Real Estate Co. Inc. (collectively, "Broker"). The
execution and delivery of this Lease by each party shall be conclusive evidence
that such party has relied upon the foregoing representation and warranty.
Tenant shall indemnify and hold Landlord harmless from and against any and all
claims for commission, fee or other compensation by any Person (other than
Broker) who shall claim to have dealt with Tenant in connection with this Lease
and for any and all costs incurred by Landlord in connection with such claims,
including, without limitation, reasonable attorneys' fees and disbursements.
Landlord shall indemnify and hold Tenant harmless from and against any and all
claims for commission, fee or other compensation by the Broker and any Person
who shall claim to have dealt with Landlord in connection with this Lease and
for any and all costs incurred by Tenant in connection with such claims,
including, without limitation, reasonable attorneys' fees and disbursements.
The provisions of this Article 34 shall survive the Expiration Date.
ARTICLE 35
INDEMNITY
---------
Section 35.1. Tenant shall not do or permit any act or thing to be done
------------
upon the Premises which may subject Landlord to any liability or responsibility
for injury, damages to persons or property or to any liability by reason of any
violation of any Requirement, and shall exercise such control over the Premises
as to fully protect Landlord against any such liability. Except to the extent
arising from the negligence or willful misconduct of Landlord, Landlord's
employees, agents, licensees or contractors or any Indemnitee, Tenant shall
indemnify and save the Indemnitees harmless from and against (a) all claims of
whatever nature against the Indemnitees arising from any act, omission or
negligence of Tenant, its contractors, licensees, agents, servants, employees,
invitees or visitors, (b) all claims against the Indemnitees arising from any
accident, injury or damage whatsoever caused to any person or to the property of
any person and occurring during the Term in or about the Premises, (c) all
claims against the Indemnitees arising from any accident, injury or damage
occurring outside of the Premises but anywhere within or about the Real
Property, where such accident, injury or damage results or is claimed to have
resulted from an act, omission or negligence of
80
<PAGE>
Tenant or Tenant's contractors, licensees, agents, servants, employees, invitees
or visitors, and (d) any breach, violation or non-performance of any covenant,
condition or agreement in this Lease set forth and contained on the part of
Tenant to be fulfilled, kept, observed and performed. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, fines, suits, demands, costs and expenses of any kind or nature
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof but except with respect to claims with respect to bodily
injury or death, shall be limited to the extent any insurance proceeds
collectible by Landlord under policies owned by Landlord or such injured party
with respect to such damage or injury are insufficient to satisfy same.
Section 35.2. If any claim, action or proceeding is made or brought
------------
against Landlord, which claim, action or proceeding Tenant shall be obligated to
indemnify Landlord against pursuant to the terms of this Lease, then, upon
demand by the Landlord, Tenant, at its sole cost and expense, shall resist or
defend such claim, action or proceeding in the Landlord's name, if necessary, by
such attorneys as Landlord shall approve, which approval shall not be
unreasonably withheld. Attorneys for the indemnifying party's insurer are
hereby deemed approved for purposes of this Section 35.2. Notwithstanding the
foregoing, an indemnified party may retain its own attorneys to defend or assist
in defending any claim, action or proceeding involving potential liability of
Five Million Dollars ($5,000,000) or more, and Tenant shall pay the reasonable
fees and disbursements of such attorneys. The provisions of this Article 35
shall survive the expiration or earlier termination of this Lease.
Section 35.3. The provisions of this Article 35 shall be subject to the
------------
provisions of Section 10.5 hereof.
ARTICLE 36
ADJACENT EXCAVATION-SHORING
---------------------------
If an excavation shall be made upon land adjacent to the Premises, or shall
be authorized to be made, Tenant, upon reasonable advance notice, shall afford
to the person causing or authorized to cause such excavation, a license to enter
upon the Premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the Building from injury or damage and to
support the same by proper foundations, without any claim for damages or
indemnity against Landlord, or diminution or abatement of Rental, provided that
Tenant shall continue to have access to the Premises and the Building.
ARTICLE 37
MISCELLANEOUS
-------------
Section 37.1. This Lease is offered for signature by Tenant and it is
------------
understood that this Lease shall not be binding upon Landlord or Tenant unless
and until Landlord and Tenant
81
<PAGE>
shall have executed and unconditionally delivered a fully executed copy of this
Lease to each other.
Section 37.2. The obligations of Landlord under this Lease shall not be
------------
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Building or the Real Property, as the case may be, and in the event of
any such sale, conveyance, assignment or transfer, Landlord shall be and hereby
is entirely freed and relieved of (i) all covenants and obligations of Landlord
hereunder with respect to which performance of Landlord was due prior to the
date of such sale, conveyance, assignment or transfer, provided and to the
extent that such transferee assumes the obligations of Landlord under this
Lease, and (ii) all covenants and obligations of Landlord hereunder with respect
to which performance of Landlord is due from and after the date of such sale,
conveyance, assignment 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 purchaser at any such sale, conveyance, assignment or
transfer of Landlord's interest in the Building or the Real Property, that such
purchaser has assumed and agreed to carry out any and all covenants and
obligations of Landlord hereunder. The partners, shareholders, directors,
officers and principals, direct and indirect, comprising Landlord (collectively,
the "Parties") shall not be liable for the performance of Landlord's obligations
-------
under this Lease. Tenant shall look solely to Landlord to enforce Landlord's
obligations hereunder and shall not seek any damages against any of the Parties.
The liability of Landlord for Landlord's obligations under this Lease shall be
limited to Landlord's interest in the Real Property and Tenant shall not look to
any other property or assets of Landlord or the property or assets of any of the
Parties in seeking either to enforce Landlord's obligations under this Lease or
to satisfy a judgment for Landlord's failure to perform such obligations. After
any such sale, conveyance, assignment or transfer, the liability of the
immediately former Landlord hereunder that may continue pursuant to clause (i)
above shall be limited to the proceeds of (a) such sale, conveyance, assignment
or transfer and (b) proceeds of casualty, title or other insurance policies.
Section 37.3. Notwithstanding anything contained in this Lease to the
------------
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Escalation Rent,
additional rent or Rental, shall constitute rent for the purposes of Section
502(b)(7) of the Bankruptcy Code.
Section 37.4. Tenant's liability for all items of Rental shall survive the
------------
Expiration Date.
Section 37.5. Tenant shall reimburse Landlord as additional rent, within
------------
ten (10) days after rendition of a statement, for all expenditures made by, or
damages or fines sustained or incurred by, Landlord, due to any default by
Tenant under this Lease, with interest thereon at the Applicable Rate.
82
<PAGE>
Section 37.6. This Lease shall not be recorded.
------------
Section 37.7. Tenant hereby waives any claim against Landlord which Tenant
------------
may have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any consent or approval requested by Tenant, and Tenant
agrees that its sole remedy shall be an action or proceeding to enforce any
related provision or for specific performance, injunction or declaratory
judgment and in the event of a determination that such consent or approval has
been unreasonably withheld or delayed, the requested consent or approval shall
be deemed to have been granted; however, Landlord shall have no liability to
Tenant for its refusal or failure to give such consent or approval, unless it
shall be determined in the final and unappealable judgment of a court of
competent jurisdiction that Landlord has withheld its consent arbitrarily or
capriciously. Tenant's sole remedy for Landlord's unreasonably withholding or
delaying consent or approval shall be as provided in this Section 37.7.
Section 37.8. This Lease contains the entire agreement between the parties
------------
and supersedes all prior understandings, if any, with respect thereto. This
Lease shall not be modified, changed, or supplemented, except by a written
instrument executed by both parties.
Section 37.9. Tenant hereby (a) irrevocably consents and submits to the
------------
jurisdiction of any Federal, state, county or municipal court sitting in the
State of New York in respect to any action or proceeding brought therein by
Landlord against Tenant concerning any matters arising out of or in any way
relating to this Lease; (b) hereby irrevocably designates Dorsey & Whitney or
other law firm located in Manhattan if disclosed to Landlord in writing, to
accept service of any process on Tenant's behalf and hereby agrees that such
service shall be deemed sufficient; (c) irrevocably waives all objections as to
venue and any and all rights it may have to seek a change of venue with respect
to any such action or proceedings; (d) agrees that the laws of the State of New
York shall govern in any such action or proceeding and waives any defense to any
action or proceeding granted by the laws of any other country or jurisdiction
unless such defense is also allowed by the laws of the State of New York; and
(e) agrees that any final judgment rendered against it in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law. Tenant further
agrees that any action or proceeding by Tenant against Landlord in respect to
any matters arising out of or in any way relating to this Lease shall be brought
only in the State of New York, county of New York. In furtherance of the
foregoing, Tenant hereby agrees that its address for notices given by Landlord
and service of process under this Lease shall be the Premises. Notwithstanding
the foregoing provisions of this Section 37.9, Tenant may, by written notice to
Landlord, (i) change the designated agent for acceptance of service of process
to any other law firm located in the City, county and State of New York and/or
(ii) change its address for delivery of service of process to any other address.
Section 37.10. Unless Landlord shall render written notice to Tenant to
-------------
the contrary in accordance with the provisions of Article 26 hereof, Mendik
Realty Company, Inc. is authorized to act as Landlord's agent in connection with
the performance of this Lease,
83
<PAGE>
including, without limitation, the receipt and delivery of any and all notices
and consents in accordance with Article 26. Tenant shall direct all
correspondence and requests to, and shall be entitled to rely upon
correspondence received from, Mendik Realty Company, Inc., as agent for the
Landlord in accordance with Article 26. Tenant acknowledges that Mendik Realty
Company, Inc. is acting solely as agent for Landlord in connection with the
foregoing, and neither Mendik Realty Company, Inc. nor any of its direct or
indirect partners, officers, shareholders, directors or employees shall have any
liability to Tenant in connection with the performance of Landlord's obligations
under this Lease and Tenant waives any and all claims against any such party
arising out of, or in any way connected with, this Lease or the Real Property.
Section 37.11. (A) All of the Schedules and Exhibits attached hereto are
-------------
incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Schedules and Exhibits hereto, the terms and provisions of
this Lease shall control. Wherever appropriate in this Lease, personal pronouns
shall be deemed to include the other genders and the singular to include the
plural. All Article and Section references set forth herein shall, unless the
context otherwise specifically requires, be deemed references to the Articles
and Sections of this Lease.
(B) If any term, covenant, condition or provision of this Lease, or
the application thereof to any person or circumstance, shall ever be held to be
invalid or unenforceable, then in each such event the remainder of this Lease or
the application of such term, covenant, condition or provision to any other
Person or any other circumstance (other than those as to which it shall be
invalid or unenforceable) shall not be thereby affected, and each term,
covenant, condition and provision hereof shall remain valid and enforceable to
the fullest extent permitted by law.
(C) All references in this Lease to the consent or approval of
Landlord shall be deemed to mean the written consent or approval of Landlord and
no consent or approval of Landlord shall be effective for any purpose unless
such consent or approval is set forth in a written instrument executed by
Landlord.
ARTICLE 38
RENT CONTROL
------------
If at the commencement of, or at any time or times during the Term of this
Lease, the Rental reserved in this Lease shall not be fully collectible by
reason of any Requirement, Tenant shall enter into such agreements and take such
other steps (without additional expense to Tenant) as Landlord may request and
as may be legally permissible to permit Landlord to collect the maximum rents
which may from time to time during the continuance of such legal rent
restriction be legally permissible (and not in excess of the amounts reserved
therefor under this Lease). Upon the termination of such legal rent restriction
prior to the expiration of the Term, (a) the Rental shall become and thereafter
be payable hereunder in accordance
84
<PAGE>
with the amounts reserved in this Lease for the periods following such
termination, and (b) Tenant shall pay to Landlord, if legally permissible, an
amount equal to (i) the items of Rental which would have been paid pursuant to
this Lease but for such legal rent restriction less (ii) the rents paid by
Tenant to Landlord during the period or periods such legal rent restriction was
in effect.
ARTICLE 39
RENEWAL TERM
------------
Section 39.1. Tenant shall have the option (the "Renewal Option") to
------------ --------------
extend the term of this Lease for one (1) additional period of five (5) years
(the "Renewal Term"), which Renewal Term shall commence on the date immediately
succeeding the Fixed Expiration Date and end on the fifth (5th) anniversary of
the Fixed Expiration Date, provided that (a) this Lease shall not have been
previously terminated, (b) no Event of Default shall have occurred and be
continuing (x) on the date Tenant gives Landlord written notice (the "Renewal
-------
Notice") of Tenant's election to exercise the Renewal Option, and (y) on the
- ------
Fixed Expiration Date, and (c) Tenant shall occupy the entire Premises as its
executive offices for the conduct of its business on the date the Renewal Notice
is given and on the first (1st) day of the Renewal Term. Such Renewal Option
may be exercised with respect to the entire Premises only and shall be
exercisable by Tenant delivering the Renewal Notice to Landlord at least nine
(9) months prior to the Fixed Expiration Date. Time is of the essence with
respect to the giving of the Renewal Notice. Upon the giving of the Renewal
Notice Tenant shall have no further right or option to extend or renew the Term.
Section 39.2. If Tenant exercises the Renewal Option, the Renewal Term
------------
shall be upon the same terms, covenants and conditions as those contained in
this Lease, except that (i) the Fixed Rent shall be deemed to mean the Fixed
Rent as determined pursuant to Section 39.3 hereof, (ii) the provisions of
Section 3.5 hereof shall not be applicable during the Renewal Term, and (iii)
the provisions of Section 39.1 of this Article relative to Tenant's right to
renew the Term of this Lease shall not be applicable during the Renewal Term.
Section 39.3. For the Renewal Term the Fixed Rent shall be determined as
------------
follows:
(A) The Fixed Rent for the Premises for the Renewal Term shall be an
amount equal to the greater of (a) the annual fair market rental value of the
Premises (the "Fair Market Rent") on the first day of the Renewal Term
----------------
multiplied by ninety-five percent (95)%, and (b) the Fixed Rent payable by
Tenant on the Fixed Expiration Date (the greater value of (a) and (b) being
hereinafter referred to as the "Rental Value"). The Fair Market Rent shall be
------------
determined on the basis of the highest and best use of the Premises as offices
assuming that the Premises are free and clear of all leases and tenancies
(including this Lease), that the Premises are available in the then rental
market for comparable first class office buildings in midtown Manhattan, that
Landlord has had a reasonable time to locate a tenant who rents
85
<PAGE>
with the knowledge of the uses to which the Premises can be adapted, and that
neither Landlord nor the prospective tenant is under any compulsion to rent, and
taking into account:
(i) the fact that the Base Taxes and the Base Operating
Expenses provided herein shall not change for the purpose of calculating the
Escalation Rent payable pursuant to Article 27 hereof, which payments shall
continue to be made during the Renewal Term;
(ii) the fact that as of the first day of the Renewal Term,
Tenant shall not be required to pay, in addition to the escalation payments
presently provided for under this Lease, Tenant's Share of such other escalation
payments which Landlord is then charging tenants under other leases or offers
for leases in the Building or in other buildings then owned by Landlord or its
Affiliates or under common management with the management company then managing
the Building or of such other escalation payments which other landlords are then
charging tenants under leases or offers for leases in other office buildings
which are similar in character or location to the Building;
(iii) the fact that Tenant shall have no further right to
renew this Lease;
(iv) the fact that Landlord shall not be obligated to perform
any work in the Premises to prepare the same for Tenant's occupancy nor shall
Tenant be entitled to any Tenant Fund;
(v) the fact that Tenant shall not be entitled to any credit
against the Fixed Rent; and
(vi) whether or not Landlord is or is not obligated to pay a
brokerage commission with respect to the Renewal Term.
(B) For purposes of determining the Fair Market Rent, the following
procedure shall apply:
(1) Landlord and Tenant shall each contemporaneously deliver to
the other, at Landlord's office, a written notice (each a "Rent Notice"), on a
-----------
date mutually agreed upon, but in no event later than ninety (90) days prior to
the Fixed Expiration Date, and if no date is mutually agreed upon, then on the
ninetieth (90th) day prior to the Fixed Expiration Date, which Rent Notice shall
set forth each of their respective determinations of the Rental Value
(Landlord's determination of the Rental Value is referred to as "Landlord's
----------
Determination" and Tenant's determination of the Rental Value is referred to as
- -------------
"Tenant's Determination"). If Landlord shall fail or refuse to give such Rent
----------------------
Notice as aforesaid, Landlord's Determination shall be deemed to be equal to the
Fixed Rent then payable by Tenant on the Fixed Expiration Date and if Tenant
shall fail or refuse to give such Rent Notice as aforesaid, Tenant's
Determination shall be deemed to be the same as Landlord's
86
<PAGE>
Determination. If neither Landlord nor Tenant shall deliver a Rent Notice as
aforesaid, the Rental Value shall be deemed to be equal to the Fixed Rent then
payable by Tenant on the Fixed Expiration Date.
(2) If Landlord's Determination and Tenant's Determination are
not equal and Tenant's Determination is lower than Landlord's Determination, and
either Determination exceeds an amount equal to the Fixed Rent then payable by
Tenant on the Fixed Expiration Date, Landlord and Tenant shall attempt to agree
upon the Fair Market Rent. If Tenant's Determination is higher than Landlord's
Determination, the Fixed Rent for the Renewal Term shall be equal to Tenant's
Determination. If Landlord and Tenant shall mutually agree upon the
determination (the "Mutual Determination") of the Rental Value their
--------------------
determination shall be the Fixed Rent for the Renewal Term, and shall be final
and binding upon the parties. If Landlord and Tenant shall be unable to reach a
Mutual Determination within ten (10) days after delivery of both Determinations
to each party, Landlord and Tenant shall jointly select an independent real
estate appraiser (the "Appraiser") whose fee shall be borne equally by Landlord
---------
and Tenant. In the event that Landlord and Tenant shall be unable to jointly
agree on the designation of the Appraiser within five (5) days after they are
requested to do so by either party, then the parties agree to allow the American
Arbitration Association, or any successor organization to designate the
Appraiser in accordance with the rules, regulations and/or procedures then
obtaining of the American Arbitration Association or any successor organization.
(3) The Appraiser shall conduct such hearings and
investigations as he may deem appropriate and shall, within thirty (30) days
after the date of designation of the Appraiser, choose either Landlord's or
Tenant's Determination, and such choice by the Appraiser shall be conclusive and
binding upon Landlord and Tenant. Each party shall pay its own counsel fees and
expenses, if any, in connection with any arbitration under this Article. The
Appraiser appointed pursuant to this Article shall be an independent real estate
appraiser with at least ten (10) years' experience in leasing and valuation of
properties which are similar in character to the Building, and a member of the
American Institute of Appraisers of the National Association of Real Estate
Boards and a member of the Society of Real Estate Appraisers. The Appraiser
shall not have the power to add to, modify or change any of the provisions of
this Lease.
(4) It is expressly understood that any determination of the
Rental Value pursuant to this Article shall be based on the criteria stated in
Section 39.3 hereof.
(C) After a determination has been made of the Rental Value for the
Renewal Term, the parties shall execute and deliver to each other an instrument
setting forth the Fixed Rent for the Renewal Term as hereinabove determined.
(D) If the final determination of the Rental Value shall not be made
on or before the first day of the Renewal Term in accordance with the provisions
of this Article, pending such final determination Tenant shall continue to pay,
as the Fixed Rent for such
87
<PAGE>
Renewal Term, an amount equal to Landlord's Determination. If, based upon the
final determination hereunder of the Rental Value, the payments made by Tenant
on account of the Fixed Rent for such portion of the Renewal Term were greater
than the Fixed Rent payable for the Renewal Term, Landlord promptly shall refund
to Tenant the amount of such excess.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
MENDIK REALTY COMPANY, INC., as Agent for
TWO PENN PLAZA ASSOCIATES, Landlord
By: /s/ Kevin R. Wang
--------------------------------------
Kevin R. Wang, Senior Vice President
APERTUS TECHNOLOGIES INCORPORATED, Tenant
By: /s/ Sue Hogue
--------------------------------------
Sue Hogue
Vice President & C.F.O.
Federal I.D. # 41-1349953
<PAGE>
STATE OF MINNESOTA )
) ss.:
COUNTY OF HENNEPIN )
On the 12th day of September, 1995, before me personally came Sue Hogue, to
me known, who, being by me duly sworn, did depose and say that she resides at
No. 7275 Flying Cloud Drive, Eden Prairie, MN 55344; that she is the Vice
President & C.F.O. of APERTUS TECHNOLOGIES INCORPORATED, the corporation
described and which executed the foregoing instrument; that she signed her name
thereto by order of the board of directors of said corporation.
/s/ Susan P. Taylor
-----------------------------
Notary Public
(SEAL APPEARS HERE]
<PAGE>
Schedule A
----------
RULES AND REGULATIONS
---------------------
(1) The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall not be obstructed or encumbered by Tenant
or used for any purpose other than ingress and egress to and from the Premises
and for delivery of merchandise and equipment in prompt and efficient manner,
using elevators and passageways designated for such delivery by Landlord.
(2) No awnings, air-conditioning units, fans or other projections shall be
attached to the outside walls of the Building. No curtains, blinds, shades, or
screens, other than those which conform to Building standards as established by
Landlord from time to time, shall be attached to or hung in, or used in
connection with, any window or door of the Premises, without the prior written
consent of Landlord which shall not be unreasonably withheld or delayed. Such
awnings, projections, curtains, blinds, shades, screens or other fixtures must
be of a quality, type, design and color, and attached in the manner reasonably
approved by Landlord. All electrical fixtures hung in offices or spaces along
the perimeter of the Premises must be of a quality, type, design and bulb color
approved by Landlord, which consent shall not be withheld or delayed
unreasonably unless the prior consent of Landlord has been obtained for other
lamping.
(3) No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside of the
Premises or Building or on the inside of the Premises if the same can be seen
from the outside of the Premises without the prior written consent of Landlord
except that the name of Tenant may appear on the entrance door of the Premises.
In the event of the violation of the foregoing by Tenant, if Tenant has refused
to remove same after reasonable notice from Landlord, Landlord may remove same
without any liability, and may charge the expense incurred by such removal to
Tenant. Interior signs on doors and directory tablet shall be of a size, color
and style reasonably acceptable to Landlord.
(4) The exterior windows and doors that reflect or admit light and air into
the Premises or the halls, passageways or other public places in the Building,
shall not be covered or obstructed by Tenant.
(5) No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules, nor shall any article obstruct any air-conditioning supply or
exhaust without the prior written consent of Landlord.
(6) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by Tenant.
A-1
<PAGE>
(7) Subject to the provisions of Article 3 of this Lease, Tenant shall not
mark, paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires shall be permitted, except
with the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed, and as Landlord may direct.
(8) No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction or otherwise.
(9) Tenant shall not make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them whether by the use of any musical
instrument, radio, television set, talking machine, unmusical noise, whistling,
singing, or in any other way.
(10) Tenant, or any of Tenant's employees, agents, visitors or licensees,
shall not at any time bring or keep upon the Premises any inflammable,
combustible or explosive fluid, chemical or substance except such as are
incidental to usual office occupancy.
(11) No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made in existing locks
or the mechanism thereof, unless Tenant promptly provides Landlord with the key
or combination thereto. Tenant must, upon the termination of its tenancy,
return to Landlord all keys of stores, offices and toilet rooms, and in the
event of the loss of any keys furnished at Landlord's expense, Tenant shall pay
to Landlord the cost thereof.
(12) No bicycles, vehicles or animals of any kind except for seeing eye
dogs shall be brought into or kept by Tenant in or about the Premises or the
Building.
(13) All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place in the manner and
during the hours which Landlord or its agent reasonably may determine from time
to time. Landlord reserves the right to inspect all safes, freight or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
(14) Tenant shall not occupy or permit any portion of the Premises demised
to it to be occupied as an office for a public stenographer or typist, or for
the possession, storage, manufacture, or sale of liquor, narcotics, dope, or as
a barber or manicure shop, or as an employment bureau. Tenant shall not engage
or pay any employees on the Premises, except those actually working for Tenant
at the Premises, nor advertise for labor giving an address at the Premises.
(15) Tenant shall not purchase spring water, ice, towels or other like
service, or accept barbering or bootblacking services in the Premises, from any
company or persons not
A-2
<PAGE>
approved by Landlord, which approval shall not be withheld or delayed
unreasonably and at hours and under regulations other than as reasonably fixed
by Landlord.
(16) Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Landlord, Tenant shall refrain from or discontinue such advertising.
(17) Landlord reserves the right to exclude from the Building between the
hours of 6 P.M. and 8 A.M. and at all hours on days other than Business Days all
persons who do not present a pass to the Building signed or approved by
Landlord. Tenant shall be responsible for all persons for whom a pass shall be
issued at the request of Tenant and shall be liable to Landlord for all acts of
such persons.
(18) Tenant shall, at its expense, provide artificial light for the
employees of Landlord while doing janitor service or other cleaning, and in
making repairs or alterations in the Premises.
(19) The requirements of Tenant will be attended to only upon written
application at the office of the Building. Building employees shall not perform
any work or do anything outside of the regular duties, unless under special
instructions from the office of Landlord.
(20) Canvassing, soliciting and peddling in the Building is prohibited and
Tenant shall cooperate to prevent the same.
(21) There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
side guards.
(22) Except as specifically provided in Section 2.2 of this Lease, Tenant
shall not do any cooking, conduct any restaurant, luncheonette or cafeteria for
the sale or service of food or beverages to its employees or to others, or cause
or permit any odors of cooking or other processes or any unusual or
objectionable odors to emanate from the Premises. Tenant shall not permit the
delivery of any food or beverage to the Premises, except by such persons
delivering the same as shall be approved by Landlord, which approval shall not
be unreasonably withheld or delayed.
(23) Tenant shall keep the entrance door to the Premises closed at all
times.
(24) Landlord shall have the right to require that all messengers and other
Persons delivering packages, papers and other materials to Tenant (i) be
directed to deliver such packages, papers and other materials to a Person
designated by Landlord who will distribute the same to Tenant or (ii) be
escorted by a person designated by Landlord to deliver the same to Tenant.
A-3
<PAGE>
(25) Landlord and its agents reserve the right to inspect all packages,
boxes, bags, handbags, attache cases, suitcases, and other items carried into
the Building, and to refuse entry into the Building to any person who either
refuses to cooperate with such inspection or who is carrying any object which
may be dangerous to persons or property. In addition, Landlord reserves the
right to implement such further measures designed to ensure safety of the
Building and the persons and property located therein as Landlord shall deem
necessary or desirable.
A-4
<PAGE>
Schedule B
----------
CLEANING SPECIFICATIONS
-----------------------
GENERAL CLEANING:
- ----------------
NIGHTLY
- -------
General Offices:
----------------
1. All hardsurfaced flooring to be swept using approved dustdown
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and window sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste disposal cans and baskets.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
Public Lavatories (Base Building):
---------------------------------
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and receptacles
in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill and clean all soap, towel and toilet tissue dispensers as needed,
supplies therefore to be furnished by Landlord at a reasonable charge to
Tenant. If the Premises consists
B-1
<PAGE>
of a part of a rentable floor, said charge to Tenant shall be that portion
of a reasonable charge for such supplies that is reasonably allocable to
Tenant.
8. Empty and clean sanitary disposal receptacles.
WEEKLY:
- ------
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvers and other ventilating louvers within a person's
reach.
3. Wipe clean all brass and other bright work.
QUARTERLY:
- ---------
High dust the Premises complete, including the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings not
reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors and door
bucks and other surfaces not reached in nightly cleaning.
3. Dust all pipes, ventilating and air-conditioning louvers, ducts, high
moldings and other high areas not reached in nightly cleaning.
4. Dust all venetian blinds.
Wash exterior and interior of windows periodically, subject to weather
conditions and requirements of law.
B-2
<PAGE>
EXHIBIT "A"
-----------
FLOOR PLAN
This floor plan is annexed to and made a part of this Lease solely to
indicate the Premises by outlining and diagonal marking. All areas, conditions,
dimensions, and locations are approximate.
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
EXHIBIT "B"
----------
APPROVED CONTRACTORS IN CONNECTION WITH THE INITIAL ALTERATIONS
(attached hereto)
<PAGE>
REV. 8/94
APPROVED CONTRACTORS LIST
GENERAL CONTRACTORS PHONE NUMBER CONTACT PERSON
- ------------------- ------------- --------------
Ambassador Construction (212) 922-1020 Irving Koven
Lehr Construction (212) 353-1160 Gerald Lazer
Ocean Valley Ent. (718) 776-0077 Gary Sherwood
Structure Tone (212) 481-6100 John White
Tri-Star Const Corp. (212) 486-0808 Bill Weiner
SUB-CONTRACTORS
- ---------------
ASBESTOS ABATEMENT
- ------------------
Advatex (212) 819-1806 Joe Donolo
NAC (212) 219-0880 Louis Forese
Abtron (212) 967-0584 Steffen
AWNINGS
- -------
Acme Awning Co. (718) 409-1881 Ken Cohen
BLINDS
- ------
Everest Industries, Inc. (212) 967-4600 Roy Landesman
Ultimate Services (212) 531-0623 David Marinelli
BOILERS
- -------
Spyral Marine (718) 834-9393 Nick Papps
Marine Welding (718) 991-3203 William Falco
CERAMIC
- -------
Quarry Tile (212) 679-8889 Helen Stember
Port Morris (718) 378-6100 Vincent Lauricella
CONCRETE
- --------
Melva Const. Corp. (718) 472-2145 Chris Batalias
Ocean Valley Ent. (718) 776-0077 Gary Sherwood
Landsite Contracting (516) 938-8200 Adriano P. Lott
CONVECTORS/COVERS
- -----------------
Steel Towne (718) 329-3637 Manny or Gene
Wenig Corp. (212) 542-3600 Ray Zimmerman
Hack Environmental (914) 946-3800 Ken Hack
<PAGE>
REV. 8/94
APPROVED CONTRACTORS LIST
DEMOLITION
- ----------
General Container, Inc. (718) 834-8100 Charlie Raffa
Advance Carting (212) 691-3200 Gene Skowronski
Riteway (212) 458-8900 Nick Verna
DaCosta Demolition (718) 565-8588 Ernie DaCosta
DRYWALVSHEETROCK
- ----------------
CLK Construction (212) 986-4580 Cory Koven
Dejil (718) 939-3700 Sy Levine
Ess & Vee (212) 786-1100 Tony Verderame
John Moresky (516) 735-7015 John Moresky
MET Construction (718) 329-9400 Don Masterson
Nordic Interiors,Inc. (718) 456-7000 Lloyd Jacobson
Ocean Valley Ent. (718) 776-0077 Gary Sherwood
ELECTRIC
- --------
Forest Electric (212) 549-4110 Phil Altheim
MEB Electric (212) 564-4442 Steve Gristina
T.C. Miller (212) 924-6650 Jonathan Feldberg
C.W. Greene (212) 267-0440 James Angus
FLOORING
- --------
Everest Industries (212) 967-4600 Roy Landesman
Lorraine Flooring (718) 482-0068 Stephen Verderame
FOLDING WALLS
- -------------
Flexwall
Modernfold Doors (212) 684-4210 Robert Styles
National (Midhattan) (212) 924-1567 Edmund Grecco
GLASS REPLACEMENT
- -----------------
East Side Glass (212) 674-83S5 Mark Rosen
Knickerbocker Glass (212) 247-8500 Sidney Glasser
H.V.A.C.
- --------
Omega Cooling (212) 268-7100 Ron Irving
Nelson Air Device (718) 729-3801 Nelson Blit
P.J. Mechanical (212) 243-2555 Mitchell Singer
P & L Mechanical (212) 966-6054 Tom Lacorazza
Penguin Air Conditioning (718) 706-2503 William Ash
Refrigeration Resources (516) 921-5149 George
<PAGE>
REV. 8/94
APPROVED CONTRACTORS LIST
HARDWARE/DOORLOCKS
- -------------------
Midtown (212) 730-2052 Bill Ferrara
Weinstein & Holtzman (212) 233-4561 Jeff Hymowitz
HARDWARE/BUILDING SUPPLIES
- --------------------------
Crest Supply (212) 967-2276 Bill Bowerman
Consolidated Supply (718) 824-2033 Mark Wisner
LATH & ACOUSTICS
- ----------------
Ess & Vee Acoustical (718) 786-1100 Tony Verderame
Superior (516) 352-0300 Quinn Mesorana
MARBLE
- ------
Quarry Tile (212) 679-8889 Helen Stember
Joe Cochoran (516) 423-8737 Joe Cochoran
MASONARY/PLASTER
- ----------------
Belcraft (718) 784-5505 Greg Ozzino
Indelicato (718) 409-9022 Ed DiGiacomo
METAL/GLASS PARTITION
- ---------------------
F&F (201) 402-7710 Eric Frank
Metralite (718) 961-1770 Don Silverman
Acme (718) 384-7800 George DeFeis
Abbott
PAINTING
- --------
Bond Painting (212) 944-0070 Stuart Feld
J.I. Hass (212) 687-6678 Jay Hass
Shatz (212) 757-6363 George Story
PLUMBING
- --------
Crest Repair & Maint. (212) 967-2276 Bill Bowerman
a/k/a B & Z Mechanical
American Contracting (212) 736-6618 Richie Silver
PAR Plumbing (516) 887-4000 Sandi Deutsch
Pace Plumbing (718) 383-6100 Michael Griffin
<PAGE>
REV. 8/94
APPROVED CONTRACTORS LIST
WIRE MESH
- ---------
Acorn Wire & Iron Works (212) 697-7370 Bert Damone
Bellis Wire Work (718) 383-6100
RAISED FLOOR-
- -------------
(Gayle, King, Carr)
Floating Floors
Donn Floors
(Werner Krebs) (212) FA5-5400 Val Bonanno
Raised Floors (201) 778-2444 Eric Lagerstrum
Computer Floors (201) 340-3666 Tor Sudlin
American Computer Floors
C-Teg Mfg. (212) 686-8994
R IGGENG
- --------
Aalco Transport & Storage (516) 789-8000 Jeff Krevat
ROLLING DOORS
- -------------
Franklin Sq. Iron Works (212) 227-3580 Richie Singer
Amer. Overhead Door
Atlas Doors (201) 572-5700 Tom Eodice
Doors Unlimited (212) 269-8513
Miric Industries (212) 594-9898 Mike Petrico
ROOFING
- -------
A. Best (718) 779-3003 Lon Best
Melva Const. Corp. (718) 472-2145 Chris Batalias
Arrow Restoration (718) 729-0411 Marshall Geller
Richardson & Lucas (212) 242-8493
SCREENS
- -------
LeJac (516) 334-0855 Todd Morris
Raven (212) 534-8408 Martin Soss
Jenteen (201) 755-2127 Jerry Segal
SECURITY
- --------
Guard Technologies, Inc. (609) 452-2052 Mark Landis
SIGNS
- -----
Ensign Systems, Inc. (718) 416-2052 Kevin Ryan
Engraphics (212) 691-0777 Susan Perdoch
<PAGE>
REV. 8/94
APPROVED CONTRACTORS LIST
SPRINKLER
- ---------
CGA Associates (201) 696-2208 Carl Guinta
Columbia Mechanical (212) 594-3014 Nick Pizzone
Sirina Fire Protection (516) 942-0400 Tony Florez
Abco Peerless Sprinkler (516) 294-6850 Charles D'Augelli
STRUCTURAL STEEL & STEEL WORK
- -----------------------------
Burgess Steel Products (212) 563-6000 Eugene Guerin
Franklin Iron Works (212) 863-5001 Ron Singer
Koenig Iron Works (212) 924-4333 Norman Rosenbaum
Jaravi
TOILET ARTICLES
- ---------------
LeJac (516) 334-0855 Tod Morris
Flush Metal (718) 784-3380 Jack Rubin
Jenteen
WATERPROOFING
- -------------
Melva Const. Corp. (718) 472-2145 Chris Batalias
A. Best Contracting (718) 779-3003 Lon Best
Arrow Restoration (718) 729-0411 Marshall Geller
Richardson & Lucas (212) 242-8493
WOODEN FLOORS
- -------------
Capital (Hoboken)
Designed Wood Flooring
Center (212) 925-6633 Arnold Feinberg
Elite Flooring (212) 228-1050 Robert Rutledge
WOODWORKERS
- -----------
Antal
Panner (718) 545-4100 Ira Nerenberg
WPC
Millwright Woodwork (212) 755-1020 Martin Sherlock
Creative (212) 989-2130
Midhattan
Capital
Nordic (718) 456-7000 Lloyd Jacobson
<PAGE>
REV. 7/94
APPROVED CONTRACTORS LIST
WINDOWS
- -------
Air Master (718) 824-2033 Mark Wisner
Metro Windows (516) 360-8811 Elliot Glasser
<PAGE>
EXHIBIT "C"
-----------
LOCATION OF DEMISING WALLS
Landlord will, at its expense, construct the demising wall (which shall be
of material, design, capacity, finish and color of the standard adopted by
Landlord for the Building) in the location shown on the attached floor plan.
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
Exhibit 10.10
-------------
APERTUS TECHNOLOGIES INCORPORATED
1995 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I. INTRODUCTION
------------
Section 1.01 Purpose. The purpose of the Apertus Technologies
-------
Incorporated 1995 Employee Stock Purchase Plan (the "Plan") is to provide
employees of Apertus Technologies Incorporated, a Minnesota corporation (the
"Company"), and certain related corporations with an opportunity to share in the
ownership of the Company by providing them with a convenient means for regular
and systematic purchases of the Company's Common Stock, par value $.05 per
share, and, thus, to develop a stronger incentive to work for the continued
success of the Company.
Section 1.02 Rules of Interpretation. It is intended that the Plan
-----------------------
be an "employee stock purchase plan" as defined in Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder. Accordingly, the Plan shall be interpreted and
administered in a manner consistent therewith. All Participants in the Plan
will have the same rights and privileges consistent with the provisions of the
Plan.
Section 1.03 Definitions. For purposes of the Plan, the following
-----------
terms will have the meanings set forth below:
(a) "Acceleration Date" means the earlier of the date of stockholder
-----------------
approval or approval by the Company's Board of Directors of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company
Common Stock would be converted into cash, securities or other property,
other than a merger of the Company in which stockholders of the Company
immediately prior to the merger have the same proportionate ownership of
stock in the surviving corporation immediately after the merger; (ii) any
sale, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; or
(iii) any plan of liquidation or dissolution of the Company.
(b) "Affiliate" means any subsidiary corporation of the Company, as
---------
defined in Section 424(f) of the Code, whether now or hereafter acquired or
established.
(c) "Committee" means the committee described in Section 10.01.
---------
(d) "Company" means Apertus Technologies Incorporated, a Minnesota
-------
corporation, and its successors by merger or consolidation as contemplated
by Article XI herein.
(e) "Current Compensation" means all regular wage, salary and
--------------------
commission payments paid by the Company to a Participant in accordance with
the terms of his or her employment, but excluding annual bonus payments and
all other forms of special compensation.
(f) "Fair Market Value" as of a given date means such value of the
-----------------
Common Stock as reasonably determined by the Committee, but shall not be
less than (i) the closing price of the Common Stock as reported for
composite transactions if the Common Stock is then traded on a national
securities exchange, (ii) the last sale price if the Common Stock is then
quoted on the Nasdaq National Market, or (iii) the average of the closing
representative bid and asked prices of the Common Stock as reported on
Nasdaq National Market on the date as of which the fair market value is
being determined. If on a given date the Common Stock is not traded on an
established securities market, the Committee shall make a good faith
attempt to satisfy the requirements of this Section 1.03 and in connection
therewith shall take such action as it deems necessary or advisable.
<PAGE>
(g) "Participant" means a Permanent Full-Time Employee who is eligible
-----------
to participate in the Plan under Section 2.01 and who has elected to
participate in the Plan.
(h) "Participating Affiliate" means an Affiliate which has been
-----------------------
designated by the Committee in advance of the Purchase Period in question
as a corporation whose eligible Permanent Full-Time Employees may
participate in the Plan.
(i) "Permanent Full-Time Employee" means an employee of the Company or
----------------------------
a Participating Affiliate as of the first day of a Purchase Period,
including an officer or director who is also an employee, but excluding an
employee whose customary employment is less than 20 hours per week.
(j) "Plan" means the Apertus Technologies Incorporated 1995 Employee
----
Stock Purchase Plan, as amended, the provisions of which are set forth
herein.
(k) "Purchase Period" means the approximate 6-month periods beginning
---------------
on (i) the first business day in January and ending on the last business
day in June and (ii) the first business day in July and ending on the last
business day in December of each year; provided, however, that (a) the
initial Purchase Period will commence on August 1, 1995, and will terminate
on December 29, 1995, and (b) that any then current Purchase Period will
end upon the occurrence of an Acceleration Date.
(l) "Common Stock" means the Company's Common Stock, $.05 par value,
------------
as such Common Stock may be adjusted for changes in the Common Stock or the
Company as contemplated by Article XI herein.
(m) "Stock Purchase Account" means the account maintained on the books
----------------------
and records of the Company recording the amount received from each
Participant through payroll deductions made under the Plan.
ARTICLE II. ELIGIBILITY AND PARTICIPATION
-----------------------------
Section 2.01 Eligible Employees. All Permanent Full-Time Employees
------------------
shall be eligible to participate in the Plan beginning on the first day of the
first Purchase Period to commence after such person becomes a Permanent Full-
Time Employee. Subject to the provisions of Article VI, each such employee will
continue to be eligible to participate in the Plan so long as he or she remains
a Permanent Full-Time Employee.
Section 2.02 Election to Participate. An eligible Permanent Full-
-----------------------
Time Employee may elect to participate in the Plan for a given Purchase Period
by filing with the Company, in advance of that Purchase Period and in accordance
with such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company for such purpose (which authorizes
regular payroll deductions from Current Compensation beginning with the first
payday in that Purchase Period and continuing until the employee withdraws from
the Plan or ceases to be eligible to participate in the Plan).
Section 2.03 Limits on Stock Purchase. No employee shall be granted
------------------------
any right to purchase Common Stock hereunder if such employee, immediately after
such a right to purchase is granted, would own, directly or indirectly, within
the meaning of Section 423(b)(3) and Section 424(d) of the Code, Common Stock
possessing 5% or more of the total combined voting power or value of all the
classes of the capital stock of the Company or of all Affiliates.
2
<PAGE>
Section 2.04 Voluntary Participation. Participation in the Plan on
-----------------------
the part of a Participant is voluntary and such participation is not a condition
of employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS AND STOCK PURCHASE ACCOUNT
---------------------------------------------
Section 3.01 Deduction from Pay. The form described in Section 2.02
------------------
will permit a Participant to elect payroll deductions of any multiple of 1% but
not less than 1% or more than 5% of such Participant's Current Compensation for
each pay period, subject to such other limitations as the Committee in its sole
discretion may impose. A Participant may cease making payroll deductions at any
time, subject to such limitations as the Committee in its sole discretion may
impose.
Section 3.02 Credit to Account. Payroll deductions will be credited
-----------------
to the Participant's Stock Purchase Account on each payday.
Section 3.03 Interest. No interest will be paid upon payroll
--------
deductions or on any amount credited to, or on deposit in, a Participant's Stock
Purchase Account.
Section 3.04 Nature of Account. The Stock Purchase Account is
-----------------
established solely for accounting purposes, and all amounts credited to the
Stock Purchase Account will remain part of the general assets of the Company or
the Participating Affiliate (as the case may be).
Section 3.05 No Additional Contributions. A Participant may not make
---------------------------
any payment into the Stock Purchase Account other than the payroll deductions
made pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
------------------------
Section 4.01 Number of Shares. Each Participant will have the right
----------------
to purchase on the last business day of the Purchase Period all, but not less
than all, of the largest number of whole shares of Common Stock that can be
purchased at the price specified in Section 4.02 with the entire credit balance
in the Participant's Stock Purchase Account, subject to the limitations that (a)
no more than 2,000 shares of Common Stock may be purchased under the Plan by any
one Participant for a given Purchase Period and (b) in accordance with Section
423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at
the beginning of each Purchase Period) of Common Stock and other stock may be
purchased under the Plan and all other employee stock purchase plans (if any) of
the Company and the Affiliates by any one Participant for any calendar year. If
the purchases for all Participants would otherwise cause the aggregate number of
shares of Common Stock to be sold under the Plan to exceed the number specified
in Section 10.03, each Participant shall be allocated a pro rata portion of the
Common Stock to be sold.
Section 4.02 Purchase Price. The purchase price for any Purchase
--------------
Period shall be the lesser of (a) 85% of the Fair Market Value of the Common
Stock on the first business day of that Purchase Period or (b) 85% of the Fair
Market Value of the Common Stock on the last business day of that Purchase
Period, in each case rounded up to the next higher full cent.
ARTICLE V. EXERCISE OF RIGHT
-----------------
Section 5.01 Purchase of Stock. On the last business day of a
-----------------
Purchase Period, the entire credit balance in each Participant's Stock Purchase
Account will be used to purchase the largest number of whole shares of Common
Stock purchasable with such amount (subject to the limitations of Section 4.01),
unless the Participant has filed with the Company, in advance of that date and
subject to such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company which requests the distribution of the
entire credit balance in cash.
3
<PAGE>
Section 5.02 Cash Distributions. Any amount remaining in a
------------------
Participant's Stock Purchase Account after the last business day of a Purchase
Period will be paid to the Participant in cash within 30 days after the end of
that Purchase Period.
Section 5.03 Notice of Acceleration Date. The Company shall use its
---------------------------
best efforts to notify each Participant in writing at least ten days prior to
any Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN; SALE OF STOCK
-----------------------------------
Section 6.01 Voluntary Withdrawal. A Participant may, in accordance
--------------------
with such terms and conditions as the Committee in its sole discretion may
impose, withdraw from the Plan and cease making payroll deductions by filing
with the Company a form provided for this purpose. In such event, the entire
credit balance in the Participant's Stock Purchase Account will be paid to the
Participant in cash within 30 days. A Participant who withdraws from the Plan
will not be eligible to reenter the Plan until the beginning of the next
Purchase Period following the date of such withdrawal.
Section 6.02 Death. Subject to such terms and conditions as the
-----
Committee in its sole discretion may impose, upon the death of a Participant, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's death occurred and in accordance with Section 5.01, the entire
credit balance in such Participant's Stock Purchase Account will be used to
purchase Common Stock, unless such Participant's estate has filed with the
Company, in advance of that day and subject to such terms and conditions as the
Committee in its sole discretion may impose, a form provided by the Company
which elects to have the entire credit balance in such Participant's Stock
Account distributed in cash within 30 days after the end of that Purchase Period
or at such earlier time as the Committee in its sole discretion may decide.
Each Participant, however, may designate one or more beneficiaries who, upon
death, are to receive the Common Stock or the amount that otherwise would have
been distributed or paid to the Participant's estate and may change or revoke
any such designation from time to time. No such designation, change or
revocation will be effective unless made by the Participant in writing and filed
with the Company during the Participant's lifetime. Unless the Participant has
otherwise specified the beneficiary designation, the beneficiary or
beneficiaries so designated will become fixed as of the date of the death of the
Participant so that, if a beneficiary survives the Participant but dies before
the receipt of the payment due such beneficiary, the payment will be made to
such beneficiary's estate.
Section 6.03 Termination of Employment. Subject to such terms and
-------------------------
conditions as the Committee in its sole discretion may impose, upon a
Participant's normal or early retirement with the consent of the Company, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's approved retirement occurred and in accordance with Section 5.01,
the entire credit balance in such Participant's Stock Purchase Account will be
used to purchase Common Stock, unless such Participant has filed with the
Company, in advance of that day and subject to such terms and conditions as the
Committee in its sole discretion may impose, a form provided by the Company
which elects to receive the entire credit balance in such Participant's Stock
Purchase Account in cash within 30 days after the end of that Purchase Period,
provided, however, that such Participant shall have no right to purchase Common
Stock in the event that the last day of such a Purchase Period occurs more than
three months following the termination of such Participant's employment with the
Company by reason of such an approved retirement. In the event of any other
termination of employment (other than death) with the Company or a Participating
Affiliate, participation in the Plan will cease on the date the Participant
ceases to be a Permanent Full-Time Employee for any reason. In such event, the
entire credit balance in such Participant's Stock Purchase Account will be paid
to the Participant in cash within 30 days. For purposes of this Section 6.03, a
transfer of employment to any Affiliate, or a leave of absence which has been
approved by the Committee, will not be deemed a termination of employment as a
Permanent Full-Time Employee.
4
<PAGE>
ARTICLE VII. NONTRANSFERABILITY
------------------
Section 7.01 Nontransferable Right to Purchase. The right to
---------------------------------
purchase Common Stock hereunder may not be assigned, transferred, pledged or
hypothecated (whether by operation of law or otherwise), except as provided in
Section 6.02, and will not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition or levy of attachment or similar process upon the right to purchase
will be null and void and without effect.
Section 7.02 Nontransferable Account. Except as provided in Section
-----------------------
6.02, the amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation or other disposition of such amounts will be
null and void and without effect.
Section 7.03 Nontransferable Shares. Except as the Committee shall
----------------------
otherwise permit, during the one-year period following the purchase of each
share of Common Stock by a Participant pursuant to Section 5.01 hereof, the
Company shall hold the Common Stock certificate representing such share or
shares issued in the name of such Participant (or as otherwise directed by the
Participant pursuant to Section 8.04 hereof), such share or shares may not be
assigned, transferred, pledged or hypothecated in any way, and any attempted
assignment, transfer, pledge, hypothecation or other disposition of such share
or shares will be null and void and without effect. Thereafter, such Stock
certificate shall be delivered in accordance with Section 8.01 thereof.
ARTICLE VIII. STOCK CERTIFICATES
------------------
Section 8.01 Delivery. Promptly after the last day of each Purchase
--------
Period and subject to such terms and conditions as the Committee in its sole
discretion may impose, the Company will cause to be delivered to or for the
benefit of the Participant a certificate representing the Common Stock purchased
on the last business day of such Purchase Period.
Section 8.02 Securities Laws. The Company shall not be required to
---------------
issue or deliver any certificate representing Common Stock prior to registration
under the Securities Act of 1933, as amended, or registration or qualification
under any state law if such registration is required. The Company shall use its
best efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.
Section 8.03 Completion of Purchase. A Participant shall have no
----------------------
interest in the Common Stock purchased until a certificate representing the same
is issued to or for the benefit of the Participant.
Section 8.04 Form of Ownership. The certificates representing Common
-----------------
Stock issued under the Plan will be registered in the name of the Participant or
jointly in the name of the Participant and another person, as the Participant
may direct on a form provided by the Company.
ARTICLE IX. EFFECTIVE DATE, AMENDMENT AND
-----------------------------
TERMINATION OF PLAN
-------------------
Section 9.01 Effective Date. The Plan was approved by the Board of
--------------
Directors on May 11, 1995 and shall be approved by the stockholders of the
Company at their 1995 Annual Meeting to be held in July 1995. In the event that
the Plan is not so approved by the stockholders of the Company, it shall be
immediately terminated.
5
<PAGE>
Section 9.02 Plan Commencement. The initial Purchase Period under
-----------------
the Plan will commence on the date set forth herein. Thereafter, each
succeeding Purchase Period will commence and terminate in accordance with
Section 1.03(k).
Section 9.03 Powers of Board. The Board of Directors may amend or
---------------
discontinue the Plan at any time. No amendment or discontinuation of the Plan,
however, shall without stockholder approval be made that: (i) absent such
stockholder approval, would cause Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Act") to become unavailable with respect to the Plan,
(ii) requires stockholder approval under any rules or regulations of the
National Association of Securities Dealers, Inc. or any securities exchange that
are applicable to the Company, or (iii) permit the issuance of Common Stock
before payment therefor in full.
Section 9.04 Automatic Termination. The Plan shall automatically
---------------------
terminate when all of the shares of Common Stock provided for in Section 10.03
have been sold.
ARTICLE X. ADMINISTRATION
--------------
Section 10.01 The Committee. The Plan shall be administered by a
-------------
committee (the "Committee") of two or more directors of the Company, none of
whom shall be officers or employees of the Company and all of whom shall be
"disinterested persons" with respect to the Plan within the meaning of Rule 16b-
3 under the Act. The members of the Committee shall be appointed by and serve
at the pleasure of the Board of Directors.
Section 10.02 Powers of Committee. Subject to the provisions of the
-------------------
Plan, the Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. The Committee shall have full and complete
authority to determine whether all or any part of the Common Stock acquired
pursuant to the Plan shall be subject to restrictions on the transferability
thereof or any other restrictions affecting in any manner a Participant's rights
with respect thereto but any such restrictions shall be contained in the form by
which a Participant elects to participate in the Plan pursuant to Section 2.02.
Decisions of the Committee will be final and binding on all parties who have an
interest in the Plan.
Section 10.03 Stock to be Sold. The Common Stock to be issued and
----------------
sold under the Plan may be authorized but unissued shares, or the Company may
purchase Common Stock in the market for sale under the Plan. Except as provided
in Section 11.01, the aggregate number of shares of Common Stock to be sold
under the Plan will not exceed 200,000 shares.
Section 10.04 Notices. Notices to the Committee should be addressed
-------
as follows:
Apertus Technologies Incorporated
7275 Flying Cloud Drive
Eden Prairie, Minnesota 55344
Attn: Chief Financial Officer
ARTICLE XI. ADJUSTMENT FOR CHANGES
----------------------
IN STOCK OR COMPANY
-------------------
Section 11.01 Stock Dividend or Reclassification. If the outstanding
----------------------------------
shares of Common Stock are increased, decreased, changed into or exchanged for a
different number or kind of securities of the Company, or shares of a different
par value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Articles of Incorporation, reverse stock split or otherwise, an appropriate
adjustment shall be made in the
6
<PAGE>
maximum numbers and kind of securities to be purchased under the Plan with a
corresponding adjustment in the purchase price to be paid therefor.
Section 11.02 Merger or Consolidation. If the Company is merged into
-----------------------
or consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
--------------
Rights to purchase Common Stock granted under the Plan shall be
construed and shall take effect in accordance with the laws of the State of
Minnesota.
7
<PAGE>
Exhibit 10.11
-------------
APERTUS TECHNOLOGIES INCORPORATED
DEFERRED COMPENSATION AGREEMENT
In this Agreement:
"You" (or "your") means --
----------------------------------------
"Apertus" means -- Apertus Technologies Incorporated, a
Minnesota corporation
"We" (or "our") means -- you and Apertus together
"Board" means -- the Board of Directors of Apertus
"CFO" means -- the Chief Financial Officer of Apertus
(or his or her delegee)
Recitals:
A. You are now employed by Apertus in the capacity of _______________________.
B. Apertus desires to provide deferred compensation benefits to a select group
of management or highly compensated employees.
C. Apertus, through action of the Board, has selected you to participate in
such benefits and we have agreed on benefits and other matters as described
in this Agreement.
Agreement:
We agree as follows:
1. Establishment of Accounts. The amount of benefits payable by
-------------------------
Apertus to you under this Agreement will be determined by reference to
bookkeeping accounts ("Accounts"), which the CFO will establish and maintain for
you. For each Election Form described in Section 2 below, a separate Employee
Contribution Account and Employer Contribution Account will be maintained.
2. Credits to Employee Contribution Account Under Your Election
------------------------------------------------------------
Form. You may elect to have a specific dollar amount or a specific percentage
of your compensation from Apertus (up to the maximum specified by the Board but
no more than 75%), which would otherwise be received and included in your gross
income, deferred in accordance with the further provisions of this Agreement by
giving written notice to the CFO in an Election Form acceptable to the CFO and
approved by the Board.
1
<PAGE>
As of the last business day of the calendar quarter that includes each such
payday, there shall be credited to the Employee Contribution Account for such
Election Form the amount of compensation to be deferred for such pay period as
elected by you. Each Election Form will specify your maximum contribution (for
purposes of this Section 2), Apertus contributions (for purposes of Section 3),
the deemed cost of Stock (for purposes of Section 4), your Payment Election (for
purposes of Section 6) and a Vesting Date (for purposes of Section 7).
3. Credits to Employer Contribution Account From Apertus. As of the
-----------------------------------------------------
date of each crediting under Section 2 above, there shall be credited to the
Employer Contribution Account for the Election Form additional amounts as
specified in such Election Form.
4. Designation of Measuring Investment. Each Account shall be
-----------------------------------
deemed to have invested the amounts credited under Sections 2 and 3 above in
common stock of Apertus ("Stock") as of each date of such crediting, assuming,
however, for this purpose, that the cost of Stock is the lowest Average Price of
Stock for the four "Calendar Quarters" following such date. For this purpose,
"Average Price" means the average of the closing prices for Stock on each
business day in the Calendar Quarter; and "Calendar Quarters" are (i) the three-
calendar month period following such date, and (ii) each of the next three
three-calendar month periods. Upon approval of the Board, you and the CFO may
agree upon other measuring investments. The Account and such Stock (or other
measuring investments) are specified solely as devices for computing the amount
of benefits to be paid by Apertus under this Agreement, and Apertus is not
required to purchase such Stock (or other measuring investments).
5. Investment Credits to Account. On each date that any dividend or
-----------------------------
other distribution becomes payable with respect to Stock (or any other measuring
investment), there shall be credited to the respective Accounts the number of
shares of Stock (or units of such other measuring investment) which could be
purchased on such date with such amount just as if such Stock (or such other
measuring investment) were held on a basis whereby its dividends and other
distributions were reinvested automatically.
2
<PAGE>
6. Payment to You After Vesting Date. If you continue employment
---------------------------------
with Apertus until the Vesting Date specified in any Election Form, Apertus will
pay to you as soon as administratively feasible following the date specified by
your Payment Election in such Election Form a single lump sum of cash in an
amount equal to the entire present value (as of such specified date) of the
Employee Contribution Account for such Election Form and of the Employer
Contribution Account for such Election Form.
7. Effect of Certain Events. Notwithstanding Section 6 above, the
------------------------
following rules shall apply:
7.1. If You Leave Apertus (Voluntary Termination). If you
--------------------------------------------
terminate employment with Apertus before the Vesting Date specified in any
Election Form, Apertus will pay to you as soon as administratively feasible
a single lump sum of cash in an amount equal to the entire present value
(as of the date of your termination of employment) of the Employee
Contribution Account for such Election Form (or, if greater, the amount of
your contributions to such Account) and you will forfeit the Employer
Contribution Account for such Election Form.
7.2. If Apertus Terminates Your Employment (Involuntary
--------------------------------------------------
Termination).
------------
7.2.1. Termination Without Cause. If your
-------------------------
employment is terminated by Apertus before the Vesting Date specified
by any Election Form and such termination is without "cause," Apertus
will pay to you as soon as administratively feasible a single lump sum
of cash in an amount equal to the entire present value (as of the date
of your termination of employment) of the Employee Contribution
Account for such Election Form (or, if greater, the amount of your
contributions to such Account). In addition, Apertus will so pay an
amount equal to the present value (as of the date of your termination
of employment) of the Employer Contribution Account for such Election
Form multiplied by a fraction, the numerator of which is the number of
days between the date of such Election Form and the date of your
termination of employment (including both such dates) and the
denominator of which is the number of days between the date of such
Election Form and such Vesting Date (including both such
3
<PAGE>
dates). For this purpose, "cause" means any of the following
activities by you: (a) serious misconduct, such as fraud, embezzlement
or misappropriation of Apertus property; (b) undue use of influence
based upon your status as an employee of Apertus; (c) criminal
activities, whether or not prosecution or conviction occurs; (d)
failure to perform the essential functions of your job in a
satisfactory fashion or to comply with the express policies and
procedures of Apertus relating to your employment, which failure
continues after written notice of such failure; or (e) use of illegal
drugs or abuse of legal drugs, including alcohol, after a prior
written warning concerning such conduct.
7.2.2. Termination With Cause. If your employment
----------------------
is terminated by Apertus before the Vesting Date specified by any
Election Form and such termination is for "cause" (as defined in
Section 7.2.1 above), Apertus will pay to you as soon as
administratively feasible a single lump sum of cash in an amount equal
to the entire present value (as of the date of your termination of
employment) of the Employee Contribution Account for such Election
Form and you will forfeit the Employer Contribution Account for such
Election Form.
7.3. If You Become Disabled. If your employment with Apertus is
----------------------
terminated due to total and permanent disability (as defined by the Apertus
Savings and Investment Plan), Apertus will pay to you as soon as
administratively feasible a single lump sum of cash in an amount equal to
the entire present value (as of the date of your termination of employment)
of each Account.
7.4. Effect of Change of Control. Upon the occurrence of an
---------------------------
"Acceleration Date" (as hereinafter defined) while you are employed by
Apertus, the provisions of Section 7.1 and 7.2 relating to forfeiture shall
not apply to you, with the result that you will be deemed to be fully
vested in each account and each Employer Contribution Account will be paid
in full at the same time as the related Employee Contribution Account.
"Acceleration Date" shall mean either a Distribution Date or a Transaction
Date.
4
<PAGE>
"Distribution Date" shall have the meaning set forth in Section 3
of the Rights Agreement dated as September 18, 1986 between Apertus and
Norwest Bank Minnesota, National Association (formerly Norwest Bank
Minneapolis, National Association).
"Transaction Date" shall mean the date of shareholder approval of
(i) any consolidation or merger of Apertus in which Apertus is not the
continuing or surviving corporation or pursuant to which shares of Apertus
Stock would be converted into cash, securities or other property, other
than a merger of Apertus in which shareholders immediately prior to the
merger have the same proportionate ownership of stock of the surviving
corporation immediately after the merger; (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of Apertus; or (iii) any plan of
liquidation or dissolution of Apertus.
8. Payment to Beneficiary. If you die either (a) before the Vesting
----------------------
Date for an Employer Contribution Account but while employed by Apertus, or (b)
after the Vesting Date for an Employer Contribution Account but before receiving
payment, Apertus will pay to your beneficiary (as determined under Section 13)
as soon as administratively feasible after your death a single lump sum of cash
in an amount equal to the entire present value (as of the date of your death) of
such Employer Contribution Account and of the related Employee Contribution
Account.
9. Conditions to Payments. As conditions to receiving the payments
----------------------
described in this Agreement, you agree as follows:
9.1. Nondisclosure of Information. You will not, either before
----------------------------
or after your termination of employment with Apertus, without authorization
of Apertus, disclose to (or use for) any person or corporation or other
entity (or make personal use of) any files or trade secrets or other
confidential information concerning the business, clients, methods,
operations, financing or services of Apertus or any affiliate. Trade
secrets and confidential information shall mean information disclosed to
(or otherwise known by you) as a consequence of employment by Apertus and
not generally known in the industry.
5
<PAGE>
9.2. Surrender of Books and Records. You acknowledge that all
------------------------------
files, lists, books of account, records, literature, products and any other
material owned by Apertus or any affiliate, or used by them in connection
with the conduct of their business, shall at all times remain the property
of Apertus or any such affiliate and that upon termination of employment
with Apertus, you will surrender to Apertus or any such affiliate all such
lists, books, records, literature, products and other materials.
10. Source of Payments. Benefits due under this Agreement shall be
------------------
paid out of the general funds of Apertus, and you and your beneficiaries shall
not have any preferred interest by way of trust, escrow, lien or otherwise in
any specific assets. The rights accruing to you and your beneficiaries
hereunder shall be solely those of unsecured creditors of Apertus.
11. Nontransferability. You and your beneficiaries shall not have
------------------
the right to assign, encumber or otherwise anticipate the payments to be made
under this Agreement, and the benefits provided hereunder shall not be subject
to seizure for payment of any debts or judgments against you or any beneficiary.
Notwithstanding the foregoing, any payments due to you or any beneficiary under
this Agreement shall be offset by any amounts owed by you to Apertus.
12. Tax Withholding. Apertus may deduct from any benefit payment
---------------
(and transmit to the proper taxing authority) such amount as it may be required
to withhold under any applicable federal, state or other law.
13. Beneficiaries. You may designate one or more beneficiaries who,
-------------
upon your death, shall receive the benefits that otherwise would have been paid
to you. You may change or revoke any such designation from time to time. No
such designation, change or revocation shall be effective unless executed by you
and delivered to the CFO during your lifetime. Unless you have otherwise
specified in the beneficiary designation, the beneficiary or beneficiaries so
designated shall become fixed as of your death so that, if a beneficiary
survives you but dies before the receipt of all payments due such beneficiary,
such remaining payments shall be payable to such beneficiary's estate. If you
do not designate a beneficiary pursuant to this section, or if for any reason
such designation is ineffective, in whole or in part, then the benefits that
otherwise would have been paid to you (or the
6
<PAGE>
part thereof as to which the designation is ineffective, as the case may be)
shall be paid to your estate and, in such event, the term "beneficiary" shall
include such estate.
14. Claims Procedure. Payments under this Agreement will be made to
----------------
you automatically. Payments will be made to a beneficiary only after a proper
written claim for payment has been filed with the CFO. If you or any
beneficiary is in disagreement with any determination that has been made, a
claim may be presented.
14.1. Making a Claim. The claim must be written and must be
--------------
delivered to the CFO. Within 90 days after the claim is delivered, the
claimant will receive either: (a) a decision; or (b) a notice describing
special circumstances requiring a specified amount of additional time (but
no more than 180 days from the day the claim was delivered) to reach a
decision.
If the claim is wholly or partially denied, the claimant will
receive a written notice specifying: (a) the reasons for denial; (b) the
provisions of the Agreement on which the denial is based; and (c) any
additional information needed in connection with the claim and the reason
such information is needed. Information concerning the claimant's right to
request a review will also be given to the claimant.
14.2. Requesting Review of a Denied Claim. A claimant may
-----------------------------------
request that a denied claim be reviewed. The request for review must be
written and must be delivered to the CFO within 60 days after claimant's
receipt of written notice that the claim was denied. A request for review
may (but is not required to) include issues and comments the claimant wants
considered in the review. The claimant may examine pertinent documents by
asking the CFO. Within 60 days after delivery of a request for review,
claimant will receive either: (a) a decision; or (b) a notice describing
special circumstances requiring a specified amount of additional time (but
no more than 120 days from the day the request for review was delivered) to
reach a decision. The decision will be in writing and will specify the
provisions of this Agreement on which it is based.
7
<PAGE>
14.3. In General. All decisions on claims and on reviews of
----------
denied claims will be made by the CFO, who shall have the sole discretion
to interpret and construe the Agreement and to determine all factual and
legal questions under the Agreement. The CFO shall have the sole
discretion to hold one or more hearings. If a claimant does not receive a
decision within the specified time, the claimant should assume the claim
was denied or re-denied on the date the specified time expired. The
claimant may, at the claimant's own expense, have an attorney or other
representative act on behalf of the claimant, but the CFO has the right to
require a written authorization. The CFO also has the right to delegate
the authority to make decisions.
15. Other Benefit Programs. This Agreement is in addition to, and
----------------------
not in lieu of, any other employee benefit plan or program in which you may be
or become eligible to participate by reason of employment with Apertus. Receipt
of benefits under this Agreement shall be disregarded under such other plans or
programs unless any such other plan or program specifically provides otherwise.
Without limitation of the generality of the foregoing, payments under this
Agreement shall be disregarded for purposes of the Apertus Savings and
Investment Plan.
16. Applicability to Successors. This Agreement shall be binding
---------------------------
upon and inure to the benefit of Apertus and you, the successors and assigns of
Apertus, and your beneficiaries, personal representatives and heirs. If Apertus
becomes a party to any merger, consolidation or reorganization, this Agreement
shall remain in full force and effect as an obligation of Apertus or its
successors in interest.
17. Amendment. This Agreement may be amended or revoked at any time
---------
by the Board, but no such amendment or revocation shall have the effect of
reducing your vested benefits as of the date of amendment without your consent;
provided, however, that such restriction on amendment or revocation is not
intended to prevent possible reduction of benefits due to reduction in the value
of Stock (or other measuring investments) with respect to any Account. The CFO
may issue implementing rules (not inconsistent with this Agreement) and will
inform you of any rules, amendments or revocation of this Agreement.
8
<PAGE>
18. Applicable Law. Except to the extent governed by federal law,
--------------
this Agreement shall be construed in accordance with the laws of the State of
Minnesota.
19. Headings. The headings of the paragraphs herein are included
--------
solely for convenience of reference and shall not control the meaning or
interpretation of any provisions of this Agreement.
20. Regulatory Compliance. The CFO shall monitor regulatory
---------------------
compliance. This Agreement will be interpreted and administered consistent with
the intentions stated in this Section 20.
20.1. ERISA. For purposes of the Employee Retirement Income
-----
Security Act of 1974 ("ERISA"), this Agreement is intended to be part of an
employee pension benefit plan which is maintained primarily for purposes of
providing deferred compensation for a select group of management or highly
compensated employees. The CFO shall monitor compliance with regulations
and rulings of the Department of Labor (including 29 C.F.R. (S)2510.104-23)
to carry out that intention and shall file with the Department of Labor the
statement required by such regulations.
20.2. Tax Laws. For purposes of Section 3121(v) of the Internal
--------
Revenue Code and other tax and social security laws, this Agreement is
intended to be part of a "nonqualified deferred compensation plan."
20.3. Securities Laws. For purposes of the Securities Exchange
---------------
Act of 1934, as amended (the "Exchange Act"), your interests under this
Agreement are intended not to be "derivative securities" within the meaning
of Rule 16a-1(c) under the Exchange Act. Notwithstanding any other
provision of this Agreement, all payments under this Agreement will be made
in cash (and not in Stock or any other measuring investments) and no
payment shall be made with respect to an Account before six months the last
crediting to such Account under Sections 2 or 3, unless made by reason of
your death, total and permanent disability or termination of employment
with Apertus.
9
<PAGE>
21. Entire Agreement. This Agreement and each Election Form
----------------
incorporate our entire agreement with respect to deferred compensation and other
matters addressed in this Agreement and supersede any other related written or
oral communications.
INTENDING TO BE LEGALLY BOUND, we have signed this Agreement.
Dated: ________________, 1995 APERTUS TECHNOLOGIES
INCORPORATED
By
----------------------------
Its Chief Financial Officer
----------------------------
Employee
10
<PAGE>
Exhibit 13
----------
Management Discussion and Analysis of
Financial Condition and Results of Operations
During the fiscal year ended March 31, 1996, Apertus Technologies
Incorporated(R) continued to provide enterprise-strength solutions that enable
organizations to integrate traditional, large-scale computer systems with
networked computing environments. This commitment was further enhanced by the
acquisition of BlueLine Software on June 30, 1995.
Apertus presently markets the following products: DataStar and EXPRESS (TM)
(network integration products), Enterprise/Access and Enterprise/Integrator
(data integration products), and MQView and VisionNet (application
management products).
DataStar is a high-capacity, channel-attached gateway that provides a wide
range of TCP/IP-to-SNA network connectivity solutions. During fiscal 1996, the
DataStar was enhanced to provide increased capacity and improved performance
with new Pentium modules and an optional datastreaming channel interface.
EXPRESS is a suite of communications software products for linking
computers running the UNIX operating system with various IBM platforms.
Available on most UNIX platforms, EXPRESS supports a wide range of connectivity
with mainframes, including screen and peer-to-peer access, file transfer, and
printing support.
VisionNet is a family of products that provides a comprehensive software
solution for monitoring the performance of SNA, TCP/IP, and IPX networks.
Enterprise/Access provides client/server access to mainframe systems and
was enhanced by the addition of a new Web Edition that enables corporations
conducting business over the Internet to access data without changing their
applications, data, or infrastructure.
Enterprise/Integrator, released on a limited basis in fiscal 1996, is an
object-oriented tool that transforms, cleanses, merges, and synchronizes data
from heterogeneous databases, providing solutions for complex data integration
issues.
MQView is a system management application that provides centralized
configuration, monitoring, and client reporting of IBM's commercial messaging
product family, MQSeries (TM).
With these products and the expansion of Apertus' international sales
efforts with new offices in Germany, Canada, and Holland, the Company continues
to make progress toward achieving its strategic initiatives: growing our
worldwide customer base, expanding our commitment to sales of our newer
generation data and application management products, and developing leading edge
enterprise-strength solutions consistent with its focus. Fiscal 1997 represents
a period of transition for Apertus. As the market for its network integration
products becomes increasingly competitive, Apertus is looking towards the sales
of its data integration and application management products to renew growth and
improve upon operating results experienced in fiscal 1996. Apertus anticipates
this transition will extend into fiscal 1997 with Apertus' goal to be to return
to profitability in the second half of the year, subject to the uncertainties
associated with new product introductions.
Fiscal 1996 Compared to Fiscal 1995
Net revenues from operations in fiscal 1996 decreased approximately $5.3
million from fiscal 1995 revenues. The revenue decrease is associated with the
softening in the market for the Company's traditional network integration
products and a lengthening sales cycle for certain key accounts. Growth in the
-2-
<PAGE>
international marketplace has offset some of the decline in the domestic arena.
In fiscal 1996, international revenue represented 31% of total revenues as
compared to 14% in fiscal 1995. The Company expects the international component
of revenue to remain at the current level for fiscal 1997.
The cost of revenues as a percentage of revenues increased to 33% in fiscal
1996 from 30% in fiscal 1995. The trend toward a higher cost of revenue reflects
the payment of international royalties associated with BlueLine revenue, profit
margin pressures internationally, and the impact of lower sales volume as it
relates to the fixed overhead base.
Research, development, and engineering costs as a percentage of revenues
increased to 27% in fiscal 1996, as compared to 20% in fiscal 1995. This
increase period-over-period is principally attributable to the additional
development costs acquired through the BlueLine acquisition, coupled with
weakened sales in the connectivity marketplace. Selling, general, and
administrative costs as percentage of revenues increased to 44% in
fiscal 1996 from 34% in fiscal 1995. The increase is due principally to the
acquisition of BlueLine, whose costs are reflected as of July 1, 1995, coupled
with increased investments in the selling and distribution channels.
Interest income in fiscal 1996 was $741 thousand, as compared to $712
thousand in fiscal 1995. This increase is primarily due to a a higher average
rate of return.
Fiscal 1995 Compared to Fiscal 1994
Net revenues from operations in fiscal 1995 increased approximately $28.4
million, 108% over fiscal 1994 revenues. The increase in revenues resulted
primarily from the following: a full year of System Strategies, Inc. (SSI)
revenues (SSI was acquired in January 1994) versus only a quarter of revenue
activity in the prior year; strong revenue growth in its international,
commercial, and telecommunication marketplaces; and increased maintenance
revenue due to the expanded installation base of products.
The cost of revenues as a percentage of revenues decreased to 30% in fiscal
1995 from 43% in fiscal 1994. This decrease resulted principally from a
continued shift toward sales of products that contain a larger portion of
software and thus result in higher margins.
Research, development, and engineering costs as a percentage of revenues
decreased to 20% in fiscal 1995, as compared to 23% in fiscal 1994. This
decrease principally reflects the increase in revenue noted above. Selling,
general, and administrative costs as a percentage of revenues decreased to 34%
in fiscal 1995 from 37% in fiscal 1994. This change also reflects the increased
revenues noted above.
Interest income remained relatively static, as rising interest rates have
offset a lower average cash and marketable securities balance. The lower cash
and marketable securities balance principally resulted from a $10 million
payment made to NYNEX in December 1993 related to the acquisition of SSI as well
as to a $2 million settlement of notes payable with NYNEX in the fourth quarter
of fiscal 1995.
Impact of Inflation
The Company has not experienced any significant impact from inflation.
Liquidity and Capital Resources
The Company had working capital of $14 million and $24 million on March 31,
1996 and April 2, 1995, respectively. This decrease is due primarily to the net
loss incurred in the current year, the acquisition of BlueLine Software in
fiscal 1996, and the repurchase of 199,500 shares of the Company's common stock
in the open market. Cash, cash equivalents, and marketable securities were
approximately $11.3 million and $20.3 million on March 31, 1996 and April 2,
1995, respectively. This decrease is primarily due to the acquisition of
BlueLine Software, the net loss incurred in the current fiscal year, and the
repurchase of common stock in the open market.
The Company believes that the current cash on hand, plus the cash to be
generated from its operations in fiscal 1997, will be adequate to cover the
projected cash needs for working capital and capital expenditures in fiscal
1997.
-3-
<PAGE>
APERTUS TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
<S> <C> <C> <C>
March 31 April 2 April 3
1996 1995 1994
REVENUES
Sales $ 37,666 $ 45,713 $ 20,719
Rentals and services 11,653 8,913 5,487
Total 49,319 54,626 26,206
COSTS AND EXPENSES
Cost of sales 10,902 12,794 7,424
Cost of rentals and services 5,456 3,474 3,729
Research, development and engineering 13,205 10,674 5,986
Selling, general and administrative 21,937 18,407 9,801
Other charges 5,820 - 9,029
Total 57,320 45,349 35,969
Income (Loss) from Operations (8,001) 9,277 (9,763)
OTHER INCOME (EXPENSE)
Interest expense (27) - -
Investment income 741 712 747
Total 714 712 747
Income (Loss) From Operations
Before Income Taxes (7,287) 9,989 (9,016)
Income Tax Expense (203) (150) -
Net Income (Loss) $ (7,490) $ 9,839 $ (9,016)
Income (Loss) per Common and
Common Equivalent Share $(0.54) $0.69 $(0.70)
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding 13,897,000 14,266,000 12,884,000
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
APERTUS TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31 April 2
1996 1995
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 5,455 $ 13,140
Cash in escrow - current portion 1,539 106
Marketable securities 4,318 6,310
Accounts receivable, less allowance for doubtful
accounts of $1,539 in 1996 and $865 in 1995 14,216 14,067
Note receivable 8,700 -
Inventories 3,881 3,126
Installment receivables - current portion,
less allowance for doubtful accounts of
$300 in 1996 and $0 in 1995 1,018 150
Other 388 453
Total current assets 39,515 37,352
Property and Equipment
Property and equipment 15,686 12,606
Less accumulated depreciation 10,681 8,897
Net property and equipment 5,005 3,709
Other Assets
Cash in escrow - net of current portion - 757
Note receivable 8,700 -
Capitalized software 6,286 3,917
Installment receivables - net of current portion 1,310 49
Goodwill - net of accumulated amortization of $204
in 1996 1,697 -
Other 876 842
Total other assets 10,169 14,265
Total $ 54,689 $ 55,326
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 5,100 $ 2,932
Accrued expenses 6,029 6,437
Deferred revenue 4,255 3,863
Note payable 1,000 -
Current portion of long-term debt 8,976 151
Total current liabilities 25,360 13,383
Long-term Debt - net of current portion - 8,976
Shareholders' Equity
Common Stock --authorized 30,000,000
shares at $.05 par value, shares outstanding of
14,028,455 in 1996, 13,526,800 in 1995 701 676
Additional paid-in capital 57,062 53,231
Retained deficit (28,237) (20,747)
Unearned compensation (197) (193)
Total shareholders' equity 29,329 32,967
Total $ 54,689 $ 55,326
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
APERTUS TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
March 31 April 2 April 3
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(7,490) $ 9,839 $(9,016)
Adjustment to reconcile net income
(loss)to net cash
provided by/(used in) operating
activities net of
purchase of companies:
Depreciation 1,369 1,100 608
Amortization 2,520 3,087 326
Non-current portion of other charges 5,820 - 7,829
Net assets/provision for discontinued
operations - - 208
Accounts receivable 815 (3,132) (559)
Installment receivables 848 878 76
Inventories (755) (34) 116
Other assets 175 218 (7)
Accounts payable, accrued expenses,
deferred
income and income taxes (1,147) 4,504 (920)
Net cash flows provided by/(used in)
operating
activities 2,155 16,460 (1,339)
INVESTING ACTIVITIES
Purchase of company (net of cash acquired) (4,547) - (9,549)
Purchases of marketable securities (8,383) (1,228) -
Sales and maturities of marketable
securities 10,375 1,131 -
Net sales of marketable securities - - 14,775
Purchases of property and equipment (2,523) (1,785) (557)
Capitalized software (3,412) (2,484) (1,387)
Reduction in carrying value of property
held
for sale - - 638
Change in cash held in escrow (676) 92 (955)
Net cash flows provided by/(used in)
investing activities (9,166) (4,274) 2,965
FINANCING ACTIVITIES
Debt transactions:
Repayments (150) (2,213) (115)
Capital transactions:
Stock options exercised 612 1,213 393
Stock repurchased by company (1,194) - -
Net change in restricted stock 58 (86) -
Net cash flows provided by/
(used in) financing activities (674) (1,086) 278
Net increase (decrease) in cash and cash
equivalents (7,685) 11,100 1,904
Beginning cash and cash equivalents 13,140 2,040 136
Ending cash and cash equivalents $ 5,455 $13,140 $ 2,040
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 833 $ 828 $ 840
Cash paid (received) for income taxes 283 0 (39)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-6-
<PAGE>
APERTUS TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid-in Accumulated Unearned
Shares Amount Capital Deficit Compensation
<S> <C> <C> <C> <C> <C>
1994
Balance, March 28, 1993 12,675,900 $634 $51,553 $(21,570) $ (90)
Options exercised 229,475 11 382 - -
Net change in restricted stock 36,500 2 112 - (114)
Compensation earned - - - - 37
Net loss - - - (9,016) -
Balance, April 3, 1994 12,941,875 647 52,047 (30,586) (167)
1995
Options exercised 577,425 29 1,098 - -
Net change in restricted stock 7,500 - 86 - (86)
Compensation earned - - - - 60
Net income - - - 9,839 -
Balance, April 2, 1995 13,526,800 676 53,231 (20,747) (193)
1996
Options exercised 191,403 10 603 - -
Share issued in connection with
the BlueLine Software, Inc.
acquisition 504,252 25 4,351 - -
Net change in restricted stock 5,500 0 61 - (61)
Compensation earned - - - - 57
Stock repurchased (199,500) (10) (1,184) - -
Net loss - - - (7,490) -
Balance, March 31, 1996 14,028,455 $701 $57,062 $(28,237) $(197)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Dollars in thousands, except per share amounts)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Apertus
Technologies Incorporated and its wholly owned subsidiaries, Systems Strategies,
Inc. and BlueLine Software, Inc. (together "the Company"). All inter-company
accounts and transactions have been eliminated in consolidation.
Description of Business
Apertus develops and markets software products for integrating diverse
corporate applications, data, and networks. The Company's principle markets are
in North America, Europe, and the Pacific Rim.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest March 31. Fiscal 1996
and 1995 were 52-week years, respectively. Fiscal 1994 was a 53-week year.
Revenue Recognition
Sales include direct sales to distributors and customers, sales-type lease
contracts, and commitment contracts. Sales are generally recorded when the
product is shipped, except that sales-type lease contracts are recorded as sales
when the products are accepted by the customer. Under commitment contracts,
the revenue attributable to the current fiscal year is recognized when the
product is shipped to the distributor. Any related costs are accrued at this
time.
-7-
<PAGE>
Equipment under all other lease contracts is accounted for under the operating
method, and rental income is recognized during the period the equipment is on
lease. Service revenues are recognized over the period covered by the service
contract.
Cash Equivalents
Securities, which are readily convertible to cash with original maturities of
three months or less when purchased, are considered cash equivalents.
Marketable Securities
As of April 4, 1994 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Investments in marketable equity securities and debt securities are
classified as available-for-sale. Available-for-sale securities are carried at
fair value with the unrealized gains and losses, net of tax, reported as a
separate component of shareholders' equity. Realized gains and losses and
declines in value judged to be other than temporary are included in investment
income along with interest and dividends.
Capitalized Software
The Company, in accordance with SFAS No. 86. capitalizes software development
costs by project. These capitalized costs are amortized on a straight-line
basis over a period of three years or the expected life of the product,
whichever is less. Research and development costs are charged to expense as
incurred.
Major Customers
Sales to the following customers have accounted for a significant percentage
of sales for the three year period ended March 31, 1996. The following table
outlines these percentages:
Fiscal Years Ended Ameritech GTE
March 31, 1996 4% 10%
April 2, 1995 9% 26%
April 3, 1994 10% 15%
Inventories
Inventories are valued at the lower of cost or market with cost determined on
a first-in, first-out basis. Inventories are as follows:
March 31 April 2
1996 1995
Raw Material $ 652 $ 499
Work-in-process 1,542 1,161
Finished goods 1,687 1,466
Total $3,881 $3,126
Property and Equipment
Property and equipment is recorded at cost and depreciated on a straight-line
basis. Leasehold improvements are depreciated over the lessor of the lease life
or the life of the improvement. Property and equipment consists of the
following:
March 31 April 2 Depreciable
1996 1995 Lives in Years
Machinery
and equipment $11,474 $ 9,208 3-6
Furniture and fixtures 3,817 3,287 4-10
Leasehold improvements 395 111 4-5
Property and
equipment $15,686 $12,606
Income (Loss) per Common and Common Equivalent Share
Income (loss) per common and common equivalent share is based on the weighted
average number of common shares outstanding plus common stock equivalents
resulting from dilutive stock options where applicable.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases.
Impairment of Long-Lived Assets
The Company records impairment losses on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.
-8-
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock Issued for Employees
The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees"(APB 25) and related interpretations in accounting
for its employee stock options. Under APB 25, when the exercise price of
employee stock options equals the market price of the underlying stock on
the date of the grant, no compensation expense is recognized.
2) CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
Cash, cash equivalents, and marketable securities at March 31, 1996 and April
2, 1995 consist of the following:
<TABLE>
<CAPTION>
Cash and
Cash Short Long
Type Equivalents Term Term Total
<S> <C> <C> <C> <C>
March 31
Bonds $ - $ 551 $ - $ 551
Commercial Paper 1,078 3,768 - 4,846
Cash in escrow - 1,538 - 1,538
Other 4,377 - - 4,377
Total $ 5,455 $5,857 $ - $11,312
April 2
Bonds $ - $4,816 $ - $ 4,816
Commercial Paper 7,196 1,494 - 8,690
Cash in escrow - 106 757 863
Other 5,944 - - 5,944
Total $13,140 $6,416 $757 $20,313
</TABLE>
All marketable securities mature in fiscal 1997. At March 31, 1996 and
April 2, 1995, the cost of marketable securities approximated market value.
3) PURCHASE OF BLUELINE SOFTWARE, INC.
Effective the close of business on June 30, 1995, the Company purchased the
stock of BlueLine Software, Inc. (BlueLine). The total purchase price was
$8,750, of which approximately 50% was paid in cash and 50% was in issued
Apertus common stock.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the operating results of BlueLine have been included in the
consolidated operating results since the date of acquisition.
On acquisition, approximately $1,900 of goodwill was recorded, which is being
amortized on a straight- line basis over 7 years. Additionally, the Company
recorded approximately $738 of escrow cash to be used to offset any unrecorded
liabilities that existed at the acquisition date. If no unrecorded
obligations are noted, the balance will be paid out to original BlueLine
shareholders on December 31, 1996. Included in the assumed liabilities is an
unsecured $1,000 note payable, which is due on October 24, 1996. This balance
carries an interest rate equal to LIBOR plus 1.75%. As of March 31, 1996, this
rate was 6.98%. The carrying value of the note payable approximates fair value.
A portion of the purchase price amounting to approximately $5,100 was
allocated to purchased research and development. This was charged against
earnings in the first quarter of fiscal 1996 and was included in "Other
charges."
The following table shows the pro forma consolidated results of operations as
if BlueLine had been acquired as of the beginning of the periods presented:
Unaudited
Fiscal 1996 Fiscal 1995
Revenues $ 51,284 $61,705
Net income (loss) $(10,477) $ 9,926
Net income (loss) per share $ (.75) $ .69
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operation.
-9-
<PAGE>
4) PURCHASE OF SYSTEMS STRATEGIES, INC.
Effective the close of business on December 31, 1993, the Company acquired the
stock of Systems Strategies, Inc. (SSI), a wholly owned subsidiary of AGS
Computers, Inc., a NYNEX Company. The total purchase price was $14,000, which
included a $10,000 payment on December 31, 1993 and promises to pay to NYNEX the
principal sum of $1,000, without interest, on June 30, 1995 and the principal
sum of $3,000, without interest, on June 30, 1996. The present value of the
payments due June 30, 1995 and 1996 of $3,740 were included on the balance sheet
as "Notes Payable" at April 3, 1994.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the operating results of SSI have been included in the consolidated
operating results since the date of acquisition.
A portion of the purchase price amounting to approximately $5,500 was
allocated to purchased research and development. This was charged against
earnings in the third quarter of fiscal 1994 and was included in "Other
charges."
During fiscal 1995, Apertus and NYNEX reached a settlement whereby the Company
released NYNEX of any liability connected with the collection of outstanding
receivables guaranteed by NYNEX under the original contract. This settlement,
along with a cash payment of $2,060 made in the fourth quarter, relieved the
Company of any future obligations to NYNEX.
5) SALE OF FORMER HEADQUARTERS
On October 26, 1993, the Company sold its former headquarters property,
consisting of land and a building, to Best Buy Co., a Minnesota corporation,
for $8,700. Payment for the building is evidenced by a note receivable due on
June 12, 1996 for the same amount. Additionally, the sales agreement required
that Best Buy make interest payments of $287 on January 31, 1994 and $430 on the
business day immediately preceding each of August 1, 1994, February 1, 1995
and August 1, 1995. On June 12, 1996 the note receivable and $745 in additional
accrued interest will be due and payable.
The property is subject to a mortgage securing a loan to the Company from The
Prudential Insurance Company of America ("Prudential.") The Company and
Prudential have contracted with First Trust National Association ("First Trust")
whereby First Trust will receive all amounts due from Best Buy under the sales
agreement and make the required payments to Prudential under the Company's
current loan obligation. The Company had deposited the sum of $999 with First
Trust to be held in escrow and used to cover the difference between the
payments due from Best Buy and the payments due to Prudential. The cash held
in escrow at First Trust on March 31, 1996 is approximately $776. The current 9%
mortgage loan with Prudential of $8,976 will mature of the debt on June 12,
1996. The approximates fair sale of the former value. headquarters resulted in a
one time charge of $2,250 to operations in fiscal 1994. This amount was included
in "Other charges." The carrying value of the debt approximates fair value.
6) CAPITALIZED SOFTWARE
Capitalized software costs are as follows:
March 31 April 2
1996 1995
Capitalized software costs $ 3,917 $ 4,894
beginning of year
Capitalized software
acquired
through acquisition of
BlueLine - net 1,273 -
Software costs capitalized 3,412 2,484
Less amortization expense (2,316) (3,461)
Capitalized software - end
of year $ 6,286 $ 3,917
7) INSTALLMENT RECEIVABLES
Installment receivables
are as follows:
March 31 April 2
1996 1995
Payments to be received
under sales-type leases $ 2,824 $ 211
Less:
Unearned income (196) (12)
Current portion (1,318) (150)
Total $ 1,310 $ 49
-10-
<PAGE>
8) INCOME TAXES
On March 31, 1996 the Company has operating loss carryforwards of $48,253,
which is available to offset taxable income through 2010. For financial
reporting purposes, a valuation allowance has been recorded to offset deferred
tax assets that may not be realized. Included in the net operating loss
carryforward is $417 of deductions resulting from disqualifying dispositions of
stock options. These deductions currently have a full valuation allowance and
when realized for financial statement purposes, will not result in a reduction
in income tax expense. Rather, the benefit will be recorded as additional paid-
in-capital. The provision for federal, state, and foreign tax expense consisted
of:
Fiscal Years Ended
1996 1995 1994
Current
Federal $- $- $-
Foreign 158 - -
State 45 32 -
Alternative Minimum Tax - 118 -
Total $203 $150 $-
The effective income tax expense differed from the federal statutory rates of
follows:
Fiscal Years Ended
1996 1995 1994
Taxes at statutory rate (34%) 34% (34%)
State income taxes 1% 1% -
Effect of foreign income tax rate 2% - -
Alternative Minimum Tax - 1% -
Impact of net operating loss
carryforward - (34%) -
Change in valuation allowance 34% - 34%
Effective tax rate 3% 2% -
The components of deferred tax assets and liabilities were as follows:
March 31 April 2
1996 1995
Deferred tax assets
Net operating loss carryforwards $ 19,301 $ 18,740
Research and development credit 1,081 1,081
Inventory reserve 866 731
Allowance for doubtful accounts 735 346
AMT credit carryforward 127 127
Other 1,654 1,621
Total deferred tax assets $ 23,764 $ 22,646
Deferred tax liabilities
Capitalized software $ (2,005) $ (1,567)
Depreciation and amortization (342) (273)
Total deferred tax liabilities $ (2,347) $ (1,840)
Net deferred tax assets $ 21,417 $ 20,806
Valuation allowance (21,417) (20,806)
Total net deferred tax assets $ 0 $ 0
9. STOCK OPTIONS, WARRANTS, AND RESTRICTED STOCK
Under the Company's stock option plans, certain officers, directors, and
employees may be granted options to purchase the Company's common stock at
prices equal to the fair market value of the stock at the date of grant.
Following is a summary of stock options under these plans:
Fiscal Years Ended
1996 1995 1994
Granted
Number of shares 257,500 75,000 891,250
Price per share $4-$12 $3-$12 $2-$3
Exercised and cancelled
Number of shares 401,550 602,275 372,300
Price per share $ 1-$9 $ 1-$5 $1-$6
Outstanding at year end
Number of shares 1,307,350 1,451,400 1,978,675
Price per share $ 1-$9 $1-$12 $1-$3
At March 31, 1996, options to purchase approximately 825,350 shares of common
stock at exercise prices ranging from $1 to $12 were exercisable, and 1,002,174
shares are reserved for future issuance.
The Company has entered into restricted stock agreements with various
employees. The agreements call for issuance of the Company's common stock to
these employees and provides for vesting over a 5-year employment period. As of
March 31, 1996, 247,500 shares have been granted, and 52,500 shares are reserved
for future issuance. The value of the stock at the time of grant is deferred and
is amortized over the term of the agreements.
10. OTHER CHARGES
In the first quarter of fiscal 1996, the Company recorded non-recurring
charges of $5,820. These charges related primarily to the purchase of BlueLine
and the closing of a west coast location. (see note 3)
-11-
<PAGE>
In the third quarter of fiscal 1994, the Company recorded charges of $9,029.
These charges related primarily to the purchase of SSI (see note 4) and the
sale of the former headquarters (see note 5).
11. COMMITMENTS AND CONTINGENCIES
The Company has various operating lease agreements, which expire
through the year 2014 for its facilities principally located in Minnesota,
New York, and Western Europe. The Company is responsible for real estate
taxes, maintenance, and utilities.
Future minimum lease payments as of March 31, 1996 are $1,716 in 1997, $1,153
in 1998, $1,169 in 1999, $1,145 in 2000, and $3,707 for the years
thereafter. Rental expense for property and equipment under operating leases for
fiscal 1996, 1995, and 1994 was $2,177, $1,800, and $1,000, respectively.
The Company is involved in various claims and proceedings that, in the opinion
of management and counsel, do not involve amounts material to the
financial position of the Company.
12. EMPLOYEE BENEFIT PLANS
Since 1984, Apertus Technologies Incorporated has maintained a 401(k) Savings
and Investment Plan for its eligible employees.
Employees scheduled to work 1,000 hours in the first year may become
participants in the before tax contributions feature of the Plan as of the first
enrollment date after their date of hire and may become participants in the
matching contribution feature of the plan as of the first enrollment date
following six months of service.
Employees' contributions can range from 1% to 15% of their compensation.
Apertus currently matches 25% of the first 4% of employees' contributions.
Company contributions were $135, $121, and $84, toward 401(k) employer
contributions in fiscal years 1996, 1995, and 1994, respectively.
-12-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Apertus Technologies Incorporated
We have audited the accompanying consolidated balance sheets of Apertus
Technologies Incorporated as of March 31, 1996 and April 2, 1995 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years ended March 31, 1996, April 2, 1995, and April 3, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Apertus
Technologies Incorporated at March 31, 1996 and April 2, 1995, and the
consolidated results of its operations and its cash flows for the years ended
March 31, 1996, April 2, 1995, and April 3, 1994 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, MN
/s/ Ernst & Young LLP
May 6, 1996
-13-
<PAGE>
COMPANY REPORT ON FINANCIAL STATEMENTS
To the Shareholders of Apertus Technologies Incorporated:
The management of Apertus Technologies Incorporated has prepared, and is
responsible for, all information and representations contained in the
financial statements and other sections of this Annual Report. The Company's
financial statements have been prepared in conformity with generally accepted
accounting principles.
Apertus maintains a system of internal accounting controls designed to provide
reasonable assurance that transactions are executed in accordance with the
proper authorization, that all such transactions are properly recorded and
summarized to produce reliable financial records and reports, that assets are
safeguarded, and that the accountability for assets is maintained. The Company
maintains high standards when selecting, training, and developing personnel, to
insure that management's objectives of maintaining strong, effective internal
controls and unbiased, uniform reporting standards are attained.
Ernst & Young LLP, independent auditors, have audited the Company's financial
statements in accordance with generally accepted auditing standards and their
report is included herein.
The Audit Committee of the Board of Directors, which is composed solely of
directors who are not officers or employees, meets regularly and on special
occasions, as needed, with corporate financial management and the independent
auditors to review their activities. The independent auditors have access to
the Audit Committee without management being present to discuss the results of
their work, the adequacy of internal financial controls and the quality of
financial reporting.
May 6, 1996
-14-
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
For the Year Ended March 31, 1996
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Revenues $49,319 $54,626 $26,206 $27,718 $22,763
Income (loss) from
continuing operation (8,001) 9,839 (9,016) 2,485 (375)
Net income (loss) (7,490) 9,839 (9,016) 2,485 (2,361)
Income (loss) per share:
Income (loss) from
continuing operation (0.54) 0.69 (0.70) 0.19 0.03
Net income (loss) (0.54) 0.69 (0.70) 0.19 (0.19)
BALANCE SHEET DATA
Working capital 14,155 23,969 16,280 26,283 23,304
Total assets 54,689 55,326 43,563 43,868 42,875
Long-term debt/notes
payable - 8,976 12,882 9,270 9,359
Shareholders' equity 29,329 32,967 21,941 30,527 27,687
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL
(Unaudited) QUARTER QUARTER QUARTER QUARTER YEAR 1996
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues $11,068 $15,109 $13,044 $10,098 $49,319
Net income (loss) (5,259) 2,081 (1,330) (2,982) (7,490)
Net income (loss) per
share (0.39) 0.14 0.09 (0.21) (0.54)
BALANCE SHEET DATA
Working capital 18,065 18,387 16,748 14,155 14,155
Total assets 57,907 60,566 59,755 54,689 54,689
Long-term debt / notes
payable 8,939 8,902 8,863 - -
Shareholders equity 32,127 33,895 32,543 29,329 29,329
</TABLE>
-15-
<PAGE>
DIVIDEND POLICY AND PRICE RANGE OF COMMON STOCK (UNAUDITED)
The Company has not declared any cash dividends on its common stock, and the
Board of Directors intends to retain all earnings for use in its business for
the foreseeable future. At March 31, 1996, the Company had 1,472 shareholders
of record.
The Company's common stock is traded on NASDAQ under the symbol APTS. The
following table sets forth the high and low, end-of-the-day prices for the
common stock reported on NASDAQ for the period indicated.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal 1996
First Quarter 15 7-3/4
Second Quarter 10-1/2 6-3/4
Third Quarter 10-7/8 7
Fourth Quarter 7-3/4 2-3/4
Fiscal 1995
First Quarter 4-1/8 2-13/16
Second Quarter 8-7/8 4
Third Quarter 12-3/8 7-3/4
Fourth Quarter 13-3/4 8-7/8
</TABLE>
Board of Directors
Robert D. Gordon
Chairman of the Board, Chief Executive Officer, President, Apertus Technologies
Incorporated
Nicholas J. Covatta
Chairman of the Board, Atlantis Group, Inc.
Robert W. Fischer
President, Robert W. Fischer & Co., Inc.
Arch J. McGill
President, Chardonnay, Inc. Group
Clarence W. Spangle
Independent Consultant
George E. Hubman
Independent Consultant
Corporate Officers
Robert D. Gordon
Chairman of the Board, Chief Executive Officer, President
Julie Cummins Brady
Corporate Vice President, Secretary and General Counsel
Sue Hogue
Corporate Vice President, Chief Financial Officer
Martin Hahn
Corporate Vice President, DataStar and EXPRESS
Lizabeth Converse Wilson
Corporate Vice President, Sales
Lloyd Hagemo
Corporate Vice President, MQView and Vision
Auditors
Ernst & Young LLP
Transfer Agent
Norwest Bank Minnesota, N.A.
Founded in 1979, Apertus Technologies Incoporated is headquartered in suburban
Minneapolis, Minnesota, with major offices in New York, NY, and London, England.
The Company has sales and service offices throughout North America and Europe.
A copy of the Company's annual report on Form 10-K (excluding exhibits) filed
with the Securities and Exchange Commission may be obtained without charge to
shareholders upon written request to: Vice President, Investor Relations,
Apertus Technologies Incorporated, 7275 Flying Cloud Drive, Eden Prairie, MN
55344
-16-
<PAGE>
Exhibit 21
----------
<TABLE>
<CAPTION>
State or County of Percentage of Voting Securities
Incorporation or Directly or Indirectly Owned
Organization by the Registrant
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Registrant:
Apertus Technologies Incorporated Minnesota
Subsidiaries:
BlueLine Software, Inc. Minnesota 100%
Apertus Technologies Canada Inc. Canada 100%
BlueLine B.V. Holland 100%
Systems Strategies, Inc. New York 100%
Datanex, Inc. Oregon 100%
Systems Strategies Limited United Kingdom 100%
Lee Data Export Limited Jamaica 100%
Lee Data Far East Pte. Ltd. Singapore 100%
Apertus Inc. GMBH German 100%
</TABLE>
<PAGE>
Exhibit 23.1
------------
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (From 10-K)
of Apertus Technologies Incorporated of our report dated May 6, 1996, included
in the 1996 Annual Report to Shareholders of Apertus Technologies Incorporated.
Our audit also included the financial statement schedule of Apertus Technologies
Incorporated listed in Item 14(a). This schedule is the responsibility of the
Company management. Our responsibility is to express an opinion based on our
audit. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 2-91060) pertaining to the Lee Data Corporation Savings and
Investment Plan, in the Registration Statement (Form S-8, No. 33-38924)
pertaining to the Apertus Technologies Incorporated Long Term Investment Plan,
in the Registration Statement (Form S-8, No. 33-50648) pertaining to the Apertus
Technologies Incorporated Stock Acquisition Loan Assistance Program, in the
Registration Statement (Form S-8, No. 33-88884) pertaining the amendments to the
Apertus Technologies Incorporated 1990 Long-Term Incentive Plan, of our report
dated May 6, 1996, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of Apertus Technologies Incorporated.
Ernst & Young LLP
Minneapolis, Minnesota
June 27, 1996
<PAGE>
Exhibit 24
----------
Powers of Attorney
KNOW ALL PERSONS BY THESE RESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert D. Gordon, Sue A. Hogue and Julie
Cummins Brady and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and in their
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Apertus Technologies Incorporated for the fiscal year ended March
31, 1996 and all amendments to such Annual Report on Form 10-K, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of the, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Signature Date
--------- ----
/s/ Robert D. Gordon June 28, 1996
- --------------------------------------------
Robert D. Gordon, Chairman of the Board,
Chief Executive Officer, President and Director
(principal executive officer)
/s/ Sue A. Hogue June 28, 1996
- -------------------------------------------
Sue A. Hogue, Chief Financial Officer
(principal financial officer and
principal accounting officer)
/s/ Nicholas J. Covatta June 28, 1996
- ---------------------------------------------
Nicholas J. Covatta Jr., Director
/s/ Robert W. Fischer June 28, 1996
- --------------------------------------------
Robert W. Fischer, Director
/s/ George E. Hubman June 28, 1996
- -------------------------------------------
George E. Hubman, Director
/s/ Arch. J. McGill June 28, 1996
- --------------------------------------------
Arch J. McGill, Director
/s/ Clarence W. Spangle June 28, 1996
- -------------------------------------------
Clarence W. Spangle, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-03-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,455
<SECURITIES> 4,318
<RECEIVABLES> 14,216
<ALLOWANCES> 1,539
<INVENTORY> 3,881
<CURRENT-ASSETS> 39,515
<PP&E> 5,005
<DEPRECIATION> 10,681
<TOTAL-ASSETS> 54,689
<CURRENT-LIABILITIES> 25,360
<BONDS> 9,976
0
0
<COMMON> 701
<OTHER-SE> 28,628
<TOTAL-LIABILITY-AND-EQUITY> 54,689
<SALES> 37,666
<TOTAL-REVENUES> 49,319
<CGS> 10,902
<TOTAL-COSTS> 57,320
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (7,287)
<INCOME-TAX> (203)
<INCOME-CONTINUING> (7,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,490)
<EPS-PRIMARY> (.54)
<EPS-DILUTED> (.54)
</TABLE>
<PAGE>
Exhibit 99.1
------------
CAUTIONARY STATEMENT
Apertus Technologies Incorporated ("Apertus" or the "Company"), or persons
acting on behalf of the Company, or outside reviewers retained by the Company
making statements on behalf of the Company, or underwriters, from time to time,
may make, in writing or orally, "forward-looking statements" as defined under
the Private Securities Litigation Reform Act of 1995 (the "Act"). This
Cautionary Statement is for the purpose of qualifying for the "safe harbor"
provisions of the Act and is intended to be a readily available written document
that contains factors which could cause results to differ materially from those
projected in such forward-looking statements. These factors are in addition to
any other cautionary statements, written or oral, which may be made or referred
to in connection with any such forward-looking statement.
The following matters, among others, may have a material adverse effect on
the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement shall be deemed to be a
statement that any one or more of the following factors may cause actual results
to differ materially from those which might be projected, forecast, estimated or
budgeted by the Company in such forward-looking statement or statements:
. Decreased demand for the Company's products (particularly the Company's
traditional Network Integration Products).
. Heightened competition (particularly in the market for the Company's
Network Integration Products), including more intense price competition;
the introduction of new products by new and existing competitors; and the
entry of new competitors.
. Market acceptance risk associated with new product introductions
(particularly the Company's new Data Integration Products and System
Management Products).
. Risk of lengthening sales cycles with key customers.
. Risk of technological obsolescence of the Company's products.
. Inability to manage the Company's cost structure to a level consistent with
profitability as the Company aggressively funds new products while
retaining its traditional products.
. Risks associated with sales of products outside the United States,
including those related to foreign regulatory requirements, exchange rate
fluctuations and local political, social and economic factors.
. Higher service, administrative or general expenses occasioned by the need
for additional advertising, marketing, administrative or management
information systems expenditures.
. Failure to obtain new customers or retain existing customers.
. Inability to carry out marketing and sales plans.
. Loss or retirement of key executives.
. Risks associated with the company's dependence on proprietary technology,
including those related to adequacy of copyright, trademark and trade
secret protection, independent development by competitors, infringement
claims by third parties and the related potential for significant
litigation expense.
<PAGE>
. Risks associated with single sources of supply for certain components used
in the Company's products, including the potential for delays in product
shipments, delays in production and increased supply costs.
. Termination of supply contracts or renegotiation at less cost-effective
rates or terms of payment.
. Changes in interest rates causing a reduction of investment income or in
the market value of interest rate sensitive investments.
The foregoing review of factors pursuant to the Act should not be construed
as exhaustive or as any admission regarding the adequacy of disclosures made by
the Company prior to the effective date of the Act.
